Opinion of the European Central Bank of 18 May 2017 on the financial independence of Sveriges Riksbank (CON/2017/17)
Date: 2017-05-18
Institutions: European Central Bank
Subjects: Sweden, capital increase, capital movement, central bank, foreign-exchange reserves, profit

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 reserve2. 

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 

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2 

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). 

See the draft referral to the Council on Legislation, The Riksbank’s financial independence and balance sheet, p. 1. 

 
 
 
 
                                                            
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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 applied4. 

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 Authority6. 

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 

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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, Proposal 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. 

The Riksbank Act 1998, Chapter 10, Articles 1, 3 and 4. 
The Riksbank Act, Chapter 7, Articles 2, 3 and 4. 
The Riksbank Act, Chapter 6, Article 8. 
The Budget Act, 2011, Chapter 5, Section 1, first paragraph. See comment to footnote 4. 
The Riksbank Act, Chapter 7, Article 3(2); the Budget Act, Chapter 5, Section 1, second paragraph. 

See the draft referral, footnote 2, p. 17. 
See the proposed new Article 1, Chapter 10 of the Riksbank Act. 
See proposed first to third paragraphs of new Article 2, Chapter 10 of the Riksbank Act. 

See proposed fourth paragraph of new Article 2, Chapter 10 of the Riksbank Act. 

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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 done13. 

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 time14. 

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  guaranteed  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 Treasury15. 

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 for 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 billion subject to the CPI adjustment, if applicable)17. 

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See proposed new Article 8, Chapter 10 of the Riksbank Act. 
See the draft referral, footnote 2, pp. 20-24. 
See proposed new Articles 3 and 4, Chapter 10 of the Riksbank Act. 
See proposed new Article 5, Chapter 10 of the Riksbank Act. 

See proposed new Article 6, Chapter 10 of the Riksbank Act. 

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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  capital19.  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 further  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 below21. 

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 
Parliament22. 

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 place23. 

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 
Act24. The second paragraph of the new chapter stipulates 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  adjustment)  through  the  National 

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The Riksbank Act, Chapter 10, Article 3. 
See proposed second paragraph of new Article 10, Chapter 10 of the Riksbank Act. 
The Riksbank Act, Chapter 10, Article 4. 

See proposed first paragraph of new Article 4, Chapter 10 of the Riksbank Act. 
See proposed new Article 7, Chapter 10 of the Riksbank Act. 
See draft referral to the Council on Legislation, footnote 2, p. 43. 

See proposed new Chapter 10a of the Riksbank Act. 

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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 proposed 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 manner26. 

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 Office. 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 management27. 

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  stage  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 

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See proposed new Article 3, Chapter 10a of the Riksbank Act. 

See draft referral, footnote 2, pp. 30-31. 
See draft referral, footnote 2, pp. 18, 34-35, 39-40. 
See Article 131 of the Treaty. 

See paragraph 3.4 of ECB Opinion CON/2008/34. 

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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 Riksbank31. 

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 the European System of Central Bank (ESCB)-related 

tasks required of it under the Treaty and the Statute). 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 operations32. 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.  Financial  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 forecasts33. 

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  January  2017,  which  is  four  times  Sweden’s  GDP34. 

Sweden’s large and growing cross-border banking sector has considerable commitments in foreign 
currencies35. 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  advisable,  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  exceptional  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. 

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See, e.g., ECB, Convergence Report June 2016, pp. 194-95. 
See ECB Opinions CON/2005/54, CON/2008/34 and CON/2013/53 and EMI Opinion CON/1997/26. 

See, e.g., ECB, Convergence Report June 2016, p. 25. 
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. 
See Sveriges Riksbank, Consultation response to the report 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. 
See Sveriges Riksbank, Consultation response to the report on the Riksbank’s financial independence and balance 
sheet, 27 April 2017, p. 1. 

See, e.g., ECB, Opinion CON/2012/69, paragraph 3.3; The Riksbank Act, Chapter 6, Article 8. 

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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  capital  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  Act37,  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 developments38. 

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  legislative  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. 

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The Riksbank Act, Chapter 10, Article 1. 

See paragraphs 4.3 and 4.4 of ECB Opinion CON/2008/34. 

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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 losses40. 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  interests41.  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  parties42.  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  reports44  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 

40 

41 
42 
43 
44 

With effect from 2004, unrealised gains and losses are reported 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. 
In addition, the National Audit Office, in addition to the Parliament, will continue to receive proposals on an annual 
basis from the Riksbank regarding the allocation of the Riksbank’s profits and the draft legislative proposal will mean 
that they will also receive proposals, at least every five years, with respect to the transfer of funds in the reserve fund 
to the primary capital. 

See paragraph 3.6 of ECB Opinion CON/2007/14 and paragraph 3.2 of ECB Opinion CON/2009/53. 
See ECB, Convergence Report June 2016, p. 27. 
See ECB, Convergence Report June 2016, p. 27 and paragraph 4.2.2 of ECB Opinion CON/2013/53. 

See ECB, Convergence Report June 2016, p. 195. 

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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 Riksbank’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 Riksbank’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  Treaty46.  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 
profit47. 

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 tasks48. 

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 

46 
47 

48 

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  proposal  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. 
See European Commission, Convergence Report June 2016, p. 115. 

See  Commission  of  inquiry  –  Review  of  the  monetary  policy  framework  and  the  Sveriges  Riksbank  Act,    2016), 
pp. 5-6. 

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. 

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exchange rate, interest rate, credit and gold price 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  stipulates  that  an  amount  equal  to  two  thirds  of  the 
targeted equity will be referred to as the guaranteed level of the restricted equity52. 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 would 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 existing 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  possibility  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  that  the  Riksbank  should 

realise  profits  booked  in  the  revaluation  accounts,  excepting  changes  in  the  value  of  the  gold 

49 

50 
51 

52 

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). 
The Riksbank Act, Chapter 4, Article 1. 
The Parliament device, 2014, Chapter 9, Article 17. 

See proposed fourth paragraph of new Article 2, Chapter 10 of the Riksbank Act. 

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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  financial  independence  as  the  Riksbank  might  not  be 

able to autonomously avail itself of sufficient financial 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 provide 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 the 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 
54 
55 

56 

See draft referral to the Council on Legislation, footnote 2, p. 43. 
See Articles 127(2) of the Treaty; Articles 18.1, first indent, 23, second indent, 30 and 31 of the Statute. 
The Swedish Constitution (2011:109), Chapter 9, Article 13. 

The Riksbank Act, Chapter 1, Article 2 as well as Chapters 6 and 7. 

11 

                                                            
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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  where  it  has  insufficient  financial  resources  to 

carry out its monetary and exchange 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 foreign 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 201557. 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  GDP58.  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 flexibility 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 may 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 
58 

59 

IMF Country Report 16/354, Sweden selected issues, November 2016. 
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). 

See Sveriges Riksbank, Consultation response to the report on the Riksbank’s financial independence and balance 
sheet, 27 April 2017, p. 8. 

12 

                                                            
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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  foreign  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  exclusively  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 significant 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  Riksbank’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 

13 

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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 

14