Danish central bank access to improve liquidity

COPENHAGEN: Denmark's central bank said on Tuesday it would improve financial institutions' access to liquidity by expanding its lending base.

The National bank said in a statement that the new arrangements would come into force on Oct. 1 and remain in place until further notice.

It did not specify what the measures would entail but said the conditions of the new arrangement would be laid out soon.

The announcement followed news last week that the central bank had slightly expanded the range of collateral that banks and mortgage lenders could use when borrowing from the National bank.

Danish banks have seen funding costs rise and a number of them have been shut out of foreign funding markets in recent weeks due to worries about the possibility of smaller bank failures following the collapse of Fjordbank Mors in June.

On Friday, Denmark's economics and business minister said the government was working on a plan to help smaller banks regain access to international funding markets and make it more attractive for the sector to consolidate.

Copyright Reuters, 2011