member of the assembly, count wedel jarlsberg, insisted that the nation must have its own bank. the people ’ s elected representatives took responsibility for the monetary system, as stated in article 75 of the constitution : « it devolves upon the storting to supervise the monetary affairs of the realm ». the scandinavian journal, 1799, in the travel diaries of thomas robert malthus, edited by patricia james, cambridge university press ( 1966 ). see norges bank working paper 23 / 2013, contributions to a history of prices in norway : monthly price indices, 1777 – 1920, by jan tore klovland. bis central bankers ’ speeches the storting delegated the task of supervising the monetary system to norges bank, which was established in 1816. the king would no longer have the authority to print money at will. at its inception, norges bank ’ s head office was located in trondheim, a twelve - day journey from the government in christiania, and even farther from stockholm3, giving the central bank a geographical – and not just formal – distance from the government authorities. the value of money would be guaranteed by a stock of silver and a silver tax was introduced. but establishing confidence would take many years. the banknotes that were printed were not fully redeemable in silver until 1842. since then, the value of norway ’ s currency has been fairly stable for long periods, but we have also experienced periods of deflation, high inflation and waning confidence. the lesson has been the same every time : restoring confidence comes with a cost. much has happened since 1814. norway no longer lags behind other western economies. inflation is low and stable. we have established a clear division of responsibility for economic policy and well developed institutions founded on the constitution written at eidsvoll 200 years ago. the bicentenary is a natural occasion for me to cover the scope of norges bank ’ s tasks, against the backdrop of the challenges facing us today. low growth and structural changes in 1814, the great powers of europe dominated world trade. the world ’ s economic centre of gravity has since shifted westward. today, in the 21st century, the centre of gravity is moving across the pacific to asia. chart 2 : international trade for the us and china when china became a member of the world trade organization in 2001, its foreign trade was 30 percent of that of the us. the chinese economy has since grown at an unprecedented pace. in 2013, china overtook

considered to be normal. banking regulation when the drafters of the constitution gathered at eidsvoll, there were no private banks in norway. norwegian businessmen who needed credit had to borrow from friends or acquaintances or travel to copenhagen or hamburg to raise loans. this was expensive and cumbersome. the men of eidsvoll needed a bank that could provide credit in norway. norges bank quickly became an important lender. it was not until the latter half of the 1800s that a private banking system truly came into being. norges bank acquired its present - day role of the bankers ’ bank and lender of last resort. with private banking came banking crises. the 1899 crash in christiania triggered the first serious banking crisis in norway. a real estate bubble in the capital burst and house prices bis central bankers ’ speeches plummeted. it took more than 100 years for real house prices in oslo to return to their precrash level. 4 banks play a key role in the payments system and channel credit from savers to investors. if the flow of credit seizes up, problems will rapidly spread through the entire economy, as witnessed during the latest financial crisis. a robust banking system is of benefit to us all. banks are now adapting to new capital requirements. on top of the new capital requirements is a countercyclical capital buffer. the countercyclical capital buffer will vary over time. it will be increased when financial imbalances build up. in the event of economic stress and large bank losses, banks will be able to draw down the buffer. chart 7 : key policy rate and bank lending rates even if the key policy rate is low, interest rates on loans to households and enterprises are not particularly low. banks have responded to the new requirements by increasing interest margins to boost earnings. it can be safely assumed that once they have adapted to the new requirements, interest margins will decrease. the countercyclical capital buffer is not an instrument for managing business cycles. the key policy rate and the buffer are designed to promote different objectives. monetary policy is geared towards ensuring low and stable inflation and is the first line of defence for managing business cycles. the countercyclical capital buffer is designed to strengthen banks ’ capacity to withstand periods of large losses. the simultaneous failure of many banks will paralyse the economy. the payments system and flow of credit for investment will seize up. the downturn could be long - lasting. this is why it is often the case that