But the confidence crisis that followed in the wake of Lehman filing for bankruptcy protection also affected the Swedish financial system. To counteract the effects of the financial crisis, the Riksbank has supplied the market with loans in kronor and US dollars in a similar manner to what other central banks have done in their currency areas. The loan facilities have allowed a different class of collateral than usual. The maturities have been longer than those the market has been able to offer and longer than the Riksbank normally provides. In total, the Riksbank has increased its lending by more than SEK 400 billion. We will continue to provide the market with liquidity as long and as far as it is needed. During the autumn the Riksbank has received signals from Swedish industrial and trade companies that they have been unable to find satisfactory credit. Quite simply, they have not been able to borrow on the market or from the banks in the same way as usual. This problem originates outside of Sweden and has arisen despite the Swedish banks being financially strong. As a preventive measure, the Riksbank established a new, temporary, credit facility on 29 October. The aim is to improve the opportunities for companies to borrow money. Companies can organise their financing through this facility by issuing and selling commercial paper to the banks. The banks can in turn use commercial paper as collateral for loans from the Riksbank.
Putting all of the responsibility on monetary policy would probably mean such high interest rates that they would have seriously negative repercussions for the real economy. Moreover, the argument remains that it is difficult to determine when a credit boom changes from being beneficial for growth to becoming a risk that can trigger a financial crisis. I nevertheless think that the crisis has taught us that when we conduct monetary policy we must also follow a number of variables that are linked to the build-up of risk in the financial markets, primarily credit growth in different sectors of the economy. The fact that monetary policy alone cannot prevent financial crises does not mean that we can only look at an inflation target and otherwise disregard what a long period of low interest rates may entail with regard to risks in the financial system. This is also the view the Riksbank has expressed  BIS Review 149/2008  5  in recent years, occasionally, one must say under strong criticism from both academics and various other parties in society. Monetary policy can alleviate the consequences of the financial crisis The financial crisis has meant that the focus normally placed on monetary policy has been transferred to the measures taken to safeguard financial stability. Monetary policy cannot be used to resolve acute problems in the financial markets. This requires a different type of measure, as I have already described. What role can monetary policy then play in the current situation?