At the same time, we know that the implementation phase of the new banking regulations will be lengthy. Consequently, there is reason for Sweden both to proceed more rapidly than planned and to introduce stricter regulations than required by Basel III. The Riksbank’s work with financial stability Perhaps the most important lesson of the financial crisis is that we must take a broader approach to understanding and analysing systemic risks. Even if, before the crisis, we and other central banks pointed out individual factors as possible threats to financial stability, nobody really succeeded in predicting the situation that then arose. The traditional approach of analysing institutions, markets and infrastructure separately was not sufficient. During the  7  See the Riksbank’s report to the Riksdag 2009/10 RB:4 “Report on certain areas that require investigation as a result of the financial crisis”, www.riksbank.se. See also Economic commentaries no. 1, 2010, www.riksbank.se. 8  BIS central bankers’ speeches  crisis, problems in individual institutions and markets rapidly spread and had far-reaching consequences for completely different markets in other parts of the world. The financial crisis also revealed the strong link between the Riksbank’s two main assignments – monetary policy and financial stability. Without stability in the financial system, it is difficult to conduct monetary policy, at the same time as price stability promotes financial stability. Normally, we use different types of measure for each of these two tasks. However, during the crisis, we needed to use both types of measure.

Reforming and adapting financial regulation remains an urgent priority. G20 Leaders have agreed on detailed principles and a roadmap. The newly formed Financial Stability Board has the difficult task of steering regulatory reform. We are very fortunate that the FSB, as well as the Basel Committee, has been enlarged and become a true reflection of the world economy. As you may know, the European Union is moving towards the creation of a new European Systemic Risk Board (ESRB) which will be responsible for macro-financial supervision and will draw extensively on the resources and expertise of the Eurosystem. In France, the Government has decided to create a single authority responsible both for banking and insurance supervision, with very close links to the Central Bank. This will enable us to look at the state of and developments in the financial system from a truly systemic perspective. Much remains to be done. Let me outline the main objectives. In the current circumstances we should (1) try and keep up the momentum in the pursuit of reforms, (2) achieve balance in the implementation of the agenda; and, (3) ensure consistency between our regulatory actions and macroeconomic policy. Keeping up the momentum Over the last few weeks, major international banks have announced impressive quarterly profits. It is striking that these performances were achieved only a few months after some of those same institutions came very close to failure. This might give the impression that the financial sector has recovered its balance and that no further reforms are necessary.