speech date : 10 november 2016 speaker : governor stefan ingves venue : the swedish bankers ’ association bank meeting, grand hotel, stockholm sveri ges riksbank se - 103 37 stockholm ( brunkebergstorg 11 ) tel. + 46 8 787 00 00 fax + 46 8 21 05 31 registratorn @ riksbank. se www. riksbank. se necessary reforms for a more stable financial sector crises are expensive and should be avoided when financial crises afflict us it becomes obvious to all how much damage they cause. unfortunately, this insight is often temporary, as it is easy – even a human survival instinct – to forget problems and leave them behind us. as a representative of the basel committee i therefore see it as an important task to remind you of how costly financial crises are to the national economy and how important it is that we have robust regulatory frameworks that reduce both the cost of crises and the probability that they will occur. although we often see a return in the growth rate of the economy, crises usually lead to a permanent fall in gdp, which takes a very long time to recover from. even today, almost 10 years after the financial crisis broke out, many countries are struggling with low growth, high unemployment and low inflation. in several cases they also have high sovereign debt. and in the case of sweden, there is no other event since the second world war that has affected swedish gdp as negatively as financial crises. there are two clear dents in swedish gdp post - war development : during the financial crisis in the 1990s and during the global financial crisis 2008 - 2013. the most acute problems are remedied but some work remains a crucial cause of the most recent financial crisis was that banks around the world had taken on too much risk. this was possible for two reasons. firstly, the regulatory framework applying at the time did not sufficiently influence the banks ’ risk taking. secondly, the banks themselves evidently did not have the will or ability to manage their risks on their own. the answer was the basel iii agreement - a comprehensive package of reforms with the main purpose of strengthening the banks ’ capital base to ensure that they can manage losses in a better way and improve the banks ’ liquidity management. but even if basel iii dealt with the most acute shortcomings, work remains to be done to ensure that banks around the world are well capitalised. i intend to spend a little 1 time here talking about the reform work the basel committee is

finance. in crisis prevention, the supervisor has the tools for regulating and supervising the institutions, while the central bank might play a supporting role through monitoring the stability of the system and the links to the real economy. in crisis management, the supervisor lacks the financial resources to back any intervention, while the central bank has the power to act as a lender of last resort. in other words, the likelihood that the central bank will have to provide liquidity support to a financial institution is partly determined by the quality of supervision. at the same time, the central bank may very well need the supervisor ’ s analytical or informational support to be able to decide on whether or not and how to intervene. finally, in crisis resolution, even if the ministry of finance takes the lead, it is likely to rely extensively on the supervisor and the central bank for advice and execution. if we agree that there is a link between the soundness of institutions and financial stability, then supervisors must be interested in crisis management and resolution and central banks must be interested in certain aspects of supervision. in the last decade, at least in sweden, the macro and micro perspective have grown gradually closer. indeed, the swedish fsa now has an explicit interest in the stability of the system, while the riksbank has taken a greater interest in the stability of single institutions, if they are judged as systemically relevant. we have regular contacts to share information and assessments and coordinate policy. if before, the relationship between the two authorities might have been described as polite but uninterested, it is now a mix of curiosity, some competition and frequent flirting. the times they are a - changin ’ this could have been the happy end of our story but recently there have appeared challenges to this set - up. all over the globe, the financial markets are becoming more integrated and financial institutions as well as financial infrastructure companies are consolidating domestically as well as cross - border. the challenge touches all the aspects of regulatory involvement – crisis prevention, crisis management and crisis resolution. cross - border integration of financial markets … in the eu, the process of cross - border integration has been actively promoted by the creation of the euro and the ongoing harmonisation of regulation and supervision – in the last years epitomised by the financial services action plan ( fsap ). admittedly, financial markets integration in the eu has so far been a mixed picture. until now, integration has mostly taken place in wholesale markets, such as the