Gold and foreign currency reserve
The gold and foreign currency reserve can primarily be used to provide emergency liquidity assistance to banks, to fulfil Sweden's share of the international lending of the International Monetary Fund (IMF) and to intervene on the foreign exchange market, if need be. These commitments place great demands on the management of the gold and foreign currency reserve. Consequently, the reserve is mainly maintained in those currencies in which emergency liquidity assistance may be needed and in such assets as can rapidly be converted into liquid funds.
A secondary aim of the gold and foreign currency reserve is to generate a healthy return for the Riksbank, and ultimately for central government, in relation to the risk taken in the management of the reserve.
On 31 December 2016, the market value of the gold and foreign currency reserve was SEK 512.2 billion.
The gold reserve
Like many other central banks, the Riksbank owns gold. Among other reasons, this is due to gold's historical association with banknotes and coins. In the past, a coin or banknote could be redeemed at the Riksbank in exchange for gold.
These days, the gold reserve is justified, to a large degree, by the fact that the value of gold does not normally follow the same pattern as the value of the foreign currency reserve. Consequently, the value of the gold and foreign currency reserve together is more stable than the value of the gold reserve and the foreign currency reserve separately. The gold can be used to fund emergency liquidity assistance or foreign exchange interventions, among other things.
The Riksbank has concluded an agreement with a number of other central banks, the Central Bank Gold Agreement (CBGA), which places a limit on the amount of gold the central banks may sell each year. The aim of the agreement is to limit the central banks' sales of gold in order to avoid undesirable effects on the gold price.
On 31 December 2016, the Riksbank owned 125.7 tons of gold. At the same date, the market value of the gold was SEK 42.4 billion. The gold is stored at the central banks in the United Kingdom (BoE), Canada (BoC), the United States (Fed), Switzerland (SNB) and at the Riksbank.
The foreign currency reserve
The foreign currency reserve, for the most part, consists of securities issued in US dollars (USD) and euros (EUR). However, to spread the risks, a smaller part of the foreign currency reserve consists of British pounds (GBP), Australian dollars (AUD) and Canadian dollars (CAD). On 31 December 2016, the market value of the foreign currency reserve was SEK 469.8 billion.
As the foreign currency reserve contains so many US dollars and euros, the value of the reserve is highly sensitive towards the development of these currencies against the Swedish krona. However, the Riksbank also has liabilities in US dollars and euros, which reduces its currency exposure. To further reduce the effect of exchange rate fluctuations, part of the currency exposure in US dollars has been converted into Norwegian kroner (NOK) with the help of derivative instruments.
The foreign currency reserve's euro assets mainly consist of German (DE) government bonds, but also of bonds from France (FR), the Netherlands (NL), Belgium (BE), Austria (AT) and Italy (IT).
The value of the Riksbank's assets and liabilities in foreign currency is influenced by international interest rate developments. On 31 December 2016, the Riksbank's interest-rate sensitivity was 3.0, which means that, if interest rates abroad were to rise by one percentage point, the value of the Riksbank's net assets in foreign currency would fall by 3.0 per cent.
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