This conference will provide an opportunity to reassess our traditional views on many of the issues before us. On this note, I wish you a very engaging and substantive conference. 2  BIS Review 20/2009
It is assumed in the really negative scenario of the Financial Stability Report that developments in the Baltic countries and the rest of eastern Europe will be much weaker, although that is far from the only reason behind the poor development. Here, too, approximately 40 per cent of the loan losses are expected to come from operations in these regions. In this scenario all of the banks meet the statutory requirement of Tier 1 capital adequacy of at least four per cent. However, it may be necessary to have higher capital adequacy to avoid negative consequences such as funding problems and downgraded credit ratings. In the unlikely event that this very negative scenario were to occur, several banks might therefore be forced to act to strengthen their capital bases. If this could not be achieved solely through private capital injections, there is a possibility for the government to inject capital by virtue of the Government Support to Credit Institutions Act of last autumn. The Riksbank’s assessment is that we, together with other Swedish authorities, are also well prepared to be able to manage the problems that could arise if the situation were to deteriorate to the level of the stress test described in the Financial Stability Report. Let me just clarify that the Financial Stability Report’s test of the financial system’s resilience cannot be compared with the alternative scenarios of a “more probable” nature that are usually presented in the Monetary Policy Reports.