The establishment of KommuneKredit was authorised under Danish Parliamentary Act No. 35 of 19th March 1898. Pursuant to this Act the Minister of the Interior approved the establishment of KommuneKredit as a credit association with the purpose to provide loans to Danish local governments and to Danish semi-municipal institutions which are fully guaranteed by local governments.
The members of KommuneKredit comprise municipalities (kommuner) and regions (regioner) – together local governments – which have loans outstanding or have guaranteed outstanding loans to semi-municipal institutions. Municipalities are the lowest tier of local authority in Denmark in geographic terms and encompass the whole country. Regions are the second tier and comprise the territory of a number of municipalities. Currently there are 98 municipalities and 5 regions in Denmark. All municipalities and regions are currently members of KommuneKredit.
Local governments can only borrow for certain purposes not for current expenditures or commercial projects. At all times new loans must comply with the current rules on local government borrowing.
KommuneKredit is rated AAA/Aaa. The rating reflects the strong guarantee structure of KommuneKredit where the members of the association are jointly and severally liable for all of KommuneKredit’s obligations. In addition, the members i.e. the local governments are not allowed to default, hence KommuneKredit is regarded as one of the strong issuers amongst the municipal agencies.
KommuneKredit is supervised by the Ministry for Industry, Business and Financial Affairs.