credit model does not always fit into the framework of new international financial regulation. in recent years, we have also seen a clear tendency for mortgage banks to resemble other banks more and more. our expectations must be realistic. and we must face the fact that there are limits to the number of special arrangements that the danish mortgage credit sector can obtain when new international regulation is introduced. instead, our ambition should be to fit danish mortgage credit into the framework laid down by the international standards and rules. we can do so by seeking to influence this framework. but we should choose our battles carefully. a challenge in relation to denmark ’ s efforts to influence developments in international regulation is that much of this regulation is initially conceived by the basel committee, where we do not have a seat. we only have a say from the stage where the rules are transposed into eu regulation. so the main channel of influence goes via the eu cooperation. by the way, the european commission should be given credit for generally listening to the danish views. at least if our argumentation is convincing and supported by empirical data. on the other hand, we must accept that non - membership of the banking union closes another possible channel of influence on international financial regulation – the ecb. * * * more changes to financial regulation are likely to be introduced in the coming years in the form of new initiatives from the basel committee as well as changes to eu regulation resulting from the banking union. according to the basel committee, the forthcoming changes are not aimed at increasing the total capital requirements for the financial sector. bis central bankers ’ speeches but for the individual institution the new requirements could mean that it should prepare for increased capital adequacy requirements. therefore, it would be wise to ensure robust capitalisation. this can be done by raising capital in the market or by retaining a larger share of profits. in this connection i would like to make it clear that an increased share of own funding relative to debt funding does not entail any substantial extra costs for a credit institution. more equity capital makes the institution more robust and reduces the returns demanded by both bond owners and shareholders. and the return on and risks related to the assets are the same irrespective of the method of funding. moreover, right now might be a good time to boost the capital buffers as equity investors ’ expected returns are currently low. * * * given the very low level of interest rates, the targets set by credit institutions for return on equity seem to be rather high. according

as such it is worth preserving. under the traditional danish mortgage system, mortgage loans are redeemable at around par. this is a good arrangement, which safeguards consumers against unpleasant surprises. a sound mortgage system must have a high degree of consumer protection. it is good to know that danish consumers have not been offered loans with an artificially low initial rate of interest and a correspondingly higher rate later on. * * * the fact that capital may be most difficult to obtain when you really need it is something that the financial sector should keep in mind now that the government is offering a supply of risk capital. it would be wise to have extra large buffers against losses and to employ the capital received in a sufficiently flexible manner. the financial sector should remember that society has now lent it a hand twice. the reason is that this sector is not just another business sector, it also fulfils an important role in society. this role should be at the core of any decisions on capital injections in the near future. the way the sector has acted – both before and during the financial crisis – must naturally be a key consideration when the new regulatory regime is laid down. * * * we are living in turbulent times. we have yet to reap the benefits of the financial sector rescue packages launched all over the world, and the real economic prospects are bleak. nevertheless, i think we can say that the danish system for financing real property has steered through the crisis fairly well when we look at the situation in other countries. throughout the rough period it has been possible to obtain mortgage loans. true, conditions have been tightened, but the mortgage system has risen to the challenge. there are many good reasons for this, but i will not go further into that. thank you for your attention.