. however, i note that several institutions have launched initiatives to safeguard future earnings, and focus is on streamlining operations in order to reduce costs. well - functioning it systems and a tight rein on costs will be key competitive parameters for banks in the coming years. this creates an underlying need for consolidation, also within the financial sector. digitalisation and new legislation give more players access to the market for bank products. from the payments market we know that digital solutions have a tendency to create natural monopolies because it costs less to perform one extra transaction once the digital infrastructure is in place. in recent years, we have seen tech giants, such as apple and amazon, enter the financial market. experience from both the usa and china shows that these firms are extending their original core business to page 3 of 6 include payments and subsequently also financial services such as lending. although it is difficult to predict both short - and long - term developments, the financial sector may be seeing the emergence of new business models in which data and network effects will play a decisive role. as regards the banks'capitalisation, we can see that the largest institutions meet their capital targets, but that excess capital adequacy has shrunk in recent years. this is attributable to increasing capital requirements, while the level of capitalisation has been stable. we note that there is substantial variation in excess capital adequacy across the largest institutions, and in a few institutions it constitutes less than 2 per cent of risk - weighted exposures. this must be deemed to be a low level of excess capital adequacy – not least because capital requirements are expected to increase in the coming years. in our assessment the institutions should reconsider their capital targets so as to ensure an appropriate distance between capitalisation and capital requirements. the need to reconsider capital targets is underscored by the results of our most recent stress test. it shows that a few of the systemic banks will fall short of their capital buffer requirements in a severe stress scenario – even if the countercyclical capital buffer is assumed to be released. the institutions can improve their capitalisation by issuing new capital or by disbursing a smaller share of earnings. disbursements to shareholders in the form of dividends and buy - backs of own shares were historically high in 2015 - 2018. during that period, an average of 86 per cent of the profit for the year was disbursed. this year, it looks as

. losses on lending and investment. conversely, the necessary transition will also create opportunities and a need for new skills. so in some respects the transition towards a green economy resembles the changes driven by globalisation. a robust financial sector may contribute to the green transition by ensuring continued allocation of capital. consequently, financial institutions should include climate - related risks in their risk management. in the same way, central banks and authorities should include climaterelated risks in their work. a major goal should be that the requirements for financial institutions reflect the actual risks. for example, artificial discounts should not be given with a view to accelerating the green transition. and conversely, capital requirements for co2 - intensive assets should be tightened if these prove to be linked to greater risks. at danmarks nationalbank, we have begun to look at the significance of climate change in relation to our task of ensuring a robust economy and financial stability. since climate change is a cross - border challenge, solutions must also be found in cooperation with others. page 2 of 6 that is why danmarks nationalbank has become a member of the " network for greening the financial system ", a group of central banks and supervisory authorities. within this network, 48 members on a voluntary basis exchange experience and discuss how to manage environmental and climate - related risks in the financial sector. today we have also published an analysis shedding light on a number of climate - related risks to which the financial sector is exposed. next year we plan to develop a stress test of the danish banks and mortgage banks in which focus will be on climate - related risks. financial stability now, let me turn to the sector and its soundness. a few days ago, we published our semi - annual analysis of financial stability in denmark. the good news is that the largest institutions – the systemic credit institutions – are still posting high earnings. the systemic credit institutions achieved a return on equity of 8. 4 per cent p. a. in the first six months of this year. if we look at how they did this, it is worth noting that profits have to a considerable extent been boosted by factors that are unlikely to continue in the coming years. loan impairment charges continue to be very low. at the same time, extensive remortgaging has had a positive impact on the financial results. the long period of low interest rates combined with a flat yield curve has led to falling core earnings for the banks. weaker earnings will reduce the institutions'first line of defence against losses