During 2004 the banking system assets were raised by Lek 52.8 billion (or 14.1 percent), about Lek 18.5 billion more than the growth of assets evidenced over 2003. Year 2004 underwent a significant rise in lending activity, with a growth rate of 38 percent (or Lek 19.3 billion) at end of 2004, compared to 30.5 percent at end of 2003. Therefore, lending rose to 16.4 percent of total assets of the system at end of 2004, from 13.5 percent in the same period of 2003. Lending quality indicator (problem loans to credit balance ratio) is estimated at 4.2 percent, from 4.6 percent at end of 2003. The lowest level of this indicator highlights improvement in lending quality and limited banking system exposure to credit risk. Downward trend of capital adequacy ratio during 2004 was due to a better exploitation of banks’ capacities in terms of extending in riskier investments. During 2004 the supervision process, trying to be proactive and continuous, had on its focus the risk assessment of banks’ activity. Following up the requirements of Supervision Development Plan, the document on “Operative Supervision Policy” was drafted and approved, prescribing banks’ supervision principles. In view of this policy, the supervision cycle for banks that present less concern to supervision is lengthened from 12 months to 18 months, whereas for problematic banks it is reduced to 6 months.
I shall now go on to briefly describe how the repo rate forecast is produced. How is the repo rate path determined? The publication of our repo rate forecasts makes greater demands than previously on the internal preparation work. The new method of working requires a greater interaction between the staff and the Executive Board, and the Board members are involved at an earlier stage of the process. This is made easier by members of the Executive Board being full-time employees and not merely being called together for monetary policy meetings. So what does the practical work leading to the published repo rate path actually entail? The monetary policy decision-making process normally follows an established preparatory process. 4 During a number of weeks employees in the Monetary Policy Department prepare draft forecasts for economic developments, including the repo rate. After this there are meetings together with the Executive Board of the Riksbank, and a main scenario for economic developments, including the repo rate, is drawn up. Of course, the main scenario is based on a combination of model-based forecasts and assessments. 3  See Lars E.O. Svensson, “Policy expectations and policy evaluations: the role of transparency and communication”, Economic Review 2010:1, Sveriges Riksbank. 4  For a more detailed description of the preparatory work prior to the monetary policy decisions, see Kerstin Hallsten and Sara Tägtström (2009): “The decision-making process – how the Executive Board of the Riksbank decides on the repo rate,” Economic Review 2009:1, Sveriges Riksbank.