Presentation accompanying the speech
Welcome to the Riksbank!
Today I am going to talk about the challenges faced by the Riksbank and other central banks in designing their operational frameworks when normalising their balance sheets (see Figure 1) and how this affects the Swedish banks. For several years, the amount of central bank liquidity in several countries has been at or near record levels, due to monetary policy-driven asset purchases. But that is now changing.
My message here today is that our monetary policy counterparties, the banks, need to prepare for the fact that there will soon be substantially less central bank liquidity in the Swedish banking system. They need to adapt to managing their liquidity in the market. This makes greater demands of the individual bank to have both operational capacity and a willingness to lend and borrow on the overnight market. At the same time, the banks should always be able to use the Riksbank’s lending facilities without hesitation when needed. They not only can, but should, use them when the money market is for some reason struggling to reach equilibrium and overnight rates are moving erratically. The Riksbank’s lending facilities are there to be used and are the basis for stable interest rate formation.
