crisis, while other central banks were cutting their rates, for good reasons. there are also implications of the choice of exchange rate regime that go beyond macroeconomic outcomes. financial stability considerations, for example, play a role too. but this topic is for another day. * * * the future is uncertain – underscores need for stable anchor * * * the advantages of the regime are likely to become even more important and valuable when looking ahead. we are facing uncertain times and a potentially more volatile global economy than what we had become used to in the years of the so - called great moderation. globalisation may be on retreat and protectionist tendencies are gaining ground. these tendencies are reinforced by the pandemic, russia ’ s war in ukraine and broader geopolitical developments. but they were already in train before. climate change is causing disruptions. high temperatures, droughts and limited wind in europe increased existing energy supply disruptions this summer. the energy transition and climate events will become increasingly disruptive in the years ahead. see e. g. rey, helene 2013. “ dilemma not trilemma : the global financial cycle and monetary policy independence. ” proceedings – economic policy symposium – jackson hole, federal reserve bank of kansas city : 285 – 333. page 6 of 7 as we are hit by shocks and volatility, it is important to have sound economic structures supported by strong institutions. many of the shocks that we currently face are global in nature. they will impact the euro area as well as denmark. aligning ourselves closely with the euro area while ensuring a credible and stability - oriented framework for fiscal policy is therefore likely to continue to be desirable. conclusion to conclude, the danish economy has been on a remarkable journey over the last four decades. while the reasons are many, as well reflected in our conference today, i am convinced that the decision to adopt a fixed exchange rate regime has played a central role. i have focused on the many advantages we experience with our system. but it is also clear that the fixed exchange rate regime is not a one - sizefits - all panacea. as we have heard, there are a number of ways monetary stability can be achieved, and any regime has trade - offs. but advantages in my view outweigh drawbacks for denmark. i am convinced this is also the case in the years to come. it has stood the test of time over forty years – and it is as relevant as ever. thank you for your

speech by governor lars rohde at the macroprudential policy conference in copenhagen 2018 19 november 2018 check against delivery dear guests, i am very pleased to welcome you to this macroprudential policy conference in copenhagen. the conference is a result of our excellent cooperation with the european department at the imf and the center for financial frictions at copenhagen business school. the ambition for today is to have an open debate about the merits and limitations of macroprudential policy. and to discuss current challenges and the way forward. to me, the essence of where we stand today with macroprudential policy is best captured in a quote by the danish philosopher søren kierkegaard : " life can only be understood backwards ; but it must be lived forwards. " * * * so let me start with the beginning. 10 years ago, the financial crisis demonstrated that financial risks can potentially affect both the financial system and the real economy. it also underlined that financial crises are expensive and affect the welfare of citizens. the lesson was that we need to ensure that the financial system can serve the real economy in good and in bad times. there was a clear need for better and more comprehensive regulation. as a result, macroprudential policy moved up on the political and academic agenda. the idea being that dosed correctly, prudential measures could reduce the likelihood and costs of financial crises. in my view, there are three important things we have to focus on to reduce the likelihood and costs of a financial crisis in the future : page 1 of 5 1. it is important that the incentives in the banking sector reflect those of any other private company. 2. it is important to limit procyclical behaviour of borrowers and lenders. 3. it is important to build strength in good times to overcome bad times. let me elaborate. * * * first, on getting the incentives right. one important lesson from the financial crisis is that bail - out creates the wrong incentives for banks. we need to break with the old model where profits are privatised and losses are socialised. to avoid excessive risk taking by shareholders, creditors and management, all banks must be able to fail. therefore, in my view, the most important eu initiative since the crisis has been the bank recovery and resolution directive. the purpose of credible resolution plans is to ensure that all credit institutions can be resolved – without the use of taxpayer funds and without distressing the economy. the directive paves