by the superintendence of securities and insurance ( svs ), and pension funds, which are large players in our financial system, are regulated by the superintendence of pensions ( sp ). in this setting, the preservation of financial stability crucially relies on the capacity and ability of all players involved, including us, to share our views and coordinate our actions. this is currently done through routine interaction between us, and more formally through periodic meetings in the financial stability council, an entity created precisely to guarantee such coordination. 2. financial stability tools let me now turn to the discussion of what are the most appropriate tools to pursue financial stability. of course, this discussion draws from the previous one on whether the central bank should be in charge of it. but let ’ s forget about that for a second to tackle one of the main aspects of this debate, which is whether a central bank that cares about financial stability should use the policy rate as a tool. there are different views on this regard, both in academic and policy circles that you probably know well. i am among the ones who think that the interest rate is often too blunt a tool to deal with financial stability issues, especially when they have clear sources that can be addressed more directly, since the policy rate affects every sector of the economy. furthermore, under some circumstances the required movement in the policy rate for financial stability purposes may be in conflict with the price stability mandate. assuming that such tradeoff is absent, that reasonable movements in the policy rate are expected to be useful to deal with financial stability concerns, and that there are no better tools at hand, it may be reasonable to rely on it as a tool for financial stability. however, in many situations at least one of these conditions would not hold and other options would prove more efficient. for instance, more often than not financial stability concerns are related to specific segments of financial intermediation. concerns about rapid growth in credit to the housing sector can be tamed by changes in loan - to - value or debt - toincome ratios, for example. dynamic provisions related to general or specific forms of credit may also help banks maintain a solid position through the financial cycle, and discretional changes to reserve requirements may also help rein in rapid bank credit expansion. of course, all these measures are not cost free and their use must properly consider these costs against specific financial stability concerns. for instance, increases in reserve requirements affect only the banking sector, which may lead to disin

. 9 after having clarified this matter of principle, i will now discuss the development of household indebtedness in sweden. in 2011, the riksbank pointed out that a gradually rising repo rate, michael woodford presents a theoretical analysis of how such factors can be incorporated into a model for inflation targeting in woodford, michael ( 2012 ) “ inflation targeting and financial stability ”, sveriges riksbank economic review, 2012 : 1. sveriges riksbank. bis central bankers ’ speeches apart from stabilising inflation and resource utilisation, may also have the positive side effect of helping to slowdown household borrowing. credit growth in the household sector, which is closely linked to the development of the housing market, has gradually declined since 2010. household indebtedness is still high, but it levelled off last year. this suggests that the risks in this area are limited, at least at the moment. however, i believe that it will be important to monitor developments in the period ahead to check that new risks do not arise. figure 11. decline in lending to households credit growth, annual percentage change companies households - 5 - 5 - 10 - 10 source : statistics sweden conclusions today, i have discussed three aspects that were particularly important to my assessments and my stance when the repo - rate decision was made in february. two of these relate to the debt crisis in the euro area. my view is that it is taking too long to improve public finances and that the risks associated with a high level of indebtedness mean that the debt - ridden countries themselves must assume a greater responsibility for resolving their problems. the third aspect relates to the risks that can arise when the real interest rate is low for an extended period of time. this can, for example, lead to overheating tendencies or a too rapid increase in indebtedness. my conclusion is that, in the current situation at least, these risks are limited. this was one of the important reasons why i was able to vote for a repo - rate cut at the latest monetary policy meeting. a lively public debate is currently underway on a couple of the issues i have addressed here. this applies, for example, to the need for consolidation and which strategy is best for finding solutions to the debt crisis in the euro area as quickly as possible. the question of what role the central banks should play in counteracting an excessive expansion of credit and indebtedness is also often debated,