The Riksbank can grant both intraday and overnight credit, and also uses other monetary policy instruments that entail risks corresponding to those for granting credit. To limit these risks, the Riksbank, like most other central banks and in accordance with the Sveriges Riksbank Act, applies the principle that adequate collateral shall be pledged for all such exposures.
The collateral is mainly comprised of different types of securities, but in special cases foreign currency may also be used as collateral.
Securities that are accepted by the system must be issued by a government, central bank, local government or other public body or company that has a satisfactory credit rating. Moreover, the issuer must be domiciled in a country that is approved by the Riksbank. Securities must also be issued in a currency that the Riksbank has approved. The Riksbank's credit rating requirements are stated in appendices to the Collateral Instructions, as is information about eligible countries and currencies.
Special restrictions apply for securities issued by a Swedish bank or foreign credit institution. Such securities are not eligible if the counterparty and issuer are domiciled in the same country. In other cases the accepted collateral value is limited to a smaller portion of the counterparty's total collateral value.
Securities issued by the counterparty or a company closely linked to the counterparty are not eligible. Securities must meet the requirement for minimum outstanding volume in order to be eligible.
In order for a security to be used as collateral there must be an established arrangement for this purpose that the Riksbank considers to be sufficiently secure. Because of this requirement it is not always feasible in practice to use all securities that meet the Riksbank's requirements.
The Riksbank, together with the Danish and Norwegian central banks, has developed an automatic system for using liquidity in one of the central banks, in the form of account balances in the central bank, as collateral for intraday credit in one of the other central banks. This system is called the Scandinavian Cash Pool. In addition to account balances in Danish and Norwegian kronor within the frame of the Scandinavian Cash. Pool, the Riksbank also accepts aaccount balances in EUR that are paid to the Riksbank via Deutsche Bundesbank. In order to use foreign currency as collateral, a separate agreement with the Riksbank is required for which a separate fee is charged.
The Riksbank has largely automated the collateral management process, which means that participants in RIX can quickly gain access to increased credit in RIX by registering a transfer of securities in Euroclear Sweden or depositing foreign currency into an account. Participants in RIX can also obtain information in RIX about the collateral provided.