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THE ORIGIN OP PRIVATE BANKS.
1025
debts, the management of which was left to a Board exclusively subordinating
under the Riksdag — the National Debt Board. In order to get the State the
necessary means, this Board was authorized, among other things, to issue notes
and practice a sort of banking business. These notes, however, soon fell in value,
whereas the notes issued by the Bank kept their original value. It was decided
in 1802 that the Bank should cash with its own notes those issued by the National
Debt Board, after the average rate of the latter (8/* of the nominal value). Partly
for these reasons, partly as a result of loans to the State during the war 1808/09,
the condition of the Bank was so weakened that the value of the notes
considerably declined. After many years of deliberations one succeeded, in 1830, in
bringing order into the money system, and at the same time it was decided that
the Bank should again resume payment of the notes with silver, but only at 3/s
of their nominal value, which approximately corresponded to the market value of
the notes. About the close of 1834, this decision was put into execution. From
that time, the State bank-notes have always remained redeemable.
As already mentioned, the loan business of the Bank of Sweden consisted
originally in loans on mortgage and lombard loans. The former gradually became
loans on a long lease. Loans on personal security practically first came into
existence after 1802, when the National Debt Board had concluded its
aforementioned banking business. For the last named loan business a special
establishment was instituted in connection with the Bank — the State Discount — which
in the commencement was an association between the Bank and private
shareholders; in 1816 the latter, however, were excluded. The real discounting business
did not, however, develop until after 1830, and from that time the loan business
of the Bank was gradually transformed into better conformity with rational banking
principles. Thus, for example, in 1864, the mortgage business of the Bank ceased
and was transferred to the General Mortgage Bank.
The Origin of Private Banks.
At the conclusion of the 18th century and the beginning of the 19th
some Discount institutions were established, which were managed by
the Riksdag together with private persons, and afterwards Discount
Offices were established in some of the larger towns, privately and
supported by the State Bank. These establishments had to give up
their work on account of their failing successfully to fill the places of
well organized credit institutions. In 1823, a special Committee of the
Riksdag expressed the desireableness of all credit work being carried on
by private persons instead of by the State. In conformity with the
economical views of the time, it was considered that only in this way
were to be expected the care and attention necessary for a credit
institution. On the basis of this principle the committee brought forward a
bill, accepted by the Riksdag and resulting in a Royal Proclamation
of January 18, 1824. Herein the establishment of Private Banks was
granted, but only after a concession to every special bank. Under the
protection of this law, the first private banks in our country arose.
In the absence of any provisions in the law regarding the issue of
paper-currency, these banks found themselves at liberty to issue their
own notes. The conditions of such an issue were determined later in
Sweden. 65
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