The Bank of Estonia has been at or close to the frontier of this revolution. Today it provides a rich daily diet of reports, forecasts, working papers, speeches and tweets. th  The 20 century may yet be seen by historians as a Golden Age for central banks. Central bank numbers rose from under 20 at the start of the century to over 175 by its close. Those with operational independence for monetary policy rose from fewer than 40 in 1971 to over 150 today. And the numbers of central banks 7  with responsibilities for regulatory policy has risen sharply too, especially since the crisis. 5 6 7  Barro and Gordon (1983). For example, Nelson (2005). Haldane (2017a). 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  th  The rise in central bank numbers in part reflects the greater numbers of nation states in the 20 century. But this, too, is revealing. Establishing a central bank has increasingly been seen as an essential building block of nation state-building, a crucial element in the fabric of democratic statecraft. Indeed, that was precisely the Estonian experience, as events in this very room a century ago testify. The Age of Innocence  This Golden Age of central banking has persisted for a century. As best we can tell, it has served economies and societies well. Prior to the crisis, the global economy entered a golden period of its own with steady 8  growth and stable inflation, known as the “Great Moderation”.
A century ago, depositors could lose confidence in the banks and rush to withdraw their savings. However, deposits stabilised when guarantee schemes were established in the 1930s. Loans to households make up a third of banks’ assets. Residential mortgage loans are longterm loans. At the same time, funding for Norwegian banks has changed. Market funding has assumed a more important role. In recent years, both short-term market funding and funding  BIS Review 8/2010  1  in foreign currency have grown in Norwegian banks. Banks have increasingly transformed short-term deposits from international money markets into long-term domestic lending. This is the main reason for the strain on liquidity experienced by Norwegian banks when foreign funding came to a halt in 2008. For Norwegian banks, the financial crisis has primarily been a liquidity crisis and not a solvency crisis. The authorities all over the world are currently reviewing the regulation of banks’ liquidity. The Basel Committee on Banking Supervision presented recommendations on quantitative liquidity requirements in December 2009. The UK, Switzerland and New Zealand have introduced, or are in the process of introducing, stricter rules. Norwegian banks must also expect the regulation of liquidity to be more stringent in the future. It will be more difficult to base housing finance on short-term funding. Issuing covered bonds may be an alternative.