by 159 b. kr. to almost 322 b. kr. at the end of the year. the main explanation is that total treasury deposits in the central bank rose by 135 b. kr. over 2006 to 211 b. kr. at the end of the year. the balance on government current accounts increased by 47 b. kr. and the deposit in the foreign currency account amounted to 94 b. kr. at the end of the year. most of the foreign currency deposit is accounted for by the €1 billion loan taken by the treasury towards the end of the year to boost the central bank's foreign reserves. notes and coin in circulation grew by 10 % to 14. 5 b. kr. and the central bank's liabilities towards deposit money banks by just over 10 b. kr. on the asset side, the central bank's claims on deposit money banks and other financial institutions increased by 59 m. kr., and its foreign assets by 101 b. kr. the growth in foreign assets was largely the result of the treasury's euro loan, but partly due to the impact of the depreciation of the krona on the nominal amount of the reserves denominated in domestic currency. at the end of the year, the central bank's equity amounted to 48. 2 b. kr., an increase of almost 12 b. kr. from the end of the year before. in the budget for 2007, the treasury was authorised to strengthen the central bank's capital position. the treasury borrowed €1 billion in international capital markets in 2006 for the sole purpose of boosting the central bank ’ s foreign reserves. all the proceeds from the loan were deposited in a foreign currency account in the central bank. the treasury earns interest on the deposit at a rate matching that of the foreign loan. here i have briefly summarised the highlights of the central bank ’ s accounts. the financial statements for the year are published in their entirety in the annual report with notes, and the bank ’ s results and changes in its balance sheet during the year are also described in more detail there than i have entered into here. in june 2006, jon sigurðsson stepped down as governor of the central bank of iceland when he was appointed minister of industry and commerce in the government of iceland. in formal terms he was on leave from the central bank from the middle of june until the end of august. jon

on public administration of banks. these arrangements helped to dampen the effects of the crises and prevent new ones. commercial banks were subject to separate legislation and supervised by the newly established banking and savings bank inspectorate. supervision of savings banks commenced as early as 1900, with the establishment of the position of inspector of savings banks. this was probably one reason why savings banks were not as expansive as commercial banks during world war i. nor were they as severely affected by the banking crisis. a gradual increase in the regulation and supervision of financial enterprises and the introduction of a financial safety net did not mean that the market - based system was abandoned. however, recessions and demands for more protectionism led to restrictions on international trade and capital movements. the result was that domestic investments increasingly had to be financed through domestic savings. this can be illustrated by looking at the relationship between the saving ratio and the fixed investment rate for selected countries. a strong correlation indicates a limited degree of openness. measured in this way, integration was greater before 1914 than in the interwar period. protectionism had a very harmful effect on economic developments. ecklund, g. j. and s. knutsen ( 2000 ). vern mot kriser? norsk finanstilsyn gjennom 100 ar. ( protection against crises? 100 years of norwegian financial supervision ) fagbokforlaget. jones, m. t. and m. obstfeld ( 1997 ). saving, investment, and gold : a reassessment of historical current account data. nber working paper series. after world war ii, international organisations were established to promote economic cooperation and their objective was increased integration of international trade and fixed investment. however, crossborder capital movements remained heavily regulated. the same applied to direct regulation of financial enterprises. other considerations, than returns and risk, took precedence in connection with the provision of credit and capital movements. at the end of the 1970s, direct controls were gradually removed. as a result of the emergence of new financial instruments, the controls no longer had the same effect. there was a growing realisation that the existing controls had a negative effect on the allocation of credit and capital, and hence on longterm economic growth. cross - border capital movements were gradually liberalised. it was not until the 1990s that capital was able to move between countries as freely as before 1914. because of the serious effects of financial crises, the financial industry is subject to many regulations and