Price stability, defined as low and stable inflation in line with that of trading partners, was established as an anchor for economic policy.41 To implement this policy, both the monetary system and Norges Bank had to be re-established as independent institutions. Whether government gave or Norges Bank repossessed control over the policy instruments, especially the key policy rate, is subject for debate. But the result was that Norges Bank in fact gained independence in interest rate setting to achieve the government-defined policy objectives. Inflation fell from double-digit figures around 1980 to 2–3 percent a decade later. During the banking crisis around 1990, Norges Bank played a key role, which Bomhoff had paved the way for 90 years earlier, as a provider of liquidity to troubled banks. During the 1990s, the intellectual basis for modern monetary policy was laid in Norges Bank. The transition from exchange rate targeting to inflation targeting, with an explicit price  38  In a letter to Norway’s ambassador in London dated 1963, for example, he wrote: “As you may have seen from the Norwegian newspapers, I have in several lectures proposed that we should consider building entirely new towns as part of solving the problems of the districts.” Discussions with Viking Medstad on 3 January and 24 October 2013. 39  http://www.nhh.no/Files/Filer/Om%20NHH/lehmkuhlforelesning/lehmkuhl_1972.pdf. 40  Berg, Thomas N. (2011): “Mellom politikk og marked” [Between policy and market], Norges Bank Staff Memo no 19, Norges Bank. http://www.norges-bank.no/Upload/Publikasjoner/Staff%20Memo/2011/StaffMemo 1911.pdf , p. 62.

This is why the ESAs and national supervisors together with the central banks are members of the ESRB and why the ESRB and the ESAs form the European System of Financial Supervisors. The ESRB’s main tasks are threefold: to identify and prioritise systemic risks; to issue early warnings when significant systemic risks emerge; and to issue policy recommendations for remedial action in response to the risks it identifies. The ESRB will not focus on individual institutions, individual countries or individual macroeconomic issues – it will take a strong horizontal focus, across countries, across sectors and across the boundaries between the financial sphere and the real economy. Interlinkages and spillovers should be key terms in its analysis. To achieve these tasks, the ESRB is drawing on information from many sources, including strong analytical input from its members; intelligence gathered from financial system participants; and the data necessary to understand the nature of interlinkages that define the financial system. ESRB analysis must be broad-based covering potentially any aspect of the EU’s financial system – markets, institutions and infrastructure. The ESRB is being established at a time when the concerns of markets and policy-makers about short-term vulnerabilities seem to prevail over perceptions of medium- and longer-term risks. This confronts the ESRB, as well as other macroprudential bodies around the world, with specific challenges. The ESRB needs to consider what activities to initiate, well before a fully-fledged macroprudential policy framework is developed in the medium term.