Apart from the fact that it was difficult to value the instruments themselves, the complex links between the banks and their special companies made it difficult to see the actual exposures of the banks. Eventually, no one knew where the risks  BIS Review 135/2009  3  were. The increasing amount of loans not only made investors highly indebted in relation to their equity, many banks also did not really have enough capital in relation to the risks they took. When economic activity began to decline in the USA and prices fell on the US housing market, many institutions suffered major losses. Uncertainty about who might be exposed to impaired assets led to trade petering out on a number of financial markets. Many banks now found it difficult to find funding on these markets. In September 2008, the major US investment bank Lehman Brothers filed for bankruptcy protection. This had extensive repercussions throughout the world. The global financial crisis escalated and the Swedish banks were also seriously drawn into the crisis. All over the world, banks and other financial institutions began to cut back their exposures and reduce their level of indebtedness. The decline in lending reinforced the downturn in global economic activity. This in turn accelerated the decline – many assets fell dramatically in value and the banks' loan losses increased. A vicious circle arose in the global economy in which the financial turmoil aggravated the weakening of the real economy and vice versa.
The dramatic credit expansion of several of the Swedish banks in the Baltic region in euro is one example of a behaviour that entails considerable risks, something that the Riksbank has long pointed out in its Financial Stability Reports. 8  BIS Review 135/2009  There may therefore be good reasons for thinking about different ways to achieve a greater impact for our analyses and assessments in the future. Can we be clearer and more direct when formulating warnings and risk scenarios? Can we, for example, go public to a greater extent, for example by using open letters and so on, in order to increase the pressure on banks to change their risk behaviour? And how should we handle the increase in the banks' lending in foreign currencies? These are examples of questions that the Riksbank and other central banks must now address. There is no doubt that the crisis has raised important and complicated questions. Wars and crises usually strengthen the position of the state. This crisis is no exception. The central banks have taken over the issuing of banknotes, but the provision of credit is still essentially conducted on private markets. The general view is that it is not appropriate for the state to work, for example, with the credit assessment or risk assessment of individual loans. The state can establish rules and regulations for the market, but not work in the market itself.