But looking at the comparison, I wonder what banks in the other euro area countries that have significantly reinforced their capital ratios will think. Moreover, unlike Spain, most of our peers have activated – or have announced the activation – of countercyclical capital buffers, which may partly explain the increase in their solvency ratios. 6/15  Dividend policy  It is worth remembering that the clearest route to strengthening capital is through the organic generation of reserves. That leads once again to highlighting the importance of profitability and, in relation to profits, of dividend policy. Each bank should give structure to this dividend policy, bearing in mind its present and future capital needs. As I have occasionally indicated, in my view dividend payments are excessively rigid. They have functioned more as a fixed remuneration than as a genuine, variable distribution of each year’s return. In this respect, one possibility used by banks at various times has been to use scrip dividends. These allow remuneration to the shareholder to take the form of the delivery of new issued shares, instead of cash. This policy enables the necessary remuneration of capital to be combined with the organic generation of capital, although it inevitably entails some dilution of earnings per share, as also occurs whenever there are capital increases. It is the responsibility of each bank to assess these aspects when setting its dividend policy.
At present, we base our forecasts on the development of the repo rate expected by the financial markets. Professors Giavazzi and Mishkin give several reasons why they advocate that the Riksbank should present its own interest rate forecasts. Perhaps the most important reason is that this would show most clearly what the Riksbank’s own expectations of future monetary policy are. This would make it easier for companies and households to plan for the future. This point of view is easy to agree with, and I have expressed similar thoughts myself in various speeches. We are currently considering and working on how this might be achieved. Compensating for earlier deviations from target As I mentioned to begin with, there are a couple of points where I do not agree entirely with the authors’ conclusions. One such point is how the Riksbank should act if inflation has been below, or above, target for a long period of time. Professors Giavazzi and Mishkin suggest that if inflation has been below target for a long period of time, monetary policy should partly compensate for this by being extra expansionary in the future. As I understand it, the background to this is the developments in recent years, when inflation has been below the target. Here it is worth pointing out that when inflation has been below target level for a long period of time, there have been good explanations for this. The most recent episode has mainly been due to the fact that productivity growth has been surprisingly high.