This is an important milestone – one that takes us further towards embedding the right idea of increased resilience for those few insurers that have the capacity to impact the global financial system. I look forward to your continued support as the IAIS builds on this progress to put into practice the overall package of requirements for systemic insurers by 2019. And we will need your support as we further develop, over time, an International Capital Standard to apply to all internationally active insurance groups. Our aim is nothing less than a standard which embodies the principles which underpin ICAS and Solvency II. Conclusion The ideas I’ve described today are vital to preserving the positive role of insurance in the financial system and the real economy. 6  BIS central bankers’ speeches  These ideas – tailored capital standards that promote a level playing field; a framework to hold the right people to account; and global standards for globally systemic insurers – are needed now in practice. The Bank knows that as our reforms are implemented and as your business models evolve we need a regulatory approach that is regularly reviewed, adjusted if necessary; and that takes account of evolving financial conditions, product innovation and changing markets. Robust interaction with the industry is essential to ensuring the right ideas can be put into action now, and for the future.
Here I am thinking about variables like the economy’s potential growth rate, the output gap and the NAIRU etc. Why should identifying asset market misalignments, excessive credit growth and a rapid decline in private financial balances be more difficult than forming an opinion about variables such as these? My view about monetary policy in this respect is of course closely bound up with my experience of the Swedish banking crisis, but it is also in line with a central bank’s mandate to achieve long-run price stability. If anything, a financial crisis substantially increases the risk of outright deflation after some time. The central bank could manage this risk in two ways: by at least trying to prevent the bubble from building up by tightening monetary policy at an early stage, and then by loosening monetary policy aggressively if a bubble builds up and bursts anyway. To my mind, both such actions would be in line with focusing on long-run price stability, whether the central bank follows an explicit or an implicit inflation targeting approach. Although I will be leaving my job as governor of the Bank of Sweden towards the end of this year, I have no qualms about forecasting that financial stability will remain on the agenda and be a key challenge for financial authorities for many years to come. 2  BIS Review 68/2002