The demand, made by Economy Minister Morten Ostergaard on Friday, may rankle with EU regulators who have wanted to iron out national differences in new banking rules agreed in the aftermath of the 2008 financial crisis.

"The Danish government considers it as an extremely important point that each Danish bank within the banking union can continue to cover up to 70 per cent of their buffer by highly secure Danish mortgage bonds," Ostergaard told Reuters.

"That is of utmost importance if Denmark is to participate in the euro group's banking union," he said.

The European Commission said last year it backed Denmark's position that its mortgage-backed bonds could be seen as highly liquid assets used in buffers against months-long shocks in financial markets.

But the European Banking Authority and the European Central Bank want such national anomalies stamped out so that investors can compare banks like for like across borders.

The liquidity buffers are required by the Basel III rules drawn up as the world's main regulatory response to the crisis and endorsed by leaders of the G20 economies, including the EU.

Basel III stipulates up to 60 percent of a bank's liquidity buffer must be in the form of cash or top-rated government bonds. Mortgage bonds can only be included, subject to a discount, in the remaining 40 percent of the buffer.

Danish banks hold together 750 billion Danish crowns ($110 billion) in mortgage-backed bonds, close to the 70 percent limit.

($1 = 6.7612 Danish crowns)

(Reporting by Erik Matzen; Additional reporting by Huw Jones in London; Writing by Sabina Zawadzki; Editing by Ruth Pitchford)

Stocks treated in this article : Danske Bank A/S, Jyske Bank A/S, Sydbank A/S, Nordea Bank AB