Deleveraging by some international banks is leading to a pull-back into home markets. But some regulatory responses, not just market responses, may reinforce this pull-back, by restricting the flow of capital and liquidity outside home markets. Not only will this ring-fencing of national systems weaken international banking and trade, it may introduce new risks to financial stability when global banks are not able to deploy liquidity from one part of the banking group to other parts in need. Better international co-ordination in the implementation of rules is therefore needed to ensure that they serve their intended national objectives without weakening the global system as a whole and introducing new vulnerabilities. A sound financial system anchored by a core of strong local banks Just as we derive lessons from troubled banking systems, it is worth looking too at those that have not run into problems. It is notable that among the jurisdictions with systemically important financial centres, Canada, Australia, Hong Kong, and Singapore have held up well during the global financial crisis. A little remarkably, the top ten banks in Bloomberg’s latest annual ranking of the world’s strongest banks included four Canadian banks, the three Singapore local banks and two Hong Kong banks. There is no room for complacency – the financial crisis has shown how volatile financial markets can be and the speed with which contagion can spread. Banks have to be constantly vigilant against the build up of risks and maintain strong buffers against contingencies.
To reduce the lock-in effects and increase mobility in the housing stock, a review is needed of capital gains taxation when homes are sold, of property taxation and of the current tax relief on interest expenditure. Housing policy: The fundamental causes of increasing indebtedness need to be addressed. The fact that the housing market is functioning poorly, among other reasons due to the construction of new homes not corresponding to the demand, is an important cause of the indebtedness. It is therefore necessary to introduce measures that create a better balance between supply and demand for housing. Another reason why the housing market is functioning poorly is that the rent-setting system creates housing supply limits and lock-in effects that make it particularly difficult to find housing, particularly for young people and for people who are not yet established on the housing market. More rented accommodation would probably improve the balance of supply and demand. In addition, it is important to have measures that lead to the existing housing stock being used more efficiently. Suggestions in the area are not lacking either. See, for example, the recently published special study on more flexible rent-setting and uniform taxation from Finanspolitiska rådet (the Swedish fiscal policy council). 28 If such reforms are adopted, complaints over the amortisation requirements will also decrease. 28 Finanspolitiska rådet (2019). 10 [13]  “My vision” As you see, I have a strong desire for the housing market to change from the way it is today.