bank in troubles. it also includes formulating credible resolution plans for credit institutions. this is all about getting the incentives right. no credit institution should be “ too big to fail ”. these are well - known areas of progress since the crisis, but we still have some way to go before the new and harmonised regulatory framework is fully in place. there are indeed still bumps on the road. at the current juncture, where the memory of the last financial crisis seems to be fading, page 8 of 9 it is important that we stay committed to the implementation of the new regulation. this will reduce the likelihood of a new financial crisis with all its detrimental effects on our economy. if we – through ongoing reforms and implementation of the new rules being adopted in basel and brussels – end up delivering on all three pillars of regulation, then i think we have learned our lesson from the crisis well. and once all these measures are in place, we will be ready to take the next step : removing unnecessary red tape by simplifying the remaining part of the regulation and easing some of the administrative burden on banks. the three - pillar system would leave it to market forces to keep the financial sector in check. as long as banks perform on all three parameters, the credibility and soundness of their balance sheets and business models will ensure their access to necessary capital and funding. and with the resolution regime in place, we no longer need governments to save banks with taxpayers ’ money. conclusion to conclude, this period of low interest rates and unconventional monetary policy has been fundamental for the economic recovery. while global economic developments are indeed strengthening, we should be prepared for lower growth rates going forward. structural reforms to lift potential growth and rebuilding of fiscal buffers are important. low interest rates have also left a legacy, affecting banks'earnings, central bank balance sheets, as well as asset - price valuations. as normalisation of monetary policy proceeds, we must be ready to carefully manage risks and spillovers. implementation of regulatory reforms and an effective macroprudential framework will be essential to contain financial stability risks. thank you very much for your attention. page 9 of 9 danmarks nationalbank national asset - liability management europe conference 1 march, 2018 global economy is strengthening positive output gaps in the us and euro area upward revisions to economic forecasts per cent of potential gdp real gdp growth, per cent year - on - year projection output gap closed us - 1 - 2 - 5 world imf projections jan 2018 us euro area

resilient to the losses incurred in the wake of the crisis and the subsequent market correction. this inability to absorb losses exacerbated the economic downturn. since then, much has been done to increase the resilience of the financial system, both internationally and in denmark. for example, capital requirements have been enhanced, and the solvency of danish financial institutions has improved considerably. this has contributed to a more robust financial system as a whole. expected returns are likely to be lower than pre - crisis levels as an effect of higher capitalisation and increased resilience of banks. especially in a low interest rate environment, the perception that returns on equity should be double - digit is misguided. and setting targeted returns at such page 4 of 9 high levels may trigger banks to take on far too much risk and create new vulnerabilities for the future. it may take some time for investors to adjust their expectations. they will need to take into account that the risks embedded in banks'shares have declined with increased capitalisation and that banks have become a safer investment. central bank balance sheets have expanded markedly slide 7 : expanding central bank balance sheets with interest rates closer to their effective lower bound than ever before, central banks have had to resort to new approaches to achieve the necessary monetary accommodation. these approaches include unconventional measures such as targeted lending operations, asset purchases and forward guidance. consequently, several central banks in advanced economies have experienced pronounced balance sheet expansions. this is clear evidence that monetary policy has played a key role during the last decade of crisis management in the global economy. usually, variations in the balance sheet of danmarks nationalbank reflect changes in our foreign - exchange reserves. and as you probably know, denmark experienced a massive inflow of currency shortly after the swiss central bank's decision to abandon the floor on the swiss franc against the euro. over the following weeks, we saw unusual turbulence in the danish foreign - exchange market. so in response, we used our usual measures to defend the peg. we intervened heavily in the fx market by buying euros and selling danish kroner to meet the elevated demand. in addition, monetary policy rates were significantly reduced. the sizeable intervention caused a sharp increase in fx reserves by almost 15 per cent of gdp in less than two months. as the pressure abated, the level of fx reserves was gradually reversed over the course of 2015 to reach a level of just above 20 per cent of gdp – close to the current level.