The government issued a general guarantee for the banks’ liabilities and set up a special Bank Support Authority to cope with the banks that were in serious difficulties. The government, explicitly supported by the opposition, acted just as vigorously and promptly as the situation required. But this did entail making a decision on the basis of insufficient information about the causes and depth of the crisis - that could have burdened the government budget with at least 10 billion US dollars. Having to take such important decisions at short notice and without adequate information about the financial system is an experience we do not wish to repeat. The Riksbank is accountable to the Swedish parliament with regard to keeping a stable price level our inflation target - but also with regard to promoting financial stability and a safe and efficient payment system. After the crises there was room for some self-criticism in this respect. In practice, we had not supported our stability target with any systematic analytical work on overall stability. To address this, we started to build up knowledge and analytical capability in the field of stability. By publishing a Financial Stability Report in 1997, we were among the first central banks to issue a periodic public account of our appraisal of financial system stability. Its example has been followed to date by about thirty other countries, including Indonesia. Today, interest in financial stability is well established.
Central banks need to acquire a better understanding of how the banks manage their liquidity, how they select their sources of funding and the effects this has on their resilience to disturbances. The analysis of stability also needs to be supplemented with methods for stress tests, that is, ways of analysing the sensitivity of banks to shocks. Another area that will prove challenging for both stability analysis and risk management preparedness in the future is the ongoing integration in Europe and, more generally, banks’ tendency to set up cross-border establishments in many countries. I see great scope for close international cooperation on these issues, both in terms of developing methods for analysis and for other aspects of stability surveillance and crisis management. I would like to thank the Bank of Indonesia once again for devoting an international conference to these important topics. Thank you! 4  BIS Review 58/2003