As trading position can be transformed swiftly through the use of derivatives and hence may not be reliable, regulatory focus has shifted to assess internal risk models, rather than the instruments held at a point in time. In addition to external regulation, the Group of Thirty in its 1993 study of derivatives made recommendations at strengthening risk-management techniques and procedures. Another industry initiative was JP Morgan’s decision to release its own proprietary risk-management model for general use. In addition, changing consumer behaviour resulting from aging population, for example, calls for new and sophisticated products like pension funds and long-term debt instruments. Also, consumers’ expectations are likely to be higher as they now have access to more choices from more diversified markets. Finally, de-regulation has occurred because old regulations have not prevented the massive losses incurred by worldwide bank failures. In many countries, the losses caused by bank failures have been as high as 15% of GDP, with bank losses in Japan and France at an estimated 8% of GDP. In the light of these heavy costs, governments around the world have begun to look seriously at the cost of regulation. The latest initiative include the Japanese Big Bang, which would be complete by 2000. Should the Central Bank also act as the Supervisor? There are several arguments in support of the assumption of the supervisory role by the central bank. The first is efficiency consideration.
The article was more or less an explicit encouragement to readers to withdraw their money from the bank and go to the Riksbank to redeem it for gold: “Anyone who brings SEK 1,000 in banknotes to the Riksbank has the legal right to receive 50 SEK 20 [gold coins] and these currently have a value of SEK 1,450 – 45% profit on the most risk-free of investments”12 The final results were indeed an onslaught of people who wanted to redeem their banknotes at the Riksbank, who were therefore forced to raise the discount rate in order to defend the gold reserve. In connection with this, the Riksbank requested release from the obligation to redeem banknotes for gold, which was subsequently also granted. ...but it was also followed by deflation and recession However, shortly afterwards the trend was reversed. There were various reasons, including the weakening of international economic activity. But the most important reason for the severe turnaround in general prices was connected with the view of the monetary system that prevailed at the time. The political view was that Sweden should return to the gold standard as soon as possible, and to the parity that had applied before the war. To make this possible, the krona needed to be strengthened, which required bringing down prices and 11  See, for example, Fregert (2013) and Hasselberg (2021). 12 Statsvetenskaplig tidskrift, [Political science journal] May 1922, p. 151. 6 [14]  wages. It was therefore recognised that a period of actual deflation would be required.