Nykredit is opening the latest Danish covered bond auction season today (Friday), after having yesterday announced plans for a stock exchange listing for the group, citing stricter capital requirements being imposed by international regulators as a reason for the move.

An IPO of Nykredit Holding would be a historic move for the mutual institution, which through Nykredit Realkredit is the largest issuer of mortgage covered bonds. Under the group’s plans, the Nykredit Association that owns 89.9% of Nykredit today would nevertheless retain a controlling interest post-listing.

The Danish group said the move is rooted in the challenge Nykredit is facing in terms of the new and stricter capital requirements underway from international authorities.

“The forthcoming requirements are not final yet, but their scope is expected to be significant,” said Nykredit. “In the absence of fundamental changes, these requirements, even in a minimum version, will pose a substantial challenge for Nykredit with its current structure.

“A challenge that Nykredit, as a responsible, systemically important financial institution, must address and strive to resolve now.”

Nykredit has cited the potential introduction of mortgage risk weight floors under Basel IV among factors putting unwarranted pressure on capital requirements.

A final decision on the plan is expected to be taken by the Committee of Representatives of the Nykredit Association on Wednesday. Nykredit said that it expects to be ready for an IPO within 12-24 months, but that the final timing of a listing depends on market conditions and whether “sufficient clarity is achieved about the coming international capital requirements”. Rothschild has been appointed adviser.

Nykredit Realkredit meanwhile today kicked off the latest refinancing auction season in Denmark, which Danske analysts said will feature around Dkr123bn (Eu16.5bn) of Danish krone issuance. According to the Danske analysts, this is around Dkr43bn less than in the corresponding season last year, with one year supply down from Dkr93bn to Dkr71bn.

Nykredit’s peers will begin their auctions next week.