(Figure 3)  3  4  The term “lender of last resort” refers to the central bank’s ability to inject money into the financial system. BIS central bankers’ speeches  Figure 3 The Riksbank’s lending SEK, billions  Source: The Riksbank. We also provided special liquidity assistance to two smaller banks. When the Icelandic bank Kaupthing was impacted by the problems in Iceland, the Riksbank provided its Swedish subsidiary with liquidity assistance. Carnegie Investment Bank also received liquidity assistance when it encountered problems with its funding shortly thereafter. It was against this background of unease on the financial markets and the insufficient legislation we had at that point for managing banks in distress that the Riksbank made the assessment that defaults by any of the banks could give rise to serious problems for the financial system. Under other circumstances, this assessment would probably have been different. The Riksbank was also very active in the international cooperation to strengthen financial stability in our neighbouring countries. Together with the central banks of Denmark and Norway, we entered into a swap agreement with Iceland’s central bank and, together with Denmark’s central bank, we entered a swap agreement with Latvia’s central bank while awaiting support from the International Monetary Fund (IMF). The Riksbank also entered into a swap agreement with Estonia’s central bank. In addition, the Riksbank contributed towards strengthening the IMF’s lending capacity. Sweden’s commitments to the IMF increased heavily during the crisis and now amount to a maximum of over SEK 100 billion.
I hope today’s deliberations would guide the relevant committees and those who are associated in policy formulation to take this important initiative forward. Thank you. 2/2