The Origins and Nature of Scandinavian Central Banking (Palgrave Macmillan Studies in Banking and Financial Institutions)

"This book explores the formation and evolution of Scandinavian central banks. It begins by defining the nature of 'central banking' in general, before moving on to investigate how and when it became meaningful to regard today's Scandinavian central banks as such. It also explores how Scandinavian central banks have conformed to the defined ideals of "central banks" over the last 100 years, clarifying the distinctions between commercial banks and central banks, and between central banks and departments of governments. The author shows how the outbreak of the Great War was the catalyst which fundamentally transformed the originally purely commercial banks into 'central banks'. The book also analyses how different the three Scandinavian central banks are, how these differences can be explained by the different political and economic circumstances surrounding their original formation, and the differences in the political environments in which they later developed."-- Provided by publisher Preface and Acknowledgements 6 Contents 9 List of Tables 14 Part I: The Nature of Central Banking 16 1: Some General Remarks on “Central Banking” 17 1.1 The Emerging Public Interest in “Central Banking” 17 1.2 Some Preconditions for Having “Central Banks” 20 2: Defining “Central Banks”: Four Criteria 25 2.1 From Chartered Banks to Central Banks 25 2.2 The Four Criteria Defining Central Banks 26 2.2.1 Criterion I: Being the Sole Note-Issuing Bank in the Country 26 2.2.2 Criterion II: Being the Guardian of the Value of the Country’s Currency 27 2.2.3 Criterion III: Being the Bank for the Government 30 2.2.4 Criterion IV: Being the Bank for the Country’s Other Banks 31 2.3 What Is Not Mentioned? 34 Part II: Before the Deluge. The Very Different Origins of Scandinavia’s Central Banks, the Great War, and the Four Criteria 37 3: Sveriges Riksbank, and the Four Criteria 38 3.1 The Origins. Stockholms Banco (1656) and the Invention of Banknotes 38 3.1.1 The Political Scenario 38 3.1.2 Stockholms Banco, War Finance and the Invention of Banknotes (1656–1664) 40 3.2 Sveriges Riksbank (1668–1866–1914) 43 3.2.1 The Formation, Organization, and Operation of the Bank 43 3.2.2 Sveriges Riksbank as an Issuer of Banknotes (Criterion I) 48 3.2.3 Sveriges Riksbank as Guardian of the Currency (Criterion II) 51 3.2.4 Being the Banker for the Government (Criterion III) 57 3.2.5 Sveriges Riksbank as Bank for the Country’s Other Banks (Criterion IV) 59 4: Danmarks Nationalbank and the Four Criteria 65 4.1 The Origins. The Copenhagen Bank (1736–1813) 65 4.1.1 The Political Scenario 65 4.1.2 The Copenhagen Bank (or the Kurantbank) 67 4.1.3 An Interlude. The Rigsbank, (1813–1815) 71 4.2 Nationalbanken i Kiøbenhavn (1818–1936) 73 4.2.1 The Scenario 73 4.2.2 Nationalbanken as an Issuer of Banknotes (Criterion I) 75 4.2.3 Nationalbanken as Guardian of the Currency (Criterion II) 76 4.2.4 The Nationalbank as Bank for the Government (Criterion III) 78 4.2.5 The Nationalbank as Bank for the Country’s Other Banks (Criterion IV) 79 5: Norges Bank and the Four Criteria 81 5.1 The Political Scenario 81 5.2 The Origins. The Formation of Norges Bank in 1816 84 5.3 Norges Bank and the Four Criteria 87 5.3.1 Norges Bank as a Note-Issuing Bank (Criterion I) 87 5.3.2 Norges Bank as Guardian of the Currency (Criterion II) 88 5.3.3 Norges Bank as Banker for the Government (Criterion III) 88 5.3.4 Norges Bank as Bank for the Country’s Other Banks (Criterion IV) 89 6: The Scandinavian Currency Union (1873–1914) 92 6.1 The Formation and Workings of the Scandinavian Currency Union 92 6.2 Some Comparisons with the Latin Currency Union 98 6.3 Some Comparisons with the Post-World War II Systems 102 6.3.1 Some Comparisons with the Bretton Woods System 102 6.3.2 Some Comparisons with the European Currency Union 103 7: How the Great War Formed Scandinavian Central Banking 105 7.1 The External Financial Position of the Scandinavian Countries in 1914 105 7.2 The Central Banks, the Outbreak of the War, and the Aftermath 108 7.2.1 Sveriges Riksbank 108 The Riksbank Balance Sheet, 1897–1920 111 7.2.2 Nationalbanken i Kjøbenhavn 113 The Balance Sheet of the Nationalbank, 1902–1920 116 7.2.3 Norges Bank 118 Norges Bank’s Balance Sheet 1914–1924 122 7.3 Some Preliminary Conclusions 125 Part III: The Interwar and Postwar Period 128 8: Sveriges Riksbank and the Four Criteria 129 8.1 The Interwar Years 129 8.1.1 The Evolution of the Governance of the Riksbank 129 8.1.2 The Role of the Riksbank in the Crisis of the 1920s 131 8.1.3 Practical Matters. The Riksbank and the Kreuger Affair 135 8.1.4 The Debates Over the Role of the Riksbank 139 8.2 The Post-War Years 144 8.2.1 Social Democratic Rules and Regulations 144 8.2.2 Deregulation and the Crises of 1988–93 149 8.2.3 EU Membership and the Riksbank Acts of 1987 and 1999 153 3. Kap. Direktionen 156 9: Danmarks Nationalbank and the Four Criteria 157 9.1 The Nationalbank in the “Roaring” 1920s 157 9.1.1 The Banking Crisis of the 1920s 157 9.1.2 The Exchange Rate Problem 161 9.2 The Nationalbank and the Challenges of the 1930s 164 9.2.1 Foreign Exchange Shortage and Rationing 164 9.2.2 The Nationalbank Act of 1936 167 9.3 The War Years 175 9.4 The Post-War Years 178 9.4.1 Foreign Exchange Shortage and Regulations 178 9.4.2 Deregulation 183 9.5 The Financial Crisis of 2008–12 184 10: Norges Bank and the Four Criteria 189 10.1 The Shifting Problems of the Interwar Years 189 10.1.1 The Crisis of the 1920s 189 10.1.2 The Problematic 1930s 194 10.2 The Troublesome 1940s 197 10.3 The Post-War Years 199 10.3.1 Nationalization of Norges Bank and Regulations 199 10.3.2 Deregulation and the Banking Crisis of 1988–92 203 10.4 The Norges Bank Act of 1985 205 10.4.1 Concluding Remark 211 11: Summary and Conclusions 212 11.1 The Idea of a “Central Bank” and the Effect of the Great War 212 11.2 The Scandinavian Currency Union 215 11.3 Regulation and Deregulation: From 1945 to 1990 216 11.4 The 21st Century 217 Appendices 219 Appendix 1 219 Appendix 2 221 Appendix 3 223 Bibliography 224 Index 234 Front Matter....Pages i-xvi Front Matter....Pages 1-1 Some General Remarks on “Central Banking”....Pages 3-10 Defining “Central Banks”: Four Criteria....Pages 11-22 Front Matter....Pages 23-23 Sveriges Riksbank, and the Four Criteria....Pages 25-51 Danmarks Nationalbank and the Four Criteria....Pages 53-68 Norges Bank and the Four Criteria....Pages 69-79 The Scandinavian Currency Union (1873–1914)....Pages 81-93 How the Great War Formed Scandinavian Central Banking....Pages 95-117 Front Matter....Pages 119-119 Sveriges Riksbank and the Four Criteria....Pages 121-148 Danmarks Nationalbank and the Four Criteria....Pages 149-180 Norges Bank and the Four Criteria....Pages 181-203 Summary and Conclusions....Pages 205-211 Back Matter....Pages 213-237