Politically, it may be difficult, if not impossible, to carry out changes to the taxation system making mortgage borrowing significantly more expensive, even if this would be the most effective way of reducing the risks associated with high indebtedness among households. This means we need tools that can counteract this kind of indebtedness and which can be used with the aim of promoting the stability of the financial system. There is a great need for such tools in Sweden The Swedish banking system is large and closely interwoven, which means that problems in one bank can easily spread to the other banks. The costs to society can thus be extensive in the event of a crisis. Increasing the safety margins in the financial system is therefore highly important. It can be enough for one bank to be impacted by problems for confidence in all banks to be dealt a blow. The important role of confidence in the financial markets became clear in the autumn of 2008, when the lack of confidence led to many banks rapidly encountering liquidity problems and being forced to rely on the Riksbank’s measures for their funding. In this regard, the Swedish banks are also particularly sensitive to shocks on the financial markets as they largely obtain funding in foreign currency. Funding in foreign currency is often for shorter durations than funding in Swedish currency and has been seen to disappear abruptly in times of stress.
Central government finances can be weakened so much that the country enters a debt crisis. From this point of view, it may be considered justifiable to make every effort to increase the resilience of the financial system. At the same time, it is important to always compare the cost of various types of measure with their benefit, so that we can design the most efficient system possible. I have presented a long list of possible instruments that could be used to conduct macroprudential supervision. By necessity, this list will include most tools, as different tools are needed to counteract different systemic risks. But we are discussing something that is relatively new. At present, we only have limited experience of conducting macroprudential supervision in practice. This means that the process of introducing macroprudential supervision will entail a certain degree of trial and error. Quite simply, we will have to test our way forward, while constantly doing our best to assess the efficiency of the instruments being employed. 13 The financial system is complex and dynamic, and the risk outlook is changing all the time. This means that it can never be determined with certainty where a financial crisis may arise. Bearing this in mind, it is important that we, in Sweden, construct a framework for macroprudential supervision that is flexible and that we do not limit our possibilities in terms of the instruments that can be used. It is also important to establish a process to evaluate and later develop and modify the toolbox.