has been followed by slowdown in house prices. growth in household debt has been higher than growth in disposable income for several years now. the household debt burden ( household debt as a percentage of disposable income ) has increased to a historically high level and is expected to rise further. however, the household interest burden ( interest expenses after tax as a percentage of disposable income plus interest expenses ) is still low as a result of the low interest rate level. the interest burden is expected to increase to fairly high levels in pace with a normalisation of the interest rate. still, on the whole, households ’ financial position is strong. the rise in the policy rate so far has not been fully reflected in banks ’ lending rates. intensified competition, especially for mortgages, has dampened increases. banks ’ interest margin has declined during the last decade. falling interest margins have, however, partly been compensated by high lending growth, and banks have so far succeeded in maintaining good results. pre - tax profits as a percentage of total assets have been solid. norwegian banks are solid. due to high growth in lending, capital adequacy ratios for banks as a whole declined slightly in 2005. nevertheless, capital adequacy ratios are still high. under basel ii, capital requirements for credit risk are to be calculated using either the standardised approach or more risk - sensitive internal ratings based ( irb ) approaches. the five largest norwegian banks have applied to kredittilsynet to use the foundation internal ratings based ( fibr ) approach for credit risk. under basel ii, the required level of capital for banks in norway will be reduced. the main reason is that mortgages constitute a substantial part of banks ’ total assets. these loans are considered low risk under basel ii. the reduction in the required level of capital may be substantial for the banks using irb approaches for credit risk, though transitional arrangements provide for a gradual reduction. with solid results in banks, a good financial situation for borrowers and a well functioning financial infrastructure, there appears to be little risk of a crisis in norway ’ s financial system in the next few years. however, the long period of strong debt growth and asset price inflation may be a source of subsequent instability in the economy and in banks ’ losses and results. during an upturn such as the current one, it is therefore important to show vigilance and provide a cushion for weaker cyclical conditions and higher interest rates. within

fall, oil companies invested about as much as all businesses in the mainland economy combined. total oil - sector demand 4 amounted to more than 13 percent of mainland gdp in 2014. this is well above current government spending of oil and gas revenues, and also more than the estimate of the permanent income. graph : demand from the oil and gas sector and government spending of oil / gas revenues it has been estimated that one in nine jobs in the norwegian economy was related to oil sector demand in 2014. 5 the step - wise development of oil and gas reserves in the north sea has helped to create a supply industry that has become world leading in special areas. the downturn following the oil price decline in 2014 has highlighted the oil - dependence of the norwegian economy. as oil - sector demand plummeted, the blow to the economy was cushioned by a substantial increase in government spending. this room for manoeuvre in fiscal policy was provided by the significant savings in preceding years. without it, the recent downturn could have become much more painful. intergenerational concerns graph : old - age dependency ratio allow me to move on to another argument for relatively high saving : the intergenerational challenges facing the norwegian economy. like many other countries, we must cope with the challenges associated with an ageing population. as we have developed a more extensive welfare state than many other countries, the impact on public finances is significant. the pension system is basically pay - as - you - go and health care is also funded by the government. an ageing population will therefore weigh quite heavily on public finances. in the 1990s and 2000s the demographic trend was different. during those years, the share of the population 67 years or older actually declined, mirroring low birth rates between the two world wars. since around 2010 the long - term trend towards a higher old - age dependency ratio has resumed. public pension costs have shot up as baby boomers have retired. the burden on the health and long - term care system is rather light at the moment. but this will change in the coming years. with the alternative strategy of spending the permanent income, we would have spent more of the oil wealth in the 1990s and 2000s, when demographic costs for the government were low. the present fiscal rule, on the contrary, allows increased spending of oil revenue also in a period where age - related costs are expected to grow much faster. 4 / 6 bis central bankers'speeches uncertainty a third concern related to wealth management is uncertainty