international actions. therefore, international governance arrangements also matter because they influence how macro - prudential policies interact across national borders. this matters a lot, not least in the baltic region. in europe, the esrb will play an important role in identifying european system - wide risks and recommending policy responses, which will help manage cross - border issues. sound crisis resolution systems also needed effective macro - prudential policy would provide a line of defence against the build - up of systemic risks but it is unrealistic to expect it to prevent all serious financial disruptions in the future. it is therefore important to supplement macro - prudential policy with other measures to lessen the impact of financial instability when it occurs. this includes special resolution regimes for financial institutions which alter normal insolvency rules so that priority is given to reducing the negative externalities created when financial institutions fail. in many countries these regimes were completely absent or insufficient to deal with the magnitude and nature of institutions that failed in this crisis. bis central bankers ’ speeches despite the lessons from the crisis of the early 1990s, sweden failed to create permanent resolution powers and so was unprepared in this respect when the recent crisis hit. 2 the lack of a legal framework meant that the authorities lacked the legal power and useful guidance on how to deal with failing banks. as a result, the swedish government quickly passed the government support to credit institutions act in october 2008, which gives the swedish national debt office powers to intervene if a failing bank poses a serious threat to financial stability. we were fortunate that we could draw on people with experience from the 1990 ’ s crisis to help draft the legislation so quickly. however, the increasing globalization of the financial system means that crisis management is more difficult today than it was at the beginning of the 1990s. as financial institutions and groups have become more internationally active, they are increasingly difficult to resolve as authorities from multiple countries must cooperate on tricky issues like burden sharing and national insolvency / resolution laws can clash. fortunately, there is currently a considerable push by international bodies such as the financial stability board and the european commission to design resolution tools ( such as bail - in tools ) and to develop guidelines or principles for national resolution regimes and for handling the failure of cross - border financial institutions. this work should help reduce the cross - border issues by making national resolution regimes more compatible. it is important that these regimes are well designed and properly implemented as we should not remain in a situation in which certain financial

is of the essence in order to ensure that credit expansion also takes place in a sustainable manner. finally, it is evident that national fiscal policy has a crucial stabilisation role to play after euro area entry, when monetary policy is no longer available. iv. concluding remarks to sum up, the new eu member states have made considerable – and, in a number of cases, impressive – progress on the road to the euro. the adoption of the single currency will bring many benefits and opportunities to these countries. at the same time, it involves responsibilities and may pose new policy challenges. the adoption of the single european currency implies a permanent commitment. it is, therefore, of paramount importance that the economic policies pursued by the euro area member countries are conducive to price stability and consistent with the constraints imposed by the single currency. the successful participation of a country in the euro area and the smooth functioning of monetary union itself requires that prospective euro area members achieve the necessary high degree of convergence in a sustained manner and prepare their economies – market structures and institutions – so that they can effectively address potential policy challenges that may arise both before and after joining monetary union. good preparation and the attainment of sustainable long - term convergence are crucial before joining monetary union. this is why the ecb – as well as the european commission – take great care to examine the sustainability of convergence and make sure that member states adopting the euro are ready for this momentous historical step. finally, let me stress that to ensure continuity and equal treatment, the ecb will, in its examination of the degree of convergence achieved, employ the same framework of analysis as in the past and will build on the same definitions and principles as set out in the previous convergence reports. thank you very much for your attention.