Sveriges Riksbank

From Wikipedia, the free encyclopedia

This is an old revision of this page, as edited by Jerryseinfeld (talk | contribs) at 21:04, 15 November 2004 (→‎1992). The present address (URL) is a permanent link to this revision, which may differ significantly from the current revision.

Sveriges Riksbank is the central bank of Sweden, sometimes called just the Bank of Sweden. It is known to be the world's oldest central bank.


History

The Riksbank began its operations in 1668, its antecedent being the Bank of Palmstruch or the Stockholm Banco, which was founded in 1656. Although the bank of Johan Palmstruch was private, it was the King who chose its management: in a letter to Palmstruch he gave permission to its operations according to stated regulations.

However, Stockholm Banco, the world's oldest note-issuing bank collapsed as a result of the issuing of too many notes without the necessary collateral. Palmstruch, who was considered responsible for the bank's losses, was condemned to death, but later received clemency. On September 17, 1668, the privilege of Palmstruch to operate a bank, was transferred to the Riksens Ständers Bank and was run under the auspices of the parliament of the day. Due to the failure of Stockholm Banco the new bank was managed under the direct control of the Riksdag of the Estates to prevent the interference of the King. When new Riksdag was instituted in 1866, the name of the bank was changed to Sveriges Riksbank.

File:1 Krona 2001.jpg
The Swedish Krona (2001)

The lesson learnt of the Stockholm Banco-experience, the Riksbank was not permitted to issue bank-notes. Nevertheless, in 1701 permission was granted to issue so called credit-notes. Some time in the middle of the 18th century counterfeit notes began appearing which caused serious problems. To prevent forgeries it was decided that the Riksbank should produce its own paper for bank-notes and a paper-mill, Tumba Bruk, was founded in Tumba, on the outskirts of Stockhom.

A few years later, the first commercial banks were founded and these were also allowed to issue bank-notes. The bank-notes represented a claim to the bank without interest paid, and thus became a considerable source of income to the banks. Nonetheless, security in the form of a deposit at the Riksbank was required to cover the value of all notes issued.

During the 19th century the Riksbank maintained a dominant position as a credit institution and issuer of bank-notes. The bank also managed national trade transactions as well as continuing to provide credit to the general public. The first branch-office was opened in 1824, later followed with subsidiary branches opening in each county (län). The present operational activities as a central bank differ from those during the 19th century. For example, no interest-rate related activities were conducted.

The position of the Riksbank as a central bank dates back to 1897 when the first Riksbank Act was accepted concurrently with a law giving the Riksbank the exclusive right of issuing bank-notes. This copyright concluded its role and importance regarding monetary policy in a modern sense, as the exclusive right to issue notes is a condition when conducting monetary policy and defending the value of a currency. Behind the decision were repeated demands that the private banks should cease to issue notes as it was considered that the ensuing profits should befall the general public.

The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel

Following the third centennial of the bank in 1968 a Prize in Economics to the Memory of Alfred Nobel was instituted. The Prize is awarded at a ceremony with the Nobel Prizes in Stockholm each year on December 10th.

1992

In late 1992 (September 14, Monday) the British pound began a steep decline that made it "leave" the "Exchange Rate Mechanism" on the Wednesday of that week. At the same time the Swedish currency began to decline, the first reaction from the central bank was to try and keep the current fixed exchange rates in place, and they set a target for their equivalent to the federal funds rate ("marginal rate") at 500%. The bank began to sell short term government securities in large amounts but soon realized that market forces were strong, so they lowered their target rate, and let everyone sell what they wanted to sell, and the country saw a large selling of SEK, and SEK denominated papers. Between September 1992 and February 1993 the Swedish currency "TCW" index went from 100 to 125, while the British currency XBP index fell from 200 to 142.

Numbers

  • British pound
    • [500,adalannay[d1990101][p][i]]
    • [500,adalannay[d19920101,19940101][p][i]]
  • Swedish krona
  • Swedish central bank target rate

Numbers and statistics

See also

External links