How the Riksbank works with financial stability

Date 09/12/2010

According to the Sveriges Riksbank Act, the Riksbank is to maintain price stability and to promote a safe and efficient payment mechanism. The latter task entails in practice a responsibility for promoting stability in the financial system. Today the Riksbank publishes the brochure “The Riksbank and financial stability”, which describes the Bank’s financial stability work. It corresponds to the brochure entitled “Monetary policy in Sweden”, which describes the Riksbank’s monetary policy objective and strategy.

 

“With this brochure we aim to define financial stability and explain why it is so important for the economy. We also want to explain how the Riksbank promotes financial stability in practice. The brochure gathers together all of the information we have published and communicated earlier on this subject, and also clarifies some of the concepts we often use when we work in this field in practice. In this way, the brochure forms a kind of framework for what we do and why. We hope that this document will help to increase knowledge of how the financial system is structured and functions, and of the Riksbank’s role in this field,” says Governor Stefan Ingves.

 

Financial stability concerns to what extent the financial system can carry out its tasks, which are mediating payments, converting savings into funding and managing risk. In the brochure the Riksbank defines financial stability as meaning that the financial system can maintain its basic functions and also has resilience to disruptions that may threaten these functions.

 

The recent financial crisis, like earlier crises, has shown that the development of financial activities requires constant new thinking in the field of financial stability. At present there are discussions, for instance, on the need to develop macroprudential policy and produce tools to oversee and counteract the build-up of systemic risk. The international discussions and the on-going inquiry work in Sweden will soon lead to further decisions affecting the scope and design of the Riksbank’s work on promoting financial stability. The brochure “The Riksbank and financial stability” will therefore be regularly reviewed and updated.