CRE valuations have fallen by about 10 per cent from their peak in June 2022 and equity valuations of European real estate groups continue to fall.6 In this context, the ESRB issued a Recommendation earlier this year to help address vulnerabilities in CRE markets.7 The sector is particularly vulnerable to lower growth, heightened inflation and higher interest rates. Rising vacancy rates result in lower income streams and lower property values. Lower collateral values and tighter financing conditions reduce CRE investors’ scope for refinancing existing debt and for taking out new loans. This, in turn, may force some investors to sell properties to meet maturing debt obligations and liquidity needs, even under stressed market conditions, thereby adding further downward pressure on prices. The cyclical vulnerabilities are compounded by adverse factors that relate to structural change. They include the impact of climate-related economic policies, the shift towards e-commerce and a greater demand for flexible office space to accommodate mobile and hybrid working models. And large falls in CRE prices could lead to spillovers on the financial system. Let me now turn to risks related to financial market corrections. This is important as all financial institutions, including banks and non-banks, interact in financial markets. Such asset price corrections and heightened volatility could be exacerbated by vulnerabilities in the non-bank financial sector. In fact, there have also been several episodes of market volatility in recent months that resulted in liquidity challenges for non-bank financial intermediaries.
These different agents may have different opinions as to what level is most appropriate for business continuity and crisis recovery planning. The Riksbank’s tasks The Riksbank’s role with regard to business continuity and crisis recovery planning can be divided into two areas. One of these concerns our role in mediating cash and payments and the other is our role of overseeing financial stability. With regard to the first role, the Riksbank issues banknotes and coins. We are also responsible for the system that makes large-value payments between the banks and for lending money intraday so that these payments can be made. The business continuity and crisis recovery planning for cash management is aimed at security for values and personnel and also reliability of supply. With regard to the RIX system, the business continuity and crisis recovery planning are aimed at being able to continue activities despite problems. It is also a question of maintaining a capacity to trace and remedy faults. The ultimate purpose of the Riksbank’s role as overseer of financial stability is to prevent both conventional and financial crises in the financial system. In concrete terms, the work entails following developments in the financial sector in the short term, primarily in the major banks, and working with structural changes, crisis management and regulation. An important part of the Riksbank’s work in this field concerns cooperation with other authorities and companies in the financial sector.