Ingves: Financial stability – where are we heading?
The financial crisis has revealed shortcomings in regulation and supervision. Discussions have therefore begun on the future form and structure of regulation and supervision.
In my speech I discuss a number of proposals for changes in the international regulation of banks, as well as the content of future efforts to prevent systemic risks with a focus on Sweden.
A feature of the international debate that I welcome is the discussion of the need, once the crisis is over, to tighten up capital requirements in general and increase the requirements regarding the quality of the capital that may be included in the capital base. Lessons learned during the crisis also point to the need for stricter requirements concerning the banks' liquidity management. However, it is important to emphasise that most of the regulatory changes I discuss should not be implemented before the situation in the financial system has returned to normal.
In the case of efforts to prevent systemic risks in the future, dialogues with and warnings to the banks will continue to be important tools. But the authorities also need to be able to apply regulations and tools more forcefully than previously.
The internationalisation of the financial system poses a special challenge to national authorities. Today, it is difficult for the authorities to limit systemic risks that develop outside their national borders. This demands the further development of cooperation between authorities in different countries. We also need to consider what more-specific measures we may be able to take to limit the risks that develop outside our borders.
In the course of my professional life I have experienced two financial crises in my own country. This is at least one crisis too many and I definitely do not want to see a third. This is why I believe it is important to move from words to action and to make sure that the regulations and tools that make it possible for us to conduct effective stability work are put in place. At the same time, we must be careful to ensure that the reforms do not undermine the efficiency of the financial system.
Read the whole speech in the PDF file below.
