The Riksbank holds foreign exchange reserves. The purpose of these is to enable the Riksbank to provide temporary liquidity assistance in foreign currency, to buy and sell currency for monetary and exchange rate policy purposes and to fulfil the commitments ensuing from Sweden’s membership of the International Monetary Fund (IMF).

So that the Riksbank can be well prepared to use the foreign exchange reserves, these consist mainly of bonds issued by governments (see Figure 1), as such assets can quickly be converted into liquid funds.^[9] See the Riksbank’s financial risk and investment policy and underlying regulations, 9 December 2021. In addition, the foreign exchange reserves also comprise bonds and other interest-bearing securities with high credit ratings issued by international organisations (such as the Bank for International Settlements (BIS)), regional authorities (bonds issued by Australian states and Canadian provinces), state-guaranteed organisations and holdings in bank accounts.

Figure 1. Distribution of different asset classes in the foreign exchange reserves, 31 March 2022 Per cent

When the Riksbank is deciding which assets are to be included in the foreign exchange reserves, its starting point is the so-called contingency requirement.^[10] Factors affecting the Riksbank’s contingency requirement are the Swedish banks’ foreign exchange needs in a financial crisis, the need for readiness to make foreign exchange interventions, the size of international commitments and the need to create confidence that the Riksbank has sufficient resources to fulfil its statutory objective and carry out its tasks. The foreign exchange is mainly made up of assets in US dollars and euros, but also in pounds sterling and Norwegian and Danish kroner (see Figure 2). The reserves are mostly made up of assets in these five currencies that the Riksbank needs to hold for contingency purposes but, in order to spread the risks, the Riksbank has also chosen to allow a small part of the foreign exchange reserves to consist of assets in Australian and Canadian dollars.

Figure 2. Assets in the foreign currency reserve by currency, 31 March 2022 Per cent