The banks then have to borrow from the Riksbank at an interest rate normally close to the repo rate; this occurs by means of “fine tuning” transactions on the part of the Riksbank. As long as the Swedish banks feel sufficient confidence in one another and the banks have adequate collateral to borrow from the Riksbank, the banks will encounter no difficulties in obtaining refinancing. Refinancing can then normally occur at the repo rate or at a rate close to the repo rate. So do the banks have sufficient confidence in one another, or is there any possible cause to reconsider the size of credit lines because of uncertainty about the year 2000? I can see no reason for any such revisions. For one thing, solvency in the Swedish banks is high. The Riksbank publishes stability reports twice a year in which we analyse the Swedish banking system. In our judgement, the financial  1  Nationalencyklopedin (The Swedish National Encyclopaedia). BIS Review 97/1999  2  strength of the banking system and its capacity to resist disruptions is good. Furthermore, the reports of the Financial Supervisory Authority make a “second opinion” available on the progress of preparations for the year 2000. The Financial Supervisory Authority will publish its next report on 1 October. One further question is whether the banks possess adequate collateral to finance increased borrowing requirements from the Riksbank.
But now that the economy has undergone a period of deep crisis and it is difficult to assess what structural changes the crisis may lead to, the process becomes even more complex. One illustration of this is how one should assess future developments in the labour market. So far employment has not fallen as much as might be justified given the historical relationship between unemployment and GDP, and the large fall in GDP. This has come as a surprise to us and to other forecasters. But what conclusions should one draw with regard to the effects in the slightly longer term when the economy recovers? Employment and the number of hours worked are now beginning to increase. Normally, one might have expected a greater adjustment in the number of hours worked than we have seen in this economic downturn. The fact that the  6  For further information on resource utilisation, see Jonsson, M., Nilsson, C. and Palmqvist, S., 2008, “Should monetary policy stabilise resource utilisation?” Economic Commentary, www.riksbank.se or Öberg, S. “Monetary policy and the elusive resource utilisation”, speech published on 25 May 2009, www.riksbank.se. 4  BIS Review 58/2010  adjustment has not corresponded to the fall in production means that productivity has been very weak. But as we observe in our most recent Monetary Policy Update, which was published last week, we expect productivity to improve in the future, which also means that the number of hours worked and the number of employed will grow slowly.