They are modified now and again, often in the wake of different types of crisis or when new economic policy experience has been gained in other ways. The most recent financial crisis and the discussions now underway around the world on central bank mandates may lead to reforms that change the political influence over central banks. In Sweden’s case, our scope for amending the Sveriges Riksbank Act is limited by Sweden’s membership of the EU, which obliges the country to 14  BIS central bankers’ speeches  follow the regulations laid down in the Maastricht Treaty. But I do not think this should hamper an intellectually and analytically based discussion on the benefits and drawbacks of the way we have designed monetary policy and financial stability in Sweden. In all likelihood, there is plenty to learn both from economic research and from what works well and not so well in other countries. It is a matter here of not throwing the baby out with the bathwater. Experience of increased autonomy have generally speaking been good, so I do not believe major changes to the regulatory frameworks to be justified in this respect. But I would nevertheless like to highlight some issues that are under discussion and that affect the autonomy of central banks.
It is why the international community responded to the crisis in Asia by promptly offering very large amounts of official assistance - $ billion in the case of Thailand, $ billion for Indonesia and $ billion for South Korea. This kind of official assistance of course is essentially for the international financial institutions and for governments - though central banks are often the channel for bilateral financing, as the Bank of England is, for example, in the case of the UK’s contribution to the bilateral support for Korea. But such official financial help cannot be unlimited and it cannot be provided without strings. It, too, has real dangers. If it were too readily forthcoming it could encourage “moral BIS Review 49/1998  -3-  hazard”, especially by encouraging commercial lenders - particularly foreign currency creditors - in the belief that they will be bailed out if things go wrong. That would be likely to add to the problem of potentially volatile capital inflows next time around. Not surprisingly, too, there is strong political resistance in many countries, including notably the United States, to the idea that public - taxpayers’money should be used to bail out private creditors, especially foreign creditors. External financing need not come solely from the public sector. Private finance would serve the same purpose, and in many situations market price adjustments may be sufficient to stem the capital outflow.