like stora enso wants long - term financing for a new paper machine, which it might not be possible to sell in a couple of years'time should the company be forced out of the investment. the company's issues of shares and / or bonds provide this long - term investment, partly because the securities can be sold on a market without having to be redeemed by the company issuing them. another important task for the financial system is to reduce risks for both savers and investors. the fact that some companies can involve greater risk than others can be balanced in a well - differentiated financial market by savers spreading their savings across different forms, buying different shares, bonds, shares in mutual funds that in themselves represent a risk spread, and by depositing some in banks. a company that takes on debt in order to make profits in future through sales on foreign markets can protect itself against exchange rate fluctuations by signing futures contracts, which state when and at what prices future income will be converted to kronor. the company can also buy input goods, such as oil, and sell, for instance, pulp at a forward rate, so that the company knows for certain what its future costs and income will be. it costs to do this, but the company then faces no risks. it is quite simply a form of insurance. when it comes to smaller companies and individual households, the securities market is hardly a suitable alternative. the risks for operators on the capital market are difficult to assess and the costs of the transactions have to be spread out over large amounts. instead, banks and insurance companies supply services to small companies and households. the banks act as intermediaries, who receive deposits that are liquid and convert them into long - term lending, so that savers'requirements can be reconciled with the needs of the investing company. the mediation of payments is perhaps the most difficult to understand function of the financial market. but bear in mind that less than 10 per cent of all payments in sweden are made with banknotes and coins. the remainder are through giro payments in various systems for small, mass transactions and large payments between banks and companies. if we were forced to use banknotes and coins, it would require a huge transport apparatus and considerable productive time to implement payments. new technology in this field is being developed all the time. just consider charge cards and e - money, where payments is through book - keeping in different accounts, without any physical money being in circulation. millions of transactions of this

lars nyberg : in the wake of the financial crisis speech by mr lars nyberg, deputy governor of sveriges riksbank, at the hq bank, stockholm, 18 november 2009. * * * i would like to start by expressing my gratitude for having been invited to discuss a few of my thoughts about what may follow in the wake of the financial crisis. make no mistake, the crisis is not behind us yet. many balance sheets in many countries must be adjusted before the world ’ s banking system can be given a clean bill of health. but the acute phase is hopefully over, giving us reason to reflect not just over why developments took the turn that they did – many others have already written volumes about this – but also over what should be done to prevent these mistakes from being repeated. much of this discussion deals with regulation and supervision and, just like after every crisis, many political initiatives are being proposed, some better than others. this is what i intend to talk about today. but there is also reason to reflect over the interplay between financial stability and monetary policy. the current crisis has indisputably demonstrated that monetary policy and financial stability overlap in many important ways that we in the central banks previously may not have entirely considered. i intend to devote the main part of my speech to this issue. bubbles and dangerous imbalances rising asset prices are currently the subject of intense discussion – in sweden, because house prices have started to rise again in the middle of a recession, internationally because prices of financial assets in many newly industrialised countries in asia and south america are rising far more rapidly than expected. is this a problem? have bubbles already arisen on the asset markets? and, if so, what should we do about it? now, to start with, remember that asset prices can rise, and rise quite far, without necessarily becoming what is known as a bubble. even if these assets become overvalued for a period of time, reality usually catches up eventually and prices are adjusted without there being any serious macroeconomic effects. 1 a bubble is something else. a bubble always includes an element of speculation, based on a belief that this development will continue and provide continuously increasing prices. this belief leads to increasing investments and, consequently, further price increases. of course, the term bubble also suggests the image of something that will eventually burst, be it with a loud bang or with a quieter one. financial bubbles are normally built up during good times when growth is high,