The high level of borrowing, particularly among US households, was an important factor contributing to the financial crisis in autumn 2008. Although debt growth has slowed in Norway, the level of debt shows no sign of falling. While monetary policy and fiscal policy have been anchored within a long-term, operational framework over the past ten years, there has been no comparable, coherent regulatory system for financial markets. Requirements are currently imposed on individual banks, but without adequate regard to overall risk in the financial system. The financial crisis highlighted the need to strengthen the current framework. In the event of shocks to the economic system, the authorities have a role as lender of last resort. This also has a side effect – banks may feel at liberty to take on excessive risk. The banks keep the profits in good time, while they expect the public to foot a share of the bill in the event of failure. Regulation of the financial sector must therefore secure financial stability, but at the same time protect the public against losses. Akerlof, Spence and Stiglitz – the 2001 Nobel Prize laureates – described how market participants adapt their behaviour and provided important background for the literature on the design of regulations. We should not have ambitions to fine-tune the economy, whether it is the real economy or the financial economy. But we must have ambitions to establish a sound operational framework that protects society against losses. This is now on the agenda in Norway and in other countries.
Improving the OTC and commodity derivatives markets is a key part of this agenda, It is a complex matter and one in which alignment of details is essential to avoid regulatory arbitrage. BIS central bankers’ speeches  1  The third challenge is to enhance transparency across the board: with regards to markets, institutions, and products. Insufficient information contributes to mispricing of risks, mistrust among market participants, which can result into downturns and crises. At our October meeting of G20 Finance Ministers and Central Banks Governors we will be discussing IOSCO “recommendations to promote markets’ integrity and efficiency to mitigate the risks posed to the financial system by the latest technological developments”. 2. Improving policy discipline globally  Aside from a more resilient global financial system, we need to have more disciplined macro policies as the lack of discipline in macroeconomic policies in several countries led to the build-up of unsustainable external imbalances before the financial crisis. There is still a gap between the degree of economic integration and the willingness of policy makers to take into account interdependence and spillovers. Keeping one’s house in order is no longer sufficient in an integrated world. Spillovers from the rest of the world can influence economies considerably. Multilateral surveillance is now being enhanced along two tracks. The informal G20 track and the formal IMF track. The G20 Framework for Strong, Sustainable and Balanced Growth, incorporates a first systematic multilateral assessment of global imbalances.