Sweden's monetary policy is highly transparent, according to the International Monetary Fund's (IMF) 2002 Financial System Stability Assessment (FSSA). According to the FSSA, there is high compliance with the IMF's code of monetary policy transparency, and the roles, responsibilities, and objectives of the relevant agencies -- the Sveriges Riksbank (SR), the Financial Supervisory Authority (FI), and the National Debt Office -- are clearly delineated in law. The FSSA suggested that there could be greater clarification as to the SR's autonomy in exchange-rate activities and a greater distinction between the roles of the SR and the FI in certain areas of mutual responsibility. Sweden is a subscriber to the IMF's Special Data Dissemination Standard (SDDS), and meets or exceeds all requirements for timeliness, periodicity, and coverage as established by the SDDS.

General Overview

Although a European Union (EU) member state, Sweden has not adopted the Euro. It therefore is not a member of the European Monetary Union (EMU) and retains full control over its monetary policy. According to an online publication, "Sweden and the EMU" offered on the Ministry of Finance (MoF) website, the Swedish parliament has held the position that joining the EMU could only occur if the Swedish people expressly approved such an action. A national referendum was held in 2003 to seek such approval, but EMU participation was rejected by a vote of 56% against. A primary concern expressed by those voting for participation was that by remaining outside the EMU, Sweden might lose economic influence within the EU as a whole. While Sweden does in fact fulfill three out of four EMU convergence criteria, it fails to fulfill the exchange-rate stability criterion set by the European Exchange Rate Mechanism (ERM2). In addition, the Riksbank Act does not fully comply with Maastricht Treaty requirements.

The most recent IMF FSSA devoted at least in part to Sweden's monetary policy transparency was published in 2002 and based on a self-assessment by the Central Bank of Sweden (Sveriges Riksbank, or SR). The FSSA found that the "monetary policy system in Sweden is characterized by a particularly high level of transparency" (p. 65) and that Sweden has "a culture of transparency and demonstrates a high degree of compliance with the IMF code" (p. 8). Public scrutiny of the policy process is a long-standing tradition, and the SR routinely provides explanations of its policy decisions. The public has confidence in the integrity of the system because of the institutional framework, structures, and practices that comprise the Swedish monetary policy system. The FSSA reported that legislation provides a clear allocation of the monetary policy roles, responsibilities, and objectives to the SR, Swedish Financial Supervisory Authority (Finansinspektionen, or FI), and the Swedish National Debt Office (Riksgalds Kontoret, or RGK). The text of this legislation is publicly available. Both the SR and the FI disseminate to the public not only regular reports, but also such information as the minutes of the board meetings and public addresses made by senior central bank staff. Nonetheless, whereas Sweden received a highly positive assessment in the 2002 FSSA, the report still found that "some aspects of transparency could be improved" (p. 23) and offered a number of recommendations designed to achieve that end, all of which related to clarity of roles, responsibilities, and objectives. The IMF suggested : (1) greater transparency in the handling of insolvency by systemically important banks; (2) that greater operational discretion be accorded the SR with regard to exchange rate interventions, and that this discretion be spelled out explicitly in the Foreign Exchange Rate Policy Act; and (3) that the respective responsibilities and roles of the SR and the FI be more clearly spelled out as they pertain to payment and settlement system supervision. The Swedish authorities concurred with these findings, and planned to issue a memorandum of understanding specifically addressing the third recommendation.

The Executive Director's Statement appended to the 2006 IMF Article IV Consultation report (published in 2007) noted that monetary policy continues to undergo development. The SR published a clarifying statement in 2006 that more closely defined the central bank's monetary policy goal and strategy. A tightening of monetary policy was presupposed, with increases in the policy rate occurring in 2006 and projected for 2007. The experience of below-target inflation in 2005 and 2006 was attributed by both the SR and the IMF staff to high growth in productivity, and low growth in labor costs, as well as an appreciation in the value of the krona and slow import price growth. Some of these conditions were expected to change in 2007 and 2008, particularly the productivity growth rate and the unit cost of labor as the employment rate rises. However, it is expected that the krona will continue to appreciate, and energy prices are likely to level off. This should lead to a gradual increase in inflation, bringing it close to the policy target.

Sweden is a subscriber to the IMF's SDDS and meets or exceeds all requirements for timeliness, coverage, and periodicity of its monetary data. According to the SDDS website, the Riksbank Act of 1988 provides the legislative framework governing data compilation, analysis, and dissemination of monetary data. Data is released simultaneously to all interested parties, summary methodologies are made available in all relevant datasets, and advance release calendars are published.

The Principles

Clarity of roles, responsibilities and objectives of central banks.

FC

According to the IMF's 2002 FSSA, the SR's position as Sweden's monetary authority is guaranteed by the Constitution, which creates the central bank, establishes its responsibility for monetary policy, and makes it accountable to parliament. The bank's specific objectives and the tools by which it is to achieve them receive further elaboration in the Riksbank Act. This Act also allocates to the SR the task of implementing the government's foreign exchange rate policy. Legislation expressly prohibits the SR from lending directly to the government or from purchasing government debt instruments directly. The FSSA found, however, areas where ambiguity remains. For instance, it was possible for the government to choose an exchange rate regime that conflicted with the SR's monetary policy objective. Swedish authorities countered this observation by arguing that the government must appeal to the SR for authorization prior to selecting its regime, and the SR retains implementational authority over the process. Nonetheless, the IMF suggested that the SR be given "operational discretion to determine the intervention bandwidths and the central rate for the exchange rate should be explicitly mentioned in the Foreign Exchange Rate Policy Act" (p. 72). This would eliminate the potential for conflict between the government and the bank on policy objectives in this area. In addition, the IMF called for greater clarity in allocating the responsibilities of the SR and the FI, particularly regarding financial and payment system supervision. Swedish authorities noted that they would issue a MoU regarding this point.

Open process for formulating and reporting monetary policy decisions.

FC

The SR is Sweden's monetary authority, by law -- specifically, the Riksbank Act -- and its roles and responsibilities are transparent and well-defined, according to the 2002 IMF FSSA. The SR's executive board bears responsibility for decision-making, independent of interference by the executive or legislative branches of government. The Riksbank Act sets out the conditions by which a board member is appointed or removed. Policy meetings are announced in advance on SR's website and via press releases. Meetings are held between eight to ten times annually, and the minutes of the meetings are available to the public on the SR website approximately two weeks after a meeting takes place. The framework underpinning monetary policy is publicly disclosed, currently centering on inflation targeting. The FSSA found the decision-making process to be highly transparent. Transparency is also furthered by the SR's practice of "actively and regularly consult[ing] with relevant counter parties on changes to the terms, conditions and procedures that govern the operation of its monetary policy instruments" (p. 68). Interested parties are invited to submit written comments and suggestions.

Public availability of information on monetary policy.

FC

On the subject of public availability of monetary policy information, the 2002 FSSA reported that the SR makes available the minutes of its Executive Board's policy meetings, along with a quarterly Inflation Report and Economic Review, a semi-annual Financial Stability Report, and an Annual Report, all of which are accessible on SR's website. The website also offers analytical and policy bulletins and a range of reports and working papers on the subject of monetary policy and other economic issues and trends. The 2002 FSSA found SR's publications to be of high quality and comprehensive in content. In addition to publications, SR's governor and members of its board address the public and interested parties frequently, and the text of their presentations is made available on the website as well. The FSSA added that the SR's operations in the krona markets are made public via the Reuters wire service. The SR also publishes its balance sheet summary weekly, and provides daily disclosure of the net position of the banking system against the central bank.

Sweden is a subscriber to the IMF's SDDS and meets or exceeds all requirements for timeliness, coverage, and periodicity of its monetary data. According to the SDDS website, the Riksbank Act of 1988 provides the legislative framework governing data compilation, analysis, and dissemination of monetary data. Data is released simultaneously to all interested parties, summary methodologies are made available in all relevant datasets, and advance release calendars are published.

Accountability and assurances of integrity by the central bank.

FC

According to the 2002 IMF FSSA, the SR's Rules of Procedure set forth all regulations regarding internal governance. The SR's general council determines the proper procedures, and they are made available in both Swedish and English. In addition, the Law on Public Employment governs appropriate behavior for the SR staff. Issues addressed in these regulatory documents include prohibitions on certain potential conflict-of-interest behaviors or behavior that would reflect badly on the bank. The SR's Executive Board also has established ethical guidelines to which staff members are subject. Again, the content of these guidelines is made publicly available. The FSSA adds that the criteria for removal of a general council member are limited to situations wherein the member is liable to a financial claim or has been the subject of criminal prosecution related to his seat on the council or his employment. This can only be achieved by the Parliament. Executive Board members, on the other hand, can be removed by the General Council (and only by the Council), and the criteria for removal are that the individual is convicted of serious misconduct or is no longer capable to fulfill the duties that board membership impose upon him. According to the 2002 FSSA, the Riksbank Law was carefully crafted to address accountability and integrity issues. The law creates a structural framework that consists of a General Council and an Executive Board. The General Council has 11 members, all elected by the parliament. The Council is headed by a Chair and Deputy Chair. The Executive Board, which is specifically charged with managing SR, comprises members who are appointed by the General Council. Both the Chair and Deputy Chair of the Council may, by right, attend and even address Executive Board meetings, but they have no voting rights therein. The SR's executive board is required to submit the bank's prior-year administrative budget to parliament for advisory purposes, with a copy to the SR's General Council. Twice annually, the bank must submit reports to parliament on monetary policy and implementation, which establishes conditions of formal accountability. The Parliament must also receive a report of SR's operations for the prior accounting year by February 15 (the accounting year coincides with the calendar year).

Within Parliament, the Office of the Parliamentary Auditors has the responsibility of auditing the SR's financial statements, according to the 2002 ROSC. This audit is made available to both Parliament and the public, and Parliament must sign off on it. The SR's integrity is ensured by provisions in the Riksbank Act. No member of the executive board may hold other employment that might impinge on their fitness for service as a board member. Board members and the Chair and Deputy Chair of the General Council are required by law to disclose their personal financial holdings to parliament, as well as their debts. The public has access to this information. The remainder of the general council and the staff of the SR must make similar disclosure to the SR, which does not make the information public. The SR's employees are also subject to the provisions of the Law on Public Employment.