The annual number of M&A deals increased threefold during the 1990s and the total value of deals increased almost tenfold in the 13 countries as a whole. Moreover, the trend accelerated during the period, with a noticeable increase in activity in the last three years of the decade. As we proceed into the first years of the 21st Century, there is little sign of this trend abating. The result has been the creation of a significant number of large and complex banking groups with a global reach. The host of today's conference is a living example of this. We also, of course, have our own homegrown example in the shape of HSBC. Motivations for consolidation The motivations behind all this activity are not hard to discern. Banks, like other companies, are in business primarily to generate value for their shareholders. M&A, it is commonly held, offers an effective means of achieving this through creating synergies that can increase revenue and reduce cost. In particular, larger banks may be able to achieve revenue gains by filling gaps in their product range and offering customers the opportunity of "one-stop shopping". Increased size and market share may give a bank more credibility in the eyes of larger customers, thus providing the opportunity for bigger and more value-added transactions. Size can also open the door into overseas markets.
The only way to  2  BIS Review 18/2003  fix the exchange rate while still retaining an independent currency is to return to the old regime and introduce currency controls, but who would want to return to such an arrangement? Exchange rate volatility is best prevented with economic policies which promote economic stability, but this does not only depend on the Central Bank. It is essential to take a long-term perspective. However, it should be noted that since September last year the Central Bank has been regularly purchasing currency in the foreign exchange market in order to boost its external reserve. The Bank’s purchases of currency have amounted to more than 13 b.kr. since that time, and have undoubtedly weighed somewhat against the appreciation of the króna in the short run, although the long-term effect is negligible, if any at all. The Central Bank’s main monetary instrument is the interest rate on its repo agreements with credit institutions. In response to anticipated overheating of the economy the Central Bank began to raise its interest rates as early as 1997 and raised them rapidly in 1999 and 2000. In the beginning of 2001 the policy rate was up to 11.4%. Since then the Central Bank has lowered its policy rate 13 times and it now stands at 5.3%. Admittedly this is a higher level than among neighbouring countries such as the euro region, which have to tackle the problems of persistent economic weakness and high unemployment.