a global central bank. this is not likely to be in the cards in the near future. so where do we stand regarding cross - border banking? in some sense, we are in the middle of a strong river. some want to go back, as they do not find it safe to continue – perhaps because they are not offered a helping hand – and given the choices currently available, it could be better for them to stay on the other side. others are banding together to hold hands and wade across. and still others are strong enough to go it on their own. it will be interesting to see how this story plays out in coming years. thank you very much! i have discussed the potential implications of the foreign currency surplus for the international monetary system in : “ the implications of cross - border banking and foreign currency swap lines for the international monetary system ”, in o. blanchard, d. romer, m. spence and j. stiglitz ( eds ), in the wake of the crisis, mit press, 2012. see flemming and klagges ( 2010 ), op. cit. bis central bankers ’ speeches

on and explanations of the developments in certain areas, such as liquidity, funding, changes in lending and deposits, asset sales, etc. the banks were urged to show restraint and downsize, and to follow that up, the central bank specifically collected information from them on their downsizing efforts. they realised, of course, that they were in a tight position, and they responded by selling assets and discontinuing selected activities in a number of countries, among other things. kaupthing bank ’ s decision to abandon its plans to acquire nibc in the netherlands was very important in this regard, not just for kaupthing itself but for all of the banks. the central bank supported all of these actions wholeheartedly ; however, it did not have the statutory authority power to force the banks to change their conduct. it is known that the central bank expressed its growing concern over the position of the banks during meetings with governmental authorities. early last year, the central bank ’ s concern centred not least on the banks ’ large near - term refinancing requirement for the coming years, which i have already mentioned, and the opinion, expressed by leaders of a number of international banks, that the global credit crunch was unlikely to ease in the foreseeable future. the central bank feared that credit markets could remain closed to icelandic banks for some time to come. although various explanations have been given for the swift rise in the icelandic banks ’ cds spreads, first in early 2008 and again that summer, it is perhaps possible to claim that the most important explanation lay in growing scepticism about the banks ’ ability to obtain the medium - term funding they needed for refinancing purposes. in late 2006, the central bank had doubled its foreign exchange reserves through an international treasury bond issue the proceeds of which were deposited with the central bank. early in 2008 it began preparing to fortify its reserves still further, as is explained in a memorandum published on the central bank ’ s website in october 2008. 21 raising the foreign reserves was deemed important in order to bolster confidence in the icelandic financial system and thus to facilitate its adjustment to a new reality. currency swap agreements with three nordic central banks were announced in may 2008 and renewed towards the end of the year. no other central banks apart from the nordic ones were prepared to lend their support in 2008, in spite of the central bank ’ s requests and in spite of the public declarations from the international community, including the financial stability forum