The Riksbank’s balance sheet
The Riksbank’s balance sheet shows the Riksbank’s various assets and liabilities. The assets are largely managed within the framework of the Riksbank's financial asset management. The Riksbank's assets normally consist mainly of the gold and foreign exchange reserves. However, since 2015 the Riksbank has increased its holdings of securities in Swedish kronor, and these currently make up the largest share of assets.
The Riksbank’s financial assets and liabilities
The Riksbank's assets and liabilities
Securities in Swedish kronor – the Riksbank's largest asset
The Riksbank manages financial assets to ensure that it can fulfil the inflation target and perform its tasks. As a result of the asset-purchasing programmes in recent years, most of the assets comprise securities in Swedish kronor. In connection with the coronavirus pandemic, the Riksbank began, in addition to buying government bonds, to buy Swedish treasury bills, covered bonds (mortgage bonds), municipal bonds and securities issued by companies. As from January 2023, the Riksbank no longer buys securities in Swedish kronor. Instead, at the monetary policy decision in February 2023, it was decided that the Riksbank would start selling part of its holdings in government bonds from April 2023. As the Riksbank's holdings of securities mature and are sold off, they will decline as a share of the Riksbank's total assets.
Another large share of the assets is made up of the gold and foreign currency reserves. These ensure that the Riksbank, if necessary, can supply temporary liquidity support in foreign currency and intervene on the foreign exchange market. The foreign exchange reserve mostly consists of debt securities in foreign currencies with high liquidity and low credit risk, primarily government bonds.
Assets also include claims on the International Monetary Fund (IMF). Part of the Riksbank's claims on the IMF is the holding of special drawing rights (SDRs) and the remaining claims consist of loans to the IMF. The Riksbank’s other assets consist of the Riksbank’s premises at Brunkebergstorg, shares in the Bank for International Settlements (BIS) and other holdings.
The banks’ holdings of Monetary Policy Instruments – the Riksbank’s greatest liability
The Riksbank’s financial liabilities mostly consist of deposits in Swedish kronor. When the Riksbank supplies liquidity to the banking system in Swedish kronor, a debt to the banks arises in the form of an increased liquidity surplus. The banks place the surplus as deposits with the Riksbank. Banks that are monetary policy counterparties to the Riksbank may place the liquidity surplus with the Riksbank through monetary policy instruments in the form of Riksbank Certificates with a maturity of one week or in a standing overnight deposit facility. These deposits have increased in recent years as a result of the Riksbank having purchased Swedish securities. Through the purchases, the Riksbank has added a large amount of liquidity to the banking system and thereby increased the banks’ liquidity surplus towards the Riksbank. As the securities mature and are sold off, the banking system's liquidity surplus towards the Riksbank will now instead start to decrease and thus the banks' deposits with the Riksbank will also decrease going forward.
For a period, the Riksbank has had liabilities in foreign currency to the Swedish National Debt Office. These liabilities consist of US dollars and euros that the Riksbank has borrowed via the Swedish National Debt Office in order to fund the foreign exchange reserve. At the beginning of 2021, the Riksbank decided to replace these loans with its own funding, by buying foreign currency and paying in Swedish kronor. Hence, deposits in Swedish kronor from banks have increased by the same amount. When the Riksbank has paid off the last foreign currency loan from the Debt Office in April 2023, the Riksbank will have a fully self-funded foreign exchange reserve. (Read more about the financing of foreign reserve assets “Self-financing of foreign exchange reserves to be completed earlier”.)
In addition, the Riksbank has a liability to the IMF corresponding to the value of the allocated Special Drawing Rights (SDRs).
The Riksbank issues the banknotes and coins that are used in Sweden. The value of banknotes and coins in circulation is reported as a liability on the balance sheet.
Profits and losses - The Riksbank’s capital
The Riksbank's profits can be used to build up equity and risk buffers. Any profits in excess of sufficient equity and buffers are distributed to the state. Profits that have not yet been realised are offset against so-called revaluation accounts (read more about revaluation accounts and the Riksbank's accounting rules in the Riksbank's Annual Report). The profits retained by the Riksbank have been aggregated over the years and now form the Riksbank's equity.
Equity is to be considered as a liability to the Swedish state as the state owns the Riksbank. When the Riksbank makes a profit, equity increases while a loss causes it to decrease. As the state does not have an explicit required return from the Riksbank, equity can be viewed as interest-free capital (interest-free liability) for the Riksbank, similar to banknotes and coins. The equity and outstanding cash jointly constitute interest-free assets that benefit the Riksbank's average earnings which should cover the costs of carrying out the Riksbank's mandates and tasks and also generate profit. In this way, the Riksbank can build up a financial buffer and strengthen financial independence.
The Sveriges Riksbank Act (read more about the new Riksbank Act, which came into force on 1 January 2023, under "The Riksbank Act") regulates how both losses and profits should be managed. If the Riksbank's equity falls too low, the Riksbank must request more capital from the state. This will restore equity to a level that ensures financial independence. The Riksbank also has the option of using profits for risk provisions, which allows the Riksbank to build up an extra buffer in advance to hedge against risks of future losses.
A central bank is, financially speaking, a very resilient institution because it can always pay for itself in its own currency. A central bank can therefore operate as usual with low, or even negative, equity for a period, as recent examples show (read more about these in the Riksbank's Staff Memo). Over a longer period, however, to safeguard financial independence, it´s important that the Riksbank has sufficient capital to protect and maintain sufficient earnings and thus the ability to self-finance. The Riksbank's financial independence is an important part of its independence in a broader sense. The independence of a central bank is fundamentally important for creating confidence in the inflation target and monetary policy, but also for other tasks that the central bank has. Thus, in addition to financial independence, it needs to have political and operational independence backed by the Riksbank Act.
Published about the Riksbank’s balance sheet
- 14/03/2023 News, Speeches Aino Bunge: Committee on Finance hearing on the Riksbank's operations and monetary policy
- 14/03/2023 News, Speeches Committee on Finance hearing on the Riksbank's operations and monetary policy
- 20/02/2023 Press release No dividend paid to the Treasury
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