bust : monetary policy, leverage cycles, and financial crises, 1870 – 2008 ”, american economic review 102, pp. 1029 – 61. a more detailed analysis is provided in the article “ financial imbalances in the monetary policy assessment ” in the riksbank ’ s monetary policy report published in july 2013. see, for instance, imf “ world economic outlook ”, april 2012, a. r. mian, k. rao and a. sufi ( 2011 ), “ household balance sheets, consumption, and the economic slump ”, chicago booth working paper, november 2011 and k. dynan, ( 2012 ) “ is a household debt overhang holding back consumption? ” brookings papers on economic activity, spring edition. bis central bankers ’ speeches imbalances that can affect confidence in the country, the currency and the banking system. i consider the assessment we made in july to entail on the whole a good balance between these difficult questions. macroprudential policy needs to be implemented without delay... at the same time, i consider it important to emphasise that the repo rate is a blunt instrument. other policy areas have more effective tools for influencing household debt. one such policy area is macroprudential policy, which entails limiting the risks in the financial system as a whole. if there were more effective tools available for managing and preventing financial imbalances, monetary policy would not need to take such risks into account to the same extent. at present, several countries and international organisations are working on producing and implementing a new framework for financial stability, where macroprudential policy will be in focus and the central bank will be given an important role. however, the design is slightly different in different countries. for instance, in the united kingdom the central bank has been given the entire responsibility for macroprudential policy, while in germany the responsibility has been given to a council, on which the central bank has a central position. it is important that a small country like sweden does not deviate from the international pattern, but also that it makes efficient use of the existing resources and competence. both the riksbank and finansinspektionen ( the swedish financial supervisory authority ) have important competence with regard to conducting effective macroprudential policy. the riksbank has considerable knowledge and experience of analysing the risks that might threaten the stability of the financial system, as well as of macroeconomic analysis and forecasting.

has wider powers to intervene directly at individual institutions. when times are good, it may also be tempting to ignore the warnings of the authorities and it may be difficult to resist the opportunity to expand when all the indicators are positive. the dramatic credit expansion of several of the swedish banks in the baltic region in euro is one example of a behaviour that entails considerable risks, something that the riksbank has long pointed out in its financial stability reports. there may therefore be good reasons for thinking about different ways to achieve a greater impact for our analyses and assessments in the future. can we be clearer and more direct when formulating warnings and risk scenarios? can we, for example, go public to a greater extent, for example by using open letters and so on, in order to increase the pressure on banks to change their risk behaviour? and how should we handle the increase in the banks'lending in foreign currencies? these are examples of questions that the riksbank and other central banks must now address. there is no doubt that the crisis has raised important and complicated questions. wars and crises usually strengthen the position of the state. this crisis is no exception. the central banks have taken over the issuing of banknotes, but the provision of credit is still essentially conducted on private markets. the general view is that it is not appropriate for the state to work, for example, with the credit assessment or risk assessment of individual loans. the state can establish rules and regulations for the market, but not work in the market itself. at the same time, faith in the ability of the financial markets to work effectively in all situations has been undermined. an effective financial sector contributes to growth and prosperity in the economy, and it is indisputable that more effective regulation and supervision are now required. in my opinion, however, it is important that the changes in the regulatory structures that are now being implemented are balanced and well considered. above all, i believe that it is important to avoid the sum total of all the regulations that are introduced restricting growth or, in the worst case, giving rise to new crises. it would be a mistake to underestimate the inventiveness of the financial sector and its ability to circumvent regulations of different kinds. producing a regulatory framework that makes the financial system safer and more secure without losing important welfare gains is really the major challenge that the authorities now face. thank you!