to protect insured depository institutions from the risks of activities conducted by bank holding company affiliates. the law limits the extension of credit by insured depository institutions to their affiliates, and the umbrella supervisor - the fed - is charged with limiting other forms of risk exposure to the depository institutions from the bank holding company structure. clearly, there is a tension between protecting banks from such risks and avoiding the extension of bank - like supervision to affiliates. the provisions of the law dealing with the relationship between the federal reserve and the functional supervisors of certain types of nonbank affiliates - the sec, the commodity futures trading commission, and the state insurance regulators - attempt to balance these considerations. as you know, these provisions call for the federal reserve to rely, as much as possible, on the examinations conducted by the functional supervisors and on public reports to obtain information about broker - dealers, insurance companies, and futures merchants. the federal reserve may examine such functionally regulated entities only if ( 1 ) the board has reasonable cause to believe that the entity is engaged in activities that pose a material risk to an affiliated depository institution, ( 2 ) the board determines that an examination is necessary to inform the board of the entity ’ s risk - management systems, or ( 3 ) the board has reasonable cause to believe that the entity is not in compliance with the banking laws. we are in the process of working out satisfactory procedures with functional regulators. but it seems to me that we also must work harder to cooperate and share information among the umbrella and bank supervisors in a manner that is satisfactory to both and that minimizes regulatory burden and overlap. in principle, the relationship between the umbrella supervisor and the primary federal bank regulator could involve the relationship between the federal reserve and either the federal deposit insurance corporation or the occ. in practice, however, the key relationship for large, complex financial holding companies will be between the federal reserve and the occ because the banks in large, complex financial holding companies are either state member banks or national banks. indeed, most of the large and complex institutions likely to take advantage of the new opportunities have lead banks, as i have noted, with national charters. this relationship between the primary bank regulator and the umbrella supervisor must respect the agencies ’ individual statutory authorities and responsibilities. at the same time, the primary bank regulator and the umbrella supervisor need to share information that allows them to carry out their responsibilities without creating duplication or excessive burden. given the systemic risk associated with the disruption of the operations of large

stability, which is one of the themes for our forthcoming discussions, has always been an important item on the central bank policy agenda. a well - known swedish economist, knut wiksell, was a clear exponent of the idea in the late nineteenth century. as it happens, he addressed an audience on the subject here in stockholm a hundred years ago almost to the day, namely on 14 april 1898. in one of his books he wrote : “ if prices rise, the rate of interest is to be raised ; and if prices fall, the rate of interest is to be lowered ; and the rate of interest is henceforth to be maintained at its new level until a further movement of prices calls for a further change in one direction or the other. ” just over three decades after his address in stockholm, sweden had to leave the gold standard in september 1931. the objective of monetary policy was declared to be to use “ every available means to maintain the swedish krona ’ s domestic purchasing power ”. in this way the riksbank was the first central bank to declare openly that its monetary policy norm was price stabilisation. notwithstanding this long tradition, after inflation ’ s rising trend in the post - war era, swedish economic policy ’ s reorientation toward price stability did not begin until the late 1980s and early 1990s. that was a decade or so after such realignment had been initiated in other countries. by then, sweden had experienced twenty years of inflation that averaged 8 per cent a year. that was the longest inflationary period since the early nineteenth century. in contrast, in the one hundred and forty years from 1830 to 1970, inflation in sweden had averaged an annual rate of 2 per cent. so one can say that in the present decade we have been re - establishing our roots. sweden ’ s policy realignment in the early 1990s was, however, more painful than anyone could have foreseen. one conceivable explanation is that, having waited longer than other countries, the road back to price stability was more difficult for us. there were also a number of exceptional events along the way. what was perhaps the worst bank crisis of the century erupted in the wake of the 1980s ’ bubble economy. exchange rate turmoil was such that, during some dramatic days, the instrumental rate was hiked to 500 per cent. in the early 1990s the budget deficit grew to be the largest in the industrialised world. there are many similarities, as well as some differences, between the