The Riksbank has the sole right to issue banknotes and coins in kronor. This comprises the single largest item on the liability side of the balance sheet. The size of this item is governed entirely by the general public’s demand for cash. 1  The currency assets in the foreign exchange reserve are invested in foreign fixed-income securities. Just over 90 per cent of the capital is invested in government bonds and the remainder in US agencies. 2  For further reading on the role of the gold reserve, see Henriksson (2002). 3  With the aim of counteracting a fall in gold prices, 15 European central banks agreed in September 1999 that they would regulate the sale of their gold holdings during a five-year period. This agreement was renewed in 2004. 4  For a detailed survey of the Riksbank’s steering interest rate system, see Otz (2005). 5  This works by means of the Riksbank selling kronor for euro on the spot market and investing the euro on deposit. At the same time, a forward agreement is made to repurchase the kronor up to six months later. Forward agreements are signed to eliminate currency risks. The average duration in the swap portfolio should be three months. BIS Review 33/2006  1  We also need our own capital in order to cover losses that may arise in our activities.
And the key to that is that both the Bank and the FSA should have a clear understanding of their respective responsibilities, and that they should continuously work very closely together to ensure that they keep sufficiently out of each others hair without letting things disappear between the cracks! Our ongoing relationship was formalised during the summer in a Memorandum of Understanding (MOU) agreed between the Bank, FSA and the Treasury. This defines very carefully our respective responsibilities and provides for both the Bank and the FSA to exchange information freely and to consult where our interests interact or overlap. It helpfully establishes a high-level Treasury-Bank-FSA Standing Committee, which will provide a forum in which a common position can be developed in relation to emerging problems. And, as a further means of ensuring that we are aware of each other’s concerns, the Chairman of the FSA will become a member of Court, while the Deputy Governor responsible for Financial Stability will serve on the FSA Board. In the end the success of these arrangements will depend upon the working relationships between our respective staff at all levels, and it is helpful in this context that our own supervisory staff are moving to the FSA which will help to ensure that we establish the right working relationships from the beginning. But we will need to work at these relationships continuously to ensure that they are embedded into the future.