Jan F Qvigstad: On the topic of keeping promises Speech by Mr Jan F Qvigstad, Deputy Governor of Norges Bank (Central Bank of Norway), at a seminar arranged by Norges Bank and Det Norske Videnskaps-Akademi (The Norwegian Academy of Science and Letters), Oslo, 11 November 2008. * 1. *  *  Why is keeping promises so difficult? This house, which now belongs to the Norwegian Academy of Science and Letters, was built by Hans Rasmus Astrup in 1886-87. Astrup was an entrepreneur. At the age of 20, he left Norway for Barcelona on a ship laden with a cargo of dried cod. He gradually built up a large trading business and later became an industrialist, not unlike businessmen of our own era. 1 For innovators and the business sector, a stable operating environment has always been important, providing a foundation for adaptation, economic growth and social progress. A stable value of money is also a component of this foundation. We were taught as children to keep our promises. If we made a promise, we had to make good on it. But we were also taught that we should not promise too much. If we do not keep our word, others lose confidence in us and our credibility takes a toll. In recent months, we have witnessed that this is of particular importance for the financial system. A proximate example is the situation in our neighbouring country Iceland.
Today, I intend to speak above all about the new results from the analysis of the Riksbank’s data on the debts of individual’s and households and explain how these relate to other studies of household indebtedness. I also want to explain why the results should be viewed in the light of the vulnerabilities in the Swedish financial system. Let me begin, however, by saying a few words about why household debt is a cause of concern to the Riksbank at all. 1  International stakeholders, for example the IMF, the OECD and the EU, have also been concerned. The risks associated with high household indebtedness have also been discussed at other central banks. The Riksbank warned about these risks already prior to the financial crisis (see, for example the speech made by Stefan Ingves on 4 October 2013). BIS central bankers’ speeches  1  Household debt can threaten sustainable growth The Riksbank has long pointed out the risks associated with the development of household debt. When household debt is analysed, the debts are usually placed in relation to something else. As most households pay their borrowing costs using their current incomes rather than their assets, the debt ratio, that is debts in relation to disposable incomes, is often used as an illustrative measure of risk. 2 Since 1995, the aggregate household debt ratio, that is total household debt as a percentage of disposable income, has increased from 90 to 174 per cent, and it is expected to continue to increase in the years immediately ahead.