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Swedish Riksbank borrows from Europe

SWEDISH Riksbank said yesterday that it will borrow 3 billion euros (US$4.2 billion) from the European Central Bank to safeguard its foreign currency reserves.

The loan is part of a swap agreement with the European bank, whereby the Riksbank can borrow up to 10 billion euros from the ECB in exchange for Swedish kronor.

The Riksbank has previously asked to borrow 100 billion kronor (US$12.9 billion) worth of foreign currency from the Swedish National Debt Office and said the loan from the ECB will be used temporarily until the entire loan from the debt office can be paid out. Around 65 billion kronor of the debt office loan will be paid out before the summer, it said.

"As a substantial part of the Swedish banks' funding is in foreign currency, the Riksbank needs to have a sufficiently large foreign exchange reserve to be able to meet a potential need from the banks," the Riksbank said in a statement.

Riksbank spokeswoman Sophie Degenne said the Swedish central bank has already entered commitments in foreign currency worth around 100 billion kronor as a result of the financial crisis.

This includes loans in United States dollars to Swedish banks, swap agreements with the central banks of Iceland, Estonia and Latvia and an increased commitments toward the International Monetary Fund.


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