by financial market uncertainty, there is much less propensity to take risks. financial market participants are more interested in low - risk assets, low - risk markets and counterparties that they know and are safe. in a severe situation, this can mean that in certain cases trading ceases altogether because even small risks are perceived as too large. this is because the problems associated with counterparty risks and a lack of transparency become more tangible when markets are turbulent. every measure by which the financial markets can be made to function even in turbulent times is welcome. some of those who stop trading when markets are unsettled would probably not do so if they had a known and safe counterparty with whom to trade in a properly transparent market. conditions are then in place for arranging securities transactions in ways that are safe and efficient, so that financial stability can be more satisfactory. the fixed - income market i shall now say something about the fixed - income market. the fixed - income market in sweden differs from its larger counterparts in europe. there are considerably fewer participants and the market is shallower – less liquid. this presumably entails higher costs this refers to the derivatives that are not traded on exchanges, for instance swaps, futures and options. for transactions of a given size, as well as closer relationships between the players. these circumstances are liable to affect how the market functions, particularly in times of unrest. the risk propensity falls and with relatively few participants, market liquidity is easily eroded. trading in the swedish bond and money market is still done mainly by telephone, over - thecounter, though some electronic trading has existed since 2001. this electronic trading is in three benchmark bonds. to work properly, electronic trading needs products that are highly standardised, as well as relatively high liquidity. in europe, electronic trading is used for roughly 75 per cent of all transactions but they account for only about 50 per cent of the volume. large orders are still traded by telephone. the functioning of the fixed - income market is important for us as a central bank. it makes it possible to implement monetary policy and thus to fulfil our task of controlling inflation. we aim to influence economic activity and thereby inflation via the price for credit – the interest rate. for this to be possible, the payment system and the credit markets must function so that the riksbank ’ s interest rate decisions show up in other interest rates. what does this require of the fixed - interest market? a discussion of

riksbank should make losses. the provisions will thus form a complement to the existing equity and revaluation accounts. 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. most central banks in small, advanced economies instead have completely self - financed foreign exchange reserves in the magnitude of 10 – 12 per cent of gdp. our borrowing of foreign currency has been criticised from time to time for raising the official measure of national debt, as well as the measure known as maastricht debt, which is often used in international comparisons. this borrowing thus leads to a conflation of the riksbank ’ s foreign exchange reserves and the public finances. large - scale borrowing for the foreign exchange reserves is also a disadvantage from the perspective of preparedness. as foreign exchange reserves funded by loans involve refinancing risks, self - financed foreign exchange reserves could strengthen the riksbank ’ s ability to act in a financial crisis. in light of this, it is reasonable to review the available alternatives for funding the foreign exchange reserves. one