The expected policy rate 3 months ahead is based on STINA contracts combined with STIBOR T/N and the policy rate. Both this series and the rate on treasury bills are shown as 10-day moving averages. Sources: Nordea markets, the Swedish National Debt Office and the Riksbank. The right-hand panel in Figure 3 instead compares the rate on covered bonds with the expected policy rate.8 According to the portfolio balance sheet theory, purchases of government bonds can also push down rates on other bonds with similar maturities, such as covered bonds. But it is difficult to see any such effect in Figure 3.9 During 2015, the rate on covered bonds instead rose in relation to the expected policy rate. Later during the purchase period, the interest rate differential declined, but to approximately the same level as before the start of the purchases. What conclusions can we draw from these observations? First, we have already observed that the rate on short government securities was lower than the policy rate. This reasonably means that, although the policy rate was cut to −0.50 per cent in 2016, it was not at its technical lower bound.10 The Riksbank's asset purchases meant that two short market rates were established, the Riksbank's policy rate, which was still indicative of pricing in the interbank  8 Covered bonds are issued by banks and mortgage institutions and used for financing mortgages to households. 9 All this is in line with Krishnamurthy and the Vissing-Jorgensen (2011).
No one knew how large the losses would be and whether the reserve capital would suffice. Funding ran short. Because what financiers in the market would want to give loans to a bank that appears unsteady? And who would want money in an account in this bank? I am sure you will remember the pictures of the queues outside Northern Rock’s branches in the United Kingdom. To restore confidence, the state and the taxpayers in many countries had to inject capital and go in as owners of the banks. This would not have been necessary if the banks had held more capital when the dark storm clouds gathered in summer 2007. The Basel Committee has taken note of this. The current capital requirements are being raised substantially. If I may go into technical details, the new regulations require that the  BIS Review 159/2010  3  banks should have a Tier 1 capital corresponding to at least 6 per cent of their assets, or more correctly their risk-adjusted assets. The risk adjustment means that for each asset one recalculates the value, depending on whether the value of the asset can be regarded as certain. One sign of this might be, for instance, that the value of the asset has varied a lot. The higher risk an asset is believed to entail, the more capital needs to be allocated. At present, the minimum requirement for Tier 1 capital is only 4 per cent of the total riskweighted assets.