sweden, whether they are made by direct debit, credit transfer or card, pass through rix at some point. the third kind of money is commercial bank money. this is the holdings in accounts with the commercial banks. such money is by definition a claim on these banks. however, banks may be forced to wind down, sometimes even going bankrupt, which happened to stockholms banco and as we saw in the most recent international financial crisis. this means that this money, the commercial bank money, does entail a risk even if the risk is slight. if the bank fails, you may not be able to redeem your entire claim on the bank from its bankruptcy estate. however, these days there is a state deposit guarantee that protects households up to a certain limit, eur 100, 000 per person and bank. those with capital above this limit and legal entities do not enjoy this protection and so commercial bank money entails some credit risk for them. commercial bank money is a claim on the bank and therefore a part of the financing of the bank. they are therefore transient, that is, the bank's customers can often move the money at short notice, either to another bank or withdraw it in the form of cash. the bank's assets, such as household mortgages, are not in general as transient. it is this that may create financial stability problems in the banking sector if the general public wants to withdraw their money and the bank cannot quickly sell assets to raise the needed liquidity. 2 the capital requirements and liquidity requirements the state makes of the banks are aimed at making them safe by requiring they hold buffers so they can cope with loan losses and an outflow of liquidity. the capital requirements also set a limit as to how much commercial bank money the banks can create. commercial bank money the most common the money that is use the most in society is commercial bank money. the banks ’ socalled deposits repayable on demand, that is, deposits with a high level of liquidity that can be used for payments, amounts to around sek 2, 200 billion, which is around half of sweden ’ s gdp, compared with around sek 130 billion in central bank money, where cash comprises just over sek 60 billion. 3 4 in sweden, we have long had a trend towards a decline in the use of cash. the trend is seen clearly if you relate the value of cash in circulation to gdp. this is the red line in 2 this was

in the riksbank ’ s balance sheet that are important in this context, one on the liability side and one on the asset side. on the liability side it is mainly changes in the general public ’ s demand for banknotes and coins that needs to be estimated. the riksbank has a monopoly on issuing new banknotes and coins. issuing banknotes and coins can be compared with issuing securities and arises as a liability in our balance sheet. changes in the general public ’ s demand for banknotes and coins show a clear and stable seasonal pattern and are therefore relatively easy to forecast. on the asset side it is a question of changes in the gold and foreign currency reserve linked to the sale or purchase of foreign currencies. such interventions are very rare and usually affected by our own decisions. other items in the riksbank ’ s balance sheet only show small and predictable changes. the total of the estimated changes in the balance sheet corresponds to how much the bank system ’ s borrowing requirement is expected to change over the coming week. compared with many other countries, it is easy to make forecasts of the swedish bank system ’ s borrowing or investment requirement. this is partly because the government transactions no longer go via the riksbank, and there is very seldom a need to make currency interventions when one has a floating exchange rate. in a second stage, the actual loan transaction is carried out by means of what is known as a repo. the monetary policy repo means that the bank system borrows money from the riksbank against collateral, with an agreement to “ repurchase ” a week later. when the repo matures, the banks pay interest on the past week ’ s loans, that is the repo rate. at the same time a new repo is carried out. the conditions for the repo are normally announced every tuesday and the repo runs from wednesday to wednesday. as the size of the repo transaction is based on a forecast of the borrowing requirement during the coming week, and the rix accounts must be regulated daily, the bank system may nevertheless need to borrow or deposit in the standing facilities on individual days. if the amounts are large, this could risk leading to major fluctuations in the overnight rate. the riksbank is therefore prepared on a daily basis to carry out what are known as fine - tuning operations. these operations involve meeting the bank system ’ s borrowing or deposit requirement on a particular day at a rate of interest that is 10