Collateral which the banks in many cases were lacking during the crisis, or at any rate to the extent needed to compensate for the enormous decline in funding on the international capital markets experienced by many banks – in Sweden and abroad. So central banks were forced to change the regulations so that the banks could pledge collateral with a less reliable value. But this solution is not sustainable in the long run, as it exposes the central bank – and ultimately taxpayers – to unacceptable risks. In practice, it means that the central bank is forced to act as dumping ground for bad assets as soon as there are problems in the financial markets. Of course, we want to avoid such situations in the future, and this is why the Basel Committee has produced a number of regulations aimed at making the banks less sensitive to liquidity problems. So what do the regulations entail? In future, a certain part of the borrowing must be longer term. Moreover, it must come from more stable sources of funding. In concrete terms, the regulations mean that one multiplies the amount the bank borrows from each type of funding source by a stability factor – in roughly the same way as for risk adjustment of the value of assets when calculating capital requirements. This gives a stability-adjusted funding profile for each institution that should better match the maturities for the banks’ lending.
As consumers embrace the digital era, insurers will need to rethink their distribution strategies and partner relationships as digital and remote options are rapidly replacing commonplace functions and tasks. Digital technology can be deployed effectively to accommodate customers’ priorities in ways that would promote customer support and loyalty whilst significantly enhancing the consumer experience and satisfaction. In many ways, the human capital and technology imperatives share characteristics that are borderless. We are living in a globalised world, with significantly greater capital and labour mobility than in any other period in history. For multinational organisations, this enables ideas and innovations to transcend borders and be more easily replicated to great positive effect, to grow successful businesses and transform the economies in which they operate. This is where foreign partners of local entities with international presence have enormous potential to make a significant contribution to the development of local economies. As international entities that actively operate in more developed insurance markets, foreign insurers should bring new and proven systems, technology and experiences which can enhance their domestic operations and benefit the wider economy of the host country. This is the fundamental value of foreign direct investments. We know of successful cases in Europe where digitisation has been transformational, where a higher adoption of straight-through  BIS central bankers’ speeches  3  processing, paperless documentation, usage of customer analytics and electronic payments have all led to improved efficiency and higher service value for insurers.