In addition, history and culture may play an important role. Perhaps, in view of recent history, German households are more savings-prone than others. Elsewhere in Northern Europe, private debt, and household debt in particular, has risen sharply in recent decades. Our part of the world became the champions of globalisation. We had the winning combination: highly educated labour, open economies with access to a large European market and, in Norway’s case, abundant natural resources. Our group of countries is characterised by solid government finances. Public debt has fallen through the entire period under consideration. At the same time, the countries in Northern Europe have amassed substantial financial assets, either in public or in private hands. Chart 4 Substantial wealth – different composition We often think that Norway really stands out, with its big sovereign wealth fund and substantial external assets. But along many dimensions we are actually fairly similar to our closest neighbours. Sweden, Denmark and the Netherlands also have considerable savings. In these countries, however, saving takes place in private pension funds. Throughout Northern Europe, pension savings entitle us all to a future income flow, whether this saving takes place in a public scheme or through compulsory pension agreements. The security this entails also enables households to bring forward a considerable portion of their consumption by borrowing, and to do so willingly. Together with solid income growth and low interest rates, this has fuelled a systematically faster rise in private debt levels than in income. Households with faith in the future borrow and invest.

Thus, in the adverse scenario described above, the fraction of banks that maintain their capital adequacy ratio (CAR) above 10% would represent 57% of the system's assets. Under the severe scenario, the figure would be 50%. There is a contrast with 2012, when the fraction 9  of banks with CARs over 10% accounted for 85% of the system's assets in the severe scenario (figure 15). All this points to the need to enhance the sector’s resilience via higher capital levels, a situation that has been acknowledged in other jurisdiction. Along these lines, the bill that modernizes banking legislation contributes to the strengthening of domestic banks’ capital requirements. As a matter of fact, one of the main milestones in terms of financial regulation was the sending to Congress of the bill that modernizes banking legislation. This incorporates international standards and expertise. One of its proposed tools is the cushion of countercyclical capital, which seeks to increase the resilience of the banking system to absorb potential losses and reduce the volatility of financial cycles. In this sense, it is essential to identify local financial cycles, taking into account not only external factors but also the idiosyncrasy of the Chilean banking system. These elements are addressed in a special chapter of this FSR. Because the Central Bank of Chile will be in charge of implementing this policy, the Board will continue to focus its efforts on its proper application, taking into account both its benefits and the potential direct and indirect costs of this tool.