few years ahead. in the shorter term they are lower, but there is nothing particularly strange about this – inflation in our own forecasts is lower too. nor should we forget that the riksbank is not the only authority that influences interest rates in the economy. apart from the measures taken by the riksbank, crisis measures taken by the ministry of finance and the national debt office of course affect costs ( spreads ) on the credit market. fiscal policy stimulation measures also affect the costs of credit risk and thus the price of credit. we should also remember that supervisory and regulatory measures that establish different forms of constraint, for example capital adequacy requirements for the banks, can indirectly affect the price of credit. a question that we are wrestling with just now is how serious the credit crunch is and whether there is a risk that it will hit the non - financial sector so hard that it will have major repercussions on the real economy over and above the credit crunch that normally follows a recession that undermines the creditworthiness of companies and households. on the one hand the supply of credit declines when the banks want to shrink their balance sheets. many companies in the riksbank ’ s company survey state, for instance, that they are finding it difficult to borrow at longer maturities. on the other hand, the demand for credit should also decline as a consequence of weak economic activity. what can be done about this and what is the role of the central banks in easing the credit crunch? the riksbank's view is that it is the financial system that as far as possible should be strengthened in order to ease the credit crunch. it is mainly the commercial banks that have knowledge about credit for non - financial companies. primarily, the banks need more capital in order to increase their resilience to potential losses in the future. this can indirectly be expected to increase the banks'credit capacity. many banks have already strengthened their capital base. the government's capital programme has also made it possible to inject further capital if the need arises. in the worst case, it may of course become necessary for the government to provide loans or guarantees directly to the non - financial sector in some way. but this is not primarily a task for the riksbank. at the same time, it is more important than ever that the authorities co - operate effectively and pull together. different phases and components of the crisis require different measures from the central bank and from other authorities. it is extremely

organizations in the united states - those that our screening criteria determine to be core banks - should be subject to the most sophisticated version of basel ii. to be clear, we are not proposing to implement either the standardized or the foundation internal - ratings - based ( f - irb ) approaches within the united states. the twenty banks that we are assuming will be under basel ii in this country either by, or shortly after, the initial implementation date would account for about 99 percent of the foreign assets held by the top fifty domestic u. s. banking organizations. we believe that this high percentage clearly signals our intent to meet our obligation to ensure cross - border competitive equality of capital regimes. that the same twenty banks also currently account for approximately two - thirds of the domestic assets of u. s. banking organization indicates their importance to our banking and financial system. these entities must operate under the best risk - management standards with the most risk - sensitive capital treatment. we do not intend to require the thousands of other banking organizations in the united states, including u. s. subsidiaries of foreign banks that do not meet the mandatory criteria, to adopt basel ii. unless they choose to adopt basel ii, they will remain under our current regulatory capital rules, which are based on basel i. those banks remaining under basel i will not be subject to an explicit regulatory capital charge for operational risk. to be sure, any of these organizations can choose the basel ii requirements whenever they want, provided they meet the infrastructure prerequisites of the a - irb and the ama approaches to basel ii. we believe that the cost - benefit nexus will make this option infeasible for most of these banks in the years immediately ahead, but ultimately that decision resides with the banks themselves. nonetheless, as the cost of risk - management techniques decline with their wider dissemination and as counter - parties and stakeholders seek the comfort that comes with banks'application of more - sophisticated risk - management techniques, the larger regional banks may wish to migrate from rules based on basel i to those based on basel ii. even if larger regional banks do not formally choose to operate under basel ii for regulatory purposes, we expect they may wish to make use of the risk - management process that underlies basel ii. indeed, i should emphasize that the movement toward more - sophisticated risk management, the prerequisite of a - irb and ama, is occurring, and would continue to occur, independent of basel ii. this movement is clearly a market trend reflective