one trend : there are currently signs that homeowners are taking higher risks. mortgage credit institutions are increasingly granting loans to highly indebted homeowners. we can also see that the mortgage credit institutions are granting more loans where the homeowner doesn't pay any instalments on the debt at all – also to the most highly indebted customers. this means that the homeowners only pay interest and contribution on their mortgage loans. in turn, the mortgage credit institutions do not build up the same margin of security as for loans with amortisation. we also know that rising interest rates may have major consequences for homeowners with variable - rate loans. some homeowners will have to tighten their belts even with a moderate rise in interest rates. the general interest rate level has been decreasing for years. in fact, many have virtually only experienced falling interest rates on housing loans. those of us with receding hairlines and slightly more years behind us do recall that interest rates were higher once. that's not to say it will happen again. several of the housing market structures are in dire need of an overhaul. let me mention three initiatives that can make homeowners, banks and the whole economy more resilient : page 2 of 7 firstly, we believe that if we're to have loans with deferred amortisation, they should only be used by the most resilient homeowners. unfortunately, denmark has not followed the other countries in this area. when we compare ourselves with other countries, i have to say that we stand out : in most countries, homeowners cannot both have deferred amortisation and as lenient a deposit requirement as we have in denmark. secondly, it's important that the new housing taxation scheme isn't delayed further. implementation of new housing taxation will restore a link between housing tax and home value. that's a sound principle. thirdly, the interest deduction should be reduced. the interest deduction actually means that the tax system rewards indebtedness. that isn't a sound principle. with the current very low interest rates, the change will not hurt homeowners. as mentioned, activity in the danish economy is high, interest rates are low and the unemployment queue is very short. in addition to the measures strengthening resilience for many years to come, it will not hurt to take a little momentum out of the economy. and yet, we've

buffers in a stress scenario. in such a situation, they will, in fact, come into conflict with other requirements. these are now the rules of the game, and the institutions must and need to take this into account in their capital planning. page 5 of 7 the new requirements are a result of the global concerns about the banks and their risk assessments in the years after the financial crisis. firstly, the internal statistical models of the big banks had been shrouded in too much mystery. secondly, the standard methods used by the small and medium - sized institutions weren't precise enough. these are some of the new and old challenges that the basel committee and the european commission intend to address with the last part of the rules. i think that the proposal contains several good elements. here, there is no getting around mentioning the output floor. that is the lower limit for how low large banks can set their risk assessment – and that regardless of how small the risks are according to their internal statistical models. the prospects of a new floor requirement and higher capital adequacy requirements for mortgage lending have made the whole danish financial sector sit up and take notice, prepared to advocate alternative solutions. we have also been skeptical about the need for the output floor. but it's time to move on. the output floor has been long in the making. it replaces an old and an even more incomprehensible floor requirement. the european commission has also adjusted the floor requirement to a european reality with several relaxations relative to the original proposal from basel. we've previously seen some imaginative calculations of what the output floor will cost in denmark's gdp accounts. let me first stress that capital is not an expense. it's a source of funding of a bank's activities that can cushion a bank before the crisis hits. of course, many of you here are well aware of this, but i think you have been quite reluctant to share this knowledge with the general public in recent years. in danmarks nationalbank, we cannot arrive at the same results as in these calculations. our calculations show that the revised output floor proposed by the commission can be expected to lead to a relatively modest increase in the capital adequacy requirements for some large banks and mortgage credit institutions, while others may not be affected at all. when we subsequently insert these increases in our macroeconomic models, we must conclude that the pass - through to the danish economy is very limited. page 6 of 7 on the