; new technology replaces outmoded practices and the labour required for each unit of capital equipment decreases. unprofitable units or firms are closed and new facilities are established. productivity rises in the economy as a whole. high productivity growth makes it possible to maintain business profits and keep price increases down. the transformation process generates a positive spiral ; the introduction of the new technology results in widespread rationalisation and greater efficiency. the resultant increase in the trend rate of growth for a longer or shorter period means that the economy can expand more rapidly than before without boosting inflation. this is the process that is often being referred to today as “ the new economy ”. i do not find the term particularly apt but if it can serve as a simple aid to understanding what the new information technology can bring about, i have no objection to using it here. a similar economic transformation is not yet discernible in sweden nor, for that matter, in other countries in europe. so the growth path has not been adjusted upwards as it has in the united states. the rate of investment both in europe as a whole and in sweden has been appreciably lower than in the united states for the past four to six years. it may be asked why the new technology is being introduced so quickly on the other side of the atlantic and so much more slowly here. first i should say that this is a very knotty question. economics has no precise methods that tell us when a technical breakthrough is likely to show up in higher economic growth. basically, however, the process is bound up with the growth climate in general. there is no exact definition of the growth climate but it does include the degree of macroeconomic stability, how the education system performs, the construction of the tax system, the legal framework and so on. so there are numerous factors to consider. it is also important to realise that adjustments to the new technology do not occur automatically. the new facilities will not necessarily be utilised in such a way that the effects suddenly show up in general economic development. a proper transformation presupposes that the right driving forces are in place and that other important requirements have already been met. otherwise the so - called new economy may mean difficulties rather than opportunities. a lack of adaptability can result instead in the economy being weaker and more susceptible to inflation. in other words, if the global economy faces sweden with stronger international competition and demands for change and the necessary renewal of the capital stock and production facilities does not happen,

small community banks and a small number of increasingly large, highly complex, internationally active institutions accounting for a growing share of total bank assets. neither a single supervisory approach, nor a single risk management technique will work for all. that need for flexibility and adaptation has been well served by our dual banking system and by the ability of individual states and state chartered banks to innovate. large and complex banking organizations one aspect of supervision that has become more crucial to our oversight process relates to systemic risk and to the activities of our largest banking organizations. a decade ago, for example, the 20 largest u. s. banking organizations held 68 percent of the assets of the 50 largest bank holding companies ; now its 82 percent. then, the 20 largest holding companies held 37 percent of all u. s. commercial bank assets ; now that figure has risen to 64 percent. those figures conceal, of course, the dramatic increase in the complexity of their activities represented by securitizations and derivative products. the notional value of derivative and futures contracts held by u. s. banks now exceeds $ 33 trillion, nearly five times the level at the end of 1990. securitizations by u. s. banks, at $ 270 billion, have grown as fast and are expanding beyond consumer - based loans, such as credit card and auto loans, to commercial credits. virtually all of these securitization and derivative activities are concentrated among the largest banks. while notional values and amounts securitized say almost nothing about the level of underlying risk to individual banks, they speak strongly to the increased volume and complexity of large bank activities and of the somewhat hidden risks they face. for these organizations, balance sheets and traditional lending have much different meanings from a decade ago. last year, the federal reserve responded to this trend by sharpening its supervisory focus on a smaller number of large complex banking organizations, both domestic and foreign. we now give increased attention to roughly twenty u. s. - owned and another ten foreign - owned banks. although they are generally the largest institutions we supervise, they warrant the greater attention not only because of their size, but also because of their on - and off - balance sheet activities, their broad range of products and services, their more complex domestic and international oversight structure, and their role in payment and settlement systems. we refer to them as lcbos, for “ large, complex banking organizations. ” in supervising these institutions we recognize that each is unique and complex and that it