##pin trust in the money we use. the financial crisis in autumn 2008 was triggered by the collapse of an under - regulated financial institution – the lehman brothers investment bank. 10 in the years preceding the crisis, lehman ’ s equity was less than two percent of its assets. with so little capital supporting loans, it does not take more than a puff of wind to bring down a house of cards. new forms of payment and new forms of money trust is necessary, though not sufficient, for money to function as a universal means of payment. it must also be efficient and safe to use. when you make a payment in a shop using a bank card, one of the largest systems we have is set in motion. payments move back and forth between banks. banks settle the payments by transferring money between their accounts at norges bank. your payment then becomes available in the recipient ’ s account, normally a few hours after the payment process was initiated. 4 / 9 bis central bankers'speeches the hub of the payment system in norway is norges bank ’ s settlement system, and it is our responsibility to make sure the system is efficient and reliable. turnover is substantial, and transactions totalling close to nok 240 billion were settled by norges bank in 2016 – every day. as a society, we are completely dependent on the smooth functioning of the payment system. without a stable settlement system, it would not be possible to use customer deposits in bank accounts as a means of payment, and substantial resources are allocated, both by banks and by norges bank, to make the system as robust and efficient as possible. technological innovation continues to bring us new methods of payment. using smartphone apps such as vipps and mobilepay, we can now make payments using our mobile phones. technology giants such as apple, samsung and google are also entering the payment market. suppliers of goods and services are making their own apps and linking them to bonus and loyalty programmes. although this may be a positive trend for many people, it comes at a price. it is difficult for us as consumers to keep track of the information we disclose and how it is used. this poses a challenge to data privacy and the security of the payment system. the apps are only a customer interface. behind them lie international card schemes such as visa and mastercard. even though users do not cover costs directly, the costs involved in using these schemes are high, making these solutions an expensive alternative for banks. eventually, banks ’ customers foot the bill one

of the loan's term and higher interest rates thereafter. it has been tempting for many to take up this type of loan for home purchases even with a poor debt - servicing capacity. these borrowers were banking on a rise in house prices that would allow them to service the loans once interest payments increased and principal payments fell due. securities were developed around these loan portfolios. a large number of risk - prone investors who were seeking high returns – and with a similar belief that a continued rise in house prices would secure the collateral values – made it easy to find buyers for these securities. weak developments in house prices towards the end of 2006 and into 2007 led to rising defaults on subprime mortgages. this resulted in a sharp increase in credit spreads for securities backed by this type of loans. into spring and the early part of summer, a succession of news releases reported large losses and collapses in funds that had specialised in these investments. it was not primarily the size of the actual losses that led to the collapse of the funds, but a shortage of liquidity. the news of mounting losses prompted a sell - off by investors in these funds. as a result of increased losses and sell - offs, the funds had to sell other, more solid securities in a weak market, which made the losses visible and reinforced the exit of depositors and other creditors. the unfolding of events became increasingly redolent of a classic bank run. the turbulence spread during summer. funds and investors in europe, australia and asia started reporting higher losses. the turbulence also spread to other financial market segments, for example stock markets which have declined sharply since mid - july. the contagion to other markets was caused by uncertainty about the risk associated with securities backed by subprime mortgages, and a lack of information about the investors in this market. as a result, financial institutions became highly reluctant to provide credit. this had a considerable impact on money market rates and gave rise to liquidity problems. on 9 august and in the days ensuing, many central banks offered extra liquidity to the banking system to ensure the functioning of the money market. norges bank supplied liquidity to the norwegian banking system through ordinary market operations on 9 august. a few days later, the us federal reserve lowered its discount rate by 50 basis points. the turbulence led to a marked increase in risk premia in financial markets as investors fled to safer havens. the price of credit risk in terms of the price of credit default swap