The SSM allows us to compare and adapt supervision across 19 countries, to identify best practices and to ensure that they are implemented consistently through effective quality assurance. There are now completely new possibilities for comparative and cross-sectoral analysis than were available at the national level. For our tasks, we can use information and insights from banks with very different business models. This enables us to identify risks and undesirable developments more clearly and at an earlier stage, and to take suitable countermeasures. We can also put work on banks’ internal models, which have a significant influence on a bank’s capital requirements, on a new footing. We will use the opportunity, given the improved level of data and insight, to implement strict rules for the approval and ongoing supervision of internal models. Despite this progress, there is still a lot to do in the further development of supervision. The effectiveness and efficiency of supervision is dependent on the legal framework it applies, although this is not the sole determinant. Soft European standards or diverging national rules impair the SSM’s ability to take action and its effectiveness. And this does not just concern  4  BIS central bankers’ speeches  national rules that affect the quality of banks’ equity. The SSM applies 19 different national legal frameworks and not only when, for example, we examine the professional suitability of managers in large, internationally active banks.
Another effect of a weak exchange rate concerns the prices of imported goods and services, with the risk of a pass-through to consumer prices. In the 1970s and ’80s, currency devaluation was frequently used as an instrument for stimulating the economy. The development of demand was boosted via production for export at the same time as imported goods became more expensive. In time, however, inflation began to move up. Now that Sweden has a flexible exchange rate regime, things work somewhat differently. If the krona weakens and firms and households perceive this as a transient movement, the effect on inflation will not be as strong as before, when a currency write-down was seen as a more permanent measure. This has  2  BIS Review 72/2001  contributed, for example, to an import price pass-through to consumer prices in the 1990s that was smaller than earlier. But the magnitude of the effects on demand and inflation with a flexible exchange rate regime will obviously depend on how much the value of the krona changes. Even with such a regime, a large shift - upwards or downwards - in the value of the krona will have some effect on demand and prices. Since last summer the Swedish krona has weakened by between 10 and 15 per cent relative to a weighted currency basket.