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Annual report 2008 SVERIGES RIKSBANK To order this publication, contact Sveriges Riksbank, Kontorsservicecenter, 103 37 Stockholm, Fax +46-8-21 05 31. E-mail: [email protected] or download from the website: www.riksbank.se. Production: Sveriges Riksbank. Graphic design: LOG. Photography: Cover: Petter Karlberg/Bravidas bildbank. Lars Trangius. Bobby Yip/Reuters/SCANPIX. Leif R Jansson/SCANPIX. Insert: Lars Trangius: pages 7, 10, 22, 36, 90. Dan Coleman: pages 56, 58, 59, 60. The Riksbank: pages 11, 39. Page 13 Anders Wiklund/SCANPIX. Page 16 Joseph Sohm/Corbis/SCANPIX. Page 24 Matton Images. Page 33 Marc Femenia/SCANPIX. Page 43 Mark Earthy/ SCANPIX. Page 50 Matton Images. Page 53 Pontus Lundahl/SCANPIX. Employees on the front cover: Lotta Allvin, Carl Fredrik Pettersson and Annika Svensson. Printers: Jernström Offset. ISSN 1400-4259. Stockholm 2009. ■ Contents Introduction 4 The year in figures 4 Summary 5 Statement by the Governor 6 AdMInISTRATION REPoRT The tasks and role of the Riksbank 9 Maintaining the value of money – price stability 10 A safe and efficient payment system 22 Asset management 36 Statistics 46 International cooperation 47 Organisation and management 49 Employees 53 Governance 55 BALANCE SHEET AND PRoFIT AND LoSS ACCOUNT Accounting principles 61 Balance sheet 64 Profit and loss account 66 Statement of cash flows 67 Notes 69 The Riksbank's administrative expenses by area of activities 77 Five-year overview 79 Proposal for the allocation of profits for 2008 81 Auditor's report 82 oTHER ITEMS The Riksbank's consultation work 83 Publications 85 Glossary 86 The Sveriges Riksbank's Prize in Economics Sciences in Memory of Alfred Nobel 2008 90 I ntroduction 4 ■ Introduction Sveriges Riksbank is the central bank of Sweden and a public authority under the Riksdag, the Swedish parliament. The Riksbank is responsible for monetary policy with the objective of main- SVERIGES RIKSBANK 2008 taining price stability. The Riksbank’s activities also include promoting a safe and efficient payment system. The Riksbank has around 345 employees (FTEs) and is governed by an Executive Board consisting of a Governor, Stefan Ingves, and five deputy governors. The members of the Executive Board are appointed by the General Council of the Riksbank for a term of office of five or six years. The year In figures The Riksbank's net income in 2008 amounted to licy counterparties accounts for the major part sek 11.2 billion, which is an increase of sek 7.1 of this increase. billion compared with 2007. The increase is partly due to the fact that the Riksbank increased Key figures 2006 2007 2008 its borrowing to the Swedish banks in connection At year-end with the financial crisis in the autumn, which Net income (SEK billion) 7.9 4.1 11.2 led to an increase in net interest income of sek Gold and foreign exchange 1.5 billion. The management of the Riksbank's reserves (SEK billion) 189 185 220 assets also benefited from the changes in exchan­ Total assets (SEK billion) 201 212 700 ge rates and the falling market rates of interest. Average number of employees 376 364 348 Net income increased by sek 2.6 billion as a re­ sult of the exchange rate effect and by sek 2.1 Repo rate (per cent) 3.00 4.00 2.00 billion as a result of the interest rate effect. Short-term interest rate (3-month T-bills, per cent) 3.10 4.18 1.36 The market value of gold and the currency Long-term interest rate reserve increased from sek 185 billion to sek (10-year government bonds, 220 billion, which is mainly because the Swedish per cent) 3.81 4.35 2.43 krona weakened during the year and the market rates of interest fell. Annual averages The value of the Riksbank's assets increased GDP (percentage change) 4.2 2.5 0.9 from sek 212 billion in 2007 to sek 700 billion Unemployment (per cent) 7.0 6.1 6.2 as a result of the Riksbank's measures to facilitate Inflation, CPI (percentage change) 1.4 2.2 3.4 funding for the banks and to stabilise the situation Note. The figures for GDP and unemployment in 2008 are in on the financial markets. The lending ofus accordance with the Riksbank's forecast from December 2008. dollars and Swedish krona to the monetary po­ I ntroduction Summary 5 ■ The Riksbank's work during the year was on 8 October. In order to mitigate the effects marked by the fact that the problems in the of the financial crisis on production and em­ us financial system had a steadily increasing ployment, and at the same time meet the in­ impact on the Swedish financial market. In flation target, the Riksbank cut the repo rate September, the situation on the international by a further 0.5 percentage points in October financial markets changed dramatically. What and by an additional 1.75 percentage points SVERIGES RIKSBANK 2008 had previously been referred to as a period of in December. At the end of the year, the repo financial turmoil now became a global finan­ rate was 2.0 per cent. cial crisis. The financial markets did not func­ tion normally, and in some cases not at all. ■ Inflation measured as the change in the The Riksbank, as well as the National Debt Consumer Price Index (cpi) averaged 3.4 per Office and the Government, therefore imple­ cent during the year. The rate of inflation fell mented a range of measures to make it easier from 4.4 per cent in September, which was for the banks to find funding and thus to con­ the highest recorded level since 1993, to 0.9 tinue supplying credit. These measures helped per cent in December. The relatively high level to improve the functioning of the financial of average inflation during the year was main­ markets. ly a result of dramatic increases in energy and food prices. According to the Riksbank's latest ■ The Riksbank offered the central banks of assessment, economic growth in Sweden was Iceland and Latvia eur loans against collate­ 0.9 per cent. ral in their domestic currencies. This support was part of a range of measures taken by cen­ ■ The Riksbank reported a net income of sek tral banks and the imf to reduce the risk of 11.2 billion. This result was partly affected by the local financial crisis in the two countries the fact that the Riksbank increased its borrow­ from spreading to other countries in the region, ing to the Swedish banks in connection with including Sweden. The measures helped to the financial crisis in the autumn, which led provide a sound basis for long­term macro­ to an increase in net interest income of sek economic and financial stability in these 1.5 billion. The management of the Riksbank's countries. assets also benefited from the changes in ex­ change rates and the falling market rates of ■ Over the course of the first eight months of the interest. Net income increased by sek 2.6 bil­ year, the repo rate was increased from 4.0 per lion as a result of the exchange rate effect cent to 4.75 per cent as a result of rapidly ris­ and by sek 2.1 billion as a result of the inte­ ing inflation. The economic situation changed rest rate effect. during the autumn, however, due to develop­ ments on the financial markets. There was a ■ During the year, the Riksbank published three risk that the global financial crisis would signi­ Monetary Policy Reports, three Monetary ficantly aggravate the international economic Policy Updates, one report entitled "Material downturn. The Riksbank and a number of for Assessing Monetary Policy" and two Finan­ other central banks therefore cut their policy cial Stability Reports. rates by 0.5 percentage points in a joint action S TAT E M E N T B Y THE GOVERNOR 6 ■ Statement by the Governor 2008 was a very eventful year. The spring and the summer were marked by considerable increases in energy and food prices and inflation reached its highest level for 15 years. In the autumn, however, SVERIGES RIKSBANK 2008 there was a turnaround when the effects of the US financial crisis began to spread and had an unexpectedly serious impact in Sweden too. The course of events at home and abroad required a very rapid and flexible response on the part of the Riksbank. All of our work in this regard was characterised by a high level of quality and efficiency in our effort to live up to the vision we adopted in 2006 – to be among the best in terms of quality and efficiency in order to maintain a high level of confidence. Recent developments clearly show how closely ment around the world as a result of the unease the Riksbank's main tasks – monetary policy and on the financial markets. In order to bring infla­ financial stability – are linked. Our most impor­ tion back to the target a couple of years ahead, tant tool in conducting monetary policy is the and to prevent the increase in energy and food repo rate. We try to influence economic activity prices from spreading to other areas, we increased and inflation by steering the price of credit, that the interest rate from 4.0 to 4.75 per cent. From is, interest rates. For the Riksbank to be able to mid­September, however, the unease on the in­ do this, however, the payment system and the ternational financial markets changed dramati­ credit markets must function so that our interest cally to become a full­blown financial crisis, and rate decisions have an impact on other interest Sweden was also affected.

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