brothers. it then became clear that many banks lacked sufficient resilience to the sudden changes in the financial markets. it also became clear that the current regulations for the banks did not sufficiently manage the risks to which the banking system was exposed. one conclusion drawn by the basel committee was that some banks had neither enough capital nor sufficiently good quality of capital to be able to manage the losses that arose. another conclusion was that global regulation was needed regarding the banks ’ liquidity risk management. a new reform work aimed at remedying these shortcomings and supplementing basel ii was begun by the basel committee. in 2010, a package of new reforms was presented in the form of what is usually termed the basel iii. the main aim was to strengthen the bank´s capital and to introduce new requirements regarding their liquidity management. the work on finalising basel iii is now being completed. when this work is done, what remains is for the basel committee members to incorporate the new regulations into their national legislation. this will probably be a time - consuming process. sweden will be dependent on how this will be incorporated into eu regulations and directives and we will of course be involved in this work. i will now turn to some of the changes the coming bank regulation will entail. a leverage ratio requirement counteracts unhealthy build - up of debt one lesson from the financial crises we have experienced is that most of them have their origins in one or more actors having borrowed far too much money. the larger the debt, the more serious the problems will be in a crisis situation. it is in this context that it is important that we are now introducing a requirement that is not risk sensitive to complement the risk - weighted capital requirement. the leverage ratio requirement is a simple and transparent measure that will limit the banks ’ capacity to borrow too much regardless of what operations they conduct. more specifically, a bank ’ s leverage ratio is its capital in relation to its total assets. the basel committee has previously agreed on a lowest leverage ratio requirement for banks of three per cent and for global systemically important banks an even higher leverage ratio requirement. for the last two years, the riksbank has been recommending that a leverage ratio requirement of five per cent should be introduced gradually for the four major 5 swedish banks. however, it is not self - evident what level the leverage ratio requirement should have. there are several academic studies in this field which indicate that a leverage ratio requirement should be much higher than the levels now being

the purpose of setting out formal targets is to provide a clear indication of the downward path for inflation over the medium term so that firms and individuals can take this into account in their economic decision - making.... the inflation targets also provide information on the specific objectives to which the monetary policy actions of the bank will be directed in the period ahead and through the medium term. this information should make the bank ’ s actions more readily understandable not only to financial market participants but also to the general public and should provide a better basis than before for judging the performance of monetary policy. see bank of canada ( 1991 ). bank of canada ( 1991 ), pp. 10 - 11 credibility, inflation, and inflation expectations after inflation fell to 2 per cent, the expectations of forecasters and businesses soon began to fall in line with the targets. at first this was for expectations at the 2 - year horizon. this then lengthened to the 6 - to 10 - year horizon. finally, long - term expectations of inflation in financial markets, as expressed by the difference between 30 - year yields on conventional and index - linked bonds, fell in line with the 2 per cent target midpoint in 1997. what was particularly noticeable after just a couple of years of targeting was that expectations over a 2 - year horizon or longer tended to be affected very little by what was happening to current inflation rates, whether for the total cpi or for a measure of core inflation. this was in marked contrast to earlier periods in canadian history, in which expectations for the future had been fairly tightly linked to recently observed inflation rates. with the low inflation target becoming increasingly credible, the whole nature of the inflation process seemed to change. the short - run response of inflation to measures of excess demand and supply appears to have fallen during this period. and the response of inflation to relative price shocks, such as changes in the exchange rate and energy prices, also seems to have declined. these changes have had the effect of reinforcing the stability of the inflation process and, therefore, of inflation itself. overall, it became increasingly evident through the last decade that the inflation target deals with expectational problems. among close observers of the economy, as well as businesses and those bargaining over wages, it promotes a much greater degree of confidence and understanding than monetary targets or a vaguely expressed desire for price stability ever did. people care about inflation. therefore, when the focus of policy is on inflation itself and when accountability is in terms of a specific measure of