It also emphasises the importance of central banks having the capacity to quickly intervene if necessary. This requires having sufficient reserves on standby. Liquidity decisive Let me conclude with a reflection. Many agents who have so far expressed an opinion on the issue have emphasised Sweden's strong public finances as a compelling reason for reducing the Riksbank's foreign currency reserve. But everyone knows that in an uneasy situation it is always liquidity that determines 16 See, for instance, Skingsley (2016): http://www.riksbank.se/Documents/Tal/Skingsley/2016/tal_skingsley_161116_eng.pdf and the Riksbank's project plan for the E-krona: http://www.riksbank.se/Documents/Avdelningar/AFS/2017/Projektplan%20ekronan_170314_eng.pdf. 17 See, for example, De Nederlandsche Bank (2016). 12 [14]  how well one copes with the problems. If you are not able to pay when the bills fall due, those around you will lose confidence in you and ultimately you may face seizure and bankruptcy. As a Swedish citizen and representative of Sveriges Riksbank, it is my duty to point to the importance of good liquidity in managing a financial crisis. This requires a foreign exchange reserve that is sufficiently large to cover at least the foreign currency needs that may arise in the short term in a situation of financial stress. In my opinion, such an insurance is a way of taking responsibility that the citizens of the country have the right to require from their government and national authorities as the world becomes faster paced and innovation increases. Thank you. 13 [14]  References Daltung, Sonja and Mithra Ericson, 2004,”Cash-supply efficiency”, Sveriges Riksbank, Economic Review, 3/2004.

In the case of annuity firms, the reforms are reliant on our confidence in the level of MA benefit taken – and hence on the fundamental spread being appropriately calculated. More broadly, in addition to the use of safeguards where appropriate, the reforms are contingent on the continued effectiveness of a central pillar of the Solvency II regime, the quality of firms’ own risk management. That will remain at the core of firm-to-supervisor dialogue and engagement. Our overall work on potential Solvency II reform has already benefited from the effective engagement as part of the pre-consultation phase of the review. Following the publication of our DP at the end of April, we are requesting more information from firms and I am looking forward to our next series of meetings in order to hear the views of firms, their investors and other stakeholders. Thank you. I am grateful to Saoirse Carberry, Craig Turnbull, Alan Sheppard, Avni Gangadia and Miranda Hewkin Smith for their assistance in helping me prepare this speech. 1. Review of Solvency II: Call for Evidence | HM Treasury 2. Brave new world - speech by Sam Woods | Bank of England. 3. Four Rs: Creating the conditions for long-term sustainable growth in the life annuity sector – speech by Charlotte Gerken | Bank of England 4. The Prudential Regulation Authority’s approach to insurance supervision | Bank of England Section 1 explains the PRA’s objectives. 5. At YE21 ‘Investment and cash excluding participations’ - Insurance aggregate data report | Bank of England, 6.