But it is not just the significance of the banks in the payment system and as a source of credit that warrants their supervision. As The Economist wrote last spring, banks are “the most hazardous economic institutions known to man”. That may sound rather drastic but there is some truth to it. It is not that bankers are a tribe of irresponsible gamblers but that their much-needed function in the economy requires them to act in certain ways. Banking is essentially a matter of taking risks. A bank’s funds (its deposits or its loans from other banks) are liable to disappear at short notice, while realising assets takes longer. Moreover, problems in one bank are liable to spread to other banks. This systemic risk exists because the banks have liabilities with each other in the form of loans or securities transactions and because they participate in the payment system. The similarity of their operations also means that problems elsewhere may hit the banks as a group. Contagious effects may occur, moreover, simply because people suspect that the banks are inter-connected. To a growing extent, oversight of system stability calls for oversight of the financial infrastructure in the sense of the systems that are needed to effect payments and to trade in and deliver financial products. Bankgirocentralen is a case in point. If these systems function properly, there will be less risk of problems either spreading between the participants and from the financial markets, or arising because the system as such is disrupted.
Although they may amount to just a single krona or even less per transaction, the savings add up to a large amount because of all the payments that are required in a modern economy. Economies and greater efficiency have featured prominently in the banks’ activities in recent years. For the authorities it is always important to consider the conditions for competition and balance them against the forces for efficiency, such as economies of scale. It is also important to monitor developments to ensure that levels of risk do not rise again. Moreover, the Riksbank has been and is a major player in the payment system. We must also scrutinise this activity continuously to ensure that our approach does not impair economic efficiency in general. 6  BIS Review 53/2003  From what I have said about the future work it is hopefully clear that the financial markets are changing rapidly and present a development that is exciting in many ways. The Riksbank will continue to be a central player in this work. Talking about such issues feels natural at a university. Perhaps I have even succeeded in inspiring some of you to become involved in questions such as these and contribute to future developments. Thank you. BIS Review 53/2003  7