A debt-to-income limit may be an appropriate measure, but strengthening the loan-to-value limit and the amortisation requirement should also be considered. It may also be necessary to reduce households’ incentive to borrow by reducing tax relief on interest expenditure. Measures are also needed to strengthen resilience among Swedish banks. Given the risks in the Swedish banking system, it is important that the banks hold enough liquidity and capital. So that the banks can manage their short-term liquidity risks, they need to have a reasonable liquidity coverage ratio in all significant currencies, for example in certain Nordic currencies and pounds sterling for those banks that obtain funding in these currencies to a great extent. 15 [23]  To ensure that the banks have enough capital, a leverage ratio requirement, which is to say a requirement for the banks’ equity in relation to their total assets, should be introduced as a complement to the risk-weighted capital requirements already existing. This would restrict the banks’ possibilities for increased credit granting. It would be particularly effective to initiate this measure when the global financial cycle is on the way up and the banks are finding it easy to obtain funding. However, it should be repeated that a fundamental cause of indebtedness in Sweden is that the housing market does not function. It has not been able to meet the rising demand for housing that has long been highly visible.
In this scenario, the combination of slower growth, smaller surpluses in Asia and higher risk premia could move global interest rates higher, increasing the burden of corporate and household debts and challenging the creditworthiness of some sovereigns. Contrary to what you might have heard, it isn’t easy to win a trade war. If the UK has been somewhat more inwardly focused of late, it has been for good reason. In many respects, Brexit is the first test of a new global order and could prove the acid test of whether a way can be found to broaden the benefits of openness while enhancing democratic accountability. Brexit can lead to a new form of international cooperation and cross-border commerce built on a better balance of local and supranational authorities. In these respects, Brexit could affect both the short and long-term global outlooks. It is in the interests of everyone, arguably everywhere – from Frobisher’s grave to Frobisher’s Bay - that a Brexit solution that works for all is found in the weeks ahead. 30  While economic, policy and geopolitical uncertainties are very high, several market-based risk metrics are not. Credit spreads, the VIX and equity implied volatilities are below the 50th percentile of their historic distributions, as is equity risk premium in the US. Despite recent volatility, high-yield corporate bond spreads also remain below pre-crisis averages.