Buying and selling financial instruments
In order to counter serious disruptions in the financial system in Sweden, the Riksbank may – if there are exceptional reasons – buy and sell financial instruments like a market maker at predetermined prices in order to temporarily support the functioning of systemically important financial markets.
Exceptional reasons means that the measure may only be taken if one of the Riksbank’s other less risky measures (credit or repurchase agreement) is deemed unable to achieve the purpose of the measure, that is to counter a severe disruption in the financial system. Furthermore, the measure shall aim to improve liquidity in a systemically important market whose lack of liquidity poses a threat to financial stability. The aim is therefore to support the functioning of the market, not individual companies. The measures shall therefore be designed in such a way as to impact as wide a group of financial instruments in the market in question as possible. The Riksbank may also need to set conditions to ensure that it does not own an excessive share in a particular company or companies in a particular market. Among other things, the importance of a market depends on its size and interchangeability, as well as its links to other markets.
Before deciding to buy or sell financial instruments to counter serious disruptions, the Riksbank may need to obtain the approval of the European Commission and carry out a proportionality assessment. Risk-taking in the context of a financial crisis may be compatible with the principle of proportionality, given the high socio-economic values at stake. Ahead of any decision to buy or sell financial instruments with the aim of countering a serious disruption in the financial system, the Riksbank shall also as a general rule give Finansinspektionen and the Swedish National Debt Office an opportunity to comment.
In the event of financial unease or crisis, the Riksbank also has the possibility of buying and selling financial instruments for monetary policy purposes.