– as far as possible – independent of your own situation. the stable financing requirement has been postponed until 2018. the debate on the consequences for adjustable - rate loans has died down. on several occasions, danmarks nationalbank has expressed its concern about the refinancing risk on these very popular loans. the idea behind the stable financing requirement has indeed been to reduce this type of refinancing risk. although the proposal has been postponed, this risk is very real in denmark. some banks spread out their auctions over the year, while others have, unfortunately, not come that far with existing loans. spreading out the auctions is a good principle, but not sufficient to solve the basic problem. a solution needs to be found before 2018. the global financial crisis has evolved differently from country to country. but there have been common traits – such as property market developments. rapidly rising property prices, very strong housing and property investments and high lending growth for financing such investments have all contributed to the financial crisis. that has also been the case in denmark. the danish banks that have succumbed to the crisis or have been close to the brink have all been characterised by very high lending growth and an almost aggressive exposure to the property sector. these factors contributed heavily to the build - up of systemic risk in the years leading up to the crisis. the basel committee has proposed that the financial institutions not only hold an extra capital buffer on a permanent basis, but also hold a countercyclical capital buffer. in good times, when lending growth is high, restrictions may be imposed on disbursement of dividend if the accumulated reserves are insufficient. this will dampen strong cyclical upswings. when the tide turns, the additional reserves are released. it is still uncertain whether this model will be sufficient to address the role of the property market and its financing in relation to financial stability in denmark. several countries have tightened or are thinking of tightening the conditions for mortgaging real property or the capital requirements imposed on the lender. such instruments come in many shapes and can be linked to cyclical developments. it will be a challenge to develop efficient economic instruments in a world with free flows of capital – not least within the eu. this openness is a great advantage to denmark, but as danmarks nationalbank sees it, we need to consider whether we can introduce instruments in this area that will support financial stability. preferably such instruments should be a kind of automatic stabilisers. if not –

, in part because budget accounting in some countries made stock reduction more difficult politically – and in part no doubt because once the principle of not reducing the stock of debt was breached, there was only one logical resting point for the process. that resting point is the cancellation of all outstanding debts, and a switch from loans to grants. that approach has now been accepted by first the g8 and then by most of the creditor nations, in several cases reluctantly. so long as net transfers to the countries in need of aid rise, the grant approach is obviously better from the viewpoint of debt sustainability, ceteris paribus. but it is not yet clear that net transfers will rise as the approach to aid switches from loans to grants. indeed, the main argument against the new approach is that it may reduce the net flow of aid to countries most in need. it remains to be seen whether that will be the case. in discussing loans versus grants it is sometimes argued – and i confess to having sometimes argued – that by making loans rather than grants, the donors encourage greater responsibility on the part of the recipient governments who have to contemplate repaying the loans. the fact that these loans often have long grace periods, and that governments often have short horizons, reduces the plausibility of this argument. i put more weight on a related argument : that for many governments it is politically easier to make concessional loans rather than grants, and that the ida cum paris club approach in effect turns these loans into some sort of high - risk but concessional bond claim on the recipient country. those who believe aid is in any case ineffective would see a reduction in aid as a benefit of the new approach. i continue to believe that aid targeted to particular needs, including health and education, and project aid can be useful and should be supported if the circumstances are reasonable, and that for governments following the right policies, general budgetary assistance can also be productive. on balance i believe the empirical evidence supports this view. but there is little doubt that the overall record of the aid process is disappointing, that in some cases aid failures are associated with serious government corruption, and that the aid process itself may contribute to government corruption. all these issues have come to the fore in the last decade, and the increasing attention they have been receiving should help improve the record. ii. on the creditor side the paris club solved the free rider problem by seeking to bring all the major creditors into the club, by requiring a consensus