Lars Nyberg: The securities market today and tomorrow Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at a conference organised by Dataföreningen, Stockholm, 10 November 2004. * * * First, thank you for inviting me to speak at this conference about the Swedish securities market today and tomorrow. Securities markets are of course a significant part of a modern economy and fulfil several important functions, which include mediating information, supplying capital and acting as a channel for risk management. They also undergo an almost continuous process of change, which offers new challenges to operators in the financial sector as well as to public authorities. It is therefore particularly exciting - and important - to be able to discuss these developments here today. Developments in the securities markets in recent years have been dramatic in many respects. For instance, we have experienced an intensive stock market upturn, followed by one of the largest crashes in modern times. IT shares went from being unbeatable profit-makers according to tabloid headlines to being worth only a fraction of what was promised. However, I am not here to discuss earnings, although the bubble phenomenon is an interesting subject in itself. Today I intend to concentrate mainly on structural change processes. We have relatively recently witnessed some tendencies to increased integration in trading in financial instruments.
At retirement age, net saving becomes negative once again. When the percentage of people in the respective age groups changes, it affects savings at a national level. Seen from a longer perspective, the most spectacular demographic trend is that we are living longer. In 1950, 10 per cent of the population was aged 65 and over. Today the figure has risen to 17 per cent, and in 2035 it will be 23 per cent, according to Statistics Sweden’s forecasts. Savings at a national level need to be adapted to be able to support this growing band of long-lived, active pensioners. The collective social insurance systems are currently undergoing development, which emphasises the need for additional private saving. There is uncertainty over what expectations and needs the welfare state should and can fulfil, but most people appear to agree that the role of the welfare state must decline as a declining workforce has to support a greater number outside of it. The original delegation of savings from the individual to society will revert to the individual in different ways. For instance, individual choices have been introduced within the framework of the pension system, giving the individual some responsibility for management of the savings. This applies to both occupational pensions and the state pension system. These changes stimulate savings and also channel some of the earlier collective savings into savings markets, particularly mutual funds and pension funds. The fact that we have had a large inflow of capital into the securities markets is therefore fairly unsurprising.