Lars Nyberg: IT in the financial sector Speech by Mr Lars Nyberg, Deputy Governor of Sveriges Riksbank, at UNISYS, Executive Business Conference, 16 September 2002. *  *  *  To begin with, I would like to thank you for the opportunity to come here today and discuss how information technology has affected the financial sector. This is a very large subject, with many possible approaches and my aim is merely to illustrate a few of these. I have also been given the chance of selecting which of them I wish to discuss, which I especially appreciate. IT and the stock market Probably the first thing one thinks of when one hears the words IT and the financial sector is the “bubble” on the stock market, the increasingly unrealistic assessment of the profits that would be generated by the new technology and the “new economy” at the end of the 1990s and the painful sobering up process when the stock market took a downturn in winter 2000. Although we all feel some unease with regard to the stock market fall when we read our old age pension forecasts, this is perhaps in the long term the least interesting aspect of IT in the financial sector. I therefore intend to limit myself to two reflections regarding the “bubble issue”. The first is that it has happened before and will probably happen again. Let me remind you of the first “IT bubble”, at the beginning of the previous century when the new technology was wireless telegraphy.
The Swedish Telecommunications Administration’s monopoly began to break up as early as the 1980s, but the real turning point came in 1993, when the Administration was privatised as Telia. The market was opened up and exposed to competition; new challengers could gradually take over more than a quarter of the total market and a significantly greater part of the mobile telephony and Internet telephony segment. At the same time, technical developments were very rapid. Fiberoptics enabled lower costs for long distance calls and increased the speed of transfer of large amounts of data, which benefited the development of the Internet. Together, increased competition and rapid technological developments led to a fall in prices with regard to both telephony and Internet connection. The lower prices for users have probably contributed to the widespread use of the Internet in Sweden. The new technology was perhaps available in all essentials to all developed countries, but the views on deregulation varied. Only eight of the 25 member countries, today 30, of the OECD allowed competition in the telecommunications market, while the remaining countries retained a monopoly. There is also a clear connection between use of the Internet and competition. Competition is allowed in the telecommunications markets of six of the nine countries with the highest Internet usage. These countries have also experiences an increase in access to the Internet six times as fast as countries that have a monopoly market.