In view of Denmark’s fixed-exchange-rate policy Danish interest rates closely match European interest rates. As the euro area’s cyclical position is weak, the monetary-policy interest rates are very low, and therefore the financial conditions are more relaxed than Danish factors alone would indicate. 2  BIS Review 21/2003  Four years ago, Danmarks Nationalbank made a number of adjustments to the monetary-policy instruments.
Nonetheless, recent events demonstrate that liquidity risks are always present for institutions – banks and nonbanks alike – that finance illiquid assets with short-term liabilities. For example, since August, mortgage lenders, commercial and investment banks, and structured investment vehicles have experienced great difficulty in rolling over commercial paper backed by subprime and other mortgages.