On the other hand, growth in advanced economies was weak and euro area GDP fell towards the end of the year. Central banks abroad announced that the key rates would be kept at a low level for a prolonged period. At the monetary policy meeting in March, Norges Bank underlined that weak growth prospects abroad and the strong krone were keeping inflation at a low level and curbing activity in some sectors. The key rate was reduced to 1.5 percent at that meeting. Europe is now in a downturn. Many countries are struggling with large deficits and mounting government debt. Structural reforms are being implemented, pension schemes are being tightened and tax systems are under review. At the same time, tighter credit standards and increased capital requirements will limit the supply of bank credit. In addition, a number of countries must restore competitiveness after a period of high cost growth prior to the financial crisis. In the short run, the tightening measures pull down activity and push up unemployment. Central banks in other countries are using strong measures to prop up activity and inflation. As shown in the chart, key rates among many of our trading partners are close to zero and are expected to remain low for a long period. In the US, UK and Japan the central banks have made large-scale government bond purchases in order to push down long-term interest rates. The European Central Bank (ECB) has also stretched itself, for example by providing long-term loans to banks.

These would include vulnerabilities resulting from global imbalances, growth prospects, developments in housing markets, creditworthiness of borrowers, to name a few. The monitoring involves processing large amounts of (often disparate) information of a statistical nature and is based on market sources. In addition, continuous market intelligence efforts are essential for effective risk monitoring and the early detection of new financial instruments, practices or business strategies which could create vulnerabilities and risks in financial markets. In the case of the Risk Board, market intelligence will be complemented by what could be called “institutional intelligence” and “policy intelligence”, given the qualitative information and expert knowledge available to central banks and supervisory authorities represented in the ESRB. The Board’s independent, impartial status could prove to be invaluable in the surveillance and identification of risks viewed as material. Risk monitoring is facilitated by a large set of tools, including contemporaneous financial stability indicators and forward-looking early warning indicators and models. These tools need to be regularly revised and updated in order to capture innovation in financial markets, fuelled by new products and business models. Macro-prudential indicators comprise a vast set of indicators – on the macroeconomic environment, financial markets, financial institutions and financial system infrastructures. More specifically, they include macroeconomic aspects, financing conditions, monetary conditions, asset valuations, risk appetite, market liquidity, funding liquidity, credit risk, financial strength of institutions, and others.