A financial crisis or unrest in the financial system means, as I mentioned earlier, that we will find it more difficult to affect the economy through monetary policy, as the transmission mechanism changes. Changes in the repo rate then do not affect the interest rates that households and companies meet in the same way as under more normal circumstances, which we of course must take into account in our monetary policy decisions. The dependency goes both ways. The monetary policy conducted can affect the risk of a financial crisis, and we must also take this into account. For example, the repo rate influences housing prices, credit granting and general financial risktaking in the economy. To create an adequate basis for making the monetary policy decisions, the Riksbank needs to analyse these effects. One recent example is the question of how the market for government bonds is affected by the Riksbank buying a large percentage of the outstanding stock. The Riksbank's purchases have meant that a relatively large share of the government bonds have not been available for trading in the market. The Riksbank therefore analyses regularly whether this might affect market functioning and ultimately financial stability. We can thus draw the conclusion that the Riksbank’s work on promoting financial stability has close links to monetary policy, both in operational and analytical terms. Financial stability is a prerequisite for a smoothly-functioning monetary policy, at the same time as monetary policy can impact the risk of a financial crisis.
I would encourage each of you to consider not just specific examples of misconduct, but the patterns within them that point to underlying causes. I suspect we will see a strong overlap with those factors that contributed to the financial crisis. I think your focus should be less on the search for bad apples and more on how to improve the apple barrels. Role of the official sector Dodd-Frank strengthened bank balance sheets, and banks have become more resilient to systemic shocks. This is a positive development. At the same time, it is also important to mitigate the sources of systemic shocks. Dodd-Frank apparently did little to curb misconduct – a possible source of systemic risk. If the people managing capital cushions and liquidity buffers view these tools as sufficient mitigants for the costs of misconduct, or if powerful incentives encourage workarounds of the new regulations, then the connection between post-crisis reforms and greater financial stability becomes threatened. In the last year, we have seen emerging approaches to supervision that aim to address culture, conduct and governance. These methods are being developed in a number of jurisdictions. 8 I am pleased to welcome representatives of 15 foreign supervisors and other official sector agencies who are joining the many representatives of U.S. supervisory and regulatory agencies here today. The topic of culture and conduct has truly become a global dialogue. We have a lot to learn from each other.