##1 1990 q2 - 4 - 2 note. broken lines represent the riksbank ’ s forecasts. legends refer to quarter when recession begins. sources : statistics sweden and the riksbank lower interest rate to subdue fall in production and employment and attain inflation target of 2 per cent the riksbank will continue to take the measures required to safeguard financial stability repo rate forecast 2008, per cent, quarterly averages 5, 0 5, 0 4, 5 4, 5 4, 0 4, 0 3, 5 3, 5 3, 0 3, 0 2, 5 2, 5 2, 0 2, 0 1, 5 repo rate repo rate forecast mpr 08 : 1 repo rate forecast mpr 08 : 2 repo rate forecast mpr 08 : 3 mpu december 08 1, 0 0, 5 0, 0 1, 0 0, 5 0, 0 note. ppr denotes m onetary policy report och ppu denotes m onetary policy update. 1, 5 source : the riksbank. profits before credit losses and net credit losses, in the major banks, summarised over four quarters, sek billion at 2008 prices profit before credit losses credit losses - 20 dec - 90 dec - 92 dec - 94 dec - 96 dec - 98 dec - 00 dec - 02 dec - 04 dec - 06 dec - 08 note. international financial reporting standards applied from and including the first quarter 2005. sources : bank reports and the riksbank.

macroprudential policy in their jurisdictions. governance arrangements for macroprudential policy a vital aspect of the macroprudential policy framework will be the design of the governance arrangements. they will determine how the different elements of the framework are brought together and will influence how macroprudential policy interacts with other policy areas. governance arrangements should be effective in three broad areas ; they must ensure that the macroprudential decision - maker ( the “ macroprudential agency ” ) has : ( i ) a clear mandate ; managed to avoid the fiscal consolidation currently seen in many other eu countries. one reason for sweden ’ s robust public finances is that it had to implement a programme of fiscal consolidation in the mid1990s, following the swedish banking crisis. therefore, sweden had already learnt the importance of maintaining sustainable deficits and debt levels, and had already imposed many of the public reforms required to deal with structural problems that can inhibit economic recovery. bis central bankers ’ speeches ( ii ) access to the necessary information and the analytical capability to set policy ; and ( iii ) control over a sufficient set of tools to achieve its mandate. the need for a clear mandate effective governance arrangements must ensure that the macroprudential agency has a clear mandate. that is, the objectives of macroprudential policy, the tools available to the macroprudential agency and the interaction of macroprudential policy and other public policies must be clearly set out. this is necessary to ensure that : ( a ) there is no ambiguity about the macroprudential agency ’ s role ; ( b ) expectations on the agency are in line with what it can achieve ; ( c ) the macroprudential agency can be held accountable for its actions ( or lack of action ) ; and ( d ) any overlaps between policy areas or agencies can be better handled. it may be desirable to set out the macroprudential mandate ( and objectives ) explicitly because this could make it easier for the macroprudential agency to defend unpopular but necessary interventions. it would also allow policy objectives to be ranked, which would help manage policy trade - offs. however, when setting explicit mandates or objectives in law, care must to be taken to avoid inadvertently constraining policy actions. this is a potential problem because we do not fully understand the variables that influence financial stability. indeed, we currently lack a precise but comprehensive definition of financial stability. in addition to giving the macroprudential agency a clear