is even greater than the average numbers indicate. badly managed banks have been a key factor behind the sector ’ s problems in the years after the financial crisis and the preceding overheating of the economy. i welcome the danish bankers association ’ s new code of management. in your own words, this code is to address the “ individual cases of bad management, mismanagement and inexpedient management structures seen during the crisis ”. * * * turning to the international agenda, negotiations on a banking union are currently underway. danmarks nationalbank is following these negotiations closely. no decision has yet been made about danish participation, but the banking union will, in any case, have great importance for denmark. even if denmark opts out, two of the largest banks in denmark will be subject to supervision by the ecb in relation to considerable parts of their euro area activities. at present, these two banks account for more than 50 per cent of total lending by danish banks. at the same time, it is essential to all eu member states that the project is a success. financial stability in the euro area is a prerequisite for financial stability throughout the eu and has a large impact on future growth in the eu. at the same time, it is important that the banking union strengthens the single market for financial services. a well - functioning banking union requires strong confidence in the single supervisory authority. an important step will be taken with the ecb ’ s assessment of the assets and risks of credit institutions subject to direct supervision ; this will take place in the coming year. a credible exercise of that nature will give the banks involved a solid, and in some cases much - needed, stamp of quality. it is positive that the danish financial supervisory authority plans to replicate this exercise for the large danish banks, to the extent that it is possible. in this context i would like to mention the results of danmarks nationalbank ’ s most recent stress test, which will be published soon. they show that in all the stress scenarios the large banks have a common equity tier 1 ratio of more than 8, which is the threshold in the ecb ’ s stress test. recent years ’ improved capitalisation is a major reason for this. danmarks nationalbank generally takes a positive view of the banking union outlined. it is an important step towards strengthening the single market for financial services and hence cross - border competition. competition forces both banks and firms to be “ on their toes ” and improve their skills. that

clearly more so than the bonds issued by a number of countries which are members of the euro area. this chart shows how long - term sovereign yields in a number of countries have reacted to selected pieces of ecb communication in the six months leading up to the start of qe. we look at the reaction of sovereign - bond yields in the two days following each piece of communication. summing over the 17 pieces of communication included in the study, we arrive at the effects that you can see here. it could be pointed out that the suspension of government - bond issuances by the danish government to stem capital inflows caused some fluctuations in danish yields. see jakob roager jensen, jakob guldbæk mikkelsen and morten spange, the ecb's unconventional monetary policy and the role of exchange rate regimes in cross - country spillovers, danmarks nationalbank working paper, no. 119, 2017. side 6 af 13 in all of the 2 - day windows combined, danish 10 - year sovereign - bond yields declined by a total of 30 basis points. this is very close to the corresponding decline in german yields of 28 basis points. yields in other northern european countries declined slightly more. however, countries in the south of europe experienced substantially larger declines in yields. to sum up, danish and german bond yields are close substitutes. the impact of qe on bond yields in the euro area also has a spillover effect on danish bond yields. slide 14 : separator – implications for banks slide 15 : interest - rate margins are being squeezed it should now be clear that our reason for having negative interest rates is to maintain a stable exchange rate against the euro. i am happy to say that judged by this criterion, negative rates have been highly successful. let me turn to the wider implications of negative policy rates. negative rates have affected the financial sector as well as the broader economy. first consider the banking sector. the introduction of negative policy rates implies that a share of banks'deposits with danmarks nationalbank is currently being remunerated at a rate of - 0. 65 per cent. the negative policy rate has been transmitted to money - market rates which are also negative. deposits from households and firms are an important source of funding for many banks. as banks'deposit rates have settled at 0, they have not declined as much as short - term money - market rates. this means that banks'deposit margins have declined. following the outbreak of the financial