for distributing risks are reduced. instead, i see the international work already being carried out into producing norms for various areas as a better means of promoting stability and reducing risks. to summarise, the credit and foreign exchange markets play an important role in society by mediating payments and savings, both nationally and internationally. the best way to prevent excessive risk taking is not to tax transactions, but to ensure that more countries pursue fiscal and monetary policy aimed towards stability, with a suitable exchange rate regime, and follow the international regulations and norms that promote stability. these norms must be continuously adapted to developments on the financial markets and in the rest of the economy, in order to limit the risks in the financial sector.

since lending is more risky. access to capital will therefore be more restricted and interest rates will be higher. it is also in the countries'own interests that other countries meet the norms, as financial crises in one country have a tendency to spread to other countries in similar circumstances. we saw an example of this during the asian crisis 1997 - 98. as sweden is a small country with an open economy and therefore dependent on financial stability in the world around us, we contribute experts to the groups working out the norms. sweden also gives advice to countries wishing to improve their application of these norms. riksbank employees have provided assistance in countries all over the world, including latvia, poland and sri lanka. a good example of internationally agreed norms for increasing stability on the financial markets is the capital adequacy rules for banks that were developed by the basel committee. these rules came into force in 1988 and cover risks in for example lending, interest rate trading and foreign exchange trading. in principle, they require that the greater the risk taken by a bank, the more capital it must hold. as it costs money to hold capital, this creates an incentive for the banks to reduce their risk taking. the rules also increase the banks'opportunities to cover any losses they may incur. the current rules are applied in more than 120 countries. the proposal for new capital adequacy rules recently presented makes an even closer connection between the capital requirement and the risks taken, as well as reducing regulatory arbitrage and increasing the requirement for transparency. while the basel rules thus reduce excessive risk taking, they do not impair transactions made with the purpose of redistributing risks between banks, enabling a healthy level of risk taking to be attained within the respective institute. these transactions contribute to reducing the banks'risk taking and currently comprise a large part of the turnover on the foreign exchange market. allow me to give an example of how this works. a swedish export company with income in dollars, but paying out wages and taxes in kronor, must exchange dollar income for kronor. the company transfers the foreign exchange risk to the bank, by selling dollars for kronor. this can be done in two ways : either the company sells the dollars when it receives them, on the spot market, or it sells its future dollar income as soon as it receives an order, on the forward market. in both cases the bank buys dollars and thus takes over the foreign exchange risk. the bank also makes a