which funding currency the rates refer to. since the number of transactions in swedish kronor between panel banks has decreased, the stibor framework states that the banks'submissions can be based on judgements of their borrowing costs in foreign currency. the riksbank considers this unfortunate and that a reference rate in swedish kronor should be anchored in transactions in swedish kronor only. the definition of swestr is similar to those in euro, british pounds and danish kronor. like the ecb, the bank of england and nationalbanken in denmark, the riksbank has chosen to use deposit transactions with overnight maturity, and with a counterparty group that is wider than just the panel banks. the main reason is that this part of the money market tends to exhibit good and relatively stable transaction volumes, even in difficult times. the transition to swestr should begin now – it is a process that will take several years and some adjustments are required as swestr is now available, there is an alternative to stibor. we therefore call on market participants to step up their efforts for a transition to swestr. 5 however, in order for us to reach a point where transaction - based reference rates dominate in the market in sweden and internationally, certain adjustments are required in the financial markets. this process needs to run over several years. the greatest need for adjustment probably concerns maturities. the traditional interbank rates are available at several different maturities, for example three and six months. however, swestr and its international equivalents are only calculated at the shortest maturity, overnight. the reason for this, as i said, is that in sweden and abroad, it is at this maturity that a sufficient number of transactions are carried out. for the rate to be credible and representative, there needs to be a steady flow of enough transactions on which to base the calculation. the interbank rates can be developed at longer maturities even with a very limited transaction base, precisely because there is scope for the banks'own judgements – but this is also what makes them lacking in objectivity and easier to manipulate. alternatives to longer - term interbank rates being developed in order to address this problem, central banks in several countries are now working to ensure that the new reference rates can also replace interbank rates in contracts with longer maturities. in principle, it is possible to create forward - looking rates based on traded derivative instruments with the new rates as a base. however

speech date : 30 september 2021 speaker : martin floden venue : kommuninvest ( digitally ) sveriges riksbank se - 103 37 stockholm ( brunkebergstorg 11 ) tel + 46 8 787 00 00 fax + 46 8 21 05 31 registratorn @ riksbank. se www. riksbank. se swestr – a fully transaction - based reference rate * i would like to begin by thanking kommuninvest for the opportunity to participate in its finance forum. as usual, the finance forum offers a highly appreciated meeting place where representatives of both authorities and the private sector can have open and fruitful discussions on current financial market issues. thank you to kommuninvest for that! as mentioned in maria viimne ’ s presentation, i am going to talk today about the riksbank's new reference rate swestr. i will explain why the riksbank considers that financial market participants in sweden should now begin the transition from stibor, the traditional reference rate in swedish kronor, to the riksbank's transaction - based reference rate swestr. i will also describe how the riksbank intends to be active in and support this process. however, in order to provide some context, i will first briefly explain the importance of reference rates in the financial market. i will also provide some background to the interbank rates, such as stibor and libor, which have been dominant in the markets to date, and describe the problems with these reference rates. reference rates fulfil a useful function in society reference rates can be perceived as a rather technical issue and they are rarely at the centre of the daily economic debate. however, reference rates are used worldwide in a variety of contracts and concerning very large contract values. they therefore fulfil a central function in our financial markets. * i would like to thank ola medelberg for help in writing this speech, and ingrid wallin johansson, anders ryden, johannes forss sandahl and marianne sterner for valuable comments. 1 a reference rate works as a benchmark in the pricing of financial contracts. the main intention of such a benchmark is that pricing shall follow market developments, and that none of the contracting parties shall be able to manipulate it. i think that reference rates can be seen as a common tool that exists to facilitate for everyone who participates in or is affected by the