Monetary policy and the financial crisis In principle, one can say that monetary policy is working as normal within the framework that has been in place since 1995. And unlike earlier crises, not least that at the beginning of the 1990s, we have in the storm now raging a credible nominal anchor for the economy in the form of an inflation target. I think this is worth pointing out. It is actually thanks to the credible inflation target that the Riksbank has the flexibility to forcefully counteract the negative effects of the financial crisis on production and employment. Of course, the financial crisis means that the circumstances for conducting monetary policy are abnormal. For example, there have not been many occasions when the economy has ground to a halt in the way that has happened in recent months. This creates challenges for monetary policy. One such challenge is that historical relationships in the economy have to some extent changed as a result of the crisis. One contributory factor to the repo rate needing to be cut so much during the autumn was that rising risk premiums in the wake of the financial crisis meant that the normal link between the short-term market rates and the repo rate was broken. This was indicated by the reactions to our reduction of the repo rate by a total of 1 percentage point in October. The market rates fell to a much lesser extent. On the other hand, the market rates followed the repo rate downwards in December.
Adherence to this requirement will inject transparency, accountability and ensure the integrity of the financial system. It will prevent criminals from hiding their ownership of companies and assets through complex methods and vehicles. I last spoke at this conference in 2011. The theme of the 2011 conference was “Raising the bar in enforcement and compliance”. Looking back and taking stock of the present state, I am glad to see that the whole industry has matured and progressed in such a significant way. This is validated by the NCC report that the sector’s control measures for both money laundering and terrorism financing are strong. Further, fines imposed by the Bank on financial institutions has decreased over the past few years, reflecting the progress made by institutions in ensuring adequate controls. I hope the industry continues to strengthen its capability to fight crime. Another area in which progress has been made is the priority accorded within each institution to compliance. The focus of the compliance function has developed to become more comprehensive as financial institutions have a better understanding of the threats and risks involved. With increasing awareness of the direct and indirect costs of non-compliance, the compliance function is no longer viewed only as adherence to rules set by regulators, but is instead, an integral part of the organisation’s culture. The very fact that the theme of this 4/5  BIS central bankers' speeches  conference is on reshaping the future, governance and transparency is a testament to this.