The foreign currency reserve
The foreign exchange reserves are a financial asset that, like the gold reserve, aims to ensure that the Riksbank can carry out its tasks. The foreign exchange reserves largely consist of securities issued in US dollars and euros, as these are the most important currencies when it comes to being able to provide liquidity to the financial system in a crisis.
Swedish banks currently have liquidity requirements in primarily US dollars (USD), euros (EUR), Pounds sterling (GBP) and Norwegian (NOK) and Danish (DKK) kroner. The composition of the foreign exchange reserves shall reflect which currencies the Riksbank needs to hold for contingency purposes and the Executive Board has therefore decided that assets in these currencies shall be included in the foreign exchange reserves.
The assets in the foreign exchange reserves
On 31 December 2020, the total market value of the foreign exchange reserves was SEK 437.5 billion. The Riksbank’s preparedness to provide temporary liquidity assistance in foreign currency at short notice places heavy demands on the assets in the foreign exchange reserves. The foreign exchange reserves are mostly maintained in the currencies in which emergency liquidity assistance may be needed and in such assets as can rapidly be converted into liquid funds. Therefore, the assets in the foreign exchange reserves mainly consist of government bonds. The reserves are mostly made up of the five currencies that the Riksbank needs to hold for contingency purposes but, in order to spread the risk, the Riksbank has also chosen to allow a small part of the foreign exchange reserves to consist of Australian dollars (AUD) and Canadian dollars (CAD).