MNI BRIEF: Thedeen Unveils Riksbank Liquidity Facility Rethink

The Riksbank could change interest rates on its liquidity and lending facilities as it seeks to ensure that commercial banks use them in times of tight liquidity but borrow and lend reserves more among themselves as the central bank's balance sheet is slimmed down, Governor Erik Thedeen said Thursday.

Thedeen said banks had been reluctant to borrow from the Riksbank during periods of money market volatility and one step being considered is lowering the Supplementary Liquidity Facility's interest rate, which is currently 0.75 percentage points higher than the policy rate. The SLF accepts a wider range of collateral and should boost liquidity in times of stress.

The Riksbank has made rapid progress on quantitative tightening and Thedeen said banks should prepare to borrow and lend reserves more among themselves as reserves diminish and, if necessary, the central bank may adjust interest rates on its deposit and lending facilities to achieve this.