de france. the guarantee is granted for a fee, so that the beneficiaries pay costs corresponding to normal market conditions and also with a view to protect taxpayers ’ interests. second, the law also creates a state - owned company empowered with eur 21 billion and entitled to subscribe to banks ’ subordinated debt issues or preferred shares. as you know, six banks have issued subordinated debt and the government subscribed to these issues for eur 10. 5 billion. such support boosted their capital position and as a result ensure these banks to keep up their lending to the economy. did the french banks really need such a boost to their solvency and capital? setting aside the belgo - french bank dexia, the answer is “ not really ”. dexia was very specific : because of its large exposure to us monoline risks, public recapitalisation was absolutely necessary. by contrast, all the other french banks have sufficient own funds, be it in terms of prudential requirements or in comparison with their peers from other developed countries. public recapitalisation is not aimed at making up for faults or weaknesses. rather, it is to anticipate potential problems. circumstances are indeed exceptional ; even the soundest and most profitable banks cannot take it for granted that they will be able to tap markets to meet their funding and capital needs. as long as such uncertainty pervades and markets continue to fail, it is the public authorities ’ duty to protect the credit system and safeguard the financing of the economy. the private sector strategies to overcome the crisis cover several aspects. first, i would like to mention the initiative to create a compensation scheme with a central counterparty for credit default swaps ( cds ). this initiative from the private sector is strongly encouraged by public authorities given its importance for financial stability. regarding institutions themselves, different proposals are on the table which relate to their business model and risk profile, to governance and risk management schemes and to disclosure and communication policy. in terms of risks profile, two main models are intensely discussed. under the first one, universal banks that benefit from diversified sources of profits were better off during the crisis. by contrast, specialised financial institutions, especially those heavily engaged in investments activities, suffered significant losses. i have already mentioned the case of french banks. in the same vein, the interest of deutsche bank for postbank in germany stems from the same logic : to diversify sources of funding and of profitability. conversely, the other model

experiences problems, this may then have serious repercussions for the financial system and, ultimately, the real economy. however, traditional supervision has not sufficiently taken into account the risk of financial problems becoming contagious. monitoring those risks is also a rather different process to monitoring the risks in an individual institution. traditional regulation and supervision have also found it hard to handle the tendency to rollercoaster behaviour of the financial sectors. in good times, there is almost always a tendency to expand lending and to ignore the risks this entails. however, when the downturn comes, the same players tend to run for the exits at the same time, which serves only to according to the analysis, a monetary policy designed such that housing prices continued to rise in accordance with the trend in the period 2000 - 2004 would have entailed a repo rate around 8. 5 per cent, an inflation rate of – 4. 3 per cent and a level of gdp growth of – 0. 6 per cent in 2007, that is in the year before sweden was hit by the global financial crisis ( see claussen et al., 2011 ). monetary policy is also ineffectual if one wants to counteract contagion risks due to the size and complexity of the banks and their exposures to each other. bis central bankers ’ speeches make the downturn worse. a vicious circle arises when a credit crunch leads to lower production and lower employment, which in turn feed back into in the financial sector by making loan losses even higher. this type of feedback effect between the financial system and the macro economy is not the province of traditional financial supervision either. this is where the concept of macroprudential policy comes in. quite simply, financial supervision must be complemented by a much broader approach. this broader approach is usually referred to as macroprudential policy. at the european level, the efforts to develop a framework for macroprudential policy have resulted in the formation of the european systemic risk board ( esrb ). this body, in which the riksbank is represented, will be responsible for overall macroprudential policy for the financial system in the eu. the esrb ’ s tasks include identifying and ranking systemic risks. when such systemic risks are discovered and are deemed to be significant, the esrb should issue warnings and, when appropriate, recommend that corrective measures should be taken. when necessary, the esrb will make these warnings and recommendations public. a so - called comply