to hold more capital when they issue mortgages. we could perhaps also consider whether it is possible to create financial incentives for households to reduce their indebtedness, for instance, via the tax system. however, such solutions are beyond the mandate of the riksbank. regardless of what one decides to do, i believe it is very important to make households aware of the risks a high level of indebtedness may entail for their own finances. as i said earlier, there is a risk that many households are taking it for granted that the economic conditions that have prevailed in recent years will continue to apply. but it is not only households ’ increased propensity to take on debt that has caused our current situation. if we look back, we can see that the rise in household indebtedness has gone hand in hand with housing prices. one important explanation for the rising housing prices is that the supply of new housing has been inadequate. compared with many other countries, construction of new housing in sweden has been very low. there are several factors that are usually highlighted as explanations for this structural problem : high costs for land and construction, the current legislation on planning, construction and the environment that makes strict demands regarding the type of housing that can be built, and rent regulations. i do not intend to go into this in depth now, but would like to note that structural measures are required in the housing market, which will contribute to an increase in housing and reduce the lock - in effect. however, such measures are beyond the mandate of the riksbank. we should perhaps also reflect on the banks ’ funding of mortgages, to create a better balance in funding sources and thus better stability. the banks ’ issues of covered bonds to fund housing have been successful and led to good access to funding and lower funding costs, and ultimately to lower mortgage rates. but one should also be aware that as covered bonds have become so common, we have also built vulnerabilities into the banking system : the dependence on the market for covered bonds functioning properly and the risk that the banks ’ balance sheets are too highly mortgaged limits the scope to take action in a crisis situation. an excessive share of encumbered assets risks putting the banks ’ other investors bis central bankers ’ speeches at a disadvantage, which can mean they become more volatile in times of financial stress. a study carried out a few years ago found that all of the four major swedish banks were among the ten banks in europe with the

highest percentage of encumbered assets. 8 after the financial crisis, we can also see that swedish banks are mortgaging more of their assets than before. the matching between lending and funding may also comprise a risk, both with regard to maturity and currency. in sweden, the matching between maturities is relatively poor. 9 i therefore take a positive view of the plans to introduce new rules to improve matching between maturities for lending and funding. we should be able to create more stability with longer maturities for the banks ’ funding. i said at the start that i would keep to the stability and systemic - risk perspective, and have therefore not discussed the level of household indebtedness or the relationship to household assets. this would require a speech that was twice as long! my message is that household indebtedness is at a high level and that we have constructed a housing funding model that has made us sensitive to shocks. we need to have firmly established confidence in the swedish housing market and the marker for covered bonds from both swedish and foreign financiers, to ensure that our model functions properly. i am well aware that the risks linked to household indebtedness and the housing market entail very complex questions. i also know that rapid and drastic changes risk leading to severe and dramatic adjustments of debts and housing prices. naturally, we wish to avoid this. but at the same time, i think it is important to begin to take action. in the long run, it is no sustainable for debts to continue increasing at the same pace as today. so why does the riksbank care about household indebtedness? the riksbank is concerned about household indebtedness partly because international confidence in the swedish housing and mortgage markets are necessary conditions for our financial system to function smoothly. financial developments in turn are linked to developments in the real economy. the indebtedness of swedish households can thus affect the riksbank ’ s conditions to carry out its statutory tasks, price stability and financial stability. it is therefore important that the riksbank continues to follow developments, analyses and highlights risks linked to household indebtedness. see barclays 2012. ( over - promising? encumbrance at european banks, barclays capital equity research. see financial stability report 2013 : 2, sveriges riksbank. bis central bankers ’ speeches