The result of this was that the credit rating agency Moody’s lowered the credit ratings of several Danish banks  BIS central bankers’ speeches  3  and loan loss insurance became more expensive. Moody’s justified this change by claiming that the implicit state guarantee had decreased. Major Swedish banks have a large share of market funding in foreign currency In addition, the major Swedish banks receive a large share of their funding – about half – from the financial markets. In addition, almost half of this market funding is in foreign currency. The integration of financial markets is basically a good thing. Much of foreign currency borrowing is necessary to meet lending needs. And market funding can be good for spreading financing risks. But at the same time, the risk of imported shocks increases. Borrowing in foreign currency for lending in Swedish kronor also increases dependence on the efficiency of the swap market. The liquidity risks taken by the major Swedish banks are also still larger than the European average. Unexpected negative events or disruptions on the international financial markets can thus cause considerable problems for the major banks and ultimately for the Swedish economy. Swedish banks have low risk weightings The low risk weightings in Sweden are particularly important for the Basel regulations on capital adequacy. At present, of course, the banks can calculate risk weights using internal risk-classification models based on historical data on loan losses. From an international perspective, these internal models generate very low risk weights for Swedish mortgages.
Stefan Ingves: Financial crises in an international perspective Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, at the Danish Financial Supervisory Authority, Copenhagen, 12 September 2006. *  *  *  Thank you for inviting me here today. It is easy to forget what a financial crisis entails, now that a number of years have passed since we last experienced one and it is therefore important that we remind ourselves. Although we cannot yet see any immediate threats, we must look ahead to prevent potential crises. During my twenty minutes or so today I intend to talk about the following: •  the fact that most of the various crises in different countries during the 1980s and 1990s have had a number of common causes,  •  the fact that it is important to invest in preventing and managing crises,  •  the fact that risks and potential vulnerabilities in the financial system are now changing rapidly as the differences between banks and other financial institutions decline and crossborder integration intensifies,  •  the fact that the cooperation between authorities within and between countries must be developed further, both with regard to regular monitoring and crisis management. In particular, it is necessary to discuss how the responsibilities and costs should be divided up in the event of a crisis. Many of the experiences I describe refer to crises and countries outside of Scandinavia, even outside of Europe, which does not prevent them from being relevant to our discussion.