If problems arise in parts of the financial system, operators can find alternative sources of credit. A larger bond market would enhance financial stability. This is also the case in Norway. New investment and risk management instruments Structural changes and strong growth over the past decades have led to more perfect financial markets. This has made the markets more efficient and improved the distribution of resources and risk between operators, sectors and regions, and over time. There is rapid growth in product development in financial markets, and trading in instruments for the transfer of credit risk is rising. Greater focus on risk management by banks and other operators generates demand for these products. The emergence of new instruments is being driven forward by intensified competition, technological developments and new, more risk-based capital adequacy requirements. In many countries, there has been a tendency towards separating those who provide loans and who assess and price the risk, from those who take over the loans and bear the risk. Through securitisation, banks can sell entire loan portfolios to special purpose vehicles that issue bonds that are collateralised by these loans. It is the buyers of these bonds that bear the risk. Such special purpose vehicles are not subject to capital adequacy requirements or supervision. Asset-backed bonds are a similar instrument where bond holders have collateral in loans that banks have transferred to a mortgage company. Mortgage companies are subject to supervision and capital adequacy requirements. Efforts are being made to allow these instruments in Norway.
On its behalf, Eesti Pank has always provided you with the best knowledge at its disposal. I sincerely hope that the constructive cooperation between the Riigikogu and Eesti Pank will continue in the years to come. Thank you for your attention! BIS central bankers’ speeches  3