SEK 5 billion reversed from previous risk provisions to the financial result for 2022
News The Riksbank is expected to report an unrealised loss for 2022, and the Executive Board has thus decided to reverse previous financial risk provisions of SEK 5 billion to the result for the 2022 financial year. The preliminary reported result will therefore be a loss of SEK 81 billion. The unrealised loss is mainly due to globally rising market interest rates, which has reduced the market value of the Riksbank's assets.
During the coronavirus pandemic, central banks around the world bought large volumes of assets to avoid a financial crisis and support the economy as a whole. Consequently, they now have large asset holdings in domestic currency. As far as the Riksbank is concerned, these holdings mainly consist of government bonds and so-called covered bonds (mortgage bonds).
Global inflation and, as a consequence, interest rates have risen rapidly in 2022. This has reduced the market value of both the Riksbank's asset holdings in Swedish kronor and foreign assets in the international reserves. This unrealised reduction in value is expected to affect the reported results for 2022, via a so-called write-down.
The decision to reverse SEK 5 billion, from previous risk provisions, improves the preliminary reported result for the 2022 financial year. However, despite the reversal, the expected result will be negative and the Riksbank's equity will be very low.
According to the provisions on capital in the new Sveriges Riksbank Act, which applies from the 2023 financial year onwards, the Riksbank shall submit a petition to the Riksdag to restore its equity if it falls too low. A petition should be based on a broad assessment of the Riksbank’s financial position and future earning capacity at the time. It is therefore uncertain how large an amount the petition may cover, and the Riksbank needs to provide more analysis and information going forward.
The Riksbank’s mandate
The Riksbank's mandate is to maintain low and stable inflation and contribute to a stable and efficient financial system. In this way, the Riksbank contributes to sound and stable economic development. The measures taken by the Riksbank to fulfil its mandate, including during the difficult years of the pandemic, have contributed to the unrealised loss for 2022. At the same time, however, these measures have generated economic benefits such as increased economic activity and higher tax revenues for the state.
Provisions for financial risks are a long-term measure intended to act as a buffer if the Riksbank makes losses. For the 2020 and 2021 financial years, a total of SEK 5 billion was set aside and this is now being reversed for 2022.