5  See also Siven, C-H. (1998) "Penningteori utan pengar – hundra år med Knut Wicksell", Ekonomisk Debatt 1998, year 26, no. 6. 6  Wicksell, 1898 [1936], p. 189. 7  See also Orphanides, A. (2207), "Taylor Rules", Board of Governors of the Federal Reserve System, January 2007. 16  BIS Review 41/2009  lending. In the same way as the policy rate can be expressed as a Taylor rule, it should be possible to express the banks’ capital adequacy requirement as a function of, for instance, the lending gap, or growth in lending in the economy and the output gap. Image 10: A ”Taylor rule” for capital adequacy  (  )  (  c t = c + α L Lt − L* + α Y Yt − Y  )  Here the capital adequacy requirement the banks are subject to depends on the development of total lending in relation to a long-term trend and economic activity. The idea is that the capital adequacy requirement will increase when lending increases too substantially, and will decrease when lending declines. In this way the banking system will be forced to build up capital reserves in good time, which can in turn be used to cover losses when times are hard. One creates a model that evens out cycles rather than reinforcing them. The current capital adequacy rules are sometimes accused of being procyclical.
1/4  BIS central bankers' speeches  More will be done if necessary, of course, but the diagnosis that was reached yesterday by the Governing Council is that a little less is necessary today because growth is stronger and Europe is doing better. And to make this quite clear, how much will the ECB disburse in, say, 2017? The decision that was taken yesterday is to extend our asset purchases for a further nine months by buying € billion per month of various financial instruments, which makes an additional € billion euro. That’s the decision: we will add € billion to the € billion per month planned for the first three months of 2017, making € billion, so for the whole of 2017 that comes to slightly less than € billion extra compared with what we are doing already. And since March 2015? Asset purchases today come to around € trillion in total, so if we add 1,500 and 800 it means that, at the end of next year, we’ll be at just over € trillion. Yes, and you realise that with this € trillion growth is good, average, but it’s not stronger. What would happen without this € trillion? Well, without it, if the ECB wasn’t doing what it’s doing, growth would be between 0% and 1%, inflation would be close to zero and unemployment wouldn’t be falling in the euro area. But as you know, unemployment is now falling fairly quickly in the euro area.