af Jochnick: Does the Riksbank have to make a profit?
First Deputy Governor Kerstin af Jochnick holds a speech on Friday morning saying that the Riksbank needs to make a profit in the long run to be able to cover the costs of its operations and thus safeguard its independence from the government and parliament. "We must be able to build up buffers so we do not jeopardise our ability to perform our tasks," says Mrs af Jochnick.
The Riksbank's assignments are to maintain price stability and to promote a safe and efficient payment system. "So does the Riksbank need to make a profit?" asks Mrs af Jochnick. She goes on to say, "A profit only becomes important when it affects the balance sheet and thereby the Riksbank's ability to carry out its tasks."
"The main reason why I have chosen to talk about the Riksbank's possibilities to make a profit is that it is not self-evident that the Riksbank will always report large profits year after year." The coming five-year period looks rather gloomy from this perspective.
One needs to understand the Riksbank's balance sheet to be able to understand the Riksbank's capacity to make a profit. This has changed over the past ten years as a result of the active decisions to reinforce the foreign currency reserve and re-introduce a portfolio of Swedish securities, and also as a result of the decline in the use of cash. The extremely low interest rates here in Sweden and abroad also have an effect on the capacity to make a profit. All in all, this leads to the Riksbank's profits shrinking.
"Today the Riksbank is financially strong, which will be necessary over the coming years when we will not make any profit," observes Mrs af Jochnick. And she points out that the Riksbank does not need to make a profit every year, but that in the long run this should work to safeguard the bank's independence. "We need to consider more closely the challenges the Riksbank's funding is facing," she concludes.
Read the entire speech: Does the Riksbank have to make a profit?
