Riksbank plans about SEK 200 billion of currency loans to hedge its reserve, replacing swaps
Serguey Asael Shinder1 min readSweden's Riksbank announced on 4 November that it plans to finance part of its foreign currency reserve with foreign currency loans taken through the Swedish National Debt Office, in an amount equivalent to around SEK 200 billion. The aim is to reduce currency risk on its balance sheet, and the loans are also intended to replace the FX swaps the Riksbank has used for currency hedging since 2023.
The background is a choice made in 2021, when the Riksbank decided to finance the reserve itself, so that foreign currency assets are matched by liabilities in Swedish kronor. That leaves the balance sheet exposed to exchange rate moves. Borrowing in the same currencies as the assets means the effects of exchange rate changes on both sides cancel out. The Sveriges Riksbank Act of 2023 allows the bank to borrow foreign currency for the reserve, with the Debt Office managing the loans and total borrowing capped at 5% of GDP at the time of the decision.
The Riksbank provisionally intends to start in the first quarter of 2027, provided market conditions remain stable. Implementation combines selling foreign currency for kronor with replacing existing swaps, is expected to take 12 to 18 months and will be spread evenly over the period to limit the effect on the exchange rate. More detail will come with the monetary policy decision in December. The bank stresses that the change is not meant to alter the long-term size of the reserve and serves no monetary policy purpose.
What it means
The move is about the Riksbank's own accounts, not about rates, but the transactions involve selling foreign currency for kronor over a year or more. The even spreading is there precisely so the market does not read it as intervention.