(Finance) – The Swedish central bank will request a capital injection from the governmentafter suffering significant losses on bond purchases made to support the economy, according to Governor Erik Thedéen.
“For his independence It is also important that the Riksbank has sufficient equity capital and earnings capacity to finance itself,” he said in a speech at Stockholm University. “When interest rates rose in 2022, the Riksbank suffered losses on bond purchases it had previously carried out to support the economy. These losses have left the bank with insufficient equity capital.”
“The new law on the Riksbank now requires us to ask for the strengthening of equity capital – he added – The main rule is that the equity capital is brought back to the base level of around SEK 40 billion. This will be the starting point when the Riksbank presents its petition to the Riksdag in March.”
Financing represents a greater challenge in Sweden than in many other countries where central banks receive large amounts of interest-free financing due to the increased use of cash. “In the long term, the Riksbank needs to strengthen its earnings, as cash financing in circulation has decreased and, furthermore, our operations are now more extensive and resource-intensive than before,” said Thedéen. “It is important that the Riksbank is not in a situation where we have to regularly go to the Riksdag to ask for more capital. This would be contrary to the principle of financial independence.”
(Photo: NFT CAR GIRL on Unsplash)