For a small, open economy with its own currency not to have a significant foreign exchange reserve with the possibility for the central bank to use it in a flexible manner is a risky strategy. For the Riksbank to be able to carry out its tasks and thus contribute to maintaining confidence in the Swedish economy, both in stable economic times and in a financial crisis, the Riksbank must be financially independent. This means that its equity capital and earnings capacity must be sufficiently large. The levels for equity capital in the proposal do not attain this aim. It is worrying that our views have not been taken into account in this area. In my opinion, this is the wrong way to go, if politicians and citizens still want to have an independent central bank that can take powerful action using its entire balance sheet to stabilise the economy. Our opportunities for international cooperation are also restricted, which I find very unfortunate. I do not believe that one really understands here how the global central banking cooperation works. The Riksbank has the major benefit of belonging to the circle of central banks that are at the core of what is usually called the central banks’ bank, the BIS. This is where much of the cooperation between central banks is coordinated, and the Riksbank has long enjoyed a deep-rooted credibility by constructively cooperating and helping out when other central banks need support and funding, through IMF programmes or in pure central banking operations.

The global banks play a major role as providers of liquidity in home, host and international markets. Even in emerging markets, debt and equity market liquidity often relies on active participation by global banks. Enhanced regulatory requirements should therefore be targeted, risk appropriate, and applied in a non-discriminatory way on banks posing the same level of risk, be they domestic or global banks. The safety buffers for global banks, which clearly needs to be enhanced, cannot therefore rest too heavily on premiums in up-front capital, liquidity and other regulatory requirements. We should strengthen supervision and crisis resolution capabilities to complement and avoid an over-reliance on regulation. Strengthen continuous supervision rather than rely excessively on upfront regulatory requirements. Effective international coordination among supervisors requires more open and transparent sharing of information between home and host supervisors – home supervisors will want to be well informed about the requirements imposed on significant overseas subsidiaries, and host supervisors need to be kept apprised of developments at the parent bank. Cross-border supervisory colleges and crisis management groups are therefore critical, and they have to be strengthened to ensure that  2  BIS central bankers’ speeches  national policy measures are globally consistent and mutually supportive. So that is the first risk, of going too far with respect to global banks such that the global financial system is impaired. The second risk is that of the fragmenting or balkanising finance. We are already seeing signs of this, and most especially in the wake of the European crisis.