The low inflation can largely be explained by the surprisingly strong productivity. Over the past fifteen years Sweden has had higher productivity growth than many other industrial nations, including the United States. Productivity is important for the development of inflation in the slightly shorter term. If productivity rises quickly, wages can increase without the companies’ costs rising. High productivity growth thus leads to low inflationary pressure, all other things being equal. We still know too little about what lies behind the strong productivity growth. There are many indications that globalisation and increased use of information technology play an important role. 2  BIS Review 54/2007  These changes have probably led to many companies meeting tougher competition that has forced them to rationalise. However, IT developments have also given them new tools to make their production more efficient. In other words, there has been an increase in both the driving forces and the opportunities for making production more efficient. We must become better at understanding the driving forces behind productivity growth. For instance, the Riksbank has begun a project to gain greater insight into the relationship between investments in IT, organisation changes, on-the-job training and productivity. At the beginning of May we organised a seminar where a number of organisations and authorities presented their views on the situation. In December we will also be organising a workshop where external researchers will contribute valuable points of view. As a complement to this, we are creating channels for direct contacts with companies.

This shift away from a "one-size-fits-all" minimum liquidity requirement would be in line with international best practices for liquidity risk management. The new framework will be announced in the second half of this year. Its implementation will be phased out to minimise potential disruptions to financial markets. As business models and technologies continue to evolve, MAS has kept close touch with market participants and discussed with them the possible risk implications of new activities. We have avoided pre-empting market developments with premature regulation. Regulation has to be responsive but it cannot prejudge how the market will develop and business strategies will crystallise. MAS has issued regulatory guidelines on the provision of financial services through new delivery channels. Examples include the policy statement on capital treatment of internet-only banks; guidelines on technology risk management for all institutions engaging in internet banking; and sound practice guidelines on internet securities trading. The proposed SFA will introduce an authorisation regime to cater to new trading systems, often referred to as Alternative Trading Systems, so as to increase the scope of products available to investors. Developing talent Attracting and developing talent, both Singaporean and foreign, is critical to fostering innovation and a vibrant financial centre. In January this year, MAS announced that a Financial Network for Excellence in Training (f-NExT) would be established to encourage greater collaborative efforts in enhancing workforce capabilities within the financial sector. The Institute of Banking and Finance (IBF) will take on a new role as the central executive arm of f-NExT.