This is extremely important, although no one knows exactly how large a share of these assets are volatile. It is clear that a small group of non-residents are ready to sell their assets at the current offshore exchange rate. This spring’s auctions did not tempt owners of short-term Treasury bonds. Many will turn out to be long-term investors in the sense that they will not unwind their positions at an auction price approaching the official exchange rate, but will continue to reinvest as long as the interest rate differential exceeds the assessed risk. The auctions will reveal whether this is the case. Because it is unrealistic to expect more than a limited portion of the offshore krónur to be released through auctions, the Investment Programme does not stop there. When the incentive to participate in the investments diminishes – for example, because investors consider the auction exchange rate not favourable enough to justify a five-year commitment, or because the investment projects are not sufficiently large in scope – an exit tax will be levied on short-term capital movements. This step will not be taken, however, unless the offshore exchange rate moves close to the onshore rate, which would be a clear indication of enhanced stability of these assets. A number of critics have found fault with this sequence of events and suggested that the exit tax be levied immediately. In their opinion, this would generate significant income for the Treasury and facilitate the full removal of the capital controls much sooner than is currently projected.
We are entering a consultation period that is absolutely critical and that will lead in June next year to the issuance of an opinion by EIOPA. This opinion, which will be reviewed by the Commission, will form the basis for the negotiations with the Council and Parliament that are scheduled to start in early 2021. Here again, we need to put the challenges posed by Solvency II into perspective. Let me remind you that this is the most ambitious reform ever undertaken in insurance. The new regulatory framework, based on an  Page 5 of 6  approach that takes into account all risks to which insurers are exposed, has undeniably strengthened the resilience of the European insurance market. However, and you yourselves see this every day, the prudential requirements imposed by Solvency II have a number of drawbacks, including being volatile and complex. To remedy this, let’s take advantage of the window of opportunity offered by the directive’s review, and push for four priorities that are essential for financial stability and for the sound financing of the economy: (i)  All things being equal, the revision must not lead to an increase in capital requirements for the European insurance industry. (ii)  It would be counterproductive to artificially lower the capital requirement by stopping equity investments. But despite the advances obtained in 2018, this asset class is still being penalised.