breach of these regulations should lead to a revocation of the licence and the bank being closed. the safety net also includes the ability of the central bank to lend on special conditions to an illiquid but solvent bank when financial stability is at risk. in many countries, there is also an explicit guarantee to the small depositors, for which the banking sector itself is to take the responsibility. but this safety net, while reducing the risks involved, provides no full protection against failures. in particular, it does not extend to the case when the financial system is threatened in its entirety. and while the formal depositor protection should reduce the pressure from the public on the government to intervene in a bank failure, if the scheme is not properly set up, this expectation may prove unfounded. the government has a direct interest in an efficient insolvency and resolution framework so the stakes are still high for the government in a banking crisis. while owners have little to lose when capital is low, and many creditors are protected by the deposit insurance, the state – and the whole economy in the end - may at worse suffer enormous losses. therefore, unlike the situation in ordinary companies, the lack of an efficient insolvency regime will not primarily be a creditor problem only, but a problem which will fall right into the government ’ s lap. and if the insolvency framework is not efficient and cost effective, it may be rational for the government to intervene beyond the ordinary regulatory framework. if there is no other way to deal with the problem, it may even be rational to contribute capital directly. this may be the case even if such an investment cannot be justified on the basis of a corporate capital investment appraisal. the alternative of not intervening may simply be very much more expensive. now, if this intervention by the government makes the owners and creditors better off than they would have been otherwise, the rules of the game change completely. if owners and creditors can speculate on a bail - out, market discipline will be eroded. clearly, this needs to be avoided. and the conclusion is that, if anything, it is even more necessary to have effective and efficient insolvency and resolution frameworks for banks than for companies in general. in the swedish banking crisis, the public interest was secured by special crisis legislation so, how do we fare in this respect? well, let us take a look at some real crises. i will start with the case with which i am most familiar,

##mined goods and services whose prices usually vary a lot. let us look at an example of the first type. figure 2 shows how inflation in sweden has developed since 2011. it shows clearly a falling trend in inflation up to 2014 - 2015. after that, the trend has been an upward one. but it is also clear that there are major variations from one month to the next. in other words, there is a considerable amount of white noise in the series. see rich and steindel 9 see, for instance, andersson and berg ( 1995 ). 10 see a discussion on its purpose in heikensten and vredin ( 1998 ). see, for instance, nessen and soderstrom ( 2001 ) and also apel and jansson ( 1999 ). 12 there are also calculation methods that are more anchored in economic theory. two examples are eckstein ( 1981 ) and quah and vahey ( 1995 ). 13 there is also scope here for methods that entail in a preliminary stage estimating models where current inflation is explained by actual inflation in earlier periods and by a number of explanatory variables. in a second stage, one can then calculate which inflation models predict each period in time. 5 figure 2. cpif inflation annual percentage change. 3. 0 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 - 0. 5 cpif sources : statistics sweden and the riksbank a simple way of getting rid of the white noise and clarifying the actual trend is to calculate a twelve - month moving average for the series. 14 figure 3 shows the results of such a calculation. now the white noise has been removed and the underlying development is shown more clearly. but it must be emphasised that this is the underlying development given the method i have chosen. first i have calculated the level for a twelve - month moving average for the cpif. then i have calculated the twelve - month change for the moving average. 6 figure 3. cpif inflation, twelve - month moving average annual percentage change. 3. 0 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 - 0. 5 cpif, twelve - month moving average sources : statistics sweden and the riksbank the second common method of calculating underlying inflation is, as we said, to exclude certain predetermined prices or groups of prices. perhaps the most common measure used internationally is inflation excluding energy and food prices