The financial system is important, and the risks in the system must be constantly reviewed. Let me give you some examples of areas that I believe will need to be investigated. As I mentioned earlier, the Swedish banks’ high dependence on market funding entails an increased risk that they will suffer liquidity problems in a stressed situation. It is of course always possible for the Riksbank to lend Swedish kronor, but it is unreasonable for the banks to take liquidity risks based on the expectation that the Riksbank will provide extraordinary loans if things do not go according to plan. The ability of the banks to comply with the Liquidity Coverage Ratio in the Basel III Accord should therefore be investigated. The differences in the maturities of the banks’ assets and liabilities in foreign currencies that I described above are also a potential source of concern in more troubling times. The Riksbank cannot after all offer unlimited liquidity in any other currency than our own. As you know, the Riksbank has therefore recently strengthened its foreign-exchange reserve so that in a situation in which the foreign-exchange market is seriously disrupted the Riksbank will be able to provide extraordinary loans in US dollars and euros. The aim of course is to strengthen the Riksbank’s preparedness to safeguard the basic workings of the financial system and thereby help us to avoid major economic costs.
The Swiss franc is trading currency number 5, ranging behind the Big Three and Sterling, but well ahead of the currencies of much larger countries like Australia and Canada. Economically more important than the trading volume is - second - the position of a currency held in international portfolios. Relative to the size of our country, the SFR occupies an unusually prominent position in international institutional and private portfolios. This position is the combined result of an above-average stability record, an efficient financial centre and the commitment to an independent monetary policy which lends the SFR special diversification characteristics in global portfolios. This certainly is a sign of strength, a sound basis for value creation, especially in our financial industry. At the same time, its strong position makes the SFR particularly sensitive to global capital movements. Thirdly, due to relatively low interest rates, the Swiss franc - like the yen - periodically plays an important role in the short-term financing of trading positions. Currency and securities traders take short positions in our money market to finance long positions elsewhere. This is a rather volatile game, often reinforced by herd effects, which comes and goes with short-term exchange rate expectations. These so-called carry trades from time to time generate a significant amount of short-term exchange rate volatility. In the recent past, however, such strategies have lost their appeal, probably as a combined consequence of last year's increase in money market rates and the appreciation of the Swiss franc.