was introduced in 1998. considerable savings have been built up in the economy, and at some point this will invariably lead to higher private consumption and investment. fiscal easing at the current juncture could prove to be badly timed as it might boost an economy which is already on its way up, with a risk that the economy overheats again. besides sound fiscal policy, the transition from a country with large external debts to a creditor nation is important in relation to denmark ’ s status as a safe haven. a few decades back, the current - account deficit was a theme that dominated practically all economic discussions. denmark had permanent deficits from the early 1960s until 1990. external debt accumulated and constituted 40 per cent of gdp when it peaked in 1986. that severely restricted denmark ’ s room for economic manoeuvre. many of us remember finance minister knud heinesen ’ s warning that denmark was heading for an abyss. today we are in the opposite situation. denmark ’ s net foreign assets now exceed 35 per cent of gdp and continue to grow. however, we expect them to fall this year due to rising long - term interest rates, which will entail capital losses on pension funds ’ hedging instruments in particular. in recent years, denmark has received the equivalent of 3 per cent of gdp in annual return on its net foreign assets ; this increases consumption opportunities correspondingly. the current account of the balance of payments reflects the difference between savings and investment in the economy overall. the positive trend since 1990 is attributable to a structural increase in the propensity to save rather than lower investment. true, the investment ratio is somewhat low at present, but in view of the current cyclical position it is not unusually low. one of the reasons for the structural increase in the propensity to save in denmark is that the tax deductibility of interest payments has been reduced steadily from 73 per cent in the mid1980s. undoubtedly, labour - market pensions also play a role as they are in the nature of compulsory savings for some people. as i have already mentioned, denmark ’ s net foreign assets provide a sound annual return. investment income from abroad increases domestic demand. that leads to upward pressure on wages in denmark, which in turn weakens competitiveness. in other words, an internal revaluation process takes place. in countries with floating exchange rates, the currency would appreciate. this is a kind of balancing mechanism, and part of the deterioration of denmark ’

liscc portfolio. bis central bankers ’ speeches simultaneously, the federal reserve is also able to compare the range of practices in liquidity risk management across the portfolio. qualitative deficiencies identified in clar, such as questionable internal stress testing regimes, are addressed through the same set of supervisory tools. knowledge gained through clar assessments also provides a macroprudential perspective on liquidity vulnerabilities and funding concentrations in the system as a whole. an interim appraisal of liquidity regulation the financial crisis revealed the need for prudential regulation to consider systemic vulnerabilities, as well as weaknesses in traditional regulation aimed at assuring the financial condition of individual firms. both microprudential and macroprudential shortcomings were never as apparent as in the series of runs and general funding stress that defined much of the crisis. today, as i hope i have adequately explained, we have a better appreciation for the role liquidity regulation should play in tandem with capital regulation and resolution mechanisms, and as a means for both complementing and limiting the lolr function of central banks. we are well along the road of implementing regulatory and supervisory policies to play that role. even though these measures are in some cases still under development and in others still being phased in, the liquidity positions and management practices of liscc firms have improved considerably over the past few years. since 2012, the liscc firms ’ combined buffer of high - quality liquid assets has increased by about a third, and their reliance on short - term wholesale funding has dropped considerably. despite this progress, and perhaps to some degree because of it, important issues remain. liquidity regulation is still a relatively new undertaking, certainly in its present form that includes quantitative requirements. 18 there is still need for conceptual work on such questions as how to specify the extent to which banks should be required to self - insure against liquidity risk by maintaining larger liquidity buffers and more closely matching assets with liabilities, and how to define the circumstances in which central banks should provide liquidity. it is also clear that liquidity regulation has the potential to generate unintended effects. for example, in periods of stress firms are likely to have multiple incentives to hoard accumulated liquidity, rather than to use it to relieve the funding needs of households and other firms. the upshot would be to exacerbate systemic strains and cause a reduction in economic activity. this tendency toward liquidity hoarding may be