There are several arguments for conducting financial stability work in the central bank such as: –  There is a clear link to monetary policy;  –  Central banks usually run the large value payment system which is an important nexus in the financial system;  –  Central banks may provide exceptional liquidity assistance – ELA – to problem banks, but must then understand the implications for the system as such;  Much of the stability work is crisis-oriented – both the precautionary work and that dealing with actual crisis situations. The Riksbank participates in many international fora that promote stronger frameworks to prevent or at least to manage crises. The recent global crisis led to a number of conclusions showing that we need a broader framework in which to analyse financial stability and deal with problem situations. For instance: –  Not only banks will destabilise the system;  –  Systemically-important institutions pose even greater challenges than we thought;  –  Liquidity developments must be closely monitored;  There are clear linkages between submarkets and also between jurisdictions. The experience gained during the crisis leads to some specific challenges for central banks: –  Central banks must maintain a sufficient capacity to provide liquidity to meet sudden needs, but at the same time we must maintain strong incentives to avoid the banks and markets relying on central bank funding rather than approaching their normal channels.
In political terms it would help make the Euro area more than the sum of its parts. Jean Monnet famously declared that “nothing is possible without men, but nothing lasts without institutions.” The mandate of this decision-making institution must be to achieve the strongest, sustainable and balanced growth. II. How we should define concretely the tasks for a Euro area Finance Minister  I see four of them. First, the Minister would be in charge of preparing the euro area-wide collective strategy to fulfill the mandate I just described. It would be essential for the euro area to collectively agree on overall economic policy objectives, and on the division of tasks through the setting of individual performance targets for Member States. Such an agreement could be reached following a two-step process: •  A preparation phase would require assessing: (i) potential growth, with a quantified ambition to raise it; (ii) the euro area output gap; (iii) the sustainable fiscal and external stances for the euro area as a whole, as well as the sustainable distribution of these positions across countries. •  In a decision phase, the euro area Finance Minister would propose a strategy, consisting of the collective objective and – as far as necessary – its country specific translations in terms of reforms and policy stance, bearing in mind of course the rationale for subsidiarity.