governing capital requirements amplify cyclical fluctuations. the rules must therefore require banks to build up strong capital buffers over and above the minimum requirement in normal times. then the banks would not have to increase capital when a turnaround occurs, but on the contrary be able to absorb losses. this will counteract the need for banks to ration credit in adverse periods. many norwegian banks do not have sufficient buffers today to safeguard their own, their shareholders ’ or the economy ’ s best interests. third, banks ’ funding methods make them vulnerable. earlier, the two main sources of bank funding in norway were retail and wholesale deposits. in recent years, banks have borrowed heavily in both domestic and foreign markets. during the crisis, this proved to involve high liquidity risk for banks. in the future, in regulations and in practice, deposits must again take precedence as the largest funding source for banks. we also anticipate that bonds collateralised by high quality mortgages will become important. the credit swap arrangements can be seen as building a bridge to such a market. fourth, government authorities may be reluctant to apply stricter requirements to domestic banks, fearing that their competitiveness may weaken. such a drift in regulation towards a – too low – minimum level is important to avoid. for norway, it is essential that rules are applied both strictly and equally in the nordic countries. allow me to conclude. the world economy is these days in the deepest recession in the post - war period, in spite of the strong use of various measures. most markets and countries, including norway, have been hit by the crisis. norges bank has set the interest rate at a low level to curb the decline in activity and counteract an excessive fall in inflation. in accordance with its mandate, norges bank has given weight to anchoring and strengthening expectations that inflation will be low and stable ahead. this enhances the effectiveness of monetary policy. thank you for the opportunity to present these opening remarks.

the same time, persistently low interest rates pose challenges to financial stability. yet despite the fact that monetary policy has been stretched far, no country has retreated from 8 / 9 bis central bankers'speeches the basic rationale behind flexible inflation targeting. in norway, the ministry of finance is now considering whether the regulation on monetary policy should be modernised. after more than fifteen years, this is only natural. it should nevertheless be noted that the system has functioned well. since the introduction of inflation targeting, the norwegian economy has been exposed to a number of major shocks, most of which have originated beyond norway ’ s borders. in responding to these shocks, flexibility and scope for judgement in the conduct of monetary policy have been significant strengths. inflation has generally been low and stable since the beginning of the 1990s and has remained so throughout the period of inflation targeting. at the same time, monetary policy has contributed to dampening fluctuations in the real economy. 5 as long as inflation is firmly anchored, monetary policy can address other concerns. we can seek to counteract the build - up of financial imbalances by keeping the interest rate a little higher than would otherwise be the case. but norges bank cannot take the main responsibility for developments in house prices and debt. nor can monetary policy influence the economy ’ s longterm growth capacity. the past couple of years have been demanding for the norwegian economy. monetary policy can be supportive, but cannot take primary responsibility for needed structural adjustments. the shift towards a less oil - driven economy lies ahead. conclusion the original task of meteorologists was to forecast the weather so that ships could find shelter and property could be secured before the storm hit. today, climatologists give advice on how we can curb global warming. when economists take the temperature of the economy, they do so in order to forecast its future path. this exercise provides insight that helps the business sector adapt and facilitates the conduct of economic policy. the greatest challenges we face are global. in addressing these challenges we should build on fundamental economic principles. the climate challenge is calling out for cost - effective solutions, nationally and globally. the liberalisation of global trade has brought undeniable benefits. but insufficient attention has been paid to the other side of the coin : not everyone has shared in the benefits. the signs of growing protectionism are of concern. in a world facing common problems, going it alone is not the solution. if we all pull together, the burden becomes easier to bear. come what