This should be set against the Riksbank’s costs for conducting its operations, which amounted to around SEK 750 million a year. Net interest income was thus almost ten times higher than expenditure. If we make the same calculation for 2014, the picture is rather different. Based on the interest rates that applied at the turn of the year, net interest income is around SEK 3.5 billion. Now the bank also has sizeable interest expenditure amounting to SEK 2.4 billion (and this despite the repo rate being zero, so the bank does not pay interest on liabilities in Swedish krona). Net interest income is thus SEK 1.1 billion, which still covers the costs of conducting the bank’s operations – but now with a much smaller margin than before. As you can all see, this is a very rough and simplified calculation. The return on a bond portfolio is not just determined by the interest rate at a particular point in time, but also by the yield curve and how it moves over time. We have calculated this, too, and when we estimated the expected return on the foreign currency reserve, we have used data from interest rate forecasts by the National Institute of Economic Research.6 From 1988 onwards, the Riksbank’s results have on average exceeded SEK 8 billion a year. I have chosen 1988 as starting year as this was when we began to apply the principles for how to calculate the size of the dividend, which still apply today.
This is reflected in the diversity of banking services and products offered in the Kingdom and their highly advanced level. Currently, 15 banks are operating in the Kingdom with a network of 1,251 branches at the end of the first quarter of 2006, including the branches of Gulf and foreign banks such as the Gulf International Bank, the Emirates Bank, BNP Paribas and Deutsche Bank which was opened last week. In addition, licenses were granted to several Gulf and foreign banks to open branches in the Kingdom. Also, the establishment of a Saudi bank with a paid-up capital of Rls 15 billion has been approved. Preparations are currently underway on finalizing the procedures of its establishment under the name of “Bank AlEnma”. On this occasion, I congratulate the NBK on the commencement of its operation in the Kingdom, and I wish the Bank and its staff good luck and success. BIS Review 70/2006  1