Liquidity reserve to meet customer needs under all circumstances
To be able to continue providing customers with financing during periods of uncertainty in the financial markets, and to ensure that matured funding can be repaid in a timely manner, Kommuninvest has a liquidity reserve. At year-end, the reserve amounted to SEK 44.7 (47.3) billion, equivalent to 11 (13) percent of the lending volume.
Reserve with high credit quality and low risk
The starting point for the Company’s liquidity strategy is good matching of assets and liabilities. The Company also maintains a liquidity reserve, the purpose of which is to safeguard existing and future undertakings during periods of financial stress. The Company must always be able to fulfil the agreements into which it has entered and, accordingly, the Company’s liquidity reserve is dependent on funding in each relevant currency. Strict rules and a conservative approach guide Kommuninvest’s liquidity reserve. According to the Company’s instructions, the liquidity reserve shall ensure that the Company’s commitments can be maintained while maintaining lending capacity, see also page 36 in the PDF. The scale of the liquidity reserve is adapted according to funding maturities, for example, and external factors, such as exchange and interest rate fluctuations. As of 31 December 2019, the liquidity reserve corresponded to 11 (13) percent of the lending volume. In accordance with the Company’s strategy, the liquidity reserve shall be invested short-term, with the average maturity not exceeding 12 months. Individual investments may have a maturity of up to 39 months.
Focusing on effective and prudent asset management
In 2019, asset management activities were characterised by a liquidity reserve comprising highly tradable assets of superior credit quality. Direct investments are made mainly in securities issued by national governments or central banks, Sovereigns, Supranationals and Agencies (SSA)¹ and multilateral development banks.
At the end of 2019, 84 (86) percent of the reserve was invested in securities with the highest possible creditworthiness. 70 (76) percent consisted of investments in securities issued by issuers in Sweden. See Note 3 for further information on the Company’s credit risk exposure.
1) Among others, these include the Company’s neighbour organisations in the other Nordic countries.
Investment rules for the liquidity reserve
The liquidity reserve may have a maximum average maturity of 12 months
The maximum maturity of individual investments is 39 months.
For further information, see the Risk and capital management section on pages 35-39 in the PDF or Kommuninvest’s website, www.kommuninvest.se.
Liquidity reserve distributed by country
|Sweden 70 (76) %||70%|
|Supranationals 4 (7) %||4%|
|Finland 7 (7) %||7%|
|Germany 11 (4) %||11%|
|Denmark 2 (2) %||2%|
|UK 2 (2) %||2%|
|USA 4 (0) %||4%|
|Canada 0 (2) %||0%|
Liquidity reserve distributed by rating category
|AAA 84 (86) %||84%|
|AA 16 (12) %||16%|
|A 0 (2) %||0%|
Liquidity reserve distributed by issuer category
|National government or central banks 41 (78) %||41%|
|Credit institutions (subsidised lenders) 13 (9) %||13%|
|Credit institutions (bank balances) 4 (4) %||4%|
|Credit institutions investment repos 37 (-) %||37%|
|Multilateral development banks 4 (7) %||4%|
|Regional or local governments and authorities 0 (2) %||0%|