SPEECH DATE: 29/01/2018 SPEAKER: First Deputy Governor Kerstin af Jochnick LOCALITY: Sveriges riksbank, Stockholm  SVER IG ES R IK SB AN K SE-103 37 Stockholm (Brunkebergst org 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn @ riks ban k.se www.riksb ank.s e  How the Riksbank contributes to financial stability* In Sweden we have a large financial system, which contributes positively to jobs and growth. But it also entails risks, not only for financial companies, but also for the entire Swedish economy. We have in modern times experienced two bank crises, which the responsible authorities have succeeded in managing in a good way, but which have in the long run lowered production levels and thus general welfare in Sweden. Discussing what central banks and other authorities do in the field of financial stability is therefore important. Right now it is particularly interesting to discuss what the Riksbank does, as the Riksbank Committee is in the process of reviewing the Sveriges Riksbank Act. One of the areas the Committee is to analyse is precisely the Riksbank's responsibility for financial stability, and it is good that this is clarified. The current act says that the Riksbank shall "promote a safe and efficient payments system”. The concrete meaning of this text is not self-evident, but the Riksbank has interpreted it as a task of promoting financial stability.
However, it is important that there are also good forms for discussion, cooperation and consultation between the authorities and the Financial Stability Council is one useful forum for this. The Riksbank's voice on liquidity issues should carry particular weight For the Riksbank, with its central role in providing liquidity to society, the management of liquidity among participants in the financial system is particularly important. The first sign of a financial crisis – regardless of whether it concerns an individual institution or the financial system as a whole – is namely often a shortage of liquidity. By acting as lender of last resort and using its balance sheet, the Riksbank is therefore usually the public authority that first takes action in a financial crisis. In the same way as the fire brigade tries to work on prevention by reducing the risk of fires, it is reasonable that the Riksbank should in various ways contribute to reducing the risks of a financial crisis. It is therefore natural that the Riksbank should analyse and comment on regulations that affect the probability of Sweden suffering a financial crisis, and also the cost of the crisis if it should  10 [12]  come to that. My view is that the Riksbank's voice should carry particular weight with regard to liquidity issues, given our central role in supplying liquidity. There are many different ways of formalising this.