Happily, the government has now appointed a financial crisis commission with the task of looking more closely into these issues. This is good news, and the sooner we can reach a satisfactory solution regarding how best to allocate responsibility, powers of authority and tools, the better. And although I do not wish to anticipate the commission’s inquiry, I see a future role for the Riksbank with regard to macro-prudential supervision. Monitoring and preventing systemic risk is very much in line with our current macro-oriented work on safeguarding price stability. Not least because the cyclical factors affecting price stability may lead to the build-up of systemic risk. Increase the resilience of the banking sector 4 The third type of measure concerns, as I said, strengthening the banking sector’s resilience in general. This is important not just because of the current developments in the housing market. The financial crisis showed very clearly that the current regulatory framework for the banking sector is inadequate. Although Swedish banks escaped relatively lightly this time, we could see how banks in other countries suffered acute liquidity and capital shortages. And this is why we now have an international agreement on the new regulatory framework for the banking sector – Basel III – which establishes new minimum requirements that the banks must meet with regard to both capital and liquidity. This is, of course, welcome. But the fact is that some weaknesses still remain. For example, the implementation period for the Basel III rules is very long.

So I am very pleased that at end-June this year the Group of Governors and Heads of Supervision, which I had the privilege to chair, adopted the consultative document regarding global systemically important banks. The envisaged measures have several objectives. These objectives include reducing the probability of an adverse event occurring, reducing the extent or impact of the failure of a systemically important bank and reducing the cost to the public sector. The framework is built on two building blocks that increase the loss absorbency of global systemically important banks. The first building block is a gradual capital surcharge based on the degree of systemic importance, ranging from 1% to 2.5 % of risk weighted assets. 2  BIS central bankers’ speeches  The second building block is that the additional capital requirements have to be met with common equity. The unambiguous choice of common equity as the unique instrument to meet the capital surcharge should ensure robustness. These measures complemented with supervisory judgement should capture structural and cyclical changes in the banking system. Shadow banking The introduction of more stringent capital requirements for credit institutions under Basel III as well as the requirements for global systemically important banks, may provide incentives for banks to shift part of their activities outside the regulatory perimeter. It is therefore decisive that we continue our work to improve our capacity to identify and assess the potential risks stemming from the shadow banking system. We need to develop a better understanding of the interconnections between regulated and non-regulated entities.