Summary

The coronavirus pandemic led to the closure of large sections of society, thereby creating a very uncertain future for both households and business-es. In such a situation, central banks and other authorities may have to take over some of the financial risks that the private sector does not wish to, cannot or dares not take, to contribute to the smooth functioning of the economy. Among other things, the Riksbank decided to buy securities in Swedish kronor at large amounts, which contributed to lower long-term interest rates and improved the functioning of various markets. The Riksbank's assessment is that the asset purchases have supported the Swedish economy, maintained confidence in the inflation target and made it easier to access credit and liquidity in uncertain times.

The Executive Board made decisions on asset purchases well aware that this increased the risk of the Riksbank making financial losses in the future. As market rates have risen rapidly recently, the market value of the Riksbank's asset holdings has fallen sharply, and this has also led to substantial value losses so far this year, albeit unrealised.

We note that the recent rapid rise in interest rates means that the Riksbank will probably report a large loss this year. We discuss how different accounting principles affect when these losses will affect the reported result. For the Riksbank, most of the losses at an interest rate rise can be reported this year. We show an example of a scenario in which the Riksbank reports a loss of SEK 65 billion in 2022, which reduces equity to low levels. Although the increase in interest rates has a strong impact on earnings this year, it is likely that the reported results for coming years will again be positive.

The aim of the Riksbank's assets purchases was not to generate profits for the Riksbank. To assess whether the Riksbank's asset purchases have been successful, we need to look at the overall effects on the entire Swedish economy, not just the Riksbank's financial results. By means of a simple calculation example, we note that the positive effects of the asset purchases on public finances alone can be in the order of SEK 70 billion extra in income for the government and municipalities. The broad benefits for the Swedish economy from asset purchases should therefore outweigh the dis-advantage of the Riksbank's expected financial losses.

Published: 4 July 2022