My colleague James Proudman, the Executive Director for UK Deposit Takers at the Prudential Regulation Authority, will talk later about the role of supervision in influencing conduct at the firm level. Governance and Accountability  As cases of misconduct were uncovered, too many senior managers pled ignorance about the unethical practices that were taking place on their trading floors. In response, the UK introduced the Senior Managers 8  9  Regime (SMR) , Certification Regime and a set of Conduct Rules . At its heart, the SMR aims to improve governance and culture within financial institutions by ensuring clear allocation of responsibilities and lines of accountability amongst the most senior individuals in firms. The Certification Regime requires firms to assess and certify the fitness and propriety of employees deemed capable of causing ‘significant harm to the firm or its customers’ every year. If misconduct does occur, the SMR includes stronger powers for regulators to hold individuals to account. It includes a statutory ‘duty of responsibility’ that requires all Senior Managers to take reasonable steps to prevent regulatory breaches in areas for which they are responsible. If a regulatory breach does occur, the regulator can impose sanctions on the individual, including financial penalties and suspension. The regime includes two prescribed responsibilities relating to culture - overseeing the development of the firm’s culture and ensuring the adoption of the firm’s culture in the management of the firm. These prescribed responsibilities would typically be allocated to the Chairman and CEO respectively.

To facilitate the funding of banks operating in Norway, a swap arrangement was established allowing banks to exchange covered bonds for government securities for up to NOK 350 billion. A number of banks have made use of this facility, so far in an amount totaling NOK 80 billion. The arrangement provides banks with Treasury bills. Banks have used these as collateral for loans, sold them or kept them as liquidity reserves. Norges Bank has also expanded its use of its ordinary instruments. We have supplied additional liquidity through our loan facilities and made arrangements for banks to furnish a greater range of securities as collateral for the loans. We have also provided loans with longer-than-usual maturities. The longest maturities have been two- and three-year loans, which have been geared to small banks. Norges Bank has also supplied Norwegian kroner through currency swaps and offered USD loans to Norwegian banks. Norges Bank entered into a swap agreement with the Federal Reserve, authorising a loan of up to USD 15 billion. The measures have been effective. Money market rates, which for a period were above 8 per cent, are now approximately 3½ per cent. In this period Norges Bank reduced the key policy rate by 3.75 percentage points to 2 per cent on 25 March. Banks’ lending rates have decreased considerably. Credit flows have improved, but access to credit is still difficult for enterprises. Money market premiums have fallen. In the first quarter of 2009, premiums on three-month interest rates in Norway stood at 1.2 percentage points.