Source: IM F  GDP growth in the USA Annual percentage change 5  5  4  4  3  3  2  2  1  1  0  0  -1  -1  -2  -2  -3  -3 00  01  02  03  04  05  06  07  08  09  10  11  12  Sources: IMF and the Riksbank  BIS Review 109/2010  9  Purchasing managers’ index Index figure above 50 indicates growth 65  65  60  60  55  55  50  50  45  45  40  40 Euro area  35  35  USA  30  30 00  01  02  03  04  05  06  07  08  09  10  Sources: Institute for Supply M anagement, M arkit Economics and Swedbank  Inflation in the USA Annual percentage change 6  6  5  5  4  4  3  3  2  2  1  1  0  0 -1  -1 CPI USA  -2  -2  CPI excluding energy and food USA  -3  -3 00  01  02  03  04  05  06  07  08  09  10  11  Source: Bureau of Labor Statistics  Central banks’ balance sheets Per cent of GDP 30  30 The Riksbank  25  20  25  ECB Federal reserve  20  15  15  10  10  5  5  0 jan-07  0 jul-07  jan-08  jul-08  jan-09  jul-09  jan-10  jul-10  Sources: Bureau of Economic Analysis, Eurostat, Statistics Sweden and the respective central banks  10  BIS Review 109/2010  GDP growth in the euro area Annual percentage change 5  5  4  4  3  3  2  2  1  1  0  0  -1  -1  -2  -2  -3  -3  -4  -4 -5  -5 00  01  02  03  04  05  06  07  08  09  10  11  12  Sources: IMF and the Riksbank  Inflation in the euro area Annual percentage change 5  5 HICP total HIKP excluding energy and unprocessed food  4  4  3  3  2  2  1  1  0  0  -1  -1 00  01  02  03  04  05  06  07  08  09  10  11  Source: Eurostat  Public finances in the OECD-area Per cent of GDP 2  100 Government net lending General government gross financial liabilities  0  95  -2  90  -4  85  -6  80  -8  75  -10  70 00  01  02  03  04  05  06  07  08  09  10  Source: OECD  BIS Review 109/2010  11  Interest rate differential against Germany Percentage points 10  10  Greece Ireland  8  8  Italy Portugal Spain  6  6  4  4  2  2  0  0  -2 Jan-07  -2 Jul-07  Jan-08  Jul-08  Jan-09  Jul-09  Jan-10  Note.

In order to reap the benefits from economies of scale and scope, Nordea has chosen to concentrate its different functions, such as treasury operations, credit decision-making and risk management to specific centres of competence within the group. It is therefore questionable whether the different entities within the group really are selfcontained, even if they are legally independent subsidiaries. With this structure, it is also less likely that the group as whole can survive a failure of one of its entities. Hence, operationally and in economic terms, Nordea increasingly resembles a bank with a branch structure. A consequence is that the present regulatory structure may be less well-suited for efficient supervision and regulation of the group. A fourth challenge is that the practicalities of supervision and crisis management are greatly complicated as the number of relevant authorities increases. In normal times, this means that the regulatory burden for the financial firms increases. Also, the need for supervisory cooperation increases, which demands new supervisory procedures and the creation of common supervisory cultures. In times of financial crises, sharing information and coordinating action becomes a difficult priority, especially since time is a scarce resource in crises. A fifth challenge is that conflicting national interests emerge as banks become truly crossborder. The national authorities have a national mandate and are responsible to the national government or parliament. They are therefore unlikely to take the full external effect of their actions in other countries into account.