Why does the Riksbank work with financial stability?
The Riksbank has the Riksdag’s mandate to “promote safe and efficient payments”. Payments are material to every economic activity and a central feature of the financial system. The State therefore has a particular interest in overseeing the functioning of payment systems. A serious crisis in the financial system is liable to entail extensive economic and social costs.
How does the Riksbank work with financial stability?
The Riksbank analyses the financial system’s stability on a continuous basis for the early detection of changes and vulnerabilities that could lead to a crisis. The main focus of the analysis is on the four major banks, as they have a decisive role in the stability of the Swedish financial system. The Financial Stability Report, published twice a year, presents the Riksbank’s view of the risks and the banks’ capacity to cope with any shocks. Knowledge is also disseminated in other ways: by arranging dialogues with market participants, publishing speeches and participating in the public debate. Moreover, the Riksbank is in a position to influence the framing of laws and rules that pertain to supervision and crisis management, for instance by submitting opinions and by participating in international organisations.
What does the financial system consist of?
In Sweden the four major banks are predominant, that is, Handelsbanken, Nordea, SEB and Swedbank. In addition to these banks, the financial system comprises other institutions, market places and the financial infrastructure for registering and settling transactions. The infrastructure also includes the public framework, that is, rules and supervision.
Why is it important that there is confidence in the financial system?
If a problem arises in one institution it may suffice to generate suspicions that spread to similar operations elsewhere. A loss of confidence can make it difficult for the banks to undertake their operations, in which case the system will be in danger. The basic requirements for confidence are sound institutions and efficient markets.
What can the Riksbank do if such serious problems arise as to threaten the entire system?
The Riksbank is the authority that is in a position to provide emergency liquidity assistance if problems are so serious that the entire system is threatened.
Has the Riksbank granted liquidity assistance to any institution?
During the financial crisis that began in autumn 2008 the Riksbank granted special liquidity assistance to Kaupthing Bank Sverige AB and to Carnegie Investment Bank.
Which authorities does the Riksbank cooperate with regarding financial stability?
The Riksbank cooperates closely with Finansinspektionen (the Swedish financial supervisory authority), the Ministry of Finance and the Swedish National Debt Office. The Ministry of Finance is responsible for the regulation of financial enterprises and Finansinspektionen is responsible for supervision. The Swedish National Debt Office is responsible for the deposit guarantee, among other things. The authorities’ interaction is important both in the preventive work and in the event of crisis management. The same also applies internationally as financial enterprises increasingly operate across national borders.