credit is functioning well in every aspect. the international credit markets are still largely closed to swedish companies and they cannot borrow from foreign banks to the same extent as before. the riksbank has also granted special liquidity assistance during the autumn to kaupthing bank sverige ab and carnegie investment bank ab. the liquidity assistance was offered in the form of loans against collateral and at a higher interest rate than on normal loans. the market turbulence and the great uncertainty that prevailed were reasons for granting liquidity assistance to safeguard financial stability, even though these institutions were relatively minor participants in the swedish financial market. confidence in the swedish financial system could have been seriously damaged if a failure like the one at lehman brothers had been allowed to occur. the riksbank ’ s assessment was that the two banks were experiencing temporary liquidity problems, but that their solvency was not threatened. finansinspektionen later revoked carnegie ’ s licence to conduct banking activities owing to serious deficiencies in the company ’ s risk management and violation of the law concerning asset management. the decision to revoke the licence thus had nothing to do with carnegie ’ s liquidity problems or with the riksbank ’ s loan. carnegie is now owned by the swedish national debt office and the riksbank ’ s liquidity assistance has been repaid. the riksdag ( the swedish parliament ) has also introduced a new act concerning support to credit institutions, which will give the government the opportunity to take the necessary measures to strengthen stability in the financial system. for instance, a government guarantee programme has been presented to support the banks ’ and mortgage institutions ’ medium - term funding, and a stability fund has been established to manage potential future solvency problems in swedish institutions. the current situation despite the crisis in the global financial markets and the increasingly gloomy economic prospects, the assessment is that the swedish banks still have good resilience to facing the situation that has arisen and future developments. 1 the losses arising from the international crisis have so far been limited, not least in an international perspective, and the swedish banks have good financial strength. in addition, most of the banks ’ borrowers have a good ability to pay their loans. to summarise, the riksbank ’ s assessment is therefore that the stability in the swedish financial system is satisfactory. but it is important to emphasise that the measures taken by the riksbank and other authorities are currently a necessary condition for this to be the case.

same time, the large us commercial paper market suffered substantial disruptions. this market is an important source of financing, both for financial companies and ordinary industrial companies. the industrial companies tried to make use of their promised loan facilities with the banks, but the banks were not able to lend money as usual. this resulted in a credit gridlock, which severely limited the access to loans. the problems spread from the united states to europe and the european credit system also essentially ceased functioning. this meant that the swedish banks and the swedish financial system also suffered problems. … followed by countermeasures and stabilisation in this situation governments, central banks and other authorities were forced to intervene to avoid a collapse in the global financial system. without these measures the financial markets would most probably have ceased functioning – things were so serious. the measures have taken different forms in different countries, but two main types can be identified. the first is that the banks have been offered risk capital or other guarantees so that they can survive the crisis. the aim is to avoid more defaults like lehman brothers occurring when the financial market is so vulnerable. those who lend money to a bank should be able to feel certain that the bank will still be there when it is time to repay the loan. the second type of measure is that the central banks have continuously supplied the banks with the short and medium - term loans they have not been able to obtain in the usual way on the market. although it is not yet possible to know whether the measures will succeed in full, my assessment is that they have been sufficient to counteract the most acute problems. the measures create a basis for restoring confidence among the general public and between participants in the financial markets. if one tries, one can see some signs of normalisation in the form of falling interbank rates and improved liquidity in the form of higher turnover on some markets. but progress is slow. i consider it rather surprising that market functioning has not normalised to a greater degree, despite the extensive and forceful measures taken by central banks and governments. it is possible that the authorities have not succeeded in communicating the fundamental message that all who lend money to a bank will get their money back. a remaining problem is that, as a result of the crisis, the market is requiring that the banks reduce their risks in relation to equity capital. the banks are therefore selling financial assets, which squeezes the price in the entire world market. this is why the banks want to reduce their balance sheets by cutting