12  The new committee for financial stability at the Bank of England will take responsibility for decisions on macrostability, but not traditional supervisory issues, which will also be moved to the Bank of England. The new committee partly consists of the same people as the monetary policy committee. 12  BIS central bankers’ speeches  the krona’s exchange rate if necessary. However, it has not been used for this purpose since 2001, and, when it was used, the results were unfavourable. The financial crisis made abundantly clear that the foreign currency reserve was also needed to provide the banks with liquidity in foreign currency in the event of a crisis. This is a matter of the central bank’s fundamental function as lender of last resort. As I mentioned earlier, it can no longer be seen as only concerning liquidity in kronor. Of the four major banks’ lending to the public of about SEK 7 000 billion, about SEK 2 500 billion was funded with securities issued in foreign currencies, of which about half had times to maturity of less than one year. The Riksbank’s gold and foreign currency reserve was not enough to meet the need for dollars that arose during the crisis. This amounted to about SEK 200 billion and was invested in various currencies and different types of asset. During the autumn of 2008, our lending in dollars peaked at about SEK 250 billion.
The weakening of the US currency resulted in a further decrease in the dollar’s share of foreign currency reserves. Recently, in an effort to prevent the dollar’s share from dropping too low and with a view to rebalancing, we bought dollars again on a number of occasions. Furthermore, as part of the 2004 strategy, the proportion of government bonds was also reduced in favour of other borrowers’ bonds. The required minimum rating for bond investments was lowered from A2 to BBB, thus covering the entire “investment grade” range. Corporate bonds have now also been added to the National Bank’s investment universe, albeit only those of foreign companies. Currently, roughly 4% of both foreign currency reserves and free assets are invested in corporate bonds. The credit quality of all our investments is still very high. Borrowers with the top rating AAA account for over 70% of the investments. Close to 20% bear the AA rating. The remaining investments have an A or a BBB. The average residual maturity (duration) of all bonds held by the National Bank was kept at 4-5 years. The first investments in equities issued exclusively by foreign companies will be made at the beginning of 2005. The addition of equities and corporate bonds is likely to improve the degree of diversification of the investments and will contribute to the achievement of slightly higher returns in the medium term. The main difference between the investment structures of foreign currency reserves and free assets is their currency profile.