falls in gdp and high unemployment. central government finances can be weakened so much that the country enters a debt crisis. from this point of view, it may be considered justifiable to make every effort to increase the resilience of the financial system. at the same time, it is important to always compare the cost of various types of measure with their benefit, so that we can design the most efficient system possible. i have presented a long list of possible instruments that could be used to conduct macroprudential supervision. by necessity, this list will include most tools, as different tools are needed to counteract different systemic risks. but we are discussing something that is relatively new. at present, we only have limited experience of conducting macroprudential supervision in practice. this means that the process of introducing macroprudential supervision will entail a certain degree of trial and error. quite simply, we will have to test our way forward, while constantly doing our best to assess the efficiency of the instruments being employed. 13 the financial system is complex and dynamic, and the risk outlook is changing all the time. this means that it can never be determined with certainty where a financial crisis may arise. bearing this in mind, it is important that we, in sweden, construct a framework for macroprudential supervision that is flexible and that we do not limit our possibilities in terms of the instruments that can be used. it is also important to establish a process to evaluate and later develop and modify the toolbox. i consider that a clear but, at the same time, flexible framework for macroprudential supervision will create the best conditions to counteract future financial crises. but this is not to say that this would be enough to ensure that no financial crisis ever occurs again. the crises of tomorrow will probably have completely different causes to the crises of yesterday, making them difficult to protect ourselves against. however, the scale of the costs of a financial crisis justify making every effort to protect ourselves. as regards the question of where responsibility for macroprudential policy ought to lie, it is clear that this area is closely linked to both the riksbank ’ s and finansinspektionen ’ s activities. the riksbank has been analysing the stability of the financial system for fifteen years and also currently provides recommendations for safeguarding it in its financial stability reports. finansinspektionen also works for the stability of the financial system but with a focus on

##ntial perspective in the market - based finance sector. while some progress has been made in this area in recent years, further work is needed. indeed, compared to the banking sector where the tools are already in place, we are at an early stage of development. there are some key questions that will need to be considered in the development of a macroprudential policy framework for market - based finance, which i have discussed in greater detail in my written contribution to the financial stability review : 1. what is the appropriate toolkit to target excessive liquidity mismatches and excessive leverage in the market - based finance sector? 2. what is the appropriate balance between time - varying and structural interventions? 3. what is the most appropriate approach to international co - ordination in this area? 4. how to consider the appropriate balance between costs and benefits of additional resilience in the market - based sector? finally, aside from developing and operationalising the overall macroprudential framework for the market based finance sector as a whole, it is also clear that reform of the regulatory framework for mmfs is required. specific reforms will need to be targeted on the appropriate areas, whether, for example, it be on the liability side to align mmfs ’ liabilities with the nature of liquidity on the asset side, or on the asset side, to address the lack of liquidity in certain money market instruments. potential reforms will need to be carefully assessed to ensure that balance can be achieved between maintaining the benefits of this sector and increasing its resilience. 2 / 3 bis central bankers'speeches the challenges we face to address the gaps in the current framework for market - based finance so as to make it fully operational are similar to those faced when developing and operationalising tools for the banking sector. we at the central bank of ireland are committed to working with our colleagues in europe and beyond to develop and operationalise a more comprehensive macroprudential framework to safeguard financial stability, for the benefit of all our citizens. 1 see www. centralbank. ie / news / article / speech - deputy - governor - sharon - donnery - macroprudential - policy - lessons - in - the - pandemic - era - 19 - feb - 2021 3 / 3 bis central bankers'speeches