serve this role. they are not so - called inside money ( claims on other financial institutions ) but claims on nonfinancial companies and, mainly, private households. we are confident that the european commission will take these issues into account when deciding upon liquidity definitions within the next few months. the european commission has recently forwarded another proposal, namely on the potential structural separation of large banks. as you may know, that proposal is seeking a “ mandatory ring - fence ”, that is a separation of bank lending facilities from proprietary trading and certain other trading activities. separation may be useful in some countries, whereas in other countries, such as denmark, there is not much of a convincing case for such separation. problems in our banking sector came from traditional lending activities, not proprietary trading. the broader debate over the merits of structural separation will continue. my point at this stage is only that due notice should be taken of the potential dilemma between on the one hand asking banks to hold larger amounts of highly liquid assets, and on the other insisting that such assets should be managed in separate corporate structures. maturity extension for mortgage covered bonds as regards the danish mortgage bonds, you may have noticed a public debate over the past few months, as well as a law passed last week, on the introduction of mandatory extension of mortgage credit bonds under certain conditions. the underlying issue is the following. over the last decade, danish mortgages became increasingly reliant on long - term loans with a maturity up to 30 years, financed by the issuing of short term bonds, down to a maturity of 12 months. borrowing costs are consistently passed through directly to borrowers – so called “ match - funding ”. and demand for these bonds have been consistently very robust and high – for example, market rates of the 12 month bonds have on average been below 30 basis - points during the past year. but the system has been short of a comprehensive answer on what would happen in the extremely bis central bankers ’ speeches unlikely, but also rather scary, event of a failure of the now frequent auctions of new shortmaturity mortgage bonds. the solution has been to introduce a mandatory extension of mortgage bonds with shorter maturities than the underlying loan in case an auction would fail, or if the interest rate has increased by more than 5 percentage points in the year preceding the previous refinancing. in such a case, the bonds will be extended for a year with an interest rate equal to the interest rate at the latest refinancing

the widening of the fluctuation band. we also tried to obtain support from page 4 of 7 the bundesbank to get back to a narrow band between the danish krone and the d - mark. markets eventually calmed down and the krone exchange rate against the d - mark was brought back to its level from before the turmoil. the erm crisis is the last time that a crisis has caused a noticeable deviation of the exchange rate from its central parity. during the global financial crisis in 2008, new lessons were learned. first of all, we were reminded of the need for large buffers. this applies to our foreign exchange reserve. but also, in the financial sector. we also saw how excessively accommodative economic policies in the years leading up to the crisis contributed to the economic setback in denmark. heightened global uncertainty prompted investors to seek safe havens. several small currencies came under pressure – including the danish krone. to stabilise the krone, we intervened heavily. to quote my predecessor, former governor nils bernstein on the matter ; “ we could literally see our reserves pouring out of our coffers. i felt like driving a car without brakes. ” as a result, we increased interest rates on several occasions, thereby widening the spread between our policy rate and that of the ecb. a clear example that defending a fixed exchange rate regime is costly at times. but we never doubted that it was worth it. and as a result of our efforts, the exchange rate remained stable throughout the crisis. in the aftermath, we decided to increase our foreign exchange reserves significantly. as governor bernstein put it ; “ we had to recognise the truth in the simple saying ; money is hardest to come by when you need it most. ” in the first 30 years of the fixed exchange rate policy, currency crises were typically associated with downward pressure on the krone. that changed with the sovereign debt crisis in 2011 - 12. assets in danish kroner were suddenly considered a safe haven by investors who worried about the risk of a potential break - up of the euro area. as a result, we intervened heavily by purchasing currency. we also became acquainted with negative interest rates. it was the first time in our 200 - year history that we had negative rates – in fact, it was the first page 5 of 7 time for any central bank to reduce its key policy rate into negative territory. the introduction of negative rates brought us some spotlight in the central