EN ECB-PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 18 May 2017 
on the financial independence of Sveriges Riksbank 
(CON/2017/17) 
 
Introduction and legal basis 
On 21 March 2017 the European Central Bank (ECB) received a request from the Swedish Ministry of 
Finance for an opinion on a draft legislative proposal concerning the financial independence and balance 
sheet of Sveriges Riksbank (hereinafter the ‘draft legislative proposal’). 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the third indent of Article 2(1) of Council Decision 98/415/EC1, as 
the draft legislative proposal concerns Sveriges Riksbank. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted 
this opinion. 
 
1. Purpose of the draft legislative proposal 
1.1. The draft legislative proposal proposes to amend the Riksbank Act with the aim of regulating 
(a) the size of the Riksbank’s equity capital; (b) the allocation of the Riksbank’s profits and losses, 
including the distribution of dividends from the Riksbank to the Treasury; (c) the circumstances in which the Riksbank may request a recapitalisation following losses; and (d) the Riksbank’s right to 
borrow from the Swedish National Debt Office for its foreign currency reserve
2. 
1.2. Existing provisions regarding the Riksbank’s capital, accounting framework, allocation of profits and 
foreign reserves  
1.2.1. Currently, the Riksbank Act provides that the Riksbank shall have capital in an amount of one 
billion kronor (SEK), a reserve fund of SEK 500 million and a contingency fund. Each year, the 
General Council of the Riksbank makes proposals to the Swedish Parliament and the National Audit Office on the allocation of the Riksbank’s profit. The Riksbank’s profit and loss account and 
balance sheet are approved by the Parliament, which also determines the allocation of the 
                                                            
1 Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
2 See the draft referral to the Council on Legislation, The Riksbank’s financial independence and balance sheet, p. 1. 
ECB-PUBLIC  
2 Riksbank’s profit3. The Riksbank is required to keep accounts in accordance with generally 
accepted accounting principles. In addition, the ECB’s guidelines on the legal framework for accounting and financial reporting in the European System of Central Banks have to be applied
4. 
1.2.2. Currently the Riksbank Act provides that, in pursuance of its monetary policy, the Riksbank may, 
inter alia, purchase, sell and mediate foreign exchange. In pursuance of its foreign exchange 
policy, the Riksbank, inter alia: (a) is to hold assets in foreign currency, foreign claims and gold; 
(b) may purchase, sell and mediate foreign currency, foreign government securities, other liquid 
debt instruments in foreign currency and gold, as well as other rights and obligations linked to such 
assets; and (c) may obtain credit in foreign currency5. In exceptional circumstances, the Riksbank 
may, with the aim of supporting liquidity, grant credit (including in foreign currency) or provide 
guarantees on special terms to banking institutions and Swedish companies subject to the supervision of the Financial Supervisory Authority
6. 
1.2.3. Under the Budget Act, the National Debt Office, by decision of the Government, may raise loans for 
the central government to satisfy the Riksbank’s need for foreign currency reserves7. Under the 
Riksbank Act, in pursuance of its exchange rate policy, the Riksbank may issue its own debt 
instruments denominated in foreign currency for these purposes8. As clarified in the referral 
accompanying the draft legislative proposal, such borrowing is carried out in practice by the 
National Debt Office raising foreign currency loans, then the Riksbank issuing a customised bond 
to the National Debt Office that reflects the loans raised by that Office9. 
1.3. Draft legislative proposal’s provisions regarding the Riksbank’s equity capital  
1.3.1. The draft legislative proposal provides that the Riksbank’s equity shall not exceed SEK 60 billion 
(referred to as the ‘targeted equity’)10. For this purpose equity consists of primary capital, a reserve 
fund and retained profits. The Riksbank’s restricted  equity consists of its primary capital and the 
reserve fund. Initially, the primary capital shall amount to SEK 40 billion, and the reserve fund shall 
amount to zero11. The draft legislative proposal further stipulates that an amount equal to two thirds 
of the targeted equity shall be referred to as the guaranteed level of the restricted equity12. 
Although the phrase ‘guaranteed level’ is used in the draft legislative proposal, the draft legislative 
                                                            
3 Guidelines have been drawn up by the General Council of the Riksbank on how its profit is to be allocated. 
According to these guidelines, the Riksbank should pay 80 % of its profit to the State, after adjustment for exchange 
rate and gold valuation effects and based on a five-year average, with the remaining 20 % used to increase its own 
capital. See the Riksbank's submission to the Parliament, Pr oposal for the allocation of the Riksbank's profits for the 
financial year 2016, p.4, and the General Council's Annual Report 2016, available at www.riksbank.se  . However, as 
these guidelines are not legally binding, there is no statutory provision limiting the amount of profit that may be paid 
out. 
4 The Riksbank Act 1998, Chapter 10, Articles 1, 3 and 4. 
5 The Riksbank Act, Chapter 7, Articles 2, 3 and 4. 
6 The Riksbank Act, Chapter 6, Article 8. 
7 The Budget Act, 2011, Chapter 5, Section 1, first paragraph. See comment to footnote 4. 
8 The Riksbank Act, Chapter 7, Article 3(2); the Budget Act, Chapter 5, Section 1, second paragraph. 
9 See the draft referral, footnote 2, p. 17. 
10 See the proposed new Article 1, Chapter 10 of the Riksbank Act. 
11 See proposed first to third paragraphs of new Article 2, Chapter 10 of the Riksbank Act. 
12 See proposed fourth paragraph of new Article 2, Chapter 10 of the Riksbank Act. 
ECB-PUBLIC  
3 proposal does not, as such, legally guarantee the level of the Riksbank’s restricted equity. The draft 
legislative proposal further provides that when calculating the targeted equity and the so-called 
guaranteed level, the amounts shall be recalculated in accordance with the annual percentage 
change in the Swedish consumer price index published by Statistics Sweden (the ‘CPI adjustment’), except that if the change is less than zero (i.e. in the event of deflation), no 
recalculation need be done
13. 
1.3.2. As noted in the referral accompanying the draft legislative proposal, the Riksbank needs to have 
access to more loss-absorbing equity to manage losses that may arise as a result of a number of 
risks faced by the Riksbank. The Riksbank’s recent purchase of government bonds with the aim of influencing long-term and short-term interest rates has created new risks for the Riksbank’s equity, 
as significant holdings of government bonds are associated with risks due to lower asset values for the holdings when there is a trend towards rising interest rates. In addition, the banking sector in 
Sweden has continued to increase in size, and experiences from the financial crisis suggest that 
the Riksbank should have loss absorbing equity. The Riksbank’s seigniorage should not be considered when determining the Riksbank’s need for equity, due to changes to the general level 
of interest rates, together with the expectation that the banknote usage in Sweden will decrease over time
14. 
1.4. Draft legislative proposal’s provisions regarding the allocation of the Riksbank’s profits and losses  
1.4.1 The draft legislative proposal provides that, if the Riksbank’s annual accounts show a profit, 
provisions must be made to the reserve fund. However, such provisions may not exceed an 
amount corresponding to the change in the guarante ed level of the restricted equity, as adjusted 
pursuant to the CPI adjustment. Any excess funds will be transferred to retained profits. If after 
such transfers to the reserve fund and retained profits the Riksbank’s equity exceeds the targeted equity (SEK 60 billion subject to the CPI adjustment, if applicable), the excess profit shall be 
transferred to the Treasury
15. 
1.4.2 The draft legislative proposal also provides that if the Riksbank’s annual accounts show a loss, this 
loss will in the first instance be covered by retained profits, then by the reserve fund and, as a last 
resort, by the primary capital. If, after covering fo r losses, retained profits are greater than zero, an 
amount may be transferred from retained profits to the reserve fund that corresponds to no more 
than the change in the guaranteed level [for] the restricted equity pursuant to the CPI adjustment16. 
If the primary capital has been used to cover losses, the profits of coming years shall in the first 
instance be used to restore the primary capital to the level it stood at prior to the loss arising. Excess funds may be transferred to the reserve fund until the Riksbank’s restricted equity amounts 
to the guaranteed level set out above (SEK 40 billi on subject to the CPI adjustment, if applicable)
17. 
                                                            
13 See proposed new Article 8, Chapter 10 of the Riksbank Act. 
14 See the draft referral, footnote 2, pp. 20-24. 
15 See proposed new Articles 3 and 4, Chapter 10 of the Riksbank Act. 
16 See proposed new Article 5, Chapter 10 of the Riksbank Act. 
17 See proposed new Article 6, Chapter 10 of the Riksbank Act. 
ECB-PUBLIC  
4 1.4.3 As currently set out in the Riksbank Act, the General Council of the Riksbank makes proposals to 
the Parliament and the National Audit Office on the allocation of the Riksbank’s profit18. The draft 
legislative proposal stipulates that, when applicable, and at least every five years, the General 
Council of the Riksbank shall make proposals to the Parliament and the National Audit Office on transferring the funds in the reserve fund to the primary capital
19. As currently set out in the 
Riksbank Act, the Riksbank’s profit and loss account and balance sheet are approved by the 
Parliament, which also determines the allocation of the Riksbank’s profit20. The draft legislative 
proposal provides that the Parliament shall furt her determine transfers of funds in the Riksbank’s 
equity to cover losses, as set out above, as well as the restoration of the restricted equity, as set out below
21. 
1.5. Draft legislative proposal’s provisions regarding recapitalisation of the Riksbank  
1.5.1. The draft legislative proposal provides that if, following deduction of funds from the revaluation 
accounts, losses result in the level of the Riksbank’s restricted equity being less than half of the 
guaranteed level set out above (i.e. less than SEK 20 billion subject to the CPI adjustment, if 
applicable), the Riksbank may submit a request for the level of the restricted equity to be restored. 
A request for restoration may concern at most the sum necessary to ensure that the restricted equity amounts to the guaranteed level set out above (SEK 40 billion subject to the CPI 
adjustment, if applicable). The determination on the request for restoration is made by the 
Parliament
22. 
1.5.2. As noted in the abovementioned referral, when making the calculation as to when the restricted 
equity falls below half of the guaranteed level, the Riksbank must first deduct existing funds in the revaluation accounts. The Government concludes that the Riksbank should realise profits booked 
in the revaluation accounts, excepting changes in the value of the gold reserve, before restoration of the restricted equity can take place
23. 
1.6. Draft legislative proposal’s provisions regarding the Riksbank’s foreign currency borrowings from 
the National Debt Office  
1.6.1. The draft legislative proposal introduces a new chapter in the Riksbank Act governing borrowing 
from the National Debt Office for the Riksbank’s foreign currency reserve pursuant to the Budget Act
24. The second paragraph of the new chapter stipul ates that if the Riksbank has used some of 
its foreign currency reserve for liquidity support borrowing may take place through the National 
Debt Office to restore the foreign currency reserve. In addition, if exceptional grounds exist for 
doing so, the Riksbank may decide to strengthen its foreign currency reserve by borrowing in 
advance up to SEK 50 billion (as adjusted pursuant  to the CPI adjustme nt) through the National 
                                                            
18 The Riksbank Act, Chapter 10, Article 3. 
19 See proposed second paragraph of new Article 10, Chapter 10 of the Riksbank Act. 
20 The Riksbank Act, Chapter 10, Article 4. 
21 See proposed first paragraph of new Article 4, Chapter 10 of the Riksbank Act. 
22 See proposed new Article 7, Chapter 10 of the Riksbank Act. 
23 See draft referral to the Council on Legislation, footnote 2, p. 43. 
24 See proposed new Chapter 10a of the Riksbank Act. 
ECB-PUBLIC  
5 Debt Office25. If exceptional grounds exist for doing so, and the Riksbank deems that the foreign 
currency reserve needs to be strengthened over and above this amount, this decision is taken by the Parliament following a request from the Riksbank. 
1.6.2. The referral notes that the reason for the pr oposed arrangement is that advance strengthening of 
the foreign currency reserve should be limited to the event of a financial crisis or similar serious 
situations when there is a need to meet rapidly arising liquidity requirements (in general or in 
individual financial institutions). Circumstances of this type may be considered to form exceptional 
grounds for the advance strengthening of the foreign currency reserve to allow a rapid response to 
any such need that arises. This means that, in normal situations, the foreign currency reserve shall not increase in an uncontrolled manner
26. 
1.6.3. The referral notes that at the end of 2016 the Riksbank’s debt to the National Debt Office for the 
Riksbank’s foreign currency reserve amounted to SEK  257 billion. The Government considers that 
existing advance loans that the Riksbank has already taken to strengthen the foreign currency 
reserve must be repaid when the draft legislative proposal enters into force. If the Riksbank intends to retain existing loans up to an amount of no more than SEK 50 billion, exceptional grounds for 
this borrowing must exist. However, in the Government’s opinion, no such exceptional grounds exist at present. The repayment of the current foreign exchange loans should take place through 
the Riksbank transferring assets to the National  Debt Office corresponding to the Riksbank’s 
foreign exchange loans from the National Debt Offi ce. Allocation of asset types to be transferred to 
the National Debt Office should take place following agreement between the Riksbank and the 
National Debt Office. Transferred assets should be managed within the framework of the National Debt Office’s debt management
27. 
1.7. Entry into force of the draft legislative proposal  
The draft legislative proposal would enter into force on 1 January 2018. 
 
2. General  observations  
2.1. The ECB would like to emphasise that, although Member States with a derogation, including 
Sweden, do not yet participate in the third st age of economic and monetary union, they have a 
legal duty to adapt the statutes of their national  central banks (NCBs) to ensure compatibility with 
the Treaty28 and the Statute of the European System of Central Banks and of the European Central 
Bank (the ‘Statute’). Any legislative reform in any such Member State should aim to gradually 
achieve consistency with Eurosystem standards29. 
2.2. The ECB recalls that it has repeatedly pointed out in its convergence reports that Sweden needs to 
adapt its legislation governing the Riksbank to comply with Treaty requirements related to, inter 
                                                            
25 See proposed new Article 3, Chapter 10a of the Riksbank Act. 
26 See draft referral, footnote 2, pp. 30-31. 
27 See draft referral, footnote 2, pp. 18, 34-35, 39-40. 
28 See Article 131 of the Treaty. 
29 See paragraph 3.4 of ECB Opinion CON/2008/34. 
ECB-PUBLIC  
6 alia, financial independence and the distribution of profits30. The ECB recalls that both the ECB and 
its precursor, the European Monetary Institute, have issued several opinions in response to consultation requests from the Swedish Ministry of Finance and the Parliament which have 
considered matters relating to the financial independence of the Riksbank
31. 
2.3. The independence of an NCB, as required under Article 130 of the Treaty and Article 7 of the 
Statute, would be jeopardised if it could not autonomously avail itself of sufficient financial 
resources to fulfil its mandate (i.e. to perform th e European System of Central Bank (ESCB)-related 
tasks required of it under the Treaty and the Statut e). The principle of financial independence also 
implies that an NCB must have sufficient means to perform not only its ESCB-related tasks but also its own national tasks, e.g. financing its administration and own operations
32. Therefore, a Member 
State may not put its NCB in a position where it has insufficient financial resources and inadequate net equity to carry out its tasks. For all these reasons, financial independence implies that an NCB 
should always be sufficiently capitalised. Financ ial independence requires that in performing its 
tasks an NCB can independently assess the risks involved and has the power to decide on any necessary precautions to take. An NCB is best placed to make these assessments and needs to 
have the necessary tools to evaluate the relevant circumstances and to make forecasts
33. 
2.4. The ECB takes particular note that the Government  has identified a number of financial risks faced 
by the Riksbank, including the relatively large size of the banking sector in Sweden, the Riksbank’s 
significant holdings of low interest-bearing government bonds, and the anticipated decline in the 
Riksbank’s seigniorage income due, inter alia, to decreased banknote usage in Sweden. Regarding 
the relatively large size of the Swedish banking sector, the Swedish banking system's total balance sheet amounted to SEK 17,250 billion in Janu ary 2017, which is four times Sweden’s GDP
34. 
Sweden’s large and growing cross-border banking sector has considerable commitments in foreign currencies
35. This entails significant risks to financial stability both in Sweden, as well as potentially 
for other countries in the Nordic-Baltic region, where Swedish banking groups have substantial market presence. In this respect it would be ad visable, from a financial stability perspective, to 
carefully consider the Riksbank’s day-to-day and exceptional spending needs given the Riksbank’s 
tasks, including the Riksbank’s tasks in exceptio nal circumstances, with the aim of supporting 
liquidity, to grant credit or provide guarantees on special terms to banking institutions and Swedish 
companies, subject to the supervision of the Swedish Financial Services Authority36. 
                                                            
30 See, e.g., ECB, Convergence Report June 2016, pp. 194-95. 
31 See ECB Opinions CON/2005/54, CON/2008/34 and CON/2013/53 and EMI Opinion CON/1997/26. 
32 See, e.g., ECB, Convergence Report June 2016, p. 25. 
33 See ECB, Convergence Report June 2016, p. 25; paragraph 2.2 of ECB Opinion CON/2009/53, paragraph 2.4.2 of 
ECB Opinion CON/2009/83, paragraph 3.3 of ECB Opinion CON/2014/24, paragraph 2.2 of ECB Opinion 
CON/2014/27 and paragraph 3.1.1 of ECB Opinion CON/2014/56. 
34 See Sveriges Riksbank, Consultation response to the r eport on the Riksbank’s financial independence and balance 
sheet, 27 April 2017, pp. 1-2; see also Statistics Sweden´s Financial Market Statistics, January 2017 . 
35 See Sveriges Riksbank, Consultation response to the r eport on the Riksbank’s financial independence and balance 
sheet, 27 April 2017, p. 1. 
36 See, e.g., ECB, Opinion CON/2012/69, paragraph 3.3; The Riksbank Act, Chapter 6, Article 8. 
ECB-PUBLIC  
7 2.5. There are several provisions in the draft legislative proposal that would undermine the Riksbank’s 
independence, including its financial independence and its ability to independently perform its basic monetary and foreign exchange policy functions, and the ECB’s concerns in this regard are set out 
below in more detail. To ensure that the Riksbank has the requisite level of independence, it is critical that at all times it has sufficient ca pital and foreign exchange reserves to conduct its 
functions, and that it remains in a position to ensure the required existence of financial buffers, to 
preserve an appropriate level of own funds and reserves. 
 
3. Specific observations 
3.1 Level of the Riksbank’s equity capital 
3.1.1 Pursuant to the Riksbank Act
37, the Riksbank has its own funds that are kept separate from the 
Treasury. Furthermore, the Government’s budget has no special appropriations item for the Riksbank. The cost of the Riksbank’s operations are instead covered by its own revenues, e.g. 
from the return it receives from investing the capital allocated to it. Therefore, it is important that the 
Riksbank’s equity is able to generate sufficient return to cover costs and accrued losses in the 
Riksbank’s operations. 
3.1.2 As mentioned above, in carrying out its tasks an NCB should assess the risks involved and have 
the power to independently decide on the necessary precautions to take. The draft legislative 
proposal provides for a statutory ceiling on the level of targeted equity which may be held by the 
Riksbank, resulting in it not having discretion to increase its targeted equity when required to cover 
its risk exposures. The draft legislative proposal therefore impacts adversely on the Riksbank’s financial independence, in particular with respect to its ability to deal with future financial and 
economic developments
38. 
Furthermore, there is no separate guarantee obligation with respect to the so-called guaranteed 
level [for] restricted equity, while the draft legislative proposal implies that the Riksbank can only 
apply for recapitalisation when the restricted equity has fallen below a certain level. As such, when these aspects are considered together, the draft le gislative proposal contains an absolute ceiling 
on the level of the target equity but a more permeable lower limit which can drop quite considerably below the so-called guaranteed level before more substantial corrective action will occur. The ECB 
has concerns with respect to this arrangement from a financial independence perspective as it 
appears to be relatively permissive of a downward move in the level of equity capital while 
prohibiting an increase in the level of target equity or, at least, not providing a statutory mechanism 
under which it can be increased. 
                                                            
37 The Riksbank Act, Chapter 10, Article 1. 
38 See paragraphs 4.3 and 4.4 of ECB Opinion CON/2008/34. 
ECB-PUBLIC  
8 3.1.3 The ECB understands that the Riksbank’s equity would not include its Riksbank’s revaluation 
accounts39. The revaluation accounts will not therefore be included when calculating the Riksbank’s 
primary capital or targeted equity. From the perspective of legal certainty, it would be preferable to 
explicitly clarify this exclusion of the revaluation accounts from the definition of equity in the draft 
legislative proposal. 
3.2 Allocation of the Riksbank’s profits and losses 
3.2.1 Detailed legal regulations on profit allocation are a positive development as they would bring not 
only transparency and predictability to the treatment of profits and the timing of payments to the 
Treasury, but would also legally bind the Government and the Parliament. However, it is noted that the Parliament’s formal role in approving the Riksbank’s profit and loss account and balance sheet 
and in determining the allocation of its profit is not envisaged to be repealed by the draft legislative proposal. On the contrary, the Parliament’s formal role is planned to be expanded, so that the 
Parliament would also approve transfers of funds in the Riksbank’s equity to cover losses
40. This is 
incompatible with the financial independence required of an NCB under the Treaty and the Statute. 
3.2.2 Article 130 of the Treaty and Article 7 of the Statute explicitly prohibit that NCBs and members of 
their decision-making bodies seek or take instructions from, inter alia, any government of a Member State or any other body when carrying out  the tasks and duties conferred on them by the 
Treaty and the Statute. In this context, it is important to shield the rules related to the distribution of 
profits from third-party interests
41. As distribution of profits is one of the areas of financial 
independence where an NCB is most vulnerable to outside influence, decisions on the allocation of 
profits should be taken by the NCB’s decision-making bodies and should not be subject to the discretion of third parties
42. As stated by the ECB in its convergence reports and previous 
opinions43 an NCB’s statute may prescribe how its profits are to be allocated. In the absence of 
such provisions, decisions on the allocation of profits should be taken by the NCB’s decision-
making bodies on professional grounds, and should not be subject to the discretion of third parties unless there is an express safeguard clause stating that this is without prejudice to the financial 
independence necessary for carrying out the NCB’s ESCB-related tasks as well as national tasks. 
3.2.3 The ECB has repeatedly pointed out in its convergence reports
44 that the current arrangements 
regarding the Parliament’s approval of the allocation of the Riksbank’s profits are incompatible with 
the requirement of central bank independence under the Treaty and the Statute. While the draft 
                                                            
39 With effect from 2004, unrealised gains and losses are re ported in special revaluation accounts, which consist of the 
difference between the cost of the acquisition value and the market value. If the unrealised losses exceed the 
unrealised gains at the end of the year, the difference is reported in the profit and loss account. This calculation is made security by security and currency by currency. See Sveriges Riksbank, Annual Report 2016, Balance sheet 
and profit and loss account, note 24. 
40 In addition, the National Audi t Office, in addition to the Parliament, w ill continue to receive proposals on an annual 
basis from the Riksbank regarding the allocation of the Ri ksbank’s profits and the draft le gislative proposal will mean 
that they will also receive proposals, at least every five year s, with respect to the transfer  of funds in the reserve fund 
to the primary capital. 
41 See paragraph 3.6 of ECB Opinion CON/2007/14 and paragraph 3.2 of ECB Opinion CON/2009/53. 
42 See ECB, Convergence Report June 2016, p. 27. 
43 See ECB, Convergence Report June 2016, p. 27 and paragraph 4.2.2 of ECB Opinion CON/2013/53. 
44 See ECB, Convergence Report June 2016, p. 195. 
ECB-PUBLIC  
9 legislative proposal reduces the scope for discretion on the Parliament’s part in respect of the 
Riksbank’s profit allocation45, the Parliament’s right of approval of the allocation of the Riksbank’s 
profits still impinges on the Riksban k’s financial independence and is incompatible with Article 130 
of the Treaty. As a consequence, the right of approving the Riksbank’s annual accounts and determining the allocation of its profit should be transferred to the Riksbank. 
3.2.4 In this respect, the ECB notes that the Riksb ank’s monetary policy framework and the Riksbank Act 
are currently subject to a separate review by a cross-party parliamentary committee. The ECB 
notes that the current procedure whereby the General Council of the Riksbank makes proposals to 
the Parliament on the allocation of the Riksbank’s profit, and the Parliament determines the allocation of such profit, has been criticised by the European Commission for not being compliant 
with NCBs’ independence as set out in the Treaty
46. The Commission further states that the 
concept of NCBs’ independence implies that the Riksbank itself must approve the annual accounts 
and determine the allocation of the Riksbank’s profit. As a consequence of the Commission’s 
critical view, the directive to the committee asks the committee to consider a process whereby the General Council approves the annual accounts and determines the allocation of the Riksbank’s 
profit
47. 
3.2.5 The ECB considers that profits may be distributed to the Treasury only after any accumulated 
losses from previous years have been covered and financial provisions deemed necessary to 
safeguard the real value of the NCB’s capital and assets have been created. As regards financial 
provisions or buffers, NCBs must be free to independently create financial provisions to safeguard 
the real value of their capital and assets. Member States may also not hamper NCBs from building up their reserve capital to a level which is necessary for a member of the ESCB to fulfil its tasks
48. 
In this regard, the ECB understands that under the draft legislative proposal the Riksbank will continue to apply the ECB's guidelines on the legal framework for accounting and financial 
reporting within the ESCB, according to which an NCB may establish a provision for foreign 
                                                            
45 However, in this regard, there continue to be some difficulties with respect to the level of discretion provided to the 
Parliament, especially when certain provisions are read in conjunction with Article 11 of the draft legislative proposal, 
which provides that the Parliament has the power to approve the Riksbank’s profit and loss account and balance 
sheet and determine (a) the allocation of the Riksbank’s profit, (b) transfer in the Riksbank´s equity following a loss 
or a subsequent profit and (c) restoration of the Riksbank´s restricted equity. For instance, Article 3 of the draft legislative proposal does not contain an explicit requirement for a specific minimum amount of provision to be made 
to the reserve fund if the Riksbank’s annual accounts show  a profit; it only contains a maximum amount of provision 
which can be made. In addition, a clearer explanation of what  constitutes ‘excess funds’ to be transferred to retained 
profits pursuant to Article 3 of the draft legislative propos al is needed to make clear that this constitutes the full 
remaining amount from the profit which has not been made as a provision to the reserve fund. When considered in 
light of these factors and the broad power provided to the Parliament in Article 11, the draft legislative proposal 
(Article 4) does not appear to contain an explicit and definitive limit on the amount that can be transferred to the 
Treasury. 
46 See European Commission, Convergence Report June 2016, p. 115. 
47 See Commission of inquiry – Review of the monetary policy framework and the Sveriges Riksbank Act,  2016), 
pp. 5-6. 
48 See ECB, Convergence Report June 2016, p. 27; paragraph 3.3 of ECB Opinion CON/2009/26, paragraph 3.2 of 
ECB Opinion CON/2009/53 and paragraph 2.1 of ECB Opinion CON/2012/69. 
ECB-PUBLIC  
10 exchange rate, interest rate, credit and gold pric e risks on its balance sheet and will decide on the 
size and use of the provision on the basis of a reasoned estimate of the NCB's risk exposure49. 
3.3 Request for recapitalisation of the Riksbank 
3.3.1 The ECB has a number of specific concerns regarding the provisions of the draft legislative 
proposal concerning requests by the Riksbank for a recapitalisation following losses. 
3.3.2 The ECB understands that under the existing provisions of the Riksbank Act50 and the Swedish 
Parliament device51 the Riksbank already has the unrestricted right to make proposals to the 
Parliament or the Government with respect to the restoration of the Riksbank’s capital. The draft 
legislative proposal implies that, henceforth, the Riksbank will only be entitled to submit a request 
to the Parliament for the level of its restricted equity to be restored up to a sum necessary to 
ensure the so-called guaranteed level if the Riksbank’s restricted equity has fallen below a certain level (i.e. when the restricted equity is less than the initial level of SEK 20 billion, as adjusted by the 
CPI adjustment, if any). This would appear to restrict the Riksbank’s existing general right to submit 
a request to the Parliament or the Government. 
3.3.3 In addition, the draft legislative proposal stip ulates that an amount equal to two thirds of the 
targeted equity will be referred to as the guaranteed level of the restricted equity
52. As previously 
mentioned, although the phrase ‘guaranteed level’ is used therein, the draft legislative proposal 
does not, as such, legally guarantee the level of the Riksbank’s restricted equity. The ECB would 
therefore expect the draft legislative proposal to stipulate how the State would implement this 
guarantee, so that the State would automatically recapitalise the Riksbank on its request and up to 
the amount of the guaranteed level. 
3.3.4 Also, the proposed provision that the Riksbank wo uld only be able to submit a request to restore its 
restricted equity when the level of the Riksbank’s restricted equity is less than half of the guaranteed level implies that the Riksbank may be forced to continue operating with nearly a third 
of its targeted equity only. A crucial element of the Riksbank’s financial independence is the 
Riksbank having sufficient funds at its disposal to  be able to perform its tasks, including ESCB-
related tasks and national tasks. As a consequence, either the Riksbank’s ex isting general right to 
submit a request to the Parliament or the Government should be retained or, at a minimum, the level at which the Riksbank should have the possi bility to request the Parliament to restore its 
restricted equity should be increased. 
3.3.5 In addition, the Riksbank would only be able to submit this request following deduction of funds 
from the relevant revaluation accounts. The Government concludes t hat the Riksbank should 
realise profits booked in the revaluation accounts, excepting changes in the value of the gold 
                                                            
49 Article 8 of Guideline (EU) 2016/2249 of the European Central Bank of 3 November 2016 on the legal framework for 
accounting and financial reporting in the European System of Central Banks (ECB/2016/34) (OJ L 347, 20.12.2016, 
p. 37). 
50 The Riksbank Act, Chapter 4, Article 1. 
51 The Parliament device, 2014, Chapter 9, Article 17. 
52 See proposed fourth paragraph of new Article 2, Chapter 10 of the Riksbank Act. 
ECB-PUBLIC  
11 reserve, before restoration of restricted equity can take place53. At a minimum, this implies that in 
calculating when the restricted equity falls below the SEK 20 billion level (as adjusted by the CPI 
adjustment, if any) at which the Riksbank may submit a request, the Riksbank must first deduct 
funds existing in the relevant revaluation accounts. Considering that at year-end 2016 the Riksbank’s equity and relevant revaluation accounts amounted to over SEK 81 billion, this implies 
that the Riksbank would only be authorised to request a restoration in its restricted equity at a lower 
level compared to the existing level of the Riksbank’s equity. Considering that funds existing in the 
relevant revaluation accounts are not included when calculating the Riksbank’s equity, the ECB 
understands that the draft legislative proposal may imply that the Riksbank would have to be incurring and reporting negative net equity before it is authorised to request a recapitalisation. The 
ECB further understands that, as opposed to being a mere accounting or calculation exercise, this implies that the Riksbank would have to dispose of assets underlying the revaluation accounts 
before being in a position to request the restoration of its restricted equity. The ECB is concerned that there is a risk that any such obligation to realise revaluation gains recorded in the revaluation 
accounts could undermine the Riksbank’s financia l independence as the Riksbank might not be 
able to autonomously avail itself of sufficient fina ncial resources to fulfil its mandate. An obligation 
to dispose of assets underpinning the revaluation accounts before making a request to the 
Parliament could also interfere with the Riksbank’s independent decision-making process on what assets to hold, interfering with the Riksbank’s mandate where these assets are held in pursuance 
of the Riksbank’s monetary or foreign exchange policy. 
3.3.6 Lastly, the draft legislative proposal does not pr ovide for any obligation on the part of the State to 
provide capital after a request has been submitted by the Riksbank to have its restricted equity 
restored.
 Nor does the draft legislative proposal clarify within which particular time period the State 
should respond to the Riksbank’s request. 
3.3.7 In light of the foregoing, the ECB reiterates th e importance of ensuring that the Riksbank’s financial 
independence is safeguarded. The Riksbank should not be put in a position where it has 
insufficient financial resources and inadequate net equity to carry out its tasks. 
3.4 Riksbank’s foreign currency reserve 
3.4.1 The holding and management of foreign reserves in pursuance of a central bank’s monetary, 
exchange rate and liquidity policies is a basic function of a central bank, both within the ESCB54 
and internationally. 
3.4.2 The ECB understands that under the Swedish Constitution55 and the Riksbank Act56 the Riksbank 
is responsible for monetary and foreign exchange policy and may conduct a variety of operations in foreign currencies in pursuance of its monetary and foreign exchange policies. The ECB 
                                                            
53 See draft referral to the Council on Legislation, footnote 2, p. 43. 
54 See Articles 127(2) of the Treaty; Articles 18.1, first indent, 23, second indent, 30 and 31 of the Statute. 
55 The Swedish Constitution (2011:109), Chapter 9, Article 13. 
56 The Riksbank Act, Chapter 1, Article 2 as well as Chapters 6 and 7. 
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12 understands that the draft legislative proposal does not purport to limit in any way the independent 
powers enjoyed by the Riksbank in this respect. 
3.4.3 As previously noted, central bank independence requirements under the Treaty and the Statute 
require that the Riksbank must be able to autonomously avail itself of sufficient financial resources to fulfil its monetary and foreign exchange policy mandates and finance its own operations. A 
Member State may not put its NCB in a position w here it has insufficient financial resources to 
carry out its monetary and ex change rate policy tasks, as well as its national tasks. The Riksbank is 
best placed to independently assess what level of foreign reserves is necessary to enable it to 
perform its tasks. 
3.4.4 The ECB understands that the Riksbank’s foreign reserves were strengthened in recent years, 
partly because Sweden’s commitments to the International Monetary Fund (IMF) have increased, but mainly to address potential systemic liquidity issues in foreign currency in the financial sector. 
The strong reliance of the Swedish banking sector on international wholesale funding at short 
maturities to finance its activities increases the vulnerability of the banking sector to liquidity crises. The majority of this fore ign currency funding comes in the form of short-term certificates, unsecured 
bonds, covered bonds and deposits by non-Swedish monetary and financial institutions and has doubled since 2001 to 120 % of GDP in 2015
57. The Riksbank’s foreign reserves therefore need to 
be sufficiently robust to provide liquidity support to banks when necessary. Taking into account 
banks’ foreign currency liquidity needs as well as the time that may be required to replenish foreign 
reserves by borrowing or by accessing central bank swap lines, and the desirability to have a buffer 
for contingencies, the ECB considers, in line with recent model-based analysis from the IMF and the Riksbank, that it would not be appropriate to reduce Sweden’s existing foreign reserves of 11 % 
of GDP
58. In light of the potential disruptive effects on the financial sector and on the national 
economy in the context of a liquidity crisis, a clear system and robust processes for decisions on 
the foreign reserves, which nevertheless allow flexibilit y with regard to the size of the amounts, is 
key to allow the Riksbank to efficiently provide liquidity support in crisis situations. The Riksbank 
needs to be in a position to access foreign reserves rapidly, without waiting for a crisis to 
materialise, at which point lengthy procedures ma y be necessary in order to mobilise the necessary 
foreign reserves59. In this respect the ECB notes that the provision of euro liquidity pursuant to 
currency swap arrangements between the Riksbank and the ECB is not available on an unconditional basis. 
3.4.5 The ECB understands that the draft legislative proposal does not purport to regulate the 
appropriate level of the Riksbank’s foreign reserve assets generally, but rather the Riksbank’s 
                                                            
57 IMF Country Report 16/354, Sweden selected issues, November 2016. 
58 The IMF analysis suggested that the appropriate reserve cover for banks’ foreign exchange liquidity needs was 
about 8.5 % to 9.5 % of GDP. A buffer on top of such amounts was also needed for other potential use of reserves in 
a crisis, such as making interest payments on foreign exchange debts and meeting obligations to the IMF. Albeit 
using different assumptions, the Riksbank conducted a similar analysis and came to the conclusion that the banking 
system’s need for refinancing from the Riksbank’s currency reserve over a three-month period amounted to the 
equivalent of SEK 535 billion (12 % of GDP). 
59 See Sveriges Riksbank, Consultation response to the r eport on the Riksbank’s financial independence and balance 
sheet, 27 April 2017, p. 8. 
ECB-PUBLIC  
13 ability to borrow foreign currency from the National Debt Office. In this respect, the ECB notes that 
it is relatively unusual within the ESCB for an NCB to strengthen its foreign reserve assets by borrowing from its national debt office or Government. Insofar as such borrowings are financed by 
debt issuances in the international capital markets by the National Debt Office, on behalf of the State, the ECB fully understands the Government’s desire to impose limitations on the Riksbank’s 
ability to increase its foreign reserves through this  particular means. As noted by the Government, 
the scope for raising loans in foreign currency is limited, and the need for advance borrowing by the 
Riksbank through the National Debt Office may be legitimately submitted to a broader assessment, 
in which the Government’s entire borrowing requirement, the costs of borrowing and the budgetary policy framework, can be considered. The ECB shares the Government’s view that the Riksbank’s 
other possibilities for obtaining fo reign exchange and other tools to  safeguard liquidity and the 
supply of foreign currency should also be taken into consideration. On this basis, the ECB clearly 
understands that the draft legislative proposal is not intended in any way to constrain the Riksbank’s ability to increase its foreign reserves  by the other means at its disposal, whenever 
necessary in pursuance of the Riksbank’s independently formulated monetary, foreign exchange 
and liquidity policies. This understanding is of importance to the ECB, since any other 
understanding would clearly encroach on the Riksbank’s independence under the Treaty and 
Statute in the performance of its basic monetary, foreign exchange and liquidity policies. It would 
not seem realistic for the Riksbank to rely exclus ively on the National Debt Office to meet the 
Riksbank’s foreign currency needs in a financial crisis situation, taking account of the availability 
and cost of funding in such situations, as well as the time period within which the National Debt 
Office would be able to borrow the necessary amounts of foreign currency in the market. 
3.4.6 The ECB notes that at the end of 2016 the Riksbank’s debt to the National Debt Office for the 
Riksbank’s foreign reserve assets was SEK 257 billion . This amounts to over half of the foreign 
reserve assets on the Riksbank’s balance sheet at year-end 2016, and almost one third of the total assets on the Riksbank’s balance sheet at year-end 2016 (SEK 845 billion). The Government 
considers that existing advance loans that the Riksbank has already taken to strengthen its foreign 
reserve assets must be repaid when the draft legislative proposal comes into force, and that this 
repayment should take place through the Riksbank transferring assets to the National Debt Office 
corresponding to the Riksbank’s foreign exchange loans from the National Debt Office. Absent the explicit agreement of the Riksbank, such a signif icant asset transfer would represent a substantial 
interference in the institutional and financial independence of the Riksbank pursuant to the Treaty and Statute, as it would interfere with the Riksb ank’s ability to independently manage its foreign 
reserves and overall balance sheet in pursuance of its basic monetary, foreign exchange and liquidity policies. In principle, the terms of these borrowings have already been contractually 
agreed, and the ECB understands that a prepayment arrangement has not been agreed by the 
Riksbank and the National Debt Office. Any early repayment of the loans would therefore require 
the Riksbank’s agreement. The Government’s proposal to restrict the Riksbank’s right to borrow 
through the National Debt Office for the strengthening of its foreign currency reserves should only operate on a prospective basis, and not retrospectively. If a transitional approach is agreed, with 
the aim of gradually phasing out the existing arrangement, the Riksbank would not be forced to 
ECB-PUBLIC  
14 immediately repay its foreign current debt to the National Debt Office, but rather would be able to 
build up its foreign exchange reserves gradually in parallel, in accordance with the Riksbank Act, as its outstanding debt to the National Debt Office  matures. Any forced immediate repayment of the 
debt to the National Debt Office would interfere with the Riksbank’s ability to independently carry out its basic monetary policy, foreign exchange and liquidity tasks. The referral accompanying the 
draft legislative proposal should, therefore, reflect this important point. 
 
This opinion will be published on the ECB’s website. 
  
Done at Frankfurt am Main,18 May 2017. 
 [signed] 
 The President of the ECB 
Mario DRAGHI