Eva Srejber: How the Riksbank's financial assets are managed Speech by Ms Eva Srejber, First Deputy Governor of the Sveriges Riksbank, at the Handelsbanken, Stockholm, 25 April 2006. References and diagrams to the speech can be found on the Sveriges Riksbank website, www.riksbank.com. *  *  *  Let me begin by thanking you for the invitation to come here and speak about the Riksbank’s financial asset management. The reason that I wish to take up this question is that, as you know, we recently changed the currency allocation in our foreign exchange reserve. This change is part of the general review of financial asset management that has been under way at the Riksbank for some time. In order to avoid any confusion with regard to what lies behind overall changes in our financial asset composition, it is important to explain the principles for our asset management. On a general plane, the Riksbank does not differ from other asset managers. Like them, we endeavour to generate earnings for our owner, in our case the general government. It is instead the way our management is limited that makes the Riksbank, like other central banks, different. Central banks exist ultimately to carry out a number of tasks crucial to the economy, which are linked to monetary and exchange rate policy and the functioning of the payment system. For us at the Riksbank it means that we are to ensure that inflation is low and to promote the safe and efficient functioning of the payment system.
In response to the wider environment, constant adaptation is needed both of the architecture itself and the institutions within it, such as the IMF. In terms of our quest for financial stability, this focuses specifically on sovereign debt, crisis prevention and resolution. Progress has been made since the Asian Crisis, but significantly more is needed to build on the emerging elements of the exceptional access framework, and the Fund’s lending-into-arrears policy, but also Collective Action Clauses, and the recently devised Principles for Stable Capital Flows and Fair Debt Restructuring in Emerging Markets. In using the matrix to categorise sources of threat there are of course a number of ways one could cut the cake. Credit exposure to emerging sovereign debtors for example can appear in the “credit” and “international architecture” boxes. iii)  Activities  Now we can move to the rows. To use the matrix as a location device to focus our efforts, decide on deliverables and enhance our resource allocation, we need to create the “boxes” by considering the types of activity we could undertake to address each main source of threat – the rows. a)  Assessment of Threats  Firstly we need to evaluate threats to the system. We need a process of data collection and assessment to analyse information and market intelligence from multiple sources. This “horizon scanning” enables us to get early warning of how and where threats could appear. We cannot do all this without knowing how markets work.