s loan to carnegie investment bank ab has been repaid by the swedish national debt office, which has taken over the debt and now owns the company. the debt office can now take over a financial institution, as in carnegie ’ s case. this applies in a situation where an institution that does not meet the requirements for liquidity assistance from the riksbank has to default on its payments and this is assessed to threaten financial stability. this is made possible by the stability plan for the financial system decided by the riksdag just over two weeks ago. the stability plan also means that the government can extend guarantees to individual institutions or to a group of institutions. these are important components for putting together a suitable financial safety net and i welcome the riksdag ’ s decision. i also believe that it would be good if we further develop this legislation in the long term. it should be possible for the government to reconstruct a credit institution without having to take over ownership. and it is not only in situations where financial stability is seriously threatened that such laws and regulations are needed for banks and other credit institutions. it is important for the credibility of the banking system as a whole that there is a regulatory framework which amongst other things enables depositors to quickly regain their money. monetary policy and the financial crisis a small, export - dependent economy like sweden ’ s is not unaffected by world economic activity and what is happening in the global financial system. in a way, i think that one can say that the distinction between monetary policy and financial stability is erased when a financial crisis breaks out. if one does not forcefully counteract the crisis, there is a risk that it will have a strong impact on inflation and growth. the decline in production and employment can then be both profound and prolonged. monetary policy cannot solve all of the problems in the financial markets. this requires additional measures. and as i said, such measures are now being taking in most parts of the world now, as well as in sweden. but monetary policy can alleviate the effects of the financial crisis on the economy. the riksbank has also implemented monetary policy measures, largely as a result of the international financial crisis. in the space of just over two weeks, we cut the interest rate on two occasions, by a total of one percentage point, to 3. 75 per cent. rapid change in the situation when anxiety escalates in mid - september normally, we raise or cut the repo rate in smaller steps and emphasise that

##bank welcomes. with regard to legislation, i also believe that further supplementary measures will be needed in future. i will return to this later on. during the recent financial turbulence the riksbank has not only had regular contacts with other authorities and the political system – we have also had closer contacts with market participants than usual. central banks around the world have also had close cooperation with regard to reducing the strains in the financial markets in various ways. so what have we at the riksbank done to make the markets function better? improving the functioning of the markets the swedish banks have mainly experienced two problems. one has been the lack of access to more long - term funding in swedish kronor. the other has been the limited possibilities to borrow in us dollars. as i mentioned earlier, it has been much more difficult and costly for the banks to obtain financing other than at very short maturities. the banks ’ possibility to finance themselves is of course important to financial stability. it also affects other interest rates in the economy and thereby the impact of monetary policy. we at the riksbank try to counteract these effects of the financial turmoil. we have therefore offered the banks financing – against collateral and at an interest rate – at longer durations than normal, and than what is currently available in the markets. we have so far granted loans in swedish kronor at maturities of three months and six months to a total of sek 203 billion. one can say that we in this way replace part of the bank ’ s short - term financing with more long - term financing. this reduces their financing risk. it is important to point out that these measures do not have any direct monetary policy effects. the riksbank supplies liquidity with regard to loans of longer maturities, but at the same time withdraws the same amount of loans with short maturities at the repo rate. another problem for the swedish banks has been the shortage of loans in us dollars. therefore we have also offered the banks loans in us dollars. both the loans in kronor and the loans in us dollars have the aim to maintain financial stability by creating the right conditions for the markets to return to a more normal situation. this is also the aim of the swedish national debt office ’ s extra issues of treasury bills. a further effect of the measures is to improve the functioning of the mortgage bond market. for instance, the riksbank accepts covered mortgage bonds as collateral for its loans to the banks. in