Mr Bäckström discusses the Swedish economy in the 21st century  Speech given by Mr Urban Bäckström, Governor of the Sveriges Riksbank and Chairman of the Board of Directors and President of the Bank for International Settlements, at the Swedish Shareholders Association, held in Gothenburg on 22 November 1999. *  *  *  First a word of thanks for the invitation to Gothenburg to discuss the Swedish economy in the 21st century. A week or so ago the Riksbank raised the repo rate from 2.90% to 3.25%. The decision was based on the assessment of inflation prospects we had presented in the October Inflation Report and our analysis of economic statistics that had subsequently become available. By raising the instrumental rate now, we aim to contribute to the continuation of a favourable economic trend, with stable prices and sustainable growth. We made the increase somewhat larger than was expected so as to be in a position to leave the repo rate unchanged for the rest of this year, given that the Swedish economy follows the path predicted by the Riksbank. Under these circumstances there is no point in dwelling on current monetary policy and its conditions. Instead I shall be considering a couple of matters to do with growth conditions for the Swedish economy in the longer run. This has a topical flavour on the threshold of a new millennium, perhaps particularly so at a time when so much discussion refers to the so-called new economy.
Following the impetus of the G20 and the Financial Stability Board, there is a current trend in accounting reform for reducing the scope for mark-to-market and for moving from an incurred loss model to a forward looking model of provisioning. In particular, both the IFRS and the US GAAP will include an amortized cost category for financial assets such as loans. In my view, these types of changes in the accounting rules constitute the first, and to my mind the most powerful line of defense to limit the procyclicality brought forward by the crisis. I also want to point that even we if are witnessing some significant progress between the two sets of accounting standards, I am convinced that further convergence is needed. II. Indeed, when it comes to the sources of differences and discrepancies between US and European regulation frameworks, I’d like to bring to your attention the following issues: –  Regarding OTC derivatives, further consistency at technical and implementation level is key in order to avoid regulatory arbitrage;  –  The convergence between IFRS and US GAAP is particularly needed to allow for a level-playing field implementation of some regulatory requirements, such as a leverage ratio, over different jurisdictions. 2  BIS central bankers’ speeches  2.1 Regarding the OTC derivatives reform, there is a great degree of parallelism in the EU and US approaches, but issues arise as the details are worked out.