In a recent report, the Commission identified a number of risks to the financial stability of various EU countries, including Sweden.3  1  Modestino & Dennett (2012)  2  Finansinspektionen (2012). 3  European Commission (2012)  BIS central bankers’ speeches  3  In this sense, the European Commission’s analysis does not depart radically from our own. As I have already said, there are good reasons to try to prevent problems and to curb excessive risk-taking as regards housing loans. This is why we in Sweden have argued that Sweden must have the possibility of placing higher requirements on the Swedish banks – particularly the major banks. As you are aware, the EU countries are currently negotiating new capital adequacy regulations for the EU. The Riksbank’s opinion is that the EU should establish minimum requirements, but that individual countries, such as Sweden, for example, should be able to go further – just to reduce the risk of financial crises at a national level. I know that the Ministry of Finance and Finansinspektionen agree, as do several other countries and, for example, the European Systemic Risk Board. The Riksbank has an important role to play in the prevention of financial crises The Riksbank’s task of preventing new crises is connected to our responsibility for the country’s means of payment. Only the Riksbank can provide unlimited liquidity to the Swedish banks in a crisis situation. During the crisis of 2008 and 2009, the banks could also borrow as much as they needed from the Riksbank.
4  BIS central bankers’ speeches  The regulation of the financial sector affects the country’s citizens Policy discussions in Sweden, in the EU, globally  Could be perceived as abstract Often technical  Behaviour of the financial sector  Effects on the real economy  Swedish citizens and consumers  Crises cost society enormous amounts GDP growth in Sweden, 1960-2010, SEK billion  Source: The Riksbank  BIS central bankers’ speeches  5  The real effects have a high social and economic price Unemployment in Sweden, 1985-2000, percentage of labour force  Source: The Riksbank  Problems in the banking sector impact the country’s citizens in many ways Via the real economy  Problems in the banking sector  Directly against bank customers  Via the public sector  Weaker economic development  Deposit guarantee Need for capital injections  Increased uncertainty  New banking relationships  Higher unemployment Lower wages Lower pensions  Higher taxes Deterioration of public welfare  Higher interest rates  New terms  Poorer economy for households  6  BIS central bankers’ speeches  A financial crisis will ultimately threaten basic social functions The financial system is central in the society  Household  Who can pay whom in a serious crisis? Household’s bank Grocery shop  Grocery shop’s bank  ?