Danmarks Nationalbank 2005 Danmarks Report andAccounts Nationalbank Report and Accounts 05 Danmarks Nationalbank Havnegade 5 DK-1093 Copenhagen K D A N M A R K S Telephone +45 33 63 63 63 Fax +45 33 63 71 03 N A T I O N A L www.nationalbanken.dk E-mail: [email protected] B A N K 2 0 0 5 aab_DK_06.indd 1 10-02-2006 13:59:59 Report and Accounts 2005 REPORT AND ACCOUNTS 2005 At the meeting of the Board of Directors held on 20 March 2006 the Board of Governors reported on the activities of Danmarks Nationalbank. The report was noted. Danmarks Nationalbank's accounts for 2005 were submitted by the Board of Governors for adoption on the recommendation of the Committee of Directors. The Board of Directors and the Royal Bank Commissioner accepted the recommendation. This Report is based on information available up to 2 March 2006. The small picture on the front cover is a section of the fairy tale coin "The Little Mermaid", which is the second coin in a series of five with fairy tales as their common theme. The motif was designed by the sculptor Tina Maria Nielsen. Text may be copied from this publication provided that Danmarks Nationalbank is specific- ally stated as the source. Changes to or misrepresentation of the content are not permit- ted. The Report and Accounts is available on Danmarks Nationalbank's website: www.nationalbanken.dk under Publications and can be ordered by filling in the form on Danmarks Nationalbank's website. The Report and Accounts 2005 is also available on request from: Danmarks Nationalbank Information Desk Havnegade 5 DK-1093 Copenhagen K Telephone: (+45) 33 63 70 00 (direct) or (+45) 33 63 63 63 Office hours: Monday-Friday 9.00 am-4.00 pm. E-mail: [email protected] Explanation of symbols: - Magnitude nil 0 Less than one half of unit employed • Category not applicable … Data not available Details may not add because of rounding. Datagraf, Auning A/S ISSN 1397-520x ISSN (Online) 1398-3849 20-03-2006 11:48:00 Antal sider: 172 Rev. nr. 2 H:\Aarsberetninger\2005\Engelsk\faerdige\Hel.doc Oprettet af Hanne Christensen Report and Accounts 2005 3 Contents FOREWORD ........................................................................................... 9 REPORT OF THE BOARD OF GOVERNORS SUMMARY ............................................................................................ 13 THE DANISH ECONOMY International background ................................................................... 16 The Danish economy ............................................................................ 20 Wage and price trends ........................................................................ 24 Credit expansion .................................................................................. 26 Economic prospects .............................................................................. 27 MONETARY AND EXCHANGE-RATE POLICY The framework of the fixed-exchange-rate policy ............................ 29 The ECB's monetary policy .................................................................. 31 The monetary and foreign-exchange policy of Danmarks Nationalbank ................................................................. 32 The money market and the short-term interest rates ....................... 37 FINANCIAL MARKETS Interest rates ......................................................................................... 40 Foreign-exchange markets .................................................................. 44 Stock markets ....................................................................................... 47 THE DOMESTIC FINANCIAL SYSTEM Banks ..................................................................................................... 51 Mortgage-credit institutes .................................................................. 53 Investment associations ....................................................................... 53 Pension companies ............................................................................... 54 The bond market .................................................................................. 55 Agreement on new capital-adequacy rules in the EU ....................... 56 Himmerlandsbanken ............................................................................ 57 Memoranda of Understanding ........................................................... 58 20-03-2006 11:48:00 Antal sider: 172 Rev. nr. 2 H:\Aarsberetninger\2005\Engelsk\faerdige\Hel.doc Oprettet af Hanne Christensen Report and Accounts 2005 4 BANKNOTES AND COINS Banknotes and coins in circulation ..................................................... 60 Upgrading of banknotes ..................................................................... 61 New banknote series ............................................................................ 62 Counterfeit banknotes ......................................................................... 62 Fairy tale coins ...................................................................................... 63 Tower coins ........................................................................................... 64 2005 coin set ......................................................................................... 64 Faroese banknote series ...................................................................... 65 PAYMENT SYSTEMS Development in payment and settlement systems ............................ 67 Oversight ............................................................................................... 69 Infrastructure for krone-denominated payments ............................. 70 Infrastructure for euro-denominated payments ................................ 70 INTERNATIONAL MONETARY COOPERATION Period of reflection in the EU .............................................................. 73 Non-EMU member states ..................................................................... 74 Future enlargements of the EU ........................................................... 76 The Stability and Growth Pact ............................................................. 76 Discussion of the IMF's future development ...................................... 80 Debt relief from IMF to poor countries .............................................. 81 Lending by the IMF .............................................................................. 83 The IMF's macroeconomic and financial surveillance of Denmark ... 85 ORGANISATION AND TASKS OF DANMARKS NATIONALBANK Danmarks Nationalbank's objectives and values ............................... 87 Danmarks Nationalbank's management ............................................ 89 Departments ......................................................................................... 91 Staff ....................................................................................................... 95 Lectures ................................................................................................. 98 Other initiatives in 2005 ...................................................................... 98 Representation on committees, etc. ................................................... 101 Representation in international organisations .................................. 101 Danmarks Nationalbank's Anniversary Foundation of 1968 ............ 103 Danmarks Nationalbank's guest apartments at Nyhavn 18 .............. 104 The Erik Hoffmeyer Travel Grant Foundation .................................... 104 RISK MANAGEMENT Operational risk .................................................................................... 105 Danmarks Nationalbank's management of financial risks ................ 106 20-03-2006 11:48:00 Antal sider: 172 Rev. nr. 2 H:\Aarsberetninger\2005\Engelsk\faerdige\Hel.doc Oprettet af Hanne Christensen Report and Accounts 2005 5 DANMARKS NATIONALBANK'S ACCOUNTS FOR THE YEAR 2005 REPORT ON DANMARKS NATIONALBANK'S ACCOUNTS Presentation of Danmarks Nationalbank's accounts ......................... 118 APPENDIX Press releases ........................................................................................ 136 Danmarks Nationalbank's publications .............................................. 152 Danish bank holidays other than Saturdays and Sundays ................ 154 APPENDIX OF TABLES .......................................................................... 155 Charts Chart 1 Growth in the gross domestic product, GDP ..................... 17 2 Contribution to growth ...................................................... 21 3 The balance of payments ................................................... 23 4 Wage increases in Denmark and abroad .......................... 24 5 Nominal and real effective krone rates ............................. 25 6 Increase in consumer prices and IMI .................................. 25 7 Growth in lending by banks and mortgage-credit institutes .................................................. 26 8 Borrowing by households from Danish banks and mortgage-credit institutes .................................................. 27 9 Krone vis-à-vis euro ............................................................. 30 10 The ECB's interest rates and short-term money-market interest rate in the euro area ............................................. 31 11 Lending rates of the ECB and Danmarks Nationalbank ... 32 12 Capital imports related to portfolio investments ............. 33 13 Net position of the monetary-policy counterparties vis-à-vis