price risks correctly. they are mark - to - model instead of mark - to - market. to put it bluntly, if my pension is invested in long - term illiquid assets, i would prefer my pension company to be run by a younger ceo. that way, i would be able to hold him or her accountable for how these investments pan out – avoiding moral hazard problems. a second risk relates to liquidity. a larger share of illiquid assets in portfolios increases liquidity risks. from 2023, pension companies'liquidity needs will become even larger when the requirement for central clearing of interest rate swaps and other derivatives is introduced. central clearing reduces the systemic risks of derivatives transactions. but potentially large liquidity needs require sound liquidity management in order to avoid the risk of forced sales of assets. setting aside more liquid assets to cover liquidity risks also means fewer funds available to invest countercyclically. pension funds will then have less flexibility to buy assets traded at distressed price levels. this may also be side 5 af 7 unfortunate from a systemic perspective, if pension funds are less able to play a stabilising role in periods of market stress. as a central banker, i am not – as many of you – burdened with promises of delivering certain levels of return to pension scheme members. however, i am tasked with keeping tabs on the stability of the financial system as a whole. therefore, i would have serious concerns about investment strategies based on continuously increased risk - taking in the search for yield. in its recent financial stability report, the imf also identifies increasing holdings of riskier and more illiquid assets by institutional investors as a key vulnerability in the global financial system. expectations and behaviour should be adjusted to avoid insecurity this brings me to my last and most important point today. going forward, there is no substitute for ( 1 ) acknowledging the conditions we face today, ( 2 ) increasing transparency about implications for pension plans, and finally, ( 3 ) adjusting expectations and behaviour accordingly. a growing number of pension plans are recognising the impact of the low rate environment and adjusting expected return assumptions. in denmark, the council for pension projections recently reduced their return assumptions over a ten - year horizon for eight out of ten asset classes. by reducing the stock of defined benefit plans, pension funds have transferred a large share of the risk from the low yield environment to present and future pensioners. today, many pension savers have a higher

to balance interests involves different interest groups and produces a complex picture. so a widely accepted and objective benchmark is needed, and shibor can take this responsibility. i suggest that more products, from company - wide provident fund, public welfare fund, company - wide trust fund to wealth management products, housing provident fund and broker depository fund shall be linked to shibor. seventh, the authenticity and quality of shibor. in the previous year, shibor made big strides. delighted though, i also closely watch the quality and authenticity of shibor. the spread between shibor within 3 months and the actual trading rate is small, so market transactions are brisk. but the spread between long and medium - term shibor rates and the actual trading rates is relatively large. because shibor is a benchmark for the inter - bank market that has become a main force for the money market and bond market, some of the protracted problems are also reflected in shibor. for example, some trading rates include some factors beyond the market, including special arrangements and adjustments tailored to a specific counter - party. one rate that concludes a deal with one particular counter - party cannot apply to other counter - parties. similar situations still exist. we hope shibor is less distorted, but whether a deal can be sealed concerns credit approval. the most standard practice is to base risk premium on the credit standing of different counter - parties and add the risk premium to shibor. we don ’ t want to see complicated factors ( such as interest transfer ) intervening trading rates to make trading rate and quoted shibor rate further apart. the solution of this problem involves many aspects such as internal management, credit approval and delegation of power to branches. as far as transparency of trading price is concerned, there is such a belief that lack of transparency and extreme transparency shall both be avoided. in case of over transparency, after a transaction is made, all other counter parties know about the trading rate. but in fact, it is normal to add risk premium when trading with smaller banks. how to determine an appropriate level of transparency? we wish to provide a system as convenient as reuters where one can publicize transaction information to the whole market and deal with individual counter - parties through a small window. but as far as price - quoting banks are concerned, price quotation and internal management shall become more clearly defined to eliminate interest transfer and other “ noises ” other than risk premiums outside the system, while such “ noises ” shall be dealt