During the financial crisis, the Riksbank has lent US dollars to Swedish banks and entered into swap agreements with the central banks of Iceland, Estonia and Latvia and increased its commitments towards the International Monetary Fund (IMF). In total, these arrangements correspond to approximately 100 billion Swedish Kronor.
The National Debt office said that most of the lending will be done in euros and dollars, via capital and money markets through commercial papers to help restore the Riksbank’s foreign-exchange reserves to their former level. It also said that it has already borrowed a total of 106 billion Swedish Kronor in foreign-currency bonds and krona swaps, part of which will be lent to the central bank.
One of the Riksbank’s tasks is to ensure that the payment system in Sweden works safely and efficiently. An important component of this work is to be able to provide liquidity assistance to the Swedish banks in a crisis situation. As the banks fund a significant part of their operations in foreign currency, the Riksbank must have a sufficient reserve of foreign currency to be able to meet the needs of the banks when necessary.
Stefan Ingves, Governor, Riksbank, said: “we still need to be prepared for the eventuality that the financial crisis may be both severe and prolonged. This is why we need to strengthen the foreign currency reserve. This is part of our work to safeguard financial stability.”
