all the money we spend daily is deposit money created by a bank. there is little likelihood that many customers will withdraw large amounts simultaneously. banks can therefore create far more deposits than they can pay out at the same time. 6 but a bank cannot extend loans and create deposits without limitations. first, it must assess the customer ’ s debt - servicing capacity, ie credit risk. second, the bank must assess the degree of liquidity risk associated with lending long and creating deposits that customers can withdraw at any time. third, it must comply with statutory rules. banks ’ willingness to assume some degree of liquidity risk is a public good. in its absence, we would have less access to long - term loans and money in the form of bank deposits. on the other hand, too much liquidity risk entails a risk of instability and crises like the one we experienced in 2008. banking regulation implicitly provides a trade - off between these considerations. the other main activity of banks is payment services, which are services we use virtually every day. today, most people in norway receive money as a bank deposit directly into their account. as long as there are payment solutions that give us cheap and simple access to money, the account is an efficient and safe wallet. chart : banks provide payment services but how is it that bank deposits can become money that we can use as payment? an important pre - condition is that there is an infrastructure to enable deposits to be efficiently transferred 2 / 7 bis central bankers'speeches between customers and banks. as the bankers ’ bank, norges bank creates the money banks use to pay each other, so - called central bank reserves, which are the banks ’ deposits at the central bank. transfers of customer deposits between banks can take place without frictions because a corresponding amount of central bank reserves are transferred between banks ’ own accounts at norges bank, where banks have a common and trusted means of payment and settlement system. this helps ensure that there is no difference between the money created by dnb and money created by nordea. the money is interchangeable. for us, it is all norwegian kroner. as such, banks play a key role in delivering services we want from the financial system, albeit subject to a framework designed by the norwegian authorities. the banking sector is more strictly regulated than most sectors of the economy. with the right to create money comes obligations. competition from new participants chart : competition from new participants many of the services banks offer can be provided by others

2002 2004 sources : trcis, ministry of finance and norges bank the fall in the value of the krone over the past year has strengthened the norwegian business sector. the business sector is, however, still feeling the effects of a sharp rise in labour costs over a period of several years. relative labour costs measured in a common currency are in line with the level prevailing in 1990, but approximately 10 per cent higher than in the mid - 1990s. the internationally exposed sector has been scaled back. those companies that are currently operating may be in a better position to bear the high wage level. nevertheless, costs may limit activity and employment. growth in the norwegian economy picked up again through the summer of 2003. in the period ahead, solid growth in household income, subdued consumer price inflation and low interest rates will provide the conditions for high growth in private consumption. there is optimism in the building and construction sector. high petroleum investment is also supporting activity while mainland business investment has been low for a long period. the number of persons employed began to increase in the summer of 2003 and unemployment stabilised. an economic turnaround has occurred, with a soft landing after the long period of high cost inflation in norway and a low level of activity in other countries. but inflation is too low. as mentioned, there are three main factors that have contributed to this. first, the global downturn had considerable implications for the impact of interest - rate setting in norway. a strong krone contributed to the decline in inflation. the krone has now returned to its previous level so that the effect will be reversed. second, low inflation in other countries and rapid changes in the international division of labour have resulted in a fall in prices for imported goods and services, even when measured in terms of what norwegian importers pay in foreign currency. third, intensified domestic competition also appears to have exerted downward pressure on prices. as a result of both changes in the international division of labour and increased domestic competition, there is idle labour and available real capital in norway. we cannot rule out that adjustments will be made over a period of time and that these adjustments will encompass a large portion of the domestic economy. thus, it is possible that the level of output that is consistent with stable inflation will increase. inflation will remain low in 2004. however, the easing of monetary policy will gradually push up inflation. as mentioned, it may take some time before interest rates in other countries are increased to a considerable extent. we have seen that in periods