In autumn 1997 the Riksbank accordingly presented its first more cohesive public analysis of financial stability. The new report was intended to signal the importance the Riksbank attached to work on stability and it also helped to focus and develop the internal efforts. The experience of work on the Inflation Report had been encouraging, so it seemed natural to build up the work on and communication about issues to do with stability in the same way. By launching the Financial Stability Report or, as it was called initially, the Financial Market Report, the Riksbank was the first central bank to issue a public account of its appraisal of financial system stability. Its example has been followed to date by about thirty other countries. Recurrent financial crises have made it clear that there will always be problems which the authorities are obliged to address in some way and it may therefore be of some assistance to have a clear, structured presentation of the approach to financial stability. This has led the International Monetary Fund, for example, to pay growing attention to these issues. Since 1999 the IMF and the World Bank are engaged in joint evaluations of national financial systems in what is called a Financial Sector Assessment Program. Matters to do with stability are also on the agenda almost every time I meet my colleagues from other countries. BIS Review 53/2003  1  Principles for financial system oversight First I should perhaps reiterate what we mean by the financial system.
A clear-cut arrangement for the management of crises can be difficult to construct in advance. It is hard to tell at present how these problems should be resolved. In principle there are two conceivable approaches. One involves continued cooperation on agreements, joint principles and regulatory frameworks. The other is to have more supranational management. It is probably a combination of the two that will be needed. The important thing today, however, is that a debate on these complex issues gets under way before we find ourselves in a situation where it is necessary instead to deal with them in an emergency. More advanced risk management Another factor that will probably affect future work on the supervision and oversight of stability is the banks’ increased possibilities of managing risks. The assessment of risks is one of banking’s traditional functions. Things have changed markedly in this respect since the mid 1990s. Technical progress and new financial theories have led to a refinement of the methods for and possibilities of measuring credit risks. This has been accompanied by facilities for trading risks with additional financial instruments in increasingly international markets. All this has enhanced the ability of the banks to manage risks. Banks in general - not just the largest international groups - have invested in new systems for risk management. The trend, which began earlier, has been accelerated by the new capital adequacy rules, Basel II, that have just been produced.