not point to the mortgage banks being particularly severely affected. this is because the mortgage loan is nearly always the last item of debt that a family with a tight budget defaults on. for most families, even considerable worsening of their finances would lead to only a small increase in the probability of falling behind with mortgage payments. the danish economy has stabilised. that is also true of the financial sector. for the first time since the collapse of roskilde bank in the early summer of 2008, the summer has been quiet – and even sunny. but there are, nevertheless, a couple of financial summer stories to tell. bis central bankers ’ speeches the first one is about f1 loans, i. e. mortgage loans with annual refinancing. the current debate was triggered by a word of warning from s & p. but the debate on the robustness of the construction behind the f1 loans is much older. particularly after the auction in december 2008, people began to say, “ suppose that... ”. suppose that the bonds had not been sold. at that time it was more the rule than the exception that markets froze. liquidity typically dried up if doubts arose as to the credit risk. households ’ long - term loans with annual refinancing are based on bonds with much shorter maturities. this has given mortgage banks qualities resembling those of ordinary banks, in that there may be “ runs ” on them. that risk did not exist under the old mortgage credit model since all loans were “ prefinanced ”. so the question is, what would happen in practice if a mortgage bank finds itself in a situation – due to uncertainty about the credit risk, perhaps – in which it cannot sell short - term bonds in connection with refinancing. the brief answer is that danmarks nationalbank will act as the lender of last resort – as it does for other banks – if the mortgage bank is solvent and can pledge adequate collateral. in practice, the latter would presumably be all the bonds not sold in the market. mortgage bonds, also bonds issued by the mortgage banks themselves, are now part of danmarks nationalbank ’ s collateral basis, i. e. they may be pledged to danmarks nationalbank as collateral. this option will limit the impact of a scenario in which bonds are difficult to sell. so the response to s & p and others is that this is not an immediate threat to financial stability in denmark. but this does not mean that a business

been given additional resources and powers. the crisis revealed various weaknesses, and they have been addressed. but as we have seen previously, pressures to ease the rules will emerge at some point. personally, i am rather surprised to see what is happening in denmark. the bank rescue packages enjoyed broad political support and until recently they had a clear aim : a financial crisis – never again! the time had come to tidy up and tighten the rules. however, winds of change seem to be sweeping across the political landscape. has the danish financial supervisory authority now been given too much power, and have the requirements imposed on mortgage banks become too tight? it is as if the financial crisis has already been forgotten. but i would be surprised if our collective political memory is that short. if so, it would be shorter than in other european countries. so i would like to remind you that in denmark we provided massive support during the financial crisis, and the government took on huge risks on behalf of the tax - payers. under bank rescue package 1, the government provided guarantees for an astronomical kr. 4, 200 billion. with bank rescue package 2, the government gave the financial sector a capital injection of kr. 46 billion in order to prevent a potential credit crunch, and it guaranteed debt issuances of kr. 194 billion. on the fifth anniversary of the introduction of the general government guarantee, the government has still injected capital totalling kr. 31 billion into the sector. so far, the government has not had any direct costs that have not been covered by the sector ’ s payments for this support, but the risk has been enormous. in that perspective there can be no doubt that there was a need for tightening. yes, we have come a long way in terms of tidying up, but it would be unfortunate if the pendulum has already begun to swing back. thank you for inviting me to speak. bis central bankers ’ speeches