In addition to issuing banknotes and coins and providing a central payment system, the Riksbank supports the stability of the financial system in several ways. Under normal conditions, the Riksbank works on the general prevention of financial crises. The Riksbank draws the attention of banks and other participants on the financial markets to risks that the Riksbank has identified. This is aimed at encouraging the participants themselves to take measures to dampen their risk-taking and strengthen their resilience. The Riksbank’s work consists of:
- gathering and distributing information on the financial system,
- analysing and monitoring the financial system on an ongoing basis,
- preventing threats to financial stability by informing of, and warning against, risks that are building up,
- affecting the financial regulatory framework so that it contributes to stability and efficiency.
In its preventive work, the Riksbank has no binding statutory tools to influence financial market participants. Instead, the Riksbank primarily acts (in public and in dialogue with financial system participants) by calling attention to and warning of risks and events that may threaten financial stability.
The Riksbank endeavours to be as open, clear and predictable as possible in its financial stability communication. It is necessary that the Riksbank is open and clear in its assessments of financial stability for the economy’s participants to form an opinion of the risks and uncertainties in the financial system, and to act accordingly.
The Riksbank’s views on financial stability are communicated in several different ways. The Riksbank’s Financial Stability Report is published twice a year. In this report, the Riksbank presents its assessment of financial stability in Sweden and draws attention to risks that may develop into threats to financial stability. Furthermore, the members of the Executive Board present the Riksbank’s assessments in various speeches. In addition, the Riksbank continually assesses the Swedish infrastructure and publishes the results of these assessments annually in separate publications. The Riksbank also presents its assessments of financial stability at bilateral meetings with various participants, both in Sweden and abroad.
The collection of information and dissemination of knowledge
According to the Sveriges Riksbank Act, the Riksbank has the right to request the information needed to fulfil the task of promoting a safe and efficient payment system. The Riksbank gathers statistics for this purpose from many different sources.
Statistics Sweden (SCB) compiles financial market statistics on the Riksbank’s behalf. This consists of statistical information on Swedish financial institutions and financial markets. These statistics are gathered every month and include information on liabilities and assets among companies in the financial sector, current lending and borrowing rates and other information.
Each year, the Riksbank compiles information on the financial markets and publishes this in the report the Swedish Financial Market. This publication sheds light on the construction and functioning of the Swedish financial system and details the participants active in it.
The Riksbank also gathers statistics from banks and infrastructure companies, such as information on the banks’ exposures towards one another in the form of various commitments, the number of transactions in the infrastructure system, and other factors relevant to the functioning of the system.
When necessary, the Riksbank also conducts its own surveys, aimed in various ways at illuminating the conditions on the financial markets. For example, twice a year, the Riksbank conducts a risk survey. The aims of this survey are to obtain an overall view of risk on the Swedish fixed-income and foreign exchange markets, and to build up an understanding of the participants’ views on the market’s functioning. Even the manner in which the Swedish public carries out payments has been investigated using surveys.
The Riksbank’s international network is also significant for the gathering of information. Through its participation in a number of international working groups, the Riksbank has knowledge of (and participates in discussions dealing with) developments in the rest of the world. The Riksbank has also entered into a number of agreements with other authorities on the exchange of information and cooperation on crisis management, which plays a major role in this context.
Ongoing stability analysis
The Riksbank continually analyses the development of the financial system’s risks and resilience, with the aim of assessing financial stability. The figure below illustrates the areas included in the Riksbank’s stability analysis. The payment system forms the core of the analysis, as this is where all transactions between participants take place. The banking groups are the main participants in the payment system. These, in turn, are affected by developments in the financial markets and their borrowers. In turn, macroeconomic developments are highly significant for both the financial markets and the banks’ borrowers.
Areas included in the Riksbank’s stability analysis
The focus for the Riksbank’s analysis and supervision is the parts of the system that are or may be systemically important. The main focus for monitoring is currently on the four major banking groups , as they play such a central part in payment mediation and credit supply. Together, these banks currently account for about three-quarters of the deposits from and loans to the Swedish public.
The financial markets are also significant to the Riksbank’s analysis, as they are so important to the funding and risk management of the banks and companies. In an international comparison, Swedish banks have a large element of market funding – they fund about half of their lending via securities and half via deposits. Furthermore, about two-thirds of their market funding is in foreign currency.
As regards the financial infrastructure, the Riksbank’s analysis is focused on those parts that are important to payments by the public and to the smooth functioning of the financial markets. The participants in these systems and the manner in which they use the systems are also significant to the analysis.
Assessment of financial stability
Schematically, the Riksbank’s stability assessment and analysis can be split into three stages: identifying and assessing risks, assessing resilience and stress testing resilience. These three stages form the basis of the Riksbank’s assessment of financial stability.
Read more
You find more information on the Riksbank’s international work and the agreements with other authorities on the exchange of information and cooperation on crisis managementcan via the links below.