The issue is all the more difficult since the host authorities of the bank branch or subsidiary may have a different view. For them, the bank may have an important role in the market, whereas the bank group is fairly insignificant in the home country. Sweden and other EU member states grapple with these issues. Some steps have been taken, for instance to sign Memoranda of Understanding so that central banks and supervisors in different countries undertake to inform one another and cooperate in problem bank situations. But talking and sharing information is not enough to solve the problems. This is, of course, not only an issue for Europe and I believe that the issue of solving crises in cross-border financial groups should be discussed more on the global level, such as in the Financial Stability Forum. Before concluding this part, I wish to say a few words on deposit guarantee systems. This topic is relevant both for domestic banks and for cross-border banks. For a long time there was no unanimous view on the benefit of such systems. Those who argued against them said that depositors might become lazy in their screening of banks and would put their money only in the banks which offered the highest returns, even if these banks took excessive risks in their activities. There would be a lack of discipline on the banks from the depositors. Also the bank owners and managers might venture into excessive risk-taking knowing that the depositors would be taken care of under a guarantee system.
Banks, their managers and owners, which are affected by supervisory measures must be able to appeal the decisions, although in some circumstances the measure must remain in force while the judicial process is underway. We should not forget the importance of the so called preconditions, the major external factors which fundamentally affect the supervisors’ ability to conduct efficient supervision. The preconditions are, for example, a stable and sustainable macro economic environment; adequate laws and a good judicial system; good accounting and auditing rules; and an adequate system to deal with problem banks and other institutions. In the Swedish pre-crisis situation there was macro-economic instability with excessive price volatility. Inflation had been high and fluctuating, and current account and fiscal deficits had remained high for many years. This made it difficult for the authorities to assess the underlying financial stability of banks and other institutions. Recent important regulatory issues for the financial institutions As you are aware, countries around the world are presently preparing their banks and authorities for the implementation of the Basel II capital requirements. It implies huge financial costs and workloads, but is expected to provide benefits in the form of better managed banks, lower losses and more precise capital requirements. Swedish banks will start implementing the Basel II from 1 January 2007 so their preparations are now at full steam.