Monetary policy instruments

Standing deposit and lending facilities

To control the interest rate in the overnight market in Swedish kronor, the Riksbank offers standing facilities overnight through which monetary policy counterparties can deposit or borrow Swedish kronor against collateral from the Riksbank. Monetary policy counterparties can make deposits overnight in the standing deposit facility and borrow unlimited amounts overnight against collateral, either in the Riksbank’s standing loan facility at the Lending Rate, or in the Riksbank’s supplementary liquidity facility at the Liquidity Facility Rate.

RIX participants that are credit institutions domiciled or with a branch in Sweden and that are monetary policy counterparties have access to the standing deposit and loan facilities.

Market operations

Market operations are primarily aimed at conducting monetary policy effectively by signalling which interest rate level should be established in the market in Swedish kronor to attain the inflation target and to manage liquidity within the banking system. Market operations can include everything from loans at shorter and longer maturities against collateral, repos, purchases or issues of securities, loans in foreign currency, and foreign exchange swaps. The type of market operation the Riksbank chooses to utilise depends on the needs of the financial markets and the operation’s expected effects on the economy.

Normally, when the banking system has a structural liquidity surplus towards the Riksbank, market operations are aimed at reducing the liquidity in the system and, when the banking system has a structural liquidity deficit, the market operations are aimed at increasing liquidity. By offering the monetary policy counterparties the possibility of depositing their surplus with the Riksbank, or borrowing in the event of a deficit, via these weekly market operations with a term of one week and at an interest rate corresponding to the Riksbank's policy rate, the Riksbank can signal which interest rate should be established on the market in Swedish kronor to attain the inflation target.

Since 2008, the Swedish banking system has had a structural liquidity surplus towards the Riksbank. Therefore, the Riksbank issues Riksbank Certificates once a week, normally on Tuesdays, to reduce the liquidity in the banking system at an interest rate equal to the policy rate. 

• Riksbank Certificates

When necessary, the Riksbank can make monetary policy more expansionary by purchasing securities. The aim of such purchases can be both to bring down the general level of interest rates in the economy and to facilitate credit supply. The type of securities the Riksbank chooses to purchase depends on several factors such as supply and demand of various securities and their associated risk. For several years, the Riksbank has purchased government bonds with the aim of making monetary policy more expansionary. If monetary policy needs instead to be tightened, the Riksbank can sell securities to reduce the holdings faster than the pace at which they would otherwise mature. As from 2023, no further purchases are being made and as from April 2023, the Riksbank will sell government bonds.

• Purchases and sales of government bonds

Collateral for credit

When the Riksbank supplies liquidity to the financial system, i.e. provides loans in Swedish kronor or foreign exchange, this must be carried out so that it does not pose a risk to the Riksbank’s capital. The Riksbank therefore has to take collateral that is sufficiently adequate to prevent this. The Riksbank therefore imposes certain requirements before something is approved as collateral and decides how this collateral is to be valued. Under normal circumstances, these requirements and the haircuts applied are fairly high. The Terms and Conditions for RIX also specify which collateral requirements apply to various monetary policy instruments; read more on the page Collateral.

Terms and conditions for Monetary Policy Instruments

The Riksbank’s various monetary policy instruments are used by the monetary policy counterparties. The terms and conditions for the use of monetary policy instruments are described in the Terms and Conditions for RIX; read more on the page Conditions and instructions. The Terms and Conditions for RIX also specify which collateral requirements apply to different instruments; read more on the page Collateral. 

There are special conditions applying to some monetary policy instruments normally used by the Riksbank. Such special conditions apply to Riksbank Certificates.