Swedish National Bank
|Central bank of||Sweden|
SEK (ISO 4217)
|Bank rate||1.0 to 1.75 |
|Interest on reserves||0.25 to 1.0 |
|Interest paid on excess reserves?||not applicable (no reserve requirements)|
|Preceded by||Riksens Ständers Bank (1866)
Stockholms Banco (1668)
Sveriges Riksbank, or simply Riksbanken, is the central bank of Sweden. It is the world's oldest central bank and the world's 4th oldest bank still in operation. It is sometimes called the Swedish National Bank or the Bank of Sweden (not to be confused with Swedbank, a retail bank).
The Riksbank began its operations in 1668, its antecedent being Stockholms Banco (also known as the Bank of Palmstruch), which was founded by Johan Palmstruch in 1656. Although the bank 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, Stockholms 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 17 September 1668, the privilege of Palmstruch to operate a bank was transferred to the Riksens Ständers Bank (translation: Bank of the Estates of the Realm) 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 a new Riksdag was instituted in 1866, the name of the bank was changed to Sveriges Riksbank.
Having learnt the lesson of the Stockholms 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 Stockholm.
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 Swedish currency was backed by gold and the paper-certificates could be exchanged for gold coins until 1931, when a specialized temporary law was written to free the bank from this obligation. This law was renewed every year until the new constitution was ratified in 1975 which split the bank from the government into a stand-alone organization not obligated to exchange notes for gold.
In November 1992, the fixed exchange rate regime of the Swedish Krona collapsed. A few months later, in January 1993, the Governing Board of the Riksbank developed a new monetary policy regime based on a floating exchange rate and an inflation target. These policies were extensively influenced by assistance from the Bank of Canada, which had extensive previous experience controlling inflation, while similarly being a small open economy, heavily subject to foreign exchange rate swings.
From 1991–93, Sweden experienced the most severe recession since the 1930s. The recession in the early 1990s forced inflation down to around 2%. The rate of inflation continued to be low during the subsequent years of strong growth in the late 1990s.
During the 2000s, the operations and administrative departments were down-sized on behalf of the policy departments Financial Stability Department and Monetary Policy Department. A direct consequence of the changing times was that the Riksbank closed down all its branches in Sweden and outsourced the handling of coins and bills to a private company. Today the policy departments are the core of the central bank and they employ about half of the bank's 350 full-time posts.
The motto of the Bank is Hinc robur et securitas, which is latin for Herefore strength and safety.
Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel
Following its third centennial in 1968, the Bank instituted the annual Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, which is awarded with the Nobel Prizes at the Prize Award Ceremony in Stockholm, on 10 December, the anniversary of Nobel's death.
Negative Interest Rate
In July 2009 Sweden's Riksbank was the first central bank to use a negative interest rate, lowering its deposit rate to −0.25%, a policy advocated by deputy governor Lars E. O. Svensson. to counter economic slowdown due to the financial crises of 2008. The deposit rate is the interest (or in this case, "penalty") commercial banks get for depositing capital at the Riksbank overnight. The lending rate, i.e. the interest commercial banks have to pay for borrowing money, was still positive, at 0.75 percent.
Governors of Sveriges Riksbank
- Ivar Rooth, 1929–1948
- Klas Böök, 1948–1951
- Mats Lemne, 1951–1955
- Per Åsbrink, 1955–1973
- Krister Wickman, 1973–1976
- Carl Henrik Nordlander, 1976–1979
- Lars Wohlin, 1979–1982
- Bengt Dennis, 1982–1993
- Urban Bäckström, 1993 – 31 December 2002
- Lars Heikensten, 1 January 2003 – 31 December 2005
- Stefan Ingves, 1 January 2006–
- Economy of Sweden
- Monetary policy of Sweden
- Parliament of Sweden
- Government of Sweden
- Swedish National Debt Office
- Södra Bankohuset
- "Repo rate, table". Sveriges Riksbank. 22 Feb 2012. Retrieved 25 August 2013.
- "History". Sveriges Riksbank. 23 March 2009. Retrieved 2 September 2010.
- "Frequently asked questions". Sveriges Riksbank. 19 March 2009. Retrieved 2 September 2010.
- Inflation Targeting – The Swedish Experience from The Bank of Canada accessed on 26 May 2007
- Ward, Andrew; Oakley, David (27 August 2009). "Bankers watch as Sweden goes negative". Financial Times.
- "Bankers watch as Swedish interest rates goes subzero - CNN.com". CNN. 28 August 2009. Retrieved 24 May 2010.
- (Swedish) (English) Official site of Sveriges Riksbank in English
- Historical Monetary Statistics of Sweden 1668–2008 published by the Riksbank