This is primarily a matter of using tools aimed at financial companies, as it is within these companies that problems that may ultimately lead to a financial crisis can arise. But there may also be reason to use tools aimed at households and non-financial companies. Such tools can form important complements, for example by dampening demand for credit. Naturally, there are already policy areas that directly or indirectly influence financial stability. As regards the housing market, which is a sector that is creating a great deal of unease in Sweden due to high indebtedness and high prices, this is influenced by factors such as regulations for tax deductions for interest payments, changes to property tax, rent control and other regulations that affect incentives for housing construction. But decisions on measures in these areas are primarily taken on the basis of other goals than safeguarding the stability of the financial system. In micro supervision, which is the kind of supervision carried out by Finansinspektionen in Sweden, a series of different tools is also used to influence financial stability. However, at present, Finansinspektionen’s remit is focused on dampening risks among individual institutions, not in the system as a whole. What we need, quite simply, are specific tools for macroprudential supervision that can be used with the direct aim of promoting stability in the system. This will make it possible to counteract the systemic risks created by policies in other areas so that the system as a whole remains stable. The housing market is a good example of this.

Let me briefly mention a few of the lessons from our experience in Covid-19. First the capital framework does not in practice support use of bank capital buffers in a stress as we intended7. And that would have mattered a lot in the absence of the substantial government support for the corporate sector. Second, we need to change our approach to stress testing in a stress if we are to avoid those stress tests further amplifying any downturn8. And third, in a shock of roughly half the size of the global financial crisis, it was only large-scale use of central bank balance sheets that calmed dysfunction in the system of market-based finance.9 We are continuing to learn through the Russia-Ukraine crisis too. We are exploring concentrations in, and interconnections across, energy and other commodity markets, the financial system, and the real economy, as well as the potential for feedback loops between them. And we have observed too that commodity markets are relatively opaque. We must now develop the macro-prudential framework to reflect the lessons from these recent stresses. Looking beyond recent events, neither the financial system nor the economy stands still: there are clear structural changes that macro-prudential policy must confront. 1.The rise of market-based finance: vulnerabilities that are as much global as domestic One key challenge is that many vulnerabilities are as much global as they are domestic.10 That includes non-bank, or market-based, finance. Non-bank financial institutions currently represent around 50% of global (and UK) financial sector 4/7  BIS central bankers' speeches  assets.