with other types of loans in so - called structured credit products. these investment products, sometimes packaged with various credit and liquidity guarantees obtained from banks or through derivative contracts, were divided into portions, or tranches, of varying seniority and credit quality. thus, through financial engineering, a diverse combination of underlying credits became the raw material for a new set of financial assets, many of them garnering high ratings from credit agencies, which could be matched to the needs of ultimate investors. the complexity of structured credit products, as well as the difficulty of determining the values of some of the underlying assets, led many investors to rely heavily on the evaluations of these products by credit - rating agencies. however, as subprime mortgage losses rose to levels that threatened even highly rated tranches, investors began to question the reliability of the credit ratings and became increasingly unwilling to hold these products. similar concerns arose in the market for asset - backed commercial paper ( abcp ). in this market, various institutions established special - purpose vehicles to issue commercial paper to help fund a variety of assets, including some private - label mortgage - backed securities, mortgages warehoused for securitization, and other long - maturity assets. investors had typically viewed the commercial paper backed by these assets as quite safe and liquid. but the concerns about mortgage - backed securities and structured credit products more generally ( even those unrelated to mortgages ) led to great reluctance on the part of investors to roll over abcp, particularly at maturities of more than a few days, leaving the sponsors of the various investment vehicles scrambling for liquidity. those who could not find new funding were forced to sell assets into a highly illiquid and unreceptive market. importantly, investors ’ loss of confidence was not restricted to securities related to subprime mortgages but extended to other key asset classes. notably, the secondary market for private - label securities backed by prime jumbo mortgages has also contracted, and issuance of such securities has dwindled. 1 even though default rates on prime jumbo mortgages have remained very low, the experience with subprime mortgages has evidently made investors more sensitive to the risks associated with other housing - related assets as well. other types of assets that have seen a cooling of investor interest include loans for commercial real estate projects and so - called leveraged loans, which are used to finance mergers and leveraged buyouts. although structured credit products and special - purpose investment vehicles may be viewed

led to some long discussions among the executive board. it was not easy to calculate how large the foreign currency reserve should be, and different executive board members had differing views on the matter. finally, in the spring of 2009, we agreed to ask the swedish national debt office to temporarily borrow a further sek 100 billion in foreign currency, thereby reinforcing the foreign currency reserve to about sek 300 billion. including the agreements with the fed and the ecb, the foreign currency reserve thus amounted to about sek 600 billion in the autumn of 2009. now it has decreased to about sek 300 billion again and, according to an earlier decision, part of this is temporary. 14 i was one of those who considered that the riksbank ’ s own foreign currency reserve should be greater than sek 300 billion, and this is an opinion that i still hold. my reason is that the swedish banking system is still highly dependent on market funding in foreign currency. if the fiscal problems in greece lead to the writing off of the greek national debt, this may lead to renewed difficulties for the swedish banks in obtaining funding in foreign currency. one alternative to retaining a good - sized currency reserve in the riksbank would be for the banks to reduce their dependence on market funding in foreign currency. as i mentioned earlier, greater demands will be made on the banks ’ liquidity through the basel regulations. but they say nothing about requirements for preparedness regarding liquidity in foreign currency, something which is particularly important for us in sweden. imposing charges on the agreement with the ecb is conditional to approval from the ecb in every single case. it was used to borrow a smaller sum in conjunction with the riksbank ’ s swap agreement with latvia. in its recently concluded mission, the imf concluded that the foreign currency reserve is sufficient to meet risks, but this assessment should be reviewed on an ongoing basis with reference to developments in the euro area. bis central bankers ’ speeches the banks ’ market funding in foreign currency could possibly get the banks to reduce this, thereby reducing the need for a large foreign currency reserve and thus fund the costs to society of the foreign currency reserve. 15 however, such charges do not exist at present and the effects of any charges are not clear. conclusion about a week ago, we published our first financial stability report for the year. in this, we report that the swedish banks ’ resilience towards shocks has continued to improve over the last six months. however, in large