Here I am thinking about variables like the economy’s potential growth rate, the output gap and the NAIRU etc. Why should identifying asset market misalignments, excessive credit growth and a rapid decline in private financial balances be more difficult than forming an opinion about variables such as these? My view about monetary policy in this respect is of course closely bound up with my experience of the Swedish banking crisis, but it is also in line with a central bank’s mandate to achieve long-run price stability. If anything, a financial crisis substantially increases the risk of outright deflation after some time. The central bank could manage this risk in two ways: by at least trying to prevent the bubble from building up by tightening monetary policy at an early stage, and then by loosening monetary policy aggressively if a bubble builds up and bursts anyway. To my mind, both such actions would be in line with focusing on long-run price stability, whether the central bank follows an explicit or an implicit inflation targeting approach. Although I will be leaving my job as governor of the Bank of Sweden towards the end of this year, I have no qualms about forecasting that financial stability will remain on the agenda and be a key challenge for financial authorities for many years to come. 2  BIS Review 68/2002
Of course we need to take into account the fact that smaller companies have potentially weaker finances, but this is clearly something that needs to be watched closely;  –  outstanding loans to VSEs were up 2.8% year-on-year at the end of the third quarter 2015, whereas cash loans only rose by 1.1% over the same period. Equipment loans to VSEs also grew by just 1.3%, as facilities in this category are mainly used to buy property, which is clearly less likely to enhance productivity or competitiveness. Evidently, things are proving more difficult for VSEs, and the sentiment on the ground seems to confirm this. It is in everyone’s interest – both the banks’ and the business community’s – that we resolve this contradiction regarding credit: between the banks’ ostensible commercial ambitions on the one hand, and the continuing failure to fully meet VSEs’ demand for loans. It is therefore important that we improve VSEs’ access to financing. I would like to propose three main focuses for action: the first concerns the banks, the second the Banque de France, and the third VSEs’ business customers. 1) First of all, it is absolutely vital that –at the very least- the five fitting commitments made by banks to improve dialogue with VSEs and SMEs, which were set out at the end of the excellent report drafted by the Observatory for Business Financing in the summer of 2014, be fully implemented.