Another example is that the Riksbank has entered into what are known as swap agreements with the Fed and the ECB, which means that if necessary we can borrow dollars or euro in exchange for Swedish kronor. This type of swap agreement is, put simply, an agreement to buy a currency at a particular time and to sell it back at a later date. A further measure is that we accept more types of security as collateral when the banks borrow money from the Riksbank. Moreover, the Riksbank has in different contexts extended the list of eligible counterparties so that more financial agents will have the chance of easier management of liquidity and funding. Need to coordinate? “Exit strategy” is a buzzword that has been used for a while now. There is currently much discussion on how and when the measures taken around the world during the financial crisis are to be phased out. One question that is highlighted is that international coordination might be necessary for some of these processes. Some of the discussion concerns timing and how “aggressive” one can be when slowing down the powerful stimulation from fiscal and monetary policy. If one eases up on the stimulation too soon and too hard, it may jeopardise the economic recovery. If one instead eases up too late and too little, there is a risk that inflationary pressures will be too strong. Here I believe that every country must make its own assessment, as conditions differ in different countries.

Turning to direct investments, let me be clear that the PRA supports sensible diversification of portfolios backing annuities into assets such as infrastructure finance, commercial real estate lending and equity release. However, we expect insurers to do this properly. That includes:  6  https://www.bankofengland.co.uk/prudential-regulation/letter/2018/solvency-2-risk-margin  6  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  6  1. Having a strategy and risk appetite. Insurers need a disciplined approach. To put it flippantly, they should not be buying whatever is on the market this week or simply because they see their competitors buying those assets. The risks from direct investments are different to bonds. This is especially true if insurers originate their own Matching Adjustment assets: for example, by financing property development. Boards need to set clear risk appetites that capture all material risks at a suitable level of granularity, translating into a set of limits. 2. Building the right capabilities. Some insurers do investment in-house and others outsource. All insurers need people with sufficient market knowledge in all three lines of defence. That includes underwriting, risk management and potentially work out. 3. Developing appropriate management information, including for the board. 4. Appropriate valuations, internal ratings, and Matching Adjustment and Solvency Capital Requirement calculations. On this final point, we have provided considerable guidance on our expectations in Supervisory Statement 3/17 (SS3/17), particularly in relation to restructured equity release mortgage portfolios. One thing that has become clear to me is the importance of internal ratings.