Danish mortgage banks issue three types of bonds to fund loans granted against a mortgage on real property:
- Særligt Dækkede Obligationer (SDOs) issued by either commercial or mortgage banks.
- Særligt Dækkede Realkreditobligationer (SDROs) issued exclusively by mortgage banks, fulfilling the former as well as the new legal requirements.
- Realkreditobligationer (ROs) issued exclusively by mortgage banks.
Both commercial banks and mortgage banks may issue SDOs, but only mortgage banks may issue SDROs and ROs. In practice, there is no significant difference between the two types of covered bonds.
SDOs and SDROs must comply with a number of demands not enforced on ROs. The most significant demand is that the loans they fund must remain within a statutory lending limit throughout the term of the loan. ROs are only required to be within the lending limits at the time the loan is granted.
Each month, Danmarks Nationalbank calculates portfolios and transactions in mortgage bonds distributed on maturity and sector. The calculation is based on information received from VP Securities, a Danish clearing house. Portfolios are calculated at market value at the end of each month. If there is no market price at the end of the month, the most recently registered price or the price at par will be used.