Large Banks, Market-based Banking, and the Financialisation of Danish Mortgage Markets

ABSTRACT

This paper puts forward three arguments; firstly, the origions of Danish market-based banking can be traced to the shift by a small group of large commercial banks into the mortgage lending business. Secondly, the Danish case demonstrates the centrality of housing and the politics of mortgage market liberalisation to the rise of market-based banking. And finally, that national diversity in the form of market-based banking mattered for Danish financial stability. Historically, the Danish mortgage model was characterised by cooperative mortgage associations focused on the provision of stable equitable access to housing finance. However, as we shall see, the 1986 financial crisis marked a turning point for Danish finance, and from that point on, a small group of the large commercial bank became increasingly influential. The empirical sections outline three stages to the transformation of Danish finance. In the 1980s, a financial crisis led to the creation of a new type of large commercial bank. In the 1990s, the large banks diversified into the mortgage business crowding out the traditional mortgage banks. Finally, in the 2000s, the large banks provide credit for a massive housing bubble through new forms of market-based banking.

KEYWORDS:

• Financialisation
• mortgage markets
• market-based banking
• large banks
• privatised Keynesianism
• comparative capitalism

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Additional information

Funding

The work of the author was supported by the HECAT project, funded within the EU Framework Programme for Research and Innovation Horizon 2020, under [Grant number 870702].

Notes on contributors

Patrick Gallagher

Dr Patrick Gallaghers' PhD titled Financialisation and the Politics of Growth in Denmark and Ireland, was completed at the National University of Ireland Maynooth. During this time he was an ERC scholar working as part of the New Deals in the New Economy team. Currently Dr Gallagher is working as a post doctoral researcher on the HECAT project with the Deaprtment of Mangamnet and Organisations at WIT funded under the Horizon 2020 program. The aim of the project is to develop a disruptive technology to assit in the labour market decision making process. This article was supported by his work on HECAT.