May 3: Sweden’s central bank may need to have some of its age-old laws changed if it’s to act on a pledge to do “whatever it takes” to save the economy.
The Riksbank’s 352-year history gives it the distinction of being the world’s oldest central bank. But the legislation governing it has yet to catch up with the kind of policy it needs to deliver to address the crisis triggered by Covid-19, Bloomberg reported.
Specifically, the Riksbank doesn’t have the legal right to buy bonds issued by companies, even though it’s made clear it’s ready to do so as part of a recent package of emergency measures.
“The intention of the current Riksbank Act doesn’t allow the bank to make outright purchases of corporate bonds or other private securities on the primary or secondary markets,” said Niklas Schullerqvist, secretary to the parliamentary committee charged with overhauling the bank’s policy framework.
So far the Stockholm-based central bank has bought 5.6 billion kronor ($568 million) of corporate commercial paper as part of an emergency quantitative-easing plan. But it’s refrained from buying corporate bonds — an important source of financing in the biggest Nordic economy — despite repeated assurances it will so.
Schullerqvist says the Riksbank needs to consider European Union legislation on state aid as corporate bond purchases “may be considered supporting some specific parts of the economy.”
Riksbank spokesman Tomas Lundberg said the bank’s legal team is looking into the matter, but wouldn’t comment further because “it’s an ongoing process.”