This can in turn give rise to an acute threat to financial stability and ultimately to the economy as a whole – not only in Sweden but also in our neighbouring countries, where Swedish banks have operations. Via FX swaps which have maturities of different lengths. These must be renewed gradually and their prices alter. 6  5 [14]  There is a process consisting of many stages behind the lending for Swedish mortgages and corporate loans. In this process, both the Swedish banks and their counterparties on the foreign exchange market are dependent on the funding in foreign currency functioning constantly. Different currencies in the banks’ balance sheets (a simplified example)  How can we then best manage the banks’ increased liquidity risks in foreign currency? A natural starting point is that the banks – just like other private commercial actors – should manage their liquidity risks themselves. They therefore need to insure themselves by having enough liquidity reserves and sufficiently stable funding in foreign currency. This reduces the risk that the government will have to intervene in the event of a crisis. Hopefully, it also gives the authorities a little more time to take in the whole situation and to find an appropriate solution if problems nevertheless arise. A liquidity buffer can to some extent also be regarded as a “deductible” that can at least on the margin reinforce the banks’ incentives to manage their liquidity risks.

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