Sveriges Riksbank

Sveriges Riksbank, usually called the Riksbank, is the central bank of Sweden and one of the oldest surviving central banks in the world. It began operating in 1668 after the transfer of the banking privilege formerly associated with Stockholms Banco, also known as Bank of Palmstruch, to the parliament of the Swedish Estates. The transfer reflected concerns about the earlier bank’s excessive note issuance and weak backing. The new institution was placed under parliamentary rather than royal control, a governance arrangement intended to protect it from direct interference by the monarch. The institution was initially known as the Riksens Ständers Bank, or Bank of the Estates of the Realm. Its present name, Sveriges Riksbank, was adopted after the creation of a new Riksdag in 1866. During the eighteenth and nineteenth centuries, the bank’s activities were broader than those of a modern central bank. It issued or supported banknotes, provided credit, handled elements of the country’s trade and financial transactions, and developed a nationwide branch presence. In response to counterfeiting concerns, it established Tumba Bruk in the eighteenth century to produce secure banknote paper. The Riksbank’s modern central-banking role took shape in the late nineteenth century. The 1897 Riksbank Act gave it the exclusive right to issue banknotes, ending the long-term role of private commercial banks as note issuers and creating a foundation for centralized monetary management. Sweden’s currency was linked to gold for extended periods, although the bank’s obligation to exchange notes for gold was suspended in 1931 and ultimately ended as Sweden’s constitutional and institutional arrangements were modernized. The bank played a central role during Sweden’s financial and currency turmoil in the early 1990s. In November 1992, the fixed exchange-rate regime for the krona collapsed. In January 1993, the Riksbank adopted a floating exchange-rate framework and an explicit inflation-targeting regime. This framework made price stability the core of monetary policy while allowing the krona to move in foreign-exchange markets. The policy transition coincided with Sweden’s severe early-1990s recession and banking rescue, after which inflation remained comparatively low during the later decade’s economic recovery. Today, the Riksbank’s responsibilities include maintaining price stability, supporting a safe and efficient payment system, promoting financial stability, managing parts of Sweden’s foreign-exchange reserves, and issuing Swedish banknotes and coins within its legal mandate. It publishes monetary-policy and financial-stability assessments and participates in European and international central-bank cooperation. Its policy work is organized principally around monetary policy and financial stability, while several operational activities have been streamlined. Swedish cash-handling functions and the management of physical notes and coins have increasingly involved external service providers, and the bank has closed its former regional branches. The Riksbank has also been associated with unconventional monetary-policy experimentation. In 2009 it became the first central bank reported to have introduced a negative policy interest rate, lowering its repo rate to 0.25 percent and applying a negative deposit rate. It later returned the repo rate to zero in 2014 and moved it below zero again in 2015 and 2016, alongside purchases of Swedish government bonds. These measures were intended to support demand and lift inflation toward the bank’s target after a prolonged period of very low inflation. Another major area of work is the proposed e-krona, a possible central-bank digital currency designed to respond to Sweden’s declining use of cash. The Riksbank began a formal research program in 2016 and later reported that it had not identified major technical obstacles to an e-krona. The bank has not, however, established that an e-krona will be issued. Sveriges Riksbank also established the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 1968, marking its tercentenary. The prize is administered and presented within the Nobel Prize framework, although it is not one of Alfred Nobel’s original prizes.

Sveriges Riksbank traces its origins to the failure of Stockholms Banco, a private bank established in 1656 by Johan Palmstruch. Stockholms Banco issued notes without adequate backing and collapsed. Responsibility for its banking privilege was transferred on 17 September 1668 to the Riksens Ständers Bank, operated under the authority of the Swedish parliament of the Estates. This institution became the Riksbank and is generally regarded as the oldest surviving central bank. The early bank was deliberately separated from direct royal control. It was initially restricted in its ability to issue banknotes, although it later received permission to issue credit notes. Counterfeiting became a significant problem in the eighteenth century, encouraging the bank to produce its own banknote paper. Tumba Bruk was established for this purpose and became an important part of Sweden’s note-production history. During the nineteenth century, the Riksbank was a major credit institution and banknote issuer. It opened its first branch in 1824 and later developed a network of county branches. Its functions at that time included lending, national financial transactions and, for part of the period, activities that would now be associated with commercial banking. The institution’s modern monetary-policy role developed after the 1897 Riksbank Act, which granted it the exclusive right to issue banknotes. Centralizing note issuance strengthened the bank’s capacity to influence monetary conditions and defend the value of the currency. Sweden’s monetary system was linked to gold for a substantial period. The Riksbank’s convertibility obligation was suspended in 1931 and was maintained through temporary legislation until Sweden’s later constitutional settlement removed the obligation. A major institutional change followed in the 1970s, when the Riksbank’s status was separated from the government in accordance with a new constitutional framework and its modern operational independence was reinforced. The most important modern turning point came during the Swedish banking and currency crisis of 1991–1993. The fixed exchange-rate policy ended in November 1992 when the krona was allowed to float. In January 1993, the Riksbank’s governing board adopted a floating exchange rate and an explicit inflation target. This framework became the central organizing principle of Swedish monetary policy and helped anchor expectations during the recovery from the crisis. In the 2000s, the bank reorganized around monetary-policy and financial-stability functions. Administrative and operational activities were reduced, the domestic branch network was closed, and physical cash handling was increasingly outsourced. The Riksbank continued to provide analysis and oversight for the Swedish financial system while participating in European cooperation, including membership of the European Systemic Risk Board. Following the global financial crisis, the Riksbank became known for experimenting with negative interest rates. It first pushed its repo rate below the conventional zero boundary in 2009, returned the rate to zero in 2014, and again introduced negative rates from 2015 through 2016. It also purchased government bonds during this period to support inflation and economic activity. These actions attracted international attention because few central banks had previously used negative policy rates at scale. The decline in Swedish cash use led the Riksbank to investigate whether a central-bank digital currency could preserve some of the characteristics of cash in electronic form. The e-krona project began in 2016 and produced interim research in 2017. The bank has continued to study legal, technical and economic questions, but the research program has not by itself constituted a decision to issue an e-krona. The Riksbank also founded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 1968, during its tercentenary year.

• 2016

  E-krona research program begins

  [1]Sveriges Riksbanken.wikipedia.org

  The Riksbank begins structured research into a possible digital form of central-bank money.

• 2009

  Negative policy rate is introduced

  [1]Sveriges Riksbanken.wikipedia.org

  The Riksbank lowers its repo rate to 0.25 percent and applies a negative overnight deposit rate.

• 1993

  Inflation-targeting framework is adopted

  [1]Sveriges Riksbanken.wikipedia.org

  The Riksbank adopts a floating exchange rate and an explicit inflation target.

• 1992

  Fixed exchange-rate regime collapses

  [1]Sveriges Riksbanken.wikipedia.org

  Sweden abandons its fixed exchange-rate regime during the currency and banking crisis.

• 1968

  Economic Sciences prize is established

  [1]Sveriges Riksbanken.wikipedia.org

  The bank creates the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel during its tercentenary year.

• 1931

  Gold convertibility is suspended

  [1]Sveriges Riksbanken.wikipedia.org

  A temporary law releases the bank from its obligation to exchange notes for gold coins.

• 1897

  Exclusive banknote-issuing right

  [1]Sveriges Riksbanken.wikipedia.org

  A new Riksbank Act gives the institution exclusive authority to issue Swedish banknotes.

• 1866

  The bank adopts its present name

  [1]Sveriges Riksbanken.wikipedia.org

  Following the creation of a new Riksdag, Riksens Ständers Bank becomes Sveriges Riksbank.

• 1824

  First branch office opens

  [1]Sveriges Riksbanken.wikipedia.org

  The Riksbank opens its first branch and later expands its network across Sweden’s counties.

• 1750

  Tumba Bruk is established

  [1]Sveriges Riksbanken.wikipedia.org

  The Riksbank establishes a paper mill to produce more secure paper for Swedish banknotes and limit counterfeiting.

• 1701

  Permission to issue credit notes

  [1]Sveriges Riksbanken.wikipedia.org

  The bank receives permission to issue credit notes after its earlier restrictions on banknote issuance.

• 1668

  Riksens Ständers Bank begins operations

  [1]Sveriges Riksbanken.wikipedia.org

  The Swedish parliament assumes the former banking privilege of Stockholms Banco and establishes the institution that becomes Sveriges Riksbank.

• 1656

  Stockholms Banco is founded

  [1]Sveriges Riksbanken.wikipedia.org

  Stockholms Banco, the predecessor institution whose collapse led to the creation of the Riksbank, begins operations.

Independent national central bank focused on price stability, resilient financial markets and secure payments.

• currency · 1873

  Swedish krona

  The Swedish krona is Sweden’s national currency. Within its legal mandate, the Riksbank issues Swedish banknotes and coins and supports confidence in the currency through monetary policy, reserve management and payment-system responsibilities.

• central-bank service · 1993

  Monetary policy

  The Riksbank sets monetary policy for Sweden, using the repo rate and other instruments to influence economic conditions and keep inflation near its target. It communicates its assessments through policy decisions, forecasts and monetary-policy publications.

• central-bank service

  Financial stability analysis

  The bank monitors systemic risks, evaluates the resilience of Swedish financial institutions and markets, and contributes to the functioning of a stable financial system. This work complements its monetary-policy mandate and European supervisory cooperation.

• digital currency research · 2016

  E-krona research

  The e-krona project examines whether Sweden should introduce a digital central-bank currency that could provide some cash-like functions in an economy where physical cash use has declined. Research has addressed technical, legal and policy questions; no issuance decision is established here.

• economic research prize · 1968

  Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel

  Established in 1968 for the Riksbank’s tercentenary, this annual prize recognizes important contributions to economic sciences and is presented within the Nobel Prize ceremony framework.

• 2016

  Launch of the e-krona research programOther

  Background

  Use of physical cash was declining in Sweden, raising questions about the future form of central-bank money.

  Action taken

  The Riksbank began research into a possible digital currency with cash-like characteristics.

  Aftermath

  The project produced interim findings but did not itself establish a decision to issue an e-krona.

  Source

• 2015

  Negative rates and government-bond purchasesStrategy

  Background

  Inflation had remained close to zero and below the bank’s stated target.

  Action taken

  The Riksbank reduced the repo rate below zero and announced purchases of Swedish government bonds, with further rate reductions later in 2015 and 2016.

  Aftermath

  The measures were intended to support inflation and prevent an appreciation of the krona from weakening the recovery.

  Government-bond purchases announced. SEK 30 billion announced in February 2015 and a further SEK 30 billion announced in March 2015 (2015)

  Source

• 2009

  Introduction of a negative repo-rate environmentOther

  Background

  The global financial crisis created weak economic conditions and concerns about insufficient demand.

  Action taken

  The Riksbank lowered the repo rate to 0.25 percent and pushed the linked overnight deposit rate below zero.

  Aftermath

  The move attracted international attention as an early example of negative policy rates by a central bank.

  Source

• 1993

  Adoption of inflation targetingStrategy

  Background

  The fixed exchange-rate regime had collapsed during Sweden’s severe banking and currency crisis.

  Action taken

  The Riksbank adopted a floating exchange rate and an explicit inflation-targeting framework.

  Aftermath

  The framework became the foundation of Swedish monetary policy and was followed by a period of comparatively low inflation during the later 1990s.

  Source

1. 1Sveriges Riksbanken.wikipedia.org
2. 2Official website of Sveriges Riksbankriksbank.se