as a percentage of their total assets. so far, there are 15 banks and mortgage companies participating in the arrangement. several participants report that the credit swap arrangement is a good source of funding in today ’ s market. the government receives, which is reasonable, compensation for making treasury notes available. the rate has been in the order of a half per cent. with a large volume of treasury notes in circulation, we see the possibility of the formation of an interbank market for loans in nok, where government securities are used as collateral. in the event, this would provide the norwegian money market with greater insulation from the shifting weather conditions in the us dollar market. we are not there yet. banks ’ equity capital accounts for 6 per cent of total assets. this is low from a historical perspective, but not compared with banks in other countries. banks are procyclical. they amplify business fluctuations. during an expansion, loan losses are low and bank earnings increase due to higher turnover. capital is readily available. during a downturn, bank losses increase, and earnings and access to equity capital may deteriorate, forcing banks to tighten lending. norwegian banks need more capital in the period ahead to enable them to absorb expected and any unexpected losses and to satisfy tighter counterparty capital requirements. the government ’ s offer to supply core capital through the government finance fund will now allow banks to improve their financial strength without rationing credit. there must be no doubt that the banks have the capital they need. the measures i have discussed have been implemented to lessen the effects of the financial crisis. another question is which lessons we can draw. the authorities in many countries are now working towards increasing the robustness of financial markets. four points stand out. first, for a given risk assessment, banks must be subject to higher equity capital requirements. banks calculate their capital requirements based on internal risk models. the models capture historical loan performance. the capital requirements are determined by the degree of credit risk exposure as derived from this historical performance. one drawback is that the historical basis for the models, and hence for the risk assessments, is too limited. banks must not be able to reduce capital below a minimum level even if they extend loans that, according to the models, seemingly involve low risk. second, regulation must to a lesser extent contribute to amplifying cyclical fluctuations. with losses now rising, as a result of the abrupt and pronounced turnaround, banks must increase equity capital. consequently, the rules

martin redrado : dynamism and soundness in the face of the crisis article by mr martin redrado, governor of the central bank of argentina, published in el chronista, 8 may 2009. * * * the decades of macroeconomic instability and recurrent crises that we have faced in argentina were not harmless in terms of welfare. although latin american countries have shown lower economic growth rates and higher macroeconomic volatility than other regions, the case of our country is on a different scale. if we consider the past 30 years, the average growth in latin america was less than half of asia ’ s, with volatility that nearly doubled asian levels. in that period of time, argentina ’ s growth was three times lower than in emerging asia, while volatility turned out to be eight times higher. this process triggered enormous economic and social losses, hindering on our chances to develop and leading to changes in our citizens ’ behavior. indeed, the consequences of this process include portfolio dollarization ; fiscal, financial or external dominance ; obstacles to develop a long - term credit market ; and the marked negative correlation between changes in retail deposits and foreign exchange fluctuations. these factors, which undermined the power of some traditional monetary policy instruments, have played a key role in the design of our monetary - financial system. in these cases, it is essential to ensure systemic stability and build “ buffers ”, which give priority to avoiding " the next crisis " and minimize the effects of disruptions. in particular, our risk management strategy based on four pillars ( permanent equilibrium in the monetary market, managed floating exchange rate regime, maintenance of external liquidity buffers, appropriate financial regulation and supervision ) is fully compatible with these aims as well as with the tools available. this scheme, which was carefully developed along recent years, now allows us to overcome each volatility episode in the new international context, minimizing the impact on the real economy and avoiding inconsistencies that might make it unsustainable over time. this has not occurred by chance. it was the consequence of the central bank ’ s deliberate strategy, which has prepared us to deal with the new scenario in the best possible way. one of the main structural reforms in our system has been, for example, the design of a specific regulatory framework preventing currency mismatches, reducing the exposure to the public sector, and maintaining prudence when introducing financial innovations. in addition, we accumulated international reserves during the “