seen around 1990. in addition, mortgage - credit legislation was previously often used as an element of economic policy. a case in point is the introduction of so - called mixed loans in the mid - 1980s. the beginning of the 1990s saw new adjustments to the acts, but this time the purpose was to stimulate economic development. this implied liberalisation of the rules. furthermore, the last decade or so has been characterised by extensive waves of conversion which have helped to reduce the homeowners'interest costs in step with the general global decline in interest rates in that period. the introduction and widespread use of adjustable - rate loans have also contributed to this, and at the same time short - term interest rates have been lower than long - term interest rates. finally, the introduction of the so - called deferred - amortisation loans has meant that the homeowners'debt service can be limited to interest payments for a number of years. in other words, deferred - amortisation loans represent an easier way of achieving the same results as with supplementary mortgage credit. the gradual liberalisation has made it easier for existing homeowners to weather situations of financial tightness. when social events altering the ability to meet payments occurred, many homeowners came through by remortgaging or raising supplementary mortgage credit, and society was spared many problems. in recent years new homeowners have made extensive use of the new mortgaging opportunities in such a way that they can be expected to be more vulnerable in the future. this applies both when the homeowners'net income is reduced and when the level of interest rates in the economy rises significantly. what will happen in the coming years? the scope for relaxing the borrowing conditions seems to be exhausted - unless interest payments are frozen. indeed, in view of the current level of interest rates further significant relaxations in this respect can hardly be envisaged. on the contrary, everybody is talking about the risk that interest rates will increase. the coming years will then show who have successfully advised their customers about the consequences of interest - rate changes or changes in the customers'ability to meet payments - and who have merely been sales men. the basic principles of mortgage credit in denmark have been retained in the many adjustments to mortgage - credit legislation over the years. the mortgage - credit institutes are intermediaries providing loans on the basis of bonds. the credit risk is “ pooled ” so that the bondholders are not dependent on one single borrow

, it is easier for the central bank to support the economy as healthier banks tend to lend more. the worst case, to say it very bluntly, is of a central bank providing liquidity to banks just to buy or carry legacy assets, and the banking sector doesn ’ t restructure. this was typically the japanese situation in the early 2000s. perhaps paradoxically, a rigorous aqr and stress test helps monetary policy. appropriately treating banks ’ holdings of sovereign debt according to the risk that they pose to banks ’ capital makes it unlikely that the banks will use central bank liquidity to excessively increase their exposure to sovereign debt. this is because banks will be wary of the constraints placed on sovereign debt by the stress tests to which they are subject at the same time. therefore, should the procyclical impact of the aqr be significant, then monetary policy would be able to act – without hesitation and being reassured that the side effects of a liquidity injection that we have seen for the 2011 – 2012 operations would be minimised. so how would you assess whether the aqr was procyclical? don ’ t forget we have our two pillar approach : we analyse the business cycle, but we also look at money and credit. we will see from the second pillar very quickly if the credit situation doesn ’ t improve. at this stage of the recovery, what we see at the moment is quite normal. the big corporate firms do not have as many constraints as the smes. they have around €2trn in excess cash, they can access debt markets. the reluctance to invest comes more from the business confidence side. and if you did act because of the impact of the aqr, what exactly would you do? depending on the situation, the central bank can decide on the most effective way liquidity provision can be provided. there are no restrictions on the way a central bank provides liquidity to the banks via repo, a priori. bis central bankers ’ speeches you want to reach your price stability objective. at the same time, you want to be sure that when you provide liquidity against adequate collateral, it doesn ’ t reduce the incentive to restructure the banking sector. and so by having a well - designed comprehensive assessment – like the one we ’ re preparing now – we are easing the job of the central bank. bis central bankers ’ speeches