Major banks and dealers at the core of these markets generate both short- and longer-term credit and market risk exposures from a number of sources and activities, including trading positions, loan commitments that support securities issuance, and warehousing positions in advance of packaging and distributing them. Retained interests associated with securitization transactions are substantial relative to capital of the largest firms. And the importance of securitization for the firms-both from a funding and revenue generation standpoint-provides an incentive for them to support investors in these products in ways that may go beyond contractual obligations. •  The post-trade processing and settlement infrastructure, particularly in credit derivatives, is still quite weak relative to the significance of these markets, although the major dealers and buy-side investors are making a substantial effort to address these problems. The total stock of unconfirmed trades is large and until recently was growing considerably faster than the total volume of new trades. The time between trade and confirmation is still quite long for a large share of the transactions. The share of trades done on the available automated platforms is still substantially short of what is possible. Until the adoption of a new protocol last fall, firms were typically assigning trades without the knowledge or consent of the original counterparties. Nostro breaks, which are errors in payments discovered by counterparties at the time of the quarterly flows, rose to a significant share of total trades. Efforts to standardize documentation and provide automated confirmation services has lagged behind product development and growth in volume.

GDP for Mainland-Norway has on average increased by 2.8 per cent annually since 1990. This compares to 1.7 per cent in Sweden, 2.1 per cent in Denmark, 1.9 per cent in Finland and 2.5 per cent in Iceland over the same period. The differences for average GDP growth since 1995 are somewhat smaller. Although GDP growth in Norway was moderate in 2001, capacity utilisation in the Norwegian economy remains high. So far, the impact of the international slowdown on the Norwegian economy has been limited, partly due to high oil prices. Unemployment has been low since the mid-1990’s. Private consumption is expected to remain buoyant due to high wage growth and an expansionary fiscal policy in the years ahead. Prices for domestically produced goods and services are rising fast. Inflation in Norway is being dampened by a close to zero rise in prices for imported consumer goods. The different cyclical developments in Norway are also reflected in the stock market. Norwegian stock prices have become much less correlated with world markets over the last years. The correlation is considerably lower than in the other Nordic countries. The correlation for Denmark is also rather low, but this is partly due to low exchange rate correlation. When looking at the correlations using national currencies, the Danish correlation is higher and more in line with that for Sweden and Finland. BIS Review 47/2002  1  Iceland and Norway have the highest key interest rates among the Nordic countries, at 7.9 and 7.0 per cent respectively.