speeches over time, the major swedish banks have also become increasingly dependent on borrowing on the capital markets. today, they only receive slightly less than half of their funding from normal deposits. the other half is comprised of what is usually called “ purchased money ”, which is to say money borrowed on the market ( figure 4 ). and almost two - thirds of that money comes from overseas. the fact that the major swedish banks do not base their funding on traditional bank deposits ( which are usually considered to be very stable ) but on market borrowing ( which is much more volatile ) is itself worth noting. on this point, sweden clearly differs from the pattern seen in many other countries ( figure 5 ). however, this is essentially a reflection of the structure of household saving in sweden. we swedes do not deposit our money in the bank, we invest in funds. private fund investment is thus far more widespread in sweden than it is in most other european countries. so our savings do not arrive at the bank directly as normal deposits, but take an indirect route via the funds and insurance companies that manage our savings, not least the ap funds. this is because they invest a portion of the money they manage in the banks ’ various borrowing instruments. this provides us with at least a good part of the explanation as to why our banks borrow more on the capital market and less from households than banks bis central bankers ’ speeches in many other countries do. but it does not explain why borrowing takes place abroad – and this is exactly the problem that i wish to address here. have the banks become too large? let me first make a small digression. as the swedish banks have grown so rapidly in recent decades, mostly by expanding overseas, it would not be out of place to ask whether they have become too large for sweden. is there, perhaps, a limit for how large a banking system can be in relation to the total production capacity and fiscal capacity of one country? the risks for society may, quite simply, become too high. experiences from iceland and ireland during the last crisis undeniably suggest this. and the swedish banks are certainly large. the combined balance sheet totals of the major banks are equivalent to slightly more than four times gdp ( figure 6, left - hand diagram ). this multiple is among the highest in europe, in the same order of magnitude as the united kingdom and the netherlands ( prior to the crisis, iceland was in ninth place ). however, i think that we should perhaps be

i have just described have the potential to significantly minimize the probability of bank failure. they may also assist in reducing the extent to which strains on bank capital and liquidity result in an impaired ability to extend credit to the real economy. but the probability of bank failure cannot be reduced to zero. the system of bank regulation and supervision therefore needs to be buttressed by arrangements for deposit insurance ( for protecting depositors in the event of default ) and for bank resolution ( to ensure orderly wind up and avoid knock - on effects to the rest of the banking system ). in this regard, an effective deposit protection scheme becomes an important aspect of the financial safety net especially in crisis times. although zambia did not experience bank failures during the current global crisis, work on the establishment of the deposit protection scheme is currently in progress. quick bank resolution is also an essential element that inspires confidence in the financial system. in zambia, for instance, work on liquidations has been going on for some time in some cases. the establishment of an effective depositor protection scheme should assist in early bank resolutions while providing protection to the most vulnerable depositors. chairperson, although the bank of zambia has exercised the function of lender of last resort ( lolr ) in the past during the banking crisis in the 1990s, there was no clear lolr policy framework in place. there has been renewed concern that the economic slowdown, if prolonged, could create liquidity pressures in the banking system in zambia. past experiences and current global slowdown build a strong case for a clearly designed lolr framework in which the central bank can exercise this function. the challenge in the regulatory and supervisory arrangements is that of operationalising the lender of last resort. lender of last resort should be seen in light of its role in promoting wider public good and systemic financial stability and ultimately, the wider economic stability. it plays an important role in the economy to avoid the social cost of a bank failure. some bank failures may lead to contagion effect on other banks which has the potential to transmit to the entire economy. lender of last resort should be an essential element of the wider institutional framework for governments and central banks for dealing with banking crises in addition to prompt corrective action, bank resolution and deposit insurance among others. distinguished delegates, the speed with which the crisis spread across the globe highlights the global nature of financial markets and the importance of cross border supervision. the risk posed by cross - border operations by financial institutions is clearly significant if not properly