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The Competition Council approves the merger between Nykredit A/S og Totalkredit A/S

14. oktober 2003

The Council meeting 14. October 2003

The Competition Council approved the merger between the two mortgage credit institutions Nykredit A/S and Totalkredit A/S on 14 October 2003. However, the approval is conditional on the parties making substantial amendments in their original merger agreement. Nykredit and Totalkredit have entered into a number of commitments to the Council in order to eliminate the detrimental effects of the merger. Without these commitments the competition on the mortgage market was at risk of being reduced.

The commitments can be grouped in three different categories.

Firstly, the parties have conscented to reduce the currency of the agreement by 50 pct. Originally Nykredit was to have almost exclusive rights for nine years to have Nykredit mortgage-products distributed throughout the 106 banks owning Totalkredit. Now the most anti-competitive provisions of the agreement are only to run for four years and the less anti-competitive provisions for not more than 6 ¼ years. This implies, that either party is free to cooperate with more efficient market-players after the expiry of the various provisions in the agreement. This option will encourage the parties to increase their efficiency.

Secondly the commitments ensure that consumers will benefit from the merger as well. Nykredit has agreed to lower the interest-differential by more than five pct. At the same time costumers who file mortage loan applications via the internet will receive a 600 DKK discount. If this becomes a popular way of filing applications an alternative distribution channel, which will enhance competition in the market as well, has been made. Along with that Nykredit will also facilitate the process of buying and selling bonds. This step will increase the preasure on the banks as well.

Finally, Nykredit will introduce registration of bonds free of charge. If ofher mortgage credit institutions go along with this initiative in order to compete successfully, consumers will save more than 100 million DKK annually.

Thirdly transparency in the mortage-credit sector will increase in several ways. The size of the commission that the 106 banks receive from Nykredit in return for their intermediary-services will be disclosed to the public.

The advantages gained from the commitments will balance the negative effects of the merger and ensure that the merger does not weaken the competition in the market as such.