Many of the mortgages are also interest-only loans. This means that there is a risk that housing prices and indebtedness will now be driven up to unsustainable levels. For those of us making the monetary-policy decisions, the key issue is what measures will be taken to slow down the build-up of debt and, not least, what effects these might have on household consumption and ultimately on inflationary pressures in the Swedish economy while our monetary policy is taking effect. This is an important source of the uncertainty we have to deal with. Unfortunately, there is so far little experience to learn from with regard to the effects of socalled macroprudential policy measures. This makes it difficult for those making decisions and for those of us assessing what the decisions will be and what effects they may have. 1  “Results from a survey on company pricing”, Economic Commentary No. 4, 2014. 2  The Riksbank’s Business Survey, September 2014. BIS central bankers’ speeches  3  One trade-off concerns “dosage”. What one wants to achieve is that the growth in debt and housing prices slows down, but at the same time one wants to avoid a heavy fall in housing prices. This is a delicate task. Another question concerns the fact that macroprudential policy involves getting banks and borrowers to behave in ways that they would not otherwise, for instance, amortising their loans quicker than they do now.
Second, when trying to enforce new supervisory guidelines and rules on our local banks, one of the first questions they will ask is what is being done elsewhere. It is thus very helpful to be able to point to the relevant international standard in order to confer legitimacy on what we are trying to achieve. Of course, this presupposes that international standards are relevant to individual countries and territories. The Basle Committee on Banking Supervision has played a major role in setting standards which do have such relevance. In particular, the Basle capital adequacy ratio, which is still called the “Cooke ratio” in parts of Asia in deference to our chairman here today, has become the de facto capital standard in most supervisory systems around the world despite the fact that it was originally intended to apply only to internationally active banks. Despite this enormous achievement, however, it can be argued that the subsequent work of the Committee did become somewhat too narrowly focused on issues which are of principal interest to supervisors from G-10 countries. This is only natural since these are the people who comprise the Basle Committee but it perhaps left something of a vacuum in the setting and promulgation of standards with more global relevance. In particular, much of the work of the Basle Committee has been dominated in recent years by the formulation of its recommendations to extend the capital adequacy regime to cover the market risk arising from trading in derivatives and other financial instruments.