It is not a case of rescuing banks and bank management for their own sake or that of the shareholders or of “giving away taxpayers’ money” as it is sometimes wrongly described in the debate. In the long term we need a well-developed system for managing insolvent institutions The Riksbank’s possibility to provide liquidity assistance to a financial institution when financial stability is threatened assumes that the institution is solvent and able to continue to pursue its operations. In the case of Carnegie, Finansinspektionen withdrew the institution’s licence to conduct banking operations on Monday this week. The Riksbank then withdrew its liquidity assistance to the bank, is it no longer met the criteria for being granted this type of credit. The Riksbank’s loan to Carnegie Investment Bank AB has been repaid by the Swedish National Debt Office, which has taken over the debt and now owns the company. The Debt Office can now take over a financial institution, as in Carnegie’s case. This applies in a situation where an institution that does not meet the requirements for liquidity assistance from the Riksbank has to default on its payments and this is assessed to threaten financial stability. This is made possible by the stability plan for the financial system decided by the Riksdag just over two weeks ago. The stability plan also means that the government can extend guarantees to individual institutions or to a group of institutions.
As I mentioned earlier, this has a restraining effect on the economy, not least in that investments fall. Developments on stock markets around the world have fluctuated considerably and on the whole there has been a substantial fall. In many countries property prices are also falling, but in Sweden the decline has on the whole been fairly limited so far. However, all in all this development has led to a decline in wealth for many Swedish households, which is expected to dampen consumption. Various surveys indicate that households and companies have a more pessimistic view of the future now. The financial crisis has contributed to a deterioration in the prospects for global economic activity and to dampening international demand. The price of many commodities, such as oil and food, has fallen. This gives lower inflationary pressures. When international demand is lower, the Swedish economy is also affected via exports. We are assuming that exports will slow down next year, but recover during 2010. It is also clear that the uncertainty in the economy has increased in general. This affects households’ and companies’ financial decisions regarding the future. The uncertainty can also have contributed to the recent substantial weakening in the Swedish krona against most other currencies. It is not unusual that the value of currencies of small and very exportdependent economies, like Sweden’s, falls in times of market turbulence. This was the case, for instance, after the Asia crisis and the acts of terrorism on 11 September 2001.