Sveriges Riksbank A R  The objective of the Riksbank is to maintain price stability besides promoting a safe and efficient payment system The Riksbank thereby contributes to sustainable growth and increased employment  in brief

■ Governing Board appointed by the newly elected Riksdag on  October. C

■  New Riksbank legislation approved by the Riksdag on November. ■ 1998 IN BRIEF 1 ■   New Governing Council, as of , appointed by the Riksdag on December. ■ THE RIKSBANK’S OBJECTIVE 2

■  The six members of the new Executive Board, as of , appointed by the Governing Council ■ GOVERNOR’S STATEMENT 3 on  December. ■ EXCHANGE RATE SYSTEMS ■ The Riksbank decides on  June to lower the repo rate from . to . per cent. IN THE 20TH CENTURY 4

■ The Riksbank decides on  November to lower the repo rate from . to . per cent. ■ MANAGERIAL STATEMENTS 5 ■ The Riksbank decides on  November to lower its borrowing and lending rates, in each case by . percentage points, to . and . per cent. ■ MONETARY POLICY 6 ■ The Riksbank decides on  November to lower the repo rate from . to . per cent. ■ THE FINANCIAL SYSTEM 12 ■ The Riksbank decides on  December to lower the repo rate from . to . per cent. ■ INTERNATIONAL COOPERATION 15 ■ GOVERNING COUNCIL 20 ■ The Riksbank signs the ERM Agreement in September; the krona is not participating. ■ EXECUTIVE BOARD 21 ■ The Riksbank participates in IMF support, totalling about USD . billion, for Brazil. ■ OVERVIEW OF DEPARTMENTS 22 ■ The Riksbank, together with the Financial Supervisory Authority and financial firms, forms a joint council for the coordination of general measures for the Year  transition. ■ THE YEAR 2000 QUESTION 28

■ More than two persons out of three in Sweden support the Riksbank’s  per cent inflation target. ■ CASH HANDLING AND ITS MANAGEMENT IN 2002 29 ■ Seven old banknotes demonetised at the turn of . ■ HUMAN CAPITAL & THE ENVIRONMENT 30 ■ Four Inflation Reports and two Financial Market Reports published during the year. ■ ANNUAL ACCOUNTS 32

■ COMMENTS ON THE ACCOUNTS 32

■ ACCOUNTING PRINCIPLES 33 Selected statistics 1998 1997 1996 Year-end figures: ■ BALANCE SHEET 34 Repo rate (per cent) 3.40 4.35 4.10 ■ PROFIT AND LOSS ACCOUNT 35 Money rate (three-month, per cent) 3.43 4.52 3.62 ■ NOTES TO THE ACCOUNTS 36 Bond rate (ten-year, per cent) 4.18 5.98 6.71 Exchange rate (TCW) 130.60 121.51 117.83 ■ PROPOSED ALLOCATION SEK/DEM 4.8512 4.4185 4.4325 OF NET REVENUE FOR 1998; SEK/USD 8.1320 7.9082 6.8859 FIVE-YEAR OVERVIEW 40

Annual figures: ■ NOBEL MEMORIAL GDP growth (per cent) 2.9 1.5 1.3 PRIZE IN ECONOMIC SCIENCES 42 Unemployment (per cent) 6.5 8.0 8.1 CPI change (per cent) 0.4 0.9 0.8 ■ PUBLIC INFORMATION 43

Balance on current account (SEK billion) 38 51 44 ■ CALENDAR 44 Balance of trade (SEK billion) 140 141 125 Government borrowing requirement (SEK billion) –10 * 0 21

* Preliminary figure.

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SVERIGES RIKSBANK 1998 T R’  The Riksbank’s objective is price stability

The Riksbank is the Swedish central bank At its first meeting, in the beginning tral bank that is free to formulate monetary and is accountable for monetary policy. , the Executive Board decided that the policy so that this objective is fulfilled. The objective of the Riksbank’s oper- current formulation of the monetary policy A framework for monetary policy, con- ations is to maintain price stability. target continues to apply. Monetary policy sisting of a central bank with a demarcated Monetary policy’s principal instrument will go on aiming at keeping the change in independence to fulfil a price stability ob- for maintaining price stability is the repo rate the consumer price index at  per cent with jective under democratic control, has been – the rate for bank financing in the Riksbank. a tolerance interval of ± percentage point. the foundation for central bank reforms in The Riksbank adjusts the repo rate to influ- There is reason, however, to clarify the for- several other countries. This approach also ence the level of economic activity and hence mation of monetary policy. lay behind the construction of the institu- in time the development of prices. Monetary policy normally aims at ful- tional framework for the European Central The Riksbank is also required to pro- filling the  per cent target in twelve to Bank (ECB) as expressed in the Maastricht mote a safe and efficient payment system. twenty-four months time. There are two Treaty and in the statutes of the European The Riksbank fulfils this objective by grounds for departing from this rule. One is System of Central Banks (ESCB) and the supplying currency in the form of notes that in the relevant time perspective the ECB. and coins, holding credit balance on ac- consumer price index may be pushed up- counts, providing a basic infrastructure in wards or downwards by one or more factors the form of systems for the distribution of that are not considered to affect inflation cash, the RIX system and so on, and carry- more permanently. Changes in interest ex- ing responsibility for the oversight of pay- penditure, indirect taxes and subsidies are ment transactions. examples of such factors. The other reason Moreover, without prejudice to the ob- is that a quick return to the target in the jective of price stability, the Riksbank is to event of a sizeable deviation can sometimes support general economic policy with a be costly for the real economy. If either of view to achieving sustainable growth and these situations occurs, the magnitude of high employment. the deviation from the target, defined in terms of the CPI, that may be motivated I  one to two years ahead will be clarified by   the Riksbank in advance. Since the beginning of  the Riksbank Such a clarification facilitates an ap- has conducted monetary policy with an in- praisal of monetary policy’s performance. flation target formulated by the Governing The new legislation closely corres- Board. Inflation is to be held to an annual ponds to economic policy’s grounds for a rate of  per cent, with a tolerance interval more independent central bank. A price of ± percentage point. stability objective is liable to carry little weight if people are not convinced it will be P   observed. Giving the objective an institu-    tional foundation in various ways can On  November  the Riksdag (Swe- strengthen its credibility and thereby im- den’s parliament) passed legislative amend- prove the effectiveness of monetary policy. ments with the aim of strengthening the in- One way of providing such an institutional dependence of the Riksbank. The new le- foundation is to give monetary policy the gislation applies from  January . The statutory function of fulfilling the price sta- most important component is the statutory bility objective and delegating the conduct objective for monetary policy. of monetary policy to an independent cen-

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SVERIGES RIKSBANK 1998 G’  A turbulent year in financial markets

During  the unrest in international finan- instability in Sweden’s banking system dur- cial markets that had started the year before in ing the year. The direct exposures of Swed- Asia became more pronounced. The inter- ish banks were small, both to the emerging national crisis prompted a successive down- markets and to counterparties with high ward revision of international economic levels of risk. This is probably an effect of prospects and also affected the outlook for eco- the bank crisis in Sweden in the early nomic growth in Sweden. However, notwith- s – the banks have become more pru- standing considerable problems in other parts dent and also improved their risk assess- of the world, during the year Sweden’s finan- ment capability. cial system continued to display stability. Another consequence of the Swedish bank crisis is that the authorities have inten-   sified their efforts to prevent new risks from Developments during  and their conse- arising. For the Riksbank this involves a con- quences for the work of the Riksbank were tinuous analysis of financial market tenden- strongly influenced by crises in international cies; the findings are presented twice a year financial markets. The turbulence in finan- in the Financial Market Report. The Finan- cial markets was markedly accentuated when cial Market Report from November  the Russian government announced a debt contained an analysis of counterparty risks moratorium in the middle of August. At- in the banking system. The Report proved N   tempts to limit existing losses, together with highly topical in that it was counterparty    concern about additional losses, caused in- risks which lay behind the autumn’s wide- As of  the Riksbank is operating under vestors to dispose of assets they perceived as spread problems in western financial mar- new legislation. The amendments can be risky and illiquid. Minor currencies, such as kets. said to have formalised the independence the Swedish krona, weakened and borrowers This analysis completed the Riksbank’s that already characterised the Riksbank’s with unfavourable credit ratings were obliged presentation of the intellectual framework ongoing work. One of the most notable to pay increasingly high interest rates. for its work of overseeing the stability of the changes is probably the altered organisation The mood among investors became still financial system as a whole. The other two that the new legislation prescribes. The more nervous in the light of the problems main components – the banking system’s Riksbank is now managed jointly by the six with the U.S. hedge fund Long Term Capital competitiveness and its credit risks on loans full-time members of the new Executive Management. There were growing fears that to households and firms – have been pre- Board, who also make the monetary policy the situation could result in a general liquid- sented in detail in earlier issues of the Finan- decisions. ity crisis and that banks would have difficul- cial Market Report. ties in performing their basic economic func- The Riksbank is also a participant in the S, A  tion of supplying loans to households and international cooperation for strengthening firms that are deemed to be creditworthy. the financial system. The work on EMU Such a development might also affect real preparations was, however, less intensive economic activity. In order to prevent such a during  because the Riksdag decided situation from arising, a number of central that Sweden would not adopt the euro from U B banks lowered their instrumental rates. the start. The ongoing work is governed by G the Riksbank’s ambition that, in the event of S’   a decision to participate in the euro area, the   preparations for which the Riksbank is re- The problems in the international bank sponsible shall have been completed after an market never occasioned any widespread interval of not more than a year.

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SVERIGES RIKSBANK 1998 E       Government decides the exchange rate system

The current regime, whereby the Government ity objective for the Riksbank. For the first 1900 decides the exchange rate system, has had time, a central bank had the explicit object- 1873 Sweden comes onto many predecessors, such as the gold standard, ive of stabilising the price level. gold standard the currency snake and the currency basket. Once again, the flexible exchange rate was seen as temporary and in April  On  November  the Riksbank aban- the krona was linked to sterling. When the 1914 Floating exchange rate doned the fixed exchange rate regime. The run-up to World War II led to rapidly rising change to a flexible rate came after a turbu- inflation in Britain, the krona was linked to lent autumn in European financial mar- the U.S. dollar in August . 1924 Gold standard kets. Finland had suspended the markka’s International agreements for fixed ex- ecu link in September and sterling and the change rates were concluded in Bretton 1931 Floating exchange rate Italian lira were withdrawn from the Ex- Woods in . A fixed value in gold was 1933 Fixed rate with sterling

change Rate Mechanism. assigned to the U.S. dollar, together with 1939 Fixed rate with dollar The fact that the Riksbank’s Govern- fixed dollar rates for other currencies. Swe- ing Board, not the Government, decided den joined the system in August . the exchange rate system distinguished the In , Bretton Woods gave way to the Riksbank from most other central banks. European currency snake, in which the 1951 Bretton Woods As of , however, new legislation pre- participating currencies were linked to scribes that the Government decides the each other but floated freely against other exchange rate system. currencies. Sweden joined in March . Sweden has had a fixed exchange rate Sweden participated in the snake until for most of this century, though its construc- August . In April that year the krona tion has varied. Under the gold standard the had been devalued, on the Government’s 1973 Currency snake Riksbank undertook to exchange kronor for initiative, by up to  per cent against the gold at a fixed rate; this set the krona’s value other snake currencies. When Sweden left 1977 Currency basket in relation to other countries on the gold the snake and adopted a fixed exchange 1989 New Riksbank Act: standard. The Swedish krona has also been rate in relation to a basket of currencies, the Riksbank decides exchange rate system linked directly to sterling as well as to the krona was devalued another  per cent. U.S. dollar. Other fixed exchange rate sys- The basket currencies were weighted 1991 Ecu link 1992 Flexible exchange rate tems have been the European currency with each country’s share in Sweden’s for- 1999 Amended Riksbank Act: snake, the currency basket and the ecu peg. eign trade, except that for the U.S. dollar Government decides The krona’s fixed rates with the basket and which weight was doubled. The first five 2000 exchange rate system the ecu are instances of unilateral undertak- years with the currency basket saw two ings by Sweden, while the krona’s participa- more krona devaluations. The Riksbank In the s, real independence for the tion in the currency snake was based on Governor, Lars Wohlin, took the initiative central bank was increasingly emphasised international agreements. for the  per cent devaluation in Septem- as important for achieving price stability. The change from the gold standard to ber , while the  per cent devaluation This led to a new Riksbank Act in , a flexible exchange rate at the outbreak of in October  was decided in practice by with the provision that, following consult- World War I was generally regarded as the incoming Social Democrat Govern- ation with the Government, the Riksbank temporary. After the war, Sweden was the ment. The krona’s central rate with the is to decide the exchange rate system. This first country to return to the gold standard, basket was then maintained for the rest of procedure was used twice: on  May , in . The krona came off the gold stand- the s even though inflation in Sweden when the currency basket was replaced by ard again in September ; the fixed ex- was, on average, around two percentage a link to the ecu, and on  November change rate was replaced by a price stabil- points above the OECD level. , when the krona was left to float.

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SVERIGES RIKSBANK 1998 M 

The year in review

Global economic development in the period Most of the evidence suggests that eco- what ought to determine a country’s use of of relevance for monetary policy will prob- nomic growth in Sweden will become a currency, together with information the ably be somewhat weaker than estimated stronger in the coming two years. To date, Riksbank has obtained from interviews and earlier. For this reason the outlook for infla- however, subdued price movements have surveys of Swedish firms and households, tion is somewhat more favourable. The accompanied the upswing. This mainly re- we have concluded that the introduction of probability of an outcome for wages that is flects a number of favourable transitory ef- the euro will not appreciably alter the role appreciably above the main scenario has fects but there may also be signs of a some- of the krona in the Swedish economy. Lars diminished. At the same time, the effects of what lower inflation propensity. The strength Heikensten, World Trade Day,  August. the Asian crisis are highly uncertain. The displayed by productivity may perhaps en- Despite good economic fundamentals conclusion is that at present there is no rea- able the Swedish economy to expand some- in Sweden, since the summer the krona has son to alter the repo rate. Governor Urban what faster without immediately generat- weakened sharply and last week this ten- Bäckström, Stockholm Chamber of Commerce and ing inflationary pressure. But it is still too dency accelerated. In a matter of days the Veckans Affärer,  January. early to form a more definite opinion on exchange rate with the German mark de- The prospects for inflation from the de- whether the productivity trend has changed. clined by up to  per cent. In that situation mand side look a bit better than they did It is now important that incoming statistics the Riksbank decided to intervene in the when the repo rate was last raised. Another are followed closely and assessed. There is foreign exchange market, which nowadays positive sign is that the wage agreements no reason at present to alter the repo rate. is unusual. We did so to demonstrate that which have been concluded so far in  Urban Bäckström, Monetary Policy Forum,  we considered the krona’s fall was excessive indicate a rate of wage increases that is April. in relation to the fundamental state of the somewhat lower than in the main scenario Like many central banks in central Eur- economy. Urban Bäckström, Swedish Share- described in December. However, the re- ope, the Riksbank has moved from a situ- holders Association,  October. cent weakening of the krona is a cause for ation that pointed to the likelihood of a rela- The assessment that growth in the rest concern. Deputy Governor Lars Heikensten, tively quick succession of continued inter- of the world will be weaker than we counted Economics Association, Umeå,  February. est rate increases to one where the need of on earlier led the Riksbank to conclude Economic development in Sweden in higher interest rates in the near future that with an unchanged repo rate, in the the coming two years should be fairly seems to have disappeared. With the bright coming twelve to twenty-four months the favourable, with good growth, some in- inflation prospects and a strict interpret- rate of inflation would be below the target. crease in employment and moderate infla- ation of the Riksbank’s rule for monetary The effects on inflation from the slowing tionary pressure. The crisis in Asia can be policy decisions, today there may even be tendencies were judged to be greater than said to result in some deferment of the on- grounds for considering a minor down- the stimulus from the weaker exchange rate. going monetary policy realignment. Urban ward repo rate adjustment. Lars Heikensten, Under these circumstances, on  November Bäckström, Riksdag Standing Committee on Fi- Almega-affiliated Employers’ Associations,  May. the Riksbank lowered the repo rate  basis nance,  March. In the June Inflation Report the Riks- points to . per cent. Urban Bäckström, In the latest Inflation Report we con- bank’s overall assessment of inflation in the Standing Committee on Finance,  November. sidered that in the coming twenty-four coming years was adjusted downwards. As Today I have concentrated on the fi- months the rate of inflation would tend to the rate of inflation twelve to twenty-four nancial system in the longer perspective. rise but somewhat more slowly than we months ahead was judged to be below the But in the midst of all the uncertainty about had expected earlier. The prospects point- target, the Riksbank considered that, at the present situation, there is one thing ed to a cautious tightening of the monetary least for a time, there was room for a some- about which we can be quite sure: this is not stance in the coming twelve months. New what more expansionary monetary stance. the last financial crisis. The financial mar- statistics have been published since then The repo rate was therefore lowered  ket players – savers, investors, fund man- but they do not entail any substantial basis points. Lars Heikensten, Local Authorities agers, supervisors and overseers – must not changes in our outlook. Lars Heikensten, Economics Seminar, Malmö,  August. lower their guard. Not again. Lars Heiken- Shareholders Association, Trelleborg,  March. On the basis of theoretical analyses of sten, Shareholders Association,  November.

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SVERIGES RIKSBANK 1998 M  Inflation expectations remain low

The objective of monetary policy is price sta- the trend was downwards. In January the prices was . per cent lower than a year bility. The Governing Board of the Riksbank -month change in the CPI was . per earlier and the downward effect of this on formulated this objective in January  and cent, while in December it had dropped to the CPI amounted to almost half of a per- it has applied since the beginning of . In- –. per cent. centage point. flation, measured as the change in the con- The harmonised index of consumer There were also a number of transitory sumer price index (CPI), is to be held at an prices (HICP) also pointed downwards dur- effects on inflation that monetary policy annual level of  per cent, with a tolerance ing . At the beginning of the year the neither can nor should react to, at least as interval of ± percentage point. The inflation rate of inflation in Sweden was the second long as they do not alter inflation expect- target is evaluated in an annual perspective. highest in the EU area, exceeded only by ations. The continued fall in house mort- Greece. The rate in Sweden then declined gage expenditure during  had a In the four years, –, since the infla- rapidly, and in September the -month marked downward effect on the CPI; the tion target became operational, the CPI change was the lowest in the EU area. The impact in December was – . percentage has risen at an average annual rate of . relatively faster retardation of inflation in points. Indirect taxes and subsidies were per cent. This is below the target but it does Sweden was partly due to substantial cuts also changed substantially during the year; mean that the average change in the CPI in indirect taxes; but underlying inflation the net effect of such changes on inflation has been inside the tolerance interval. With was also lower. The average rate of in- in December was – . percentage points. the retardation of inflation and the estab- crease in Sweden’s HICP in  was . These transitory factors accordingly had a lishment of confidence in the inflation tar- per cent. get, interest rates have fallen. The lower One of the main explanations for the Indexes of inflation Consumer price index (CPI): the average development interest rates have dampened the rate of low rate of inflation in Sweden is that the of prices for domestic private consumption. Calculated price increases and are an important global economic effects of the crisis in Asia monthly by Statistics Sweden. Underlying inflation (UND1X): the CPI excluding reason why inflation has been below the have been greater than assumed earlier. changes in interest expenditure and direct effects of target in these years. The underlying rate Import prices have therefore been more changes in indirect taxes. Calculated monthly by Stat- of inflation in this period has been close to subdued than expected even though the istics Sweden. Domestic underlying inflation (UNDINHX): the CPI ex- the target, with average increases of . per krona was . per cent weaker on average cluding import price movements, changes in interest ex- cent for UND1X and . per cent for in  compared with . Falling com- penditures and direct effects of changes in domestic in- direct taxes. Calculated monthly by Statistics Sweden. UNDINHX. modity prices contributed to this together Harmonised index of consumer prices (HICP): the CPI During  the average rate of CPI in- with a slow price rise for manufactured excluding the following items: house mortgage interest . expenditure; tenant-owned housing charges; certain flation was still low, only per cent, and products. In December the level of import components of health and medical care; property tax, depreciation, some repairs, insurance and leasehold rent for owner-occupied housing; pools and totaliser betting. Calculated monthly by Statistics Sweden. Diagram 1. CPI and underlying inflation, percentage 12-month change Monetary policy’s target variable, the CPI, includes 6 price effects from changes in indirect taxes and sub- sidies, as well as price movements for imported goods. 5 Assessments of inflationary pressure need to consider the extent to which pressure is coming from such fac- 4 tors. In the Inflation Report the Riksbank therefore pub- lishes various indicators of underlying or core inflation, 3 for example UND1X and UNDINHX. The HICP is con- structed for comparisons of price stability among the 2 member states of the European Union (plus Iceland and Norway); it is also used as a target variable in the EMU. 1 During 1998 Statistics Sweden began to com-

0 pute indicators of underlying inflation on behalf of the Riksbank. The calculations start from the Riksbank’s –1 definitions of underlying inflation, UND1 and UND- 92 93 94 95 96 97 98 INH, but there are minor differences in the methods. Statistics Sweden has chosen to refer to its indexes as UND1X UNDINHX CPI UND1X and UNDINHX.

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SVERIGES RIKSBANK 1998 Diagram 2. CPI inflation and inflation expectations of households and industry, percentage 12-month change

6

5

4

3

2

1

0

–1 92 93 94 95 96 97 98 99 CPI Industry Households Note. The expectations have been shifted twelve months ahead to coincide with the CPI changes to which they refer. combined downward effect on CPI infla- tion in December of . percentage points. Both the domestic component of infla- Diagram 3. Bond market investors’ yearly expectations of inflation two and five years ahead, per cent tion and short-run inflation expectations were lower than expected. Inflation’s aver- 6 age annual underlying rate was . per cent 5 . in terms of UND1X and per cent in 4 terms of UNDINHX. The higher level of domestic underlying inflation came mainly 3 from price increases for services and from 2 goods that are priced administratively. 1 A factor of central importance for the inflation process is inflation expectations. 0 In that economic agents aim to maintain or –1 92 93 94 95 96 97 98 improve the real level of income, expect- 2-year 5-year ations that future inflation will be high are liable to result in inflationary price and wage increases. Diagram 4. CPI components, percentage 12-month change

During  households and industrial 4

firms expected that the rate of inflation in 2 the coming twelve months would be about 0  per cent. Surveys of the major Swedish and foreign investors in the bond market –2 showed that their two-year inflation expect- –4 ations were just over  per cent and their –6 five-year expectations close to  per cent. –8

All in all, inflation expectations derived –10 from survey data and financial prices –12 pointed to very low inflation in the short 95 96 97 98 run and a rate in the longer run that was in Domestic inflation Interest expenditure Imported inflation excl. taxes (63.4%) (8.7%) excl. taxes (27.9%) line with the Riksbank’s inflation target. Even in an economy where confidence in price stability has been established, infla- tion expectations may fluctuate to some ex- The credibility that resulted from the con- Private consumption has shown an up- tent, at least in the short run. Such fluctu- solidation of government finances has been ward trend since the second half of ; ations may be caused, for example, by a major factor behind the lower interest the annual increase in  is estimated to changes in current inflation that the Riks- rates and these in turn have provided a have been . per cent. The growth came bank neither can nor should react to. basis for the recovery in the domestic sec- mainly from rising demand for durable tor. Net exports, which had made a major goods but increases were also noted for cer- S contribution to GDP growth in the preced- tain types of services, such as entertain-   ing years, developed less favourably than ment, restaurants, telecommunications and The economic recovery that began in Swe- expected, partly on account of the Asian foreign travel. Several factors are con- den towards the end of  and continued crisis. GDP growth in  is estimated to tributing to the growth of consumption: the in  became even stronger during . have been almost  per cent. wealth, incomes and expectations of house-



SVERIGES RIKSBANK 1998 Diagram 5. GDP growth and its components, per cent (GDP) and percentage points

4

3

2

1

0

–1

–2

–3

–4 93 94 95 96 97 98 GDP ■ Consumption ■ Investment ■ Stockbuilding ■ Net exports

holds all developed favourably during The narrow money supply (M, cur- pected to be very unfavourable in  . The Stockholm Stock Exchange did rency in circulation) rose . per cent in ( Japan, Latin America and Canada). fall sharply in the autumn but recovered . The broad money supply (M, which Growth in the euro area was good in relatively quickly; in the year as a whole the also includes bank deposits and certificates 1998, though the Asian crisis and its wider stock market rose . per cent. This was of deposit) rose . per cent. One explan- consequences did subdue the upswing. Do- accompanied by an . per cent increase ation for the lower rate of increase in M mestic private consumption and invest- in house prices. The lower interest rates was that households reduced their bank de- ment developed particularly well com- also helped to stimulate consumption. posits in December. Total advances to pared with . Gross fixed investment recovered after households from banks and housing credit The rate of HICP inflation fell during the temporary dip in . High capacity institutions rose . per cent in annual the summer in France and Germany to the utilisation prompted a strong increase in terms. lowest levels in the euro area, . and . business investment in particular. Public per cent, respectively. Inflation was highest investment also rose, after falling for a W  in Ireland and Italy, at . and . per cent, number of years. The economic improve-   respectively. The average rate of inflation ment contributed to a rapid consolidation The financial crisis in the emerging mar- in the euro area was just over  per cent, of government finances. Some of the sur- kets in Asia worsened during  and also which is well in line with the ECB’s ob- plus was used for additional spending, had effects in Russia and parts of Latin jective. above all in the form of increased grants to America. As a result, the global rate of In October  the ECB announced local governments. GDP growth slackened more markedly that its monetary policy’s primary object- Foreign trade has expanded markedly than had been foreseen a year ago. World ive of price stability was to be defined as a in recent years. Exports of goods and ser- economic growth is calculated to have year-on-year increase in the euro area vices are currently equivalent to approxi- dropped from . per cent in  to . HICP of below . per cent, to be main- mately  per cent of GDP, while imports per cent in . The crisis also led to in- tained over the medium term. are equivalent to almost  per cent. With creased uncertainty in financial markets The move to Stage Three of EMU on the Asian crisis and the international eco- throughout the world, with large fluctu-  January  had caused instrumental nomic slowdown, export growth for goods ations in share prices. rates in the euro area to converge in recent and services is calculated to have slackened The Asian crisis contributed during years. Even so, at the beginning of  the from . per cent in  to . per cent in  to somewhat clearer signals of an eco- spread between a number of these national . With the strong domestic demand, nomic slowdown in the United States. rates was still comparatively large. The imports are judged to have risen . per However, domestic demand developed rates in Ireland and Italy, for example, were cent. This points to a negative contribution favourably; private consumption is calcu- . and . per cent, respectively, as to GDP growth from net exports in . lated to have risen . per cent and gross against . per cent in both Germany and With the higher economic activity, fixed investment . per cent. France. During the year there was some labour demand rose during . The Expectations of poorer opportunities convergence but the spread remained number in employment grew by , per- for growth in the coming years prompted broadly the same until the beginning of sons, of which , in private services. the U.S. Federal Reserve to lower its instru- December. In a joint action the central Public sector employment stopped falling mental rate in three steps during the au- banks in the euro area then lowered their during the year and turned into an increase tumn, by a total of . percentage points instrumental rates to . per cent (except of , persons. The level of registered to a level of . per cent. The poorer for Italy, where the rate was lowered to . unemployment declined . percentage growth prospects had to do with financial per cent). The monetary easing that this points from  and the rate in December turbulence as well as limited conditions for joint action represented was to be seen in was 5.5 per cent. It was mainly the good de- domestic demand and decreased opportun- the light of the global financial crisis and velopment of employment that lay behind ities for exports. More than half of U.S. ex- expectations that this would greatly reduce the reduction of unemployment. ports go to regions where demand is ex- the growth of exports from the euro area.



SVERIGES RIKSBANK 1998 Diagram 6. Interest rates, per cent

14

12

10

8

6

4

2 92 93 94 95 96 97 98

Marginal/repo rate Treasury 10-year bond rate

The economic situation in Japan re- sequence of the financial crisis. GDP is esti- Price tendencies during the rest of the mained weak, with few signs of a recovery mated to have fallen as much as  per cent. spring were more subdued than the Riks- from the prolonged recession. Better con- bank had expected. Prices were particular- ditions were, however, created for resolving F    ly weak for goods that are imported or ex- the bank crisis in that the legal provisions   posed to competition from imports; besides for bank support were adopted. Domestic In the Inflation Report in December , reflecting a further fall in petroleum and demand remained weak during , the Riksbank had judged that the rate of other commodity prices, this was due to ef- mainly as a consequence of decreased in- inflation one to two years ahead would ex- fects that the weak growth in Asia was now vestment but also because private con- ceed the  per cent target. The assessment beginning to have on other parts of the sumption fell. Moreover, exports to Asia envisaged that full capacity utilisation global economy. Meanwhile, the low infla- dropped sharply when demand declined in would be reached towards the end of  tion expectations meant that wage settle- Southeast Asia in particular. The down- and that wage increases in ‒ would ments during the spring continued to be re- ward trend in industrial output, which was average  per cent a year. On  December strained. While the Riksbank’s economic marked in the first half of , has been  the repo rate was therefore raised . assessment was broadly unchanged, the checked but is still strongly negative, with percentage points to . per cent with ef- strong productivity growth did suggest that an expected fall of . per cent in . fect from  December. The Report also in two years time there would still be some The financial crisis that arose in the noted, however, that the picture of inflation unutilised capacity. All in all, therefore, in- spring of  in Southeast Asia developed was not clear-cut; the incipient crisis in flation prospects were judged to be more during  into a deep recession, with Asia might lead to a more marked slow- subdued than before. In the June Inflation falling production in all the countries that down in the international economy and Report, the main scenario indicated that were affected initially (Indonesia, South thereby to lower inflation prospects. inflation one to two years ahead would be Korea and Thailand). One effect of the cri- In the Inflation Report in March , below the  per cent target. The assessment sis has been a marked improvement in cur- inflation prospects seemed more subdued of uncertainties, with the risk of a consider- rent-account balances in this region. This than in the December Report’s main scen- able international economic slowdown, swing has come from steeply falling im- ario. This was partly because the Asian supported the picture of a more subdued ports and broadly unchanged exports. The crisis was now judged to be more protract- path for inflation. In the light of this, on  lack of export growth is a consequence of ed and severe. Other factors were the steep June the Riksbank decided to lower the domestic financial problems and weak de- fall in petroleum and other commodity repo rate . percentage points to . per mand from countries in this region. But as prices and indications, from wage settle- cent with effect from  June. growth is still strong in China, India and ments in the winter, that wage increases In the September Inflation Report the Taiwan, it is estimated that for the whole of would be somewhat lower than expected Riksbank judged that inflation one to two Asia excluding Japan, GDP growth in  earlier, in the region of . to  per cent a years ahead would be somewhat below the was negligible rather than negative. year in ‒. On the other hand, the target; at the end of the forecast period, In Latin America the financial crisis has domestic economic situation was largely however, the rate was expected to be ap- mainly affected Brazil, where GDP growth unchanged and full capacity utilisation proximately  per cent and thus in line with below  per cent is estimated for  and the was expected some time during . The the target. The Riksbank considered that forecasts for  point to a recession, with Report’s main scenario pointed to inflation there were two main and counter-balan- repercussions in other countries in this re- being marginally above the target one to cing factors that would be crucial for infla- gion. Under these circumstances, a support two years ahead. This favoured some tight- tion prospects and the future formation of programme coordinated by the Internation- ening of the monetary stance; but as a fur- monetary policy. On the one hand inter- al Monetary Fund, totalling over USD  ther worsening of the Asian crisis could not national activity could be weaker than en- billion together with fiscal restrictions, was be ruled out, the Riksbank decided to leave visaged in the main scenario and thereby agreed in December . In Russia the situ- the repo rate unchanged for the time lead to lower inflation; on the other hand, ation worsened during , partly as a con- being. at the same time, exchange rate uncer-



SVERIGES RIKSBANK 1998 Diagram 7. Nominal effective (TCW) exchange rate, index: 18 November 1992=100 140

135

130

125

120

115

110

105

100 92 93 94 95 96 97 98

Diagram 8. CPI with uncertainty intervals, percentage 12-month change  4 ahead would be below the target. On November the Riksbank therefore decided

3 to lower the repo rate another . per- centage points to . per cent. 2 In the December Inflation Report the outlook for growth was considered to have 1 worsened somewhat since the September Report. The international economic pro- 0 spects also seemed to be more subdued. The Riksbank considered that with the –1 95 96 97 98 99 00 lower growth, the economy would still have Note. The uncertainty intervals show the 50, 75 and 90 per cent chances of CPI inflation being within the respective some unutilised resources in one to two range. years time. The earlier repo rate cuts and the depreciation of the krona were expect- tainty had grown during the summer and a ant for real economic tendencies. A highly ed to counter the effects of this to some ex- more permanently weak currency might volatile exchange rate is liable to disturb re- tent. However, the overall assessment lead to stronger inflationary pressure. In source allocation. pointed to underlying inflation being addition, the financial turbulence, in the The exacerbation of the international below the target and that transitory effects global economy as well as in Sweden, made financial crisis made it clear that the real would lower CPI inflation still more. The future developments extremely difficult to economic consequences were likely to be -month change in the CPI was judged to assess. The Riksbank therefore refrained greater than envisaged earlier. It was the be . per cent at the end of  and . from changing the repo rate. suspension of payments in Russia in August per cent at the end of . Under these During the autumn the turbulence in that mainly contributed to this but so did circumstances, on  December the repo international financial markets grew. The the near failure of the U.S. hedge fund rate was lowered . percentage points to financial crisis contributed to a rapid dep- Long Term Capital Management. New . per cent. reciation of the krona, to its weakest level in statistics from the IMF and the OECD led Uncertainties in inflation assessments the past three years. In relation to econom- to further downward revisions of growth For various reasons, the assessment of economic activ- ic fundamentals, with good growth, low in- and inflation forecasts for the OECD area. ity and inflation that is presented in the Inflation Re- port includes elements of uncertainty. With a view to flation and a growing surplus on public fi- The consequences of this for growth and elucidating this, since the December 1997 Report the nances, however, the abrupt and pro- inflation in Sweden were judged to counter Riksbank has presented the inflation assessment with nounced depreciation seemed to be unmo- the stimulatory effect of the krona’s an uncertainty interval; a new method for calculating the uncertainty interval, together with the probability tivated. In order to underscore this view, depreciation. In the light of this, on  No- distribution for the overall inflation assessment, was the Riksbank intervened in the foreign ex- vember the Riksbank decided to lower the then introduced in the June 1998 Report. This is in-  . . tended to clarify the element of uncertainty in the fore- change market on October, purchasing repo rate from to per cent. This cast and whether any forecasting error is more likely to kronor for foreign currency. was followed on  November by a down- be upside than downside. The graphic representation of the uncertainty interval is shown in Diagram 8, There may be grounds for the Riks- ward adjustment of the Riksbank’s interest which refers to the situation at the beginning of De- bank to promote a stable exchange rate as rate corridor: the deposit and lending rates cember 1998. long as the inflation target is not jeopard- were both lowered . percentage points to The calculation of the uncertainty interval in- volves some subjective judgements but also uses his- ised. The primary consideration in the for- . and . per cent, respectively, with ef- torical relationships. Two aspects of the forecast distri- mation of monetary policy is how inflation fect from  November. bution are assessed subjectively: whether there are grounds for being more, or less, uncertain than usual prospects relate to the inflation target; the When the corridor was adjusted, the and whether the risk of forecasting errors is upside, exchange rate is only one of many factors Riksbank’s inflation assessment had also symmetric or downside. The interval visualises the in- flation assessment’s inherent uncertainty. This uncer- in the Riksbank’s inflation assessment. At become firmer; the overall assessment in- tainty concerns the existence of economic shocks as the same time, the exchange rate is import- dicated that inflation one to two years well as the transmission mechanisms.



SVERIGES RIKSBANK 1998 In the spring of 1999 the Riksbank will be introducing a computer game, Star Gold, on the Internet (www.riksbank.se), with upper secondary pupils as the main target group. The purpose of the game, which is in Swedish, is to provide insights into the Riksbank’s primary objective, price stability, and the foundations for monetary policy. Players who find themselves in trouble can get assistance from the robot.

Careful! You ll be outside the corridor if you don t watch out. Brake harder!



SVERIGES RIKSBANK 1998 T  

Satisfactory stability

The good competitive position of Swedish , the Riksbank has published its assess- stitutions, particularly the four major bank banks reinforces stability; in the latest Finan- ment of financial system stability twice a groups, that the Riksbank focuses when cial Market Report it was concluded that the year in the Financial Market Report. analysing the financial system. In that sys- Swedish financial system is currently stable. Work at the Riksbank on monitoring fi- temic crises can be triggered by a bank sus- nancial stability covers two main areas. pending payments, it is this risk that the One of the main functions of the Riksbank This follows from the construction of the Riksbank needs to analyse and try to pre- is specified in the Riksbank Act as being to payment system, which can be said to con- clude. ‘promote a safe and efficient payment sys- sist of two components: the infrastructure tem’. There are mainly two means of pay- and financial firms. T  ment in Sweden: account holdings and The infrastructure consists of the tech- Analytical framework notes and coins. Of all the payments, it is nical and administrative systems whereby Monitoring and assessing risks in the bank estimated that  to  per cent in value payments can be executed between finan- sector is a major aspect of the Riksbank’s terms are based on credit balances on vari- cial firms and other economic agents, as oversight of payment system stability. The ous types of deposit account. It is the pay- well as between different financial firms. It work is divided into market analysis and risk ment system that makes account-based also includes systems for entering into and analysis. payments feasible as an alternative to the completing transactions with financial The market analysis concentrates on the use of cash. assets. The infrastructure comprises mar- competitive situation in the bank sector. ketplaces in which financial assets are trad- This follows from the perception that one T  ed, clearing systems in which payments are of a financial system’s foundations is a com-  compiled, and settlement systems for regis- petitive banking system that is sufficiently Oversight over the payment system is es- tering and completing pledging and own- profitable. Weak earning power is liable to sential because an efficient system can be ership transactions with financial assets. induce banks to take increased risks, which said to oil the wheels of the economy. This Normally only certain financial firms may then lead to considerable losses and a helps to lower costs and reduce risks in the have access to the payment system’s infra- greater likelihood of payments being sus- production of goods and services, thereby structure. In order to use the system, other pended. One important component of the promoting growth and employment. By firms and private individuals therefore market analysis is the trend in bank sector the same token, a disturbance in the pay- have to turn to these financial entities. As costs. The market analysis was discussed in ment system may have negative effects on the firms with a central position in the pay- the first Financial Market Report, which was the entire economy. Since the autumn of ment system are the banks, it is on these in- published in November . The risk analysis looks at the financial Diagram 1. Prices for commercial and residential properties in metropolitan areas, risks involved in the banks’ operations. The index: 1987=100 risks to which banks are exposed in their 250 operations were reviewed in the second Fi- nancial Market Report, which appeared in  200 May . Particular attention was paid to the credit risks in bank lending to house- holds and firms because historically these 150 risks have at times been substantial. The main purpose of the analysis was to eluci- 100 date the relationship between bank credit risks and the macro economic trends. The

50 analysis of credit risks showed that stability 87 88 89 90 91 92 93 94 95 96 97 98-06 in the bank sector was satisfactory. No signs Commercial properties Residential properties Sources: Catella Information and the Riksbank. were detected of a risk of more widespread



SVERIGES RIKSBANK 1998 Diagram 2. Pre-tax return on bank shareholders’ capital in selected countries, per cent 40

30

20

10

0

–10

–20

–30 Sweden Switzerland U.S. U.K. Norway Germany Denmark Belgium Finland France Netherlands Average

■ 1993 ■ 1997 Source: Bankstat. loan losses in connection with the econom- ic upswing. It is often in connection with Diagram 3. Bank group profits, SEK billion, moving 12-month average rising activity that a build-up of risks occurs 80 in bank loan portfolios. The Report did, 70 however, note that property prices had 60 been rising rapidly, above all in the metro- 50 politan regions. The ability of various cat- 40 egories of borrower to meet commitments was also assessed in the Report. 30 The third Financial Market Report, which 20 was published in November , focused 10 on counterparty and settlement risks, which 0 occur in connection with transactions be- 90 91 92 93 94 95 96 97 98 tween financial firms. The starting point is Profit before loan losses Loan losses Sources: Annual reports and the Riksbank. what happens if a counterparty to a finan- cial market transaction cannot meet its be attributed to economic factors such as Because large payments involve greater commitments; the other party may then falling interest rates, for example. risks than small ones, the Riskbank can incur losses of various kinds, depending on The element of uncertainty in assess- best work towards its goal of contributing the type of transaction and the stage at ments of financial system stability is accen- to financial stability by concentrating on which the problem arises. The transactions tuated by the international financial mar- large value payments. This means an em- between financial firms amount in practice ket unrest. A suspension of payments by phasis on the RIX system which handles all to the connections between the banks and sizeable international banks is one way in large value transactions and also on the the payment system. The analysis of coun- which the problems could spread to Swed- systems for handling securities. Besides in- terparty and settlement risks accordingly ish banks. The direct exposures of Swedish volving very large amounts, these systems joins up the two main components of the banks to problem countries are compara- are crucial for the functioning of the secur- Riksbank’s analysis of financial system sta- tively small and the banks, in an inter- ities market and thereby for the Riksbank’s bility. national comparison, look strong at present. other main function, monetary policy. The The Report noted that banks have That is one reason why they may cope with relevant Swedish securities systems, OM large exposures in the form of counter- international turbulence more successfully and VPC (Central Securities Depository), party and settlement risks, a phenomenon than banks in other countries. Profitability handle large values and settle in the RIX that is particularly evident in the Swedish seems to be developing satisfactorily, though system. Shortcomings in such securities bank market, which is dominated by a few the international unrest may have some systems can have a considerable negative large banks. This heightens the risk that downward effect on results. The good com- impact on financial markets. sizeable problems for one bank will have petitive position of Swedish banks rein- contagious effects on the financial system. forces stability. In the latest Report the over- The RIX system Other components of the risk analysis are all assessment was that the Swedish finan- Work on modifying the RIX system has liquidity risk and market risk. cial system is currently stable. been in progress in the past two years, part- ly with a view to improving stability and ef- Stability in Sweden’s bank sector P  ficiency, partly in connection with the In the November  Report, certain  adaptation to EMU. signs were noted that a build-up of the risks General analysis and oversight A new mode of communication, mes- associated with bank lending was on the In its work on payment system infrastruc- sage handling through SWIFT, has been way, in the first place in the real-estate sec- ture the Riksbank aims to reduce systemic introduced by degrees, starting in June tor. However, much of this tendency could risks and heighten the system’s efficiency. . Since September  it is being used



SVERIGES RIKSBANK 1998 for all payments initiated by the partici- liquidity collateralised with securities; for forum for central bank cooperation. The pants in the RIX system. This enables Sweden the supply is limited to one billion aim is to identify those aspects that are rele- these players to integrate their own systems euro. The eligible securities include Swed- vant for central banks, define the role of with the RIX system and thereby process a ish Treasury paper and housing bonds. central banks in the retail payments market  larger volume of payments. TARGET , Routines for cross-border pledging of securi- and consider how this responsibility is to be the joint system for payments between EU ties were also worked out during . managed on a daily basis. central banks, is based on SWIFT commu- They enable a bank to obtain credit from This work included a study to elucidate nication. the central bank in one country against se- the factors which may lead to conflicts be- Marking to market was introduced in curities pledged with the central bank in tween market players as regards terms of  for the securities that banks pledge as another country. access (pricing, for example) to important collateral for Riksbank loans. Previously, infrastructural components of the payment collateral was accepted for up to  per Securities settlement system. Such conflicts reduce efficiency. cent of its face value. Since April , it is During , VPC and its counterparts in The development of new payment facilities marked to market and then reduced by a Denmark and Norway had preliminary is often slowed down or stopped by conflicts  per cent ‘haircut’. Another change is that discussions about creating a joint clearing among participants. securities issued by an affiliated institution and settlement system for the securities One conclusion from the study was are no longer acceptable as collateral in the markets in the three countries. The Riks- that the Riksbank has a part to play in the RIX system; in practice, this means that a bank has been involved in these deliber- promotion of cooperation between market bank can no longer pledge securities issued ations because the cash leg of the securities players as regards payment infrastructures by the same group’s housing intermediary. systems’ transactions is settled in the cen- and innovative technology. tral bank. During the year, moreover, work The Target system was in progress together with VPC on im- Although Sweden did not participate in the proving cash settlements connected with start of the euro area, the Riksbank is in- VPC’s settlement of securities transactions. cluded in the joint payment system, TAR- On behalf of the European Central GET. The primary purpose of this system Bank, the existing securities settlement sys- is the settlement of monetary policy trans- tems in the EU area were appraised in the actions for EMU but it can also be used by first half of . This was done on the banks for rapid and reliable settlement of basis of the standards that have been estab- payments throughout the EU area. Only lished with a view to reducing the risks to payments in euro can be settled. During which the central banks may be exposed  the Riksbank completed a system, through their loans to banks in the context E-RIX, that parallels the RIX system for of monetary policy as well as the payment kronor and functions as the Riksbank’s system. VPC was one of the two systems share of the TARGET infrastructure. E-RIX that were approved without any particular came into operation on  January . reservations or comments. The participants have separate euro accounts with the Riksbank from which Retail payments market euro payments, domestic as well as cross- The Riksbank also has a more limited border, can be made and received. During function as the overseer of retail payments 1. OM’s system for registering derivative contracts listed on OM’s  exchanges; VPC’s system for interest-bearing securities and the autumn of , moreover, it became (by households and firms). Specific aspects equity listed on the Stockholm Exchange. clear that central banks in non-euro EU of efficiency and stability in this respect 2. SWIFT (Society for Worldwide Interbank Financial Telecommu-  nication) is a bank-owned organisation. countries would be in a position to provide were delineated during . Similar inter- 3. Trans-European Automated Real-time Gross Settlement Express banks in their country with intraday euro national work is being done in the G- Transfer.

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SVERIGES RIKSBANK 1998 I  Monetary cooperation in the IMF, G- and EU

Analyses of the financial crisis and efforts to . The South Korean economy im- lion from the IMF, USD  billion from construct ways of managing it were central proved in a number of respects but growth multilateral development banks and USD themes in the work of international organisa- remains negative and further reforms are . billion in loans from the Bank for Inter- tions for economic cooperation. needed, for instance in the banking and national Settlements (BIS). corporate sectors. Of the IMF funds, over USD  billion W   I was to be financed via the New Arrangements M F The crisis in Russia to Borrow (NAB, see below). As a NAB par- The International Monetary Fund (IMF), In the wake of the Asian crisis, Russia’s fi- ticipant, the Riksbank was providing USD an organisation for international monetary nancial markets came under increased  million. cooperation, continuously monitors eco- pressure in the spring. A massive capital The BIS credits are guaranteed by the nomic developments in member states and outflow pushed interest rates up and large central banks in the twenty-one participat- provides temporary financing for countries interventions were needed to defend the ing countries (including the Group of Ten). with balance-of-payments problems. A rouble. IMF negotiations began in May for Sweden is guaranteeing USD  million. country obtaining this financing concludes a new economic policy package, with add- As such a guarantee lies outside the Riks- an IMF agreement on economic reforms to itional financial support from the Fund to bank’s regular operations, the Riksbank overcome any fundamental imbalances. replenish foreign reserves and enhance has requested a sovereign guarantee to Sweden, the other Nordic countries confidence in the rouble. cover its commitment to the BIS. The Gov- and the Baltic countries form a constitu- On  July the IMF Executive Board ernment intends to present a proposal to ency for the IMF’s Executive Board and approved an economic reform programme the Riksdag to issues this guarantee. are represented there by a Nordic-Baltic for Russia, combined with USD . billion executive director. Sweden’s positions on in financial assistance. As the Fund’s re- IMF quotas raised matters presented for Board decisions are sources were strained, the General Arrange- With growing demand for IMF resources, prepared by the Riksbank together with ments to Borrow (GAB, a credit facility that an enlargement of the Fund’s capital had the Finance Ministry. The Riksbank and gives the Fund access to additional funds to been decided in principle in . When the Ministry are also represented on the cover extraordinary financing require- this decision had been confirmed in , it IMF Interim Committee and at the IMF’s ments) were activated to finance USD 8.5 remained for each country to approve and annual meeting. billion of the new programme. As a GAB pay in the increase. Ratification by mem- In  the IMF worked mainly on participant, the Riksbank provided a share ber states was in progress throughout the mastering the international financial crisis of USD  million. When the IMF Execu- year; when countries representing more that had arisen in Asia in the second half of tive Board had approved the arrangement, than  per cent of the Fund’s capital had . During  the crisis spread to Rus- a first payment totalling USD . billion accepted the increase, it became effective sia and Brazil. was made. Further payments planned for on  January . Other activities included the ratifica- September and December  were de- The quota increase have raised the tion of the Eleventh General Review of ferred because Russia had not made the IMF’s financial capital from SEK , bil- Quota and of an amendment to the IMF agreed reforms. lion to SEK , billion. For Sweden, the Articles of Agreement to allow for a special increase has raised the Riksbank’s capital one-time allocation of Special Drawing The crisis in Brazil contribution from SEK  billion to SEK Rights. During the autumn the crisis spread to  billion. The increase, due in spring , Brazil, which experienced large capital was approved by the Riksdag on  No- Improvement in South Korea outflows. An economic reform programme vember , accompanied by ratification

The second line of defence, a bilateral borrow- was agreed with the IMF in December. 1. The directorship and the responsibility for coordination rotate ing facility for South Korea that Sweden Support was provided as a financing pack- among the Nordic countries. . 2. SDRs are held by central banks and some multilateral organi- and other industrialised countries had ap- age totalling about USD billion, as- sations. They augment foreign reserves and their value is based proved in , was not activated during sembled from three sources: USD  bil- upon a trade-weighted index of the G-5 countries’ currencies.

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SVERIGES RIKSBANK 1998 of the amended IMF Articles of Agreement international economic cooperation, was ing crisis. In such matters the Riksbank to allow for a special one-time allocation of set up in connection with the General usually cooperates with the Financial Super- SDRs to certain countries. Arrangements to Borrow (GAB, see above). visory Authority. G- cooperation is undertaken between The Riksbank’s contributions in tech- The HIPC-Initiative the member states’ central banks as well as nical assistance are now concentrated to In  the HIPC initiative, which was between central banks and finance min- Russia and the Baltic countries in particu- launched by the IMF and the World Bank, istries. Sweden is chairing the G- Minis- lar. Demand for technical assistance has was prolonged to the end of . The pur- ters’ and Governors’ meetings for a year also grown from Southeast Asia in connec- pose of the initiative is to provide debt relief from autumn . tion with the crisis there. to the poorest and most heavily indebted In November  the GAB were sup- Through various international organ- developing countries, given that they under- plemented by New Arrangements to Bor- isations as coordinators, the Riksbank take economic reforms. All creditor cat- row (NAB), involving the G- and another mainly participates in the IMF/G- co- egories are involved, not just the World fourteen countries. The GAB total about operation and EU-TACIS. The Riksbank Bank and the IMF. Debt relief has been ap- USD  billion, while the NAB amount to has also provided bilateral assistance. proved in principle for seven countries. USD  billion, though if both are used The full financing of the IMF’s share had concurrently, the aggregate commitment is E  not yet been agreed at the end of . limited to USD  billion. The arrange-   EU ments aim to augment IMF financing in During spring  the work in the Euro- I  the event of a threat to international mon- pean Monetary Institute (EMI) mainly in-  etary stability. The Fund carries the credit volved completing preparations for the Euro- In April , finance ministers and cen- risk on behalf of a country for which it pro- pean Central Bank (ECB) and the Euro- tral bank governors of the G- countries vides loans with GAB or NAB financing. pean System of Central Banks (ESCB), and fifteen growth economies assembled to The Riksbank’s commitments total USD which were established on  June, when the reach a broad consensus on the feasibility of  million for GAB and USD . billion EMI was liquidated. The Riksbank Govern- strengthening the functions of the inter- for NAB, with a combined limit of USD . or has a seat on the ECB General Council national financial system. The initiative, billion. and the Riksbank is involved in some of the which accompanies the efforts in this field Intensive G- work was done in  committees set up by the Council. that are being made under the auspices of in the Basle-based Euro-currency Standing The Riksbank, along with the Finance the IMF and the World Bank, is known as Committee, the Basle Committee on Bank- Ministry, has been represented on the the Willard Group. The meeting identified ing Supervision and the Payments System Monetary Committee and the Economic three key areas for closer analysis in three Committee. Common themes were the Policy Committee. The Riksbank Govern- working groups: increased transparency analysis of the financial crisis and the de- or takes part in the biannual informal and accountability; reinforcement of na- sign of tools for managing it. meetings of the Ecofin Council. Further- tional financial systems; and the managing more, the Riksbank participates in the EU of international financial crises. T  3. Heavily Indebted Poor Countries. Reports from the working groups in the Technical assistance aims to build up insti- 4. Bolivia, Burkina Faso, Guyana, Ivory Coast, Mali, Mozambique autumn were discussed by the finance min- tutional competence in transition countries and Uganda; progress with adjustments in Bolivia and Uganda has already resulted in debt relief. isters and central bank governors in con- (former centrally-planned economies) and 5. The Group of Ten now consists of eleven countries: Belgium, nection with the annual meeting of the in developing economies. The Riksbank Canada, France, Germany, Italy, Japan, Netherlands, Sweden, IMF and the World Bank. Sweden was in- contributes by enhancing the competence Switzerland, United Kingdom and United States. 6. The fourteen countries are: Australia, Austria, Denmark, Fin- vited to the discussion. of other central banks in typical central land, Hong Kong, Kuwait, Luxembourg, Malaysia, Norway, bank functions. There has also been a large Saudi Arabia, Singapore, South Korea, Spain and Thailand.       7. EU-financed projects for Russia and Ukraine. W G T demand for technical assistance in banking 8. Replaced as of 1999 by the Economic and Financial  The Group of Ten (G-) , a forum for supervision and the management of bank- Committee.

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SVERIGES RIKSBANK 1998 cooperation through its representation on ations in relation to ERM currencies re- states have adopted the euro. The General the Commission’s Bank Advisory Commit- flected, among other things, the absence of Council is to examine the conditions for tee as well as on committees for Eurostat, an exchange rate target. non-euro countries’ future participation in the Commission’s statistical agency. In connection with the decision as to the monetary union. This will involve regu- which countries would be participating in lar assessments of the development of con- E the euro area from the start of Stage Three, vergence in these countries and the super- EMU  ECB the Ecofin Council announced in advance vision of the exchange rate mechanism, In May  the Heads of State or Govern- that the ERM central rates would apply as ERM. ment of the EU countries confirmed that bilateral exchange rates between the par- An example of the cooperation be- eleven countries met the criteria for partici- ticipating currencies at the changeover. tween central banks in the ESCB is that pation in the economic and monetary The irrevocable exchange rates for the during  the Riksbank, under special union (EMU) from the start on  January conversion of each currency into euro at terms, was incorporated in TARGET, the . Prior to that, Denmark and the the start of Stage Three were not fixed, cross-border payment system of the ESCB. United Kingdom had declared they did however, until  December . These The Riksbank will also be complying with not intend to join from the start, in accord- rates are obligatory for all conversions be- harmonised rules for accountancy and stat- ance with derogations in the Treaty proto- tween national currencies and the euro, as istical reporting. As regards internal work, col. Greece did not fulfil all the conver- well as between all participating national the Riksbank’s aim is for euro participation gence criteria. With reference to Sweden, currencies. to be feasible not later than one year after a the Heads of State or Government noted The ECB was formally established on decision to this effect. that the krona did not fulfil the Treaty’s ex-  June  after the Heads of State or change rate criterion and the Riksbank le- Government of the eleven participating Monetary policy in Stage Three of EMU gislation had not been fully adapted for countries had appointed the six members In autumn  the ECB Governing EMU participation. In other respects Swe- of the ECB Executive Board. The EMI Council decided that the price stability tar- den was considered to fulfil the Treaty’s President, Wim Duisenberg, was appoint- get for euro area monetary policy is to be a convergence criteria. ed President of the ECB. The Executive rate of inflation below  per cent, main- The decision by the Heads of State or Board manages the day-to-day work of the tained over the medium term. The strategy Government was based on convergence re- ECB, which from the start of Stage Three is based on a reference rate of . per cent ports from the Commission and the EMI in of EMU is responsible for the monetary for monetary growth and a number of eco- March. Both reports noted that the new policy of the euro area. nomic and financial indicators of inflation- Riksbank legislation would not be passed ary pressure. in time – the Treaty stipulated that statu- T   Interest rates are to be steered mainly tory central bank independence was to In spring  the EMI prepared the neces- through open market operations in the apply by the time the ESCB was estab- sary legal, organisational and logistic rules form of weekly refinancing transactions, lished. The reports also noted that the le- for the ESCB. The formal decisions were managed by the national central banks in gislation was silent about the Riksbank’s made after the ESCB had been established accordance with the ECB’s decisions. The integration in the ESCB even though Swe- on  June. ECB Governing Council has also decided den had no formal derogation from EMU The operations of the Riksbank are af- that monetary policy counterparties are to participation. The legislation was also criti- fected in some respects by the ESCB’s work observe minimum reserve requirements cised in some other respects. even though Sweden, following the Riks- and have deposit and borrowing facilities Noting that Sweden did not meet the dag’s decision, is not participating from the in the national central banks. exchange rate criterion for EMU, the start. The ECB General Council is, for ex- All monetary policy transactions in the Commission’s report mentioned that the ample, to carry on the EMI’s function of ESCB are made with the TARGET sys- krona had never participated in the Ex- monitoring the coordination of monetary tem. The ECB Governing Council decides change Rate Mechanism and its fluctu- policies in the EU area until all member which securities are eligible as collateral.

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SVERIGES RIKSBANK 1998 For cross-border payments there is a spe- The ECB is competent to decide about group worked on monitoring the extent to cial arrangement between the national the production and issuing of notes. Coins, which Swedish preparations are affected central banks for the mutual safekeeping of on the other hand, will remain a national by Sweden being outside the euro area, securities. concern, subject to Ecofin Council deci- identifying needs and problems connected sions about their technical design and ECB with a possible participation by Sweden at ERM cooperation Governing Council decisions about the a later date and developing the dialogue In accordance with the Amsterdam Declar- quantity in circulation. During  the with players that are affected by the euro’s ation by the European Council in June ECB continued the process of preparing the introduction. , a new exchange rate mechanism has technical specifications for euro notes and been adopted from the start of Stage the coordination of production so that the Financial sector consultation and information Three, when the earlier mechanism was notes will have a uniform appearance. The The Riksbank has been cooperating with discontinued. In  this resolution was Ecofin Council has set technical specifica- the financial sector on changeover issues complemented in a central bank agree- tions for euro coins; the reverse face is to since . This work is arranged in the ment on the operative procedures for have a national identity for each participat- group for Consultation and Information ERM. Central rates have been set be- ing country. with the Financial Sector (SIFS), which tween the euro and the currencies of the consists of a managerial body and five sub- non-euro countries concerned. ERM par- C  units, for monetary and exchange rate pol- ticipation is voluntary for non-euro coun-  icy, statistics, notes and coins, payment sys- tries. At the Vienna informal Ecofin meet- The move to Stage Three also required tem and legal matters, respectively. In the ing in September, the finance ministers of preparation in the private sector, not least light of the extent to which Sweden’s finan- the future euro countries, the ECB and the by financial institutions. This work was cial sector is affected by the euro, even with ministers and central bank governors of monitored essentially by the national cen- Sweden outside the euro area from the Denmark and Greece agreed that these tral banks, though the ECB coordinated start, matters discussed by the managerial two countries’ currencies would participate certain supervisory aspects and was also in body in  included this sector’s readi- in ERM from the start of Stage Three, the direct contact with financial sector repre- ness for handling euro after the move to Danish krone with a fluctuation band of sentatives. Stage Three. ±.5 per cent and the Greek drachma Other SIFS matters were the ESCB’s with ± per cent. Euro coordination in the Cabinet Office monetary policy strategy, the Riksbank’s The Riksbank has signed the central Since  the coordination of euro pre- participation in TARGET, euro currency, bank agreement on ERM without a euro parations in Sweden has been organised by and the harmonisation of statistics in the central rate being set for the krona. the Finance Ministry. In  work con- fifteen EU countries. tinued on reviewing the preparations in so- Under SIFS auspices, in January  Banknotes and coins ciety and identifying the need for measures a second situation report on the euro in the Following the European Council decision for Stage Three and in the event of Sweden Swedish financial sector was published. in Luxembourg in December , euro adopting the euro. The Riksbank is respon- The report describes the preparations in notes and coins are to be introduced on sible for euro preparations in the financial Sweden and the implications of being out-  January . Until then, notes and coins sector. side of the monetary union for the financial denominated in national currencies are ex- The Government had set up a refer- sector’s practical preparations. Effects of changeable. The ECB Governing Council ence group for Swedish euro preparations the monetary union on financial markets, has adopted guidelines for this. Following in . The group, headed by the Finance in Sweden as well as in Europe, are also the launch of notes and coins in euro, they Minister, includes the Riksbank Governor considered, as are the changes that are oc- will circulate alongside national currencies as well as other ministers and representa- curring in Sweden’s financial sector even in the euro area during a transitional period tives from the business community and the though Sweden is not adopting the euro of up to six months. labour market organisations. In  the from the start.



SVERIGES RIKSBANK 1998 The financial crisis hit Brazil in autumn 1998. In order to tackle the problems, in December Brazil and the IMF agreed on a programme of economic policy reforms. Support was provided by assembling a financing package totalling about USD 41.5 billion and consisting of USD 9 billion from multilateral development banks, USD 18 billion from the IMF and USD 14.5 billion in the form of BIS loans. Sweden contributed to the second and third components.



SVERIGES RIKSBANK 1998 G C The Governing Council, a new, enlarged body

The Council decides the salaries and other terms of employment of Executive Board members and its consent is required before a member, on leaving the Board, may take up certain employment or assignments after less than one year. The Governing Council manages the operations of the Auditing Department, makes proposals to the Riksdag on the allo- cation of the Riksbank’s net revenue and decides the working order for the Riksbank. The Governing Council may submit comments on referrals and put questions to the Riksdag and the Government about constitutional amendments or other State measures in its area of responsibility.

G B   L. to. r.: Kenneth Kvist, Göran Hägglund (deputy), Johan Gernandt, Stephan Tolstoy (deputy), Peter Up to the general election in September  Egardt, Ingegerd Troedsson, Britt Bohlin, Sven Hulterström, Jörgen Andersson, Susanne Eberstein, the Board consisted of: Kjell-Olof Feldt H-G Wessberg (deputy), Kjell Nordström, Marianne Carlström (deputy), Lars Granberg (deputy) and (Chairman), Bengt Westerberg (Vice Chair- Barbro Andersson (deputy). man), Urban Bäckström (Governor), Birgitta Johansson, Johan Gernandt, Bengt K.Å. Following the approval of new Riksbank le- Marianne Carlström, Hans Gustaf Wess- Johansson, Berit Löfstedt and Ingegerd gislation, an eleven-member Governing Coun- berg, Lars U. Granberg and Barbro Anders- Troedsson. The deputies were: Inge Carls- cil and as many deputies took up office from son Öhrn. At the statutory meeting on  son, Sinikka Bohlin, Stephan Tolstoy, Lars the turn of . December, Sven Hulterström was appoint- Hedfors, Carin Lundberg, Peter Egardt, ed Chairman and Johan Gernandt Vice Agne Hansson and the Deputy Governors: On  November  the Riksdag (Swe- Chairman. Stefan Ingves and Lars Heikensten. den’s parliament) approved new Riksbank On  October the new Riksdag ap- legislation. Under the transitional provi- F   pointed seven members to the Board: sions, on  December the Riksdag appoint- G C Kjell-Olof Feldt, Johan Gernandt, Bengt ed the new Governing Council, consisting The Governing Council appoints six full- K.Å Johansson, Berit Löfstedt, Kenneth of eleven members and as many deputies, time members as the Executive Board of Kvist, Mats Odell and Ingegerd Troedsson. with effect from  January . the Riksbank and designates one of them Governor Urban Bäckström continued his The members are: Sven Hulterström, Chairman of the Board and thereby term of office. The following were appoint- Johan Gernandt, Sinikka Bohlin, Jörgen Governor of the Riksbank. The Council ed deputies: Sinikka Bohlin, Stephan Tol- Andersson, Kenneth Kvist, Mats Odell, also decides the severance of Executive stoy, Inge Carlsson, Lars Hedfors, Siv Ingegerd Troedsson, Britt Bohlin, Peter Board members from their appointment. Holma, Göran Hägglund, Peter Egardt Egardt, Kjell Nordström and Susanne The Instrument of Government prescribes and the Deputy Governors: Stefan Ingves Eberstein. The deputies are: Reynoldh Fu- that the Governing Council may so decide and Lars Heikensten. At the statutory rustrand, Stephan Tolstoy, Carin Lund- only if the member no longer meets the re- meeting on  October the Governing berg, Sven-Erik Österberg, Siv Holma, quirements for the performance of duties Board appointed Kjell-Olof Feldt Chair- Göran Hägglund, Margaretha af Ugglas, or has been guilty of serious misconduct. man and Johan Gernandt Vice Chairman.

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SVERIGES RIKSBANK 1998 E B

Clear mandate

The collective and individual responsibilities and powers of members of the Executive Board have been specified and distinguished from the responsibilities of the Governing Council.

As of  the Riksbank is managed by an Executive Board. All monetary policy deci- sions are made by the Board. Members of the Board may neither seek nor take in- structions in the fulfilment of monetary policy duties. Before making a major mon- etary policy decision, the Riksbank is re- quired to inform the minister appointed by the Government. Meetings of the Execu- tive Board may be attended by the Chair- man and Vice Chairman of the Governing Council with the right to speak but not to make proposals or to vote. The Executive Board drafts the Riks- bank’s budget and submits it for the atten- tion of the Riksdag’s Standing Committee L. to r.: Villy Bergström, Eva Srejber, Lars Heikensten, Kerstin Hessius, Urban Bäckström and Lars on Finance, the Office of the Parliamen- Nyberg. tary Auditors and the Governing Council. The Board also presents an annual report Eva Srejber was appointed Second ment system, the Riksbank’s companies on the preceding accounting year to these Vice Chairman for a term of four years, and Riksbank submissions. Mr Nyberg also instances. Moreover, a written report on with responsibility for the preparation and has international functions in the field of monetary policy is to be presented to the coordination of international matters, the oversight. Riksdag at least twice a year. coordination of the financial sector’s EMU preparations and internal as well as exter- T  E B nal information. Ms Srejber is the Gov- On  December  the Governing Coun- ernor’s alternate in the Bank for Inter- cil as of  appointed the six members of national Settlements and has functions in the Riksbank’s new Executive Board. Urban the European Central Bank. Villy Berg- Bäckström was appointed Chairman of the ström, with a -year term, is responsible for Board and Governor of the Riksbank for a research and statistics. term of six years. Lars Heikensten was ap- Kerstin Hessius, with a -year term, is pointed First Vice Chairman for a term of responsible for matters concerning pay- five years, with responsibility for the prep- ment instruments, internal auditing and aration of monetary and exchange rate pol- risk management. Ms Hessius is also re- icy as well as international functions as a sponsible for the Riksbank’s work on coord- member of the EU’s Economic and Financial inating the financial sector’s preparations Committee and the Governor’s alternate in for the Year  transition. Lars Nyberg, the International Monetary Fund, the Group with a -year term, is responsible for the of Ten and the European Central Bank. preparation of matters concerning the pay-

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SVERIGES RIKSBANK 1998 O  D Functional arrangement with clear goals

searchers, was still included in the Secre- tariat in .

E D The primary function of the Economics Department is to contribute to the founda- tion for the Executive Board’s monetary policy decisions so that the Riksbank’s in- flation target is fulfilled. As it takes one to two years for monetary measures to affect inflation, policy has to be based on infla- tion’s forecast path. Economic theory and practical experi- ence indicate that in this time horizon infla- tion is affected by four factors: international inflation, domestic demand relative to sup- ply, cost shocks (changes in oil prices and in- direct taxes, for instance) and inflation ex- pectations. A continuous analysis of these four factors is therefore a central feature of work in this Department. The major part of Peter Lundkvist, Göran Zettergren and Malin Andersson from the Economics Department and Peter Walter the results is presented by the Riksbank four from the Monetary and Exchange Rate Policy Department engaged in work on the Inflation Report. times a year in the Inflation Report. The Major external changes and important new ities included the production of new legal aim is to provide a simple and educational functions increased the workload substantially documentation for the RIX system and account of the analysis in order to clarify for many activities during the year. work on preparations for the adaptation of monetary policy and stimulate debate. the Riksbank’s operations to the new legis- Continuous development work is under- E B S lation. taken to improve forecasting techniques The functions of the Secretariat are organ- In  the lawyers will be contributing and knowledge about effects of monetary ised under three headings: legal, advisory to ECB work on legal matters concerning policy. To support this work, the Depart- and secretariat. The managerial system is the non-euro countries, as well as to Swedish ment uses and is constantly developing a also organised by the Secretariat. The legal legislative work. They will also be develop- number of models of different sizes. The function provides legal services for the ing the legal conditions for cross-border use two large models are known as RIXMOD Bank’s management and departments. To- of collateral. Moreover, they intend to begin and NIGEM. gether with the secretariat function, it also work on monitoring observance of internal The Department represents the Riks- provides administrative support for man- and external regulations and will present a bank on a number of EU and ECB com- agement. The advisory function provides report on legal risks in the Banks’ financial mittees, which involves a considerable management with expert advice. operations. Another task in  is to review amount of work on the preparation of Swe- During  the lawyers participated the legal documentation for the system of den’s positions in European cooperation. in EMI/ECB work on the drafting of the monetary policy instruments. legal framework for the ESCB as of . The archive function, which involves M  E R They also took part in the national legisla- maintaining a proper standard of public P D tive work on amendments to the Riksbank records and providing both internal and The practical implementation of the Ex- Act from the turn of the year. Other activ- external services for personnel and re- ecutive Board’s monetary policy decisions

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SVERIGES RIKSBANK 1998 Executive Board Secretariat Monetary and Exchange Payment System Department Research Department Personnel Department Head: Rate Policy Department Head: Head: Head: Robert Sparve Head: Kai Barvell Anders Vredin Ingemar Andréasson Employees: 14 Richard Gröttheim Divisions: Employees: 5 Employees: 13 Divisions: Analysis, Trading, RIX system, Economics Department Investment, Secretariat Financial system, Cashiers’ Department Organisation and Administration Head: Employees: 33 Financial administration, Head: Department Claes Berg Analysis and control Tom Dagne Head: Divisions: Macro economic Information Department Employees: 43 Central staff and technology Agneta Rönström analysis, Head: division, eleven branches, Employees: 97 International macro analysis, Michael Wallin Financial Statistics Department eight depots (four run by the IT Department Price analysis, Employees: 12 Head: Post Office, four by Head: Monetary analysis Sigvard Ahlzén Securitas Värde AB) Staffan Wallén Employees: 33 International Department Divisions: Employees: 345 Employees: 61 Head: Current account, Christina Nordh Berntsson Financial account, Internal Auditing Department Planning and Accounting Employees: 12 Methods and publications, Head: Department Financial market Gunilla Werner Carlsson Head: Employees: 43 Employees: 9 Lena Kvist Employees: 10 is the responsibility of this Department. I D In EU matters the Department is par- The Riksbank’s monetary policy repos are The coordination of internal and external ticularly involved in preparing issues to do constructed and executed by the Trading information is the task of this Department. with economic policy cooperation for con- Division so as to bring the repo rate to the In , much of the coordination work sideration in the Economic and Financial intended level. The dealers obtain infor- had to do with making people in Sweden Committee and its alternate group. The mation about market tendencies through more aware that maintaining stable prices Department also prepares matters for the daily contacts with currency, bond and is the Riksbank’s objective and why this is Executive Board’s participation in ECB money markets. desirable. Riksbank personnel lectured at meetings and continuously follows the The Investment Division manages the universities, university colleges and educa- committees on which the Riksbank is rep- Riksbank’s foreign reserves, a portfolio to- tional associations all over Sweden, visiting resented. talling over SEK  billion, mainly in the around thirty different educational estab- The Department performs the secre- form of foreign treasury securities and lishments. The Information Department tariat function for the Riksbank’s joint con- gold. Besides aiming for a good yield, arranged a number of seminars, courses sultations and exchange of information which is transferred to the Treasury, the and study days for upper secondary teach- with the Swedish financial sector concern- managers obtain valuable information ers and journalists. The Riksbank also re- ing adjustments to the European monetary about tendencies in the international bond ceived thousands of upper secondary pupils union. markets. and other interested visitors. Another responsibility of the Depart- Information about Swedish and inter- The Department’s Information Centre ment is the Riksbank’s connections with national financial markets is processed by answers or refers hundreds of calls a month, the International Monetary Fund (IMF). the Analysis Division. The main focus is on from media, financial market players and Positions on matters for the IMF Executive market reactions to current monetary poli- the general public. Access to the Riksbank Board are coordinated with the Finance cy and expectations of the policy’s future and the prompt provision of accurate infor- Ministry as well as with the other countries direction. The analyses accordingly pro- mation are important. The Department in the same constituency as Sweden. vide an important basis for monetary pol- regularly uses various means to monitor Cooperation with the Finance Min- icy decisions. how media and people in general perceive istry and other central banks on inter- In  there were considerable the Riksbank and monetary policy. national issues for the G- is likewise coord- changes in the financial markets, mainly as The information on the home page on inated and prepared by the Department, regards the preparations for the new Euro- the Internet (www.riksbank.se) was extend- which also prepares certain matters to do pean currency, the euro. This entailed ed substantially and the number of website with bilateral loans. changes in the computer systems used by visits rose from under , in January  The international policy group, which both the Investment and the Analysis Div- to over , in December. The Riksbank is the core of all this coordination, is head- ision. The review of the computer systems regularly holds press conferences at which ed by the competent deputy governor and to prepare for Stage Three of the monetary the Inflation Report is presented; the con- includes representatives for other depart- union was accompanied by the start of ferences in September and December were ments involved in the international work. work on ensuring that the systems are certi- also accessible on the website. The International Department functions fied for the Year  transition. Further as the group’s secretariat. Year  testing of the systems is sched- I D uled for the spring of . Participation by the Riksbank in inter- P S D Changing markets and new forms of national cooperation is coordinated by this The RIX Division operates, supervises and securities present the Analysis Division Department, which also assists the Execu- develops, the Riksbank’s system for the set- with opportunities for new in-depth studies tive Board with its international contacts, tlement of payments, RIX. The new settle- and new areas to explore, besides repre- takes part in international meetings with ment system for euro payments, E-RIX, be- senting a potential for alternative invest- members of the Board and prepares such came operational at the turn of . ments. meetings. Banks participating in the RIX system can

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SVERIGES RIKSBANK 1998 F S D Statistics on the balance of payments and financial markets are produced, presented and explained by this Department. The statistics serve, for example, as a basis for the Riksbank’s monetary policy assess- ments as well as for the oversight of the fi- nancial system. They also provide a foun- dation for the public’s need of economic analysis. In  work continued on adapting the statistics to EMU requirements. This involves altered definitions and methods, as well as greatly increased reporting by fi- nancial and non-financial firms. The Riks- bank now reports statistics to the ECB on a monthly basis. The international coordination of stat- istics also continued in other contexts. The reporting of bank statistics to BIS was modi- Mats Wallinder from the Payment System Department and Håkan Nyholm and Gent Jansson from the fied and increased during , not least to Executive Board Secretariat produced a publication on the rules for RIX settlement. improve the possibility of analysing risks of financial crises. An important new field is now send and receive payments in real time new risk policy was produced for the man- statistics on financial derivatives. With re- to and from other banks in the European agement of exchange reserves. Daily risk spect to the balance of payments, the Riks- Union. This provides Swedish banks with a monitoring has improved the quality of the bank and Statistics Sweden have conclud- facility for using the new structure for pay- control and supervision of the different ed an agreement with Eurostat (the statis- ments that has been set up in Europe. types of risk. A risk group, with overall re- tical arm of the European Union) on the The Financial Administration Division sponsibility for ongoing risk management continuous delivery of statistics. Moreover, handles the monetary and exchange rate and control, was also established during Sweden has adopted the Special Data Dis- policy transactions of the Riksbank and the year. semination Standard (SDDS) that the IMF manages the securities that banks are re- The Financial System Division con- initiated and established; the Riksbank has quired to pledge for loans in kronor or tinued to develop the analytical framework accepted the function of national coord- euro. In  a great deal of work was done for the oversight of financial system stabil- inator and acts as the go-between with the on tests and preparations for the euro’s in- ity. Two issues of the Financial Market Re- IMF. troduction. Preparations in case Sweden port were presented, one focusing on credit The Riksbank took part in two global joins ERM and the euro area will contin- risks in the bank sector and the other on surveys in . One of them, initiated by ue during , along with the work to en- counterparty and settlement risks associat- BIS, concerned the turnover in foreign ex- sure that systems are certified for the Year ed with transactions between financial change and derivative markets. The other,  transition. firms. The Division also takes part in inter- on behalf of the IMF, involved mapping The work of the Analysis and Control national work, mainly in the contexts of cross-border holdings of securities. Division in  was notably affected by an G- cooperation and the European Sys- The adaptation of statistics will con- increased focus on risk management. A tem of Central Banks. tinue in . The remaining EMU require-

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SVERIGES RIKSBANK 1998 ments concern interest rate and flow statis- tics for the financial market and a country breakdown for the balance of payments. In addition, more detailed data will be pre- sented on Sweden’s external assets and li- abilities. A programme for enhancing compe- tence is being constructed in order to pro- mote efficiency and development. Another project focuses on matters to do with qual- ity and will result in a general quality pol- icy. Extensive work is being done to secure IT systems and related routines in the run- up to the Year  transition. The Department’s statistics and re- ports are published on the Riksbank’s web- site on the Internet (www.riksbank.se).

R D The main function of this Department is to carry out high quality research in fields of relevance to the Riksbank. The quality of Johannes Rosenberg and Birgitta Lundin from the Information Department collaborated on the banknote Riksbank research is judged, just like that of withdrawal campaign with Per-Olof Arevik and Mats Nilsson from the Cashiers’ Department. all other research, by other researchers’ as- sessing whether or not the reports are worth The Department was set up as recently currency at a specified level of services. publishing in scientific periodicals. This as , which means that work to date has The major part of the operations is fi- presupposes a lively exchange with re- consisted to a large extent both of formu- nanced from income. The Department is searchers in the academic world as well as lating tasks, assigning priorities and finding currently being split into two components: in the central bank domain. In , many ways of carrying them out and of establish- one for the authority function and the researchers from both worlds visited the ing the Department’s function in the Bank. other a separate company for managing Riksbank and the latter’s researchers at- Two more researchers will be recruited in the physical handling of cash. tended other central banks and scientific . New research projects and inter-de- Commemoration coins in two denom- conferences in order to check the quality partmental cooperation are to be initiated inations (, and  kronor) were issued and relevance of their work. For this, how- and developed. The areas with priority are in September  to mark the th an- ever, external contacts do not suffice. The the Bank’s credit risks, the empirical analy- niversary of the accession of HM King daily contact with other Riksbank depart- sis of inflation and monetary policy’s ef- Carl XVI Gustav. ments is at least as important. Many of the fects, and the theoretical analysis of infla- In the autumn the Department ran an Department’s research projects are initiat- tion target policy. information campaign on the withdrawal ed or undertaken in cooperation or consult- of seven old banknotes at the turn of the ation with other departments at the Bank. C’D year. The cancellation date was subse- By providing advice and participating in The supply of banknotes and coins in Swe- quently postponed to the end of March policy groups, the researchers also endeav- den is the responsibility of this Depart- . A trial campaign was also conducted our to support analyses by other depart- ment. Eleven Riksbank branches and eight to find out to what extent the substantial ments. depots supply banks and post offices with quantity of dormant coins could be

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SVERIGES RIKSBANK 1998 brought into circulation. The campaign re- P D nical environments to cope with the Year sulted in some re-circulation. The Department has accentuated its ef-  transition. All personnel at the De- The Department participates in the forts for integrating training, recruitment, partment are engaged, in principle, in this European Central Bank’s committee work work environment functions and rehabili- work, which will continue at an undimin- on the future issue of euro notes. It is like- tation efforts in the Bank’s operations. ished rate in . The Year  project wise active under the European Commis- During  the drive for training in IT, also includes technical systems and instal- sion in matters to do with euro coins. Con- languages and communication continued lations at the Bank that are normally not tinuous consultations with Swedish banks and was augmented with inputs of an eco- the Department’s responsibility. Another and retailers are arranged, including ap- nomic nature. With a view to improving job task in  was the upgrading of the PC praisals of alternative scenarios in the event situations and work climates, stress profiles environment and the introduction of a new of Sweden adopting the euro. were measured in two departments. A pro- operative system, NT. Work was also in Planning by the Riksbank for the Year ject aimed at promoting internal mobility progress on replacing the internal network;  transition includes heightened readi- was begun and will continue in . this is scheduled for completion in the first ness for supplying cash. One measure here Following extensive work on specifica- half of . is a temporary halt to the destruction of tions and the appraisal of tenders, at the Besides the above, there is the ongoing worn notes. end of  a contract was signed for the operation of systems and technical en- procurement of a new PA system. The im- vironments. The Department’s workload I plementation of the system, which is to be in  was accordingly unusually heavy. A D introduced in stages from  April onwards, The technical environment is tending to The Department devoted its efforts in  will leave its mark on work in . become increasingly complex. Additional to complying as well as possible with the resources in the form of consultants were Governing Board’s instructions to see to it O  therefore used to a greater extent than in that the Riksbank’s accounts are true, fair A D earlier years. and in accordance with generally accepted Premises, services, and equipment are sup- accounting principles, to inspecting intern- plied by this Department, which also sup- P  A al controls with particular reference to ports the work of organisational and ad- D safeguarding the valuables of the Riks- ministrative rationalisation and develop- The Department has an overall responsi- bank, and to ensuring that the Bank main- ment and manages the journal, real estate, bility for the Riksbank’s general accounts tains a satisfactory quality of information transport, security, internal services and, as and also develops methods for directing and systems security in its systems. of , the Riksbank’s archive. and monitoring activities. Much time was spent on enhancing In  alterations to the head-office As regards accountancy, preparations competence in methods and work was done building continued in connection with the are in hand for adapting the Riksbank’s ac- on a process analysis of the Riksbank’s op- work on a new security facility. The De- counts to the principles and systems that erations. The Department also takes part in partment was involved in the review of the are used in the central bank system. Changes the ECB’s committee work on internal au- administrative bloc and this resulted in are being made on a continuous basis to diting and scrutinises the joint systems in some organisational changes and adjust- improve accounting and make it more effi- the European System of Central Banks. ments to service levels. cient. One of the projects for  is a re- Work in  will be marked by the or- view of invoicing. ganisational changes at the Riksbank that IT D The process of planning and monitoring result from the new legislation, as regards Work at this Department in  focused has been developed and refined in recent the Bank’s operations as well as the cooper- on preparing and modifying computer sys- years. A control system based on the method- ation between this Department and the tems for Stage Three of the European ology of balanced score cards is being intro- Auditing Department under the new Gov- monetary union. Much work was also done duced as one item in total operational con- erning Council. on testing and adapting systems and tech- trol. This work will be stepped up in .

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SVERIGES RIKSBANK 1998 Since the beginning of 1998 the Riksbank offers universities and university colleges lectures by Riksbank economists, who are known as Riksbank Ambassadors. Around thirty of these am- bassadors gave lectures in 1998, in locations from Luleå in the north to Lund in the south. Their audiences totalled more than 5,000 students at some thirty universities and university colleges. The subjects were “Monetary policy with an inflation target” and “Monetary policy in practice”. These scenes are from a visit to Gotland University College by Peter Stenkula from the Executive Board Secretariat and Tomas Thyblad from the Monetary and Exchange Rate Policy Department.

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SVERIGES RIKSBANK 1998 T Y   Major efforts to secure the transition

progress at the Riksbank and involves com- puter systems as well as the handling of cash. The Riksbank had already com- pleted an inventory of its systems in . In the spring of  work was focused on analysing and rectifying faulty systems, ac- companied by contacts with suppliers to upgrade their products to Year  status. Meanwhile, separate Year  computer environments were constructed for tests. A number of systems were then tested indi- vidually in the autumn. Embedded sys- tems, such as controls for lifts and ventila- tion equipment, et cetera, were appraised in . Extra earmarked investments were made to increase the capacity of the test environment, for instance. The individual tests are being com- pleted early in , after which testing will focus on verifying that the Riksbank’s cen- tral systems can communicate with each Erik Gustavsson from the Organisation and Administration Department working on Year 2000 issues other. This will be accompanied by tests with Anders Hellström, Vivianne Lamell and Kent Juhnestam from the IT Department. with external bodies such as RIX partici- pants, the ECB and statistical reporters. The Riksbank’s internal security for the Year tions with a function in this context. Along Work will be completed on replacing faulty  transition will be completed by mid . with the Riksbank, most financial firms are components in property and security sys- Planning for the transition also includes height- reaching the stage of external testing–tests tems, including subsequent tests. The plan ened readiness as regards the supply of cash. involving the systems of more than one or- is to have all systems tested and approved ganisation. These tests will throw more by mid . To cope with the Year  Work on precluding risks of disturbances light both on the ability of the financial sys- transition, additional technical investments on account of the transition to a new mil- tem as a whole to cope with the transitional will also be required in . lennium has been in progress for some time problems and on any need for initiatives Each department is drawing up contin- in Sweden’s financial sector. The work has and measures of a more general nature. gency plans. This work is to be completed been monitored closely, on behalf of the The Riksbank has therefore assembled in September , when readiness will be Government, by the Financial Supervisory representatives of the financial sector and raised. During the most critical months Authority, which has also formulated re- the competent authorities to discuss how around the year-end there will be a mora- quirements and presented a series of these issues should be handled. This will, of torium on changes to components, pro- progress reports on the adjustments. course, be accompanied by continued grammes and the like, with extra-high preparations by each institution, as well as readiness for correcting any faults. G  by the monitoring activity of the Financial Planning by the Riksbank for the turn As the authority responsible for the pay- Supervisory Authority. of the millennium also includes heightened ment system, the Riksbank also has a gen- readiness as regards the supply of cash. eral responsibility for these issues in rela- I  One measure here is a temporary halt to tion to banks and other financial institu- Work on internal adaptations is also in the destruction of worn notes.



SVERIGES RIKSBANK 1998 C       PSAB Pengar i Sverige AB and cash handling

The formation of a limited company to man- motive, they can be made more efficient age the distribution and storage of cash changes and more focused on commercial develop- the role of the Riksbank in this field. The Bank ment. The potential for improving effi- will act solely as an authority, with three main ciency should lead to a reduction of cash- functions: issue banknotes and coins, be re- handling costs for the Riksbank as well as sponsible for the supply of payment instru- the private sector and ultimately result in a ments in Sweden and supervise the company. social benefit.

The Riksbank is engaged in one of the A   largest organisational changes in its history.  R On  December  the Governing The role of the Riksbank in this field is Board of the Riksbank decided that the pared down to that of an authority with physical handling of cash that is now man- three basic functions: issue banknotes and aged by the Riksbank would be transferred coins, be responsible for the supply of notes to a separate company. The Riksbank will and coins in Sweden and supervise the own the company initially but other owners company. The supervisory function in- are also conceivable in time. volves ensuring that the company performs The change follows a review of the its assignment from the Riksbank in a satis- management of cash handling that the factory manner and that the company’s op- Cashiers’ Department presented in March erations as a whole are not liable to conflict . The report, Cash in Sweden and cash with the Riksbank’s general cash-handling management in , showed that it was possi- objective. An important aspect here is that The distribution and storage of notes and coins ble to reduce the cost of handling cash in so- the company is neutral as regards competi- are two of the operations that will be managed by ciety and transform the participation of the tion. In addition to its supervisory function, the new company. central bank in this activity into a function the Riksbank will need to manage the pro- as a supervisor and analyst. curement of notes and coins, the destruc- tion of notes and the readiness stocks of PSAB P  S AB cash. General issues to do with means of On behalf of the Riksbank, the new com- payment will also have to be analysed. pany, PSAB Pengar i Sverige AB (’Money in From the decision by the Governing Sweden plc’), will have functions that in- Board in December it follows that a limited clude managing the distribution and stor- company is to be formed at the beginning of age of cash and controlling its authenticity. . Material for a decision by the Execu- In addition, the company will be in a pos- tive Board concerning the transfer of activi- ition to compete in the market for other ties and assets to the company is to be pre- payment and cash-handling services. pared for consideration in the spring of Ensuring that cash is available through- . By then the authority function is also out the country is a practical task with to be specified as regards the supply of cash many similarities to the operations of pri- in Sweden and agreements are to be draft- vate enterprises. It can be profitable to co- ed for the regulation of the new company’s ordinate these activities with other services operations. When the company has been in the market for cash that are outside the completely separated from the Riksbank, Riksbank’s domain. If the operations are the question of whether or not to sell it transferred to a company with a clear profit should be addressed.

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SVERIGES RIKSBANK 1998 H    

A changing organisation

The aim is to create and maintain a work mode and a culture that enable the Bank to fulfil its objectives in the best poss- ible way. This implies continuous reassess- ment, development and learning anew. In an increasingly complex world, the Riks- bank has deliberately endeavoured to build up a competent, credible organisation. The employees are taking a growing share of the responsibility for the operations. A new culture is being established with the focus on qualified competence. Knowledge, in- formation and decision-making have ceased to be solely the responsibility of management. The individual employee has access to all the relevant information and is accordingly in a position to acquire an overall view, take responsibility and make decisions. With the personnel’s in- Maria Hammarström and Tobias Böök plan educational projects for 1999. creasingly high qualifications, a rational use of the new competence presupposes The Riksbank is largely an organisation of C wider powers. This implies new and differ- knowledge. The continuous development of com- At the turn of  the Riksbank had  ent requirements for management and petence is most important for the ability to shoul- employees, of whom  per cent were leadership in the Bank. der its responsibilities successfully in an increas- women and  per cent men. The break- ingly complex world. down by age shows some increase during T  in the proportion aged  to  years    The past year has been full of preparations and some reduction in the age group ‒ The Riksbank is working on a long-term for and work on factors in the Riksbank’s years. During the year the Riksbank re- basis to develop management and leader- environment that have affected its oper- cruited  persons externally and  inter- ship. The implementation of a new philoso- ations and will continue to do so. These nally, which in both cases is somewhat more phy of learning and change has begun, using factors include not only the new Riksbank than the year before. Of the  persons who such key concepts as cooperation, trans- legislation, the formation of a company to left the Bank in ,  did so at their own parency, constantly learning new things, and manage the handling of cash, the technical request,  went into retirement and one taking responsibility and initiatives. A total problems with the turn of the millennium person left because of a shortage of work. of  managers and key personnel have and the course of the financial crisis but taken part in this development programme. also the growing demands to consider the P   A couple of years ago the Riksbank also environment. In the past couple of years the themes for initiated work on developing the control of Dependence on the rest of the world is work at the Riksbank have been: concen- internal operations. The new philosophy becoming more and more apparent, with trate on the main tasks, flexibility and in- for this supports the move towards a more adaptation to EMU as another important ternal mobility, cooperation, responsibility knowledge-intensive organisation as a means factor. Today’s environment calls for a high and initiative, internal and external trans- of fulfilling the overriding objectives and degree of competence, new thinking and parency, competence and learning, and strategies. This means that in the control of flexibility. leadership and delegation. operations, a number of different dimensions



SVERIGES RIKSBANK 1998 are weighted together. These dimensions in- ing, organisation and personnel depart- clude the personnel and human capital. ments of twelve central banks. The training has been provided in a The Nordic central banks have a form number of fields. The course Modern Central of mutual cooperation with a grants Banking can be mentioned in particular. It programme. The grants cover two weeks aims to give the Riksbank’s economists, who and those receiving them have an opportu- tend to be highly specialised, a holistic per- nity of further development in a specific spective on how central banks in general and field or theme. Every year these banks ac- the Riksbank in particular have developed cept grant-holders from each other. In over time and how they operate today. In  the theme in Sweden was information , communication also had priority in and IT. order to support the drive for both internal and external transparency. Courses were held E  in presentation techniques, conference tech- The Riksbank also focuses on work for niques, project leadership, and cultural differ- equality both by making department heads ences. The Riksbank has made considerable directly responsible for developing work- efforts to raise linguistic competence, primar- place equality and by formulating specific ily in English. About  persons participated goals for this. One of the goals is that the in language training during the year. proportion of women among the Riks- The handling of competence issues in bank’s managers is to be  per cent by For some years now the Riksbank has had an the Bank is supported by means of compe- . Today the proportion is  per cent. environment manager, Claes-Göran Lundberg. tence analysis, which is designed to elucidate the relationship between competence and E  had special training in their specific field. results. The analysis discloses the results that Environmental work at the Riksbank is In any organisation, high environmental are needed and the extent to which they are based on the environment policy that was competence is essential for successful en- produced. The requisite competence can adopted some years ago. The established vironmental work. The training will there- then be identified and competence enhance- environmental management system is con- fore continue to be a regular feature of the ment can be concentrated accordingly. De- tinuing the work of locating and limiting Bank’s work for the environment. A new velopment work is also in progress on per- negative environmental impacts from the element will be training in reporting en- sonnel consultations, career development Bank. As a result, the Riksbank has intro- vironmental consequences in projects and and leaving interviews. duced environmental standards for pro- enquiries. curement routines, improved energy effi- A project has been initiated for cooper- E   ciency, concluded agreements with com- ation on environmental matters and an ex-   panies for the recovery of electronic com- change of experience with the central bank In the autumn of  the Riksbank invited ponents and installed the first environment of Austria. As a result, an initiative will be central banks in Europe to a seminar on station. taken for extended environmental cooper- The Learning Organisation in a Central Bank. The competence enhancement of all ation with other central banks in the Euro- The purpose of this exercise in the philoso- employees that began in  focuses on pean Union. phy of learning and change was to ex- knowledge of ecological relationships and change experiences and discuss the pos- the perception that everyone, individuals sibilities of central banks functioning as as well as organisations, has a part to play learning organisations. The seminar at- in the efforts for a good environment. tracted a great deal of interest and was at- Some employees with tasks in property ad- tended by representatives from the train- ministration and procurement have also

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SVERIGES RIKSBANK 1998 A  Comments on the accounts

T   The loan facility that the Riksbank has The Riksdag decided to allocate net During  the balance-sheet total in- provided as a second line of defence for revenue for  in accordance with the creased by SEK , million. Events dur- South Korea was not utilised during . Governing Board’s proposal, which meant ing the year that notably affected the bal- In the  Annual Accounts this facility that SEK , million was transferred to ance sheet are reported below. was booked as an amount of SEK  mil- the Treasury, SEK , million was trans- The gold reserve is valued as of  De- lion under ‘Other foreign assets’ as well as ferred to the Contingency Fund and the re- cember  at the market price, whereas under ‘Other foreign liabilities’; in the pres- mainder, SEK  million, was transferred previously it was booked at a fixed histor- ent Annual Accounts the item is booked off to the Balancing Account. The transfer to ical price (see note 1). The market valu- the balance sheet (see note ). the Balancing Account was already booked ation increased the book value by SEK Treasury securities with a nominal in the  Annual Accounts. , million. In accordance with a deci- value of SEK , million have been sold sion by the Governing Board on  Decem- to the National Debt Office in order to ad- T     ber , this amount was entered against just the size of the domestic securities port- The Riksbank’s net revenue for  be- the Contingency Fund under Capital. folio to the current monetary policy regime. fore balance-sheet allocations amounts to The General Arrangements to Borrow The item ‘Monetary policy repos’ fluc- SEK , million (: , million). (GAB) and the New Arrangements to Bor- tuates with the liquidity requirement of the The result of both domestic and for- row (NAB) were activated during  to banking system. During  the banking eign operations in  is favoured by in- provide financial assistance to Russia and system had a liquidity deficit and the Riks- creased market prices for the portfolio se- Brazil, respectively. The Riksbank paid out bank therefore advanced liquidity by means curities as a result of falling interest rates. the equivalent of SEK  million under of its monetary policy repos. In the event of The result of foreign operations is also GAB and SEK  million under NAB. a liquidity surplus, the Riksbank issues cer- favoured by the krona’s depreciation The advances are made to the International tificates in order to withdraw liquidity. against the currencies in the foreign re- Monetary Fund (IMF), which in turn lends The Riksbank acquired a share of the serves. The element of risk in the manage- the funds to Russia and Brazil. The IMF ac- capital of the European Central Bank ment of the foreign reserves is controlled cordingly carries the credit risk in relation to (ECB) when the latter was established on through limits stipulated by the Governing these countries. During , moreover, the  June . On the establishment of the Board, for instance on the currencies and IMF has utilised just over SEK  billion of ECB, the European Monetary Institute counterparties that are eligible for asset in- the capital contributed by Sweden. went into liquidation. vestment. The Riksbank’s ecu claim on the Euro- Amounts representing proceeds from The increase in interest received on pean Central Bank (ECB) was settled when the sale of gold by the Riksbank, with a sim- loans to banks and others is a consequence the mutual swap agreement expired at the ultaneous agreement to repurchase the of the banking system needing to cover a turn of . This agreement, which same quantity of gold, are booked as of liquidity deficit throughout . served to create official ecus, involved the  December  under ‘Other foreign li- Administrative income totals SEK  Riksbank, along with the other national abilities’; for  these amounts total SEK million, which is SEK  million more than central banks in the EU area, transferring , million. In , when net account- the budgeted figure, largely on account of  per cent of their gold and USD assets in ing was practised, a total of SEK  mil- increased dividend payments from Tumba exchange for claims in ecus. lion was deducted under ‘Foreign banks Bruk and BIS. Higher market prices and reinvested and securities’. Administrative expenditure totals SEK earnings have contributed to the increase in The item ‘Currency in circulation’  million, which is SEK  million more the item ‘Foreign banks and securities’. The varies with the demand for this means of than the budgeted figure. The main reason changeover to trade-day accounting raised payment. The volume of notes in circula- for the deviation is that liabilities for holiday the level of this item by SEK  million; tion normally peaks around the turn of the pay and for December’s social security costs the balancing item is entered as settlement year, partly in connection with the in- have been booked on the accounting date; payables under ‘Other foreign liabilities’. creased retail turnover. these one-off items had not been budgeted.

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SVERIGES RIKSBANK 1998 Accounting principles

The balance sheet and profit and loss ac- assets. Securities are valued at the market’s The equivalent of the sales price is regis- count for the Riksbank have been com- closing rate. Claims and liabilities in for- tered as a liability and the pledged assets piled as provided for in the Riksbank Act eign currency are valued at the buying rate are booked off the balance sheet. and in accordance with the Accounting In- on the accounting day. Accrued interest is Assets received by the Riksbank under struction that the Governing Council has included in the market value of interest- reverse repos are not included in the ac- approved for the Riksbank. bearing assets and liabilities. counts because they constitute loan collat- Unrealized exchange gains/losses are eral; the equivalent of the purchase price is A  credited/debited to the net operating re- registered as a claim.  sults under ‘Translation of exchange rates’. The difference between the two pay- The gold reserve is valued as of  Decem- This item also includes the valuation of any ments in a repo (spot and forward) is ber  at the market price, whereas pre- forward position. treated on an account basis over the dura- viously it was booked at a fixed historical After the market valuation, interest re- tion of the repo. price. ceived on securities represents the aggre- Gold repos (gold swaps) are recorded gate return in the form of interest as well as A   gross as of  December  (see below realized and unrealized price gains and   under Repo accounting). Previously, the losses. Partly on this account, changes in Fixed material assets are booked at acquisi- proceeds were recorded net under ‘Foreign domestic and international interest rates tion value and depreciated as planned. banks and securities’. Assets used as collat- may cause reported net revenue to fluctuate Write-downs are made for depreciation eral for repo transactions are reported off appreciably between accounting periods. that is considered to be permanent. Build- the balance sheet. ings are depreciated over a period of  These changes–to market valuation of R   years, other fixed assets over ‒ years. In- the gold reserve and gross recording of gold  ventories are written off over – years. In repos–are an adaptation to the rules for the Business transactions are recorded at the certain cases, personnel costs for internal consolidated balance sheet of the Eurosys- time when the parties exchange risks and development work on IT investments are tem and can therefore be regarded as rights. For money, bond and foreign ex- included in the asset’s acquisition value. good accounting practice for a central change market transactions this implies bank. trade-day accounting. Lending and bor- Transactions in the money and bond rowing transactions, including straight markets are booked on the trade day as of repo transactions, are booked on the pay-  December . Previously they were ment day. registered on the trade day and treated as off-balance-sheet liabilities up to the settle- R  ment day. A repo is an agreement to sell assets such as Moreover, as of  December  staff- securities and gold and simultaneously related items such as holiday pay claims undertake to buy back equivalent assets at and liabilities in respect of social security a specified price in the future. contributions and pension commitments These repurchase agreements are re- are included in the accounts, in the case of corded as loan transactions and therefore pension commitments as a memorandum do not affect the holdings of gold and secur- item. ities. Assets pledged by the Riksbank as col- V  lateral for repos are still included in the ac- Assets and liabilities are booked at current counts and valued in accordance with the 1. The ECB and the central banks of the 11 countries that have market values, except in the case of fixed rules for the other holdings of securities. currently adopted the euro.

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SVERIGES RIKSBANK 1998 Balance sheet

 D

Assets, SEK million Note 1998 1997

Gold and foreign assets Gold and foreign reserves Gold 1 13,834 909 Claims on the IMF 2 13,707 9,242 ECU claim on the ECB/EMI 3 – 10,598 Foreign banks and securities 4 108,735 70,239 136,276 90,988

Other foreign assets 5 120 2,461

Domestic assets Treasury securities 6 32,842 53,088 Advances, banks 7 2,265 4,117 Monetary policy repos 8 41,581 36,216 Other domestic assets 9 203 1,124 76,891 94,545

Fixed assets Fixed assets 10 1,087 1,175 Total assets 214,374 189,169

Liabilities, SEK million Note 1998 1997

Foreign liabilities Net allocation of Special Drawing Rights in the IMF 11 2,838 2,641 Other foreign liabilities 12 4,100 3,983 6,938 6,624

Domestic liabilities Deposits, banks 13 1,679 1,961 Deposits, other 14 – 7 Special accounts 15 15 34 Other domestic liabilities 16 341 3,864 2,035 5,866

Currency in circulation Notes 17 82,288 78,986 Coins 18 3,980 3,809 86,268 82,795

Balancing account and capital Balancing account 19 47,422 47,422 Capital 20 49,848 32,211 97,270 79,633

Result for the year 21,863 14,251 Total liabilities and capital 214,374 189,169

Memorandum items, see note 32.

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SVERIGES RIKSBANK 1998 Profit and loss account

 D 

SEK million Note 1998 1997

Foreign operations Interest income 21 7,229 7,919 Interest expense 22 –417 –458 Translation of exchange rates 23 9,685 3,786 Total foreign operations 16,497 11,247

Domestic operations Interest on Treasury securities et cetera 24 4,263 3,602 Interest on loans to banks et cetera 25 1,630 496 Interest expense et cetera 26 –44 –197 Total domestic operations 5,849 3,901

Administrative income 27 169 149 Administrative expenses 28 –661 –633 Other income 29 17 21 Other expenses 30 –8 –5 Result before balance-sheet allocations 21,863 14,680

Balance-sheet allocations To balancing account 31 – –429 Result for the year 21,863 14,251



SVERIGES RIKSBANK 1998 Notes to the accounts

N  G spect of these two countries are SDR  facilities (deposits and advances) is close to million and SDR  million, respectively. zero (see note ). 1998 1997 The Bank’s aggregate GAB and NAB com- Quantity mitments total SDR  million (see note N  M Troy ounces (millions) 5.96 4.72 ).   Price Advances in the form of monetary policy USD per ounce 287.40 42.22 N  E  repos, which involve the Riksbank buying SEK/USD 8.08 4.56   ECB/EMI and paying for securities and simultan- Book value, SEK million 13,834 909 The Riksbank’s ecu claim on the ECB/ eously agreeing to reverse the transaction EMI, which arose from the creation of offi- at a specified future date. The equivalent of The  total of . million Troy ounces cial ecus, was settled when the mutual swap the payment is booked as a claim for the is equivalent to . tonnes. Excluding the agreement with the ECB/EMI expired on duration of the repo. gold in the ECB/EMI swap, the gold re-  December . serve booked in the  accounts had a N  O  market value of SEK , million. N  F     Mainly advances to Riksbank employees. N  C   IMF Predominantly foreign treasury securities The loans are arranged on normal banking and government guaranteed securities, plus terms and managed by agreement with SEK million 1998 1997 credit balances such as deposits and nostro Nordbanken. Special Drawing Rights in the IMF 3,341 2,943 accounts in foreign banks. Reserve position in the IMF 9,015 6,252 N  Advances under GAB 371 – N  F  Advances under NAB 906 – O   Accrued interest on claims 74 47 This item includes the claim on the ECB in SEK million 1998 1997 Total 13,707 9,242 respect of the portion of the Riksbank’s cap- Shares and rights ital contribution to the EMI that was sur- AB Tumba Bruk 43 43 , 860,000 shares with par value at The holding of SEK million in Spe- plus to its capital contribution to the ECB. SEK 100 each cial Drawing Rights (SDRs) in the Inter- S.W.I.F.T. 0 0 national Monetary Fund (IMF) is equiva- N  13 shares with par value at BEF 5,000 each lent to  million SDRs. The Riksbank T  Bank for International Settlements 267 267 16,021 shares with par value at has been allocated a total of SDR . Treasury bills and bonds, as well as a small 2,500 gold francs each million for no real consideration; this gives number of other bonds. European Central Bank 57 – rise to a balance-sheet liability (see note ). 5 per cent of 2.7 per cent of total rights   European Monetary Institute – 165 Sweden’s capital contribution to the N 2.9 per cent of total rights , , ,  IMF totals SEK million (SDR A Book value, shares and rights 367 475 million) and is booked net of the IMF’s ac- This item comprises a total of SEK  mil-  count for Swedish kronor as the item ‘Re- lion ( million) in the form of advances on Real estate serve position in the IMF’. the banks’ borrowing accounts with the Acquisition value 784 793  , , During the Riksbank advanced Riksbank and SEK million ( Accumulated depreciation SDR . million to the IMF under GAB million) in the form of overnight loans con- prior to current year –282 –263 and SDR . million under NAB, where- nected with fine-tuning transactions. The Accumulated depreciation upon the IMF lent these amounts to Russia purpose of the latter transactions is to fine on items sold during year 33 1 and Brazil, respectively. The Riksbank’s tune liquidity in the banking system so that Current year’s depreciation –18 –20 total GAB and NAB undertakings in re- the aggregate net position in the standing Book value, shares and rights 517 511



SVERIGES RIKSBANK 1998 SEK million 1998 1997 N  claims totalling SEK  million and miscel- Machinery and inventories D,  laneous liabilities for settlement in . Acquisition value 527 469 The accounts with staff associations, Riks- Accumulated depreciation bank employees and others that were N  N prior to current year –280 –244 booked as a net item here for  were Value of banknotes in circulation, by de- Accumulated depreciation closed in the course of . nomination (SEK million) on items sold during year 12 12 Current year’s depreciation –56 – 48 N  Denomination 1998 1997 Book value, machinery   and inventories 203 189 S 1 000 kronor 40,999 39,226 Total fixed assets 1,087 1,175 Statutory deposits by companies, mainly in 500 kronor 29,211 27,157 the form of investment reserves. During 100 kronor 9,431 9,906 The Riksbank’s fixed assets were incorp-  the total in these deposits decreased 50 kronor 955 962 orated in the balance sheet in . The by SEK  million to  million. The de- 20 kronor 1,355 1,366 assets were booked at acquisition values posits in these accounts were to have been 10 kronor 251 277 less depreciation for the years for which the returned to the companies and taxed not 5 kronor 86 92 asset had been held. The Riksbank’s collec- later than in the  tax year (the  tax Total 82,288 78,986 tion of coins and medals is not included in year for companies that were not assessed the balance sheet for tax in ). The amount remaining N  C consists of deposits that have not yet been Value of coins in circulation, by denomina- N  N   returned because of uncertainty about the tion (SEK million) SDRs   IMF depositor. This liability is the counterpart of the Riks- Denomination 1998 1997 bank’s allocation of Special Drawing N  O  10 kronor 1,444 1,371 Rights in the International Monetary Fund.  5 kronor 901 863 The total allocation is currently SDR . 2 kronor 9 9 million (see note ). SEK million 1998 1997 1 kronor 880 843 Liability with National Debt Office 225 247 0.50 krona 208 200 N  O  Suppliers’ claims 41 27 Commemorations coins 538 523  Valuation of forward position – 34 Total 3,980 3,809 This item includes the Riksbank’s SEK ac- Balanced exchange effect counts with other central banks and inter- of ECB/EMI swap – 3,315 N  national organisations (loro accounts). Repos Valuation of ECB/EMI-swap – 212 B  with nonresidents and settlement payables Other liabilities 75 29 This account has been used since  in are also booked here. Total 341 3,864 accordance with the guidelines that the Governing Board set forth that year for the N  The liability with the National Debt Office disposition of the Riksbank’s net revenue. D,  consists of incoming payments that had not Since then, the allocation to the balancing The balance of banks’ deposit accounts been transferred to the Office at the turn of account has been booked on the year’s with the Riksbank, SEK  million ( the year. profit and loss account. million), and deposits arising from transac- The balanced exchange effect and As of  this allocation will be tions for fine tuning and/or market main- evaluation of the ECB/EMI swap were re- booked on the balance sheet for the year in tenance, SEK , million (, million). versed when the swap was settled on  De- which the disposition of net revenue is de- (See note .) cember  (see note ). cided. This is a consequence of the revised Other liabilities include holiday pay Riksbank Act, which stipulates that the



SVERIGES RIKSBANK 1998 Governing Council shall continue to make interest on the net allocation of Special N  proposals for the allocation of net revenue, Drawing Rights in the IMF. The item also A  while the balance sheet and profit and loss includes interest on the Riksbank’s loro ac- account are to be presented by the Execu- counts with foreign banks and organisa- SEK million 1998 1997 tive Board. As before, both the proposals tions as well as expenditure for stock- Notes and coins 100 88 and the accounts are to be approved by the broking fees and charges for safekeeping Premium bonds 12 12 Riksdag. and accounts in the management of the Clearing and settlement 9 10 foreign exchange reserves. In  the lat- Other income 48 39 N  C ter charges amounted to SEK  million ( Total 169 149 The capital account of the Riksbank con- million). sists of: Income from notes and coins is earned on N  T services performed for the Post Office, SEK Million 1998 1997   , banks and other customers, for example Capital 1,000 1,000   counting, quality-sorting and packing of Reserve fund 500 500 The net write-up by SEK , million currency. Contingency fund (, million) includes realized as well as Premium bond income comes mainly Allocations from net revenue 34,800 29,842 unrealized exchange-rate effects on foreign from the Riksbank’s participation in the Write-up of gold reserve 12,686 – assets and liabilities. The positive balance issue and redemption of the National Debt Write-up of fixed assets 627 634 is a combined result of exchange rate move- Office’s premium bonds. Write-up of BIS shares 235 235 ments and the composition of the foreign Clearing and settlement income con- Total 49,848 32,211 reserves. sists mainly of fees from banks and others for participation in the Riksbank’s clearing The Riksbank Act states that the Riksbank N  I  and settlement system (the RIX system). is to have capital in an amount of SEK    , The main items in other income are rent , million, a reserve fund of SEK    and the share dividends from Tumba Bruk million and a contingency fund. Since  This item consists of all coupon interest as and BIS. the contingency fund has been used in ac- well as realized and unrealized profits and cordance with the guidelines set forth that losses on holdings of domestic securities. As N  A year for the disposition of the Riksbank’s a consequence of the year-end valuation at  net revenue. It is also used for entering the market prices, unrealized profits and losses amounts of asset write-ups. in the holding of domestic securities are in- SEK million 1998 1997 cluded in the result. Operating expenses N  I , Staff 302 270   N  I  Information, hospitality 11 11 Interest income as well as realized and un-     , Transport, travel 18 18 realized profits and losses on securities.   Consultant and other services 23 16 As a consequence of the year-end valu- Mainly interest income from the monetary IT expenses 36 27 ation at market prices, unrealized profits policy repos. Economics Prize 13 12 and losses in the holding of foreign secur- Other operating expenses 67 47 ities are included in the result. N  Total operating expenses 470 401 I   , N  I ,   Banknotes and coins 117 164   Mainly interest to banks on their deposit Depreciation 74 68 The greater part of this item consists of accounts with the Riksbank. Total administrative expenditure 661 633



SVERIGES RIKSBANK 1998 Expenditure on information includes costs N  M  tive position with a nominal value of SEK 155 mil- lion, equivalent to a negative market value of SEK for the Riksbank’s regular publications (for 34 million. example the Annual Report, Statistical Pledged collateral Forward interest rate contracts outstanding with a posi- Yearbook, Quarterly Review, Inflation Re- Securities with a face value equivalent to USD 70 mil- tive value at end 1998 totalled SEK 7,961.8 mil- port, and Financial Market Report), infor- lion and DEM 75 million, pledged in connection lion (5,221 million) in nominal terms and SEK with foreign securities repos. 37.9 million (5 million) at market prices. Such con- mation projects, the staff magazine Banco- tracts with a negative value totalled SEK 2,175.8 Securities with a face value equivalent to SEK 1,401 million (5,260 million) in nominal terms and SEK posten et cetera. million, pledged in connection with Swedish securi- 8.1 million (4 million) at market prices. Of the total of SEK  million in  ties repos. Undertaking to pay in an amount equivalent to SDR for transport and travel, foreign travel ac- Securities with a face value equivalent to USD 21 mil- 781.5 million in the form of an additional capital   lion, pledged as marginal collateral. counts for million, travel in Sweden for contribution to the IMF. million and miscellaneous transport for the Gold in an amount of 1.1 million Troy ounces, pledged Agreements whereby the Riksbank guarantees the in connection with gold repos. remainder. value of Swedish Treasury securities and housing The main items under ‘Other operat- Gold in an amount of 2.6 million Troy ounces, ad- bonds that are pledged as collateral for intraday vanced as loans. credits between commercial banks and central ing expenses’ are the Riksbank’s share of banks in the euro area. costs for the liquidation of the EMI (SEK  Contingent liabilities Undertaking to provide the Nobel Foundation with million), the contribution to the Royal Coin Pension commitments totalling SEK 331 million. funds for the annual award of a prize in economic Cabinet ( million), office expenses and sciences in memory of Alfred Nobel. An agreement was concluded in 1998 whereby com- real estate management. puters for home use are leased to Riksbank employ- Expenses for notes and coins totalled ees, who have the option of buying them after three SEK  million, of which  million for years at the current market price. notes,  million for coins and  million for Commitments commemoration coins. Mutual short-run exchange support agreements with the Nordic central banks to provide up to ECU N  O  2,000 million, with the credit provided by any one central bank limited to ECU 1,000 million, except Income that is not assignable to the Riks- that for the Icelandic central bank the limits are bank’s current operations or administra- ECU 200 million and 100 million. tion. The main item in  is a capital Mutual short-run exchange support agreement with gain on the sale of property in Gothenburg. one central bank. Agreement under the General Arrangements to Borrow N  O  (GAB) to provide the IMF with a credit facility of up to SDR 3823 million, of which SDR 32.5 million Expenses that are not assignable to the has been paid out.

Riksbank’s current operations or adminis- Agreement under the New Arrangements to Borrow tration. (NAB) to provide the IMF with a credit facility of up to SDR 8593 million, of which SDR 79.2 million has been paid out. N  T   Guarantee for an amount of USD 300 million on loans to Brazil from the Bank for International Settle- The portion of net revenue that is allocated ments; the Government has decided to request the to the balancing account has previously Riksdag to issue a sovereign guarantee for this com- mitment. been booked through the profit and loss ac- count for the same year. As of the  ac- Standby credits with foreign banks. 2. Amounts are given in the relevant currency; 1998 year-end Undertaking to lend up to USD 312.5 million to South counts this portion is to be entered on the exchange rates, expressed in SEK, are 8.07 for 1 USD, 4,84 Korea as part of a second line of defence. balance sheet in the year in which the dispos- for 1 DEM, 9,48 for 1 ECU, 11,44 for 1 SDR and 2,320.61 ition of net revenue is decided (see note ). At end 1998 there was no outstanding forward cur- for 1 Troy ounce of gold. rency position; at end 1997 there had been a nega- 3. The combined GAB and NAB commitment is limited to SDR 859 million; the IMF carries the credit risks.



SVERIGES RIKSBANK 1998 P       F-  Proposed allocation of net revenue for 1998

The Governing Council of the Riksbank following proposal for the disposition of the has received a report on the  financial Riksbank’s net revenue. year from the Executive Board, in accord- Disposition of net revenue in , ance with Article , Chapter  of the Riks- which totals SEK , million before bank Act (:, with amendments). balance-sheet allocations: The Governing Council considers that the guidelines for the disposition of net revenue SEK million that were set forth by its predecessor, the Transfer to the Treasury 7,600 Governing Board, in  remain appro- To Contingency Fund 10,639 priate for the disposition of net revenue in To Balancing Account 3,624 . On  February  the Governing Total 21,863 Council accordingly decided to submit the

Five-year overview

SEK billion 1998 1997 1996 1995 1994 Balance sheet Gold and foreign assets 136,396 93,449 140,241 171,325 181,786 Domestic assets 76,891 94,545 71,184 85,112 90,319 Fixed assets 1,087 1,175 1,169 864 654 Total assets 214,374 189,169 212,594 257,301 272,759

Foreign liabilities 6,938 6,624 6,583 5,941 6,146 Domestic liabilities 2,035 5,866 37,888 98,129 125,635 Currency in circulation 86,268 82,795 80,791 76,660 76,442 Balancing account and capital 97,270 79,633 73,276 72,025 55,942 Net revenue 21,863 14,251 14,056 4,546 8,594 Total liabilities and capital 214,374 189,169 212,594 257,301 272,759

Profit and loss account Foreign operations 16,497 11,247 14,230 18,546 –727 Domestic operations 5,849 3,901 4,806 666 –8,850 Administrative income 169 149 145 144 131 Administrative expenses –661 –633 –541 –533 –598 Other 9 16 –10 –7 –11 Result before balance-sheet allocations 21,863 14,680 18,630 18,816 –10,055 Balance-sheet allocations – –429 –4,574 –14,270 18,649 Result for the year 21,863 14,251 14,056 4,546 8,594



SVERIGES RIKSBANK 1998 On 27 January 1759 Carl Michael Bellman, better known today as a poet and troubadour, appears before the Bank of the Estates of the Realm to be examined for his insights into studies and bookkeeping:

■ asked, what is posting? Replied, transferring to the ledger. ■ asked, whereto what I owe be entered? Replied, entered as debit Capital account and credit Sundry. ■ asked, how to enter what passeth during the year? Rep: in their particular accounts. ■ asked, be what one has to claim debited? Replied, yes. ■ asked, when capital is borrowed, be it debited or credited? Rep: Credited. ■ When a month be posted, asked, how its accuracy be tested? Repd: by trial balancing. ■ asked, what this doth signify? Rep: see whether the items be correctly entered in debit and credit. ■ asked H. Comm: whether it be not understood by summing? Rep. yes.

Whereafter was granted to him upon request permission now to do service in the Bank.



SVERIGES RIKSBANK 1998 N M P  E S Profounder understanding of welfare issues

L:

1969 R. FRISCH AND J. TINBERGEN

1970 P. SAMUELSON

1971 S. KUZNETS

1972 J.R. HICKS AND K.J. ARROW

1973 W. LEONTIEF

1974 G. MYRDAL AND F.A. VON HAYEK

1975 L. KANTOROVICH AND T.C. KOOPMANS

1976 M. FRIEDMAN

1977 B. OHLIN AND J. MEADE Professor Amartya Sen in an interview in December 1998 at the Royal Swedish Academy of Sciences.

1978 H.A. SIMON The Sveriges Riksbank Prize in Economic values to collective decisions, and the con- Sciences in Memory of Alfred Nobel was ditions which permit rules for decision 1979 T.W. SCHULTZ AND A. LEWIS awarded for  to Professor Amartya Sen, making that are consistent with a sphere of 1980 L.R. KLEIN who has improved the theoretical foundation rights for the individual. By analysing the

1981 J. TOBIN for comparing different distributions of soci- available information about different indi- ety’s welfare and defined new poverty indexes. viduals’ welfare when collective decisions 1982 G. STIGLER are made, he has improved the theoretical 1983 G. DEBREU Instituted in  in connection with the foundation for comparing different distri-

1984 R. STONE tercentenary of the Riksbank, the Sveriges butions of society’s welfare and defined Riksbank Prize in Economic Sciences is new and more satisfactory poverty indexes. 1985 F. MODIGLIANI awarded annually for work in economic In empirical studies, Professor Sen’s appli- 1986 J.M. BUCHANAN sciences of the outstanding importance re- cations of his theoretical approach have en-

1987 R.M. SOLOW ferred to in Alfred Nobel’s will dated No- hanced our understanding of economic vember th, . The Swedish Academy mechanisms underling famines. 1988 M. ALLAIS of Sciences makes the award in accordance Can the values which individual mem- 1989 R. HAAVELMO with the principles for the Nobel Prizes in- bers of society attach to different alterna-

1990 H. MARKOWITZ, M. MILLER AND W. SHARPE stituted under that will and the prize equals tives be aggregated into values for society the amount fixed for each of those prizes. as a whole, in a way that is both fair and 1991 R. COASE theoretically sound? When and how can 1992 G.S. BECKER T  L we compare the distribution of welfare in For  the prize was awarded to Profes- different societies? What are the factors 1993 R.W. FOGEL AND D.C. NORTH sor Amartya Sen, Trinity College, Cam- that trigger famines? By answering ques- 1994 J.C. HARSANYI, J.F. NASH AND R. SELTEN bridge, England, for key contributions to tion such as these, Amartya Sen has made a

1995 R.E. LUCAS JR. research on fundamental problems in wel- number of noteworthy contributions to fare economics. His contributions range central fields of economic science and 1996 J.A. MIRRLEES AND W. VICKREY from axiomatic theory of social choice, opened up new fields of study for re- 1997 R.C. MERTON AND M.S. SCHOLES over definitions of welfare and poverty in- searchers. By combining tools from eco-

1998 A. SEN dexes, to empirical studies of famine. Pro- nomics and philosophy, he has restored an fessor Sen has clarified the conditions ethical dimension to the discussion of vital which permit aggregation of individual economic problems.

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SVERIGES RIKSBANK 1998 P  Press conferences on the Internet

P  A R It can also be mentioned that among the entrants to the Swedish Publishing Prizes for , the Riksbank won first prize in the annual report category.

R    The number of Working Papers published in  was a record,  titles (listed on the website). One Occasional Paper, describing the RIXMOD economic model, was pre- sented.

Periodical publications ■ Annual Report (1/year) ■ Statistical Yearbook (1/year) ■ Financial Market Report (2/year) ■ Inflation Report (4/year) ■ Quarterly Review (4/year)

Ad hoc publications During 1998, a growing proportion of the information provided by the Riksbank was available on the ■ The Euro in the Swedish Financial Sector Internet. This is an idea for the website’s new layout – the Swedish version – from spring 1999. – situation report 2, January 1998 ■ The Euro in the Swedish Financial Sector The Riksbank had launched a home page in Most of the statistics produced by the – situation report 3, January 1999 March , since when there has been a sub- Riksbank are likewise included in the web- stantial increase in the amount of information site. The Inflation Report and the Financial EMI-/ECB-publications ■ Assessment of EU securities settlement systems that is provided about the Riksbank and its op- Market Report are also available, as are against the standards for their use in ESCB credit erations. The major innovation during  most other reports, in PDF files for direct operations – September 1998 ■ Standards for the use of EU securities settlement was the camcorder transmission of Riksbank downloading. Other items are information systems in ESCB credit operations – January 1998 press conferences on the Internet website. about and pictures of banknotes and coins, as well as information about EMU and The website includes information about the links to other central banks and associated amended Riksbank Act that applies as of bodies such as the IMF, the World Bank, . There is a presentation of the Execu- BIS and the ECB. tive Board, together with the Riksbank’s new procedures, including the matters that I  are decided by the different bodies. Current In the spring of  both the content and information about and from the Riksbank the layout of the home page are to be renew- includes press releases, speeches, submis- ed. The Riksbank will also be introducing a sions and minutes from meetings of the Ex- computer game, Star Gold, on its website, All these publications are available free of charge ecutive Board and the Governing Council. with upper secondary pupils as the target from the Riksbank’s Information Centre: A calendar lists the dates of Executive group. The purpose of the game is to pro- Internet: www.riksbank.se Board meetings as well as the publication vide insights into the Riksbank’s primary E-mail: [email protected] dates for the minutes of monetary policy objective, price stability, and the founda- Telefax: +46 8 787 01 26 meetings and the Inflation Report. tions for monetary policy. Telephone: +46 8 787 01 00

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SVERIGES RIKSBANK 1998 C Lowest interest rate since the s

    The official discount rate (reference rate) is The fixed repo rate is lowered by the Riksbank confirmed by the Riksbank Governor at . Governor from . to . per cent with per cent (unchanged). effect from  November.

    The official discount rate (reference rate) is The Riksbank’s deposit and lending rates are confirmed by the Riksbank Governor at . lowered, in each case by . percentage per cent (unchanged). points, to . and . per cent, respect- ively, with effect from  November.   The fixed repo rate is lowered by the Riks-   bank Governor from . to . per cent The fixed repo rate is lowered by the Riksbank with effect from  June. Governor from . to . per cent with effect from  November.   The official discount rate (reference rate) is   confirmed by the Riksbank Governor at . The fixed repo rate is lowered by the Riksbank per cent with effect from  July. Governor from . to . per cent with effect from  December.   The official discount rate (reference rate) is confirmed by the Riksbank Governor at . per cent (unchanged).

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SVERIGES RIKSBANK 1998 PHOTO: MATS LUNDQVIST, NILS-INGVAR SVENSSON. BERNO HJÄLMRUD, JONAS KARLSSON/BILDHUSET, STEFAN BOHLIN, LARS FORSSTEDT, GUNILLA WELIN/ETC BILD, MIKAEL BERTMAR, TORLEIF SVENSSON/TIOFOTO, JEAN-MARC TRUCHET/TONY STONE IMAGES. “C.M. BELLMAN”, P. KRAFFT Snr., NATIONALMUSEUM, STOCKHOLM, SWEDEN. PRODUCTION: INTELLECTA AB AND SVERIGES RIKSBANK. PRINTING: LJUNGLÖFS OFFSET, 1999. ISSN 0347-5042

S R •V : B  •M : SE-  S I: .. •E-: @. •T: +     •T: +    