That is why today’s conference is conceived to bring together academic research and central bank practice. The conference structure reflects an understanding that the global financial cycle affects the euro area and its monetary policy, which in turn affects the financial cycle in Europe beyond the euro area. Therefore, the first session of the conference is on the current phase of the global financial cycle which is to a large extent driven by the US monetary policy. We recall from the 2007/2008 crisis how the financial disruptions originated and triggered a full-scale global crisis. The second session is focused on the euro area financial cycle, as influenced by the global financial cycle, and its implications for asset prices and financial stability. Since the ECB policies also shape the financial cycle in Europe outside the euro area through economic and financial channels, although divergences do exist, our third session is devoted to the financial cycle in the non-euro area EU member states. By way of example from Bulgaria, the BNB recent research and relevant estimates for the local financial cycle indeed show that we are currently in the upward phase of accumulation of cyclical risk. We have, correspondingly, decided to activate and then raised the rate of our countercyclical capital buffer. Turning to actual policy reactions in dealing with financial cycles, our conference ends with a panel where Governors will share with us their views. Dear colleagues and guests, In conclusion, let me sum up my main points.
Lars Nyberg: The financial market turmoil Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, to the Riksdag Committee on Finance, Stockholm, 22 November 2007. *  *  *  I would like to begin by thanking you for the invitation to come here to discuss how we at the Riksbank view the recent unrest in the financial markets. I shall begin by talking about the background to the market turbulence and about the spark that ignited the actual chain of events. Then I shall go on to discuss developments during the autumn and what we can learn from what has happened – as far as is possible at this early stage. In conclusion, I shall talk about the risks we see before us. Rapid changes in the credit market In recent years there have been major changes in the international credit markets. New agents have entered the market at the same time as new instruments have been introduced at a rapid pace. At the core of the changes in the credit market is a phenomenon called securitisation. This has to a great extent been practised by US mortgage institutions and banks since the 1970s. So it is not a new phenomenon. In brief, securitisation entails a number of loans, such as mortgages or credit card accounts, being placed in a specially-created company, which is then financed by issuing bonds on the market. These bonds are usually called Asset Backed Securities (ABS). Managed properly, there are considerable advantages to securitisation.