Ekholm: How can financial crises be avoided in Sweden?
Deputy Governor Karolina Ekholm held a speech on Thursday at Handelsbanken in Stockholm, where she expressed a wish to see new tools specially designed to counteract new financial crises in Sweden. Ms. Ekholm noted that work is being carried out across the world to establish the framework for the new policy area known as macroprudential supervision, which is aimed at counteracting the risks to the financial system as a whole. One important part of this work is developing a new toolbox that can effectively be used to prevent new crises. At present, Sweden lacks this type of tool. Ms. Ekholm also emphasised the need to have a clear mandate for macroprudential policy.
"Finansinspektionen has instruments at its disposal that are focused on the health and behaviour of individual participants and companies. But one important lesson of the crisis is that this is not enough. We need to complement this with tools that can focus on the financial system as a whole", Ms. Ekholm noted. In her speech, she discussed what such a toolbox could include to conduct effective macroprudential supervision in Sweden.
Ms. Ekholm pointed out that systemic risks vary in character and consequently different types of tool are needed. This suggests that a broad set of macroprudential policy instruments are needed. Ms. Ekholm also noted that the financial system is complex and dynamic and that the risk outlook is constantly changing. This means that it can never be determined with certainty where a financial crisis may arise. Bearing this in mind, she said that it is important that we, in Sweden, construct a framework for macroprudential supervision that is flexible and that we do not limit our possibilities in terms of the instruments that can be used.
You can read the entire speech in the PDF file.
