Presentation Overview
Crises as drivers for change: Nordic crisis in the 1990s and the recent global crisis.
Riksbank: Changes in organization, tasks and governance
The nexus of monetary policy, financial stability and macro-prudential regulation
Bank-/ Currency crisis
Crisis to crisis
1990
1995
2000
2005
2010
Inflation targeting regime Formal
independence
Financial crisis
Governance reforms
New cashstructure
Competence shift
Reorg. fewer depts.Down-sizing
FSR
€-referendum
Outsourcing statistics
NEW MANAGEMENT
MPR
Organization Pre-1990: Operational tasks and detailed
regulation predominated.
Trading room – to maintain stable exchange rate.
Printing and distributing notes
Post-Crisis Organization
No more fixed exchange rate, no in-house regulation
Outsourcing several activities New monetary policy – inflation targeting Gradually increasing focus also on financial
stability
Accountability, openness and confidence Moral suasion rather than hard tools.
Changes in Staffing
From 1100-1200 (750 excluding companies) to 350 current.
70 percent have academic degree and there are 50 PhDs.
Clear focus on core activities.
Staff development (FTE:s)
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1995
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2009
Subsidiaries
Riksbank
Governance From hierarchy to a flat organization. A six person Board, mainly to ensure broad
discussion on monetary policy. Drawing a line between policy decisions and
other tasks. Ideally, no involvement by Board in day-to-day
management International issues are totally integrated
Governance reforms: a day at the office for a deputy governor
”Executive Director” responsible for IT-, Administration- and Market Operations Departments
2000
2004
2010
Responsible for ”preparing” stability issues for the board. Heading the financial stability coordination group.
No particular responsibility for any specific part. Contributes to policy discussions and policy decisions and communicates them to the public.
Heads of dept., decide on…
All issues related to the day-to-day running of the respective department
Co-ordination of all issues of relevance across the bank (such as rules and regulations, salaries, budget allocation and operational plan, follow-up, projects…)
Chaired by the Head of the General Secretariat
Weekly meetings Regular reporting to the
Executive Board
The Management committee ..
Conclusions from the global crisis
Clear links between monetary policy and financial stability
Regulation and supervision – first line defence Both regulation and monetary policy affect
borrowers’ loan costs.
Regulation vs. Policy Rate
Leaning against the wind No contradiction between ”leaning” and
stabilising inflation and the real economy… … but some challenges (e.g., identifying a
leverage cycle). Monetary policy is rather blunt; regulations can
be more specific towards the financial sector.
Challenges for Regulatory Design
Finding the balance between increased regulatory costs and reducing the risk and cost of crises.
Time-varying regulation is an interesting tool Should central banks merge with supervisory
authorities to improve coordination and efficiency?
Choices for central bank governance on monetary policy vs. financial stability.
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Countercyclical capital buffer:1 Sweden
Vertical shaded areas indicate the starting years of system-wide banking crises.
1 The countercyclical buffer is 0 when the value of the credit/GDP gap is below 2, and 2.5 when it is above 10%; for gaps between 2 and 10% the buffer is calculated as 2.5/8 times the value of the credit/GDP gap exceeding 2%.
Source: BIS calculations.
0.0
0.5
1.0
1.5
2.0
2.5
80 85 90 95 00 05
Financial Stability: a Riksbank task?
Before 1990: No authority assumed responsibility for overall financial stability analysis.
The supervisors need to focus on micro-supervision.
How to formulate a mandate on FS? Currently: ”…promote a safe and efficienct payment system”
Do we need an extension of our independence?
Why is FS a Central Bank Task
Link to monetary policy Link to large value payment system operated by
central bank Preparedness to provide ELA presupposes
knowledge about overall situation of system.
The Global Crisis Showed Need to Review FS Work Scope: Include more institution categories SIFIs pose larger problems than previously
expected Liquidity developments are key Contagion between submarkets and jurisdictions.
Crisis Experiences for Central Banks Be prepared for large and sudden demands for
liquidity support, incl in foreign exchange. Review our framework for ELA Focus more on liquidity vulnerabilities in cross-
border banks Clarify the roles and mandates of the authorities
in crisis management.
Tools for FS So far: Only communication and moral suasion. The Riksbank is analyzing its need for tools. Some tools could be held at the
Finansinspektionen – to be called on by the Riksbank.
There is no conflict between MP and FS, but we need focused tools for FS.
An Example: The Riksbank Would Have Needed Tools to Stem Unsustainable Lending from Swedish Banks in Latvia
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mar-05 sep-05 mar-06 sep-06 mar-07 sep-07 mar-08 sep-08
Utlåning Bytesbalansen
Utlåningen (vs), index 100=2003, Bytesbalansen (hs), procent av BNP Källa: Reuters EcoWin
External Evaluation of the Riksbank 2006: First external evaluation of the Riksbank’s
monetary policy during the preceeding five years.
2011: Second evaluation, by Goodhart and Rochet. Will include both MP and FS, including our mandate, competencies and instruments for conducting FS work.
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