profitability. to illustrate the effect of lower lending growth on banks ’ income, we have carried out a simple calculation where the interest margin is held constant. if lending growth among banks had only been 3 per cent in 2006, banks ’ net interest income and pre - tax results would both have been approximately 6 per cent lower this year. the composition of banks ’ income has been fairly stable in the past ten years, even though net interest income has become less important since 2002. one reason for these developments is that net price gains on securities have increased in this period. bearing in mind that this was a favourable period for securities markets, it will be difficult to maintain the income share from price gains in periods of more normal returns in securities markets. with a slower rise in house and commercial property prices and lower lending growth, combined with a normalisation of loan losses, banks may find it more difficult to maintain the high level of profitability that we have witnessed in recent years. the new capital adequacy rules have had a strong impact on norwegian banks and will continue to do so in the years ahead. how banks choose to utilise capital freed up as a result of the reduced minimum capital requirements, may have an impact on both competition and structure in the norwegian banking sector. freed - up capital may be used to finance lending growth, acquire other institutions or pay back capital to shareholders and other stakeholders. on average, norwegian banks ’ capital adequacy is solid. however, the substantial reduction in minimum capital requirements, even though there are transitional arrangements, also entails some risk that banks will reduce their capital to such an extent that the buffer needed to meet unforeseen events may become smaller than advisable. banks ’ profitability may also depend on the duration and severity of liquidity problems in international financial markets. although norwegian banks are probably somewhat less exposed than banks in many other countries, the impact may nonetheless be felt. it must also be expected that there will be strong focus on liquidity risk by financial institutions and supervisory authorities, and not least in the work on international regulations in the period ahead. thank you for your attention.

far more moderate scale than for subprime - backed securities. in the last half of july, the turbulence spread to other financial market segments. the risk premium required by investors rose, and equity prices fell sharply. the contagion was due to uncertainty as to the risk subprime - backed financial products represented for the financial system, and to a lack of information about who had invested in such products. conduits and structured investment vehicles ( sivs ) were among the investor groups investing in the financial products based on subprime mortgages. as a rule, these investment companies were wholly or partially owned by banks. they invested in assets with a high rating, such as the senior tranche in subprime - backed securities. these investments were debt - financed, primarily in the short - term money market through asset - backed commercial paper ( abcp ). high ratings on these assets gave investment companies favourable funding rates. due to the turbulence in the subprime market, interest rates for abcp have risen sharply and maturities have been reduced. the flow of money to investment companies through money markets has dried up. banks have to a large extent had to finance the investment companies themselves. however, this increases banks ’ liquidity requirements. there have been examples of banks that did not have the capacity to finance their investment companies. due to uncertainty as to which financial institutions were exposed to the subprime market, many operators became very cautious about extending loans, and this eventually also led to liquidity problems in the interbank market. on 9 august and in the days ensuing, many central banks offered extra liquidity to safeguard liquidity in the banking system. norges bank supplied liquidity to the norwegian banking system through ordinary market operations on 9 august. in many countries, the money market is still dependent on injections of extra liquidity from the central bank. the banking system ’ s capacity and willingness to redistribute funds is still moderate. this increases banks ’ financing costs. the turbulence in the financial markets has also led to a sharp rise in prices for transferring credit risk, i. e. credit default swaps ( cds ), for both banks and other companies. cds prices for us banks rose for the first time in march and began to rise again at end - june. developments in cds prices for european banks lagged behind somewhat, but in the last half of july cds prices rose sharply for both us and european banks. this also affects norwegian banks and enterprises