’ t had to worry about such problems in sweden. the financial crisis of 2007 – 2009 impacted borrowers in other countries hard a meltdown in the global financial economy was averted in 2008 and 2009 at a price we are still unable to calculate. even if the total cost has yet to be calculated, we can still note that bis central bankers ’ speeches the consequences of the financial crisis are clear if we take one of its fundamental causes, the us housing crisis, as an example. in the autumn of 2011, 22 per cent of all us mortgage holders still owed more than the value of their property. this is almost 11 million homeowners. 1 one of the factors behind the development of the us housing market was irresponsible lending to households with weak debt - servicing ability. we have also seen examples of this in europe. problems in the housing sector could have severe consequences for households we don ’ t want to have to go through a similar development in sweden. our experiences of the crisis of the 1990s are more than enough. and we didn ’ t emerge unscathed from the crisis of 2008 either. nobody wants a new financial crisis. at the moment, the greatest risks to financial stability in sweden are the financial unease in the euro area and the resulting unease on the financial markets. however, our assessment is that the swedish banks are also well - prepared for weaker development than in our main scenario. i would also like to touch on a domestic risk that is frequently mentioned – swedish households ’ high levels of indebtedness and the risk of a fall in housing prices. firstly, i would like to say that we don ’ t see any acute threat in this regard. we are not facing any dramatic falling housing prices. in addition, our assessment is that the swedish banks can also cope with fairly large falls in the market value of housing. nonetheless, we at the riksbank have long warned that the high level of indebtedness may make the swedish economy vulnerable. if the economy should develop adversely, households may be forced to cut back on their consumption. when a home falls greatly in price, the household becomes unable to move without realising major losses. individual households can then find themselves in particularly dire straits. a couple of days ago, finansinspektionen presented a report on housing loans in sweden. 2 encouragingly, this report showed that the mortgage ceiling introduced in 2010 may have dampened indebtedness and risk. at the same time,

is usually referred to as financial stability concerns, to put it simply, working in various ways to ensure the financial system is stable and functions efficiently. for example, individuals, companies and organisations must be able to make and receive payments in an efficient manner. when goods are transported to consumers via our physical infrastructure, such as the road network or by air, the payment for the product is sent to the end recipient by means of the “ financial infrastructure ”. if the financial infrastructure did not function, the economy would more or less grind to a halt. the financial system also makes it possible to manage various risks that can arise in the financial markets. this is important to both households and companies. another important function is to be able to save and borrow money via the financial system. this gives households and companies the possibility to distribute incomes and consumption over time. the funds that are saved can be borrowed by companies and households to finance various investments which can then create employment and growth. when there is distrust and disturbances in the financial system, this function may be impaired, which can lead to a credit crunch. first the financial sector is affected, but then it gradually becomes more difficult for households and companies to borrow, too. consumption and investment then decline, which can lead to a substantial economic downturn. a credit market that functions well is thus an important condition for good growth. to summarise, one can say that the financial system ’ s functions are very important for economic development. it is important that the system is stable for our society to function properly on the whole. but financial stability is something that most people probably often take for granted. as long as everything is functioning well, the focus of public debate is much more often on our interest rate policy and the inflation target than on our stability task. but more recently, as the functioning of the financial markets has been hampered, the situation has almost been reversed. it has also become very clear how closely related our two main tasks are. the riksbank ’ s most important tool in conducting monetary policy is the repo rate. one can say that we try to influence economic activity and inflation by steering the price of credit, that is, interest rates. but to be able to do this, the payment system and the credit markets must function so that the riksbank ’ s interest rate decisions have an impact on other interest rates in the economy. financial stability is in other words more or less a condition for being able to conduct monetary policy in an efficient manner