countries. the low rate of interest on variable - rate mortgage loans has often been identified as the reason why the finances of the households are, nevertheless, generally sound. this raises the question of how robust household finances are to rising interest rates, and whether an increase could jeopardise financial stability. today we are able to provide a fairly detailed answer to these questions. the main conclusion of an extensive study of household finances is that the threat to financial stability from household debt and its composition is limited. the assessment is based on the share of the debt held by families with particularly tight budgets. most families have robust finances and are resilient to negative events such as a strong increase in interest rates or a protracted period of unemployment if they reduce consumption or savings, although this may entail considerable lifestyle changes. and this assessment does not even take into account that a continuous rise in interest rates is very likely to go hand in hand with an economic recovery and hence better employment opportunities. obviously this assessment of the risk to financial stability does not rule out the possibility that higher interest rates could have rather unpleasant implications for families with very tight finances. * * * bis central bankers ’ speeches before i step down, it might be appropriate to reflect on some of the experience i have gained during my seven years as governor of danmarks nationalbank. naturally, it will only be a brief summary. without doubt, the financial crisis is the single event that has had the strongest impact on the financial sector during my tenure. how prepared were we? how did we tackle the crisis itself? which follow - up steps should we take? these are important questions. regardless of our actions, denmark is a small, open economy and we would have been hit by the international financial crisis which from the autumn of 2008 caused international trade to contract by 20 per cent and later led to a european debt crisis that has descended like a fog of uncertainty on the european economies. the key question is whether we in denmark had made ourselves vulnerable to the severe shock that hit us from abroad. the answer is an unqualified “ yes ”. even without a financial crisis, the danish economy would have been under pressure. in this country, the preceding international boom with ample liquidity and low interest rates was allowed to develop into an unusual overheating of the economy, which was already slowing down when the shock hit us. the tax freeze, tax cuts, growth in public spending and new mortgage types were the domestic factors behind the overheating.

brrd is a large step in the right direction. but, looking ahead, what is the main challenge for a financial supervisory authority and for financial stability? seen from a danish supervisory perspective, it must be the everincreasing complexity of the very large banking groups and the internationalisation of banking activities. large banking groups are complex to operate. and they are complex to supervise. there is nothing new in that, but it is becoming increasingly evident. page 5 of 7 supervision of the largest banks means supervision of major international players with customers and a presence in multiple countries. that in itself is a challenge for the supervisory authority. in addition, risk management and the methods applied are becoming still more advanced. naturally, there are also many other challenges. one of them is digitalisation, which entails a gradual change in the competitive situation of the banks. developments require that the competences of the supervisory authorities constantly evolve so that they are a match for the banks. this is more easily achieved by working together. as i see it, that is the single most important reason why denmark naturally belongs within the strengthened banking cooperation – or the banking union, as it is also called. if denmark joins the strengthened banking cooperation, the danish financial supervisory authority will continue to play a significant role in relation to supervising danish banks. but it will be supplemented with the single supervisory mechanism, ssm, which involves the ecb and all other national supervisory authorities within the banking cooperation. the ssm is headed by the supervisory board, of which the danish financial supervisory authority will be a member. the single supervisory authority of the ecb leads the supervision of the largest and most complex banks within the cooperation. danish participation in this cooperation will boost the competences of the authority which is to scrutinise the largest danish credit institutions. the single supervisory authority in frankfurt can attract experts from all over europe. and it is currently building up considerable experience via its supervision of a number of very large banks. it is of paramount importance to financial stability that our supervisory authority has the competences to match the large banks. and it is equally important that we have a resolution authority with the necessary insight and resources to resolve the largest danish banks. it is considerably easier to build up and maintain such supervisory powers if you have many " customers ". the quality of the resolution also increases if you gradually accumulate experience in resolving large banks. the strengthened banking cooperation is a further development of the single market for financial services, which denmark is part of.