politiken. everyone working with these issues should read it. her main point is that the number of rules aimed at regulating the financial sector ’ s activities is overwhelming – and more are to come – and often the contents are so detailed and complex to read that even a person with a doctorate in law finds them very difficult to understand. there is a multitude of different rules with different structures, exemptions and levels of detail. it is completely overwhelming. what does this mean to banks, their boards and their customers, and how about the legislators? are we constructing a vehicle where the person in the driver ’ s seat with a firm grip on the steering wheel believes to be steering it, while the car is in fact following its own path with considerable backlash? there is no simple answer to this question, which is not unique to financial regulation. as i have already said, individual countries have little room for manoeuvre as these activities take place at the international level. however, it is important to make the rules as clear and simple as possible. that will make them easier to observe and control. keep it simple. let me try to illustrate this. since 2004, danmarks nationalbank has prepared so - called outlier memos, i. e. identified outlier banks. on the basis of – mainly – published financial statements for a large group of banks, we have been able to point out those that achieved the lowest scores for selected key ratios, such as excess capital adequacy, high lending growth, large exposures and earnings capacity. using this simple method, we sought to identify potentially vulnerable banks. subsequently, we have concluded that virtually all of the banks within this group that have actually become distressed had been identified beforehand using this relatively simple method. the danish financial supervisory authority was aware of this and included it in its supervisory activities. with the “ supervisory diamond ”, the danish financial supervisory authority has taken a step in the right direction, with focus on observing a few key ratios – and now with sanctions for non - observance. and others can also monitor these key ratios. another interesting observation is that among the 10 banks identified before the crisis as having the highest exposures to the property sector, 8 – 9 have subsequently become distressed. so the conclusion is that relatively simple key ratios can be used to identify the banks that could be at risk. aggressive lending growth combined with property speculation is the single factor with the greatest impact on the banks that have folded. * * *

seen in a broader perspective, denmark has navigated the financial crisis fairly well so far. the weeding out of unsound banks has almost been completed, and after all less than 6 per cent of the banks became distressed – measured by balance - sheet total. despite the large house price falls, the number of enforced sales is limited – especially when compared with the housing crisis in the early 1990s. if we disregard periods of unsustainable overheating and subsequent adjustment, unemployment has not been lower for the last 40 years. denmark has sound economic ratios and internationally it is among the countries with the highest credit ratings. the reason why we have not been more severely hit is that we had the necessary buffers. all in all, this is no bad point of departure for meeting the challenges of the coming years. * * * in my seven years as governor of danmarks nationalbank, 1 / 3 of denmark ’ s banks have disappeared – in numeric terms. the decline has been steady over this period and is in keeping with a trend that goes far back – crisis or no crisis. danmarks nationalbank will gladly assist you in calculating when you will be able to hold your annual meeting at a decent - sized dining table – if this trend continues. as i see it, the most significant factor is the increasing bis central bankers ’ speeches complexity of banking. so if i may offer a piece of sound advice to a director of the danish bankers association ( chief lobbyist ) who wishes to continue to have a large number of paying members, i suggest that you give priority to clear and simple rules – especially for small banks. regardless of the path you take, i would like to thank the danish bankers association, its members, its employees and its director for our good and constructive cooperation through seven years. thank you for your attention. bis central bankers ’ speeches