Liquidity facility rate cut, collateral limit removed by Riksbank
The Riksbank has cut the interest rate mark-up on its supplementary liquidity facility from 0.75 to 0.30 percentage points above the policy rate. Additionally, the 60 percent limit on covered bonds as collateral has been removed. These operational changes take effect on 8 April 2026.
Lower cost, broader access for bank liquidity
The Riksbank is reducing the interest rate mark-up on its supplementary liquidity facility from 0.75 percentage points to 0.30 percentage points above the policy rate.
This adjustment aims to strengthen the incentive for banks to utilise the facility for overnight borrowing against collateral.
Concurrently, the central bank is removing the previous 60 percent limit on covered bonds as collateral for loans from both overnight facilities and the supplementary liquidity facility.
These combined measures, effective 8 April 2026, are designed to make the facility more accessible and reduce the threshold for banks to use it when needed, ensuring well-functioning liquidity management and stable money market rates.
Adapting to less surplus liquidity
The changes are part of the Riksbank's long-term strategy to facilitate banks' adjustment to an environment with less surplus liquidity.
In recent years, the Riksbank's substantial holdings of securities led to abundant liquidity in the banking system.
As the central bank reduces these holdings, the overall liquidity decreases, placing greater demands on banks to actively manage their surpluses and deficits through interbank lending.
The standing loan facilities, including the supplementary liquidity facility, are intended for banks to use when market liquidity is difficult to obtain and short market rates rise above the Riksbank's lending rates, thus supporting the overall operational framework for monetary policy implementation.
Crucial for market stability
These adjustments to the supplementary liquidity facility represent a proactive measure by the Riksbank to guide banks through a transition to lower surplus liquidity.
By reducing the cost and increasing accessibility, the central bank aims to ensure money market rates remain close to the policy rate, thereby enhancing monetary policy transmission.
While operational, these changes are crucial for maintaining financial stability in a shifting liquidity landscape.