Crisis management in connection with a financial crisis
It is important to have good crisis management to ensure that the costs to society are not too high if a financial crisis does occur.
The Riksbank has two tools it can use to manage a financial crisis:
- supplying liquidity to the financial system
- communicating the Riksbank's assessments
In a crisis there is often a shortage of liquid funds because the financial markets that offer funding work less efficiently than normal. The confidence of financial actors in each other also declines. This uncertainty means that the liquidity that still exists in the financial system is not redistributed in the same way as under normal conditions. In such a situation, the Riksbank has several ways of quickly adding liquidity to the system. This could entail providing liquidity assistance to single institutions or general measures to strengthen liquidity.
Communication in a crisis
Communication and information are central elements of the Riksbank's crisis management. By providing open and clear communication on problems and measures, the Riksbank can help to create confidence in the financial system in a crisis situation.
If there is unease or a crisis in the financial system, the Riksbank needs to communicate its overall assessments of financial stability more rapidly and more often. If communication is to be clear, it is particularly important to carefully consider what is to be communicated, when this communication is to take place and how.
The Riksbank's measures during the financial crisis of 2007-2009
During the global financial crisis of 2007-2009, the Riksbank added liquidity to the system by:
- offering loans in Swedish kronor at longer maturities than normal
- offering loans in currencies other than Swedish kronor
- increasing access to credit, for example by accepting more forms of collateral than previously and allowing more institutions to borrow from the Riksbank
- providing emergency liquidity assistance to two individual banks (Kaupthing Bank Sverige and Carnegie Investment Bank).