For instance, the Bank of England granted the building society emergency liquidity assistance. And HM Treasury abandoned the limits of its existing deposit guarantee, extending them to cover all deposits in Northern Rock without limitation. The question that many people are probably asking is why so much effort was made for one individual financial institution. Public measures of this type could hardly be appropriate if it had been a question of an ordinary engineering company or retail chain that was in financial straits. It is due to two factors. Firstly, it concerns the special role played by the banks and the bank system as a whole in the economy. Secondly, it concerns the special contagion risks in the financial system. In a central bank context, these are usually called systemic risks. Banks and other intermediaries in the credit market who receive deposits from the general public play a central role in the financial system. They contribute, for instance, to facilitating the mediation of capital by acting as intermediaries between depositors and borrowers. They also create the conditions for more efficient mediation of payments in the economy. The banks’ deposit accounts are of central importance for the use of payment cards, credit cards and credit transfers. Many banks also participate in the system for the settlement of  BIS Review 30/2008  5  large-value payments supplied by the central bank. The banks and their account systems are therefore a vital part of the payment system.
Stefan Ingves: Can the authorities manage crises in the financial system? Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, at the Swedish Economics Association, Stockholm, 13 March 2008. *  *  *  I’m sure that no one here has failed to notice the fact that there has periodically been turmoil in the financial markets since last summer. It is scarcely remarkable or unusual that the financial markets experience upswings and downswings. And there are almost always some countries in the world experiencing problems in their financial sector. We have become used to this being a fact of life. But this time there appears to be much greater nervousness than we have seen in a long time. Central banks have also followed developments with great interest. For instance, the ECB, the Federal Reserve and the Bank of England have taken a number of well-publicised measures. So why all the commotion this time? Well, this is one of the subjects of my speech today. Financial stability is the Riksbank's other task in addition to monetary policy. Apart from being a red-hot topic of discussion, it is also an area to which I have devoted many years of work. Today I want to talk about the regulations for managing financial institutions in distress and the challenges we face. But let me first reason a little about financial crises on the basis of the current turbulence and the crisis Sweden experienced at the beginning of the 1990s.