Opinion of the European Central Bank of 24 July 2013 on the financial independence of Sveriges Riksbank (CON/2013/53)
Date: 2013-07-24
Institutions: European Central Bank
Subjects: Sweden, central bank, financing method, foreign-exchange reserves, national law, profit

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 24 July 2013 

on the financial independence of Sveriges Riksbank 

(CON/2013/53) 

Introduction and legal basis 

On  22 April  2013, the  European  Central  Bank  (ECB)  received  a  request  from  the  Swedish  Ministry  of 

Finance for an opinion on a proposals from the Commission of inquiry into the financial independence of 

Sveriges Riksbank (SOU 2013:9) (hereinafter the ‘report’). 

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/EC of 

29 June 1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities  regarding  draft 
legislative provisions1, as the report and its proposals relate to rules applicable to 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.   Background 

1.1  The  ECB  has  repeatedly  pointed  out  in  its  Convergence  Reports  that  Sweden  needs  to  adapt  its 

legislation  governing  Sveriges  Riksbank  in  order  to  comply  with  Treaty  requirements  related  to, 

inter  alia,  financial  independence  and  profit  distribution.  In  March  2008,  the  ECB  received  a 

request from the Swedish Ministry of Finance for an opinion on a report entitled ‘The Riksbank’s 

financial independence’ (SOU 2007:51). One of the main goals of that report was to propose legal 

changes  necessary  to  address  the  shortcomings  identified  by  the  ECB.  The  report  set  out  two 

alternative  proposals  for  amendments  to  the  Law  on  Sveriges  Riksbank  regarding  changes  to 

Sveriges Riksbank’s capital structure and profit distribution. 

1.2  On  4 August  2008,  the  ECB  issued  Opinion  CON/2008/342  where,  inter  alia,  it  underlined  that 

Member States with a derogation who do not yet participate in economic and monetary union have 

a legal duty to adapt the statutes of their national central banks (NCBs) to ensure compatibility with 

the Treaty and the Statute of the European System of Central Banks and of the European Central 

Bank (hereinafter the ‘Statute of the ESCB’). It also concluded that any legislative reform should 

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2  

OJ L 189, 3.7.1998, p. 42. 
All opinions are published on the ECB’s website at www.ecb.europa.eu. 

 
 
 
 
                                                 
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aim  to  gradually  achieve  consistency  with  Eurosystem  standards  and  that  neither  of  the  two 

alternatives presented were sufficient to ensure Sveriges Riksbank’s financial independence. 

2.   The 2013 proposals from the Commission of inquiry 

2.1  Due  to  the  financial  crisis  none  of  the  proposals  contained  in  SOU 2007:51  were  implemented; 

instead the experiences of the crisis provided a reason to examine the same issues afresh.  

Consequently, on 13 October 2011 the Swedish Government instructed the Commission of inquiry 

to  investigate  how  the  experiences  of  the  financial  crisis  have  influenced  views  of  Sveriges 

Riksbank’s balance sheet (Dir 2011:89). 

In the brief to the Commission of inquiry the Government instructed it specifically to determine: 

(a) 

how large Sveriges Riksbank’s foreign reserves should be and how those reserves should be 

financed; 

(b) 

the best method for coordination between Sveriges Riksbank and the Swedish National Debt 

Office; 

(c) 

the procedure to be carried out when borrowing for foreign reserves, taking account of the 

overall aim  to  guarantee  effective  borrowing  by  Sweden  and  safeguard  public  finances,  as 

well as ensure financial stability and protect Sveriges Riksbank’s independence; 

(d)  what the appropriate amount for Sveriges Riksbank’s own capital should be. 

2.2  The Commission of inquiry issued the report in January 2013. Therefore, this is the second ECB 

consultation on similar issues and has to be read in conjunction with Opinion CON/2008/34. The 

report contains a number of proposals on which the ECB provides its opinion: 

(a) 

Sveriges Riksbank’s interest free capital should be SEK 75 billion, including SEK 30 billion 

in equity capital. The capital is to be protected against inflation and restored after losses; 

(b) 

Sveriges Riksbank should be given the right to increase its foreign currency reserves so that 

its borrowed and interest-free capital can reach SEK 200 billion; 

(c) 

In  the  event that  Sveriges Riksbank  used its reserves  for  emergency  liquidity  assistance,  it 

should be given the right to restore its foreign currency reserves by borrowing to the required 

extent, without limits; 

(d) 

Sveriges  Riksbank  should  be  given  the  right  to  finance  its  lending  in  foreign  currency  by 

borrowing  to  the  extent  required,  without  limits.  This  would  ensure  a  sufficient  supply  of 

emergency liquidity to banks in distress when financial stability is threatened; 

(e)  The costs of the borrowed part of the foreign currency reserves should be covered by fees on 

banks. The proposal suggests that banks lending and borrowing in foreign currency should 

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be  required  to  take  part  in  a  mandatory  insurance  scheme  that  guarantees  emergency 

liquidity assistance in foreign currency; 

(f) 

The  currency  risk  arising  from  holding  foreign  currency  reserves  should  be  eliminated  by 

transferring it to the Swedish National Debt Office. With regard to the amount of Sveriges 

Riksbank’s equity capital proposed by the Commission of inquiry, the report points out that 

the proposed amount is based on the assumption that any foreign currency risk as a result of 

holding the currency reserves has been hedged; 

(g)  With these proposals less capital will be tied up in the Sveriges Riksbank, resulting in social 

economic gains. Transferring the foreign currency risk to the Swedish National Debt Office 

would result in a decreased need for equity capital at Sveriges Riksbank. The report argues 

that due to the end of Sveriges Riksbank’s borrowing in foreign currency, its balance sheet 

would  be  reduced  by  SEK  90-215  billion.  If  foreign  currency  borrowings  came  to 

SEK 90 billion in ‘normal times’, the savings would be between SEK 180 and 270 million 

per year. 

3.   General observations 

The ECB underlines that all observations made in Opinion CON/2008/34 are still valid. 

3.1 

In Chapter 10 of the report, entitled ‘Consequences of the commission of inquiry’s draft bill’ it is 

noted that as a result of the proposed legal changes, Sveriges Riksbank’s share capital and reserves 

would  be  considerably  reduced,  which  would  open  up  the  possibility  for  SEK  73 billion  to  be 

transferred  from  Sveriges  Riksbank  to  the  Government  by  way  of  a  special  distribution.  It 

explicitly states that government debt will fall by SEK 73 billion, or approximately 2% of GDP, as 

a result of the reduction in share capital and reserves.  It further specifies that the capital held by 

Sveriges Riksbank would be released and could be used to amortise government debt. 

3.2  Under  Article  130  of  the  Treaty  and  Article  7  of  the  Statute  of  the  ESCB,  central  banks  are 

independent,  which  also  includes  financial  independence,  and  points  out  the  general  principle  of 

monetary financing prohibition, which states that no profit distribution should be effected outside 

the regular profit distribution scheme. These concerns will be addressed below. 

3.3  The  monetary  financing  prohibition is  laid  down in Article 123(1)  of  the Treaty,  which  prohibits 

overdraft facilities or any other type of credit facility with the ECB or the NCBs of Member States 

in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or 

other  public authorities,  other bodies  governed  by  public law,  or  public  undertakings  of  Member 

States,  and  the  purchase  directly  from  these  public  sector  entities  by  the  ECB  or  NCBs  of  debt 

instruments.  The  precise  scope  of  application  of  the  monetary  financing  prohibition  is  further 

clarified by Council Regulation (EC) No 3603/93 of 13 December 1993 specifying definitions for 

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the  application  of  the  prohibitions  referred  to  in  Articles 104  and  104b(1)  of  the  Treaty3,  which 

makes it clear that the prohibition includes any financing of the public sector’s obligations vis-à-vis 

third parties. 

3.4  The distribution of central bank profits that have not been fully realised, accounted for and audited 

does not comply with the monetary financing prohibition. 

To  comply  with  the  monetary  financing  prohibition,  the  amount  distributed  to  the  State  budget 

pursuant to the applicable profit distribution rules cannot be paid, even partially, from the NCB’s 

reserve  capital.  Therefore,  profit  distribution  rules  should  leave  the  NCB’s  reserve  capital 

unaffected. Moreover, when NCB assets are transferred to the State, they must be remunerated at 
market value and the transfer should take place at the same time as the remuneration4. 

3.5  Further,  a  Member  State  may  not  impose  reductions  of  capital  on  an  NCB  without  the  ex  ante 

agreement of the NCB’s decision-making bodies, which must aim to ensure that it retains sufficient 

financial independence to fulfil its mandate under Article 127(2) of the Treaty and the Statute of 

the ESCB as a member of the ESCB. For the same reason, any amendment to the profit distribution 

rules of an NCB should only be initiated and decided in cooperation with the NCB, which is best 
placed  to  assess  its  required  level  of  reserve  capital5.  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 tasks6. 

3.6  Sweden  is  a  Member  State  with  a  derogation  and  must  therefore  comply  with  all  adaptation 

requirements under Article 131 of the Treaty. The ECB notes that the Treaty has obliged Sweden to 

adopt  national  legislation  for  integration  into  the  Eurosystem  since  1  June  1998.  All  legislative 

action  taken  by  the  Swedish  authorities  in  regard  to  legislation  concerning  Sveriges  Riksbank 

should bring the legislation in line with the Treaty requirements. 

4.  

Specific observations 

Below  are  observations  on  the  specific  draft  amendments  proposed  to  the  Sveriges  Riksbank  Act 

(1988:1385). 

4.1  Amendments proposed to Chapter 10, Article 1 

4.1.1  Article 1 states that Sveriges Riksbank’s financial independence will be guaranteed by the fact that 

it has been granted the right to issue notes and coins and furthermore, that it has its share capital 

and reserves. 

3  

4  
5  
6  

OJ  L  332,  31.12.1993,  p.  1.  Articles  104  and  104b(1)  of  the  Treaty  establishing  the  European  Community  are  now 
Articles 123 and 125(1) of the Treaty on the Functioning of the European Union. 
Opinions CON/2011/91 and CON/2011/99. 
Opinion CON/2009/83 and Opinion CON/2009/53. 
Opinion CON/2009/26. 

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4.1.2  The ECB notes that the right to issue banknotes and coins is not in itself a guarantee of financial 

independence. The article does not take into account obligations of an NCB under Article 128(1) of 

the Treaty and Article 16 of the Statute of the ESCB, and as such is not compliant with Sweden’s 

obligations under the Treaties. 

4.1.3  The  ECB  would  also  like  to  point  out,  as  already  mentioned  in  Opinion  CON/2008/34,  that 

banknotes in circulation should not be viewed as cost-free capital. This view is not supported by 

the Treaty, which does not state that euro banknotes are conceptually equivalent to cost-free capital 

owned by any individual NCB. 

4.2  Amendments proposed to Chapter 10, Articles 2, 3 and 4 

4.2.1  Article 2 states that if Sveriges Riksbank’s cost-free capital falls below the target level, the bank 

will receive a capital contribution. According to the proposals from the Commission of inquiry, the 

total interest free capital is composed of: (a) bills and coins in circulation; and (b) equity capital. 

The  latter  will  come  to  a  total  of  SEK 30  billion.  Losses  smaller  than  SEK  10 billion  are  to  be 

compensated by withholding profits until the equity capital is restored. Larger losses will require 

the restoration of equity capital by injecting new equity capital. The ECB notes that if a third party 

has  the  power  to  determine  or  influence  the  restoration  of  Sveriges  Riksbank´s  equity  capital,  it 

would be incompatible with financial independence. 

4.2.2  The  ECB  has  stated  in  its  Convergence  Reports  that  with  regard  to  profit  allocation,  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. This means that 

such  decisions  with  regard  to  the  profit  allocation  of  Sveriges  Riksbank  should  be  made  by  the 

Executive Board. 

4.2.3  Profits  may  be  distributed  to  the  State  budget  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.  Temporary  or  ad  hoc  legislative  measures 

amounting to instructions to the NCBs in relation to the distribution of their profits are not allowed. 

Against this background, the ECB notes that the profit distribution scheme for Sveriges Riksbank 

has  not  been  improved,  as  the  proposed  Article  10(6),  as  well  as  the  proposed  Article  10(7), 

continue to give a decisive role to the Swedish Parliament as well as the National Audit Office. 

4.2.4  Concerning  the  powers  of  the  Swedish  Parliament  and  National  Audit  Office,  it  is  incompatible 

with  financial  independence,  if  a  third  party  has  the  power  to  determine  or  influence  Sveriges 

Riksbank’s  budget,  unless  the  law  provides  a  safeguard  clause  so  that  such  a  power  is  without 

prejudice  to  the  financial  means  necessary  for  carrying  out  Sveriges  Riksbank’s  ESCB  and 

national-related tasks. 

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4.3  Amendments proposed to Chapter 10, Article 6 

4.3.1  Sveriges  Riksbank’s  accounts  should  be  drawn  up  either  in  accordance  with  general  accounting 

rules  or  in  accordance  with  rules  specified  by  Sveriges  Riksbank’s  Executive  Board.  If,  instead, 

such rules are specified by third parties, these accounting rules must at least take into account what 

the  NCB’s  independent  decision-making  bodies  have  proposed.  The  annual  accounts  should  be 

adopted by Sveriges Riksbank’s Executive Board, assisted by independent accountants, and may be 

subject to ex post approval by third parties, e.g. the government or parliament. Sveriges Riksbank’s 

Executive  Board  should  be  able  to  decide  on  the  calculation  of  the  profits  independently  and 

professionally. 

4.3.2  ECB legal instruments on accounting do not yet apply to Sveriges Riksbank pursuant to Article 139 

of the Treaty and Article 42 of the Statute of the ESCB. However, Sveriges Riksbank should be 

equipped with the power to adopt its own accounting guidelines, which take inspiration from the 

ECB Guidelines, until the day when Sweden’s derogation will be abrogated. 

4.4  Amendments proposed to Chapter 12, Articles 1 to 3 

4.4.1  According  to  the  report,  one  of  Sveriges  Riksbank’s  tasks  is  to  provide  emergency  liquidity 

assistance in foreign currency to Swedish banks and other financial institutions. In order to fulfil 

this task, Sveriges Riksbank is to be given the right to increase its foreign currency reserves when 

needed,  so  that  the  total  of  interest-free  and  borrowed  capital  may  reach  up  to  SEK  200  billion. 

This limit is to be indexed to the GDP in current prices. 

4.4.2  The proposed amendments restrict Sveriges Riksbank’s right to independently decide to strengthen 

the foreign currency reserve. Sveriges Riksbank’s Executive Board must have the right to instruct 

the Swedish National Debt Office to borrow whatever amount it considers necessary. 

4.4.3  The proposed amendments lack clarity and entail the risk to be non-compliant with the basic tasks 

of  the  ESCB,  such  as  conducting  foreign  exchange  operations,  and  holding  and  managing  the 

official foreign reserves of the Member States. 

4.4.4  If an NCB is made subject to a National Debt Office control on managing its foreign reserves, it 

would  undermine  the  second  and  third  indents  of  Article  127(2)  of  the  Treaty,  second  and  third 

indents of Article 3.1 of the Statute of the ESCB, as well as Articles 23, 30 and 31 of the Statute of 

the ESCB. Although Member States with a derogation are exempt from the above Articles as set 

forth  in  Article  139  of  the  Treaty  and  Article  42.1  of  the  Statute  of  the  ESCB,  as  required  by 

Article  131  of  the  Treaty,  they  have  a  legal  duty  to  adapt  the  statutes  of  their  NCBs  to  ensure 
compatibility with the Treaty and the Statute of the ESCB in respect of Eurosystem-related tasks’.7  

4.4.5  If  decisions  of  Sveriges  Riksbank  are  made  dependant  on  the  decisions  of a  national  parliament, 

this is undermining Article 130 of the Treaty and Article 7 of the Statute of the ESCB. 

7  

Convergence Report June 2013, p. 41.  

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This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 24 July 2013. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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