The Origins and Nature of Scandinavian Central Banking (eBook)

Steffen Elkiær Andersen graduated from the University of Copenhagen in 1972 before commencing a career as an economist, first as a staff economist at the Federation of Danish Industries, and then moving into banking, with positions at Danske Bank, Unibank, and HSH Nordbank where he was Chief Credit Officer in the Nordic area. He has written a number of publications in economics and finance, and writes various articles in international newspapers and magazines. His latest book was The Evolution of Nordic Finance (Palgrave Macmillan, 2010), which explored the birth and growth of financial institutions in the four Nordic countries from the mid-17th century to the recent banking crisis.

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