Six top officials at the Riksbank earned millions of dollars from investing in equities and mutual funds – gains that may have been affected by the bank’s political decisions during the covid-19 crisis, a new report reveals.
Between May 2020 and October 2021, officials, including Governor Stefan Ingves, invested a total of approximately SEK 30 million [~$3.6 million] in equities and mutual funds, according to Report by SvD Näringsliv, a local media agency.
But during the covid crisis, Ingves and his team, who all sit on the Riksbank’s Executive Board, made decisions that were supposedly designed to improve the market’s function but which ended up pumping up housing prices and sent the Swedish stock market to record levels.
The decision to print new money and at the same time keep a ceiling for low interest rates affected share and housing prices, which made the main politicians very rich, the report claims. It also cites the bank’s purchases of large amounts of corporate bonds as an incentive for profits realized by its officials.
Top officials get rich
Governor Ingves reaped the greatest reward in terms of value, it is said. His portfolio, which includes “a Swedish index fund, a short- and long-term interest fund and shares in a dozen Swedish large companies”, rose by five million kronor [~$600,000] to $ 24 million [~$2.88 million].
Ingves used the corona crisis to strengthen its stake in Scandinavian Airlines (SAS), which introduced new shares to raise capital. The report says that several companies in the central bank governor’s portfolio benefited “from the Riksbank’s banknote press … and also from the bank’s controversial decision to – for the first time ever – buy so-called corporate bonds.”
During the reporting period, the Riksbank bought bonds from around 60 large Swedish companies. The idea was to keep interest rates on the securities down – “and thereby reduce companies’ borrowing costs.” Both Ingves and his deputy Cecilia Skingsley own shares in companies whose bonds the bank bought.
The companies include the forest company SCA, hygiene outfit Essity, the industrial company Epiroc, the lock giant Assa Abloy and the engineering group Sandvik and more.
In the case of Skingsley, the Deputy Governor sold almost all of his funds for about $ 240,000 just before the covid crisis. But as markets began to fall, the central bank intervened with a stimulus package supported by Skingsley, and she bought back most of her shares at a discount, for just $ 60,000. She has not yet declared the savings, reported in detail.
Anna Breman, another deputy governor, continued to invest “large sums of money in the stock market while she voted through massive stimuli.” In total, the size of her fund savings, which mainly focuses on sustainable development, increased by almost 40% to SEK 1.8 million [~$216,000] during the pandemic. Breman has pushed the Riksbank’s policy against the effects of climate change.
According to the report, other central bank governors also regularly save in funds. Deputy Governor Martin Flodén owns units in eleven broad equity funds. The value of the funds rose sharply during the crisis; from SEK 1.2 million [~$144,000] to SEK 1.6 million [~$192,000].
It is crucial to note that neither Ingves, Skingsley’s or Breman’s securities trading violates the Riksbank Act. However, practice has raised serious ethical questions as to whether central bank officials should be able to act when their policies often affect markets.
In the United States, the Federal Reserve has been forced to put new stricter rules to reduce the risk of what can be loosely interpreted as “insider trading” involving high-ranking decision-makers. It prohibited salaried employees and senior executives from owning individual shares in certain companies, nor could they invest in bonds or derivative contracts.
Officials can still invest in broad securities such as mutual funds, the Fed said, but the funds may not be sold for at least a year and holders must give 45 days notice before trading. The rules also state that decision-makers will not be allowed to do business when there is “increased stress in the financial market.”
The sweeping measures come in the wake of revelations that several Federal Reserve officials, including President Jerome Powell, traded shares during the Covid crisis while approving policies that pumped trillions of dollars into the US economy.
The head of the Dallas Fed, Robert Kaplan, traded millions of dollars in shares of companies such as Amazon and Delta Airlines. The head of the Boston Fed, Eric Rosengren, traded smaller amounts of securities linked to real estate, according to reports. The two regional bank governors resigned after the news.
There were rules in the United States that sought to limit this type of ethical abuse. Now they are tougher. It is likely that Sweden will follow the same path, but nothing has yet happened that indicates a change in the Riksbank’s legislation to limit civil servants’ ability to save and borrow.
Bankers often have criticized cryptocurrencies such as bitcoin, which points to their perceived lack of intrinsic value and volatility as factors that undermine their usefulness as a means of exchange or safekeeping. Bank for International Settlements (BIS) chief Agustin Carstens, has previously said:
“If digital money is to exist, the central bank must play a crucial role, guarantee the stability of value, ensure the elasticity of the overall supply of such money and monitor the overall security of the system.” But from the foregoing, it is clear that central banks are not exactly a role model.
What do you think about this topic? Write to us and tell us!
All information contained on our website is published in good faith and for general information purposes only. All measures taken by the reader with regard to the information on our website are entirely at your own risk.