hold. higher interest rates, combined with lower purchasing power in house - holds, have contributed to the necessary dampening of demand. fiscal policy, both in denmark and abroad, should also contribute to dampening inflation. the looser the fiscal policy, the tighter the monetary policy. if there is a wish to provide compensation for higher inflation, it should be targeted at selected groups and fall within the framework of an overall tight fiscal policy. in denmark, we had a healthy economy to begin with, with sound public finances and a strong labour market. employment has risen sharply in the wake of the pandemic, more so than in many other countries. our starting point has been an economy at risk of overheating, and a slowdown in growth is therefore both expected and necessary. market fluctuations make demands on management of liquidity and funding risks this is the economic situation that the financial sector needs to navigate in. it may not be easy. liquidity has become less abundant and credit spreads have risen from very low levels. the high volatility across assets have led to increasing collateral requirements in the derivatives markets for interest rates, currencies and commodities. this has increased the need for liquidity among the market participants that rely on derivatives to hedge their risk. in the uk, in september, we saw an example of just how wrong things can go. here, rising interest rates led to large falls in the value of pension companies'interest rate derivatives and government bonds. the requirement for increased collateral was met by selling off large volumes of bonds in the market. this raised fears of a negative price spiral and prompted the bank of england to intervene. fortunately, a similar scenario is less likely for danish pension companies. all in all, the danish pension sector is markedly better equipped to handle the interest rate hikes we're seeing right now. in fact, danish pension companies differ positively from their british counterparts in several respects : they are less leveraged, if at all, they have more highly liquid assets and better liquidity management. 2 / 6 bis - central bankers'speeches i admit that the development has been very rapid in the past year. but it can hardly come as a surprise that interest rates and the accompanying collateral requirement have increased. however, some pension companies still have only one or a few repo counterparties for provision of liquidity. this may prove inexpedient. the demand for liquidity may arise from several quarters. the pension sector's increased liquidity need is

critical to society in a crisis situation. here, one of the key principles is that this can be done without the use of central government resources, unlike during the financial crisis. for the banks, we're in a good place with a fully phased - in mrel requirement. this ensures that the investors carry the risk, during both good and bad times. but - for there is a but. we're still not quite there yet when it comes to the handling of mortgage credit institutions. there is still no appropriate solution for how a mortgage credit institution should be handled if there are insufficient funds to cover the losses in a resolution situation. when we look into our crystal ball, the problem of insufficient funds will only grow larger as the new basel capital requirements are phased in. a solution must be found to this, and it must not involve leaving the mortgage bonds to bear the losses. our preferred solution remains that mortgage credit institutions should be covered by bail - in and mrel requirements. a bail - in allows for impairment charges to be made on the debt instruments that rank higher than mortgage bonds. the mrel requirement is risk sensitive, relatively inexpensive and comprehensible abroad. the housing market has also become more resilient. we have received both growth guidelines and good practice rules, and both contribute to fencing in credit risks. but there are holes in the fence. the rules are many, complex and, in many cases, indicative. this leaves room for interpretation, makes it harder for the institutions to navigate and reduces regulatory transparency. the price falls that we're currently seeing for houses and owner - occupied flats do not change our fundamental assessment of the housing market. the housing market is of fairly great importance to the danish economy, and the structures need to be improved. in this context, it's unfortunate that we have yet to see the introduction of a statutory general amortisation requirement for highly indebted homeowners. this would make the individual homeowner and the whole economy more resilient. and it would make many detailed rules and guidelines superfluous. the economic framework and structures have become more resilient over the past forty years. and if anyone asks whether banks and mortgage credit institutions are better 5 / 6 bis - central bankers'speeches prepared for a crisis today than when i took up my position as governor ten years ago, the short answer is yes. but, as mentioned, we're not quite there yet. however, i will safely leave