Foreign Borrowing The purpose of the central government's foreign borrowing is to ensure an adequate foreign-exchange reserve. The distribution of the central government's domestic and foreign borrowing are managed via the centralgovernment borrowing norm. The norm for foreign borrowing implies that redemptions on the foreign debt are refinanced by new foreign loans. Foreign loans raised directly in euro or swapped to euro In recent years, the central government has exclusively applied simple loan structures that are well-known in the market. The currency exposure on the foreign debt is in euro. Limiting the currency exposure to euro gives a low exchange-rate risk, in view of Denmark's fixed-exchange-rate policy vis-ávis the euro. The central government therefore raises foreign loans directly in euro or in other currencies which are swapped to euro. Euro loans Most of the foreign borrowing requirement is covered by raising euro loans. The aim is to issue benchmark-size euro loans each year. The preferred maturity for euro-denominated loans is 5 years. When foreign loans are raised, a group of international banks is contacted in order for one or more of the banks to arrange the loans. Currency swaps from kroner to euro As a supplement to direct borrowing in foreign currency, domestic borrowing combined with currency swaps from kroner to euro is used. This type of borrowing is available on attractive price terms in some periods, and furthermore supports liquidity in domestic on-the-run issues. The liquidity of the swap markets varies between currencies and types. For example, the euro market is more liquid than the krone market. Commercial Papers Short-term borrowing in the form of Commercial Papers is typically used if there is a need to increase the foreign-exchange reserve quickly, or to safeguard a positive balance on the central government's account. Interest-rate swaps As part of its management of the duration of the central-government debt, the central government can transact interest-rate swaps in both the euro and krone markets.