Further, banks’ business model of accepting deposits for lending, leads to significant leverage (a leverage of about 18 times of banks, during 1995–2010, against the leverage of 3 times of non-financial firms7). Liquidity risks can be very critical even for well capitalised banks, a lesson the global crisis has emphatically demonstrated. The banking business has become far more sophisticated and complex.
What do think about the growing power of central banks who seem to rule the world economy? Liikanen: I think we would be happy to do less in the future, but it was important that we acted in the crisis, we ensured sufficient liquidity in the market and we cut interest rates. That was the lesson learned from the depression of the 1930ties.