Kommuninvest’s internal capital assessment forms the basis for
the internally assessed capital requirement. For more informa-
tion on the Company’s internal capital assessment and capital
plan, see pages –.
Capital targets
The Company’s capital target for amounts to ,
(,) million, corresponding to a percent leverage ratio plus
the Board of Directors’ buffer of () million. In
relation to the Company’s capital base, which amounts to
,. (,.) million, the capital target is met by a good
margin. The aim of Kommuninvest’s capital planning is for all
operations to be adequately capitalised to meet both current
and future regulatory requirements. For further information
on the Company’s internal capital assessment and capital plan,
see pages –, for details of capital targets, see the table.
Capital targets
Internally estimated capital requirements
Estimated capital requirement (for the
Group) according to Finansinspektionen
Board of Directors’ buer
Capital targets
Liquidity
Liquidity
Coverage Ratio (LCR)
Total high-quality liquid assets (HQLA)
(weighted value)
Cash outflows – total weighted values
Cash inflows – total weighted values
Net cash outflows (adjusted value)
Liquidity coverage ratio, %
Net Stable
Funding Ratio (NSFR)
Total available stable financing
Total need for stable financing
NSFR
External monitoring
Reference rate phase-out
The most important reference rates for Kommuninvest, bar
none, are the Stibor and Libor three-month rates. As a con-
sequence of being approved as a strategic funding market,
Euribor and its potential replacement will also become increas-
ingly important.
At the end of the year, Kommuninvest held . billion
in derivatives referencing Stibor m and . billion in
lending referencing Stibor m. The only instruments outstand-
ing referencing Libor m were derivatives. The total nomi-
nal amount was . billion. The only instruments out-
standing referencing Euribor m were also derivatives for a
nominal total of . billion.
Since October , the Swedish reference rate, Stibor,
has been included in the ’s list of critical reference values, the
so-called Benchmark Regulation. In December, the Swedish
Financial Benchmark Facility (), which administrates Sti-
bor, requested that the Swedish Financial Supervisory Author-
ity (Finansinspektionen) issue a conclusive assessment of Sti-
bor’s compliance with the regulation.
Work to develop alternatives to Stibor commenced late com-
pared with other currencies. In December , on the initia-
tive of the Swedish Bankers’ Association, a working group was
commissioned to submit a recommendation regarding refer-
ence rates that could act as a complement and/or alternative to
Stibor. The Swedish Bankers’ Association published its nal
recommendations on May .
Following this publication, the development process was
taken over by the Swedish central bank (Riksbank) to produce
a nal framework and reference rate able to function as an
alternative for nancial contracts in . On September
, the Riksbank began publishing the alternative reference
rate Swestr, encouraging market participants to replace Stibor
T/N (Tomorrow/Next) with the new reference rate. Swestr is a
transaction-based reference rate in Swedish kronor and applies
to the shortest term, “over-night”. Like the Bank of England
and the Federal Reserve, the Riksbank also publishes historical
averages based on the daily quotations. Publication of average
rates based on Swestr commenced in October for terms of
week and month, and on November and December for
terms of months and months respectively. Publication of a
corresponding average rate for a term of months will com-
mence on March .
In the , at the initiative of the Federal Reserve, an Alterna-
tive Reference Rates Committee () was appointed as early
as in , to determine a reference rate suitable as a replace-
ment for Libor in . In June , the Secured Overnight
Financing Rate () was chosen, an reference rate based
entirely on actual repo market transactions. has been
published since early April and a market for swaps and
futures has already been established. -linked bonds have
also been issued since .
On March , Benchmark Administration (,
administrator of Libor in ) announced that the publication
of Libor in , , and would cease on December
, as planned. For , only Libor for terms of week and
months ceased at the end of , while other terms (over-
night and , , and months) will continue to be published
until June . However, the advises against entering
into new Libor agreements after the end of .
In , a project was conducted to enable the operational
handling of derivatives referencing . Handling contracts
referencing is more complex than handling Libor con-
tracts as rates are set daily and, furthermore, retrospectively.
This entails bilateral derivative agreements containing numer-
ous technicalities in terms of calculations and payment dates.
The Company’s capacity for handling the new reference rate
was assured with the completion of the project in December
.
Although Kommuninvest has assured its capacity for han-
dling -related contracts, and thus also for handling inter-
est rate and currency risks in connection with new funding in
, there are a number of contracts referencing Libor but
maturing after the discontinuation of that reference rate. A
small number of interest rate and currency basis swaps are
linked to xed-rate funding and investments in . A nominal
. billion in interest rate swaps remains outstanding, as
well as . billion in currency swaps. Some structured
derivatives mature after June , with the payment leg
referencing Libor m. The nominal amount is slightly less
than million in total.
As a result of these outstanding contracts, Kommuninvest is
exposed to operational risks in the handling of the contracts in
connection with the transition. However, although the nominal
amounts are large, the number of contracts is very small, sub-
stantially reducing the scale of operational handling for the
swaps and thus the appurtenant risks.
The change of reference interest rate on outstanding con-
tracts could potentially entail earnings risks for Kommunin-
vest. These are handled by all contracts being covered by the
Note 3, continued
FINANCIAL STATEMENTS
80
Kommuninvest i Sverige AB, company reg. no. 556281–4409Annual Report 2021