This was done not so much because the level of mortgage debt is higher than in the past but as a prudent protection – a guardrail, if you will – against the risk of a deterioration in credit quality and excessively rapid growth in the stock of debt. Thank you. 18  All speeches are available online at www.bankofengland.co.uk/speeches  18  References Andersen, A. L., Duus, C., and Lærkholm Jensen, T. 2016. “Household debt and spending during the financial crisis: Evidence from Danish micro data”. European Economic Review, Vol. 89, pp. 96-115. Atkinson, T. R. 1967. “Trends in corporate bond quality”. New York, NY: Columbia University Press. Becker, B. and Ivashina, V. 2016. “Covenant-light contracts and creditor coordination”. Swedish House of Finance Research Paper No. 16-09. Bernanke, B., Gertler, M. and Gilchrist, S. 1996. “The financial accelerator and the flight to quality”. Review of Economics and Statistics 78:1-15. Bridges, J., Jackson, C., and McGregor, D. 2017. “Down in the slumps: the role of credit in five decades of recessions”. Bank of England Staff Working Paper No. 659, available at https://www.bankofengland.co.uk/working-paper/2017/down-in-the-slumps-the-role-of-credit-in-five-decadesof-recessions. Broadbent, B. 2012. “Deleveraging”. Speech at Market News International, London. Available at: https://www.bankofengland.co.uk/speech/2012/deleveraging. Clews, R., Panigirtzoglou, N., and Proudman, J. 2000. “Recent developments in extracting information from options markets”, Bank of England Quarterly Bulletin, Vol. 40, No.1, pp. 50-60, available at: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2000/recent-developments-in-extractinginformation-from-options-markets.pdf Graham, J. R. and Leary, M. T. 2011. “A review of empirical capital structure research and directions for the future”. Annual Review of Financial Economics. Vol. 3, pp. 309-345.

However, through discussions with governors and other representatives from central banks abroad, the Board of Governors of the Central Bank of Iceland had become aware of growing opposition to the Icelandic banks’ accumulation of deposits. No doubt this opposition stemmed from many factors, among them the fact that banks in those same parts of Europe felt the pressure of the sudden competition and communicated their concerns to their authorities. Another cause was the fact that the accumulation of deposits in foreign subsidiaries increased the potential obligations of the deposit insurance schemes in the countries of operation. A third factor may have been concerns that the relatively high interest rates offered by the Icelandic banks might reflect underlying weakness. A fourth consideration was the concern about the Icelandic deposit insurance scheme with respect to deposits in foreign bank branches. It was clear, however, that the Icelandic system fulfilled the requirements set forth in European directives, which stipulate that the government must ensure that such a deposit insurance scheme is established but do not address the issue of government responsibility for the scheme’s commitments, and certainly not in the event of a system-wide shock. Official European documents corroborate this. Some declared outright that the Icelandic banks would be prevented from receiving deposits or that they would be forbidden to receive further deposits in the countries where they were already established.