Instead, it is important to analyze the loan growth in broader economic policy context where due consideration should be paid to the credibility of macroeconomic policies and the impact other policies may have on the incentive structure in the financial markets. As I stated earlier, the presence of Nordic banks in the Baltic market is, of course, a hugely important positive factor. Parent banks are sometimes considered to have an implicit responsibility for the stability of the banking systems in the Baltic countries. It is said that the Baltic banks are too small to fail. International experience lends support to this view, although the evidence is not always in one way. Hence, there are also potential risks. If parent banks are active in many countries of the region, a shock affecting exposure in one country may lead to a reduction in their exposure across the region. Build-up of exposures to common risk factors in a region may also increase the potential for contagion - a reduction in lending to countries not affected by a crisis. The potential for contagion is naturally higher in highly integrated economies. Another potential risk factor is the smallness of the banks in the Baltics combined with their high profitability. While the Nordic banks have high profitability in all of their markets, profitability in the Baltic market is especially high. As a result, the share of banking groups' assets in the Baltics is significantly lower than the share of profits banks make in this region.
Financial stability is a necessary condition to allow the pursuit of other good objectives of public policy – avoiding mis-selling, competition in the provision of financial services etc, things that are rightly not done by the  BIS central bankers’ speeches  3  Bank of England but are important to society. Financial stability is not a superior objective to these other goals, but it is in my view a necessary condition to achieve them. And, in reforming regulation we should have in mind that a healthy and competing industry is one that does not rely on the support of public money, either explicitly or implicitly. Thank you. 4  BIS central bankers’ speeches