Sweden's Riksbank and the Swedish National Debt Office publish joint approach to liquidity support for banks in resolution

The Swedish National Debt Office and Sweden's Riksbank have published a joint approach to temporary liquidity support for banks placed into resolution, aiming to clarify for market participants how a bank’s liquidity can be secured during restructuring while maintaining the principle that owners and creditors, not taxpayers, finance the bank. The approach describes how the Swedish National Debt Office, as resolution authority, can support liquidity by issuing guarantees to enable wholesale market funding or by granting credit to a bank in resolution or a bridge institution, including by guaranteeing a Riksbank loan where needed. Support is financed via the resolution reserve funded by fees from Swedish credit institutions, which totalled about SEK 61 billion at end-2024, with additional capacity to borrow up to SEK 100 billion from the central government and issue guarantees up to SEK 200 billion without a parliamentary decision, and to levy additional fees to rebuild the reserve. If guarantees are unlikely to be sufficient to secure new wholesale funding, the Riksbank is prepared to provide special liquidity support (emergency liquidity assistance) against collateral, and banks in resolution may also have access to the Riksbank’s standard intraday and overnight facilities if they participate in RIX or are monetary policy counterparties. Terms will be set case by case to preserve market discipline and be compatible with state aid rules and the EU prohibition on monetary financing.