Clothing prices, as measured in the consumer price index, have fallen by 15 per cent since 1995. In comparison, other consumer prices  2  BIS Review 65/2002  have on average risen at about the same rate in the same period. In 2002, cheaper clothes will save Norwegian consumers about NOK 4-5 billion.1 I would like to highlight two factors that have had a particular influence on economic policy when we compare today’s situation with the situation 30 years ago. •  The phasing-in of a large petroleum sector and thereafter of the revenues from this sector. •  Development of the Norwegian financial market and its integration in the global market. Norway's large petroleum revenues pose considerable challenges to economic policy. Norway’s export revenues and central government revenues can be expected to be high as long as production remains high. At the same time, we know from experience that revenues may vary sharply from year to year. As a result of the high level of earnings and fluctuations in these revenues, the most important contribution fiscal policy can make to stabilising the Norwegian economy is to provide a sound, longterm strategy for the use of petroleum revenues. Attempts to use the central government budget to fine-tune economic activity may achieve the opposite of what is intended if these attempts are perceived as a break with the long-term strategy for the phasing-in of petroleum revenues. Second, economic agents look to the future today when they make decisions about consumption and investment, wages and prices.

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.