years ago, the estimated value of the reserves was more than double the value of the fund. today, this relationship has reversed – the fund now constitutes more than two - thirds of the government ’ s estimated petroleum wealth. this could have a bearing on the choice of equity share. it is reasonable to assume that oil and gas reserves in the ground entail greater financial risk than a global, diversified securities portfolio. the risk associated with the government ’ s total petroleum wealth has been reduced by gradually transforming oil into financial assets. if we maintain the same level of risk tolerance for total government petroleum wealth as previously, we can take on somewhat higher risk in the financial portion without increasing overall risk to a higher level than previously. this point was also emphasised by the mork commission. the equity allocation and fiscal policy as i mentioned in my introduction, one of the objectives of the fund and the fiscal rule is to ensure that norway ’ s oil wealth will also benefit future generations. we have achieved this by limiting oil revenue spending over the central government budget to the expected real return on the fund over time. when the fiscal rule was introduced, the expected return was estimated at 4 percent. the estimates presented today entail a considerably lower expected rate of return for any realistic equity allocation. as mentioned, with an equity allocation of 75 percent, the expected annual real return will be about 2. 5 percent per year over the next ten years. chart : petroleum revenue spending over the budget another important objective of the gpfg and the fiscal rule is to insulate the budget from sharp fluctuations in oil revenues. the gpfg is now so large and finances such a sizeable share of government spending that it may become just as important to manage swings in the fund ’ s value as swings in petroleum revenues. the fiscal authorities face an important trade - off : on the one hand, closely linking fiscal policy to changes in the value of the gpfg will have a substantial impact on other government spending and revenues from one year to another. this is far from desirable. on the other hand, a substantial degree of decoupling between changes in the gpfg ’ s value and government spending of its funds over the budget could lead to greater uncertainty about the value of the gpfg in the longer term. oil revenue spending should be based on a realistic estimate of expected return. at the same time, due consideration must be given to return uncertainty. it may therefore be wise to consider spending somewhat less than the expected

all the money we spend daily is deposit money created by a bank. there is little likelihood that many customers will withdraw large amounts simultaneously. banks can therefore create far more deposits than they can pay out at the same time. 6 but a bank cannot extend loans and create deposits without limitations. first, it must assess the customer ’ s debt - servicing capacity, ie credit risk. second, the bank must assess the degree of liquidity risk associated with lending long and creating deposits that customers can withdraw at any time. third, it must comply with statutory rules. banks ’ willingness to assume some degree of liquidity risk is a public good. in its absence, we would have less access to long - term loans and money in the form of bank deposits. on the other hand, too much liquidity risk entails a risk of instability and crises like the one we experienced in 2008. banking regulation implicitly provides a trade - off between these considerations. the other main activity of banks is payment services, which are services we use virtually every day. today, most people in norway receive money as a bank deposit directly into their account. as long as there are payment solutions that give us cheap and simple access to money, the account is an efficient and safe wallet. chart : banks provide payment services but how is it that bank deposits can become money that we can use as payment? an important pre - condition is that there is an infrastructure to enable deposits to be efficiently transferred 2 / 7 bis central bankers'speeches between customers and banks. as the bankers ’ bank, norges bank creates the money banks use to pay each other, so - called central bank reserves, which are the banks ’ deposits at the central bank. transfers of customer deposits between banks can take place without frictions because a corresponding amount of central bank reserves are transferred between banks ’ own accounts at norges bank, where banks have a common and trusted means of payment and settlement system. this helps ensure that there is no difference between the money created by dnb and money created by nordea. the money is interchangeable. for us, it is all norwegian kroner. as such, banks play a key role in delivering services we want from the financial system, albeit subject to a framework designed by the norwegian authorities. the banking sector is more strictly regulated than most sectors of the economy. with the right to create money comes obligations. competition from new participants chart : competition from new participants many of the services banks offer can be provided by others