introduced for sifis that include mortgage credit institutions. for them, the sum of the mrel and capital and debt buffer requirements must constitute at least 8 per cent of total liabilities and own funds. the amendment is a step in the right direction. however, it does not solve the problem ; there are still sifis for which the requirements are not sufficiently high for the institutions to be recapitalised and continued in a crisis situation. furthermore, the problem with the current requirement for mortgage credit institutions is that it is not risk - sensitive. the mrel is. it increases when risks increase, as they typically do in bad times. that is why we need an mrel for mortgage credit institutions. and here is the good news. at danmarks nationalbank we have calculated the costs of introducing an mrel for mortgage credit institutions now that we have the 8 per cent requirement. and the costs are negligible. page 3 of 6 our calculations show that the sector's total costs will be in the range of kr. 100 to 200 million. the institutions can finance this by reducing costs or dividend payments. if they choose to raise their administration margins instead, we have calculated that the cost is equivalent to an average increase of less than 1 basis point in administration margins. surely that is a low price to pay for ensuring that mortgage credit institutions can be resolved without jeopardising financial stability and taxpayer funds? as i see it, this is the right thing to do. i would like to wake up in the morning, drink a cup of coffee and know that we make the right choices for society. doing away with the exemption will also give the authorities the option of using the resolution fund if required. my final message regarding resolution is this : a precondition for credible resolution is that financial institutions can be handled without any knockon effect on the sector overall. i would like to make it clear that for danmarks nationalbank it is of the essence that mortgage bonds do not suffer losses. fortunately, the bank recovery and resolution directive – brrd – provides a solution : it is possible to exclude certain liabilities and own funds from being written down or converted. that should be the case for mortgage bonds. instead, there must be sufficient eligible liabilities and own funds. that is why we should have an mrel for mortgage credit institutions. - - - - anti - money laundering and crisis resolution rules – the two topics i have talked about so far – are examples

a fixed - exchange - rate policy implies that the stance of monetary policy is from time to time out of line with domestic short - term cyclical needs, and is potentially a destabilising factor. when key monetary - policy interest rates are closely linked to german interest rates, and since 1999 euro - area interest rates, there is no room for independent domestic stabilisation by means of monetary policy. this problem appears to be particularly severe in denmark, where the business cycle – at least according to visual inspection – seems to be negatively correlated with the cyclical conditions in germany and the euro area, cf. chart 3. however, it is also possible to draw a completely opposite conclusion from the deviation in the cyclical patterns : cyclical divergence is immaterial to the success of a fixed - exchange - rate policy. the monetary - policy transmission mechanism is of crucial importance in the choice between business - cycle and exchange - rate stabilisation. the direct effect from changes in short - term interest rates to domestic demand is comparatively small in denmark. the terms for mortgage financing, which is the most important transmission channel to the household sector, are predominantly based on fixed 20 - year or 30 - year mortgage bond yields. variable mortgage lending at 1 - 5 year interest rates has, however, gained in importance in recent years, but is still at a relatively low level. the basic textbook model includes only one policy instrument for short - term stabilisation – monetary policy. this is a standard formulation in the literature and also in line with practice in most industrialised countries. discretionary fiscal policy came into disrespect after the abuse of the instrument in the 1960s and 1970s, which led to stagflation, large budget deficits and high public debt in many countries. denmark has also suffered from this experience, but discretionary fiscal policy is still used to stabilise the economy. it is important to underline that the frequency of discretionary fiscal measures is low and far below the frequency of monetary - policy changes in countries with other monetary regimes. the government does not meet every two weeks to consider an adjustment to e. g. the vat rate following the latest business - cycle information. during the past decade discretionary fiscal stabilisation measures outside the normal central - government budgetary calendar have been introduced on three occasions : temporary expansive measures in 1993, and contractive measures in 1997 and 1998. furthermore, the appropriate macroeconomic impulse from the government budget to output is also