note that the combination of shortcomings in the regulations and the profit motives of the participants on the financial markets contributed to one of the worst financial crises of the modern era. the details regarding the build - up of risk and the course of the crisis have been described several times and i will not repeat them here. it is enough this time to note that banks with a limited amount of capital and banks with a high degree of market funding proved to be vulnerable when the storm broke. these insights from the crisis lie behind the regulatory work that is now underway in sweden and abroad today. there is broad agreement that risk - taking in the banking sector must be limited and that its costs must be taken into account by the banks and their investors to a greater extent. important steps have been taken in this direction in the global agreement on future standards for regulations in the banking sectors referred to as the basel iii accord. the worlds ’ banks will be safer when this is implemented, which will benefit everyone. basel iii increases the safety margins in the system the basel iii regulations represent the introduction of much - needed standards that will require the banks to hold more and better capital. the minimum requirement for cet 1 capital, that is share capital and retained earnings, will be raised to 4. 5 per cent of the riskweighted assets. in addition to the minimum requirements there will be a capital - conservation buffer, a countercyclical capital buffer and a buffer for systemically - important banks, which all sharpen the requirements for the level of cet 1 capital. in total, the basel iii accord will represent a capital - adequacy requirement of 7 to 12 per cent of cet 1 capital depending on how important the bank is in a global systemic perspective and where the country's economy is in the credit cycle. this is a much higher level than previously. the countercyclical capital buffer is particularly interesting. this will be built up in good times, when credit growth is higher than normal, with the aim of creating airbags to protect the banking sector in troubled times. so far, this is the instrument on which international agreement has been reached in the field of macroprudential policy, that is a policy that comprises measures to prevent financial crises that are directed at the system as a whole. a leverage ratio requirement will also be introduced under which, irrespective of risk weights, a bank's assets may not exceed 33 times its own capital. a leverage ratio requirement represents an

to this – there are still structural weaknesses on the swedish mortgage market. for instance, the mortgage survey recently published by finansinspektionen identifies one such weakness : approximately half of all new mortgages are interest - only loans. 2 this increases the scope for the households to take larger loans, which in turn increases the debt stock. figure 1 shows household debt in relation to disposable income. it also illustrates how indebtedness in the household sector grows under different assumptions about amortisation. this raises a number of questions about the future. for example, how will the average loanto - value ratio in the banks'mortgage stocks develop when older mortgages are paid off and new interest - only mortgages are paid out? what will the long - term consequences of a weak or non - existent amortisation culture be for peoples'private finances, the national economy and expectations of economic policy? these are questions that we are considering and that we will analyse further together with finansinspektionen. figure 1 household debt under different assumptions regarding amortisation behaviour percentage of disposable income note. the figure presents a simple illustrative calculation of how indebtedness may develop given different assumptions about the households ’ amortisation behaviour in the future. the figure should not be interpreted as the riksbank ’ s forecast. sources : statistics sweden and the riksbank. the banks ’ extensive market funding in foreign currencies makes the system vulnerable another structural weakness in the swedish banking system is that the degree of market funding is high. we can see this, for example, by looking at lending in relation to deposits. lending is significantly higher in the swedish banking system than in many other european according to finansinspektionen ’ s mortgage survey 2013. bis central bankers ’ speeches countries ( see figure 2 ). this is partly because swedes to a large extent save in funds rather than in bank accounts. another reason is that swedish banks retain their mortgage loans on their balance sheets, while banks in many other countries “ sell ” them or securitise them. figure 2 lending in relation to deposits in the banking systems of european countries per cent 350 % 300 % 250 % 200 % 150 % 100 % 50 % 0 % note. refers to monetary financial institutions sources : the ecb and the riksbank. swedish banks are thus highly dependent on the capital markets to fund their lending. a large proportion, almost 45