 Thank you very much for giving me the opportunity to participate in this, the 6th ESRB annual conference and in some sense this is closing a circle for me. I had the honor to speak at the first annual conference of the ESRB and at that time I did so in my capacity as chair of the advisory technical committee and that is a position that I held for six years starting with the when ESRB was launched in 2011. Back then the ESRB as an institution in terms of what it was supposed to be doing and how the work was supposed to be carried out was pretty much a blank page. Over the years I've been wearing many different hats when it comes to international work. On the one hand I've been the governor of the Swedish Central Bank for quite some time but I have also been the chairman of the Basel Committee for Bank Supervision. I have worked for the IMF and I have had many other international tasks and I have also spent quite a number of years working in one form or the other within the ESRB community. I've been a member of the general board, I've been a member of the steering committee as I said I've been chairman of the advisory technical committee and for almost three years I have also been the first vice chair of the ESRB board. So everything that I'm touching on today and everything that I'm talking about is of course collared by all these different things I've done in the international and the global arena by now for many years. So in that respect having the opportunity to speak to you today is kind of bringing this full circle. I was with the ESRB at the beginning and since I'm stepping down as governor and also of course then as vice chair of the ESRB at the end of this year that brings me a full circle back to where the whole thing started and everything I'm talking about is also of course collared by my experience over these almost these many many years. Now if we go back to pre the global financial crisis uh macro prudential policies and macro prudential measures were largely unheard of and and there was not really much of a conversation about macro prudential policies because all of it was focusing on micro prudential policies in one form or the other and almost always related to individual institutions. Now during the global financial crisis it became quite clear that it was not enough to just have the focus on financial institutions as such there was also a need to keep an eye on the system as a whole and to try to better understand what the system as a whole looks like and what the vulnerabilities are. Now introducing macro prudential policies after the global financial crisis has been a game changer but on the other hand macro prudential policy is still a work in a program. One lesson that was drawn after after the global financial crisis came as early on as 2009 because then in a report by a high-level group chaired by Chakdila Rossier that group provided an outline for a European response to the global financial crisis and within that report you found the first reflections on creating the ESRB and this is also then of course what happened and that was the starting point and that's why we are still doing what we are doing today. One strand of thought which was important in creating the ESRB was to make sure that the ESRB has a very wide membership so in addition to the other ESAS the European supervisory agencies that are well known to to you the conclusion was that it wouldn't be enough just to do deal with the different parts of the European financial sector it would be also important to have somebody taking a look at the whole sector and in doing so also included all the other ESAS and other European bodies there are of relevance when it comes to financial stability for example at the European Commission and one novelty in this context was also including and creating the advisory scientific committee because it was felt that it would be important to get independent advice from academia where from individuals who have expertise in working on and thinking about financial stability issues. Roughly at the same time similar processes took place in other parts of the world for example on the US side 15 of the world's leading economists produced the so called Squam Lake report urging reformers to take a closer look at the system as a whole. At the same time similar strands of thought emerged on the side of the financial stability board and also the Basel committee on financial supervision so all in all many things were going on roughly at the same time and all of them actually in one form or the other raised the issue it is important to keep an eye on the system as a whole and not only keeping an eye on individual financial institutions. I do think that the work that we have done and others have done has served as well in the sense that fast forward to the pandemic which of course was not a financial crisis but given that when the pandemic started we really wanted to avoid having the pandemic morphing into a financial crisis we were actually in a much better position both at the macro prudential level and at the micro prudential level understanding what we needed to do in order to deal with the very unusual and strange circumstances that the pandemic produced and it's also I think a fact and it's a positive fact that the pandemic did not produce a financial crisis also and that I think is a pretty good result given that things were so different after the global financial crisis back in 2008 and I think one reason for that was that the banks and others have more and better capital than in the past but we were also in a much much better position to monitor what was going on in the system as a whole but the work is almost never done and what we now need to focus more on compared to what we have done in the past is to focus on the non-bank sector. I have the impression that a perennial issue is to deal with data gaps it takes in some instances decades to actually fix various data gaps and we need to be aware of new types of vulnerabilities that always will emerge in one form or the other. Now at the first annual conference when I gave my speech then I sort of argued that at the ESRB table you need many individuals with different backgrounds and with different competencies because in order to fully understand what the system looks like in its entirety you need to have those different competencies at the table and you need to find ways of making it possible for these individuals with various expertise to talk to each other in such a way that the sum will be more than the different parts. Now that of course on the other hand produced a very large group of individuals and it also created a quite complex structure and in the early days I'm pretty sure that many thought that hmm a table of this size can never work too many people too many diverse views but I do think that it actually has worked and that's because it became clear early on that with the structures that were created with the methodologies that were created with the way the meetings were conducted it actually became possible for all these experts with different backgrounds to come to conclusions and we also see that very clearly when it comes to the outputs from the ESRB because over the years the ESRB has produced a large number of reports participated in many consultation processes produced many occasional papers and also the ESRB has produced surprisingly many warnings and recommendations and I do sense that in the early days there were those who actually had doubts whether the ESRB would be willing and capable of producing warnings and recommendations but 10 years after I it's clear that the ESRB has been capable of of doing this and all of this based on the principle comply or act or explain basis it's also I think important to note that many of the warnings and recommendations that I'm referring to have actually been addressed to individual countries and that rate that and that shows that country country based analysis and peer pressure is something which is actually quite important now why was it possible to do this I think that one factor that has played a major role when it comes to getting things done is the governance structure of the ESRB because contrary to many other international bodies when the ESRB reaches a conclusion it does not necessarily have to be based on consensus because at the end of the day it's possible at the ESRB table to just vote and get on get on with it and I think that that's it's a blueprint for how to do things also in other international fora now what does it take then for macroprudential frameworks to be successful first of all the macroprudential authority both at the EU level and national level needs a clear political mandate to act and you also need to have a toolbox that goes hand in hand with that second the mandate needs to be well defined and you also need to have objectives that are easy easy to understand and the macroprudential policies should not be used for all sorts of other purposes third macroprudential oversight should also be transparent and accountable not least in order to prevent inaction bias which is a perennial issue both at the EU level and at the national level and accountability should allow for public scrutiny fourth you need to have the capacity to identify and assess systemic risks and you also need to understand how to mitigate those risks and to do that you need to have the capacity to both identify and assess systemic risks and that means of course that you need to have the analytical tools you need to have data and you have to need to have the methodology methodological capabilities that you need in order to carry out an informed conversation at the ESRB board and finally fifth it is essential that there is independence because without independence you run the risk of having many other lobbying institutions forcing you to do things that are either not in line with your mandate or you are not or forcing you not to fully deal with your mandate but at the same time total independence is not possible because when you deal with the financial system as a whole you also need a degree of cooperation because there are many interested parties dealing when it comes to the financial sector and that means that you need to find reasonable ways of coordinating and discussing with other experts but having said that you also need to be aware of a fact of life and that is that there will always be pressure from the financial industry and in the short run there will always also be various political pressures in order to affect the outcomes or in order to ensure that there aren't really any outcomes in the short in the short run and that is because part of the work of the ESRB is basically dealing with the perennial issue making a distinction between doing the right thing now in order to avoid catastrophes down the road compared to doing nothing now which sometimes is actually easier and then probably having to deal with a catastrophe at some time in the in in the future and this is where actually independence matters because without independence it is just so easy to sit with your arms crossed and look the other way when you should have taken decisions in order to avoid catastrophes in the in the in the future now when the ESRB was created at the same time all EU member countries started creating their own macro-pudential institutions at the domestic level this can be done in many different ways in some in some cases and actually I think in most cases macro-pudential policy is handled by the central bank and that is particularly in those cases where financial supervision is also handled by the central bank in other cases when supervision is outside the central bank macro-pudential policies have ended up with the supervisory authority regardless of how this is done and it can be done in many different ways you also need independence and cooperation in one form or the other at the other at the national national level and of course also at the national level you have the same type of political pressures that I referred to earlier and that means that one has to be careful when it comes to the institutional setup and one has to make sure that the institutional setup whichever form you have chosen is actually robust and stable over time now when it comes to robustness it's not surprising at all when we're talking about macro-pudential measures and let me give you an example for example borrow based tools now borrow based tools those tools are basically about saying no households or corporates should not be able to borrow beyond a certain amount of money and if that is the case it gets dangerous in the financial sector as a whole one example is the level of debt that is acceptable another example is whether to amortize or not amortize or how much to amortize and my country is no exception when it comes to a long-standing conversation about borrow borrow based measures and here domestically there has been pressure on the FSA to relax for example the amortization requirements that are currently in place and it's also I think worth worthwhile pointing out that in my national context the government has the right to veto any proposal to introduce new borrow based measures this is just showing that it is a non-trivial issue when it comes to designing the governance structure structures in such a way that you actually have the capacity and the willingness to say no because many macro-pudential measures are not really all that difficult to understand somebody has to have the right to say not beyond this whatever that happens to be now in order to get to that point let me compare a little bit between macro-pudential measures and monetary policy when it comes to monetary policy independence of the central bank has been discussed for decades and in an EU context this is also what is captured in article 130 of the treaty and what this really means that today after decades of conversations and after having independence enshrined in the treaty is fairly clear what monetary independence is all about and how central banks go about central banks go about deciding on monetary policy issues now given that macro-pudential policies is much younger than the conversation about central bank independence I think that it is worthwhile to go through a similar conversation might take a long time when it comes to finding solutions along similar lines when it comes to discussing how things are decided on the macro-pudential side and as is obvious when it comes to monetary policy monetary policy is kept at arms length from the political system and I do think that we need something similar when it comes to macro macro-pudential policies at the same time I would like to argue that it's obvious that there are strong complementarities between monetary policy and macro macro-pudential policies because both of them are in one way or the other dealing with the price of money and both of them are designing policies within the financial sector as such at the same time as I already alluded to you need to understand what is going on in the economy as a whole and that means that also from time to time the design of fiscal policies will make a difference when it comes to financial stability issues and what macro-pudential policies are expected to look like and a good case is presently what happened during the pandemic because then it was obvious that both monetary policy macro-pudential policies and fiscal policy all of them were kind of moving in the same direction in order to ensure that the wheels kept turning when economies were shutting down in different different forms all over the all over the world now when it comes to the institutional setup I'm convinced that the debate will probably go on forever but let me at the same time point out that in a report by the ESRB's advisory scientific committee they basically concluded that in most cases it's good to ensure that monetary policy and macro-pudential policies are closely related and that speaks in favor of dealing with macro-pudential policies within the central bank in one form or the other and if that is not the case then my view is that the central bank regardless of the institutional setup will be deeply involved in macro-pudential policies anyway in one form or the other I have many times mentioned today that you need to cooperate and you need to coordinate and that holds at the national level but it also actually holds at the international level because money flows across borders and money flows across borders faster than maybe ever ever before and that means that financial stability is nowadays not only a national affair it is also a European affair and it's also a global global affair and that means that we need to be able to think beyond our own national borders and what that means in order to safeguard the EU financial system is that we need to cooperate we need to understand various cross-border issues we need to understand the various financial sectors and we need to make sure that we have the necessary expertise in order to understand all these issues both at the pan-European level and at the national level some of the challenges are probably with us forever and but others are new now presently given that the financial sector is probably more interconnected than before we need to better understand and I alluded to this before we need to better understand what is happening in a rapidly growing non-bank financial sector and I think that the episode in 2020 which is called the Dash for Cash and a number of other somewhat similar episodes actually pointers in that direction we need to follow what is happening in the non-bank financial sector and we need to tackle vulnerabilities and we need to deal with the resilience of the non-bank financial institutions and we also need to better understand what maybe goes under the heading and market-based finance what this means is that we're presently faced with many new cross-cutting issues such as a climate change transition risk in the context of climate change but also completely new fields and completely new fields to many of us for example dealing with cyber risks and various types of a cyber threat and how to understand the digitalization process which is going on presently and at the same time many financial institutions are challenged today by the fintech sector and that also means that we need to understand what is happening within the fintech sector and we also need come to conclusions as to whether the fintech sector actually is not only a fintech sector it is actually part of the financial sector and for that reason should be regulated accordingly but to do this we need expertise and we need new types of expertise that we haven't really had in the in the past but I do think that collectively and together at the ESRB table we can bring these new types of expertise that we need to bear on how to deal with these issues in the in the future so let me sum up very briefly I'm very very glad to see how much has been achieved during the little bit more than 10-year period that I have been involved in this type of work but it's not enough to just settle down and say that many things have been achieved we still have plenty or more work to do when it comes to expanding the macro prudential framework to non-banks we need to bridge data gaps and we need to develop methodologies and new macro prudential tools and let me just mention one area among many where we have some homework to do we have made significant progress when it comes to stress testing but the stress testing that we have done so far has basically mostly dealt with the banking sector only but within that field when it comes to stress testing we also over time need to get better at and we need to be able to include climate related risks and cyber threats at the same time we also need to broaden our horizon when it comes to conducting stress testing so that we also will be able in the future to deal with the non-bank sector in a better way than what we have been doing in the in the past some old problems are likely to reemerge again because very often when things go wrong in the financial sector it is because somewhere in the system it has been possible to quietly create too much leverage and then all of a sudden an over-levered financial sector comes to the fore we're taken by surprise and things blow up and we need to ensure that we understand what is going on in the system as a whole so that we are not taken by surprise that the ESRB has been able to get things done it's not only an issue of hard work one important aspect of getting things done is the governance structure of the ESRB as i alluded to also earlier and the fact that at the end of the day it is actually possible to vote a majority decision is being taken and then you just take it from there and get on with it now when it comes to the future let me mention one aspect of continuing the work of the ESRB since 1999 the international monetary fund has been operating operating what is called the financial sector assessment program the FSAPS this is a very comprehensive assessment of the financial sector in IMF member countries i'm not arguing that the ESRB should go all the way to conducting assessments equivalent to a fully fledged SFSAP at the european level but i do think and wish that it would be a good thing for the ESRB to take a few more steps in that direction let me also conclude with a final final observation over the years it has become increasingly important to use the ESRB as a sounding board for other institutions and what one good example is when the european commissions asks the ESRB to apply on various new initiatives and various new directives so while the ESRB on the one hand only possesses soft tools and maybe it's only also only partly because of that it has become an important role the ESRB has come to play an important role when it comes to helping other european institutions to get things done when it comes to influencing influencing decisions when it comes to influencing the design of future legislation and all of this done under the umbrella of what is called a macro prudential oversight thank you