danmarks nationalbank has publicly stated that it prefers to make mistake number one. 24 the buffer should be phased in early and gradually in times of optimism. this makes it easier for credit institutions to adapt to the new, higher capital requirements by retaining profits. therefore, the costs of increas - https : / / systemicriskcouncil. dk / media / 1234 / dsrr22 - metodenotat - uk. pdf. http : / / www. nationalbanken. dk / da / presse / taler / documents / 2018 / 11 / lro % 20speech % 20macroprudential % 20 policy % 20conference % 20november % 202018. pdf. page 17 of 23 ing the buffer early in the financial cycle are relatively low compared with the costs, for society as well as the individual institution, of not having sufficient capital in crisis periods. a higher buffer increases resilience in the financial system. effects on banks'lending rates and lending to customers are expected to be limited. higher capital requirements imply that a larger share of assets must be funded using equity rather than debt. a common argument is that equity is a more expensive source of funding than debt. however, this is not necessarily the case as the risk decreases for both shareholders and creditors when a bank's equity increases. danish experience shows that the increased capital requirements introduced under the international post - crisis regulation did not result in a fall in lending. 25 in december 2017, the council recommended to the minister for business and growth to activate the ccyb at 0. 5 per cent with effect from 31 march 2019. 26 note that the date is 15 months after the recommendation due to the fact that the minister has three months to either comply or explain. according to legislation, an increase in the countercyclical buffer enters into force 12 months after the minister decides to change the buffer level. the council included forward guidance in the recommendation, i. e. it was stated that : " if the build - up of risk does not change materially, the council expects to recommend a further increase of the buffer rate by 0. 5 percentage points within the next year ". the minister followed the recommendation. however, he also noted the council's expectation to recommend a further increase of the buffer and stated that the development at that time did not indicate the need to further increase the buffer. at the same time as publishing the recommendation, the council

). at the same time, the swiss franc had weakened to its lowest level against the danish krone for 8 - 9 years. the decline in net lending may be due to expectations that the swiss franc would rally. this is confirmed by statistical analyses of data for a large number of years. the analyses find significant correlation between a weaker swiss franc and diminishing net lending. it is interesting that the danish carry speculators show a different reaction pattern to the yen carry speculators. the yen carry speculators leave their positions when the yen strengthens, apparently fearing that the strengthening forewarns an imminent stronger adjustment of the exchange rate. our domestic swiss franc speculators increase their positions when the franc strengthens, apparently believing the strengthening to be temporary. the danish swiss franc carry loan strategy is naturally far too small and insignificant to present a threat to the global financial system. the risk is rather related to the economic situation of the individual borrowers if the swiss franc strengthens against the krone. in this case too, the fat tails will sting investors if they strike. another new type of financial product that has appeared in denmark in recent years is indexed bonds. the banks'sales of this type of bonds have increased strongly since the start in 1998. at the beginning of april 2007 the outstanding volume listed on the copenhagen stock exchange was kr. 52 billion ( slide 16 ). in the next monetary review from danmarks nationalbank we will present an analysis of this product. i can already describe some of the results here. the product comprises both a relatively safe investment in bonds and an investment in options. the option investment is pegged to the development in e. g. equities, exchange rates or commodities. the product has expanded the investment universe open to private investors. we can now all speculate in whether the price of copper or of australian dollars is on its way up. one positive characteristic of indexed bonds is that any loss is often limited to a relatively small proportion of the invested amount. however, this is not sufficient to make the investment sound. indexed bonds are illiquid instruments and often have a complex structure that many can find hard to grasp. so what is the pay - off from this complexity? a high yield? not necessarily. at danmarks nationalbank we have reviewed 67 indexed bonds for a nominal value of approximately kr. 18 billion. the bonds were all listed on the copenhagen stock exchange, but have