Since end-June 2007, international money and credit markets have been marked by volatility, illiquidity and reduced risk-willingness. The problems started in the US housing market, but rapidly spread to other financial market segments. Banks, funds and financial undertakings had to bring back on their books loans from bond markets, they started to question the financial position of counterparties and held on to their money. This led to a marked increase in premiums on interbank loans. When the banks no longer wanted to provide loans to each other, many central banks provided liquidity for an extended term and eased collateral requirements. In periods, Norges Bank has also provided extra liquidity to Norwegian banks. This has reduced swings in the interest rate that banks demand for giving loans to one another. Norwegian banks rely to a large extent on foreign funding. This is why the increase in money market premiums in the US and Europe quickly fed through to Norwegian interest rates even though Norwegian banks are profitable, retain confidence and have limited loss exposures. Banks and investors, both in Norway and internationally, now apply a higher premium and higher prices for providing capital for acquisitions, restructuring and investments, and highly leveraged companies have to pay high risk premiums on loans. It has become more difficult to procure financing. BIS Review 65/1008  11  Household credit growth has eased slightly, but remains high. Corporate credit growth is also high.

By bundling financial and non-financial services, they are able to better meet the needs of consumers. Second, embedded finance by financial players. Regulated financial institutions are reinventing their business models and leveraging on technology to connect with customers at more and varied touchpoints. Financial institutions are “embedding” their offerings in an array of non-bank digital platforms in an attempt to reach new customers at lower acquisition costs. Embedded finance combines the benefits of platform economics with the trust premium that people still place with regulated financial institutions. Central banks and regulators should welcome both these developments. They offer the prospect of more efficient, more affordable, more inclusive financial services. 1/4  BIS central bankers' speeches  But we need to be alert to new sources of risk. If the distributor and underlying provider of a financial service are not the same entity, who is accountable to the customer? As the number of 3rd-party intermediaries involved in a financial service grows, there might also be increased operational risks. We will need to adapt our regulatory approaches. Pay greater attention to market conduct, consumer protection, and technology risks. Regulatory frameworks will need to become more modular and agile. Entity-based regulation remains relevant for the provision of key services such as deposit-taking, insurance, and the offer of securities. But for the growing number of players who offer niche financial services, we need to rely increasingly on activity-based regulation. This is all still fairly familiar ground, as the fundamental structure of financial services remains largely intact.