The second task of macroprudential policy is to manage structural risks, or cross-section risks, which could for instance mean that close links between different parts of the financial system at any given time will affect the risk of a crisis affecting the system as a whole. Here, I will primarily focus on the cyclical dimension of macroprudential policy. However, it is not so easy to draw any clear boundary between structural and cyclical problems on the financial markets, just as in other areas, such as the labour market. 1  2  For a few examples, see Geanakoplos (2009), Aikman, Haldane and Nelson (2010) and Borio (2012). BIS central bankers’ speeches  In Figure 1, the red line represents the normal cyclical fluctuations in the economy, the business cycle. The second curve in the figure represents the financial cycle. As I noted, the economic cycle and the financial cycle need not coincide, but can develop differently. Often, the financial cycle is assumed to have a lower frequency, fluctuate more slowly, than the business cycle, as illustrated in the figure.2 Links between the financial cycle and the business cycle can create problems A situation where both cycles definitely coincide is when the financial cycle shows a rapid downturn, as at the end of the figure. This was what happened in many countries during the financial crisis, and in Sweden during the crisis at the beginning of the 1990s.
Speech at the Federal Reserve Bank of San Francisco, 29 November. BIS central bankers’ speeches  17  Figure 1 Business cycle and financial cycle  Business cycle Financial cycle  Table 1 Increases in expenditure for standard households due to policy measures SEK and per cent Luleå 39 000 Disposable income (SEK/month) Total debt (SEK) 1 100 000 Debt ratio (%) 235 Increase in expenditure in SEK Countercyclical capital buffer 128 1 100 Tax relief Mortgage cap 1 229 Amortisation expenditure 1 078 Interest expenditure 151 Amortisation 1 833 Increase in interest rate 1 283 Increase in expenditure as a percentage of disp. income Countercyclical capital buffer 0.3 2.8 Tax relief Mortgage cap 3.2 Amortisation expenditure 2.8 Interest expenditure 0.4 Amortisation 4.7 Increase in interest rate 3.3  Upplands Väsby  Central Stockholm (high debt ratio)  44 000 1 750 000 331  55 000 3 950 000 598  204 1 750 1 956 1 716 240 2 917 2 042  461 3 950 4 415 3 873 542 6 583 4 608  0.5 4.0 4.4 3.9 0.5 6.6 4.6  0.8 7.2 8.0 7.0 1.0 12.0 8.4  Source: The Riksbank. 18  BIS central bankers’ speeches