part against the background of this risk that we should view the riksbank's liquidity support measures over the past few weeks. it is also one of the reasons for the riksbank's most recent decision to cut the repo rate by 0. 5 percentage points. role of swedish authorities one of the main duties of the riksbank is to promote a safe and efficient payment system. more specifically, this means that the riksbank continually analyses risks and threats to the stability of the swedish financial system. the purpose of the analysis is to discover any changes and vulnerabilities that could lead to a serious crisis. in the event that a crisis should occur, certain tools are at our disposal to handle the situation. over the past few weeks you have seen several examples of how we can assist the banking system in various ways with liquidity - supporting measures when the situation so requires. the riksbank is not the only authority that is responsible for ensuring financial stability. finansinspektionen also plays an important role as a regulatory authority. in the current crisis the national debt office has also helped to improve liquidity conditions in the financial system by auctioning extra treasury bills. ultimately, the government and the riksdag also have a responsibility for financial stability if it becomes apparent that the initiatives of the authorities are unable to bring a crisis under control. these days the riksbank is working very closely with other authorities to monitor developments and discuss how to handle the situation. like other swedish authorities, we are also in frequent contact with our foreign colleagues and with market participants. as i mentioned previously, the riksbank has helped where we could to improve liquidity and market conditions. but what have we actually done? what has the riksbank done? first of all, we have taken several general measures aimed at all of the riksbank's counterparties. the purpose of the measures is to solve two problems with the swedish banks : inadequate access to long - term financing in swedish krona and a limited ability to gain access to us dollars. the lack of long - term financing is due to the lack of mutual trust among the banks during the crisis, which have had a negative impact on the interbank lending markets. one consequence is that the banks have been forced to borrow for shorter terms. even if it has been possible to get financing, liquidity management have become much more difficult for the banks and risks also have increased. to enable the banks

. more and more assets and markets became affected when even borrowers with better credit ratings were hit. nor were the problems just a matter of inadequate creditworthiness of us borrowers any more, as the ability of european borrowers to pay now came into question. during the spring the turmoil reaped its most startling victim so far. bear stearns, the fifth largest investment bank in the us, was forced to suspend payments after being unable to arrange short - term financing. it hardly needs to be said that bear stearns was heavily exposed to the subprime market. conditions on the credit markets temporarily eased after bear stearns. although tensions continued, the market began to slowly return to more normal conditions and credit risk premiums decreased sharply for a while. confidence seemed to be returning to the financial markets. however, the turmoil gained renewed strength during the late summer when lehman brothers was forced to apply for bankruptcy protection. since then a number of banks in europe and the united states have experienced severe problems. banks and financial institutions that were forced into being sold or nationalised include heavyweights such as fortis in belgium, merrill lynch and aig in the united states, and hypo real estate in germany. the financial crisis had progressed from being a subprime crisis in the united states into a global confidence and liquidity crisis. where can we find the explanations? in light of current events, the obvious question is how do we explain the situation? what we see is largely the result of an extended period of vast expansion of credit and growth of the financial industry's assets, which with hindsight has proven to be unsustainable. this development was made possible because for some time economic conditions in both the us and the rest of the world were extremely favourable, with low interest rates, low and stable inflation, and robust growth. the low interest rates resulted in increased indebtedness and willingness to invest, which in turn contributed to rising asset prices, especially in the property markets. rising asset prices allowed further indebtedness, which once again fuelled asset prices. parallel to this trend, financial market participants engaged in increasingly aggressive strategies in the search for yield. banks and mortgage institutions eased credit terms in order to gain market shares. high - risk loans were packaged in complex structured products that were perceived as more secure investments than they actually were. at the foundation, the art of financial engineering that underpins the development of these products is undoubtedly positive, making it possible to