##ebtedness and in housing prices, and the low price of risk. we also wrote about the problems on the us mortgage market. but the crisis hit us from an unexpected direction. we hadn ’ t expected that the banks would face such comprehensive problems in obtaining funding on the markets. secondly, the riksbank reacted quickly and forcefully once the crisis hit sweden. the comprehensive lending to the banks, combined with the rapid and forceful lowering of the repo rate, contributed to mitigating the impact of the crisis on the swedish economy. one fortunate circumstance was that lending to the banks is what a central bank is always assumed to be able to do in its role as lender of last resort. the measures we needed to undertake were thus within the framework of our remit. what was unusual this time was that the riksbank also needed to provide the banks with funding in dollars and to provide other central banks with euros. i will return to this later. the future the financial crisis led to a global realisation of the need to reform the regulations governing the financial sector. i will now give an overall description of some of the work currently underway to reform these regulations. i will start with the international work, continue with the swedish regulations and then address our internal work at the riksbank. wide - ranging international work on the prevention of new financial crises at present, comprehensive international work is underway to adjust the framework of the financial sector. the aim is to strengthen resilience towards similar financial crises in the future. this work is being carried out by several different international bodies, for example the g20, 4 the imf, the fsb, 5 the basel committee and the european union. the first three of these are primarily focused on negotiation and agreements dealing with the direction of work, while the latter two are focused on the formulation of regulations and decisions concerning these. the basel committee has agreed to tighten the regulations for banks. the banks will be required to maintain more and better capital than under previous regulations. one important element of the new regulations is that the banks ought to build up capital in good times that they can use to deal with losses in bad times. the banks will also be forced to improve their liquidity through longer and more stable borrowing. the european union has established a new authority, the european systemic risk board ( esrb ) and three new supervisory authorities, the european banking authority ( eba ), the european insurance and occupational pensions authority ( eiopa ) and the

mr. backstom remarks on the swedish economy address by the governor of the bank of sweden, mr. urban backstrom, at svenska handelsbanken ’ s seminar in new york on 7 / 10 / 98. first of all i should like to thank svenska handelsbanken for the invitation to meet with you today here in new york. i arrived late yesterday from the 1998 annual meeting of the international monetary fund in washington d. c. the discussions in washington over the weekend focused on the current problems in the world economy. at the centre was of course the crises in emerging markets that began in thailand last year, which spread to other economies in east asia and russia and which most recently have been pressuring economies in latin america. lately, we have also seen some contagion effects spreading to the industrial countries. stockmarkets have been falling and there have also been some problems in connection with the long - term capital hedge fund. however, today i will talk about the swedish economy. i shall be using a fairly broad brush to paint you a picture of how our economy has developed in recent years and i will conclude by saying a few words about the present situation in my country. positive trend in recent years the swedish economy is now entering its sixth consecutive year of favourable growth. the average annual gdp growth rate since the summer of 1993 is almost 3 per cent. this is an improvement compared to the average that has characterised our economy in the past twenty - five years. it has been accompanied by external surpluses that are larger than for many years, making it possible to repay foreign debt. government finances, moreover, now show a surplus instead of the earlier deficits, which means that government debt is already being reduced in relation to gdp. the latest figures show that prices in sweden ’ s economy are virtually stationary. the falling trend in market interest rates in recent years has been a major factor here in that it has reduced house mortgage interest expenditure and thereby temporarily exerted a downward effect on inflation. the underlying price trend is not, in fact, as low as the cpi figures might suggest but that does not alter the conclusion that in the years ahead, inflation will continue to be low. if sweden sticks to disciplined fiscal and monetary policies, together with other ways of enhancing economic policy ’ s credibility, we have a real opportunity of reinstating the tradition of price stability that existed in sweden prior to the 1970s and 80s. let me give you a short historical background to our current economic