Purely practically, we do this by allocating parts or the whole of the result for the year, meaning that the dividend-qualifying result becomes lower than would otherwise have been the case. The dividend to the state is thus affected. However, the dividend model used by the General Council of the Riksbank spreads this effect out over five years and, due to last year’s high profit, the dividend for this year will be relatively high, even if we make a large risk provision. ... and requirements for our foreign exchange reserves The Riksbank, like most central banks, has foreign exchange reserves. Today, these amount to almost SEK 400 billion. Almost half of the foreign exchange reserves, SEK 181 billion, are funded through loans of foreign currency on the international capital market via the Swedish National Debt Office. This currency borrowing arose when the Riksbank, on a couple of occasions, needed rapidly to strengthen the foreign exchange reserves. This first happened in 2009, during the financial crisis, after which the Riksbank decided to do it again in 2012. How large the foreign exchange reserves need to be is basically based on an assessment of how much foreign currency we need to retain to be able to fulfil our commitments. The Riksbank regularly reviews this assessment. It is unusual for central banks to fund the foreign exchange reserves by borrowing foreign currency and it is also unusual for central banks to borrow from their countries’ debt offices, such as the Swedish National Debt Office.

However, similar legislation has been introduced in several European countries, and mortgage bonds regulated according to this legislation on secured bonds have come in various ways to be viewed as more creditworthy than mortgage bonds that are not. It can therefore be claimed that Swedish mortgage institutions should be given the same opportunities to issue secured bonds as mortgage institutions in other countries, which is also the view held by the Riksbank. Swedish mortgage institutions today already observe such strict legislation that they can be viewed as a kind of special company in a securitisation. The potential effects of introducing particular legislation for secured bonds are therefore possibly less in Sweden than in other countries, and it is difficult to see that the legislation regarding secured bonds would entail any dramatic change in the activities of Swedish mortgage institutions. However, there are advantages involved in introducing such legislation. Having legislation that is in line with that of other European countries will contribute to reducing any uncertainty, particularly from foreign investors, regarding the terms connected with owning securities issued by Swedish mortgage institutions. This should reasonably result in a broader circle of investors that are willing to invest in securities issued by Swedish mortgage institutions, and hopefully also  BIS Review 35/2004  1  reduce their borrowing costs. In addition, European central banks currently regard this type of mortgage bond as more creditworthy than mortgage bonds not covered by legislation on secured bonds, when market participants pledge collateral with them.