Collateral for credit from the Riksbank
The Riksbank grants credit to its counterparties on both intraday and overnight bases and occasionally with longer maturities. Granting credit is linked with risk. Consequently, the Riksbank, in accordance with the Sveriges Riksbank Act and like other central banks, makes the requirement that counterparties pledge adequate collateral in exchange for credit. The Riksbank has adopted a number of measures to mitigate the effects of the corona pandemic on the Swedish economy, including easing collateral requirements.
The collateral is mainly comprised of different types of security, but in special cases foreign currency may also be used as collateral. For a detailed description of the requirements applying for securities to be used as collateral for credit, see “Instructions for collateral” under related content.
The Riksbank has largely automated the management of collateral, which means that RIX participants can obtain rapid access to increased credit in RIX-RTGS by registering a transfer of securities in Euroclear Sweden or Euroclear Bank or by paying foreign currency into an account at certain central banks as follows.
The Riksbank, together with the Danish and Norwegian central banks, has also developed an automated solution to facilitate the management of intraday credits. With this solution, the Riksbank’s counterparties can use liquidity (in the form of holdings in an account) in one of these central banks as collateral for intraday credit in RIX-RTGS. This system is called the Scandinavian Cash Pool. In addition to holdings of Danish and Norwegian currencies within the framework of the Scandinavian Cash Pool, the Riksbank also accepts holdings in euro, which are paid into the Riksbank via the Deutsche Bundesbank. However, a special agreement with the Riksbank is required to use foreign currency as collateral; read more in the document “Collateral instructions” under related content.
In the valuation of collateral, the Riksbank makes a haircut that considers the risk with which a given security is linked. Normally, the size of the haircut depends on the type of security, its liquidity and maturity. The different types of security that the Riksbank accepts are placed into three liquidity categories. An extra haircut may be made if the valuation prices the Riksbank has access to are not up-to-date. See “Instructions for collateral” for a more detailed description of valuation of collateral. The current haircut including possible extra haircuts are reported on the page "Eligible collateral".
Temporary measure in connection with the coronavirus pandemic
Due to the coronavirus pandemic, the banks’ access to liquidity in Swedish krona needed to be strengthened and the Riksbank therefore relaxed the requirements for the collateral the banks can use when borrowing from the Riksbank.
This relaxation means that the rules on special limits for covered bonds (mortgage bonds) have been abolished. In addition, it will also be possible during the period to use own covered bonds, i.e. covered bonds issued by the counterparty or a closely linked party, as collateral. On 20 September 2021, the Riksbank decided to terminate the programme for funding to banks to support corporate lending and to revoke the decision to relax the requirements for collateral. As of January 2022, the limit rules on the use of collateral will revert to those that applied before the pandemic. Read more via the links under “Related content”.