I have also pointed to a number of risks that could lead to a different development than the one we forecast in the Monetary Policy Update. We try to determine the probability of the risks on the basis of incoming statistics. This gives us a picture of what can be regarded as a main scenario and what can be regarded as an alternative scenario. How should a monetary policymaker weigh up new and often contradictory information about the economy that indicates different paths of development? I shall conclude with a few reflections on this. As an economic forecaster, one is confronted by a constant flow of new statistics that often point in different directions. Let me illustrate this by describing the circumstances of our most recent monetary policy decision in April. Statistics Sweden had scarcely published a GDP figure for the fourth quarter that was weaker than expected, when the National Institute of Economic Research published a very strong Economic Tendency Survey for March. Nor is it unusual for statistics to be revised in a way that changes history and throws new light on the initial situation in the economy. As I mentioned earlier, Statistics Sweden revised up the figures for the number of hours worked in connection with the publication of the GDP statistics for the fourth quarter of 2011. This revision entails lower productivity growth for 2010 and 2011 than was reported earlier, and thus a new outlook on the future productivity growth trend, which has significance for monetary policy.
For one, advances in technology, telecommunications, and markets have changed the way that banks collect, measure, and manage their risks. Having gained experience in quantifying exposures to market risk, leading banks today are quantifying and using increasingly reliable estimates of the credit risk associated with particular borrowers. Evolution in markets has furthermore provided banks with more tools for managing and transferring credit risk, such as through securitisation transactions and credit derivatives. Likewise, many banks seek to quantify in a more reliable manner their exposures to operational risk, or the risk of losses stemming from failures in internal processes or systems or from damage caused by an external disruption. As risk management becomes more sophisticated, the simple and static rules of the 1988 Accord are becoming less relevant. Leading banks increasingly view the old rules as a burden, constraining their abilities to administer their businesses relative to the best information and practices available today. Supervisors, for our part, have less confidence in the 1988 Accord’s measures of risk for banks that engage in the most sophisticated forms of risk taking and risk mitigation. By the late 1990s, it became clear to banks and supervisors that we needed a new capital framework. But the Basel Committee sought more than just a reworking of the minimum requirements. We wanted instead to create incentives for the industry to enhance the state of the art in risk management.