spread between danish and ecb monetary - policy rates. this was the case in the autumn of 2008 as indicated by the chart. slide 7 : rising net foreign assets have reduced money - market spread when the fixed exchange rate was introduced, denmark was a net debtor. but after several years with significant surpluses on the balance of payments we are now a creditor nation. our net foreign assets constitute more than 50 per cent of annual gdp. the improved net foreign - asset position is likely to have contributed to reducing monetary - policy interest rates in denmark. until the mid - 1990s, the spread between denmark and germany, expressed by short - term money - market rates, fluctuated strongly and it was often several percentage points. in the subsequent period, until the outbreak of the financial crisis in 2008, the spread was very stable at a moderate positive level. after a temporary widening in connection with the financial crisis, the spread has been in negative territory for most of the time since 2012. the reduction in the spread is likely to be associated with the improved net foreign - asset position. also, whereas episodes with uncertainty in fx markets used to be reflected in downward pressure on the krone, the opposite has been the case side 3 af 13 in recent years. this was first seen in 2011 when a number of euro - area countries experienced a sovereign - debt crisis that led some investors to regard the krone as a safe haven. and more recently, we experienced strong capital inflows in early 2015 when the swiss national bank, snb, decided to discontinue the floor under the franc and the ecb subsequently announced its public - sector purchase programme. slide 8 : separator – strong capital inflows led to a forceful policy response slide 9 : swiss contagion to danish fx market the key danish monetary - policy rate first became slightly negative in 2012. this reflected capital inflows associated with the sovereign - debt crisis in a number of euro - area countries. but it was not until early 2015 that policy rates became substantially negative. on 15 january 2015 the snb announced that the floor under the franc / euro exchange rate would be discontinued. the swiss announcement surprised financial markets resulting in increased volatility in a wide range of financial asset markets. the danish fx market was one of them. in the first few hours after the swiss announcement, the danish exchange rate fluctuated more than usual. over the following days and weeks, we experienced massive inflows of currency

experienced, such losses could challenge macroeconomic and financial stability if households are not sufficiently robust. slide 28 : legal and technical challenges have been addressed let me conclude with some remarks on the legal and technical aspects of negative interest rates. in february 2015 the minister for business and growth set up a task force to identify potential issues in relation to negative rates of interest on mortgage loans. in a report from april 2015, the task force concluded that negative interest rates do not cause significant problems in relation to adjustable - rate loans. but they may constitute a challenge in relation to loans that are based on variable - rate bonds. at the same time, the task force assessed that there is no immediate need for legislation in this area. the individual mortgage banks are free to choose the model that best matches their business. as a result, they have applied different models for handling negative rates. the borrowers have received the negative interest either as a direct disbursement, as a reduction of the outstanding debt or as a capital gain. as regards taxation of interest rates, in february 2015 the danish tax authorities, skat, issued guidelines describing the taxation and deductibility of negative interest : interest income in the form of a negative rate of interest is taxable for the borrower, while interest costs in the form of a negative rate of interest are deductible for the lender. in addition, the danish parliament has adopted adjustments to a number of laws regarding the tax treatment of negative interest. slide 29 : thank you! so let me conclude. since the outbreak of the financial crisis a number of large central banks have resorted to unconventional monetary policies. this has substantially impacted the economic and financial conditions of denmark and other small open economies. by doing so, it has posed a number of challenges and led us into unchartered territory. but it is important for me to stress that the spill - overs arising from the policies of large central banks have been manageable. this has been the case for us at danmarks nationalbank as well as for our commercial banks and for firms and households. looking ahead, the rate cycle is starting to turn. this is likely to coincide with a further strengthening of the economy, and in denmark banks as well as firms and households are well positioned to coping with higher rates. in fact, higher rates will be a welcome contribution to curbing side 12 af 13 house prices as the recovery gains momentum. but needless to say, we will continue to watch out for potential