General Council of the Riksbank: Safeguarding the Riksbank’s independence

News, Consultation responses It is important that the principle of an independent Riksbank is upheld in the new Sveriges Riksbank Act and the Riksbank Committee has to a large extent used this principle as a basis. In one area, however, the Committee has chosen a legal solution that risks undermining this principle. The proposal makes a distinction between monetary policy and financial stability measures that risks creating rigidity and reducing the Riksbank’s ability to take action. These are the words of the General Council of the Riksbank in the consultation response it submitted to the Ministry of Finance.

The legislative proposal may have a bearing on the decisions on measures taken by the Executive Board of the Riksbank in the work to mitigate the economic effects of the corona pandemic. When the crisis is over, it should therefore be examined, in relation to the sequence of events and the various measures taken, whether the proposals made by the Committee are actually reasonable, before taking the decision on a new Sveriges Riksbank Act.

The General Council can give democratic legitimacy to the price stability objective

The General Council supports a system that entails greater democratic legitimacy for the precision of the inflation target, but does not see it as a matter of course that the Riksdag should approve the inflation target. Such a system could lead to a monetary policy discussion in the Riksdag that risks being confused with the general political debate. There is thus reason to instead consider giving the General Council of the Riksbank the task of approving the price stability target.

The General Council also supports the Inquiry’s proposal for a new profit allocation model and target level for the Riksbank’s equity, but points out that it is important for the framework regarding the Riksbank’s financial position to be robust. It should be possible to apply this over a long period of time and to give the Riksbank the conditions to maintain its long-term earnings capacity.

Beneficial that evaluation and scrutiny are strengthened

The General Council supports the proposals aimed at strengthening the capacity of society to evaluate and scrutinise all of the Riksbank’s activities.  It is also a welcome suggestion that the Riksbank’s provision of information to the general public and the Riksdag is confirmed by law. Clear and transparent evaluation and scrutiny of the Riksbank are necessary to ensure the Riksbank can retain the trust of the general public.

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Updated 16/04/2020