View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

61ST CONGRESSI

2d Session

)

OT?TVTATT7

/DOCUMENT

SENA1E

|

No. 576

NATIONAL MONETARY COMMISSION

The

Swedish Banking System
BY

A. W. FLUX

Washington : Government Printing Office : 1910




NATIONAL MONETARY COMMISSION.

NELSON W. ALDRICH, Rhode Island. Chairman.
EDWARD B. VREELAND, New York, Vice-Chairman.
JULIUS C. BURROWS. Michigan.

J E S S E OVERSTREET. Indiana.

E U G E N E H A L E . Maine.

JOHN W. W E E K S , Massachusetts.

PHILANDER C. K N O X , Pennsylvania.

ROBERT W. BONYNGE, Colorado.

THEODORE E. BURTON, Ohio.

SYLVESTER C. SMITH, California.

JOHN W DANIEL. Virginia.

LEMUEL P . PADGETT, Tennessee.

HENRY M TELLER, Colorado.

GEORGE F . BURGESS, Texas.

HERNANDO D. MONEY, Mississippi.

A R S ^ N E P . P U J O . Louisiana.

JOSEPH W. BAILEY, Texas.

ARTHUR B . SHELTON, Secretary.




A. PIATT ANDREW, Special Assistant to Commission.

TABLE OF CONTENTS.
Page.
5

PREFATORY N O T E
BIBLIOGRAPHY OF WORKS CONSULTED

9

INTRODUCTION

11

CHAPTER I.—Early history of the Riksbank
II.—The Enskilda banks
III.—The Riksbank and its subordinate institutions, 18341875
IV,—The Enskilda banks after 1850
V.—The later history of the Riksbank
VI.—Joint-stock banks
VII.—People's banks and savings banks
VIII.—The new bank act and the crisis of 1907
SUPPLEMENTARY CHAPTER.—The banks of Denmark and Norway-_
APPENDIX I.—Outstanding note issues of the banks in Sweden,
1899-1909
*
II.—(A.) The law for the Bank of Sweden, 1897
(B.) Regulations for the conduct of its operations _ _ _
III.—The law relating to joint-stock banks with unlimited liability, 1903
IV.—Forms for monthly and annual returns from t h e
banks
Chart showing for the Bank of Sweden the amount of the notes in
circulation, the inland bills discounted, and the gold held in
Sweden on the last business day in each week and in each month
of the years 1904 to 1909
Face

13
30




3

42
50
78
103
109
121
134
153
156
173
211
246

248




PREFATORY NOTE.
In the following pages an attempt is made to trace so
much of the history of banking in Sweden as may serve to
throw light on the way in which the system of note issues
by numerous privileged banks was developed, and thus
enable the problem presented by the centralization of
those issues, the solution of which has been but recently
achieved, to be appreciated. In tracing this history it
has been judged best to assume that the reader will care
comparatively little about the specification of the details
of the constitutional and administrative arrangements of
Sweden, or about place names, or the names of the men
who have been leaders in the developments traced. It
may, however, be convenient to state here that Sweden
has an area of about 173,000 square miles, or about oneseventeenth part of that of the United States, while its
population in 1900 was 5,136,000, or about one-fifteenth
of that of the continental United States, or, otherwise
expressed, that its area slightly exceeds the combined
areas of Michigan, Wisconsin, and Illinois, while its population in 1900 was about five-ninths of that of these three
States. At the end of 1908 the population of Sweden was
somewhat under 5,500,000, having increased from about
1,760,000 in 1750, 2,350,000 in 1880, and 3,480,000 in
1850 to the figure named.




5

National

Monetary

Commission

The population of the towns amounted to very nearly
a quarter of the total population in 1908, having increased
to this proportion from about 10 per cent in 1850 and
slightly under 10 per cent through nearly the whole of the
first half of the nineteenth century. These broad facts as
to the area and population and the distribution of the
latter between towns and rural districts may serve to
enable the magnitude of the banking operations carried
on to be judged more accurately than the simple statement
of the sums in dollars which represent those operations.
The account here given of Swedish banking has been
derived almost entirely from Swedish sources, the works
which have been found most useful for the period ending
a quarter of a century ago being Carl M. Rosenberg's
"Handbok i Bankvasendet" and the report, issued in
1883, of a committee appointed by the King to consider
what changes in bank organization might be necessary.
This report contains a valuable summary of the history
of the Bank of Sweden and its dependent organizations
and of the numerous schemes which were discussed by the
Swedish Parliament for reforming the banking system.
Prof. J. A. Leffler's monograph, "Die Schwedischen Zettelbanken" second edition, 1879, also contains a brief outline of the history of banking in Sweden. The writer has
not succeeded in procuring a copy of the Swedish edition
of this monograph. In addition to the report of the committee of 1883 just mentioned, a number of other reports
of committees, the text of the statutes, and official statistical publications have been utilized in preparing the following chapters.




6

The

Swedish

Banking

System

Considerable help has been obtained from the work
entitled "Bankpolitik" by Prof. W. Scharling, of Copenhagen, and from the articles on banking in the Scandinavian countries contributed by the same author to
Conrad's "Handworterbuch der Staatswissenschaften"
A
list of works consulted, including such accounts in the
English language as could be found, is given on page 9.
The writer desires to acknowledge gratefully the assistance in pursuing his inquiries received from the United
States minister in Stockholm, Mr. Charles H. Graves, and
also to acknowledge in a special degree the courteous assistance rendered him by Herr C. A. Weber, one of the managing directors of the Bank of Sweden, and by other
Swedish bankers who kindly accorded him interviews.
WEYBRIDGK, SURREY, December, 1909.
N O T E . — I n accordance with conventions concluded between Denmark,
Norway, and Sweden, the coins of all the three countries have legal currency
in each of them. Since the adoption of the gold standard, the currency
unit has been called a krone {pi. kroner) in Norway and Denmark and a
krona {pi. kronor) in Sweden, equivalent in United States currency to
26.8 cents.
In each case the present unit represents one-fourth of the old speciesdaler.
Previous to the adoption of the modern currency unit there had been
used in Sweden a unit called the riksdaler riksmynt (currency daler) of the
same silver content as the krona. Before 1855 the riksdaler banco (bank
daler) had been the unit in general use. Its value was one and one-half
times the currency daler, and had been fixed in 1830 at 37*-^ per cent of the
speciesdaler. Specie payments at this rate were resumed in 1834.
In Norway and Denmark the currency daler had been the rigsbankdaler, •
equivalent after tha resumption of specie payments (in 1842 in Norway and
in 1845 in Denmark) to one-half the speciesdaler. The new unit of a krone
was thus one-half the value of the currency unit previously in use in Norway
and Denmark.




7




WORKS CONSULTED.

Notes on Banking, by Sir R. H. Inglis Palgrave, in the Journal of the Royal
Statistical Society, 1873.
A History of Banking in all the Leading Nations. Edited by the editor of
the Journal of Commerce and Commercial Bulletin. New York. 1896.
[Pages 393-402 of Vol. IV relate to Sweden.]
A History of Modern Banks of Issue. By C. A. Conant.
Sweden—Its People and its Industry. Part XIV. Pages 1024-1040.
Credit and Insurance Establishments. Edited by Gustav Sundbarg.
Stockholm, 1904.
The Centralization of Note Issues in Sweden. By A. W. Flux, in the Yale
Review. 1903.
Die Schwedischen Zettelbanken. By J. A. Leffler. Zweite Auflage Leipzig. 1879.
Handworterbuch der Staatswissenschaften. Article Banken, XVI. Die
Banken in den Skandinavischen Staaten. By W. Scharling. Third
edition. 1908. Gustav Fischer. Jena.
Bankpolitik. By William Scharling. Jena. 1900. [Pages 261-280, 318,
333~334> 351-354 relate to Sweden.]
Handbok i Bankvasendet. By Carl M. Rosenberg. Stockholm, 1878.
Underdanigt Betankande till Kongl. Maj.T, angaende Kredit-forhallandernes och Lane-anstalternes ordnande. Stockholm.
1853. (Report
of Special Committee on Banking. 1853.)
Underdanigt Betankande angaende Bankvasendet i Riket och forandrad
organisation af bankanstalterna. Stockholm, i860. (Report of Special Committee on Banking, i860.)
Bankkomitens underdaniga Forslag till forandrad Organisation af Bankanstalterna. Stockholm. 1883. (Report of Special Committee on Banking. 1883. With an appendix of statistical tables.)
Betankande afgifvet den 30 Januari, 1890, af den under den 5 Oktober,
1889, i Nader tillsatta Bankkomit£n. (Report of Special Committee on
Banking. 1890.)
Betankande med Forslag till forandrade Bestammelser angaende Riksbankens Sedelutgifningsratt. Stockholm. 1900. (Report of Special
Committee on the Note-Issuing Rights of the Riksbank.)
Betankande angaende Sveriges Ofverg&ng till ett n y t t Myntsystem me*d
Guld sasom Vardematare. Stockholm. 1870. (Report of Committee
on the Transition to the Gold Standard. 1870.)




9

National

Monetary

Commission

The text of the laws touching banking, from that of 1824 to those of 1903,
in separate numbers of Svensk Forfattnings-Samling. (Collection of
Swedish statutes.)
Lagar, Instruktioner och Reglemente for Forvaltningen af Sveriges Riksbank. Riksdagen. 1907. (Contains the regulations of the Parliament
for the conduct of the business of the Riksbank.)
Periodical statistical reports of the banks, including—
Ofversikt af Sveriges Riksbanks Stallning. (Annual Statement of
Accounts of the Riksbank.)
Ofversikt utvisande Riksbankens Tillgangar och Skulder. (Monthly
Statement of Accounts of the Riksbank.)
Ofversikt af de solidariska bankbolagens och bankaktiebolagens
bokslut. (Annual Summary of Capital and Profit and Loss Accounts for Banks with Unlimited and with Limited Liability. The
title of this publication was formerly somewhat different, but the
scope was the same.)
Sammandrag af de solidariska bankbolagens och bankaktiebolagens
uppgifter. (Monthly Statement of Accounts of the Banks.)
Uppgifter om Hypotheksbanken och Hypotheksforeningarna.
(Annual Summary of Accounts of the General Mortgage Bank and
Mortgage Credit Associations.)
Annual Reports of leading banks 1904-1908.
Bidrag till Sveriges Officiella Statistik. Y.—Sparbanksstatistik.
I.—Sparbanker. II.—Postsparbanken. (Annual Reports on Savings Banks and on the Postal Savings Bank.)
Statistisk Tidskrift. (Annual Official Abstract of Swedish Statistics.)
Sveriges Riksbank 1908. (The first number of the Yearbook of the
Riksbank.)
Ekonomisk Tidskrift, utgifven af David Davidson. Upsala and Stockholm. (A monthly economic journal issued since 1899, in which
have appeared a number of important articles on banking, and
which gives regularly the weekly statement of the Banks of Sweden
and Norway, the monthly statement of the Bank of Denmark, and
the figures of the monthly returns of the principal Swedish banks.)
Svenska Bankmannaforeningens Komiterades Forslag till Skarpta
Bestammelser for vinnanda af okad Kontroll ofver arbetet i de
Enskilda Sedelutgifvande Bankerna och Aktiebankerna. Stockholm.
1891 (Report of Committee of the Swedish Bankers' Association on Revision of the Banking Laws.)
And a number of pamphlets discussing the questions relating to reforms
of the laws relating to banking, but contributing nothing directly
to the facts set forth in this volume.




10

THE SWEDISH BANKING SYSTEM
WITH SPECIAL REFERENCE TO
THE ISSUE OF PAPER CURRENCY.
INTRODUCTION.

At the present time the business of banking in Sweden
is conducted by institutions of three classes, in addition
to those credit institutions which are concerned with advances on real estate and the like rather than with banking proper. These three classes are: (a) The Bank of
Sweden (Riksbank); (b) joint-stock banks, the liability
of whose ordinary shareholders is not limited, whether
or not there be associated with them en commandite
shareholders with limited liability; (c) joint-stock banks
of the type familiar in most countries, all of whose shareholders enjoy the privilege of limited liability.
For the sake of completeness, mention should be made
also of the remnant of the people's banks. Many of these
are now included either in the second or third of the
above classes; but a few, doing business on a quite modest
scale, retain distinctive characteristics and must be considered by themselves. Savings banks also exist, and,
in their receipt of deposits and the lending of their funds,
do work in some measure of a similar character to that
which forms part of the activities of ordinary banks.
Neither of these classes of banks, however, has a close




ii

National

Monetary

Commission

relation to the phases of banking on which attention is
mainly centered in what follows, and it will not be necessary to devote much space or a separate position in the
general classification to either people's banks or savings
banks any more than to credit institutions whose function is to make advances on the security of real estate,
whether urban or rural.
Since the ist of January, 1904, the right to issue
bank notes, previously enjoyed by banks of the second
class, as well as by the Riksbank, has been restricted,
and the paper currency is now the monopoly of the central institution. The third class of banks has never
enjoyed the privilege of creating paper currency.
The peculiar position of the second class of banks can
only be understood by reference to the history of banking
development during the nineteenth century. The first
of these private, or enskilda a , banks was founded in 1831,
and there has been an almost uninterrupted controversy
in reference to the privileged position which was accorded
to the banks of this type. Some of the features of that
controversy, especially as illustrated in the legislative
enactments relating to the privileges and obligations of
banks, are sketched in the account which follows.
The third class of banks has been of continually growing importance since the first of them was founded in
1863.
o In what follows, to avoid misapprehension, the name "enskilda bank"
will be used, as in the Swedish designation of these banks, in place of rendering this term by "private" or "independent." It will not be necessary,
perhaps, to add the qualifying term "note issuing," inasmuch as other
joint-stock banks than those known as "enskilda" banks have not enjoyed
the note-issuing privilege.




12

CHAPTER I.
EARLY HISTORY OF THE RIKSBANK.

The first bank to be established in Sweden was a private
institution, established under a charter granted on November 30, 1656, to a certain John Palmstruch (or Palmstruck) and his associates. The royal decree establishing Palmstruch's bank was dated from Marienburg in
Prussia. For half a century various projects for starting
banks in Sweden had been discussed, and a charter had
been granted ten years before that now in question, but
it had not resulted in the actual commencement of banking business. The charter of 1656 authorized a bank to
deal in exchange and grant loans for the advantage of
commercial enterprise. The offices were to be in Stockholm and other towns in the Kingdom, and the difficulties
of the copper currency constituted one of the points in
reference to which the new institution was expected to
render much-needed assistance, the banks of Amsterdam
and Hamburg serving as prototypes in framing the regulations for the Swedish institution.
MacCulloch states that the funds for the conduct of the
business . of the bank were procured by borrowing the
sum of 300,000 specie dalers (say, the equivalent of $320,000
United States currency) at 4 per cent, but the final authority for this assertion is not given
The advances were made on the security of bullion or
other valuables, merchandise, and also real estate. The
interest charged was 6 per cent, with a higher rate on




13

National

Monetary

Commission

loans of small amount. The charter provided that the
King, equally with other borrowers, should give security
for advances made, and that he, like others, should be
under obligation to make repayment within a year and
six weeks.
The exchange department of the bank conducted a
deposit business. Subject to certain conditions, depositors could transfer to others sums standing to their credit,
or could withdraw them, the document used for the purpose of transfer or withdrawal being designated a bank
note. Later on payment of bills of exchange for large
amounts was required to be made at the bank. The customs revenue was to be deposited in the bank, thus insuring to it some, if not all, the banking business of the Crown.
In the month following the grant of the charter, a royal
decree ordered the division of the profits of the bank
between the Crown, the city of Stockholm (where alone
an office was established) and the bank. The share
assigned to the bank was one-quarter of the net profits.
The same decree designates Palmstruch as president of the
company. In the course of the next year more detailed
regulations for the conduct of the exchange branch of
the company's business were approved.
In August of the year 1661 the bank began to issue a
kind of deposit receipt for the copper currency received
on deposit. In form it was a simple acknowledgement
that the holder had a claim on the bank in Stockholm for
a certain sum of money. These documents were called
credit notes, and soon won general acceptance as currency.
The charter conferred no powers for this creation of paper
currency, but it is clear that the Government acquiesced




14

The

Swedish

Banking

System

in the action of the bank. The volume of issue before
long exceeded the value of the coin held by the bank,
and on the occurrence of a marked rise in the value of the
metal, copper, of which the metallic currency was made,
there was experienced a pressure of depositors to withdraw the coin standing to their credit. As loans could
not be called in with sufficient speed, the bank found
itself in difficulties. Some of the writers on the subject
are of opinion that, contrary to the stipulations of the
charter, the Government, or some of the members of the
group which owned the bank, had obtained advances
without putting up the required security. The position,
at any rate, was such in the year 1664 that the Government was desirous of rendering assistance to the bank,
and, with that in view, an investigation of its condition
was made. The Government undertook the settlement
of all the bank's business, including the redemption of
the outstanding notes, within a year, a time limit which
was repeatedly prolonged. Meanwhile the notes were
required to be accepted at their face value, both in private
transactions and in official payments.
Palmstruch was proceeded against, but the records of the
trial were not made public. The total loss was stated
at 200,000 dalers specie, but how far this resulted from
fraud, how far from losses on loans, is not known. In 1668
Palmstruch was condemned to the loss of the charter
privileges and ordered to make good the losses resulting
from his conduct of the business. Failing in this, he was
condemned to imprisonment for life, but was pardoned
and set free in 1670, and died the following year. His
associates escaped all punishment, and, in the face of the




15

National

Monetary

Commission

secrecy maintained in regard to the matter, the conclusion which has suggested itself to writers discussing the
matter is that Palmstruch did not act without the knowledge or authority of others in the matters the blame for
which was made to rest upon him alone.
It may be mentioned, before passing to the next stage
in the historical development, that in 1665 silver replaced copper as the basis of monetary valuation, the latter
having been established as basis in 1625. Copper coin,
however, remained the principal currency in circulation.
The lapse of the privilege of banking accorded to
Palmstruch and his associates did not result in the passing
away of the bank itself. After due consideration and
consultation with the representatives of the different
classes into which the people were divided (the estates
of the realm, then four in number, namely, clergy, nobility
and gentry, burgesses, and peasants) the bank was, by a
royal rescript of September 17, 1668, placed under the
authority and supervision of the Parliament 0 (i. e., the
four houses of representatives as above named), which prepared a set of regulations for the conduct of its operations,
bearing date September 22, 1668. From that time the
bank became Rikets Stdnders Bank, the Bank of the
Estates of the Realm. The authority and responsibility
of Parliament in regard to its operations became absolute.
Neither King nor ministers had, or have, rights overriding those of the Parliament, which are jealously
guarded. It is important to bear in mind this fact, that
a The peasants' representatives refused to associate themselves with the
continuance of the bank, and not till 1800 did they share with the other
three houses in its management.




16

The

Swedish

Banking

System

the use of the title Riksbank, a or National Bank, to which
the earlier name was changed in 1867, may not suggest the
existence of a control or responsibility on the part of the
executive government, which is lacking in this case,
though present in a number of other countries with centralized national banks.
The bank was guaranteed the privilege of being the custodian of the revenue received from customs dues, and
sundry other state revenues, the funds of various public
institutions, the revenue of the city of Stockholm, bequests
and other funds, while the King undertook not to exact
from the bank overdrafts on his deposit account. No
special provision for supplying capital for the bank's operations was made by the Parliament. The regulations for
the conduct of business and the classes of business undertaken, remained unchanged, the Riksbank being, in fact,
the direct continuation of the enterprise established under
Palmstruch. At first, the two departments previously
existing were maintained as separate businesses, the loan
department accepting deposits at six weeks' notice, for
which interest was paid. A secret instruction, however,
authorized the advance by the exchange department to
the lending department of the funds at its disposal
though on reasonably moderate terms.
It would appear that the bank's operations were expanding, and the benefits it afforded were appreciated, up to
about the end of the seventeenth century. In 1700, however, with war in sight, depositors began to draw out their
funds, in a spirit of fear, and a committee of inquiry was
a The name Riksbank is used in what follows, notwithstanding the fact
that it was not till 1867 that it became the true designation of the bank.
22150—10




2

17

National

Monetary

Commission

appointed in 1701 to examine into the position of the
bank's business. Meanwhile, after continued demands
for such extension, branches began to be opened, the first
in 1692, and others in 1693 and 1694, one in each year.
They were not, however, maintained for very long, the
two latter being closed in 1702 and the former in 1705.
Though three others were projected, they were not actually
established.
Among the results of the committee's inquiries was that
no part of the funds of the exchange department had been
lost, but that the managers of the loan department had
been compelled to restrict repayments to depositors in
order not to bring borrowers to ruin and expected within
a short time to restore matters to their normal condition.
The bank, when it passed under the control of the Parliament, had been expressly denied the right to issue credit
notes to circulate as currency. The report of the committee of 1701 shows, however, the existence of a system of
transfer notes in connection with a special class of accounts
by means of which payments were effected between different places. The system appears to have possessed the
more essential characteristics of the accepted check,
the transfer notes requiring indorsement and bearing the
bank's acknowledgment of the deposit of the sum represented. These notes were drawn for not less than 100
dalers in silver (as already mentioned the riksdaler was
the equivalent, in silver content, of about $1.07 of United
States currency). They were readily accepted for use as a
circulating medium, being, indeed, a necessary substitute
for Palmstruch's credit notes. They were accepted at
a premium of 3 per cent as compared with copper coin.




iS

The

Swedish

Banking

System

Their form was that of a deposit receipt, and this form
was retained when the circulating note had ceased to be a
true deposit receipt, issued against and guaranteed by the
full equivalent in cash held by the bank, but was a representative of the bank's credit, available as a medium in
which advances could be made. It was not till 1836 that
the notes of the bank were drawn in the form of a promissory note instead of that of a deposit receipt, and even
then not in the case of the fractional notes, since withdrawn.
Another form of representative of debt, issued by the
bank, but not used as circulating notes, was that known
as a bank-loan certificate, issued against loans taken up by
the bank. These are still to be found in small amounts,
the annual report of 1908 showing some $47,500 worth as
still outstanding, the interest on which amounts to $2,060.
The transfer notes were the means by which the bank
was led into difficulties on more than one occasion. They
were issued in such great volume that, when metallic
funds for foreign payment were needed by their holders,
it was found that the bank was not in a position to maintain effective redemption. The Government had secured
loans without giving adequate security and came to the
support of the bank by constituting the transfer notes a
legal tender in 1726. A renewal of serious difficulties
occurred in 1745, when among the measures taken was the
issue of notes representing 12, 9, and 6 dalers in copper
money, and authority was given the bank to cease the
redemption of notes. The fluctuations in the value of
copper were a main cause of the difficulty. As is stated
above, the value of the currency was based on silver from




19

National

Monetary

Commission

1665, instead of on the copper in use earlier. In 1717, in
consequence of a rise in the value of the metal copper, the
copper coin was given a new rating, 50 per cent above its
former value in silver or notes.
As a result of the excessive issues of credit notes, silver
reached a premium of 25 per cent in 1745, and by 1760 the
premium on the metal reached 100 per cent. The high
price of the principal Swedish export commodity—iron—
affected the balance of the foreign exchanges, and attempts made by the exchange department of the bank
to adjust the quotation were rendered fruitless by the
expansion of the loans of the loan department. In 1760
the Parliament decided to order a reduction of loans, but
it was not long before notes were once more pouring into
the circulation in large quantities, and new measures had
to be taken with the end of restricting the amount of the
advances made. It was announced that, after the lapse
of a few years, the notes would again be redeemed at par,
and this assurance to note holders resulted in a temporary
improvement in their value.
The fluctuations in the value of the currency and in the
policy of the bank naturally led to discontent and distress. After the King had consulted with the bank's
managers, representing the Parliament, and that body
had duly considered the matter, the decision to accept the
depreciation of the notes was taken in 1776, and it was
decreed that, from the following new year, they should be
redeemed at half the amount in silver represented by the
rating of 1717 on their face value in copper. When the
redemption began, the proportion borne by the metallic
funds of the bank to the reduced value of the outstanding




20

The

Swedish

Banking

System

notes was t h a t of 9 to 16. The transfer notes representing copper currency were succeeded by notes representing
gold and silver, and in t h a t way the currency was once
more regularized. The transition was assisted by favorable commercial conditions, and not less by restriction in
t h e loans made by the bank. Thus ended the first period
of irredeemability of the bank's notes, after lasting for
over thirty years.
During those years a new development in the business
of the bank had, after lengthened consideration, been
undertaken. The desirability of associating private capital
with the national undertaking had been discussed, and a
plan for doing this duly matured. The method adopted
was to establish a discount company composed of private
shareholders, whose capital was supplemented by a loan
from the bank. A royal charter for a t e r m of twelve
years was granted, on May 26, 1773, to a company with a
capital of 400,000 dalers in 7,200 shares, to which a loan
of 100,000 dalers from the funds of the State was to be
granted at 3 per cent. As state funds were not available,
t h e advance was made out of the funds of the bank, and
a further advance of 200,000 dalers at 6 per cent was made
in 1777. The managing board was composed of four
directors elected by the proprietors, and a supervisor or
inspector was appointed by the Crown. The business
undertaken consisted in receiving loans at moderate rates
from private persons, and lending funds thus obtained by
t h e process of discounting. The discount of foreign bills
was already part of the business of the Riksbank, b u t
domestic bills were, apparently, not sufficiently provided
for by t h a t institution. The new company was not to




21

National

Monetary

Commission

discount for others than those engaged in useful businesses
or manufacturing operations. In course of time there was
developed not only by the new institution, but by the Riksbank, and by other banks when they were established later
on, an extensive system of loans in small amounts against
the notes of the borrowers without collateral security.
When the twelve-year period of the charter terminated
it was not renewed, but meanwhile a similar privilege had
been granted to a discount office in Gothenburg on March
24, 1783. In this case the share capital was not specifically determined, only the amount (100 dalers) of each
share being prescribed. This institution was authorized
to establish current accounts for effecting payments
between its clients, charging a commission of one per mille
on the turnover for its services. Like the Stockholm institution, that in Gothenburg did not have its charter renewed
on the expiry of the term of the original grant.
In place of the privately owned discounting business,
there was established in Stockholm, in 1787, a general
discount office, using state funds solely for its operations,
the amount of the capital being the same as for the earlier
institution, and the business of the same class. It was,
however, permitted to this new institution to make
advances secured by a lien on rural real estate. The
management consisted of five directors appointed by the
Crown and there was, as before, an inspector to exercise
supervision over the business. In 1789 the unsatisfactory
condition of the finances of the Kingdom, resulting from
mismanagement and the financial demands of the war,
led to the transfer of the management of the public debt
to the Parliament. A national debt office was estab-




22

The

Swedish

Banking

System

lished, which created a new circulating medium in the
shape of certificates bearing interest at 3 per cent, and of
small face value. These certificates, which were accepted
in payments to the royal treasury, represented sums
as small as 2% dalers, and within a year debt certificates were in circulation to an amount represented by as
large a face value as t h a t of the total of bank notes outstanding. Already in 1790 a premium of 6 per cent was
established on bank notes in terms of debt certificates.
The Parliament which assembled in Gefle in 1792 decreed
a forced currency for the debt certificates, though with
t h e 6 per cent allowance as compared with bank notes.
The debt certificates ceased to bear interest from this
date. After this, yet smaller denominations of certificates
were issued, even down to a quarter of a daler, and their
value became fluctuating, in general, depreciating. In 1799
the bank note was worth half as much again as the debt
certificate of the same denomination.
Meanwhile the effort to associate private with public
capital in banking enterprise had been renewed. Perhaps
a not less important feature in the establishment of the
discount agency chartered on October 26, 1789, was t h a t
it was to carry on its loaning operations with the certificates of the national debt office, and thus might serve as a
means of introducing them into circulation. The capital
was to be provided, partly by a state contribution of
150,000 dalers in debt certificates, partly by the subscription of 1,000 shares at 100 dalers each. The management
was to be conducted by a board composed of two shareholders' directors and three nominees of t h e Crown.
After a year's operations, as already recounted, the large




23

National

Monetary

Commission

issues of debt certificates had begun to produce a depreciation relative to bank notes. An internal loan failed
to relieve the situation, and the issues of debt certificates
proceeded while the State had not funds with which to
redeem the growing obligations. The cessation of interest
and the forced currency accorded the certificates in 1792
have already been referred to. The institution of 1789
was brought to an end, and the right of conducting a discount business with the certificates of the national debt
office was made a monopoly of that office itself by a decree
of April 11, 1792. A new discount agency was thereupon
established, to the capital of which the national debt office
contributed 200,000 dalers (in debt certificates), adding
thereto a loan of 100,000 dalers at 3 per cent. The association of private capital with that of the State was, however, not abandoned, as 500 shares of 100 dalers each, to
be subscribed by private persons, formed part of the plan.
In Gothenburg, too, there was set up, in 1797, a private
discount establishment employing debt certificates for its
advances. These various institutions, however, failed to
maintain the credit of the debt certificates, and in the year
1800 an arrangement was made with the Riksbank for
taking over the discounting business of the national debt
office and for redeeming its certificates. Dealing with
the first-named feature first, a royal decree of August 26,
1800, authorized the Riksbank to establish a national
discount business with a capital of 600,000 dalers, of which,
for the term of the charter, namely, fifteen years, one-third
might be subscribed by private persons in shares of 50
dalers. These private shareholders were to subscribe for
their shares in metallic silver, and, further, to lend to the




24

The

Swedish

Banking

System

bank an equal sum in silver at the same time. Of t h e six
directors, two were to be shareholders' elected representatives, four appointed by the board of the Riksbank.
The business to be carried on was making advances on
bills of exchange and shares and on the security of personal
guaranties, b u t not on mortgages or on produce. The
enterprise received further support from the bank, besides
the provision of capital, and, on the termination of the
period of the charter, the institution was continued without
t h e association of private shareholders with the bank, in
accordance with regulations approved on February 7, 1816,
and under t h e title of the Discount Agency of the Bank
of the Estates of the Realm.
I n addition to the discounting business in Stockholm,
arrangements were made, in a decree of August 26, 1800,
for the establishment in other centers of discounting businesses, in which, however, private capital alone was
engaged.
Gothenburg was the seat of the earliest, its charter
dating from October 13, 1802, and its share capital being
200,000 dalers. In virtue of a charter dated February 15,
1803, a similar business was started in Malmo with a capital of 100,000 dalers, and on July 20, 1805, a charter was
granted to another in Abo with a capital of 150,000 dalers.
The capital was to be subscribed in metallic silver, in
exchange for which notes of the Riksbank were obtained.
The term for which all three charters were granted was,
like t h a t in the case of the Stockholm institution, fifteen
years. As in the case of some of the earlier ventures, these
provincial institutions were to be supported by advances
from the bank at 3 per cent, and the bank was to share in




25

National

Monetary

Commission

their profits to the extent of one-third of any excess over
7 per cent. A representative of the bank took part in the
annual audit of accounts. A fourth discount business
was established a few years later, in association with the
Gotha Canal company, for whose advantage and assistance
it was chartered on April n , 1810. Only shareholders in
the canal company could become shareholders in the discount business. The term of the charter was twenty-five
years, of which four were allowed for the preparatory operations. The canal company's capital was also to serve as
the capital of the new establishment, assistance being given
by the Riksbank in the shape of a credit of 800,000 dalers
at 3 per cent, later increased to 4 per cent. The anticipations of profit led to a subscription of over 3,000,000 dalers.
In 1816 the credit at the bank was doubled in amount, the
canal itself serving as security for the advances made by
the bank. The managing board of the bank had the right
to appoint one member on the board of the new discounting institution, and one of the auditors. The business
done by all these provincial institutions consisted in
making advances on bills of exchange and promissory
notes for a term not exceeding six months, and also in
making loans for twelve months on the security of the
shares of well-known enterprises, and in particular on
those of the Gotha Canal. The bank credit was utilized
by the issue of drafts on the bank, the minimum of these
being 5 dalers, these drafts serving as a circulating medium.
Private persons also provided the discounting business
with funds, receiving from them in exchange drafts payable on presentation, these also serving as a circulating
medium. Many of these represented small amounts.




26

The

Swedish

Banking

System

The excessive amount of the advances made and the
unrealizable nature of the security in many cases, particularly in the case of the canal itself, in which much of the
funds were sunk, naturally led to difficulties. In the critical times of 1808 the institution at Abo had to be liquidated, and, though the others were held together for a time,
by the autumn of 1817 it could no longer be concealed that
the Malmo business was insolvent. The audit of that year
showed that a startling rashness had characterized the
conduct of affairs, and the loss to the bank exceeded
430,000 dalers. The fall of the Malmo business created
so much distrust that both the Gothenburg institutions
were also compelled to liquidate, and a special meeting of
the Parliament was summoned to deal with the situation.
The total loss to the Riksbank amounted to no less than
1,343,000 dalers. Private credit institutions could no
longer command sufficient public confidence, and the Parliament resolved that the Riksbank's discount agency, to
which reference has been made above, should alone be
permitted to conduct the business of discounting throughout the Kingdom. One result was the establishment in
1824 of branches of the Riksbank in Gothenburg and in
Malmo.
In following the course of events in reference to the discount institutions, the results of the depreciation of the
debt certificates have been neglected. It has already
been noted that by 1799 these debt certificates were
worth one-third less than the notes of the bank of equal
face value. The Parliament of 1800 arranged for a resumption of redemption of the debt certificates, to begin
in 1803. The operation was to be carried through by the




27

National

Monetary

Commission

bank, which bound itself to redeem 15,000,000 dalers of
debt certificates at a deduction of one-third from their face
value, and, to the extent of one-third of the total amount,
ten-year bonds bearing interest at 4 per cent were employed as the equivalent in redeeming the debt certificates. By a foreign loan and in other ways the cash
holdings of the bank were strengthened to meet the situation.
The resumption of cash payments was duly achieved,
but the uncertainties and the financial drain of war led to
a renewal of excessive issues of circulating paper. In 1810,
and still more definitely in 1813, the bank failed to supply silver in redemption of its obligations, a course which
a law of 1810, giving the notes of the bank legal currency
without reference to their redemption on demand, permitted. After the fall of the provincial discount businesses in 1817 the bank was, by royal decree, restrained
from the issue of silver; that is to say, the notes were not
permitted to be redeemed. Overissue and depreciation
followed, and the reestablishment of order in the currency
was only effected at the expense of the legal recognition of
the depreciation contained in the law of 1st March, 1830.
A new redemption at 3 7 ^ per cent of the face value of the
notes was decreed, so that 2% dalers in bank notes were
the equivalent of 1 daler in specie (silver). This relation
was maintained from 1834, when first the provisions of
the law of 1830 were able to be carried into effect, till the
establishment of the gold standard.
Hitherto the language employed has recognized but
one currency unit, the riksdaler. After 1834 the u s e °f




28

The

Swedish

Banking

System

the riksdaler banco as well as the riksdaler species, and
also the riksdaler currency, which was the debt certificate daler, renders it necessary from time to time to employ more than the one simple term. It will be convenient to restate here the relations of the three units and of
each to the United States dollar. The riksdaler riksmynt,
or currency daler, which became the legal currency unit
in 1*855, is perpetuated in the modern Swedish currency
unit, the krona or crown {pi. kronor), equivalent to 26.8
cents United States currency.
The riksdaler banco, or bank daler, being one and onehalf times the preceding, is 40.2 cents United States currency.
The riksdaler species, or silver daler, is two and twothirds times the bank daler, or four times the currency
daler—that is to say, is 107.2 cents United States currency.
Since 1834 the redeemability of the notes of the bank
has been fully maintained in silver till 1873, and since
that year in gold. While the issue of the small notes of
8, 10, 12, 14, and 16 skillings banco (48 skillings = 1 riksdaler) was continued, little metallic coin was used in general circulation, but when their issue was stopped in 1844
their place was gradually taken by coin.
The later history of Swedish banking is not disturbed
by uncertainties in regard to the value of the currency.
The question of the policy of permitting private banknote issues was, it is true, the subject of continual discussion and of repeated projects for changes in the law,
but the private issues did not, fortunately, affect the
value of the circulating paper.




29

CHAPTER II.
THE ENSKILDA BANKS.

In the next period of Swedish banking history we have
to do with with private institutions undertaking all ordinary banking functions, not merely with attempts
to supplement the operations of the Riksbank in certain
special directions by the establishment of more or less
subordinate institutions, such as those whose rise and
fall have been briefly traced in the foregoing account.
It had long been felt that the banking requirements
o t t h e country could not be satisfactorily met by a single
central institution, and in the attempts made to supplement its operations, particularly to provide facilities
in other centers than the capital, it may be supposed
that this sentiment was an influential contributing factor.
The question occupied the attention of the Parliament
anew in 1823, and the conclusion arrived at was that
the needs of industry and commerce could be met better
by the creation of private enterprises, to act as intermediaries between the owners of surplus capital and those
who needed it for use in their undertakings, than by
confining banking operations to the publicly owned
and controlled Riksbank. The result of the discussion
was the royal decree of January 14, 1824, authorizing
the establishment of private banks. The articles of
association and the regulations for the conduct of business by the new order of banks were required to be approved by the Crown before a charter was granted- The




30

The

Swedish

Banking

System

proposed rules and the extent of the funds to be used
were to be such as might be judged appropriate to t h e
object in view, viz, t h e readier availability of private
funds for making advances to assist commerce, industry,
and agriculture. I n every case a definite declaration
was required t h a t no aid from funds of t h e S t a t e should
be given, and t h a t t h e State should not be involved
in the business to be undertaken in any other way t h a n
in private businesses in general, and should not be called
upon for any contribution toward maintaining the bank
or rescuing it from difficulties. The same publicity in
regard to the constitution and purposes of t h e private
banks was required as for other companies, through advertisement in the Official Gazette, and these published
details were to specify particularly such features as the
unlimited liability of the shareholders, who were to be
jointly and severally liable for meeting the obligations
into which the company should enter. The term for
which charters should be granted was not to exceed ten
years, though a renewal might be sought a t the expiration
of the term. In advancing money on loan, interest a t
t h e m a x i m u m legal rate might be deducted, b u t not
for more t h a n a y e a r — t h a t is, the advances might t a k e
the form of the discount of notes with not exceeding
one year's currency. The interest on loans outstanding
after the expiration of the period for which they were
granted was to be at t h e rate fixed b y t h e discount ageticy
of t h e Riksbank. Proceedings to enforce repayment
were required to be instituted two months after the due
date. Nearly seven years elapsed before any institution
of t h e kind thus authorized was established. The first




31

National

Monetary

Commission

charter was granted to an association of three persons
in Ystad on October 14, 1830, but the actual commencement of business did not take place till the 1st of April
following. A second bank secured a charter in 1832 and
began business in 1833 in Carlstad. In 1835 another
charter was granted, and under it business was started
early in 1836. In 1837 three new banks were started,
one of which was, during the term of its first charter, a
company with limited liability. An interval of ten years
preceded the establishment of the next two private banks
in 1847 and 1848. No more were founded till 1856, when
a private bank was opened in Stockholm, to be followed
by three others in different parts of the country in 1857.
The slowness with which the new institutions were created would seem to suggest that the development of the
country did not call very urgently for a widespread system
of bank offices at that time. The growth of the business
of the banks which were started, however, was considerable. At the end of 1850 the loans and discounts of the
enskilda banks (to give them the distinctive designation
belonging to them, and thus avoid the suggestion that, as
private banks, they were not joint stock institutions)
amounted to 16,000,000 of currency dalers (about
$4,290,000), while those of the Riksbank were 40,500,000
dalers, having increased in the sixteen years from 1834 by
8,500,000. Besides the eight head offices, there then existed
sixteen branch offices or agencies of the enskilda banks.
The lending business of these banks was modeled entirely on the lines of the Riksbank's discount agency's
business. Advances were made on bills of exchange, on




32

The

Swedish

Banking

System

promissory notes, occasionally on the security of real est a t e or of merchandise, including grain, and also by means
of cash credits. F u n d s for t h e purpose were procured
partly from t h e subscribed capital (though this was very
moderate and not fully paid up), partly from deposits and
the balances of current accounts, and mainly by t h e issue
of b a n k notes. The smallest face value of t h e notes
issued was 2 b a n k dalers ( = 3 currency dalers), while t h e
Riksbank was issuing, as already mentioned, fractional
notes, and also issued a note of 32 skillings banco (1 currency daler). The lack of development of t h e means of
communication enabled t h e notes to be kept in circulation
longer t h a n now, and t h u s rendered their issue a more valuable privilege. No mention is made of note issues in
the decree of 1824, b u t the charter or articles of association
of t h e individual banks provide for t h e notes, except in
the case of t h e two earliest. The omission of specific provision in their case did not, it would appear, in any way
prevent the creation of a note circulation by these banks.
I n the revised enactment of 1846 t h e subject of note
issues is duly dealt with. This enactment was framed after
a discussion extending over m a n y years, in which some
urged t h e advantages of meeting the banking needs of
the country b y a system of branches of t h e Riksbank.
There were complaints as to t h e conduct of t h e enskilda
banks, b u t t h e majority favored their continuance, and
regarded them, properly managed, as better able t h a n
branches of t h e Riksbank t o provide t h e circulating medium required b y t h e country. The proposals of t h e
Parliament were in t h e main those which are found in t h e

22150—10




3

33

National

Monetary

Commission

royal decree of January 9, 1846, respecting enskilda
banks which issue their own credit notes. The new enactment deals with a number of points omitted in that of
1824. The principal of these are the following:
1. The subscribed capital was to be at least 250,000
silver dalers; that is, 1,000,000 dalers currency ($268,000).
2. The offices, both head and branch, were only to be in
towns.
3. The articles of association were to specify the amount
of the capital, 10 per cent to be paid up before the bank
commenced business, and a further 15 per cent within a
year, security for this further payment being demanded.
The management, audits, publication of the results of the
audit in the Gazette, general meetings, and regulations for
the making of advances, granting of credits, and the arrangement of current accounts were, of course, all to be
dealt with in the articles of association.
4. The security for so much of the subscribed capital
as was not paid up might consist of deposits of current
money or of gold and silver bullion duly assayed, and also
of such real estate mortgages and bonds or shares of industrial enterprises (but not shares of any enskilda private
banks) as might be approved by the company, an agent
of the Executive Government having also the right to be
associated with the management of the bank in deciding
what collateral was acceptable. These securities were to
be deposited under official charge in a safe, to which a
public officer, as well as the bank, controlled an independent lock. So long as the business of the bank should




34

The

Swedish

Banking

System

continue, no diminution or repayment of capital was
permitted.
5. The banks were empowered t o issue (a) printed or
engraved credit notes bearing no interest and payable to
bearer on demand, of not lower denomination t h a n 3 ^
bank dalers (5 currency dalers), and, from the commencement of 1851, not of lower denomination t h a n 6% bank
dalers (10 currency dalers) [this last provision was not carried out in the sequel]; (b) interest-bearing obligations
payable to bearer or to order of not less amount t h a n 500
currency dalers; (c) deposit receipts payable to a definite
person, the transfer of which was required to be notified
to the bank, and bearing a specification to t h a t effect on
their face.
6. The department of finance was to be supplied with
specimens of blank forms for the credit notes referred to
in 5a above, and the names of those whose signatures were
to be placed on the notes were required to be advertised
in the Official Gazette.
7. Branches were to issue only drafts on the head office
payable to t h e person named thereon.
8. The maximum limit of the note issues and drafts on
the Riksbank, taken together, was to be the amount of
the holding by the enskilda bank of the following items:
(a) Current money of the realm in silver or Riksbank notes;
(b) the balance of funds deposited with the Riksbank;
(c) other holdings of gold or silver, and the security for capital subscribed b u t not paid up which has been specified
above, the bank's own loan obligations being excluded;
(d) security held for credits granted, to the extent to




35

National

Monetary

Commission

which the credits had been drawn upon, but not exceeding
in all one-half the bank's capital.
In case the limit should be exceeded, the excess was
required to be adjusted within a month.
9. The bank might not make advances on the security
of shares of enskilda banks.
10. The banks might not trade in other things than gold
and silver. Property held as security for advances
might, however, be taken over, conditionally on its being
realized as soon as that could be effected without loss.
11. Shareholders might withdraw from the company or
transfer their shares only with the assent of the company.
The same rule applied to the heirs of deceased shareholders.
12. An account of the position of the bank's affairs
was to be rendered to the Crown quarterly. An inspector appointed by the local representative of the
Crown was to take part in the making up of this account,
and was also to be entitled to inquire into the affairs of
the bank at any time, with due regard to the secrecy of
the relations of the bank with its clients.
13. The Crown was to be entitled to annul the Gharter
in case of serious breaches of its provisions.
The provisions of the earlier law were to apply in reference to the liability of shareholders and the procedure
in respect of loans. The above points are features in
which the defects and omissions of the previous law were
sought to be remedied.
The provision that the banks should be subject, in
regard to the term for prescription of claims, to such




36

The

Swedish

Banking

System

regulations as might thereafter be made was rendered
definite b y the actual determination, in a royal ordinance
of October 6, 1848, t h a t the ten-year limit applicable in
ordinary cases of debt should not apply to the notes of
enskilda banks, with the natural consequence should such
a b a n k go into liquidation.
The fixation of the minimum limit of an enskilda bank's
capital at 1,000,000 dalers currency ($268,000) is a notable
feature of the new legislation. Of the six banks chartered
before 1846, four had started with smaller capitals, and one
still possessed a capital below t h e new limit.
The proportion of the paid-up to the subscribed capital
was fixed in each case by the articles of association, the
approval of which by the Crown was a condition of the
grant of a charter.
The first of the enskilda banks was originally founded by
three subscribers who provided a capital of 400,000 dalers.
Other shareholders were shortly afterwards admitted, and
an arrangement made by which the founders and the
4,239 shareholders were each credited with a subscription
of 317,925 dalers. The face value of the shares was 150
dalers, and the total paid-up capital remained at 400,000
dalers till 1841 when, under a renewed charter, the share
capital was reorganized, the value of each share being
quadrupled, and, with 20 per cent paid up, the cash subscription was increased to 405,600 dalers. The position
of founders and other shareholders was thereafter identical.
The second bank in order of date of foundation had onethird of its subscribed capital paid up* The two which




37

National

Monetary

Commission

followed had 30 per cent paid up, the next 40 per cent,
and the sixth 20 per cent. These proportions were modified after the renewal of charters which took place in 1846,
four of the six banks above referred to adopting the 25 per
cent relation of paid-up to subscribed capital. The
inquiry by a committee in i860 showed that the 12 banks
then existing had a total subscribed capital of 25,000,000
dalers currency, but the amount paid-up only slightly
exceeded 6% millions. This last figure leaves, however,
out of account a special feature of three of the twelve
banks. The subscribers to their shares paid up the entire
face value in cash, but in two cases 75 per cent, and in the
third 60 per cent, of the amount thus obtained was invested
in suitable securities, mainly mortagages on real estate, and
only the balance retained for ordinary banking operations, thus effectively putting these three banks in line with
the other nine in this matter. Taking account of the original cash subscription of these banks, the total cash paid in
by the holders of the 25,000,000 dalers of shares amounted
to a little over 9,000,000 dalers. Under a subsequent
revision of the banking law, the course voluntarily adopted
by these three banks was made obligatory on all. It appears, further, that there was in some other cases an excess
of cash subscriptions over the minimum proportion required, the excess being invested as in the cases specially
considered above. During the years 1837-1847 there
were cases in which the directors did not enforce against
subscribers the full cash subscription specified in the




38

The

Swedish

Banking

System

articles of association, b u t this state of affairs was not
continued in later years.
The deposit of securities, under t h e control of a public
officer and of the bank jointly, suggests to the mind the
national bank system of the United States, with its provision for the purchase of government bonds as a condition
precedent to the issue of bank notes. The Swedish banks
were accorded a much greater liberty as to the selection of
t h e securities, which, however, as in the United States,
served as a guaranty for bank notes issued. I t is to be
observed t h a t the system of representing the p a r t of the
capital not paid up in cash b y securities was embodied in
the articles of association of various banks before the date
of the decree of 1846, which imposed it as a general condition on all.
The charters which were granted to enskilda banks had,
in general, a term of ten years, with the requirement t h a t
application for renewal must be made at least eighteen
months before t h e current t e r m expired. The first three
charters were due to expire in 1840, 1843, and 1845, respectively. There were three banks chartered in 1837,
and, before t h e first term of the earlier banks ran out, a
renewal was granted so t h a t all six should expire together
in 1847. Thus, after the determination of the new conditions of operation in 1846, all the six banks then existing
were at once brought under the new rules, their charters
being renewed in 1846. How the interest in t h e develop-




39

National

Monetary

Commission

ment of these banks was spreading is shown in the following comparison of the situation at intervals of ten years:
Enskilda banks, 1837-1857.
1837.
Number of banks
Number of shares
Number of shareholders °

1847.

1857.

6
22, 299
1, 025

Dalers
currency.
6. 342. 600
2,036, 940
217.418
4.085,812
1.872.735
24.380
215.046
69,604
3.533.496
682, 446

Subscribed capital
Paid-up capital
Surplus
Notes in circulation
Cash held &
Deposits
Current account balances
Other borrowings
Discounted bills c
Advances d
Loans on stock exchange collateral
Balance sheet total

12

59.925
1,826
Dalers
currency.
15. 736.320
4.535. 125
678,794
16,253,444
7.562,748
203,000

1, 451. 640

12, 000

8. 169.850
4.133.580
1.35i.457

9. 790,641

3 1 , 0 2 1 , 798

87,662
2, 924

Dalers
currency.
25, 0 0 1 , 900

6.689,475
729.44i
21.405, 736
8,800,985
3.557.930
4.722.639
2,448,500
16,348. 719
11. 105,011

1, 271, 785
55,645.205

NOTE.—The daler currency is equivalent to 26.8 cents.
° Shareholders in more than one bank are included once for each such bank.
b
Including gold, silver, Riksbank notes, notes of other enskilda banks, and deposits
at the Riksbank.
c
In this item are included all advances on notes of hand, whether secured by the
deposit of collateral pledged to the bank or by personal guaranties. In 1857 a further
item of discounted inland bills of exchange, amounting to 1,249,593 dalers currency,
should be added.
d Cash credits, secured by deposit of collateral or otherwise. The figures show the
outstanding advances. The total of credits assigned to customers at the end of 1857
was 16,249,000 dalers.

The number of banks doubled, the shareholders nearly
trebled, in the twenty years' interval covered by the table.
The subscribed capital increased threefold, the paid-up
capital in the proportion of 3 to 10, while the proportion
of paid-up capital to total assets diminished from 21 per
cent in 1837 to 15 per cent in 1847 and 12 per cent in 1857.
By far the most important means of providing the funds
for the activities of the banks was the issue of notes,




40

The

Swedish

Banking

System

which, providing double the paid-up capital in 1837,
accounted for three times the paid-up capital in 1857,
having been even more important relatively in 1847.
The principal items on the assets side of the account
are the discounts and cash credits, of which the latter had
increased most rapidly and formed the subject of no
little criticism. The feature has been so familiar through
its services in the Scotch banking system t h a t no comment on it is required here. A small commission on the
amount of the credit granted and interest on the amount
actually withdrawn on the credit provided the bank's
profit. The utility of these facilities in encouraging
enterprise has often been emphasized by writers on banking subjects. Of the discounts, it appears t h a t a large
proportion was on personal security, and the extent of
these loans was used as an argument against leaving too
much freedom and granting too great privileges to
enskilda banks. The difficulty in recovering such loans
might endanger the redemption of the notes, in which
they were largely made.
The holdings of cash items increased faster t h a n the
paid-up capital, but, in the second decennium represented, less rapidly t h a n the outstanding notes. If the
aggregate of notes, current-account balances, and credit
balances not drawn be considered, their total at the end
of 1857 was 31,250,000 dalers, as compared with which
the cash items represented 28 per cent, a not unsatisfactory showing when the probabilities of a drain arising
from any of these classes of claims on the banks is considered.




41

CHAPTER III.
THE RIKSBANK AND ITS SUBORDINATE INSTITUTIONS,
1834-1875.

Before proceeding further with the development of
legislation touching the enskilda banks, it is necessary to
review events relating to the Riksbank in the period
following the resumption of cash payments in 1834,
inasmuch as the supporters of exclusive privileges for the
state institution were able, in this period, to reassert
their strength.
The association of private capital with the national
undertaking had formed the subject of repeated and
careful discussion. One view held was that the Swedish
constitution, in its provisions dealing with the relations
of the bank to the Parliament, rendered the inclusion of
private shareholders impossible, and this view finally
prevailed, though some specious arguments on the other
side were advanced. The authorization of the establishment of the enskilda banks was one outcome of a particular
phase of the controversy, but the achievement of this step
rather stimulated than composed the discussion on principles. In the foregoing the transformation of discount
establishments intended to operate with private funds,
with support from the Riksbank, into a lending agency
of the bank itself from the year 1816 has been briefly
related, and the establishment of branch lending establishments at Gothenburg and Malmo in 1824 has also
been noted.




42

The

Swedish

Banking

System

These remained as the only branches of the Riksbank
till t h e year 1851. In the Parliament of 1850-51 a decision of great importance in reference to t h e bank's
development was taken. In addition to a third ordinary
branch of the bank to be established at Wisby, a new
system of district a banks was authorized. These banks
were to be established with private capital, b u t were to
differ from the existing enskilda banks in not having
note-issuing rights. To give them the strength without
which one of t h e main objects of their promoters, namely,
t h a t effective competition with t h e existing enskilda banks
which might hinder the further multiplication of t h e latter
if it did not provide a substitute for those already established, could n o t be attained, the Riksbank was to be a
kind of foster mother to t h e new class of banks, granting
advances and giving credits at low rates.
Between 1852 and 1862, both inclusive, 25 charters for
such district banks were granted, and 22 of t h e m started
operations. The profit made by t h e Riksbank on its
connections with these quasi branches was, however, not
satisfactory, and the Parliament of 1862-63 resolved to
withdraw the support of the Riksbank, a step which inevitably led to the gradual extinction of the district banks.
Five charters were granted in 1852 for ten years, of
which one was forfeited through t h e lapse of the interval
permitted for the commencement of operations before
business was started. Three charters were granted in 1855
and twelve in 1858, two of t h e latter not resulting in the
actual starting of business. One was granted in each of the
a Called " Filialbanker," or " Branch banks." The use of the literal rendering of their titular designation would be misleading.




43

National

Monetary

Commission

years 1859 and i860 and three in 1862. Of t h e banks
thus established, none endured for more t h a n t w e n t y
years, and the last to disappear ceased its operations on
J u n e 30, 1875. Half of t h e total number were absorbed
by, merged in, or converted into, enskilda banks. Two
others—the two first chartered—were reconstructed as
joint-stock banks with limited liability in 1872 and 1873.
The regulations contained in the royal decree of September 30, 1851, under which t h e district banks were
established, are deserving of attention as comprising some
features which were added to the law regulating enskilda
banks at its revision in 1864.
The head offices were, as with the enskilda banks,
required to be situated within a town. At least 30
shareholders were required, who accepted a joint and
several liability for t h e b a n k ' s undertakings. At least
one-fourth of the subscribed capital was to be paid in cash. a
For t h e remaining three-fourths a note, payable on six
m o n t h s ' notice, was to be given to the directors, accompanied by collateral in t h e shape of coin or bullion (duly
assayed) of gold or silver, public securities taken a t t h e
value a t which they were accepted by the Riksbank as
security for loans, or mortgages on real estate, in t h e rural
districts within the amount of t h e valuation for taxation
m a d e in 1850, in towns within two-thirds of the fire-insurance valuation, the security to be subject to t h e approval
of t h e directors and of an inspector appointed b y t h e
managers of t h e Riksbank.
« I n two cases the articles of association required that the whole be so
paid up within two years.




44

The

Swedish

Banking

System

The charter was to be granted for a period not exceeding
ten years. Subject to the fulfillment of these conditions,
t h e district bank should be entitled to advances from the
Riksbank to an amount not exceeding the uncalled part of
the subscribed capital, for which collateral security had
been provided by the subscribers, or 500,000 bank dalers,
whichever were the lower amount.
A lien on the collateral security just mentioned was to
be given as security to the Riksbank.
Four-fifths of t h e advances were to be m a d e in t h e shape
of loans, t h e remainder as an open credit on which the
district b a n k might draw, using for these drafts printed
forms supplied b y t h e Riksbank, and notifying the central institution b y t h e first outgoing post. These drafts
were to be of the same denominations as were permitted
to the branch loan offices of the Riksbank, viz, 100, 150,
500, and 1,000 b a n k dalers, i. e., 150, 225, 750, and 1,000
dalers currency, a n d none other.
If any of the district banks desired to obtain advances
only to the extent of a quarter of its subscribed capital, it
might obtain the whole in the form of an open credit,
up to the a m o u n t of 200,000 dalers currency.
The rate of interest on t h e loans and on t h e drafts on
the open credit was fixed a t 3 per cent.
The business to be carried on by t h e district banks was
to comprise t h e making of advances, t h e discount of bills
of exchange, and the opening of current accounts and grant
of cash credits under conditions to be determined in detail
b y regulations under t h e authority of the Crown.
In the yearly audit a representative of t h e Riksbank
was to take part.




45

National

Monetary

Commission

By a later modification of the regulations the one-fifth
proportion of the open credit to total advances from the
Riksbank was increased to one-third. In 1858 it was
further decided to charge a commission of at least 1 per
cent per annum on the amount of the credits opened.
The advances made might be recalled, apart from acts of
the directors of the bank receiving them, should it seem
necessary to increase the Riksbank's cash reserve, and
other means of doing so, such as the restriction of the discounting business of the agencies of the Riksbank and
of its advances on open credits in general, have proved
inadequate.
In case of notice being given of the cessation of loans to
a district bank under such conditions, that bank was
required to repay the amount by equal installments of
one-fifth yearly, beginning one year after the date of the
notice.
The detailed regulations for different district banks differed in a number of points from one another. Thus in
. some cases it was forbidden to issue share certificates, but
the subscribers received the right to an open credit without
the deposit of special collateral, in some cases to as much
as two-thirds of the subscribed capital. In some cases the
collateral accepted against an open credit was real estate.
In the older banks the regulations fixed the limit of advances against personal guaranties at one-fifth of the
subscribed capital, together with the average amount of
the payments into customers' drawing accounts over a
lengthened period. Later regulations limited this class
of advances to a fifth of the subscribed capital.




46

The

Swedish

Banking

System

The Parliament of i860 determined that the entire
amount of the advances from the Riksbank to district
banks should thenceforth be in the form of open credits
alone, limited to one-half the subscribed capital of the
bank to which the accommodation was granted, but not
exceeding in any individual case 500,000 currency dalers
and subject to an interest charge of 4 per cent, with a
minimum commission of 2 per cent per annum on the
amount of the credit opened.
The requirement from the enskilda banks by the law of
1846 of a quarterly account was not included in the district banks' regulations, so that the statistics relating to
them have been compiled from their annual audit accounts,
and the figures do not apply to the same date for all the
banks.
The drafts on the Riksbank were found to remain in
circulation for a considerable period, and, as the general
rate of interest charged by the district banks on the advances made by thern was 5 per cent (raised by a number
of them to 6 per cent during the financial pressure in
1857 or 1858) they afforded a source of no inconsiderable
profit, a larger share in which was sought, in the raising
of the rate charged, by the Riksbank itself.
The provision of the funds for the loans made by the
district banks, from which they could not be withdrawn
quickly in case of need, tied up the resources of the central
institution. As appears from the statement below, the
district banks provided by the development of the deposit
side of their business only a moderate proportion of the
funds which they lent, and the advances obtained from




47

National

Monetary

Commission

the Riksbank formed the most important part of their
available resources.
The following table gives some of the figures for the
year 1855, selected rather than 1857 because of the financially disturbed state of the last-named year, and 1867,
when as yet the greater part of this group of banks were
still in operation:
District banks 1855 and 1867.
Accounts of—
June 30 and December 31, 1855.
Number of banks

4

Dalers currency.
Subscribed capital
Paid-up capital
Reserve funds
Profit of year
Cash in hand (coin and notes)
Deposits
Current account balances
Advances from Riksbank
Loans
Advances on open credits
Bills of exchange
Security guaranty for uncalled capital
Balance sheet total

3,150,000

795.575
39,841
101,198

558.620
198,083
1.099,937
1, 796,850
2,482,661
I.09L553
192,617
2,354. 425
6, 850, 468

June 30, 1867.
18

Dalers currency.
i3.443.ooo
5,291,4*9
336,112
263,566
578,757
4.845.695
1,208,417
7,222,469
9,038,181
4,565,739
5, 137,741
8, i 5 i , 5 7 i
29,486, 135

In 1863 the number of the district banks reached the
maximum of 22, and remained at that figure but little over
a year. The subscribed capital at that time exceeded
15,000,000 dalers currency.
It will be seen that the cash with which the business
was conducted was small, the open credit at the Riksbank
serving in place of cash in hand. The dealings in inland




48

The

Swedish

Banking

System

bills of exchange had increased very notably in the interval between the selected dates, as had also the deposits
at time and notice. The capital paid up had increased
faster than the business done, and the proportion of the
funds used in lending, wrhich was provided by the Riksbank, had decreased from 48 per cent to 39 per cent.
The resolution of the Parliament which effectively
brought the system to an end was that no increase was to
be made in the sums advanced to any of the district banks,
and that such banks, if chartered in or after 1858, were
not to be entitled to any advances from the Riksbank.
It appeared that, on the ten millions (dalers currency) to
which the advances made to district banks had increased,
the Riksbank made only 2.39 per cent net, a rate regarded
as quite inadequate.

22150—10




4

49

CHAPTER IV.
THE ENSKILDA BANKS AFTER 1850.
T h e district banks had been established in p a r t in accord with the view t h a t t h e continued existence of private
note-issuing banks was undesirable. I t was alleged t h a t
t h e increase and decrease of their note issues, instead of
corresponding to t h e expanding and contracting d e m a n d
for t h e circulating medium, was really affected b y considerations leading to an inverse correspondence, t h a t is,
t h a t t h e issues contracted when t h e demand for circulation was great, and expanded in t h e opposite case. Propositions were discussed having in view t h e limitation of t h e
m a x i m u m issue to a specified amount, each b a n k being
allotted a share in this amount, b u t none of these plans
received legal sanction.
The note circulation of the enskilda banks h a d been
growing rapidly, while t h a t of the Riksbank h a d been
practically stationary. T h e figures for the end of each
year show t h a t in 1840 t h e enskilda b a n k notes h a d
already exceeded 10,000,000 dalers currency, while a t t h a t
time t h e notes of t h e s t a t e institution were in circulation
t o a value of a little over 41,000,000 dalers currency.
Until 1853, t h e a m o u n t of t h e latter did not, either in J u n e
or December, reach 40,000,000 again, except in t h e crisis
year 1847. I n 1844 it was below 30,000,000 dalers. Meanwhile t h e enskilda b a n k issues, after remaining without




50

The

Swedish

Banking

System

expansion till 1845 (in 1843 they were, in fact, slightly
under 9,500,000) rose to over 15,000,000 dalers in each
of t h e years 1847-1852 and then increased rapidly to
20,500,000, 25,400,000, and 31,600,000 dalers in the three
following years. I n these last three years there was a
parallel increase in t h e note circulation oT the Riksbank,
which increased b y 7,500,000, 8,500,000, and 8,500,000
dalers in t h e three years, respectively, to about
58,500,000 dalers in 1855? The development of the
circulation of t h e state institution through the medium
of the district banks m a y account, in part, for these
increases. B u t it is clear t h a t , up to this point, a general expansion, in which both enskilda banks and the
Riksbank shared, was in progress. At the end of 1855
the aggregate note circulation was 90,000,000 dalers
currency, as compared with 50,000,000 dalers in 1840.
At the same time t h a t , in 1855, somewhat more stringent
conditions were imposed on the district banks, the enskilda
banks were also subjected to further regulations by the
decree of November 10, 1855. The main features of t h e
new legislation were:
1. T h a t the number of shareholders must not be less
t h a n 30.
2. All banks to issue notes of the same denominations
and of uniform size for a given denomination, the lowest
value permitted being 5 dalers currency.
3. The banks were forbidden to b u y and sell other things
t h a n gold and silver, inland and foreign bills of exchange,
and interest-bearing paper, or to own real estate not
required for t h e bank's own accommodation.




51

National

Monetary

Commission

4. From loans for a period not exceeding six months,
interest at a rate not exceeding 5 per cent might be deducted for the entire currency of the loan (hitherto the
discount form of lending on a note had been permitted in
loans up to a full year), and for any period during which
the loan was not repaid after the due date, 6 per cent
might be charged—legal proceedings for recovery not to
be delayed beyond one month from the due date.
The threatened abolition of the 5 daler note had been
postponed from the end of 1850, first for one year, and later
for a further three years. The right to the continued issue
of these small notes was now definitely granted by the
decree whose new provisions are here summarized.
In the years 1856 and 1857 the charters of all the eight
then existing enskilda banks were renewed, and four additional charters were granted, one in 1856, three in 1857.
The varying designations of these banks which had been
employed during the preceding period were now unified,
and all were called by the one official name "enskilda''
banks. The opening of the Stockholm Enskilda Bank
in 1856 is recognized as marking a new era in the history
of this class of bank. Its founders had recognized that the
system of district banks was not destined to endure for
very long when the new stipulations of 1855 were imposed
on them. They had themselves applied in 1852 for a district bank charter unsuccessfully. The subscription list
needed to remain open only two days in February, 1856,
and, the charter having been granted on July 1, to date
from September 1, business was begun on October 15.
As already related, the capital was entirely paid in in cash,
and 60 per cent invested in interest-bearing securities by




52

The

Swedish

Banking

System

the directors, bringing t h e bank into a position similar t o
t h a t occupied by other banks t h e subscribers to whose
shares deposited securities for a part of the face value.
The articles of association of the Stockholm bank have
served as a model for imitation by those which were established later. The rules defining its operations included the
following:
" T h e b a n k shall b u y and sell bills of exchange and interest-bearing securities, and lend on merchandise, shares,
or other collateral which m a y be judged b y t h e directors
to give full security to t h e bank. Only in the last resort
shall loans be granted on personal guaranty, in the discretion of the directors, and never to a higher total a m o u n t
t h a n the t e n t h p a r t of the subscribed capital * * *
No loans shall be granted for a longer period t h a n six
months. "
The purpose of t h e bank's founders was to facilitate
t h e circulation of money in the most general sense of those
words. Hitherto none of the banks had developed the
deposit business. When funds were needed, means were
taken to secure t h e m partly in the shape of special loans
which the bank did not seek to retain as deposits when the
immediate need had passed, b u t the general practice of
deposit banking was, to all intents and purposes, introduced by the Stockholm bank. Similarly with current
accounts, for which t h e banks had offered small inducements. Printed forms for bills of exchange, receipts, etc.,
were not provided, and, in view of the lack of so m a n y of
the ordinary facilities of modern banks, it can be readily
understood what a field of enterprise lay open for exploitation to the new bank and its imitators. The public had




53

National

Monetary

Commission

to be t a u g h t to use the banks, and to come to regard t h e m
as necessary intermediaries in all business affairs. Hitherto the loans of the enskilda banks had been mainly granted
on securities not readily realizable or promptly liquidated,
while the funds of the new bank were employed in t h e
most regularly liquidated forms of short term loans, aiding commerce while giving a greater security to t h e lending institution.
The issue of notes was not regarded as a source of
important profits, which were sought through t h e development of the deposit business, for which the metropolis
offered so fruitful a field. Most of the deposits are m a d e
for long periods, so as to secure the highest rate of interest
from t h e bank, and t h u s the b a n k has a security in using
its deposit fund which does not accrue to deposits largely
repayable on demand. Already by the end of 1858 t h e
deposits reached nearly 6,000,000 dalers ($1,600,000) and
the current-account balances over 3,500,000 dalers.
Outstanding loans amounted to over 7,000,000 dalers, t h e
balance after repayment of three-fifths of the loans m a d e
in t h e course of t h e year. All this was achieved while t h e
capital was 1,000,000 dalers, of which only 400,000 dalers
in cash had been retained for working capital, and t h e
note issue was barely 1,150,000 dalers. The net profit of
t h e year was 228,660 dalers, from which the shareholders
received a 5 per cent dividend, t h e balance being transferred to reserve. Within t w e n t y years the dividends
increased to 20 per cent, and t h e reserve fund grew so
large t h a t , on t h e renewal of t h e charter in 1875, t h e new
capital was doubled b y t h e issue to shareholders of two
shares of 1,000 dalers for each one previously held of t h e




54

The

Swedish

Banking

System

same face value. Besides the head office, branches were
opened in various parts of Stockholm.
The example set by this bank served to stimulate development on the part of its fellows, as well as securing
imitation from the later-founded banks. As a bank of
deposit it retains a leading position, and apart from the
Riksbank, but three other banks have a larger balancesheet total to-day, or can show larger deposits than
the Stockholm Knskilda Bank.
An important new departure initiated by this bank in
1858 was the "bank-post bill" (postremissvexel), which
was speedily copied by other banks and has secured for
itself a very large place in the banking transactions of
Sweden. It is a draft by one bank or branch of a bank
on another, and, when it had once secured general acceptance, became an important supplemental means of circulation alongside of the bank note. Unlike the bank-post
bills in use in other countries, those of Sweden are payable
on demand and not subject to any deduction by way of
discount. The form of the bill was generally that of a
draft, sometimes that of a promissory note. Sometimes
the bill bears on its face the statement that it will be
cashed at all the branches of the issuing bank, sometimes that it may be cashed at most of the banks
throughout the country, the latter having come to be the
fact, even though no * definite contract to that effect
should have been made between the issuing bank and
certain of the others. All the enskilda banks without
branches in Stockholm have in that city an agent for
effecting payment of post bills (and formerly of notes
also). These bills serve for remittances between banks




55

National

Monetary

Commission

in settlement of balances, and have secured a sufficient
reputation to be accepted in neighboring countries with
much readiness.
Printed or engraved forms are in use for these bills, the
drawer's name being printed, and they are drawn for
uneven amounts, always to order, and transferable by
indorsement. They are generally drawn on a bank in
Stockholm. Their period of circulation is short, so that
the outstanding mass is much smaller compared with the
new issues made in a year than is the case with bank notes.
In many respects they resemble the bank money orders
of the members of the Bankers' Association or express
money orders, though the practice of charging a commission on them, never general, has ceased long since.0 The
issuer secures his profit through the interval between issue
and presentation, and even'when the charge for the credit
with the drawee bank is considered, the issue of post bills
in making a loan insures a higher rate of interest received
than that paid. Though the check system is known and
practiced in Sweden, the bank post bill provides an
almost invaluable facility to the business community.
Even accepted checks do not present, in the United
States, the combined security and convenience of the
Swedish bank post bill, which has practically the security
of an accepted check, and is free from charges for collection. The development of the deposit system by the
banks was a source of considerable jealousy and discontent on the part of private individuals who had previously
° T h i s is true of the bills issued at the Stockholm offices of the banks,
and a t any rate of those below a certain value issued at other places.




56

The

Swedish

Banking

System

secured loans directly from other private individuals,
and now found the banks attracting, by higher rates,
greater security, and less trouble, the funds hitherto available for private loans. The growth of the deposit business was, in fact, in p a r t a transfer to banks of business
previously conducted without their intermediation, not
wholly the creation of a new business in borrowing and
lending. Borrowers found themselves compelled to
accept from the banks harder terms and shorter loans
t h a n they had before secured direct.
So far as the business in inland bills of exchange is concerned, a t t e m p t s in 1835 a n d I ^ 5 I to encourage enterprise by bringing the law regarding such bills more into
correspondence with the needs of trade were not wholly
successful, though the provisions of the latter law permitted t h e development of the bank post bill. It was
not till borrowers had learned to meet their bills promptly,
and to be content with shorter terms of borrowing, and
the banks had instituted discrimination against mere
accommodation bills in favor of those representing actual
business transactions, t h a t the inland bill business could
flourish.
These defects are not wholly uprooted in
Sweden or elsewhere, b u t their partial removal was necessary before banks could handle inland bills reasonably
freely. A law of 1869 replaced an older commercial
custom by the legalization of ordinary acceptance on a
bill, and contributed much to increase their use, to the
m u t u a l advantage of merchants and manufacturers on
t h e one hand and their customers on the other.
Before t h e expiration of the enskilda b a n k charters,




57

National

Monetary

Commission

renewed for ten years in 1856, the definite decision which
brought the district banks to an end had been taken, as
already related, and the law applicable to enskilda banks
also underwent revision. Among the influences tending
to secure a prolongation of all essential privileges to the
enskilda banks may be counted a mistrust, even among
some who were not very friendly to the enskilda banks,
of monopolistic power in the hands of the bank which
was controlled by the legislative body. The security of
the public required some further restrictions on the institutions which provided an important part of the currency,
but, when that was adequately provided for, the greatest
possible freedom appeared desirable for the banking
institutions.
The proposals of the Parliament were only partially
adopted in the royal decree of May 20, 1864, which,
repealing the earlier statutes of 1824, 1846, and 1855,
instead of supplementing them, as on previous occasions,
substituted an entire new body of ordinances respecting
note-issuing private banks. It will be sufficient here to
note the leading new features of the legislation of 1864.
1. The ordinary shareholders must be Swedish citizens.
2. With the ordinary shareholders might be associated
others who, unlike the first, might enjoy the limitation of
their liability to the capital subscribed. These shareholders en commandite might subscribe a capital not
exceeding the half of that subscribed by the ordinary
shareholders. They possessed voting rights in the general
meetings of the company only in respect of the election of
auditors, and were eligible for election as such.




58

The

Swedish

Banking

System

3. While the transfer of ordinary shares needed to be
assented to at a general meeting of the company, limited
shareholders might transfer their holdings on notifying t h e
management and in accordance with standing rules on the
subject.
Retirement of ordinary shareholders, or the entry of
new ones, must be advertised in the Official Gazette and
recorded in the register of the county court of the district.
A register of shareholders and their holdings was required to be kept at the bank and to be open to inspection by all.
4. Within a year of starting business the entire subscribed ordinary capital, and t h a t en commandite within a
year of closing the subscription, was required to be paid
in in cash (legal tender), the charter being forfeited for
failure to fulfill this stipulation. From 60 to 75 per cent
of the ordinary capital, as might be determined by the
company, was to be invested in securities to be placed in a
publicly controlled depository; the securities to consist,
to at least one-third in value, of readily realizable interestbearing bonds and, for the remainder, of mortgages on
real estate not exceeding one-half the valuation, in rural
districts the last t a x valuation, in towns the fire-insurance
valuation, in the latter case the property being required
to be insured in an officially recognized
fire-insurance
company. The validity of the securities was to be approved both by the company and by the Crown's local
representative, or an agent acting on his behalf. The
substitution for any part of the deposited security of new
collateral to be similarly approved.




59

National

Monetary

Commission

The safes in which the securities were deposited were
required to be provided with separate locks, to which
t h e bank's management and the Crown's representative
should, respectively, possess keys.
5. A shareholder elected as director was required to
deposit with the bank at least one share certificate, there
to remain so long as he should continue a director.
Withdrawal from the functions of director to be subject
to the assent of a general meeting, and a director so retiring t o remain responsible for the business arrangements
in which he had shared until the next regular audit and
subsequent approval of the accounts by a general meeting.
6. The names of the directors and of those entitled to
sign bank notes, etc., on behalf of the company to be notified to the local representative of the Crown and advertised in the Official Gazette.
7. The names of ordinary shareholders, having unlimited liability, were not merely to be duly registered in the
, county court in the case of a newly formed bank, b u t also
advertised in the Official Gazette.
8. Before the issue of notes could commence the deposit
of securities, a£ mentioned in paragraph 4 above, to a t
least 25 per cent of the ordinary capital, was required t o
be duly attested, and the blank forms of the notes submitted for approval to the department of finance.
If the capital subscribed en commandite were desired to
be m a d e the basis of extended note issues, the provisions
set out in paragraph 4 above were to be applied to this
p a r t of t h e capital also.
9. In case bank notes should not, on presentation, be
redeemed in coin or notes of the Riksbank, the holder was




60

The

Swedish

Banking

System

to be entitled to interest at 5 per cent per a n n u m from
t h e date of refusal till the date of redemption.
10. The bank was to be entitled, with the consent of the
Crown's local representative, to realize p a r t of the capital
security specified above (see paragraph 4), the issuing
rights to be diminished by the sum thus realized and the
collateral to be replaced as speedily as possible.
11. Should the annual audit of accounts show t h a t the
reserve fund and 10 per cent of the ordinary capital was
lost, liquidation of the bank's affairs was required unless
a special general meeting of shareholders, summoned
for the purpose, should resolve to subscribe within three
months a sum sufficient to restore the capital to its
former amount.
The law of 1864 was again revised in 1874, this time
with full accord between the King and the Parliament.
The alterations were few, and may be briefly summarized
as follows:
1. In reference to the securities deposited under public
control, representing a p a r t of the capital, the upper limit
of 75 per cent was omitted.
At least half, in place of a third, were to be in readily
realizable interest-bearing bonds.
2. Monthly, in place of quarterly, accounts were to be
rendered to the finance department, according to a form
to be determined by t h a t department, to which the rights
previously exercised on behalf of the Crown as to securing information regarding the bank's affairs were now
assigned.




61

National

Mon etary

Commission

3. Notes might be issued on the security of the reserve
fund as well as of the capital, so far as represented by the
class of securities required for the capital-guaranty fund,
such securities being likewise placed in the public depository.
The provision that securities held against credits
opened might serve as backing for notes was replaced
by a provision that the commercial assets (claims due)
might so serve, but with the stipulation that the bank
should hold at least 10 per cent of the amount of its capital
in gold coin of the realm.
Any excess above the 10 per cent, and gold bullion or
foreign coin, might also serve as note backing.
Deposits with the Riksbank no longer appear, as among
the items determining the extent of the note issues
allowed.
A breach of the provisions as to the limitation of the
amount of notes outstanding, if not remedied within ten
days, was to involve a fine of 1,000 kronor for each day
the excess existed. Repeated breaches of these provisions might involve forfeiture of the note-issuing privilege.
4. Permission to issue notes of 5 and 10 kronor in value
was granted only provisionally.
5. The notes must be redeemed in gold coin of the
realm on presentation. Interest for any period during
which notes were not so redeemed to run at 6 per cent per
annum.
6. Should part of the securities deposited as capital
guaranty be realized,\ as before provided, to meet bank
notes presented for redemption, the diminution of the




62

The

Swedish

Banking

System

permissible m a x i m u m issue to be one and one-half times
the a m o u n t so realized.
I t m a y be noted here t h a t , at the end of 1875, one
b a n k is recorded as having exceeded its legal limit of
issue, though not for long enough to incur a fine.
The point of greatest importance in t h e new law is the
requirement of redemption in gold coin. I t was t h e new
mint law of 1873, establishing the gold standard in Sweden,
which led to this change from redemption in notes of t h e
Riksbank to redemption in gold, and this provision was
t h a t which encountered t h e greatest opposition. The
notes of t h e Riksbank had so long (since J a n u a r y 11,
1726) been legal tender t h a t even a partial dethronement
from t h a t position could not be accepted readily. I t
involved, of course, an increased holding of gold at the head
offices, which alone were liable t o redeem b a n k notes, the
branches being free from this liability. The exclusion of
t h e Riksbank note from the power to redeem legally an
enskilda bank note carried with it t h e exclusion of balances
held at the Riksbank from t h e legal note backing. Returning for a moment to the position created b y t h e decree
of 1864, it is to be noted t h a t in t h a t year alone eight new
charters were granted. Two of these banks ceased independent operations within a comparatively short time,
one of t h e m being absorbed after three and one-half years
by t h e oldest of the enskilda banks, which operated in the
same town in which the new bank established itself. The
other was similarly absorbed b y an enskilda bank
dating from 1856 after nearly nine years of independent
activity. Through t h e forgeries of a client, it suffered
severe losses (in which other banking institutions were




63

National

Monetary

Commission

also involved), and in 1869 a general meeting of shareholders resolved on a combination with another enskilda
bank in the same town. Neither note holders nor shareholders suffered any loss through the liquidation of its
affairs, concluded in 1874.
In 1865 four new enskilda banks were chartered, so that,
after standing at 12 from 1857, the number was doubled
in the two years 1864-65. In 1866 yet another bank was
chartered.
In charters granted after this date there was included a
new provision, namely, that the banks thus established
should subject themselves to any new regulations which
might be imposed on enskilda banks, without awaiting
the determination and renewal of the charters. For the
earlier banks new stipulations could only be imposed on
renewing the charters.
In 1868 two new charters were granted, in 1869 one, and
in 1873 one. The next fell into the period governed by
the law of 1874, being granted in 1876. Only one later
charter was granted, namely, in 1893.
The control of the department of finance, for which
provision was made in the law of 1874, w a s carried out by
the appointment of a special officer, called the inspector
of banks, in 1877. From 1868 there are printed records
setting forth a brief summary of the annual balance sheets,
and the quarterly accounts, provided for in 1846, which
are also printed, beginning with those of December, 1866.
From 1871 the printed record is partly a brief monthly
account, partly a fuller quarterly statement, and from
1875 a tolerably full monthly statement has been printed.




64

The

Swedish

Banking

System

The control of the inspector could not, of course, prevent all abuses. In one case, a bank which had been
established for twenty years, and secured a prolongation
of its charter for a third term, was brought to ruin by
frauds on the part of a director extending over a term of
years. He had succeeded in keeping from the knowledge
of all other officials, except perhaps a cashier who died
before the matter was cleared up, the fact that he was using
large sums, both of old notes supposed withdrawn from
circulation and destroyed, and of new notes issued without the knowledge of those who should have controlled
their issue, to support a sugar factory in which he was
interested. The details of the case need not be enlarged
upon, but it may be mentioned that the director in question was sentenced to six years' hard labor. The bank
disappeared from the list after 1878. No call on the unlimited liability of the shareholders was necessary.
It may be remarked in this place, as of interest in its
bearing on the public estimation which the notes of the
enskilda banks attained, that in 1869 the Riksbank began
to accept them in payments. It is, perhaps, rather to be
remarked that their acceptance by the central institution
should have been so long delayed. As the circulation of
the Riksbank had been exceeded by that of the enskilda
banks by this time, not occasionally only, but as a regular
phenomenon, the position of the enskilda bank note could
not but receive recognition.
The suppression of the enskilda bank note of 5 kronor
was resolved on as from December 31, 1879. That is, all
such notes presented after that date at the banks were
retired, and no new ones issued. As a compensation to the
22150—10




5

65

National

Monetary

Commission

issuers for assisting in the work of retiring these notes,
under certain conditions they were granted discounts on
favorable terms at the central institution, the 5-kronor
notes of that institution being placed at the disposal of the
enskilda banks in this way to a maximum amount equal
to the average of their own circulation of such notes in the
preceding twelve months. The rate of discount arranged,
for three-months' bills, was, for 1880, 2 per cent, and for
1881 to 1884, 3 per cent, at the end of which period this
special provision lapsed.
In 1879, about one-third of the total issues of the enskilda banks were in the 5-kronor denomination, about onethird in the 10-kronor, and one-third in other dencftninations. On December 31, 1879, notes to the value of
17,354,000 kronor in 5-kronor notes were outstanding. In
nine months they were reduced to less than 2,000,000
kronor, and by April of 1881 to less than 1,000,000, the
retirement of the residuum being a slower matter. The
average total issues of their own notes by the enskilda banks
were somewhat greater in 1880 and in 1881 than in 1879,
and the increased issues of 10-kronor notes accounted for
roughly two-thirds of the lapsed 5-kronor issues, the increase
of larger notes balancing the remainder of the decrease.
The increase of the 5-kronor circulation of the Riksbank's
notes between the end of 1879 and the end of 1880 was
less than half the decrease of the enskilda banks' notes of
the same denomination, and in 1881 there was even a
small decrease. The total circulation of this denomination
of note, in fact, decreased as the first and immediate result
of the cessation of issues by the enskilda banks. The
issues of 5-kronor notes by these banks had averaged
66




The

Swedish

Banking

System

over 14,000,000 kronor in value in 1879. The extent of
the special discount facilities accorded by t h e Riksbank,
as shown in t h e balance sheets of the central institution
at the end of t h e years affected, 1880 to 1884, varied from
8,500,000 kronor to over 9,500,000 kronor.
The precise place of the 5-kronor note in t h e fluctuations of the circulation, m o n t h b y month, while this denomination was issued by the enskilda banks, cannot be
determined, as t h e distinction of notes of various denominations begins only with April, 1879. Thus the figures
for the end of the years can afford b u t a partial view of
the relative importance of these small notes. The outstanding issues at the end of 1879 were larger t h a n usual
in comparison with those of the other months of the year.
In t h e years immediately following the restriction of
t h e denomination of notes permitted t o the enskilda banks
the issues of t h e Riksbank increased relatively to those
of t h e enskilda banks, as might be expected. The following comparative table is based on the figures for t h e end
of each quarter of t h e years named, and presents the
relative positions before and after t h e change:
Percentage of the total note circulation issued by the Riksbank and the enskilda
banks, respectively.
Riksbank.

Year.

1875
1876
1877
1878

38.7
33-7
_>

Average




Knskilda
banks.

Year.

61.3

33-3

36.3

63.7

35.5

1879
1880
1881
1882

66.3
66.7

64.5

Average

67

Riksbank.

Bnskilda
banks.

40. 2
43-4
42.4
41.3

59-8
56.6
57.6
58.7

41.8

58.2

National

Monetary

Commission

These figures suggest that the loss of the privilege of
issue of 5-kronor notes by the enskilda banks gave a temporary setback to their note issues. How far the economic conditions of the time, affecting, perhaps in a
different manner, the fields of activity of the different
institutions, may have contributed to the movement
shown cannot be determined.
The association with the ordinary shareholders, subjected to the unlimited liability of a partnership, of
others enjoying limited liability, appears to have occurred
first after the new ordinance of 1874 came into force.
Three of the banks issued a small amount of such shares
in 1875 and 1876, all paying, at first, 6 per cent to these
special shareholders—preference shareholders, one might
perhaps call them—while the ordinary shareholders were
receiving higher dividends.^ In 1886, on the renewal of
charters, one of the three, while largely increasing its
ordinary capital, reduced its preference shares to less than
one-half, and the rate paid on them to 5 per cent. A second
slightly adjusted the amount of preference and ordinary
capital. At the end of 1888 the former paid out the preference shareholders entirely, and a year later a further
small reduction in preference shares took place in the
second, while the two banks still retaining such shares
reduced the rate paid on them to 5 per cent in 1889.
The total of preference shares remained at 1,000,000
kronor till 1898, while the ordinary capital increased to over
60,000,000 kronor. In 1898 the Stockholm Bank, whose
introduction of new methods forty years before had given
o In the case of one bank the preference shareholders shared equally with
ordinary shareholders when the dividends of the latter exceeded 6 per cent.




68

The

Swedish

Banking

System

such a stimulus to Swedish banking enterprise, added to
its 6,000,000 kronor of ordinary capital (since doubled)
3,000,000 kronor of preference capital at 5 per cent.
The following year two issues of 250,000 kronor each of
preference capital occurred, both at 5 per cent, one by a
bank not previously having t h a t class of share, t h e other
b y one of the two which had had preference shares for
nearly a quarter of a century. In 1904 one other bank
introduced the preference share, but, as it entered into
combination with an ordinary joint-stock bank two years
later, its experience as a bank en commandite was short.
In 1899 and in 1905 one of the two oldest of the banks
of this class increased its preference capital b y 250,000
kronor on each occasion, and it now stands at 1,000,000
kronor, one-fifth of t h e total share capital. In 1906 the
other of t h e two oldest en commandite banks added 250,000
kronor to its shares en commandite.
The reduction of the
preference dividend by the Stockholm Bank to \Y2 per cent
in 1904, and t h e disappearance from t h e list of enskilda
banks in 1905 of the only other which had this form of
capital (having had it since 1899 only), completes the record
of the actual use of the powers to admit limited shareholders in banks with unlimited liability imposed on ordinary shareholders. At the end of 1908 the ordinary capital
of t h e 17 then remaining enskilda banks amounted to
113,750,000 kronor, t h e preference capital to 4,750,000
kronor, issued b y 3 banks only, the reserve funds being
nearly 74,000,000 kronor and surplus over 14,000,000
kronor. The final stage in t h e cessation of the note-issuing
privileges of t h e enskilda banks is dealt with later on in the




69

National

Monetary

Commission

completion of the account of the Riksbank's position.
Here it need be referred to but briefly. The discussion of
plans for the concentration of the note issues in the hands of
the Biksbank proceeded no less actively than had been the
case for half a century at least, but no agreement was
arrived at till 1897. Meanwhile a preparatory step was
taken in arranging for the concurrent termination of all
the enskilda bank charters at the end of 1893, those
which did not normally lapse at that date being renewed
for less than the ordinary term of ten years.
As recorded later, the final arrangement, effected in
1897, contemplated the entire cessation of enskilda bank
issues with 1903, and an arrangement generally similar
in purpose to, though more extended in scope than, that
made in 1879 *n regard to the withdrawal of 5-kronor
notes, was effected. The terms of this arrangement were
revised in 1901, considerably to the advantage of the
enskilda banks. The Riksbank was empowered to make
terms with the enskilda banks for their withdrawal from
the business of note issuing earlier than the end of 1903,
when they were to lose the right to carry it on. The
terms set out in the law of 1897 became effective only in
the case of one bank which was converted into a limited
liability banking company at the end of 1898, that is to
say, at the date when the act of 1897 came into force.
The revision of the terms offered to enskilda banks as
the price of an early abandonment of note issues, authorized by a law of May 3, 1901, was quickly effective in
securing a commencement of the process of transference
of issuing rights to the Riksbank. The terms of the
bargain are stated later in this account (pp, 90-93), and it is




70

The

Swedish

Banking

System

sufficient here to describe them as an offer of loans for a
term of years at relatively low rates of interest by the
Riksbank to the several enskilda banks, in proportion to
to the extent of their note circulation at the opening of
the year 1901, on the condition that all the branches or
offices which were open at the beginning of 1896 should
be maintained. Similar advances were to be made even
to the banks which adhered to their note-issuing privileges
till their legal termination at the end of 1903, as partial
compensation for the cessation of the privilege of note
issue. What is particularly worthy of note is that the
facilities thus offered were judged by the enskilda banks
to be worth while accepting as the price of an earlier
termination of issue of their own notes. In effect they
were a means of substituting the Riksbank notes for the
enskilda bank notes.
The oldest and most important of the enskilda banks
was the first to accept the terms, and though the law was
only promulgated early in May, 1901, this bank ceased
to issue its own notes from the end of June. Its issues
had amounted to nearly 10,000,000 kronor, or fully oneeighth of all the enskilda bank notes outstanding at the
end of June, 1901. Three months later four other banks followed suit, their aggregate issue somewhat exceeding that
of the bank first mentioned. In the course of 1901 and
1902 arrangements were similarly made with most of the
other enskilda banks, and in January, 1903, the outstanding notes of enskilda banks but little exceeded one-quarter
of the aggregate of two years earlier, while only three
banks were still issuing their own notes. By about the
middle of 1903 these three had also entered into arrange-




71

National

Monetary

Commission

ments for anticipating the legal cessation of their note
issues, so that by the end of December, 1903, the notes
not yet retired were little more than 5 per cent of the
enskilda bank circulation at the end of 1900.
The retirement of the remaining notes proceeded as
rapidly as they were presented at any bank. The circulation of Riksbank notes advanced so rapidly meanwhile
that the total circulation at the end of 1903 was over 10
per cent in excess of that at the end of 1900. A law of
June 7, 1889, had paved the way for a reasonably rapid
withdrawal of the notes of the enskilda banks from circulation by providing for the issue, on application by any
such bank, of a royal proclamation requiring all holders
of notes of the bank in question to present them for
redemption within two years of such proclamation, after
which date all right to payment should cease. The issue
of such a proclamation was provided for, however, only
in the case of banks which had not become insolvent.
The powers were exercised in the case of various of the
banks which were transformed from unlimited to limited
companies. The proclamations were required to be read
in the churches and published in the Official Gazette.
Under these arrangements, all enskilda bank notes ceased
to be legally current after the end of March, 1906.
Of the 27 enskilda banks existing at the date of the passing of the law conferring the monopoly of note issue on the
Riksbank, 17 still continue as banks with unlimited liability, 10 have either been coiaverted into ordinary jointstock banks, or been absorbed by such banks, or by other
enskilda banks. The capital represented by these 10,
reckoned as at the beginning of the last year of their opera-




72

The

Swedish

Banking

System

tions as enskilda banks, was 47,850,000 kronor, and the
total of capital, reserve, and surplus was 75,750,000 kronor.
The increase of capital of the remaining enskilda banks has,
however, fully offset this decrease, the amount at the end
of 1908 being 118,500,000 kronor of share capital, and
88,000,000 kronor of other proprietors' funds, as against
73,250,000 kronor and 33,750,000 kronor, respectively, ten
years earlier.
As already stated, one enskilda bank was converted into
a limited-liability bank at the end of 1898. Others took
the same course later, one in 1901, three in 1902, two in
1904, and one in each of the years 1905,1906, and 1907. In
each year since 1897 the total amount of the dividends
distributed by the enskilda banks has been larger than in
that or any earlier year. Comparing the five years following 1898 with the five years ending 1908, the results shown
are as follows:
Average Proportion of Profits and Expenses to Capital.
1899-1903.

Total proprietors'
Ordinary funds (cap- Ordinary
share
share
ital,
capital. serves, reand capital.
surplus).

Total proprietors'
funds (capital, reserves, and
surplus).

Per cent.

Per cent.

Per cent.

24.9

14.5

13.0

8,7

5- 1

24.5
7-5
13-9
11.3

7-3
6.0

Gross profits
Expenses
Net profits after deducting writings
down
Dividend to ordinary shareholders

13-8

9- 7

Per cent.
4. o

The capital has increased by 30 per cent in the interval
between the two periods here represented and the total




73

National

Monetary

Commission

of proprietors' funds by 45 per cent, in spite of the reduction of the average number of banks in operation from 25
to 19. In some cases ordinary joint-stock banks have been
absorbed by enskilda banks, thus partly offsetting the
movement in the contrary sense.
The banks are no longer limited by the requirement
of setting aside, as a kind of guaranty fund for note
holders, 60 or more per cent of the subscribed capital,
in the form of approved securities, mainly of the easily
realizable variety, and therefore yielding a relatively
low return; neither are they required, as before, to keep
10 per cent of their capital in gold. The gold holdings
have, in fact, been reduced to mere till money, and the
cash reserves are now formed of Riksbank notes, supplemented by deposits or credits at the Riksbank, drafts
on which serve many of the purposes of cash in hand.
The comparison of conditions before and after the loss
of note-issuing rights is not necessarily indicative of the
results of this change in the privileges and obligations of
the banks. The period is one which has witnessed great
expansion all over the world, and in Sweden as well as
elsewhere, so that the growth of banking business is
related to this industrial and commercial movement, as
well as to the local legislation. It is clear that capital
has been forthcoming in substantial amounts for enlarging the operations of banks, both with unlimited
and with limited liability. On January 1, 1904, there
were 20 ordinary joint-stock banks with a capital of at
least 1,000,000 kronor. Five years later there were 28
such banks, including those into which certain of the




74

The

Swedish

Banking

System

enskilda banks had been transformed or absorbed. The
capital had increased b y 96 per cent in the five years
and was 211,000,000 kronor a t the end of 1908. Adding
reserves, the total of proprietors' funds was a little over
325,000,000 kronor, an increase of 92 per cent in t h e five
years. The enskilda banks which were absorbed in the ininterval had, at t h e time of absorption, capital and reserves
amounting t o about a quarter of t h e increase shown in
those of the joint-stock banks. Apart from the effect
of these transfers from the one group of banks to the
other, the limited banks do not appear to have increased
their capital more rapidly t h a n the unlimited. The
latter have, apparently, appealed to subscribers no less
favorably t h a n the former. The preceding table appears
to reflect some relative reduction of expenses, a somew h a t larger appropriation to writing down the value of
assets, and somewhat better results for shareholders
since the cessation of private note issues. But, as remarked above, these results can not be dissociated from
the condition of business in the years included in the
comparison. The writings down in 1907, and to a less
degree in 1908, absorbed large sums. But, allowing for
t h e change in the number of banks, the sums paid as
dividends were not reduced, though, as t h e capital on
which they were paid was largely increased in 1907, t h e
average rate fell from 1 3 X per cent in 1906*to 9% per
cent in 1907 and rose to 11 per cent in 1908.
The reserves (including surplus) of t h e enskilda banks
have been strengthened, relatively to the capital, in t h e
years covered b y the above table from about 70 to over




75

National

Monetary

Commission

90 per cent, and are much in excess, relatively, of those of
the limited liability banks, the proportion for which is
about 55 per cent. The average capital of the unlimited
banks is about 7,000,000 kronor, as compared with
7,500,000 kronor for the limited banks, the average
amount of proprietors' funds being not very different,
namely, 11,600,000 kronor for the limited, 12,100,000
kronor for the unlimited banks. In 1897, when the new
law was passed, the 27 unlimited banks then existing
averaged under 4,000,000 kronor of proprietors' funds,
and the 11 limited banks of that date which had each
over 1,000,000 kronor of capital averaged a trifle over
5,000,000 kronor of proprietors' funds. At the beginning of
the following year there were 15 such limited banks, with
an average of about 4,700,000 kronor of proprietors' funds.
The growth in the number of the ordinary banks, and in
the importance of the banks of both classes, is reflected in
these figures. But they do not suggest that, relatively,
the unlimited banks have suffered seriously by the loss of
the right of note issue. The position both of the private
banks and of the Riksbank during the year 1907 will be
examined somewhat more in detail later.
The provisions of the new law regulating the unlimited
banks are stated in Appendix III.
It should be mentioned that the rights of note issue were
not enjoyed by the enskilda banks without some payment
to the funds of the State. The Parliament of 1859-60
imposed a tax at the rate of- one-fifth of 1 per cent on the
maximum circulation of each year as the price of the
privilege of issue. Ten years later the rate was raised to




76

The

Swedish

Banking

System

one-half of i per cent, and during the latter part of the
duration of the right of issue it stood at i per cent. It is
clear that the banks, in accepting the terms offered for
conceding the monopoly of note issue to the Riksbank,
could not but be influenced by the knowledge that their
gains from the note issues could be absorbed by the
State by the simple process of raising the rate of this tax.
They chose rather to be bought out than taxed out of
their privileges.




77

CHAPTER V.
THE LATER HISTORY OF THE RIKSBANK.
As already stated, the Riksbank was p u t on a new footing in 1830, when the circulation of the b a n k ' s notes a t
3 7 X P e r c e n t of t h e silver represented by their face value
was authorized. Its capital was fixed a t 4,400,000 b a n k
dalers, or 6,600,000 dalers currency, t h e balance of an
advance made to the S t a t e for war purposes in 1808. On
t h e resumption of specie p a y m e n t s in 1834 ft w a s found
possible to provide a capital fund of 7,500,000 dalers currency, which was increased to 15,000,000 from J a n u a r y 1,
1845, b y a transfer from t h e reserve fund which h a d been
accumulated in the meantime. In 1864 t h e capital reached
25,000,000 dalers, 30,000,000 kronor in 1879, 35> 0 0 0 > 0 °o in
1882, in 1885 40,000,000, in 1890 45,000,000, a n d it was fixed
a t 50,000,000 kronor, which it h a d reached in 1893, b y t h e
law of 1897. The fixed reserve fund remained a t 5,000,000
kronor from 1873, when it was first reached, till 1900.
At t h e end of 1902 a special fund of 12,500,000 kronor was
constituted out of reserved earnings for a special class of
loans, and by t h e end of 1908, in addition t o a reserve
fund of 10,419,000 kronor, an almost equal sum in surplus, not definitely assigned to t h e reserve fund, was able
t o be shown in t h e balance sheet. Thus a sum of 83,323,708
kronor (say $22,220,000) represents what, in privately
owned banks, would be proprietors' funds employed in t h e




78

The

Swedish

Banking

System

business. This has been accumulated entirely out of
profits, and t h a t in spite of t h e constant p a y m e n t of a
large share of those profits to the public funds. Thus, of
t h e net profits of t h e years 1835-1839, t h e national debt
office received 70 per cent, though of those of t h e following four years it received none. For 1844-1847 and
again for 1851-1853 and for 1860-1865 it received a very
large p a r t of t h e profits, while for 1867 it received t h e
whole of them.
While the b a n k gradually struggled to accumulate t h e
capital of 25,000,000 dalers originally contemplated in 1830,
and only attained it in 1864, t h e reserve fund originally
intended not being attained for another decade, the
national debt office was assigned 26,500,000 dalers of profits
t o t h e 17,500,000 dalers reserved for adding to t h e bank's
capital. In t h e next ten years 1865-1874, 11,000,000 out
of 18,000,000 kronor of net profits were assigned to the
national debt office; in the ten years 1875-1884, t h e bank
retained 13,000,000 kronor and the national debt office was
assigned over 12,500,000, and in the ten years 1885-1894,
of nearly 28,500,000 kronor of net profits t h e bank was
allowed to retain only about 7,500,000. In t h e years
1898 and 1899 t h e entire net profit was added to t h e
resources of t h e bank, in preparation for the larger responsibilities it was about to undertake. As a result, of t h e
net profits for t h e nine years 1895 to 1903, only 18,500,000
kronor were paid to the national debt office, while
14,500,000 were employed in strengthening t h e position of
t h e bank. For t h e five years during which the note
monopoly has been enjoyed by the Riksbank, while about
3>75o,ooo kronor have been added to t h e resources of t h e




79

National

Monetary

Commission

bank, the national debt office has had assigned to it
nearly 34,000,000 kronor (about $9,000,000) of bank
profits. Now that an adequate capital and reserve has
been accumulated, the payment of a large share of the
ample profits to the State is not open to the criticism
naturally directed against that course when the bank was
building up its resources out of the yearly gains. In
seventy-five years, the national debt office has received,
of the profits of the bank, a sum of $33,000,000 (United
States currency). Allowing for the value of the premises
and bank furniture, not assigned any money representation in the bank's balance sheet, it may be said that
about three-fifths of the net profits have been paid over
to the State.
Rules limiting the proportion between cash holdings
and circulating notes were framed in 1830 requiring the
provision of a cash fund not less than five-eighths of the
circulating notes. In 1834 this was modified to a twofifths proportion, but even this could not be maintained,
and in 1843 the cash actually fell to only one-third.
Under the influence of the English bank act of 1844 n e w
regulations were substituted for the old in 1845. On condition of holding at least 10,000,000 dalers currency in cash,
a fiduciary issue of 30,000,000 dalers was permitted—a regulation much more easily observed. The regulations of
1830 had fixed the minimum cash holding at 8,000,000
dalers currency (2,000,000 silver), so that the requirement
of 10,000,000 was a raising of the limit. Moreover, in
lowering the proportion of the cash at its minimum to the
circulation there was included in the latter not merely
notes but also the amount due on deposits, on which no




80

The

Swedish

Banking

System

interest was at that time paid. The balance of credits
granted, but not drawn out, being a demand obligation,
was also included. Thus the change was not calculated
to induce so weak a position as appears at first sight.
Notes in excess of the fiduciary 30,000,000 dalers and the
10,000,000 dalers against coin and bullion held in Sweden
might be covered by metal en route from abroad, by funds
of the bank on deposit in Hamburg or Altona, and by bills
on Hamburg or Altona at not exceeding sixty-seven
days' currency. Later the currency of bills available as
cover was extended to ninety days and Berlin and London included as places at which they might be payable,
while in 1866 foreign bills generally were admitted. This
provision of bills of exchange as cover for circulation was
used in 1857 as a means of evading the strict intentions of
the law. Though there was no run on the bank, its cash
decreased very rapidly between the end of 1855 a n d the
middle of 1857, owing to remittances abroad. It had
stood at about 19,000,000 dalers in 1850-1852 and from
that had increased to 52,000,000 dalers at the end of 1855.
By the middle of 1857 it had fallen to 25,000,000 dalers,
and, though the rapidity of the fall was checked in 1858, it
reached 16,700,000 dalers at the end of 1859. The funds
of the bank being to a large extent tied up in long-period
loans, the reserve could n@t be replenished or the proportion of cash assets to obligations increased by the process of
calling in these loans. Commercial loans had to be restricted if the limit of issue was not to be exceeded, and the
strain of the restriction was severely felt. An association
was formed among certain members of the exchange for
mutual assistance, and they presented for discount to the
22150—10




6

81

National

Monetary

Commission

Riksbank bills for large amounts drawn on a Swedish merchant who paid a visit to Hamburg. As the issue of notes
against these bills did not touch the fiduciary issue, drafts
on Hamburg being legal cover for the notes, funds were thus
provided to meet the need, and a state loan of 12,000,000
dalers being raised abroad at this time, the difficulties of the
situation were met, bankruptcy averted, and the losses of
the bank due to the crisis kept down to a modest amount.
The difficulties arising out of the fact that the bank was
controlled by the legislative authority, without the right
of supervision on the part of the executive, had formed,
naturally, the subject of numerous discussions. The old
plan of bringing in the interest of private shareholders to
exercise more effective control was discussed anew. The
constitution imposed an obstacle in the way, which was ingeniously avoided in the proposal of an important committee, whose report was made in i860, to divide the bank
into two parts, following the general lines of the division
of the Bank of England in 1844. The issue department,
retaining the name of the Bank of the Estates of the Realm,
would fulfill the terms of the constitution in remaining
under the control and guardianship of the Parliament
solely. The banking business proper was to be assigned
to an institution in which it would be possible, if desired,
to join private capital with that of the State.
This proposal, however, was not accepted and realized,
though the discussion of the situation had its influence on
the legislation of 1864 for enskilda banks. In 1872 the
use of bills on foreign places as cover for demand obligations was discontinued, and the balances of credits granted
but not fully used were excluded from the sum against




82

The

Swedish

Banking

System

which cash cover was needed, though current-account
balances remained a part of that sum. The cover available from that time was, in addition to the actual metal in
hand, precious metals held abroad or in transit for account of the bank and balances due from bankers and
mercantile houses abroad. The value of silver coin, after
1873, was required to be taken only at 90 per cent of its
face value and of silver metal at rates to be determined
by the managers of the bank, and, naturally, related to
the current market value of silver.
The strict provisions of the law were overstepped, in
regard to the minimum metal reserve, in 1869 and in
1870. In the former year the metallic reserve fell below
10,000,000 dalers in twenty-six weeks, and was at one time
just under 8,500,000 dalers. In 1870 there were two weeks
when the metal reserve was under the legal minimum.
The note issue exceeded the legal maximum on one occasion, namely in the weekly account of September 30, 1873,
but was already 3,500,000 dalers under the legal maximum in the following week.
As means of defending the reserve, the bank's managers
were instructed to undertake the following lines of business: Dealing in gold and silver and in foreign bills of exchange, and the purchase and sale of bonds and the debt
obligations of governments. The right of raising loans
abroad was also an important element in this connection,
a right which had been included in the regulations of 1845,
to the amount of 12,000,000 dalers currency. For such a
loan the guarantee of the State followed on the approval
of the Executive Government, without further formal




83

National

Monetary

Commission

approval of the Parliament. In the preceding, the effect
of a loan in 1857-58 has been noticed.
From January 1, 1880, the minimum metallic cash
holding was raised from 10,000,000 to 15,000,000 kronor,
and the maximum fiduciary issue to 35,000,000, while the
limit of the foreign credit just referred to was raised from
12,000,000 to 17,000,000 kronor. The abolition of the
5-kronor note of the enskilda banks was closely connected
with these measures for facilitating an enlarged circulation.
It should also be stated here that the old notes of 1 krona
had no longer been issued after the end of 1875, a n ( i the
old fractional notes were gradually being withdrawn as they
were presented for redemption. Till 1849 notes below
the value of 1 krona (then called a daler), even as small
as a quarter of a krona (6.7 cents), were issued.
In 1887 a further modification in the regulations was
made, in that the balances abroad available as cover for
notes were now required to be current-account balances,
while interest-free deposits and the bank post bills outstanding, of which an account has been given above,
were now excluded from the total determining the legal
amount of cover to be held. Thus the regulations were
made somewhat more stringent.
The fiduciary issue was also increased, subject to an increase of the metallic reserve. This reserve, four-fifths
of which was required to be gold, in coin or bars, was in no
case to fall short of 15,000,000 kronor, as before, but, should
it exceed this amount, an increase of the fiduciary issue
was permitted, not exceeding in all 10,000,000 kronor,
making the maximum 45,000,000 kronor. The condition
on which any part of this additional 10,000,000 of fiduciary
84




The

Swedish

Banking

System

issue might be allowed was t h a t t h e metallic reserve
should exceed 15,000,000 kronor b y 30 per cent of the
a m o u n t b y which the fiduciary issue exceeded 35,000,000
kronor. Thus, with a cash holding of 15,000,000 kronor,
consisting of a t least 12,000,000 gold and the remainder
of legal silver coin taken, so far as t h a t struck after 1873
was concerned, a t 90 per cent of its face value, t h e issue
might a m o u n t to 50,000,000 kronor plus t h e amount of
t h e foreign current-account balances; with a cash holding
of 18,000,000 kronor (not less t h a n 14,400,000 gold) t h e total
issue might a m o u n t to 63,000,000 kronor plus t h e amount
of t h e foreign credit balances. For greater issues t h e excess
was required to be completely covered by t h e metallic
reserve in excess of 18,000,000 kronor. The actual rights
of issue were b y no means fully used. I n 1878 and 1879
the total outstanding notes fell even below the permitted
fiduciary issue, partly owing to the withdrawal of the old
fractional notes. With t h e cessation of the 5-kronor
notes of t h e private banks from t h e beginning of 1880,
the outstanding circulation of the Riksbank increased,
b u t even in 1890 the lowest of the monthly figures (end of
April and July) were a little less t h a n 40,000,000 kronor.
F r o m 1892 onward the circulation increased rapidly, and in
1899 the m a x i m u m and minimum were 56,400,000 kronor
(February) and 75,200,000 kronor (December), respectively. I n these seven years the average circulation of
t h e Riksbank increased b y 50 per cent, a n d t h e total note
circulation of all t h e banks by 40 per cent.
After various efforts t o arrive at a satisfactory solution
of the problem of centralizing the business of note issue,
as already related, a law was passed in 1897 by which




85

National

Monetary

Commission

the matter was arranged. The fact that the new constitution then given to the Riksbank was effected, not by
the use of the royal prerogative, but by an act of the
regular legislative authorities, the Parliament and the
King in association with one another, is itself a notable
point. Previously the legislation had taken the form
of royal decrees, which were not always in close agreement with the legislative proposals framed by the Parliament. The new constitution rests on an Act of Parliament
duly assented to by the Crown, and thus, though the
control of the Riksbank was still assigned to the Parliament, modifications of its constitution must be effected
by combined action of King and Parliament, since they
involve changes of a law resting on their combined
authority.
The notes of the Riksbank retain the character assured
them by the Swedish constitution, of legal tender, and
the bank is required to redeem them on demand in gold
coin at its head office.
The capital of the bank is fixed at 50,000,000 kronor
($13,400,000) exclusive, as had been the case previously,
of bank premises and furniture.
The metallic reserve is defined as consisting of all the
domestic and foreign gold coin and gold bullion, the
property of the bank, within the country. Silver coin
is thus excluded. The metallic reserve is to be not less
than 25,000,000 kronor at all times.
The note issue remains partly fiduciary, partly covered
by cash. As cash may be reckoned the metallic reserve as
above defined; gold coin or bullion deposited abroad or in




86

The

Swedish

Banking

System

transit therefrom and covered by insurance; and the
current account credit balances of the bank with banks
and mercantile houses abroad. The fiduciary issue must
be covered by easily realizable foreign government bonds;
bonds of the Swedish Government, of the general mortgage bank, and of other Swedish enterprises which are
quoted on foreign stock exchanges; and bills of exchange,
domestic or foreign.
The m a x i m u m of the fiduciary issue was fixed in 1897 at
100,000,000 kronor, b u t any excess of the fiduciary issue
over 60,000,000 kronor was made conditional on a metallic
reserve exceeding the minimum of 25,000,000 kronor by
30 per cent of the amount of such excess of fiduciary issue.
Thus the full 100,000,000 kronor of fiduciary issue could
only be reached when the metallic reserve was a t least
37,000,000 kronor.
By a modification of the law passed on 3d May, 1901,
these limitations of the note-issuing rights underwent
important modifications and extensions.
On the one hand, the cash covering, so far as it consists
of foreign credits, is now defined as the a m o u n t of such
credits after deduction of corresponding debit amounts,
net instead of gross credit balances. Further, the words
"mercantile h o u s e s " are replaced by " b a n k i n g h o u s e s / '
The minimum metallic reserve is raised to 40,000,000
kronor, and the fiduciary issue (which, under the 1897
law, with this metallic reserve, would reach, b u t not exceed 100,000,000 kronor) may exceed its assigned amount
of 100,000,000 kronor by the a m o u n t by which the
metallic reserve exceeds its minimum of 40,000,000 kronor




87

National

Monetary

Commission

With greater stringency in certain respects, the expansion of the fiduciary issue to any required extent is thus
provided for.
With these extensions of note issues, the capital of
the bank was raised a year later by setting aside a sum
of 12,500,000 kronor as a special fund for the class of
loans repayable by installments at fixed periods. The
amount devoted to this purpose had previously formed
part of the ordinary funds of the bank, from which it
has now been separated. The fact that these loans can
not be called in to meet an emergency renders them unsuited as investments of the general funds of a noteissuing bank, and this difficulty was avoided in 1897 by
limiting their aggregate amount, and from 1903 by separating the fund from which they were made from the
general funds of the bank.
It may be noted, before passing to the provisions of
the law which restrict the operations of the bank, that,
at the close of 1908, the outstanding notes were, in round
figures, 201,500,000 kronor ($53,750,000). The metallic
reserve was 78,200,000 kronor, and the net foreign balances
26,300,000 kronor. Thus the legal fiduciary issue was
138,200,000 kronor and the issue covered by cash and
net foreign credits on current account 104,500,000 kronor,
a total of 242,700,000 kronor. The reserved rights of
issue were, therefore, 41,200,000 kronor. The outstanding
notes exceeded by one-third those of the Riksbank and the
enskilda banks together a decade previously. It might
be supposed that this growth would be accounted for by
the fact that, now that the rights of note issue are no
longer enjoyed by private banks, these latter find it




88

The

Swedish

Banking

System

necessary t o hold, as reserve, a large amount of t h e notes
of the central institution. The amount of t h e notes held
by the several banks is not stated separately from t h e
fractional currency and the credit balances (on so-called
" g i r o " accounts) at the Riksbank. The total of these at
t h e end of 1908 for the 17 surviving enskilda banks was
19,200,000 kronor, or little more t h a n 6,000,000 kronor in
excess of the corresponding total at the end of 1898, and
just under t h a t for the end of 1901. Thus b u t a small p a r t
of the increase of issues seems capable of being accounted
for b y the substitution of notes for gold as reserves held
b y the enskilda banks. On the other hand, the gold
held by the enskilda banks was steadily increasing during
the nineties. At t h e end of 1898 it reached 9,000,000
kronor, while a t the end of 1908 it was less t h a n t h e fiftieth
p a r t of t h a t amount. The gold held by the Riksbank
had, meanwhile, increased b y over 43,000,000 kronor, or
nearly five times t h e amount by which t h a t held by
enskilda banks decreased. I t thus appears t h a t the
equivalent of something like two-thirds of t h e increase of
total notes outstanding in the ten years ending with 1908
has been, as a result of the centralization of t h e note issue
in the middle of t h a t period, added to t h e gold reserves
of the country, while those reserves are now wholly
centralized under the control of the Riksbank. F r o m the
point of view of those who believe t h a t a stronger gold
backing for the circulating medium was desirable, and
indeed necessary for safety, the result must be regarded
as eminently satisfactory. I t is impossible to believe
t h a t , had t h e note issue remained in the hands of the
enskilda banks, the addition to the gold reserves would




89

National

Monetary

Commission

have been as substantial. As an example of the trend
of events we may take the figures for the end of 1892 and
compare them with those already used for the end of 1898.
In that interval the aggregate note issue increased from
101,900,000 to 150,100,000 kronor. The total gold held
increased from 24,000,000 to 40,200,000 kronor. Thus but
a trifle over one-third of the increased note issue is represented in the increase of gold holdings. The outstanding
notes of the Riksbank amounted to 44,000,000 kronor at
the end of 1892 and to 70,800,000 at the end of 1898. Its
gold reserve at the same dates was 16,800,000 and
31,200,000 kronor, respectively. Thus somewhat over
one-half of the increase in its notes outstanding was devoted to strengthening the reserve. The enskilda banks
had increased their outstanding notes from 57,900,000 to
79,300,000 kronor and their gold reserves from 7,200,000 to
9,000,000 kronor. a Of the 21,400,000 kronor increase in
notes only 1,800,000 were devoted to increasing the gold
reserve, the proportion of which to the notes outstanding
was, in fact, decreased in the interval considered.
It appears, therefore, that both in the years more immediately preceding the final arrangement of the centralization of the note issues, and subsequently, the policy
of the Riksbank has been directed toward the strengthening of the metallic reserves on which the preservation of
the soundness of the credit of the country rests in substantial degree. It is also clear that the monopoly of note
issue has conferred on the Central Institution greater
power to attain this important end.
a The highest figure ever reached for enskilda bank notes outstanding
was 83,600,000 kronor at the end of March, 1901. Their gold holdings a t
that date amounted to 9,500,000 kronor.




90

The

Swedish

Banking

System

Of t h e other principal features of t h e revision of t h e
law under which t h e Riksbank operates, three claim
more particular notice: (a) The safeguards provided
against t h e decrease of banking facilities as a consequence
of t h e cessation of t h e note-issuing privileges of enskilda
b a n k s ; (b) the limitations imposed on the kinds of business which t h e Riksbank m a y undertake; (c) changes in
the b a n k ' s constitution.
(a) I n reference to t h e first, two lines of action were
laid down. On t h e one h a n d the number of branches of
t h e Riksbank was required to be so increased t h a t there
might be one in each of the 24 districts into which Sweden
is divided for local government purposes, excepting t h a t
immediately adjacent to Stockholm, for which t h e head
office in the metropolis m a y suffice. The last of these
was opened at Upsala in the course of the year 1903. An
additional branch, making 24 in all, was opened in 1905.
On t h e other hand, as a partial compensation for the
loss of note-issuing privileges, the enskilda banks were
assured important financial support from the Riksbank
on condition t h a t they maintained all the offices which
were in operation at t h e opening of the year 1896. Those
banks which abandoned their own issuing privileges in
t h e five years' interval preceding their legal cessation on
December 31, 1903 (as has been seen all of t h e m actually
did so), were entitled, subject to the condition mentioned,
t o t h e grant of an open credit, against approved security,
at 2 per cent under the current three months' discount
rate (provided t h a t the charge should not fall below 2 per
cent) and without the usual additional commission. The
limit of t h e credit in each case was t o be one-half t h e




91

National

Monetary

Commission

amount of the outstanding notes of the bank in question
on January i, 1896. In addition, such banks were to be
entitled to rediscount approved bills of exchange at the
Riksbank at a rate not exceeding two-thirds of the rate
charged for the same accommodation to others. The
limit of these rediscounts was also to be one-half the
outstanding notes on January 1, 1896.
From January 1, 1904, till the end of 1908 these privileges were to be modified, and all the enskilda banks were
to be entitled to rediscounting privileges on the abovenamed terms up to an amount equal to 40 per cent of
their notes outstanding on January 1, 1896. This advantage was subject to the condition that none of the offices
of any bank thus privileged, which were open on January
1, 1896, should be closed while the privilege continued.
Should any office be closed, however, the Crown was to
determine in what degree, if at all, the privilege in question should be continued, the importance of the office or
offices closed forming the basis of such a decision.
The provision made for the period of transition to the
monopolized note issue was subsequently modified by a
law of May 3, 1901, which substituted the following for
what has just been set forth.
The time for abandoning its note issues having been
settled by arrangement between an enskilda bank and
the Riksbank, and on condition that none of the offices
open on January 1, 1896, should be closed during the
term covered by the arrangement, unless with the permission of the Crown on the recommendation of the managers of the Riksbank, the enskilda bank might be granted,
against approved collateral, loans not exceeding 65 per




92

The

Swedish

Banking

System

cent of its notes outstanding on January i, 1901, and an
open credit not exceeding 10 per cent of the same amount.
The interest charge on these loans and advances to be 2
per cent below the three months' discount rate of the
Riksbank, though not in any case lower than 2 per cent,
and the usual commission on the open credit being remitted. Further, rediscounts up to 25 per cent of the
notes outstanding on January 1, 1901, might be granted
at a rate not exceeding two-thirds of that otherwise
charged by the Riksbank.
At the end of each year, beginning with 1903, the amount
of the maximum limit of each of these special privileges
is decreased by one-eighth of its original amount, so that
they lapse entirely at the end of 1910.
For banks which had already given up their note issues
before January 1, 1901 (there was one such bank), the
outstanding circulation of January 1, 1896, was taken as
the measure of the advances at special rates, in place of
the circulation of January 1, 1901.
The change effected by the law of 1901 was one distinctly
advantageous to the enskilda banks. It gave them direct
loans in place of open credits, thus making them more
effective agents in putting notes of the central institution into circulation under conditions under which they
had previously issued their own. It left a sufficient open
credit to serve as the basis of drafts on the Riksbank in
the form of bank post bills, and substantial rediscounting
privileges at special rates, the latter, like the direct
loans, putting notes of the Riksbank into the hands of
the enskilda banks. Further, the substitution of January 1, 1901, for January 1, 1896, as the date, the out-




93

National

Monetary

Commission

standing circulation at which served as the measure of
the advances at special rates, practically increased the
maximum of the special advances, up to the end of 1903,
by about 40 per cent. The substitution of a period of
seven years, beginning with 1904, in which the special advances gradually decreased from being about three and
one-half times as great as under the arrangement of 1897
to final disappearance, for a five-year term, during which
the maximum of the special advances remained fixed,
was also a great addition to the concession made to the
private banks, nearly doubling the value of the concession
after January 1, 1904.
As has been seen, the value of the concession was
deemed by the enskilda banks to be adequate to justify
the resignation of their rights earlier than the date fixed
in the law for their definite cessation. Banks which
became entitled to the privileges above-named did not
lose them if, in place of remaining subject to the law of
unlimited liability, they became ordinary joint stock
banks, or were merged in such banks. About 28 per cent
of the loans and advances under the arrangement were,
at the end of 1908, made to such joint stock banks, five of
which were benefiting by the special terms, as representatives of the ten enskilda banks which have ceased to
exist as banks with unlimited liability.
(6) The grant of the monopoly of note issue to the
Riksbank was accompanied by a stricter regulation of
the nature of the business conducted by the central
institution. The purpose directly in view was, doubtless,
the more effective guarantee of the solidity and realizability
of the assets of the note-issuing authority. Incidentally,




94

The

Swedish

Banking

System

however, it resigned to other institutions certain classes
of business, and though the former note-issuing banks
have necessarily to compete for this business with other
joint stock banks, the competition of t h e privileged
central institution is removed.
The business assigned to the Riksbank falls under the
following heads:
i. Purchase and sale of gold and silver.
2. Purchase and sale of bills of exchange, drawn on
foreign firms or persons, and with a currency of not exceeding six months, such bills being payable either abroad
or in Sweden. Other foreign short-term paper, of not
exceeding six months' currency, may also be acquired
and afterwards disposed of.
3. (a) Purchase and sale of Swedish bonds, and of such
obligations of foreign governments as are quoted on
foreign stock exchanges and are readily realizable.
(h) Taking over, by arrangements other t h a n those
for purchase, of Swedish government bonds and readily
realizable obligations of foreign governments.
(c) Acting as agents in effecting t h e purchase and sale
of Swedish government bonds and the bonds of the
general mortgage bank.
4. (a) Discounting accepted inland bills of exchange payable within six months.
(b) Loans against Stock Exchange collateral repayable
within six months (fixed term) or on not exceeding three
months' notice. In t h e case of communal authorities
and other corporations of similar status t h e note of t h e
borrowing corporation may be accepted as sufficient
security without other collateral.




95

National

Monetary

Commission

(c) Loans against merchandise in a public warehouse,
or deposited in charge of an independent t r u s t w o r t h y
person who has bound himself to hold t h e m a t t h e disposition of t h e Riksbank, such loans to be for fixed terms
not exceeding six months.
(d) Grant of credit on current account for terms n o t
exceeding twelve m o n t h s against collateral consisting of
bonds, shares, or a lien on real estate, a n d also against
personal guarantees. T h e m a x i m u m a m o u n t of t h e funds
of t h e b a n k which m a y a t any time be advanced in this
way shall not exceed 15,000,000 kronor ($4,000,000, 30
per cent of t h e b a n k ' s capital), not including in this sum
t h e credit to be opened for t h e national debt office, t h e
a m o u n t of which is fixed not t o exceed 1,500,000 kronor.
(e) On similar security to t h a t named in t h e preceding
paragraph (d) there m a y be granted loans repayable b y
installments a t fixed intervals. The aggregate a m o u n t of
such loans was fixed in t h e law of 1897 not to exceed onequarter of t h e bank's capital. Five years later, a law of
May 14, 1902, set aside the sum of 12,500,000 kronor for
such loans as already stated, t h e capital remaining unchanged and t h e fund in question being provided from t h e
accumulated surplus.
5. Deposits for fixed terms, or repayable on demand, t o
be received without charge and subject t o no interest
payment.
Current accounts ( " g i r o " accounts) t o be k e p t free of
interest or commission, and t h e b a n k to m a k e t h e necessary arrangements in connection therewith for effecting
t h e business of t h e clearing house.




96

The

Swedish

Banking

System

Firms other than banking firms which have a discount
account at the Riksbank may receive interest on current
account balances.
The bank is required to receive the public revenue
and to make payments on account of the State without
charge.
The bank is required to accept at any of its offices
deposits of money and to issue sight drafts on the head
office in Stockholm for the amount thus deposited without
deduction or commission.
Arrangements for the receipt of sealed deposits are
also to be made at the head office, and at branches as may
be determined in the regulations made from time to time.
Foreign loans may be raised and accounts opened with
reliable foreign banking and mercantile houses with or
without interest.
Beyond the business included under the above heads,
and the manufacture of paper and conduct of the necessary printing, the Riksbank is prohibited from carrying
on any other class of business whatever. It may not
own real estate beyond that needed for its offices, paper
manufactory, and printing works. To protect the bank
from loss it may buy in real estate on which it has a lien
when such property is sold by auction, but such property
must be sold again on the occurrence of a suitable opportunity, and in any case when the sale can be made without
loss.
It will be observed that the Riksbank, in being excluded from paying interest on deposit accounts, leaves
an important line of business to other banks. It is also
not under the same pressure to find investments for its
22150—10




7

97

National

Monetary

Commission

funds when the attraction of interest is lacking to draw
to it a large deposit fund. As a matter of fact, as already
noted, this item has practically disappeared from the
balance sheet since 1897. Current accounts with interest
on the balance to credit of the client, though allowed
with certain reserves (see above), have, in fact, not been
developed. At the end of 1908 the resources of the
Riksbank included capital and reserves and outstanding
notes amounting to three-fourths of the whole. Of the
remainder, nearly one-third was due to business arrangements between the bank and the national debt office
and the balance of profits held for account of the State.
The element corresponding to the deposit and current
accounts of American banks amounted on December 31,
1908, to some $14,250,000 out of a balance sheet total
of $97,000,000. Of these deposits about 90 per cent
were public deposits. The average for the year 1908
was 87 percent, and for the four years 1905-1908 about
85 per cent. In 1908 the total of these giro accounts
averaged nearly $11,500,000, of which nearly $10,000,000
were the accounts of government departments. The
remainder is, doubtless, largely affected by the balances
necessary for the conduct of the clearing. The Riksbank
has to a very large extent ceased to derive its resources
from those relations with the public on which other banks
are dependent. Its note issues are the overwhelmingly
most important debt to the public. At the end of 1908
the seventeen remaining enskilda banks had time and
notice deposits totaling nearly $123,000,000, and the 28
"limited'' joint stock banks, with a capital exceeding
1,000,000 kronor ($268,000), held time and notice deposits




98

The

Swedish

Banking

System

to a total of $128,000,000. Besides the deposits, savings
deposits and other amounts ordinarily included in America
under the terms "deposits and current account balances" amounted to $34,000,000 for the enskilda banks
and $70,000,600 for the limited banks. In all, therefore,
these other banks disposed of $365,000,000 of funds
placed in their hands by the public, their proprietors'
funds amounting to about $148,000,000, and the balancesheet totals aggregating $643,000,000.
There has thus developed a situation in which the Riksbank and the other banks operate in fields almost wholly
distinct so far as the sources of their available funds are
concerned. In the matter of investments the dominant
item in the accounts of the Riksbank is inland bills of
exchange, amounting to $45,000,000 at the end of 1908^
The other banks to which reference has been made had,
at that time, rediscounted inland bills to nearly
$38,000,000, of which no less than $35,000,000 had
been negotiated with the Riksbank. Bills of exchange
formed over 46 per cent of the assets of the Riksbank,
and a little over 23 per cent of those of the other banks.
Loans on security of various kinds, on the other hand,
form a relatively small part of the investments of the
central institution, amounting to little over $10,000,000
at the end of 1908, or under 11 per cent of the assets,
while such loans amounted to no less than $378,000,000
in the accounts of the other banks, or not far short of 60
per cent of their total assets. The proportion of loans
on real estate to total loans on security was, at the date
a l t is of interest to note t h a t the average currency of bills discounted by
the Riksbank during 1908 has been calculated at about fifty-three days.




99

National

Monetary

Commission

named, but little over one-sixth for the Riksbank and
well over one-third for the other banks. Stock-exchange
securities served as collateral for three-fifths of the loans
of the Riksbank and for one-fifth of those of the other
banks. As already stated, the cash item for the Riksbank is large, gold coin and bullion and other coin amounting to 23 per cent of the assets, while the other banks held
only $13,500,000, or a little over 2 per cent, of their assets
in this form, almost exclusively in notes of the Riksbank
and in balances with that institution. Other items should
be included, such as checks and drafts payable at sight
or within a short time, if the measure of the readily available assets were required. But what has been stated
will suffice to show that the investments of the Riksbank
differ from those of the other banks, notably in those
features which are related to the ability of the bank to
meet demands promptly. In confining itself to such
investments, the central institution goes far toward
leaving the other banks in possession of the most profitable
part of the field of operations, thus removing what might
otherwise have been a reasonable cause of objection to
the grant to the Riksbank of the monopoly of note issue.
(c) One of the features in the position of the Riksbank
which had been made the subject of repeated criticism, and
many proposals for alteration, was the fact that the control of the bank rested with the Parliament alone, and
that neither in the Executive Government nor in any
independent body was there any power to influence
the discretionary authority of the Parliament. In truth,
the difficulty presented by this peculiar feature of the
constitution was perhaps rather apparent than real.




100

The

Swedish

Banking

System

Nevertheless, the proposals of the Committee of Inquiry
of 1890 included the association of appointees of the
Crown with those of the Parliament on the managing
committee of the bank to the extent of one-third of the
whole number. The actual change made fell considerably short of that proposed. The managing committee,
which formerly consisted of seven parliamentary representatives, has, by the act of 1897, been made to consist
of a Crown-appointed chairman and six representatives
of the Parliament. To the extent indicated by this
change the Executive Government has been admitted to
a share in the control over the bank. Substitutes are
appointed to act in case of the absence or incapacity
from sickness or other cause of any of the managing
committee. The committee of seven appoints three
(from 1873 to 1898, two) of its number to act as managing
directors of the bank, each having charge of certain departments of its operations. The jealousy of interference on the part of the Crown finds an expression in a
section of the 1897 act relating to occasions when a representative of the executive government may be sent to
confer with the managing committee of the bank. The
committee is forbidden to decide the question in hand
so long as the Crown's agent is present with them. They
are thus assured opportunity for private discussion and
independent action.
The more detailed provisions of the regulations approved by the Parliament for the conduct of the affairs of
the bank are stated in Appendix II (B). They include, of
course, the number and status of the bank's officers at
each office, and the scales of salaries for each grade.




101

N ational

Monetary

Commission

The law of 1897 provided for the publication, in addition to the detailed annual statement of the bank's affairs
and a monthly summary, of a weekly statement in which
is specified the amount of the metallic reserve and of the
gold held abroad or in transit, the net amount of foreign
credits, the outstanding circulation of notes, and the
excess of legal rights of issue over the actual circulation,
as also the amount of the assets which are legal cover for
the fiduciary circulation.




102

CHAPTER VI.
JOINT-STOCK BANKS.
When* the experiment of "district b a n k s " (see pp.
43-49) had been found unsatisfactory, in the early
sixties, the question of the establishment of independent
joint-stock banks without the right of note issue came once
more under discussion, and both the Parliament and the executive government showed themselves favorably disposed
toward this idea. The proposal for legislation, which
was approved in 1862-63 by t h e Parliament, did not,
however, eventuate in a law at t h a t time, and the jointstock banks which were founded before 1887 were organized under t h e general act of October, 1848, providing for
t h e formation of joint-stock companies with limited liability. The importance of the privilege of note issue was,
with the lapse of time, decreasing, as the towns grew in
size and the means of communication improved, the time
during which notes could be kept in circulation being
thereby diminished and the profits of note issue at t h e
same time decreased.
The earliest of the joint-stock banks was founded in
Gothenburg in 1863, with a forty-year charter and a capital of 5,000,000 kronor ($1,340,000), of which 20 per cent
was t o be called u p at the start. The bank was opened
for business on April 1, 1864, and opened a branch in
Stockholm in August, 1865. I t quickly developed an




103

N at ion a I Monetary

Commission

important business, and became the agent in Stockholm
for numerous banks in various parts of the country. Its
profits were substantial, and the capital was increased
from time to time as the magnitude of the business demanded. It has long been one of the largest of the
Swedish banks, and at the end of 1908 its balance-sheet
total exceeded that of any other bank than the Riksbank
itself, being a little over 200,000,000 kronor (say,
$53,600,000). The capital paid up then stood at
22,000,000 kronor (say $5,900,000), and the reserve fund
was 23,000,000 kronor, capital and reserve thus amounting to over $12,000,000, and exceeding that of any other
Swedish bank except the Riksbank and the oldest of the
former note-issuing banks, the bank whose balance-sheet
total stands next after its own. Its deposits and currentaccount balances totaled $31,000,000, its loans $30,000,000,
and its discounts nearly $11,000,000.
A second joint-stock bank with limited liability was
organized in 1864, a third in 1869, two in 1871, two in
1872, and so on. Reference has been made above to the
reorganization of unlimited banks, on the loss of their
rights of note issue, into banks with limited liability, or
their absorption by such banks. At the end of 1908
there were 28 joint-stock banks with limited liability,
having each a capital of at least 1,000,000 kronor
($268,000). Their total paid-up capital amounted to
210,968,000 kronor (say, $56,000,000), the reserves to
114,858,000 kronor ($30,500,000). The deposit and current account balances aggregated 746,000,000 kronor
($199,000,000); the loans 842,000,000 kronor ($224,-




104

The

Swedish

Banking

System

500,000); and the discounted bills, inland 281,238,000 kronor, foreign 9,888,000 kronor, or together over 291,000,000
kronor ($77,500,000), making a total of loans and discounts of $302,000,000, while the balance-sheet totals
aggregated $370,000,000.
Besides these larger joint-stock banks there were, at
the end of 1908, twelve others having a capital of less than
1,000,000 kronor each, their total capital and reserves
amounting to 7,827,000 kronor (say, $2,100,000), and
their other resources amounting in all to 18,576,000
kronor (say, $5,000,000). These are exclusive of people's
banks (see pp. 99-100).
Legislation touching the regulation of joint-stock banks
with limited liability was not effected till 1886, the law of
November 19 in that year being subsequently replaced by
that of September 18, 1903, forming part of the revised
legislation consequent on the changed situation of the
unlimited banks in regard to note issue.
The law of 1886 provided for the grant of charters to
joint-stock banks with limited liability for a period of
twenty years and to the end of the then current calendar
year. The shareholders were required to be Swedish subjects and to be at least twenty in number. The capital
was required to be at least 1,000,000 kronor, with the
reservation that when the articles of association provided
for a business of limited extent the capital might be less
than this limit, though in no case less than 200,000 kronor.
Before the bank might commence operations at least 20
per cent of the subscribed capital was required to be paid
up and security given for the payment of the remainder.




105

National

Monetary

Commission

Within three months of starting business a further 20
per cent was required to be paid up, and the remainder
before a year had elapsed from the opening.
The articles of association might not provide for an
increase of the capital to more than double the minimum
fixed in those articles.
Of the profits at least 15 per cent were required to be
applied to constituting a reserve fund, so long as that
fund amounted to less than one-half the capital.
The register of shareholders was required to be open to
examination, by anyone desiring to inspect it, at all times
during which the bank was open for business.
Joint-stock banks might not undertake commercial
business other than dealing in gold and silver, inland and
foreign bills of exchange, and interest-bearing paper.
The provision as to owning real estate was the same as
already noted in the case of the Riksbank.
Joint-stock banks might not acquire their own shares or
accept them as security for loans.
They were expressly forbidden to issue anything of the
nature of bank notes. Their deposit receipts were required to be expressly transferable only by indorsement,
and to bear the statement that they were not for use as
a circulating medium, but served merely as a record of
the deposit.
Renewal of the bank's charter was required to be sought
at least sixteen months before it expired, and the general
meeting by which the application for renewal was authorized was to be held at least twenty months before the
expiration of the then current charter.




106

The

Swedish

Banking

System

To the above provisions of the 1886 act the revised law
of 1903 made few alterations other than giving greater
precision to details, in which respect the later legislation
contrasts somewhat markedly with the earlier.
The period for the completion of the payment of the
subscribed capital was shortened from a year to eight
months after the commencement of business.
The provision against the acquisition by a bank of its
own shares is omitted, though that against their acceptance as security for a loan is retained.
It is provided that in case a deposit receipt be transferred from one owner to another the transfer should be
notified at the bank, as a security for the new owner, a
notice to this efifect replacing that required by the earlier
law to be printed on the receipts.
Interest on savings-bank deposits may not be paid on
more than 3,000 kronor ($804) on any one account.
The bank may not bind itself to repay savings deposits
without at least a week's notice, though the notice need
not be exacted in actual practice, should special circumstances render that course advisable.
The details of the legislation, as to the process of formation of banking companies, their inspection, etc., need not
be entered upon here. In the main they are such as might
apply to companies of all kinds, though the need to secure
the trustworthiness of banking institutions may call for
more careful prescriptions of the law in their case than in
that of companies in general.
The Swedish legislation contains, in some particulars,
provisions which were not found in the articles of association of certain of the earliest of the joint-stock banks.




107

National

Monetary

Commission

In these cases, where the articles in question do not include
the provision that the bank shall be subject to all future
general legislation concerning limited companies conducting a banking business, the articles of association will
continue to regulate such companies until the occasion
for a renewal of the charter or changes in the articles of
association afford opportunity to bring them under the
provisions of the legislation here referred to.
The development of Swedish banking has taken place
on a basis independent of foreign control or direction. It
may be of interest to mention that, in the early sixties,
an English company, the English and Swedish Bank, with
a directorate in London, entered the field, with the view
of financing Swedish business with the relatively cheap
capital available in England. Two offices were opened
in Sweden in 1864, with English managers. The business
done involved considerable losses, the worst of which
were the results of decisions taken by the London board,
the members of that body not being fully acquainted
with the local conditions and circumstances. After only
five or six years of activity, it was found necessary to
liquidate the bank's affairs. Though the period was one
which was, as has been shown above, not wholly unfavorable to the development of joint-stock banking in Sweden,
the native institutions beginning to arise about that time,
the opportunities were not such as to favor foreign enterprise. Capital has been raised abroad for application
in Sweden under the direction of Swedish banks, but the
actual development of banking has taken place under
native leadership and control.




108

CHAPTER VII.
PEOPLE'S BANKS AND SAVINGS BANKS.

Some brief account is necessary of the banks which
have been established in Sweden on the model of the wellknown Schulze Delitzsch institutions. Some of these
have attained considerable importance, and a number
of them have been developed into joint-stock banks.
The oldest of the people's banks was founded in 1867.
In its statutes the principle of mutuality was embodied,
the shareholders providing the capital, and, in the main,
the deposits, and receiving in turn loans and advances
by way of discounts. They were jointly and severally
liable for the debts of the bank, as in the enskilda banks.
The people's banks were, however, intended particularly to
meet the needs of borrowers on a small scale, and small
loans received preference over large ones.
No authorization was needed for the establishment of
these institutions, either from the King or from other
representatives of authority. In some cases the local
governor refused his assent to the proposed statutes, but
in at least five instances, in one of which the refusal had
emanated from the Crown itself, the banks were nevertheless able to proceed with their proposed business.
Against their will they could not be obliged to submit to
inspection or control if they did not take the form of an
ordinary joint-stock company.




109

National

Monetary

Commission

The new banking legislation introduced new regulations
forbidding the use of the title " b a n k " to any institution
not organized as a limited or unlimited joint-stock company whose articles of association had been approved
by the Crown. These regulations came into operation
with the opening of the year 1904. At that time there
were 28 people's banks which were not joint stock companies, and in addition to the head offices there were three
branch offices. These banks had 32,419 savings bank
accounts, with a total standing to their credit of 15,797,462
kronor ($4,234,000) and other deposits of rather over
half this amount. Capital and reserves amounted to
3,362,931 kronor (about $900,000) and the total resources
to about 28,000,000 kronor ($7,500,000). The disposition
of these funds was approximately as follows: Cash in
hand and with bankers, 7% percent; loans on real estate
collateral, 3 3 ^ per cent; loans on personal security and
discounted bills, each about 2 3 ^ per cent; loans on other
security, 10 per cent; stock exchange investments, 1 ^ per
cent.
Until the end of 1902 the magnitude of the affairs of these
institutions had grown from year to year. The approach
of the time when they were to cease to have the right to
the title " b a n k " produced some reduction in 1903, and
since that time their numbers and importance have declined steadily. The old name was allowed to be used
by joint-stock banks under the new laws, whether with
limited or unlimited liability. Any of the latter class
whose capital falls below 1,000,000 kronor is called a
people's bank (Folkbank) instead of bearing the title




no

The

Swedish

Banking

System

enskilda bank, which designates the larger banks with
unlimited liability. Two banks formerly peopled banks
have taken advantage of this clause, and one of these
survives in that form. Two limited liability banking
companies with a capital exceeding 1,000,000 kronor,
and 26 whose capital does not reach that figure, bore the
name people's bank at the end of 1908. The capital of
the former two amounted to $1,500,000 together and
their liabilities to the public to $2,000,000, while the 26
had an aggregate capital of about $2,750,000 and liabilities to the public about $14,750,000.
The institutions which prefer to continue to operate
without submitting their statutes for approval by the
Crown now bear various names, of which the chief is
"credit association." The total resources of the 18 which
were in operation at the end of 1908 (4 of which had been
established in 1904 and 1905) amounted to 10,027,861
kronor (say $2,687,500), of which 972,701 kronor ($260,700)
were capital and reserves and two-thirds of the remainder
savings bank deposits, the number of depositors being
15,107. The greatest decrease in the years 1904 to 1908
had been in the number of large deposits, but a great
decrease had occurred all along the line. The cash in
hand and with bankers had fallen in the five years from
7/-2 to 5 per cent, and the small holdings of bonds, etc., had
become yet smaller, while discounted bills had gained in
relative importance about as much as cash and investments had lost. Loans on real estate collateral had fallen,
while those on personal security had risen in relative importance, these items having nearly exchanged the per-




III

National

Monetary

Commission

centages represented by them five years earlier. There
has been a good deal of fluctuation in the distribution of
the funds in the five years, as is not unnatural with so
small an aggregate amount, affected by the transfer of
some of the institutions to the group of joint stock banks.
The functions of the people's banks are now being performed by the joint-stock institutions subject to control
rather than by these survivors of the old system, especially
by the smaller of the joint-stock banks, and by the savings banks, which are subject to regulation, and to which
attention may now be given.
Savings banks proper have existed in Sweden since
1820, when the first of them was opened in Gothenburg,
to be followed by another in Stockholm in the following
year, and eight others in various centers before the end of
1825. At the end of 1908 there were 428 in existence, of
which 27 were not more than five years old, so that the
system is steadily being extended even yet. The head
offices of 109 were in towns and the remainder in the lesser
centers, 25 of the 109 town banks having branches to a
total number of 374, of which only 26 were in towns, while
15 of the others possessed in all 32 branches. There were
thus 135 offices in towns and 699 in minor centers. Many
of them are open only one day a week, or even less frequently, one being open only once every second month.
In many cases there is no capital, but in only one case is
there no reserve fund. As the statutory regulations of
savings banks require that founders or their assigns shall
not receive any share of profits made by the institutions,
the capital and reserves play practically the same role in




112

The

Swedish

Banking

System

the economy of these banks, whichever of the two designations be used.
The law under which the savings banks now operate
was passed in 1892, substituting previous legislation of
1875. The statutes of the banks require approval by the
Crown, and were submitted for such approval after the
passing of the law of 1892, though they have not been required to be again approved so long as no alteration in
them is made.
The savings banks receive deposits of very small
amount, and in most cases a maximum limit to the sum
on which interest will be paid is fixed. This is in a considerable number of banks as low as 2,000 kronor ($536),
but the most usual limit is 5,000 kronor ($1,340), and
10,000 kronor ($2,680) is also a frequent limit. Higher
limits are sometimes found, three cases occurring where
the limit is 50,000 kronor ($13,400), while in a large number of instances the managing committee has power to
extend the ordinary limit in special cases. The number
of depositors (or rather of accounts) had reached 1,493,764
at the end of 1908, and had increased by over 300,000
in the ten years preceding that date. The amount standing to the credit of depositors had increased even more
rapidly, being 713,551,441 kronor (about $191,232,000) at
the end of 1908, as compared with 402,923,356 kronor
(about $107,983,000) at the end of 1898. The increase
in the ten years had thus been 77 per cent. To this
increase the interest credited had, of course, contributed
in no small degree, the actual excess of deposits over
withdrawals in the ten years having been only 23.6 per
22150—10




8

113

National

Monetary

Commission

cent of the increase of depositors' funds. The average
rate of interest actually paid in each of the last ten years
was—
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908

:

_

Per cent.
4.19
4.58
4. 67
4.44
4. 28
4.29
4.29
4.42
4.70
4.97

The average rate of interest paid since i860 has been
3.96 per cent, and the aggregate amount of interest
credited in that time has been over 70 per cent of the
amount now standing to the credit of depositors.
In 1908 the most usual rate, that paid by 325 of the
banks, was 5 per cent, but the others paid rates ranging
from 4 per cent to 5% per cent, and 6 per cent was paid
for a time in the course of the year by 3 banks.
In 1908 the withdrawals slightly exceeded the deposits,
a comparatively rare occurrence, the deposits having been
in excess in each year since 1899. The proportion of
deposits or of withdrawals in a year to the total to the
credit of depositors has not varied much from the ratio of
one to five on the average.
More than half the accounts amounted to less than 100
kronor ($26.80) each, and only 14 per cent were over
1,000 kronor ($268). The latter were, however, responsible for a little over 70 per cent of the total amount of
deposits. The average balance to the credit of each
account at the end of 1908 was 478 kronor ($128).




114

The

Swedish

Banking

System

The funds of the savings banks were invested to the
extent of 79 per cent of the total at the end of 1908 in
loans, seven-tenths of these in amount, or over 55 per
cent of the funds, being in loans with a lien on real estate
as security and 17 per cent of the funds in loans on personal security. The proportion of the funds employed in
loans has slowly increased for some years past. From 1890
to 1900 it decreased from about 76 per cent to about 69
per cent, as compared with the 79 per cent of 1908. As
far back as statistics are available the tendency has been
to increase the percentage of funds loaned on real-estate
collateral. In addition to these loans to private persons,
a relatively small but slowly growing percentage (under
\% percent in 1908) of the funds was loaned to municipal
authorities and associations of various kinds on their
notes. Stock-exchange securities, principally bonds,
were held to the value of nearly 10 per cent of the total
funds. The proportion of funds thus invested reached
about 1 3 ^ percent in 1898, but has since fallen substantially and continuously.
The law of 1892 requires each savings bank to hold in
readily realizable securities a sum of not less than onetenth of the total of its deposits. Among securities which
may be held for this purpose, however, are included realestate mortgages when the property is mortgaged to less
than half its valuation. Thus the holding of bonds, etc.,
just referred to, need not correspond to the legal obligation in question.
The proportion of the cash in hand and with bankers
to the total funds was at the end of 1908 as low as 3 ^
per cent. In 1906 it was 4 per cent, in 1905 \]/2 per cent,
XI
5




National

Monetary

Commission

and in 1903 5 per cent. It has been a somewhat fluctuating figure, and the end of the year figure may possibly not represent the normal position, but the decrease
in the last five years is very noteworthy.
It is perhaps worth noting that loans on personal
security are relatively much more important in the case
of the smaller than of the larger savings banks, while loans
on real-estate collateral are more important in the larger
banks. These latter, too, hold their funds invested to a
far greater extent than do the smaller banks.
The total funds of the savings banks include, besides
the funds of depositors, capital and reserve funds and a
relatively small amount of other funds. The capital and
reserve funds averaged 8.2 per cent of the depositors'
funds in 1908, a continuous decrease of this percentage
from 9 per cent in 1895 to 8.1 per cent in 1906 having
ceased and been replaced by a trifling increase. The
proportion is much greater in the smallest banks than in
the largest. If the banks be divided into two groups,
according as their capital and reserves fall short of 10
per cent of depositors' funds or not, the former class
included, at the end of 1908, 262 banks, with deposits
of 549,700,000 kronor, the latter 166 banks, with deposits
of 163,900,000kronor. Of the former, 72, with 399,600,000
kronor of deposits, had their head offices in towns, and 37
of the latter, with deposits amounting to 107,800,000
kronor.
In the last ten years the aggregate of capital and reserve funds of the savings banks has increased rapidly,
the total increase having been 66 per cent, but, as the
deposits have increased by 77 per cent, the proportion
n6




The

Swedish

Banking

System

of these protective funds to the deposits has been reduced,
as stated above.
The cost of administration averages somewhat under
two-fifths of i per cent per annum of the total funds, or
i per cent of the total of deposits and withdrawals in
the year.
A post-office savings bank was established in 1884,
and has been found a useful supplement to the other
savings banks, particularly in the more sparsely populated districts. There has been, however, an excess of
withdrawals over deposits in each of the years since
1899, whether due to the greater activity of other banking institutions or the higher interest which, in times of
especially active trade, these other banks are able to
offer. The turnover is somewhat more active than with
the ordinary savings banks. The total balance to the
credit of depositors at the end of 1908 was only about
46,400,000 kronor ($12,400,000), and the average account
was less than a fifth of the ordinary savings-bank
average. The recorded numbers as well as aggregate
amounts of deposits and withdrawals year by year show,
as might be expected, that the average amount of a
deposit is much less than that of a withdrawal. The
average deposit has in the last five years amounted to
the not insignificant sum of over 20 kronor (say $5.50),
while the average withdrawal has been nearly 95 kronor
(say $25.50). There is a maximum limit fixed for deposits by any depositor in the post-office savings bank
of 2,000 kronor ($536).
At the end of 1908 the number of accounts in postoffice savings banks in Sweden was 560,270, and




117

National

Monetary

Commission

the number, though some 17,000 less than in 1902,
has decreased less rapidly than the deposits. The
number of offices at which business is done steadily
increases, and had reached a total of 3,180 at the end of
1908. New depositors continue to be secured in substantial numbers. Whether the extension of the activities of other institutions has for its result the transfer
to them of depositors who have been encouraged to save
by the accessibility of the facilities offered by the postoffice does not appear, but such a position seems not
entirely improbable. The average rate of interest paid
to depositors has been barely 3.4 per cent during the ten
years 1899-1908, or about 1 per cent less than was paid
by the ordinary savings banks. The investment of the
funds has necessarily been restricted to the less remunerative forms, one-fourth of the total being lent to municipalities on their notes and over 71 per cent invested in
bonds at the end of 1907. The lower earning power has
involved a lower interest to depositors, and it is not to
be wondered at that they transfer their accounts to
other institutions offering more attractive returns on
entirely satisfactory security. The formalities required
for withdrawals are also said to discourage the use of
the post-office savings bank.
In addition to the facilities provided by the transaction of savings-bank business at over 3,000 post-offices
and branch post-offices, savings stamps are sold at these
and at over 2,000 other places where there have been
established agencies for the purpose. The number of
the latter is being rapidly extended. In 1907 savings




118

The

Swedish

Banking

Syste m

stamps were sold to the number of 1,322,937, their value
being 132,293.70 kronor ($35,455-)
The totals of savings-bank accounts in the various
classes of institutions at the end of 1908 were as follows:
Dollars.
In joint-stock banks:
With unlimited liability
With limited liability
In people's banks (formerly so called)
In savings banks
In the postal savings bank

7 7 . 2 9 7 . 233
173.70s.232
6,025.637
713,551.441
46,422,570

20,715,658
46,553.002
1, 6 1 4 , 871
191,231,786
12,441,249

The savings banks proper hold, thus, 70 per cent of
the total, and that total amounts to just over $50 per
head of the entire population.
A further class of financial institutions to which a very
brief reference may be made are those whose aim is to
provide funds for the sole purpose of loans on real estate
mortgages. The earliest of such institutions in Sweden
was founded in 1836, after which year an interval of nine
years elapsed before any other such society was started.
To assist these mortgage associations in the provision
of the funds required by them for making advances,
there was established in 1861 the General Mortgage Bank,
which raised money by the issue of its own bonds, and
received in addition a loan of 6,000,000 kronor ($1,608,000)
from the Riksbank, assigning suitable security for the
loan to the bank. The State provided further assistance
by handing over 8,000,000 kronor in government bonds
to the General Mortgage Bank, a sum increased in 1890
to 30,000,000 kronor.




119

National

Monetary

Commission

Loans are made at 4 per cent interest and an additional
one-half per cent or more as contribution to a sinking fund.
Such loans may amount to not more than half the value
of the land serving as security. Where no sinking fund
is provided for, the interest is the same, but the limit of
the loan is one-third the value of the land.
Besides the General Mortgage Bank and its associated
rural mortgage societies, there have been established
mortgage banks for lending on urban property, the earliest
of these dating from 1865. The Mortgage Security Company of Stockholm, is included among the joint-stock
banks dealt with in the preceding chapter, as it conducts, in addition to the business of bond issue and
mortgage loans, a general banking business.
The Stockholm Stock Exchange quotes the bonds of
the Swedish General Mortgage Bank at prices about
equivalent to those at which the 3.6 per cent bonds of
the Swedish Government are quoted.
At the end of 1907 the General Mortgage Bank had sold
bonds to the value of 339,000,000 kronor ($90,850,000),
of which some 60,000,000 kronor ($16,000,000) had been
redeemed. The mortgage societies had made advances
to their members, out of funds received from the General Mortgage Bank, amounting to nearly 359,000,000
kronor ($96,000,000), of which over 79,500,000 kronor
($21,300,000) had been repaid. The number of members was then 74,630, and the value of their property,
available as security for advances, 842,000,000 kronor
($225,600,000).




120

CHAPTER VIII.
THE NEW BANK ACT AND THE CRISIS OF 1907.

It has already been stated that the new banking legislation, which deprived the enskilda banks of the privilege
of issuing their own notes, by no means checked their
development. In spite of the absorption of some of them
by ordinary joint-stock banks, and the reconstruction of
others into such banks, the aggregate figures of the business of those which retained the feature of unlimited liability showed marked expansion, while the body of limitedliability banks grew, both by the addition to them of a
substantial part of the former note-issuing banks, and by
the creation of new banks and the expansion of the operations of those already in existence.
Both the preparatory period between the passing of the
new law respecting note issues and the actual monopolizing of those issues by the Riksbank, and the first years of
the new system, fell within the period of increasing business
activity throughout the western world which, after lasting
for over a decade, was interrupted by the financial troubles
experienced in the United States in the latter part of 1907,
and affecting more or less the entire business world as
well as the United States. The expansion was shared
in by Sweden, and the check to business may be supposed
to have provided a test of the new monetary arrange-




121

National

Monetary

Commission

ments. Though disturbance and losses were not avoided,
the test may be said to have given results of a satisfactory
character. This outcome of the strain will be illustrated
by a few references to the progress of events during the
critical period.
Reference may first be made to the stipulation made
between the Riksbank and the former note-issuing banks,
as a condition of the provision of credit facilities on favorable terms in compensation for the loss of note-issuing
privileges. It was that the offices which were open at the
beginning of 1896 should be maintained. The 27 noteissuing enskilda banks in existence at that date are now
represented by 17 unlimited banking companies and 5
limited banking companies. From the beginning of 1896 to
the end of the nineteenth century the number of branches
of enskilda banks increased by 17, though one such bank
became a limited-liability banking company in the meantime. The limited banks of all sizes increased in number
from 28 to 40, and their branches from 19 to 57, including
the gain from the transference from the ranks of the
enskilda banks at the end of 1898. After the opening of
the twentieth century the rate of growth was much accelerated. At that time there remained 26 enskilda banks.
These 26 banks had 99 branches and 58 sub-branches.
The 17 unlimited banks had, at the end of 1908, 94
branches and 87 sub-branches, while 80 of the offices, other
than head offices, of limited-liability banks have been
acquired by the transformation or absorption of former
note-issuing banks. It appears, therefore, that the
former 26 head offices and 157 other offices were represented at the end of 1908 by 21 head offices and more than




122

The

Swedish

Banking

System

261 other offices, for the four limited-liability banks
which resulted from the reorganization of certain of the
26 note-issuing banks have not failed to extend their
operations in the years since the reorganization, and
owned 23 other offices besides those referred to above at
the end of 1908. The note-issuing bank which reorganized as a limited-liability company at the end of 1898
had six offices, all of which were maintained under the
new organization.
At the end of 1900 the Riksbank had 19 offices, noteissuing banks 183, limited-liability banks 96, and people's
banks s2> a total of 330 offices. At the end of 1908 the
Riksbank had 25 offices, the unlimited banks (including
one people's bank) 199 offices, limited-liability banks
with capitals of at least 1,000,000 kronor 304 offices, and
lesser banks 51 offices, or a total of 579 offices. There
was thus an increase in the eight years of 249 offices, to
which must be added those of a number of institutions
representing former people's banks, and a couple of exchange offices of larger banks not included in the above
totals. No less than 59 new offices were opened in 1907,
and 43 in 1908, so that the development seems by no
means at an end. There was at the end of 1908 a bank
office for every 9,300 inhabitants on the average, whereas
at the end of 1900 there were over 15,000 inhabitants for
each bank office.
The different banks quote rates, both for loans and for
deposits, that are very nearly the same. The existence
of branches of more than one bank in many districts
insures this advantage of competition. The Riksbank's
discount rate gives, in consequence, a measure of the




123

National

Monetary

Commission

rates current everywhere, though there remains some
variation in the rates returned by the several banks in the
monthly accounts. These fluctuations may perhaps represent, in part if not entirely, differences between the
classes of business secured by the different institutions.
In general, during the last few years, the interest on
savings deposits, and on deposits at three months' notice,
has been i per cent below the three months' discount
rate of the Riksbank. Deposits at four or six months'
notice receive one-half per cent more, those at two
months' notice one-half per cent less, at one month's
notice i per cent less, than savings deposits. Deposits
for longer terms than six months do not, as is the custom
in some countries, receive any higher interest than those
for six months. Current-account balances draw interest
at i per cent below deposits at one month's notice as a
rule. With discount rates between 5 and 7 per cent
the above relations have held during the three years
1906 to 1908. With lower discount rates the scale would
naturally be modified somewhat.
Open credits are charged a commission of from onehalf to 1 per cent, and interest at one-half per cent
above bank rate, as a rule. Loans on real estate collateral
are commonly charged one-half to 1 per cent above the
three months' discount rate, and on other collateral
one-half per cent more is common, though lower rates
are sometimes quoted than on real estate collateral.
This is especially the case with the Riksbank, whose
chief loans on collateral are made against bond security.
The average bank rate of discount (on three months'
bills) and the mean of the maximum deposit rates of one




124

The

Swedish

Banking

System

of the leading banks of Stockholm during the last ten
years have been as follows:
Maximum
deposit rate
(percent).

Year.

1899

4-92

1900

5 oo
4 79
4 oo

1901
1902

Three
months' discount rate
(per cent).
5.89
5-87
5.46
4-Si
4-5o
4. 61
4-73

1904

4 oo
4 08

1905

4 17

1906

4 63
5 08

5- 20

1907
1908

5

5-88

1903

21

6. 10

The bank rate thus rose, with some fluctuations, from
^y2 per cent, the rate throughout 1903, to 5 per cent,
the rate prevailing through the first nine months of 1906.
But the increasing value of money was reflected in a rise
to 6 per cent by the middle of November, 1906, and
the maintenance of that rate till November 9, 1907,
when it was advanced to 6% per cent. From December
12, 1907, till January 29, 1908, a 7 per cent rate was
established. By successive reductions of one-half per
cent on the last-named date and on April 3 and June 6,
1908, and again on January 7 and February 19, 1909,
the j^y2 per cent rate was again reached.
If the aggregates for all the banks under the principal
heads of the monthly accounts be examined, it is found
that inland bills of exchange expanded almost without
a break through 1906 and 1907, though in the last two
months of 1907 the expansion was but trifling in comparison with the 37 per cent of increase in the preceding
twenty-two months. In 1908, however, half the in-




125

National

Monetary

Commission

crease of 1907 was lost, and the decline has continued
into 1909. Loans on collateral increased by 21 per cent
in the twenty-two months ending October, 1907, and
advances on credits by no less than 47 per cent. Taking
both together, the advance was 29 per cent. Loans and
advances have both increased at a much slower rate
during 1908, one class of loans, those on shares as collateral, having experienced a decline to about the level
reached at the beginning of 1907. Savings deposits have
advanced throughout the period under discussion, though
more slowly in 1908 than in the two preceding years,
and of time and notice deposits the same is true. So
far as the aggregates of the bank accounts go, the features
in them whien bear witness to the pressure, besides the
decrease of inland bills discounted and of loans on shares,
are a small decrease in bonds held in the last month of
1907, followed by some further small decreases in 1908,
and a slight increase in the proportion of the credits
granted which were drawn in 1907 and 1908 as compared with 1906 or 1905. A notable increase in the
(relatively small) amounts standing to the credit of current accounts is also shown in 1907, especially toward
the close of the year, and still further increases in 1908.
The gold stock of the Riksbank lost about 6,000,000
kronor out of a total of about 76,000,000 kronor, mainly
in the weeks ending November 23, November 30, and December 28, 1907, a loss which only began to be made good
after the middle of July, 1908, and was not completely
made good till late in October. In the first week of
December, 1907, the foreign government bonds held by
the Riksbank were reduced by 4,000,000 kronor, and




126

The

Swedish

Banking

System

though a large part of these were temporarily restored
in the following week, the accounts show that from the
beginning of January, 1908, until the end of May the
bonds held were less than had been usual by the amount
named, and the previous situation in this respect was
not restored till the middle of August, 1908.
By the middle of November, 1907, the net foreign credits were reduced to less than a third of the usual amount.
Throughout the year they had been much less than at corresponding dates in 1906, partly due to a decrease in the
credits and partly to an increase in the debit side of the
account, and it is, perhaps, somewhat remarkable that,
with a large increase in the net balance due on their foreign
transactions by the banks as a whole, and repeated drains
on its own foreign balances, the Riksbank failed to impose
the check of a higher discount rate on the speculative
spirit manifested in the business circles of the country.
In raising its rate on November 9 from 6 to 6 % per cent,
when the Bank of England rate had been advanced to 7
per cent two days previously, and in maintaining the 6%
per cent rate for nearly five weeks with the London rate
one-half per cent higher and the Berlin rate 1 per cent
higher, the central institution would appear to have been
open to the criticism which has been leveled at its policy
during this period. The relation of lending rates in
Sweden and borrowing rates abroad was such that the
foreign debit balances of the banks, instead of being, as in
1906 or 1908, increased toward the end of the year, had to
be largely decreased, and the banks had to turn to the
central institution for assistance in effecting this operation.
Hence the export of gold, the sale of its foreign government




127

N ational

Monetary

Commission

bonds, and the reduction of its credit balances in foreign
centers.
The fact that a new Swedish Government loan had been
arranged in France to the amount of 65,000,000 francs
enabled the national debt office to come to the assistance
of the Riksbank. For fifteen months a special item appears in the Riksbank's monthly statement representing
an arrangement with the national debt office, the amount
for which the Bank became indebted to the national debt
office being over $7,000,000 at the end of November, over
$11,000,000 at the end of December, and nearly $13,000,000
at the end of January, 1908, when the highest amount
was shown. A further sum of about $5,272,000 in foreign
exchange was arranged for in February, 1908, and this
item appears in the accounts for three months, representing presumably three months' drafts. By the time they
ran off, the strain of the situation was considerably eased.
Aided, then, by the backing of the treasury (to use a
term more familiar than national debt office) the Riksbank
was enabled to lend assistance to borrowers with sound
credit and satisfactory security. This procedure recalls
in some degree the procedure in the United States at
about the same time. It has been alleged that the other
banks found a difficulty in securing the help they needed
from the Riksbank. The monthly accounts hardly lend
support to this view. It is doubtless true that, at a time
of pressure, the rules requiring careful scrutiny of bills
offered for discount at the Riksbank were more scrupulously observed than at ordinary times. But the figures
of inland bills in the Riksbank's portfolio, of its loans with
bonds as collateral security, and of its advances on open,




128

The

Swedish

Banking

System

credits all show that it provided in substantially increased
sums the funds called for by those who depended on it,
and this means the other banks in the main. The rediscounts of the joint-stock banks of both classes have
been stated in the monthly accounts since the beginning
of 1907. In 1907 over 92 per cent, in 1908 over 94 per
cent, of the rediscounts of the other banks were made
with the Riksbank, about three-fourths of the inland
bills held by that institution being obtained by rediscounting. From September, 1907, to June, 1908, the
share of the rediscounts by other banks which was effected
with the Riksbank was higher than in the earlier months
of 1907 or the later months of 1908. Naturally the
Riksbank scrutinized the bills offered with exceptional
care at the time of pressure, but this is no proof that the
facilities usually available to the other banks were unreasonably reduced. Had such scrutiny not been made
strict, the Riksbank would have failed in its duty. It
may be blamed for not marking the discount rate up to a
figure higher than that of the Imperial Bank of Germany,
but unless it refused advances when the collateral offered
was sound it should not be accused of restricting credit.
The strict enforcement of the rule requiring the origin
of bills to be taken into account should not be interpreted in this sense. Actually it would appear from
the monthly accounts that about 20,000,000 kronor
($5,360,000) was advanced, beyond the usual amounts,
by rediscounts, and a sum little if at all short of this by
advances on bonds as collateral, of which about half
was provided when the increased discounts occurred, in
November, and the remainder early in 1908, when also
22150—10




9

129

National

Monetary

Commission

increased sums were advanced on credits opened. By
the assistance thus rendered the other banks were enabled
before the middle of 1908 to bring their floating debt to
foreign bankers to about the same dimensions as in 1906.
As by this time the discount rates in other countries had
fallen, the results of the fixing of the Swedish rate insufficiently high in comparison with the German and
English rates had been effectively dealt with. Whether
a higher discount rate might have been wiser than reliance on the support of the National Treasury is a question which need not be discussed here and has no direct
connection with the matter of the centralization of note
issues, other than this, that the Riksbank may have
endeavored to avoid burdening the other banks with
excessive charges for accommodation, partly in view of
the relatively recent restriction of the privileges of many
of those other banks. a There is'one other disturbance
revealed in the accounts, namely, the comparatively narrow margin of reserve note-issuing powers resulting from
the strain on the Riksbank. This reduction of the margin was largely the direct result of the reduction of the
credit balances abroad of the Riksbank, the reduction of
the gold stock also contributing substantially, since the
note-issuing powers are decreased by double the amount
of any decrease in gold in the bank. At the time of
smallest reserve powers, the fact that a sum of about
« For a considerable part of each of the years 1902-1906 the rate charged
by the Riksbank for rediscounts was one-half per cent below the regular
discount rate. In 1907 no such reduction of the rate was made. In 1906
the lower rate was so charged from February 7 to September 19, and in
1908 from May 22 to June 5 and from July 3 to the end of the year.
&cf. Bkonomisk Tidskrift, 1908, p. 172, in an article by M. Hamilton.




130

The

Swedish

Banking

System

$750,000 was on the way abroad further decreased the
power of issue. The weekly account for December 21,
1907, shows a margin of note-issuing powers of only 6%
per cent, the margin in the preceding week having been
about 12 per cent, while in the following week it was
about 14 per cent. The margin ordinarily runs low at
the end of December, and in 1906 fell nearly to 11 per
cent. By the last day of 1907 the increase of foreign
credit balances and some decrease of notes in circulation
brought the margin to the proportion which had been
reached on the last day of 1905, and which was again
reached at the end of 1908; but ten days earlier, as
stated above, the margin was abnormally narrow. It
is stated b that an arrangement was effected between
the Riksbank and some of the important banks of Stockholm whereby their holding of notes was transferred
each afternoon to the Riksbank, so as not to be included
in the outstanding circulation. Such an arrangement
may have contributed to the restoration of a relatively
wide margin by the end of December, but it does not
seem necessary to suggest that, but for this, the legal
issues would have been exceeded. It is implied that the
other banks hold much more substantial reserves of
notes than would appear necessary, as the offices involved
are, by the conditions of the case, conveniently placed
for procuring cash from the Riksbank without delay in
case of need. The monthly accounts do not discriminate between notes in the safe and deposits at the Riksbank, and in these cases a deposit balance would appear
to be equally available with notes in hand. Were this




131

National

Monetary

Commission

not the case, no one would imagine that the banks would
let the notes go out of their hands.
On the whole, the figures of the monthly accounts and
the weekly figures of the Riksbank appear to support the
view expressed to the present writer by bankers in Sweden
that no serious difficulty was experienced by the banks in
providing the necessary funds to aid those who needed
assistance for sound business purposes. If the banks were
restrained by the loss of note-issuing rights from granting
credit for more speculative purposes, it may be said that
this restraint was, under the circumstances, a gain and
not a loss to the community. The questionable element
is whether the discount rate was raised sufficiently early
and sufficiently high, and the centralization of note issue
would hardly operate to prevent the adoption of such
restrictions on the more speculative developments of business, but rather the contrary.
The most notable evidences of trouble are perhaps
those found in the growth of overdue debts to the banks
and in the application of large sums from profits in writing
down assets. The overdue debts have ordinarily stood
at one-tenth of i per cent of the balance-sheet total, or even
less. In 1907 they rose to over one-third of 1 per cent at
the end of the year, and in 1908 to somewhat over one-half
of 1 per cent, takiilg all the joint-stock banks together,
limited and unlimited. Such an increase must mean a
number of bad debts, and the sums applied to writing
down assets confirm this interpretation. The following
table gives figures for the last five years from all the
banks, excluding the Riksbank:




132

The

Swedish

Banking

System

[Expressed in thousands.]
Sums applied t o -

Year.

Profits of
the year.

Expenses
of the
year.

Writing down assets
from—
Reserve
fund.

1904
1905
1906
1907
1908

$11.085
12,115
14.333
17,768
18.801

$3,608
3.864

Revenue.

$111

$803

4

783

4.56i

186

980

5.179

2,867

5-373

180

2, 792
2, 721

Reserves
of various
kinds.

$i.i93
1.234
1, 146
1,361
1,994

The application of more than double the usual proportion of the year's net profits to writing down assets, and
the increased sums written to reserve funds or held in
hand, are eloquent witnesses to the fact that the banks
have suffered substantial losses. How far the large sum
so applied out of reserve funds in 1907 is to be taken as a
sign of large losses incurred, and how far it was merely a
preparation, by the one large bank which was responsible
for nearly 95 per cent of the total, for the reconstruction
which followed at the end of September, 1908, when it
ceased to operate under unlimited liability, and was converted into a limited liability bank, the writer is, unfortunately, unable to state.
So much does appear to follow from the examination of
the course of events as illustrated by the bank accounts of
the last few years, namely, that, when the sharp contraction of credit throughout the world at the close of 1907 is
taken into account, there is no evidence that the changes
in the Swedish banking law have contributed to render
such a crisis more severe, and some evidence that the
opposite has rather been the case.




133

SUPPLEMENTARY CHAPTER.
THE BANKS OF DENMARK AND NORWAY.
For purposes of comparison with conditions in the
neighboring countries, a brief summary of the position
in Denmark and Norway confined to the note-issuing
banks follows. In both cases the business of note issue
is, and has always been, the monopoly of a single privileged institution.
(a)

DENMARK.

The note circulation in Denmark is the monopoly of
the National Bank, a joint-stock institution owned by
private shareholders. The early history of the bank was
a varied one. On October 29, 1736, a charter was granted
to a bank with a share capital of 500,000 rigsdaler current
(roughly, $430,000), which acquired, among other privileges, that of issuing its notes as currency. The charter
included no provision as to the proportion of notes to the
metallic reserve of the bank, and the freedom of issue
was quickly abused, so that in 1745 it became necessary
to grant a temporary dispensation from the obligation
to redeem the notes on presentation. Though the notes
were only irredeemable at that time for a period of eighteen
months, the difficulties which had led to this measure of
relief soon recurred, through the extension of loans to
the Government, to trading companies, and to others in
excessive, amounts. The restriction was renewed from
October 6, 1757, and from that time till 1845, a period of
eighty-eight years, the bank notes remained irredeemable.




134

The

Swedish

Banking

System

In March, 1773, the bank was taken over by the State,
and the issues were increased so largely that after ten
years the outstanding amount was over two and a half
times as great as at the date of the conversion to a state
bank, and a depreciation of 10 to 15 per cent was established. To remedy the evil so far as the Duchies of
Schleswig and Holstein were concerned, there was established in 1788, in Altona, a " speciesbank," which issued
redeemable notes and replaced the depreciated currency
by them. In 1791 a similar measure was tried for Denmark itself, but was not successful.
During the war period, 1807-1814, the Government
had to rely very largely on the issue of notes for meeting
its expenses, and the circulation, which had grown from
6,000,000 rigsdaler in 1773 to 15,500,000 in 1783 and
27,000,000 in 1807, was further inflated to 142,000,000
at the end of 1812. The relation of the notes to coin
was correspondingly affected. The parity was 125
dalers current equal to 100 dalers species. The rate in
1812 had become 1,760 dalers current for 100 dalers
species—that is, the note was worth little more in coin
than 7 cents on the dollar. This situation resulted in a
declared bankruptcy, and on January 5, 1813, there was
created a new state bank with the name of Rigsbank and
a new basis of valuation established in its notes.
The new bankdaler was the nominal equivalent of
half a daler in coin—that is, five-eighths of a daler current. The notes were, however, to be rated at 6 dalers
current of the old notes for 1 daler of the new, which reduced them to five forty-eighths of their face value, or
about io}4 cents on the dollar, assuming the new notes




135

National

Monetary

Commission

to be worth their face value, and less than this in reality,
as the new notes were not at par. The total issues of the
new Rigsbank were to be 27,000,000 dalers for redemption
of outstanding notes of various kinds, 4,000,000 to provide working capital, and 15,000,000 to provide funds
for the treasury, which ceased to have the power to
issue notes. These 46,000,000 bankdalers in notes
were for circulation in Norway and Denmark, including
Schleswig and Holstein. In the latter, however, the
currency had been brought into a satisfactory condition
by means of the bank at Altona, and it was necessary
to exclude the Duchies from the field of circulation of the
new notes, against which their inhabitants protested. As
the result of the conclusion of the war in 1814, Norway
was separated from Denmark, and only a little over
7,000,000 dalers of notes, already in circulation there, were
taken over by the new Kingdom. Denmark alone was
left with the balance of nearly 39,000,000 dalers in notes,
which proved to be far beyond the needs of its population
and trade, and in 1814, in place of the ratio of 2 to 1, the
proportion of value between the species daler and the
daler in bank notes was 5)^ or 6 to 1.
The new bank had as one of its duties to reduce the
volume of the note circulation. It had no cash reserve,
and only its profits were available for building up such
a fund and for redeeming notes and withdrawing them
from circulation. There was a formal basis of value
for the notes in the shape of a lien imposed on all real
estate, corresponding to 6 per cent of the value of the
property. This took the form of a rent charge of 6%
per cent per annum on the amount of the lien in each




136

The

Swedish

Banking

System

case, and it was the annual rent charge rather than the
nominal capital value of the charge which was of importance to the bank. It amounted in all to about
2,500,000 bankdalers, and was to be applied to the reduction of the volume of outstanding notes. The separation
of Norway cut off 13,000,000 from the nominal 46,000,000
dalers of the total capital value of the rent charge, while
the notes for which Norway became responsible were, as
already stated, only about 7,000,000 dalers. The owners of
property protested against the new burden placed upon
them, and by an ordinance of July 9, 1813, the rural proprietors were granted reductions of taxation amounting
to five-sixths of the amount of the new rent charge.
The result, in effect, was that the urban proprietors paid
the entire charge on them, and that the rural proprietors
paid only one-sixth of the amount originally charged,
the remainder being paid as a subsidy from the treasury. The amount of this state subsidy was 820,000
bankdalers annually till 1830, and from that date till
1876, 328,000 bankdalers (about $176,000). In all, these
subsidies of the treasury amounted to about 27,500,000
bankdalers (say, $14,750,000) provided for the redemption
of the notes, in addition to the annual produce of the rent
charge paid by the proprietors of real estate.
At the time of the establishment of the Rigsbank, a
plan for its transformation into a private bank at a later
date was approved. The intention was realized by the
grant of a charter, to date from August 1, 1818, and to
run for ninety years, substituting for the state-owned
Rigsbank the privately owned National Bank. The proprietors whose property had been subjected to an annual




137

National

Monetary

Commission

rent charge in support of the bank were transformed into
shareholders in the new institution, being credited with
shares to the amount of the lien in favor of the bank
established as related above. Those whose annual contribution had been reduced at the expense of the treasury
were only entitled to shares in proportion to the reduced
amount really borne by them—that is, one-sixth of the
nominal lien. So far as the duchies of Schleswig and
Holstein were concerned, provision was made whereby
the payees of the rent charge might be freed from the
obligation to become shareholders, and but few failed to
take advantage of the opportunity, so that the actual
share capital was barely 8,000,000 bankdalers (about
$4,250,000). As there were no dividends for shareholders till after 1845, the advantage of owning shares
was not appreciated, but later on, after a beginning of
annual distributions was made, the situation was so altered that many took advantage of a provision entitling
them to pay in cash such amounts as might be required
to bring up the shares due to them to round hundreds of
dalers. In this way there was made a gradual addition
of about 5,500,000 dalers (say, $2,950,000) to the share
capital. Finally, in 1878, its amount was adjusted to
the round sum of 27,000,000 kroner (the daler having
ceased to be the unit, and a new unit of half the value
called the krone having taken its place), or $7,236,000.
The lien on real estate in favor of the bank could not
insure the circulation of the notes at their full nominal
value. The reduction of the amount of the circulation
effected by means of the annual revenue assured to the
bank from the rent charges gradually improved the situa-




138

The

Swedish

Banking

System

tion. The notes outstanding in 1818, when the National
Bank took over the responsibility for them, were about
31,000,000 dalers ($16,600,000). In 1820 the bank
effected a loan of 6,000,000 dalers ($3,216,000) in paper,
and the notes thus brought in were destroyed. This
brought the value of t h e note to the point t h a t 130 dalers
in paper were worth the silver represented by 100 dalers
nominally. By October, 1838, a parity between the
real and nominal value of the notes was reached, though
it was not till 1845 t h a t it was deemed safe to resume
redemption. The circulation had been reduced
to
16,500,000 dalers ($8,844,000) before this step could be
taken.
W i t h resumption of cash payments there were established regulations limiting the relation of t h e circulation
to the cash reserve. The issue might not exceed twice
the cash in hand, in which was included not only silver
actually in the possession of the bank, b u t sight drafts on
H a m b u r g to the extent of not more t h a n one-fourth of
the total cash. The p a r t not covered by cash was required to be covered by easily realizable securities to an
a m o u n t exceeding by 50 per cent the notes secured by
them.
In 1847, in addition to these regulations, a m a x i m u m
limit of 20,000,000 dalers ($10,720,000) was fixed for
t h e issues.
The growth of population and t r a d e permitted this
limit to be raised to 24,000,000 dalers in 1854, with the
provision that, of t h e 4,000,000 added, 3,000,000 should
be covered by silver. Thus the cash cover for the maxim u m issue of 24,000,000 dalers became 10,500,000 dalers




139

National

Monetary

Commission

in silver and 2,500,000 dalers in sight drafts on Hamburg, to which bonds, bills of exchange, and the like to an
amount of 16,500,000 were to be added as cover for the
remaining 11,000,000 dalers of the issue.
In 1859 the maximum limit of issue was abandoned in
favor of a maximum fiduciary issue, which was fixed at
the same amount as before, namely, 13,500,000 dalers
($7,236,000), the relaxation of the former rule merely admitting of the addition of notes to any required amount
fully covered by silver to the fiduciary issue.
After the establishment of the gold standard in 1873,
and the adoption of the monetary unit of a krone (of the
same value as in Sweden, equal to one-half the bank daler),
new regulations were drawn up regarding note issue.
They were as follows:
1. The bank may issue notes to any required amount,
provided that it has in its possession cash equal to the
excess of the issue over and above 27,000,000 kroner
and not less than three-eighths of the entire outstanding
circulation.
2. The part of the issue not covered by cash shall be
secured by good and safe assets in the proportion of 150
kroner in value to each 100 kroner of notes so secured.
Such assets may be bills of exchange both inland and foreign, balances repayable on demand by foreign correspondents, stock-exchange securities taken at the price of
the day, notes of borrowers secured by collateral, and
mortgages on real estate, though the last named may not
be held to a total amount exceeding 6,000,000 kroner.
3. As cash may be reckoned (a) legal current coin at
its face value; if the circulation be 48,000,000 kroner or




140

The

Swedish

Banking

System

over, at least 12,000,000 kroner shall be held in such coin,
and if less t h a n 48,000,000, coin equal to one-fourth of
the issue; (6)foreign gold coin or bullion, taken at 2,480
kroner per kilogram of fine gold; (c) to a limited amount,
temporarily fixed at one-third of the whole, silver bars and
foreign silver coin at cost price, such price not to exceed
the proportion to gold of 1 to 15.675.
4. The bank is required to redeem its notes in gold at
their face value on presentation at its head office and to
purchase all gold bars offered at the rate of 2,480 kroner
per kilogram of fine gold, less one-fourth per cent for the
expenses of minting.
The fiduciary issue was increased from 27,000,000 kroner
to 30,000,000 kroner by an ordinance of November 30,
1877, and again by an ordinance of December 27, 1897, to
33,000,000 kroner on condition t h a t the bank should issue
notes of 5 kroner ($1.34), its previous lowest denomination of note having been 10 kroner. The 5-kroner notes
of the neighboring countries had circulated to some
extent in Denmark, though not with quite the same
freedom as its own notes.
F r o m 1886 (ordinance of February 19) the net balances
due to the National Bank by the Bank of Norway and the
Swedish Riksbank, t h a t is, the balances held by these
banks in favor of the Danish bank less the balances held
by the latter to their credit, have been reckoned as part of
the cash in hand by the National Bank. Similar arrangements hold in Norway and Sweden. I t is found convenient in all three countries to effect payments by means of
drafts on accounts held in the central banks in the other
countries rather t h a n by a constant flow of cash to and fro.




141

National

Monetary

Commission

In view of the intimate commercial relations of the
three Scandinavian countries, the arrangement appears
a highly rational one which encourages such a course by
treating the net balances on such accounts as cash in hand.
In 1894 a further step of a similar character was taken
by permitting (ordinance of November 10, 1894) the bank
to reckon as cash both the notes of the Imperial Bank of
Germany and the treasury notes of the German Empire
held by its branch at Flensburg, and the deposit (not bearing interest) at the Imperial Bank of Germany made on account of that branch. The amount of such German notes
and deposits which might be reckoned as cash was limited
to 6,000,000 kroner in 1894, and extended (by ordinance
of June 25) to 10,000,000 kroner in 1897. The permission was accompanied by the expression of the expectation
that the bank would not use this means of extending its
issues regularly, but hold it as a reserve in case of special
necessity.
These extensions of the interpretation of the term
"cash in hand" permit of a temporary expansion of note
issues without the preliminary actual shipment of gold
to Copenhagen, and should the expansion be followed
quickly by contraction, the movement of gold may be
entirely avoided.
A further provision for elasticity is found in the regulation that the National Bank is only required to present a
monthly account to the minister of justice (acting as bank
commissioner) showing that the conditions of the law are
duly fulfilled. Should it appear from such a monthly
account that the relation of cash to notes has not been
maintained as prescribed in the law, the bank is required




142

The

Swedish

Banking

System

to restore the legal position before the next month's
account is due. It has thus power to depart from the
strict letter of the regulations for a month before rendering itself liable to penalties. This power was not utilized
until the crisis of October, 1907. In the account for the
end of that month the uncovered issue, which had been
raised to 38,000,000 kroner in 1901, was shown to amount
to 38,075,000 kroner, the cash (inclusive of the foreign
balances specified above) amounting to 85,614,000 kroner,
or nearly 70 per cent of the outstanding notes. It is clear
that the overstepping of the strict legal limit had not
resulted in a dangerously small ratio of cash to notes at
that date.
The expiration of the charter at the end of July, 1908,
was the occasion for a revision both of the constitution
and of the note-issuing regulations of the bank. The law
of July 12, 1907, renewed the charter for twenty years,
and modified the limits of note issue by restoring rules
similar to the earliest above mentioned of 1845. At least
half the circulation is required to be covered by cash, the
remainder with good and sound assets of specified classes
in the proportion of 125 kroner of such assets to 100
kroner of notes so secured. The other regulations remained unchanged, except that an elastic limit of fiduciary issue was provided by the regulation that, under
exceptional circumstances, an order in council might be
granted permitting the limit to be exceeded on payment
to the treasury of 5 per cent per annum on the excess.
The new rules were applied by anticipation in the severe
pressure of November, 1907, an order in council of November 22 granting permission to bring them into force at




143

National

Monetary

Commission

once. The November account showed a fiduciary issue
of 40,780,000 kroner and a cash holding of 81,571,000
kroner.
The National Bank has six branches, including that in
Flensburg, to which reference has already been made.
In the last ten years its dividends have ranged from 7 per
cent (in five of the years) to 7 ^ per cent (in two years)
and 8 per cent (in each of the three years ending 1907-8).
Of the profits a sum of 750,000 kroner ($201,000) is, by
the new law, required to be paid to the state treasury,
then up to 6 per cent to the shareholders, and of the balance one-fourth is claimed by the treasury. The profits
for 1906-7 amounted to 2,646,000 kroner ($709,000); for
1907-8 to 3,955,000 kroner ($1,060,000); and for 1908-9
to 2,761,000 kroner ($740,000). For 1909, therefore, the
share of the treasury was about $227,000. The reserve
fund is required to be 30 per cent of the share capital, and
to this figure it was raised in September, 1908.
The National Bank is, as has been stated above, a
joint stock company in private ownership. Its management is intrusted to 5 managing directors, of whom 2 are
appointed by the Government, 3 elected by the board
of directors, which consists of 15 representatives of the
shareholders, 3 of whom complete their term of office
in each year. Previous to the renewal of the charter in
1908 the managing directors had for a quarter of a century been 4 in number only, and 1 of these only was
appointed by the Crown. The board consisted then, as
now, of 15 shareholders, but vacancies were filled by
cooptation. The new law requires that the board should




144

The

Swedish

Banking

System

be elected by the annual meeting of shareholders, to which
meeting a report on the year's work must be presented.
The previous constitution was apparently a very
oligarchical one, but the requirement that no member
of the board should serve for a longer period than five
years consecutively, after which he should be ineligible
for reelection for two years, may have had some effect
in keeping the board in touch with a somewhat larger
number of shareholders than would otherwise have been
the case. Apart from the appointment of two managing
directors, forming a minority of the managing committee,
and a general supervision sufficient to insure the observance of the provisions of the charter and the law, which
is intrusted to the department of justice, the Executive
Government do not control the National Bank. Under
the revised law a more effective control by the shareholders may be expected than was possible under the
previous system.
At the end of 1908, the resources of the bank, apart
from a fund administered by it for the Government in
making advances to communal authorities for light railways, amounted to $45,900,000, of which $9,406,800 was
capital and reserve, $33,468,000 notes in circulation
(about $12.50 per head of the population), $1,495,000
only in current account balances and $1,391,000 in deposits at notice. The cash in hand amounted to $ 18,663,000
or about 40 per cent of the total resources. The bills of
exchange amounted to $11,586,000, of which about
$500,000 represented foreign bills. Collateral loans
amounted to $6,235,000, rather under a third being on
real estate security, two-thirds on stock exchange col22150—10




10

145

National

Monetary

Commission

lateral. The holding of bonds was only $893,000. The
item "sundry debtors" was relatively large, amounting
to rather over $6,500,000. There was due from foreign
correspondents about $2,500,000.
Though the issue of bank notes is a monopoly of the
National Bank, there is no other restriction imposed by
the law on banking in Denmark. Yet it was not till
1846 that any bank, other than the National Bank and
its two branches then existing, was started, and not till
1845 that a banking company was established in Copenhagen. Since 1870, however, a rapid development has
taken place, and this has proceeded at a remarkable
pace since 1900.
The last issue of the Statistical Year Book of Denmark
gives particulars of 133 banks, in addition to the Rigsbank. These 133 banks had an aggregate share capital
of somewhat over $53,000,000, and reserve funds amounting to about $11,500,000. Their total deposits amounted
to $183,500,000, their loans to $129,700,000, and their
discounted inland bills of exchange to $47,000,000.
In February, 1908, the excessive speculative activity
of recent years, and especially the excessive support
given by certain banks to building speculations, brought
about a severe banking crisis in Denmark. To alleviate
in some degree the resulting distress, the Government
came to the aid of the banks, establishing an advisory
committee and providing a substantial fund to guarantee
the creditors of the insolvent institutions. The difficulties of the situation proved greater than had been
anticipated, but they do not throw any important light
on the operations of particular kinds of banking legisla-




146

The

Swedish

tion, rather,

Banking

perhaps, illustrating

System
the possibilities of

absence of restraint from the side of the law, and the
difficulties which prevent the shareholders of large companies from controlling effectively those in whose hands
the management of their property has been trusted.

It

is not necessary, for t h e purpose of t h e present report,
to a t t e m p t any discussion of the causes and results of
these recent b a n k disasters in Denmark.
(b)

NORWAY.

As already related, t h e Danish Rigsbank, established in
1813, extended its activities to Norway as well as to Denmark. In t h e following year the new Government of
Norway resolved to replace the branch of t h e Danish bank
by an independent Norwegian Rigsbank, whose notes
should be used to redeem those p u t in circulation in Norway by the Danish bank. Excessive issues by this new
bank quickly brought depreciation, and by J a n u a r y of
1816 the notes were worth b u t 19 per cent of their face
value. The situation was dealt with by a law of J u n e 14,
1816, which established a new bank under the name of the
Bank of Norway, with its headquarters in Trondhjem.
The funds for the capital of the new bank were provided
by a property tax. The capital was 2,000,000 species
dalers ($2,144,000), and a further t a x was to be levied of
2,000,000 b a n k dalers, to provide for the retirement of
p a r t of the excessive issues. In 1818 the remainder of
the notes were redeemed by means of a loan, b u t at
three-sixteenths of their face value. The new Bank of
Norway received the grant of a monopoly of note issues,




147

National

.Monetary

Commission

with the obligation to arrange for the current redemption of notes before January i, 1819. It was, however,
relieved of this obligation by an enactment passed in
August, 1818.
The law permitted the issue of notes to double the
amount of the silver held by the bank, but the use of this
right proved to yield a much larger circulation than was
needed or could be maintained without depreciation. It
was not till 1842 that the notes were actually redeemable.
At that time a somewhat involved system of regulation of
the amount of the issues according to the cash held was
established. Of the total cash as much as one-third was
permitted to be held abroad.
An increase of the note issue by 2,500,000 kroner
($670,000) was made in 1863 on terms which included
the issue to the State of a share certificate for this
amount, thus bringing the capital to 12,500,000 kroner
($3,350,000).
The law of 1892, which determined the present organization of the bank, fixed the fiduciary issue at 24,000,000
kroner ($6,432,000). Of the gold held against the rest,
one-third may be held abroad, that is to say, foreign
credits payable on demand in gold may be treated for the
purpose of note backing as gold to the amount determined
by this fraction. In addition, a sum not exceeding
3,000,000 kroner may be held in those countries with
which Norway has entered into currency conventions, so
that of the balances held to the credit of the Bank of
Norway in the Swedish Riksbank and the Danish National
Bank, the sum of 3,000,000 kroner may be accounted as
equivalent to cash in hand.




148

The

Swedish

Banking

System

The Bank of Norway renders its accounts weekly„
They were formerly rendered twice in the month, and the
rule was established that if the fiduciary issue should
exceed that legally permitted, the bank should be called
on to reestablish the legal position before the date of the
next following account, and should pay at the rate of
6 per cent per annum on the excess to the treasury of the
State. At certain times of the year the reserve of issuing
rights has been rather narrow in recent years, and was but
little over 2 per cent at the end of June, 1908, the total
outstanding issue at that date being 81,174,000 kroner
($21,754,000), of which 47,951,000 kroner ($12,851,000)
were covered by cash. The fiduciary issue having been
raised to 35,000,000 kroner ($9,380,000) in 1900 the
reserve margin was only 1,777,000 kroner ($477,000).
The division of the profits takes place as follows:
To shareholders up to 6 per cent; one-tenth of the balance to be added to the reserve so long as it is less than
5,000,000 kroner. The remainder is divided equally
between the State and the shareholders until the latter
have received 10 per cent, beyond which the State takes
three-quarters of any excess, the shareholders one-quarter.
The head office was transferred to Christiania from the
beginning of 1897, the office at Trondhjem becoming a
branch. At present there are 12 branches in all.
The control of the bank remains entirely in the hands
of the Government. The president of the managing
committee of five is appointed by the Crown, the other
members by the Parliament, which also elects the 15 members of the board of directors. Thus the private shareholders have no influence as such on the affairs of the




149

National

Monetary

Commission

bank. The managers of the branches are also appointed
by the Parliament, their term of office being six years. The
accounts of the bank are required to be submitted to a
special committee of the Parliament annually, parliamentary supervision replacing that of a shareholders'
meeting.
As in Denmark, so also in Norway, banking legislation
has been limited to the regulation of the bank possessing
the monopoly of note issues. Other branches of banking
are free to all. Nearly a hundred banks are in existence,
but few of which have a capital of substantial amount.
The following tables show the volume of the note circulation in Sweden, Norway, and Denmark, and the average
bank rate in those countries in each of the years 1904 to
1908:




150

Note circulation 1904-19 08.
[In thousand kroner. The krone is equivalent to 26.8 cents.]
Country.

End of—

Sweden:
Kroner.
Maximum _ September _ I7L359
Minimum __ January
145,566
Average _

End of—

1904.

68,104
55,438

End of—

1906.

End of—

1907.

End of—

1908.

Kroner.
December. _ 183,713
January
146,536

Kroner.
December. . 2 0 1 , 9 1 1
January
155,355

Kroner.
September.. 207,552
January
173,397

Kroner.
December . _ 2 0 1 , 4 9 0
January
173,137

163,150

177,161

187,347

183,671

156,972

Norway:
Maximum _ June
Minimum. _ January

1905.

June_
January

77.143

55,679

6i,497

December. _ 1 1 8 , 9 8 0
98,028
January

104,000

109,816

76,532 June __
59,864 , January

__

8i.i75
62,923

68,770

67,012

_ 111.858
99.237

June. _
January

129,638
112,394

81,127

66,4*4

73,604

124,709
107,406

June
January

Co

73,355

faa

Denmark:
Maximum _ J u n e .
Minimum. _ January

June.
January

116,438

February

120,301

June
January

129,073
113.968
121,438

Average bank rate of discount.
Country.

1904.

Sweden:
Rediscounting
Norway
Denmark




.

1905.

1906.

1907.

1908.

Per cent.
4.607
4.381

Per cent.

Per cent.

Per cent.
6. 099
6. 099

Per cent.
5.882
5615
5. 344
6. 136

4.901
4- 500

4- 725
4-353
4.860
4- 293

5- 201
4-892
5- 176
5. 222

5.219
6. 175

Co




APPENDIX

I.

OUTSTANDING NOTE ISSUES OF THE BANKS IN SWEDEN,
1899-1909.
[Expressed in million kronor.]

End of-

Riksbank.

January _ _.
February..
March
April
May
June
July
August
September.
October
November.
December _

60. 4

Maximum.
Minimum-.
Average
Variation..

75- 2
60. 4
66. 1
14.8

End of—

January.
February
March
April
May
June




60. 4
65.3
61. 9
63.3
72. o
64. r
64.9
71.s
68.0
66. 7
75- 2

Riksbank.

59-6
56.9
65.5
61. 1
63.7
69.8

Other
banks.

Total.

74. 2
75-9
80.8
76-9
72. o
76.6
72.5
73-4
83 3
78.6
77 1
80.0

134.6

83-3

Riksbank.

Other
banks.
72.8

146. 1

57-9
59-6
64. o

81.2

138.8

60.6

79-5

135-3

62

75-7

148.6

80. 1

136.6

66
59

138.3

60

76.9

154-8

68

86. 1

146. 6

66

83.2

143.8
155. 2

64
72

82.4

155- 2
134.6

72. o

86. 1

72. o

57-9

72.8

76.8
u-3

142.9
20. 6

63.5

79 4

14. 1

13-3

Other
banks.

74- 7
79.0
83.6
79-3
75-9
79-4

*53

136.3

Total.

Riksbank.

76.9

75-4

82. 2

Other
banks.

134

85 8

49-o

i35

85.3

50.6

149

95-3

52.5

140

90. o

48.5

139

90.5

45-7

149

101.3

47.o

National

Monetary

Outstanding

note issues,

C ommis
i8gg-igog—Continued.
1902.

1901.

End of—

July
AugustSeptember
October
November
December
Maximum
Minimum
Average
Variation

Riksbank.
72. 0

75-o
88.0
90.8
89.4
_
-

101. 0
101. 0

56.9
74.4
44.1

End of-

Riksbank.

January__.
February..
March
April
May
June
July
August
September.
October
November.
December .
Maximum.
MinimumAverage. _
Variation..

Other
banks.
a

Total.

72-3
68.6
71-3
61. 1
57-o
55-6

144-3
143-6
159-3
151.9
146.4
156.6

83.6
55-6
7i-5
28.0

Other
banks.
20. 9
20.5
20. o
18. 1
16. 4
15-2
12.8
9- 2
7-5
6.2
5-3
4.6

165.8

20. 9

122. 6
142. 2

4-6

43- 2

s to n

13- 1
16.3

Riksbank.

Other
banks.

98.8

Total.

121. 4

39- 7
36.3
35- 1

121. 0

32.0

121. 2

28.6

137-4

25. 2

138.5
140.3
156.5
I53-0
149.8
162. 6

156.6
134-3
145-9

137-4
85.3

22.3

52. 1

52.5
25. 2
40. 9
27-3

162. 6
134.8
145-2
27.8

Total

104. 0

104.3

Other
banks.
4.1

3-6
3-4
3- 2
3.0
2.9
2.8
2. 7
2.6
2.6
2.5
2.4
4. 1
2.4
3.0
i-7

a During the two years following the middle of 1901 there were concluded at intervals
operative arrangements between the Bank of Sweden and other note-issuing banks, in
virtue of which the latter ceased to issue their own notes. The effect of the first of
these is seen in the July return of 1901, and the others, as they came into force, contributed to the rapid reduction of outstanding issues of enskilda bank notes. From
January 1, 1904. the Bank of Sweden alone has had the right of issue.




154

The

Swedish

Banking

Outstanding note issues,

System

1899-1909—Continued.
1906.

End of—

Riksbank.

January. _.
February..
March
April
May
June
July
August
September
October
November.
December _

146.5
149.7
165.4
155-2
iS3-4
171. 1
154.6
157-7
183.2

Maximum _
Minimum.
Average. _.
Variation.

Other
banks.

Total.

Other
banks.

Riksbank.

2. 2
2. 1
2. 1
2. 1
2. o
2. o
i-9
1-9
1-9
i-7
i-7
1.7

148.7
151.8
167.5
157-3
155-4
173- 1
156.5
159.6
185. 1
173.4
167. 1
185.4

183.7
146.5
163. 1

2. 2

185.4

1. 7
i-9

148.7
165.0

201. 9
155-4
177. 2

37- 2

0.5

36.7

1.6
1.6
1.6

155.
160.
178.
167.
168.
186.
166.
173-

46.5

171.7
165.4
183.7

(«)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)

180.
201.

1.6
1.6

o. 4
o. o

Total.

i57
161
180
167
168
186
166
i73
198

201
157
177
44

Riksbank.
End of—
1908.

January._
February _
March
April
May.
June
July
August
September
October
November.
December _

173-4
176.5
196.8
183. 1
178.9
194.4
178. 2
183.9
207. 6
195.6
189.6
190. 1

173- 1
174. 1
189.8
174-9
176. 1
188.8
174.4
178.9
196.9
191. o
184.5
201.5

168.7
176.5
192.8
179.7
181. 1
193.8
178.8
172.7
196. o
190. 6
184.7
201. 9

Maximum.
Minimum.
Average _ _
Variation.

207. 6

201. 5
173- 1

2or. 9

173-4
187.3
34- 2

183.7
28.4




a Notes no longer current.

155

168.7

APPENDIX

II.

A. LAW FOR THE BANK OF SWEDEN (RIKSBANK).
May 12, 1897.
CHAPTER

I.—Of the bank's capital.

§1. The Swedish Riksbank, which is placed under the
guaranty of the Parliament, shall conduct the business
of banking in accordance with this law.
§2. The Riksbank's capital, exclusive of its real estate,
office equipment, and its collection of coins and medals, 0
shall be 50,000,000 kronor.
CHAPTER

II.—Of note-issuing rights.

§3. The Riksbank, in accordance with a special law
regarding its rights of note issue and the legal tribunal to
which it is subject, has the sole right of issuing bank notes.
These notes, in accordance with §72 of the Constitution,
are legal tender throughout the Kingdom and shall be
redeemed by the Riksbank, in accordance with the wording
upon them, whenever redemption is demanded.
The redemption of the notes of the Riksbank shall be
effected at the head office of the bank.
§4. The notes which are issued by the Riksbank shall
bear the promise of the Riksbank to redeem them on
demand in gold coin, in accordance with the terms of the
a By the law of May 14, 1902, there were inserted at this point the words
" a n d the fund for installment loans referred to in §13, the administration
of which is assigned to the Riksbank."




156

The

Swedish

Banking

System

law of May 30, 1873, respecting the coinage of the
Kingdom.
§5. The notes of the Riksbank shall be of the following
denominations, and none other, namely, 5, 10, 50, 100,
and 1,000 kronor.
§6. The Riksbank has the right to issue notes to the
amount which is covered by the following items of its
cash assets: (a) The metallic reserve, as defined in §8; (b)
gold coin or bullion on deposit abroad or in transit therefrom and covered by a marine insurance policy; (c) the
amount of its funds in current account with foreign
banking establishments or mercantile houses.a
§7. In addition to the amount determined in accordance
with the terms of §6, the Riksbank is entitled to a note
issue6 not exceeding 100,000,000 kronor, on condition that
the notes thus issued are covered by assets of the following
classes: (a) Readily realizable foreign-government securities ; (b) the bonds of the State (Sweden), and of the
General Mortgage Bank, and other Swedish bonds which
are quoted on foreign bourses; (c) bills of exchange,
inland or foreign.
§8. As the metallic reserve of the Riksbank there shall be
included all Swedish and foreign gold coin and gold bullion
a By the law of May 3, 1901, the last five words of (c) were altered to " banks
or banking firms," and there was added to the clause the words "after
deduction of the amount owing on accounts of that nature by the Riksbank."
& In place of the words " n o t exceeding 100,000,000 kronor," etc., there
were substituted by the law of May 3, 1901, the words "of 100,000,000
kronor, and in the event of the metallic reserve being in excess of 40,000,000
kronor, of a further amount not exceeding the sum by which the metallic
reserve exceeds 40,000,000 kronor The Riksbank's outstanding notes
shall, in so far as they exceed the cash assets specified in §6, be covered
by assets of the following classes: * * *




i57

National

Monetary

Commission

which is the property of the bank and is located within
the kingdom.
The metallic reserve shall be maintained at an amount
not less than 25,000,000 kronor. a The Riksbank shall, in
the event of the notes issued in accordance with the terms
of §7 being in excess of 60,000,000 kronor, hold an additional amount of metallic reserve amounting to at least
30 per cent of the amount by which such notes are in
excess of 60,000,000 kronor.
CHAPTER

III.—Of the business of the bank.

§9. The Riksbank shall conduct its business at its head
office in Stockholm and at branches within the Kingdom;
and at least one such branch shall be situated in each of
the counties except Stockholm county. b
§10. The Riksbank may buy and sell gold and silver.
Gold bullion, delivered to the mint for account of the Riksbank, shall be paid for by the bank at its value in Swedish
money, or 2,480 kronor per kilogram of fine gold, with a
deduction of a quarter of 1 per cent for the expenses of
minting, and, in addition, if alloying or refining be required, the charges fixed for these services. The managers
of the Riksbank may, however, in case they judge it advisable, relieve the seller of the expenses of minting or any
part thereof.
§11. The Riksbank may buy and sell bills of exchange,
drawn on foreign firms or on persons resident abroad, pay«By the law of May 3, 1901, there was substituted for 25,000,000 to the
end of the section, the words "40,000,000 kronor."
& The word rendered here " c o u n t y " is, in the original, " I a n , " and describes the districts into which the Kingdom is divided for local government purposes There are, in all, 24 such districts




158

The

Swedish

Banking

System

able within six months either at a place abroad or in
Sweden, and may also acquire other foreign obligations
payable within the above specified time, and again dispose
of such holdings.
§12. The Riksbank may (a) buy and sell Swedish bonds,
and such foreign government securities as are quoted on
foreign stock exchanges and are readily realizable; (b)
otherwise acquire both the bonds of the Swedish Government and readily realizable foreign government securities ; (c) act as agent in the purchase and sale of bonds of
the Swedish Government and of the General Mortgage
Bank.
§13. The Riksbank may make advances in any of the
following ways:
(a) By discounting accepted bills of exchange payable
in Sweden within six months.
(b) By advances against a contract for repayment
either at a fixed date not exceeding six months from the
date of the advance, or on not exceeding three months'
notice, and secured by bonds, shares, or other documentary
security as collateral. Communal authorities and other
bodies of similar public status may, however, be granted
advances on the above-named conditions of repayment,
without collateral security in addition to their own notes.
(c) By advances against a contract for repayment at a
fixed date not exceeding six months from the date of the
advance, and secured by a lien on merchandise stored in a
public warehouse or in charge of third parties who bind
themselves to hold the goods or their value at the disposal
of the bank and are judged trustworthy in respect of such
an undertaking.




159

National

Monetary

Commission

(d) By the grant of cash credits and credit on current
account for terms not exceeding twelve months secured
by collateral consisting of bonds, shares, or mortgages on
real estate or of personal guaranties; in this department
of the Riksbank's business, however, a sum not exceeding
in all 15,000,000 kronor may be employed, exclusive of the
credit specified in § 14.
The Riksbank may also grant loans on contracts requiring repayment at certain fixed intervals (installment
loans) and secured by such collateral as is specified in (d).
These loans may at no time exceed, in the aggregate,
25 per cent of the capital of the Riksbank. a
§ 14. The national debt office shall be entitled to an open
credit at the Riksbank to an amount not exceeding
1,500,000 kronor. The national debt office shall not be
required to deposit security for advances under this head
or to pay any commission.
§ 15. Loans may be made to members of the managing
committee of the Riksbank or of any of its branches
only on the security of merchandise stored in a public
warehouse or of bonds of the Swedish Government, of
the General Mortgage Bank, or of mortgage associations,
and open credits may be granted them only on the security
of the bonds specified.
Loans, open credits, or overdrafts may not be granted
on the guaranty of a member of the managing committee
a By the law of May 14,1902, the final paragraph of § 13 was altered to
read as follows:
" F r o m a separate fund under the administration of the Riksbank (the
installment loan fund), with a capital of 12,500,000 kronor, the bank may
grant loans on contracts requiring repayment a t certain fixed intervals,
and secured by such collateral as is specified in (d)."




160

The

Swedish

Banking

System

of the bank or of any of its branches; and bills of exchange
bearing the name of a member of the managing committee of the bank, or of any of its branches, as drawer,
acceptor, or last indorser may not be discounted by the
Riksbank.
§ 16. The Riksbank shall, both at its head office and
at its branches, receive from everyone who demands the
accommodation:
(a) Deposits of money repayable without interest on
demand or at a time fixed when the deposit is made. No
charge shall be made for receiving such deposits, and the
receipt for the amount deposited shall be made out in
favor of a person named therein.
(b) Deposits of money, also without charge and free of
interest, to be credited to a ledger account in favor of the
depositor (giro-account), the balance of the account to be
held at the disposal of the depositor on demand.
In connection with these latter accounts the Riksbank
shall make such arrangements as may be necessary for
the efficient conduct of the clearing house.
The managers shall be empowered further to open current accounts, and to pay interest on the balances of such
accounts, for firms which do discounting business with
the Riksbank, provided they do not themselves conduct
banking business.
§ 17. The Riksbank is required to receive money on
behalf of the Government and to effect payments from
credit balances so held, in accordance with the directions
on the subject contained in the regulations of the Riksbank. No interest shall be payable on sums thus held by
the bank.
22150—10




11

161

National

Monetary

Commission

§ 18. Everyone is entitled to make payments of money
at the head or any branch office of the Riksbank, and to
receive in exchange, free of charge, a draft for the amount
on the Riksbank in Stockholm, payable on presentation.
§ 19. The Riksbank shall receive for safe-keeping deposits of gold or silver, coin or bullion, and of bonds,
shares, or other securities. The regulations of the Riksbank shall specify both how far such business shall be
conducted at other offices than the head office (at which
facilities for receiving valuables shall always be provided),
and the detailed rules which may be found requisite for
the purpose.
Sealed deposits shall also be accepted for safe-keeping
at the Riksbank, in accordance with the detailed regulations on the subject.
§ 20. The Riksbank shall, when it is deemed requisite
by the managers, arrange for foreign loans or credits not
exceeding in amount the limit specified in the regulations
of the Riksbank.
Further, the Riksbank may open accounts, with or without interest, with such banking and mercantile houses
abroad as are of good repute and sound credit.
§21. The Riksbank may conduct a printing business at
its printing works and the business of paper making at
its paper mills.
§ 22. The Riksbank shall not take part in or conduct
any class of business other than those which are expressly
permitted to it by the terms of this law; nor shall the
Riksbank own other real estate than that which is de-




162

The

Swedish

Banking

System

voted to the accommodation of its offices and that which
is found requisite for the paper mills and printing works.
In case the rights of the Riksbank shall be affected by
the sale by auction of real estate or other property on
which it has a lien, the bank shall not be prevented from
buying in such property; but property thus acquired
shall be again disposed of when a suitable opportunity
occurs and, in any case, when it can be effected without
loss.
CHAPTER

IV.—Of accounts and their publication and of
the reserve fund.

§ 23. rJ the end of every calendar year the books of
the Riksbank shall be completely made up, and a summary, giving a complete presentation of the position of
the bank, shall be prepared on the basis thus determined
and shall be printed and distributed with the Official
Gazette as speedily as possible.
§ 24. Immediately after the close of each month a
summary shall be prepared showing under their several
heads the assets and liabilities of the Riksbank. This
summary shall be promptly printed and distributed with
the Official Gazette.
For each week there shall be drawn up and inserted
in the Official Gazette a statement of the metallic reserve
of the Riksbank, and of the other cash items specified in
§ 6, together with the amount of the outstanding notes
and of the amount by which the legal rights of issue
exceed the actual issue.




163

National

Monetary

Commission

§ 25. The Parliament has the right to determine the
disposal of the yearly profits of the Riksbank, with due
regard to the provisions of § 26 below.a
§ 26. Of the realized yearly profits of the Riksbank at
least 10 per cent shall be assigned to the reserve fund
of the bank. When the reserve fund has reached at
least 25 per cent of the bank's capital, further payments
to the reserve fund may cease. Should the reserve fund
at any time be reduGed below this amount, allocations
to it from the profits shall be renewed.
The Riksbank shall hold an amount corresponding to
not less than the amount of the reserve fund in easily
realizable foreign government securities. It shall be the
duty of the managers in case it be necessary at any time
to dispose of such securities for the purpose of strengthening the cash items specified in § 6, or of providing for
losses incurred in the course of the bank's business, so
that the holding of these securities falls below the amount
specified above, to restore the amount to a figure corresponding to the reserve fund as soon as it may be
possible to do so.
CHAPTER

V.—Of the management of the bank.

§ 27. The Riksbank shall, in accordance with § 72 of
the Constitution and § 71 of the regulations of Parliament,
be managed by seven directors.
a To this there was added by the law of 14 May, 1902, the following:
" W i t h the yearly profits of the Riksbank shall be reckoned the profit
arising from the operations of the installment loan fund, provided that in
case this fund shall be reduced by losses below the amount of 12,500,000
kronor, the yearly profits of the fund shall thereafter be devoted in the
first place to bringing the fund up to that amount."




164

The

Swedish

Banking

System

The president, who may not hold any other office in
the Riksbank, shall be paid out of the funds of the bank
an annual salary equal to t h a t of each of the other directors as determined b y t h e scale of salaries fixed by Parliament.
§ 28. I n accordance with § 72 of t h e Constitution and
§ 73 of t h e regulations of Parliament, four substitutes
shall be appointed for the directors.
§ 29. Members of the council of t h e state or managers
of the national debt office may not be directors of the
Riksbank.
§ 30. No person shall be appointed a director of the
Riksbank unless he be a Swedish citizen; nor if he be
subject to legal guardianship; nor if his property has been
in the hands of receivers and he can not show t h a t it has
passed from their control; nor if he has been condemned
to loss of civil rights or be charged with offenses which
may result in such loss; nor if he has been excluded
from practice in the courts of law or from holding service
under t h e Crown.
A director m a y not be a member of t h e managing board
of any other bank except a savings b a n k or t h e Postal
Savings Bank.
§ 31. In case the King, either on representation from
the directors of t h e Riksbank or for other reason, shall
appoint a representative to discuss any special business
with t h e directors, t h e directors shall hold a consultation
with t h e King's representative, b u t they are forbidden to
arrive at a determination of t h e m a t t e r under discussion
until t h e said representative has withdrawn.




165

National

Monetary

Commission

§ 32. After the close of each year the directors shall
present to the parliamentary committee on banking a report on the position, the business, and the management
of the Riksbank. This report shall be printed and be
made accessible to the public.
§ 33. The boards of management of the branch offices
shall be appointed by the directors in accordance with the
more detailed provisions of the regulations for the Riksbank.
§ 34. The directors may not receive instructions regarding the business of the Riksbank from any other
authority than the Parliament and from the parliamentary committee on banking in respect of those matters in which the committee is entitled to give instructions on behalf of Parliament. The directors are in these
matters responsible to the Parliament or its banking committee and auditors alone.
Questions touching the freedom from responsibility of
directors shall be determined by the Parliament.
The responsibility of directors and of managers of
branch offices shall be determined by special statutes.
§ 35. A director of the Riksbank or a member of the
managing board of a branch office may not act as agent
in connection with the discount of bills of exchange or the
provision of loans or open credits at the head or branch
offices of the Riksbank.
Should this regulation be broken by a director, information shall be given to the law officers of Parliament, who
shall take proceedings in accordance with the provisions
of the statutes regulating the responsibility of directors.




166

The

Swedish

Banking

System

Should the regulation be broken by a member of the
managing board of a branch office, procedings shall be
taken in accordance with the regulations of the Riksbank
and the special statute regulating the responsibility of
such managers.
§ 36. The following matters relating to the business of
the Riksbank shall be regarded as confidential: Particulars of discounts, loans, credits, and other matters involving the relations of clients to the bank, the consideration
and determination by the directors of the matters specified in § 11 and in § 12, subsections (a) and (6) of this law,
the means of maintaining the metallic reserve, and the
manufacture of bank notes.
The consideration and determination of such questions
shall be dealt with in special records, the contents of
which shall be kept secret so long as the banking committee of Parliament, the auditors, or the directors of
the Riksbank shall consider that secrecy is necessary
in the interests of the bank.
§ 37. The directors and auditors and the members of
managing boards of branches, all officers of the Riksbank,
and those who assist the auditors in their examination
of the conduct and management of the bank shall maintain complete secrecy as to everything regarding the
relations of private persons to the Riksbank and everything touching the management which is of such a nature
as to require secrecy in accordance with this law and
the regulations of the Riksbank.
§ 38, Further instructions regarding the management
of the Riksbank which may be necessary, in addition




167

National

Monetary

Commission

to the provisions of this law, shall be set forth by Parliament in special regulations.
These regulations shall be drafted in such agreement
with the provisions of this law that they may contain
nothing which is in conflict with the law.
CHAPTER

VI.—Transitional provisions.

§ 39. This law shall be in force from January 1, 1899,
except as to those parts which are specified below.
§ 40. The provisions of Chapter V as to the conduct
and management of the Riksbank shall become operative immediately.
§ 41. In accordance with the law regarding the rights
of note-issue of the Riksbank and the tribunal under
whose jurisdiction it is placed, private banks retain the
right of issuing their own notes until the end of the year
1903, and the Riksbank is required to grant to these
banks the facilities specified below.
From the beginning of the year 1899 and till the end
of the year 1903 any private bank which, after at least
three months' notice to the secretary of the department
of finance, abandons its right to issue its own bank notes
and maintains all those branch offices which were in
operation on January 1, 1896, shall be entitled to the
following facilities:
The grant of an open credit, up to the half of the
amount of its notes outstanding on the last-named date,
against security approved by the directors and without
other charge than interest on the amount drawn, which




168

The

Swedish

Banking'

System

shall be charged a t 2 per cent below the current rate for
the discount of three-months' bills of exchange, provided
the rate charged is not less t h a n 2 per cent per annum.
The rediscount at the Riksbank, up to the half of the
amount named, of bills of exchange approved by the
directors, at a rate of discount not exceeding two-thirds
of t h a t otherwise in force at t h e Riksbank.
On the receipt of the above-named notice b y the secretary of the department of finance, the directors of the
Riksbank shall be immediately informed thereof.
From the beginning of the year 1904 to the end of the
year 1908 any private bank which has maintained all the
branch offices specified above shall be entitled to rediscount facilities on the terms above named to the amount
of 40 per cent of the aggregate of its notes outstanding
on J a n u a r y 1, 1896.
In case a private bank which, in accordance with the
above provisions, receives or would otherwise be entitled
to receive credit or rediscount privileges, has closed or
shall thereafter close any of its branch offices which
were in operation on J a n u a r y 1, 1896, the King may
determine, with due regard to the extent and importance
for the business of the community of the offices thus
closed, whether and how far their closing shall involve
the reduction of the amount of such credits or rediscounts,
or whether the bank shall be entirely deprived of these
privileges.
The right to credit and to rediscounting facilities,
which is set forth above, shall be retained even should




169

National

Monetary

Commission

the private bank be converted into a limited liability
banking company."
a
By the law of May 3, 1901, the following important addition was made
to the provisions of § 4 1 :
" In place of the facilities herein secured to private banks, the directors
of the Riksbank shall be entitled to grant to any private bank which, under
arrangements made with the directors as to the time and conditions for the
cessation of its issues of notes, shall resign its rights of note issue before
the end of the year 1903, and has not closed and does not, throughout the
period of the agreement, close any of the branch offices which were in
operation on January 1, 1896, without the assent of the King or the directors, the following facilities, viz:
" A loan not exceeding 65 per cent of the amount of the private bank's
notes outstanding on January 1, 1901, and an open credit not exceeding 10
per cent of the same amount, against security approved by the directors,
and the private bank shall be entitled to be relieved of other charges
on the open credit than interest on the amount drawn, but shall be required to pay, both on the loan and on the credit, interest at 2 per cent
less than the current rate of discount charged by the Riksbank on three
months' bills of exchange, provided that the rate thus fixed be not less
than 2 per cent per annum. The amount of the loan and of the credit
shall, before the end of the month of December in each year, beginning
with the year 1903, be reduced by one-eighth part of their original amounts.
" T h e directors shall be entitled further to grant to a private bank, m
accordance with such an arrangement as is specified above, the right of
rediscounting at the Riksbank bills of exchange, approved by the directors,
within the limit of 25 per cent of the private bank's bank notes outstanding
on January 1, 1901, at a rate of discount not exceeding two-thirds of the
rate otherwise current at the Riksbank. This right of rediscount shall
also, beginning with the close of the year 1903, be reduced each year by
one-eighth part of its original amount.
" T h e facilities thus granted to a private bank shall be retained, in case
the private bank be converted into a limited liability banking company, by
the said company.
" T h e directors shall, further, be entitled in the case of any limited liability banking company into which a private note-issuing bank may have
been converted before January 1, 1901, to make arrangements in reference
to the facilities specified above, but based on the said bank's outstanding
circulation on January 1, 1896.
" When a private bank has effected an arrangement with the directors
of the Riksbank whereby it undertakes to resign its note-issuing rights
on a fixed date, the directors shall notify the secretary of the department
of finance thereof without delay."




170

The

Swedish

Banking

System

§ 42. In the interval from the beginning of the year
1899 to the end of the year 1903 the assets which, in accordance with § 7, are required to be held against the excess
of the Riksbank's circulation over and above the amount
determined in accordance with § 6, may include such
claims on private banks in respect of credits granted to
them as are specified in § 41. a
§ 43. The provisions of § 9 in regard to branch offices
of the Riksbank shall be brought into operation gradually,
and shall be completely carried out before the close of the
year 1904.
« In accordance with the modification of § 41, the form of § 42 was
changed by the law of May 3, 1901, to the following:
" Among the assets which, in accordance with § 7, are required to be held
against the excess of the Riksbank's circulation over and above the amount
determined in accordance with § 6, may be included, up to the end of the
year 1903, the claims on private banks in respect of credits granted them,
which are specified in the second paragraph of § 41, and also to the end of
the year 1910 the loans to private banks and the claims on such banks in
respect of credits granted them which are specified in the seventh (i. e., the
supplementary) paragraph of the same section.




171




APPENDIX II.

B. REGULATIONS FOR THE ADMINISTRATION AND MANAGEMENT OF THE BANK OF SWEDEN (THE RIKSBANK,) ISSUED
MAY 29, 1907.
PART I.—GENERAL

PROVISIONS.

§ i. The Riksbank remains under the guaranty of the
Parliament, and is managed by the directors appointed
for that purpose in accordance with the law jointly
sanctioned by the King and Parliament and the special
provisions of the present regulations.
§ 2. (i) The capital and reserve fund of the bank are
determined by the law for the Bank of Sweden of the 12th
May, 1897, §§2 and 26.
(2) The surplus of net assets over and above the amount
of the capital and reserve fund shall be entered in the
balance sheet as reserved resources.
§ 3. In regard to the note issue and the metallic reserve,
the provisions of the law for the Bank of Sweden of the
12th May, 1897, Cap. II, apply.
§ 4. The bank is required to redeem its notes on demand
at its head office on the basis determined by the King and
Parliament, so that notes in kronor or currency dalers
are redeemed at their face value, notes in specie dalers
or bank dalers at the rate of 1 specie daler or bank daler
for 1 yi currency dalers, and note
' -10 skillings
copper after the same rate as for notes in bank dalers.




173

National

Monetary

Commission

§ 5. The procedure, in the event of the failure of the
bank to redeem its notes on demand, is determined by
the law relating to the note-issuing rights of the Bank of
Sweden, etc., of the 12th May, 1897, § 2.
§ 6. The publication of bank statements is determined
by §§ 2 3 a n d 24 of the law for the Bank of Sweden of the
12th May, 1897.
PART

2.—OF THE BUSINESS OF THE BANK.

(a) Of the purchase and sale of gold, silver, foreign bills of
exchange, and bonds, and of the maintenance of the metallic
reserve.
§ 7. (1) At both the head and branch offices of the bank
Swedish gold coin, struck in accordance with the royal
ordinance of the 31st July, 1868, and earlier statutes,
is accepted at its value in current coin.
(2) Swedish silver coin, struck in accordance with the
royal ordinance of the 3d February, 1855, and earlier
statutes, is accepted by the bank on the basis determined
by § 3 of the law of 30th May, 1873, respecting the introduction of the new coinage system.
(3) In regard to foreign gold and silver coin which is
not authorized to pass as current money in Sweden in
accordance with conventions to that effect, the directors
have power to determine both the varieties of coin which
shall be purchased and the price to be given for each.
(4) The purchase and sale of gold and silver are provided
for in the law for the Bank of Sweden of the 12th May,
1897, § 10.
Gold and silver imported by sea shall be covered by a
marine insurance policy.




174

The

Swedish

Banking

System

(5) In regard to the acceptance of uncoined gold at
the branch offices, the directors are empowered to lay
down such regulations as they may deem necessary.
(6) The directors may determine whether bar silver
and other uncoined silver may be purchased by the bank
and may, after inquiry, fix the price to be paid.
(7) The directors are empowered to decide as to the
emission of Swedish gold coin struck before the year 1873,
or of foreign gold or silver coin which is not authorized
to pass as current money in Sweden in accordance with
conventions to that effect.
(8) Bar gold and bar silver is held at the head office
for sale at such advance in price as the directors may
determine.
§ 8. (1) The right of the bank to purchase, or to
acquire otherwise, and to sell, both foreign securities and
certain classes of bonds, and to act as agent in the purchase and sale of Swedish and foreign bonds, is determined by the law for the Bank of Sweden of the 12th
May, 1897, §§ 11 and 12.
(2) The directors are empowered to place the bank's
holdings of foreign securities on deposit with known and
reliable foreign banking establishments or business houses,
and to issue drafts against such deposits.
(3) The directors have the right to determine in each
individual case the conditions on which accounts shall
be opened with foreign banking establishments and
business houses in accordance with the law for the Bank
of Sweden of the 12th May, 1897, § 20, second part.




175

National

Monetary

Commission

In the event of the metallic reserve showing a, tendency to diminish to the amount fixed as its minimum
limit by § 8 of the law for the Bank of Sweden of the
12th May, 1897, it shall be the duty of the directors to
take, in good time* such steps as may be deemed appropriate in the circumstances of each case, either by the
sale of bonds or government securities, by the reduction
of the outstanding note issue through decrease of loans
and discounts, or by the use of credits arranged abroad.
The directors have the power to select that or those of
the courses specified which they may deem best in the
circumstances for the attainment of the end in view.
§ 10. The amount of the foreign credit of which the
bank is empowered to make use by the law for the Bank
of Sweden of the 12th May, 1897 (§ 20, first part), may
not exceed 20,000,000 kronor.
(6) Of the notes of the bank, of the exchange of notes and of
coin, and of other means of payment received by the
bank.
§ 11. (1) The text of the notes which the bank issues
in accordance with the law for the Bank of Sweden of
the 12th May, 1897, shall run as follows: The Bank of
Sweden will, on demand, redeem this note of
kronor
with gold coin in accordance with the law of the 30th
May, 1873, respecting the coin of the realm.
(2) These notes shall bear the signatures of two of
the bank's officers. Notes of the 1,000 kronor denomination shall be signed by hand, but the signatures shall be
printed on notes of other denominations.




176

The

Swedish

Banking

System

(3) The head and branch offices of the bank shall
always be provided with the bank's notes for exchange
against lawful coin of the realm.
(4) In regard to the redemption of worn and damaged
notes, the provisions of the royal ordinances of the 5th
March, 1836, the 4th February, 1859, the 7th November,
1873, a n d the 24th October, 1890, shall be followed, and
also the instructions for officers of the bank's head office.
(5) In the case of the presentation of notes so soiled
and damaged that the redemption is a matter of the
investigation and testing of special considerations and
evidence, and not of the examination of the notes themselves, the directors shall determine the question of their
redemption.
(6) Notes of denominations expressed in dalers, and
notes of 1 krona, when received at the bank, shall be
rendered unusable in the manner prescribed for that
purpose.
§ 12. There shall be available at the head office of the
bank Swedish coin, including divisional coin of all the
denominations struck at the mint under the existing
laws. It is the duty of the directors to insure that so
far as possible the requisite supplies of each variety are
provided.
Further, in accordance with § 16 of the law respecting
the coin of the realm of the 30th May, 1873, there shall
always be provided at the branch offices in Gothenburg
and Malmo a stock of gold, silver, and bronze coin sufficient for the exchange of such currency as is legal tender

22150—10




12

177

National

Monetary

Commission

only in payments to the State against equal sums of current coin, and for the issue of gold coin in exchange for
divisional money in any multiple of 10 kronor.
At other branch offices gold, silver, and bronze coin is
paid out only in proportion as it is received.
The currency of coin, including divisional coin, is determined in the law respecting the coin of the realm of the
30th May, 1873, §§13 and 14, the latter as modified by
the royal ordinance of the 25th June, 1881.
§ 13. (1) The head and branch offices shall accept, in
exchange for current money, any amounts of copper coin,
struck in accordance with mint indentures of earlier date
than the year 1855, and of the tokens issued by the national
debt office. Such coins and tokens shall not be reissued.
(2) Divisional money of copper, struck in accordance
with the mint indenture of 1855, shall also be retained by
the bank.
(3) The directors shall determine at what value such
copper divisional money as is no longer reissued for circulation shall be entered in the accounts of the bank.
§ 14. For payments to the bank, and deposits therein,
at both head and branch offices, in addition to coin of the
realm and the notes of the bank, there may be used the
drafts of the head and branch offices, notes issued by
enskilda banks so far as the directors may determine that
they should be recognized as acceptable, and, as the
directors may approve, drafts payable at sight issued by
other financial institutions.
The directors may lay down rules in regard to the acceptance of notes and drafts of such institutions.




178

The

Swedish

Banking

System

§ 15. The head and branch offices shall be open to the
public on all days except holy days at hours to be determined by the directors.
(c) Of bank post bills.
§ 16. (1) The drafts which, in accordance with § 18
of the law for the Bank of Sweden of the 12th May, 1897,
are issued by the bank shall be made out to a named person or order and may not be transferred in blank.
(2) Money may be paid into any of the offices of the
bank and a like sum be notified by telegram by the office
where it is received to be paid to a person designated at
any other of the bank's offices. The paying office shall,
however, be entitled, if the payment in ready cash present
difficulties, to issue a bank post bill for the amount, payable at the head office. The directors are empowered to
issue special instructions fixing the commission and the
conditions generally which, with due regard to the security
of the bank, may be deemed proper for the exercise of
the rights in question.
(d) Of deposit and current accounts.
§17. The bank is required, in accordance with the law
for the Bank of Sweden of 12th May, 1897 (§ 16a), to
accept deposits of money free of charge at its head and
branch offices, and to repay the sums deposited, without
interest, on demand or at a date fixed at the time of making the deposit. The receipt for such deposits shall be
made out in favor of a named person.
Such deposit receipts shall be delivered up when the
money is withdrawn.




179

National

Monetary

Commission

§ 18. (i) In accordance with the law for the Bank of
Sweden of the 12th May, 1897 (§ l ^ a n d § 17), the bank
shall—
At its head and branch offices accept from whomsoever may desire such a service money to be carried to a
ledger account on which no commission shall be charged
or interest paid, and be under obligation to repay the depositor on demand the amount standing to his credit.
Also, without payment of interest, accept payments on
account of the Treasury of the State and make payments
from the funds standing to the credit of the State.
(2) For this class of business the following principal
rules shall apply:
(a) Written notice shall be given of the opening of an
account.
(b) Deposits and withdrawals may be made of sums of
any amount, fractional or other.
(c) A receipt is provided for deposits, which receipt is
not transferable.
(d) For withdrawals there may be used either written
or printed drafts, or checks to a named person or order,
and these may not be transferred in blank. The depositor shall be provided with a book of blank checks duly
numbered, without charge.
The directors may notify other appropriate regulations.
§ 19. In the event of the opening, in accordance with
§ 16 of the law for the Bank of Sweden of the 12th May,
1897, of interest-bearing current accounts with firms conducting a discount business with the bank, and not them-




180

The

Swedish

Banking

System

selves doing a banking business, the following are the
principal rules which shall apply to such business:
(a) Deposits and withdrawals may be made of any
amounts, fractional or other.
(b) A receipt is provided for deposits, which receipt is
not transferable.
(c) For withdrawals checks to a named person or order
are used. These may not be transferred in blank. The
depositor is not entitled to use other blank checks than
those provided by the bank. For these blank checks,
which shall bear an acknowledgment of the receipt of the
sum withdrawn, no charge may be made.
(d) A check drawn on an account is payable on presentation, provided that the sum standing to the credit of the
account is sufficient to meet the check.
(e) Interest is reckoned on deposits beginning with the
first business day after the deposit is made and reckoned
on the highest multiple of ioo kronor in the balance to
credit of the account.
(/) The directors determine the maximum of what may
be accepted on any one account, and the rate of interest,
which may vary as between the head office and the different branch offices.
The directors may notify other appropriate regulations.
(e) On the acceptance for safe-keeping of gold, silver, and
securities, and of sealed packets.
§ 20. (1) When in accordance with § 19 of the law for
the Bank of Sweden of the 12th May, 1897, gold or silver in
coin or bars is received for safe-keeping at the head office




181

National

Monetary

Commission

of t h e bank, a receipt for t h e deposit shall be issued.
This receipt, which shall be m a d e out in favor of a person
named therein, shall s t a t e :
(a) T h e weight of t h e gold or silver, whether coined or
uncoined, and, further, in t h e case of coin, t h e n u m b e r
a n d value of each variety and, in respect of bullion, a
statement of its fineness, of which t h e depositor is required
t o present a certificate from t h e assay office;
(b) I t s estimated value in coin of the realm; a n d
(c) The bank's undertaking, on presentation
receipt and p a y m e n t of t h e commission specified
to deliver u p t h e deposit, or, in case t h a t should
possible, to pay t h e a m o u n t named in the receipt
of t h e realm.

of t h e
below,
n o t be
in coin

(2) When, in accordance with t h e provision of t h e law
cited in clause (1) t h e head office of t h e b a n k accepts for
safe-keeping bonds, shares, or other securities of t h e n a t u r e
which t h e directors determine, there shall in like manner
be issued a receipt therefor. In such cases each variety
of bonds, shares, or other securities shall be regarded as a
separate deposit, and one receipt shall not be m a d e to
cover securities of more t h a n one class and variety. I n
general, t h e receipt shall specify:
(a) T h e numbers, dates of issue, a n d amounts, a n d also
t h e series, running number, or other identifying marks,
a n d the value placed on the securities, which latter shall,
as far as possible, be determined in accordance with t h e
current quotations for the securities; and
(b) The bank's undertaking to deliver u p t h e securities
deposited on presentation of t h e receipt a n d p a y m e n t of t h e




182

The

Swedish

Banking

System

commission specified below, or to furnish other securities of
t h e same class, variety, and amount, or to pay the value of
any missing securities at the prices specified in t h e receipt.
(3) The commission payable for the safe-keeping of
gold, silver, or securities shall be ^V per cent per a n n u m
of t h e value stated in the deposit receipt, fractions of
thousands being reckoned as whole thousands. Without regard t o t h e duration of t h e period for which t h e
deposit is made, there shall be paid, on making the
deposit, commission for at least one year. The commission shall not in any case be less t h a n 1 krona per
a n n u m for each separate deposit.
Should a depositor present for safe-keeping securities
of t h e same class and variety as he has already on deposit
a t the bank, he may, on presenting his older receipt,
obtain a new receipt covering b o t h t h e new and t h e old
deposit. In this case the commission charged on t h e new
receipt for t h e unexpired period of t h e older one shall be
reckoned only in proportion to the unexpired term and
for the newly deposited securities; it shall, however, not
be less t h a n 1 krona.
Should t h e deposit not be withdrawn within t h e period
for which commission has been paid, it is regarded as
renewed for one year on t h e existing terms. Should a
depositor withdraw the deposit before the expiration of
the period for which commission has been paid, he shall
not be entitled to recover any p a r t of t h e commission.
Securities notified or drawn for redemption may, however,
be replaced by others of the same class and variety, and
these m a y be substituted for an equal value in redeemed




183

National

Monetary

Commission

securities without further payment of commission.
Should no fresh securities be substituted for those redeemed, a new receipt shall be issued for the remaining
securities and for the unexpired period covered by the commission already paid without extra charge.
(4) In case the directors, in accordance with the final
provision of § 19 of the law for the Bank of Sweden of the
12th May, 1897, have arranged for the acceptance for
safe-keeping at the head office of packages or of other
movable property, an official appointed by the directors
shall assure himself that the contents are not of a nature
to hinder the acceptance of the deposit, and that official
shall, in his office at the bank, seal the deposit with the
seal of the depositor, and a deposit receipt shall be issued.
The receipt, which shall be in favor of a person named in it,
shall in general contain:
(a) A description of the external appearance and cubic
content of the package; and
(6) The bank's undertaking to deliver up the goods with
the seal intact on presentation of the receipt and payment
of the commission specified below, but without liability on
the part of the bank for involuntary injury or accident.
(5) For sealed packages the commission shall be reckoned
in accordance with their cubic content and the duration of
their deposit, so that for each month there shall be paid—
For packages with a cubic content—
Kronor.
Not exceeding 25 cubic decimeters
o. 50
Exceeding 25 cubic decimeters and up to 50 cubic decimeters > o. 75
Exceeding 50 cubic decimeters and up to 75 cubic decimeters. _ 1. 00
Exceeding 75 cubic decimeters and up to 100 cubic decimeters. 1. 25
Exceeding 100 cubic decimeters and up to 125 cubic decimeters- 1. 40
Exceeding 125 cubic decimeters and up to 150 cubic decimeters. 1. 55




184

The

Swedish

Banking

System

and so on, rising by 15 ore for each further 25 cubic decimeters of cubic content or part thereof. Without regard
to the period for which the deposit is made, a commission
for at least three months shall be paid in all cases.
(6) In regard to the deposit for safe-keeping in the
bank of gold, silver, securities, or sealed packages, the following rules shall apply:
If the depositor is not satisfied with the bank's estimate of the value of the gold, silver, or securities, or with
the measurement of packages or the commission charged,
the deposit shall not be accepted.
Further, in the case of sealed deposits, at least the minimum commission fixed as above for each deposit shall be
paid at the time of deposit:
For each month commenced commission shall be
charged as for a complete month, and
Commissions not previously paid shall be payable at the
end of each calendar year.
(7) Any further regulations necessary for the conduct
at the head office of the business dealt with under the preceding clauses (1) to (6) may be notified by the directors.
(8) Should the directors, in accordance with § 19 of
the law for the Bank of Sweden of the 12th May, 1897,
have arranged for the receipt at any branch office, for safekeeping, of gold, silver, securities, or sealed packages, the
directors may prescribe the details of the regulations
which they may deem necessary for conducting this class
of business, having regard to the principles laid down
above.




185

National

Monetary

Commission

(9) In regard to the safe-keeping for government departments of securities or sealed packets, the directors
have power to effect a special agreement with the authority
in question, and commission may be charged at a reduced
rate or be entirely remitted.
Regulations as to the safe-keeping at the bank of bonds
and securities belonging to the postal savings bank and of
the safe-keeping of documents in connection with the
agreement between the State on the one side, and on the
other the IyUossavaara-Kiirunavaara Company and others,
respecting certain mineral properties, etc., are contained
in § 51 below.
(10) Notwithstanding the regulations in the second and
third of the preceding clauses as to the form and content
of deposit receipts and the redelivery of the valuables,
the directors are empowered to make such further regulations as they may deem appropriate regarding deposits
of large amount.
(/) Of the lending operations of the bank.
§ 21. (1) [Contains a list of the offices and of the
geographical limits within which the business of each
is to be conducted.]
(2) Discounts, loans, credits, and overdrafts may not
be granted to those not resident or carrying on an established business in the several lending districts. As
maker, acceptor, or indorser of a bill, or as mortgagee
or guarantor, those may, however, be accepted who
do not belong to the district in which discounts, loans,
credits, or overdrafts are applied for.




186

The

Swedish

Banking

System

Without regard to the division of the country into
districts, loans may be made on collateral security (but
without right to repay by installments) and credits opened
on similar security, and also, at the head office, overdrafts may be granted.
Further, banking establishments, whether belonging
to the head office's district or not, may be granted loan
facilities of all classes at that office.
§ 22. In accord with the provisions of § 13 of the law
for the Bank of Sweden of the 12th May, 1897, the lending operations of the bank comprise—
(a) Discount of bills of exchange.
(b) Loans secured by pledge of bonds, shares, or other
securities, or, in particular cases, by the borrower's note
alone.
(c) Loans secured on merchandise.
(d) The grant of open and current account credits.
(e) The grant of advances from the installment loan
fund.
(a)

DISCOUNT OF BIU<S.

§ 23. (1) Bills which are discounted by the Bank
shall be drawn in Swedish money, be accepted, and payable within six months of the date of their offer for discount at such places within Sweden as are recognized as
banking centers by the directors.
(2) Bills payable at a place other than that where
the acceptor resides shall bear the name of a person or
firm resident in the place of payment from whom payment at the due date may be procured.




187

National

Monetary

Commission

(b) U)ANS SECURED BY THE PLEDGE OF BONDS, SHARES, OR OTHER SECURITIES, OR, IN CERTAIN CASES, BY THE BORROWER'S NOTE AU)NE.

§ 24. (1) Loans are granted against a promise of
repayment either at a fixed date not later than six months
thereafter or at not more than three months' notice,
secured by collateral consisting of bonds, shares, or
other securities. The directors have the right to determine what securities shall be accepted as collateral
and at what quotation they shall be taken.
(2) Municipalities and other associations of a like
order and institutions may be granted loans on the
above conditions of repayment without other security
than their own notes.
(c) IvOANS ON MERCHANDISE-

§ 25. (1) Loans are- granted against a promise of
repayment at a fixed date not later than six months
thereafter secured by collateral consisting of merchandise in a public warehouse, or stored in the keeping of
a third party who is pledged to hold it or its value at the
disposal of the bank and is accepted as reliable for the
fulfillment of such a pledge.
A warrant, in which the goods are specified and described shall be issued in favor of the bank or assigned
to the bank's head office or the branch office concerned.
(2) The directors determine the classes of goods on
which loans may be made, and their value as security,
and are empowered to prescribe such measures of control with regard to the proper storage of the goods as
they judge appropriate and necessary for the bank's
security.




188

The

Swedish

Banking

Sy

stem

(3) The formalities connected with the release of goods
thus pledged, or any part thereof, shall be in accordance
with what is prescribed for such cases or may be prescribed in future by the directors.
(4) Both the directors and the managers of the branch
concerned, the latter each for the district assigned to that
branch, are entitled to cause goods pledged to the bank
and stored in warehouses or other places of storage to be
inspected and inventories made of them, as often and in
such manner as may be found most convenient and necessary for the security of the bank.
(d) THE GRANT OF OPEN AND CURRENT ACCOUNT CREDITS.

§ 26. (1) A credit shall be opened in favor of the
national debt office as prescribed in the law for the Bank
of Sweden of the 12th May, 1897, § 14.
(2) In general credits may be opened on the security
of bonds, shares, or mortgages on real estate, and also
secured by guarantors, after the consideration of applications for such credits by the branch managers concerned or, when that is specially prescribed, by the
directors, who shall decide on such applications.
(3) Credits shall not be granted for a longer term than
twelve months.
(4) The commission to be charged is fixed by the
directors and may be different for different cases.
(5) Withdrawals and deposits may be made in any
amounts, even or otherwise. Interest is charged on
amounts advanced from and with the day on which the
advance is made. If the amount outstanding be not an
exact multiple of 10 kronor, interest shall be charged on




189

National

Monetary

Commission

the lowest multiple of 10 kronor which exceeds the
amount outstanding.
(6) For withdrawals there may be used either written
drafts, made out in favor of a named person, or checks to
a named person or order, and these may not be transferred
in blank. The borrower may not make use of other
check forms for this purpose than those supplied to him
by the bank. For these blank checks, on which an
acknowledgment of receipt shall be written, no charge
shall be made.
(7) A borrower who, at the expiration of the period for
which the credit was granted, has been accorded a new
credit to run from that date, is entitled to have any balance due from him at the expiration of the former credit
transferred to the new account, so far as such balance does
not exceed the amount of the newly opened credit.
(8) Current account credits (overdrafts) may be
granted by the directors for terms not exceeding twelve
months, and secured by the same classes of collateral as
are prescribed for open credits, and in general on such
terms as the directors prescribe, but no commission shall
be chargeable on such credits.
(9) The aggregate amount of such credits as may be
granted by the bank under clause (2) above, and of overdrafts, shall be limited, as prescribed in the law for the
Bank of Sweden of the 12th May, 1897 (§ 13d), so as not to
exceed 15,000,000 kronor.
(e) GRANT OF LOANS FROM THE INSTALLMENT LOAN FUND.

§ 27. (1) Installment loans are granted against the note
of the borrower, with either collateral security consisting




190

The

Swedish

Banking

System

of bonds, shares, or mortgages on real estate, or with personal guaranties.
(2) Such loans shall be repaid by the discharge in each
sixth month from the date of borrowing, of at least onetenth part of the amount lent together with interest
accrued, subject to the entire amount of the outstanding
part of the loan becoming due in case of failure to make
such payments when due.
(3) Advances are not made in less amounts than 300
kronor.
(4) In the case of loans secured on personal guaranty,
the borrower is required, at the date for the payment of
each installment, should it be demanded, to furnish evidence of his own and his guarantors' continued trustworthiness, or to provide new security which is acceptable.
The consequence of failure to do so shall be that the entire
outstanding amount of the loan shall become due at once.
(5) No borrower may secure advances of more than
6,000 kronor at one time.
(6) Other regulations which may be regarded as requisite for the security of the bank in regard to this class of
advances may be notified by the directors.
(7) Should applications be received at the head or
branch offices for loans of this class to an aggregate amount
exceeding the available funds, the applications shall be
dealt with in the order in which they are received.
Special regulations applicable to loans and discounts.
§ 28. The following special regulations shall apply to the
entire lending operations of the bank:




191

National

Monetary

Commission

(i) Discounts, loans, credits, or overdrafts may not be
granted—
(a) To directors of the bank and members of the managing committees of its branches, except that they may
obtain loans secured on merchandise stored in a public
warehouse or on the bonds of the State or of the general
mortgage bank or mortgage associations, and may have
credits opened in their favor on the security of the bonds
named.
(b) To officials and clerks in the head or branch offices
of the bank, except that such officials and clerks may be
granted, by the head office or the branch office concerned,
a loan or credit on the security of bonds of the State, or
of the general mortgage bank, mortgage associations, or
municipalities.
(2) Loans, credits, and overdrafts may not be granted
on the security of the personal guaranty of a director, a
member of a branch managing committee, official, or
clerk in the bank, and no bill of exchange bearing the
name of a director, member of a branch managing committee, official or clerk in the bank, as drawer, acceptor,
or last indorser, may be discounted at the bank.
(Cf. § 15 of the law for the Bank of Sweden of the 12th
May, 1897.)
(3) The loans to which §§ 24, 25, and 27 apply are
granted in multiples of 10 kronor.
§ 29. (1) The note of a borrower who secures a loan,
open credit, or credit on current account, shall, in case the
borrower's or his guarantor's trustworthiness is not
known to the management, or the collateral offered does




192

The

Swedish

Banking

System

not appear in itself to furnish ample security, be accompanied by a certificate relating to their trustworthiness
signed by a civil servant, public official, or private person
on whom the management can place complete reliance.
Independently of this, it is the duty of the management,
in the case of each application for the discount of bills,
loan, open credit, or credit on current account, to examine into the acceptability of the security offered and to
exercise care that the security of the Bank is in every case
properly provided for. The management may not neglect,
with a view to this end, to procure all the information
which might influence judgment of the position of debtors
and their capacity to meet the obligations into which they
have entered.
In particular, in the discount of bills regard shdll be had
to the origin of the bills.
(2) In case a borrower, mortgagor, or guarantor be unable to write, or in case their signatures be not known to
the management, these shall, in every instance, be certified
by two trustworthy men, in the former case as witnesses
by their signatures to the contract made, in the latter to
the identity of the signatures.
§ 30. (1) The public is entitled to conduct business relating to lending and borrowing at the head and branch
offices of the bank in writing. All the requisites provided
at the bank's offices are placed at the disposal of clients
free of charge, under such restrictions and conditions as the
directors prescribe.
(2) The prohibition contained in § 35 of the law for the
Bank of Sweden of the 12th May, 1897, of directors or
22150—10




13

193

National

Monetary

Commission

members of branch managing committees from taking, in
the capacity of agents for others, any decision in regard to
discounting bills or provision of loans or credits at the
head or branch offices, shall also apply to the clerical staflf
at the head and branch offices of the bank.
Should a director offend against this rule, information
thereof shall be given to the chief law officer of the Parliament, who shall institute proceedings in accordance with
the law relating to the liability of directors.
Should a member of a branch managing committee
offend against the rule, the circumstances shall be notified
to the directors, who, in the question of legal action, are
empowered to proceed in accordance with the special law
on the subject of the liability of these branch managers.
ShoulxMeifofcmber of the clerical staff offend against the
rule in question, the matter shall be reported to the directors or the managing committee concerned, who are
empowered to dismiss the offender or to suspend him for
a fixed period of not less than six months from his functions and emoluments.
§ 31. (1) The rate of interest charged on loans, credits,
overdrafts, and the rate of discount on bills of exchange
shall be fixed by the directors with due regard both to the
financial situation, to the period of the loan, and to the
security offered. These rates may be different at the
head and branch offices of the bank.
(2) On loans and advances which are not repaid on or
before the due date, there shall be charged, from that date,
interest at the rate of 6 per cent per annum, unless the rate
stipulated on the advance be higher than this, in which




194

The

Swedish

Banking

System

case interest shall continue to be reckoned at that higher
rate until the repayment is completed.
§ 32. The head and branch offices of the bank shall be
open for the making of loans and advances on every business day in the week.
§ 33. The bank's head and branch offices are, in accordance with the terms of the royal decree of April 18, 1681,
to secure the aid of the officers of the Crown both in Stockholm and throughout the country in the prompt execution
of the legal proceedings for recovery arising out of the
lending business of those offices, and it is the duty of those
officers, on the conclusion of the proceedings, to forward
the amounts recovered on claims without delay to the head
or branch office concerned.
§ 34. The bonds issued by the bank before the year 1830
as a means of procuring funds may not be accepted as
collateral for loans, but the bank will redeem on demand
such of those bonds as are not by express stipulation perpetual.
§ 35. The provisions regarding special rates of discount,
and special advantages as to loans and credits, in favor of
Enskilda banks are contained in the law for the Bank of
Sweden, transitional provisions. (§ 41.)
PART

3.—OF THE ADMINISTRATIVE OFFICERS
OF THE BANK AND THEIR DUTIES.

§ 36. (1) In accordance with § 72 of the constitution
and § 71 of the standing orders of the Parliament, the bank
is managed by seven directors.
The chairman, who may not hold any other office in the
bank's administration, receives from the funds of the bank




195

National

Monetary

Commission

a yearly salary equal in amount to that which each of the
other directors is entitled to receive as director in accordance with the scale of salaries fixed for officers of the bank.
(2) In accordance with § 72 of the constitution and § 73
of the standing orders of the Parliament, four substitutes
for the directors are appointed, one by the King and three
by the Parliament.
(3) In the manner prescribed in § 71 of the standing
orders of the Parliament, the directors themselves elect a
vice-chairman from among themselves to preside when
the chairman is prevented from attending.
(4) If the number of directors available be not as great
as is required for the conclusion of the business in hand
in accordance with later regulations, one of the substitutes
appointed by the Parliament shall be summoned to attend.
The substitute appointed by the King is summoned
when the chairman has notified his inability to be present.
(5) When a director is prohibited from acting as such
by the terms of § 29 and § 30 of the law for the Bank of
Sweden of the 12th of May, 1897, he shall withdraw and
in his place one of the substitutes shall be summoned.
§ 37. In the conduct of the business of the bank the
directors are required to observe both the laws of the
realm and the special laws, regulations, and ordinances
relating to the bank.
§ 38. (1) The directors elect from their number three
managers, one principal and two others, whose duty it
shall be, in accordance with the regulations of the bank
and the instructions given by the directors, and in general
in accordance with the division of functions between




196

The

Swedish

Banking

System

them, to present the business for the consideration of the
directors, to supervise the carrying out of the decisions
of the directors, to conduct the purchase and sale of foreign
bills of exchange and make the arrangements necessary
in that connection, to supervise the internal organization
of the bank, and in general to conduct the current business
of its administration.
(2) The managers are each entitled to one and a half
month's vacation yearly.
(3) The directors elect, also from their own number,
one director who shall, in accordance with the instructions
given, supervise the conduct of the bank's paper mill and
printing works, and bring before the directors the business
relating to the mill and printing works.
The director selected for this function need not be one
of the managers, though one of these may be so selected.
(4) The salaries assigned to the directors and the managers, and to the director who supervises the paper mill
and printing works, are specified in the scale of salaries
fixed for officers of the bank.
(5) When, in accordance with the rights assigned them
in clause (2) above, one of the managers takes a vacation, *
and in consequence thereof or by the instructions of the
directors one of the substitutes is summoned to take part
in the administration of the bank, the latter shall be
entitled to receive from the funds of the bank a payment
at the same rate as is assigned to a director for the time
during which he serves.
(6) Should a manager be absent on vacation or be
engaged on the business of the bank at a distance from




197

National

Monetary

Commission

the head office, and the directors find it desirable to
appoint a special deputy manager, the latter shall be
entitled to receive from the funds of the bank for the
period of such service a payment at the fate assigned for
managers in the scale of salaries.
(7) When, in the absence of the chairman, the substitute appointed by the King is called upon to serve, payment shall be made to him from the bank's funds on the
same scale as is fixed for the chairman, but not for an
aggregate period of more than one month and a half in
each year, not including, however, in this period any time
during which the chairman may have been absent on the
business of the bank.
§ 39. (1) For the conduct of ordinary business the
directors shall meet once each week, or oftener if the nature
and pressure of business require it, and at such meetings
at least five directors shall be present. Business which
requires immediate dispatch may, however, be done when
only four directors are present, in case three of them are
in agreement thereon, but in meetings with the directors
of the national debt office at least five directors of the
• bank shall take part.
Should there be a divergence of opinions between the
directors, the votes of the directors shall be recorded, each
being entitled to one vote. In cases in which the votes
are equal, the chairman has the right to give a casting
vote. Anyone whose vote is not on record is regarded
as assenting to the decision of the majority, and a director
who may be prevented for any reason from being present
when any decision is taken is not thereby disqualified




198

The

Swedish

Banking

System

from joining in further discussions in regard to the same
matter which may arise. Only in the case of elections
to offices to which some one of the directors might be
appointed shall votes be given by secret ballot.
Measures taken in the name of the directors may not
be so taken except in consequence of a decision of a meeting
of the directors.
(2) At least four directors are required to go over the
business relating to loans on every ordinary week day.
§ 40. In respect to the classes of business which are
required to be kept secret, and to the obligation of directors, members of branch managing committees, auditors
and clerks to maintain secrecy in regard to the relations
between clients and the bank, and other confidential matters, the provisions of the law for the Bank of Sweden of
12th May, 1897 (§§ 36 and 37) apply.
§ 41: (1) It is the duty of the directors to see that gold
received at the royal mint for account of the bank for
coining or other purposes is brought into account as
speedily as may be, by delivery to the bank either as coin
or in bars. Bar gold shall be entered in the bank's
accounts at its coinage value without deduction for cost
of mintage.
(2) Bar silver is entered in the accounts at such value
as the directors may decide in the circumstances of the
case.
(3) The directors shall, when the royal mint has gold
or silver in its possession for account of the bank, be represented by one of the managers at the annual inspection
which takes place in the month of January in each year,




199

National

Monetary

Commission

or more frequently if necessary, in the manner which the
King ordains. Should there be found anything in connection with such an inventory which calls for report, the
directors may send a statement thereon to the King.
§ 42. At least once in each year the directors shall
cause an inspection to be made of all the safes and other
storage places at the head office, and also cause the premises and equipment of the bank in Stockholm to be
inspected.
§ 43. (1) The directors are empowered to grant an
extension of time to debtors of the bank for the payment
of their debts to the bank, after careful consideration of
the circumstances in each individual case, and to accept
a composition towards the liquidation of debts to the bank
in the case of such of the bank's debtors as may have
assigned all their property for the benefit of creditors.
In no other cases than the last named, however, may the
directors remit anything of what should be paid in accordance with agreements made and the ordinances in
force, but all questions regarding remission of what is due
shall be submitted to the next parliamentary committee
on banking for decision in the order required by the
instructions given to that committee.
(2) The directors have power to decide, both for the
head office and, on the advice of the branch managing
committees concerned, for branch offices, what shall be
written off as doubtful debts in the accounts.
§ 44. The directors shall make a report on complaints
communicated to the parliamentary committee on banking or to the auditors, and on applications to the com-




200

The

Swedish

Banking

System

mittee which m a y be forwarded to t h e directors in proper
time.
§ 45. The directors are entitled at any time to delegate
a representative, whether one of themselves or not, to
inspect the branch offices.
When such a d u t y is undertaken by one of the directors,
no special remuneration is assigned in t h a t regard, b u t
traveling and maintenance expenses are allowed a t the
rates fixed in the current regulations. Other persons undertaking this d u t y are assigned remuneration as the
directors m a y determine.
§ 46. (1) The directors are intrusted with t h e payment
out of the funds of the bank of—
(i) The assigned contributions to the various orphanages in the Kingdom.
(ii) The subscription to the widows' and orphans'
funds at t h e head and branch offices of the bank and at the
paper mill.
(iii) Assistance to those persons who formerly received
Christmas gifts and continue to be in need of t h e m to the
same amount as has been customary.
(iv) The fixed yearly payments which the Parliament
has granted to certain persons still living.
(v) Remuneration for t h e continuance of t h e record of
t h e bank's transactions.
The directors shall notify the banking committee of
alterations in these respective payments.
(2) In case of imitation or falsification of t h e bank's
notes, and of t h e uttering of such imitated or falsified notes,
t h e directors are empowered to offer and to pay out of the




201

National

Monetary

Commission

funds of the bank such rewards as they may judge expedient in the circumstances of the case.
§ 47. [Deals with the management of the paper mill.]
§ 48. Real estate owned by the bank, with the exception
of such as may have been bought in for the protection of
liens held on the property by the bank, may not be disposed of by the directors without the assent of the
Parliament.
§ 49. In accordance with the provisions of § 32 of the law
for the Bank of Sweden of the 12th May, 1897, the directors shall make to the banking committee of the Parliament each year a report on the financial situation, business, and administration of the bank. This report shall
be printed and be made accessible to the public.
In addition the directors are required to report on the
matters specified to the official parliamentary auditors
of the treasury, riksbank, and national debt office.
With these reports the directors shall forward to the
banking committee and to the auditors the reports required from the managing committees of branch offices,
and shall also send to the auditors the reports received
from the auditors of the branches, accompanied by such
information and explanation as may be called for by the
matter contained in the latter reports or by conditions
to which attention is called in them.
The directors shall cause the report on the bank as a
whole which, by the existing rules, is to be made by the
auditors of the Parliament for each year, to be printed,
published, and forwarded to the Parliament, together
with the statements and explanations to which it may
give rise.




202

The

Swedish

Banking

System

§ 50. The directors shall at all times be prepared with
arrangements by which the bank's cash, securities, and
documents may be able to be transferred without loss of
time to a safe place in case of necessity. The directors
shall seek advice and information in such circumstances
of the King.
§ 51. (1) I t is t h e d u t y of the bank directors who are
appointed by the Parliament—
In accordance with § 50 of the constitution, jointly with
the directors of the national debt office, to confer with t h e
King in regard to the selection of a place for t h e meeting
of Parliament, in case serious obstacles should prevent its
meeting in t h e capital.
In accordance with § 98 of the constitution, in t h e event
of the death or resignation of the chief law officer of the
Parliament, in association with the directors of the
national debt office, to induct into the office the person
selected as his successor by the Parliament, and, in the
event of t h e appointment as chief law officer of t h e person
selected as successor to t h a t office by the Parliament, or
of his death or resignation of the right to succeed to the
office, they shall, in association with the directors of the
national debt office, proceed to the election of another.
In accordance with § 109 of the constitution, in t h e
event of the grant of money by the Parliament, without
an agreement being reached before the close of the Parliamentary session as to the mode of raising the money,
then in association with the directors of the national debt
office, to prepare and issue a new draft of ways and means
on t h e basis t h a t t h e items in the current scheme of ways




203

National

Monetary

Commission

and means shall be increased or decreased uniformly in the
proportion of the sum actually granted to that contained in
the financial arrangements of the preceding Parliament.
In accordance with § 32 of the constitution, to assist
by the attendance of three delegates at the consideration
by each new Parliament of those formal powers of attorney
which shall confirm the authority of the directors.
(2) In accordance with the royal ordinance regarding
a postal savings bank for the Kingdom, the directors are
entitled to select one of their number to be a member
of the Administrative Board of the postal savings bank;
to arrange for the safe-keeping by the bank on behalf of
the postal savings bank of the bonds and other valuable
documents belonging to the postal savings bank, on payment to the bank of the commission fixed by the directors,
and on the request of the Administrative Board of the postal savings bank, to arrange for the sale or pledge of such
valuable documents, the property of the postal savings
bank, as its Administrative Board may deem necessary.
On the basis of the agreement approved by the Parliament of 1907 between the Swedish Government on the
one side and on the other the Luossavaara-Kiirunavaara
Company, theGellivare Iron Ore Fields Company, and the
Grangesberg-Oxelosund Transportation Company, respecting certain quarries, etc., the directors are to receive and
preserve the documents referred to in that agreement,
without charge for the service, and in accordance with the
said agreement conduct the business involved.
(3) In association with the directors of the national
debt office, the bank directors shall further—




204

The

Swedish

Banking

System

(a) Select and appoint a person to be a member of the
board of directors of the Gotha Canal on behalf of the bank
and the national debt office, in order to secure the future
supervision and control over the maintenance of the canal.
A new appointment shall be made each year, but the previous representative may be reappointed;
(b) Select a representative to take part in the audit of
the canal company's accounts on behalf of the Bank and
the national debt office; and
(c) Take the necessary measures for carrying out the
decision of the Parliament in the matter of new buildings
for the Parliament, etc., and the Bank; these shall be in
accordance with the more detailed provisions of the instructions of the Parliament under dates the n t h and 12th
May, 1888, and the 6th April, 1906.
PART

4.—OF THE MANAGEMENT OF THE BRANCH
OFFICES OF THE BANK.

§ 52. (1) The managing committees of each of the
branch offices in Gothenburg and Malmo shall be composed of four members and that of each of the other
branch offices of three members. All these, and the requisite number of substitutes, appointed for one calendar
year at a time, shall be chosen by the directors, who shall
have the right to remove one or more such officers from
their appointments when they find occasion to do so; in
the place of officers so removed, others shall be at once
appointed.
Should a member of a branch committee cease to serve
for any other reason before the end of the period for which




205

National

Monetary

Commission

he was appointed, a new member shall be appointed to
take part in the work of the committee for the remainder
of the period. On the annual occasions of the appointment of the committees, retiring members may be reappointed.
(2) The directors shall choose from among the members
of each branch committee one member to act as manager
and conduct the daily work of the management, but the
chairmen and vice-chairmen shall be elected by the committees themselves from their own number.
(3) In the case of an ordinary member of a branch committee being accidentally prevented from serving, one of
the substitutes shall be summoned.
Should the member who acts as manager be prevented
from performing his functions, the committee shall arrange
for the carrying on of the work until the directors have
decided on the arrangements to be made.
(4) At the time determined by the directors on representations made to them on the subject, and when they
have arranged for the due conduct of the affairs of the
branch, the managing member of the committee is entitled
to a yearly vacation:
In the case of the branches at Gothenburg and Malrno
for one month and a half.
In the case of other branches for one month, but from
and with the sixth year after his appointment as manager,
for one month and a half.
Other ordinary members of the committees of all
branches, with the exception of those at Gothenburg and




206

The

Swedish

Banking

System

Malmo, are entitled in like manner, after due notice to
the committee concerned and in case no special obstacle
exist to such a course, to holidays at the charge of the
bank, amounting for each of them to not more than one
month in the aggregate in each year.
§ 53. In the conduct of the branch offices the committees are required to observe not only the law, regulations,
and ordinances applying to the bank, but also the instructions issued, or which may be issued, by the directors
as a whole or by the managing directors.
§ 54. It is the duty of the managing member of a branch
committee to supervise carefully the conduct of affairs at
the branch, to present to the committee the business
relating to loans and other matters, and to conduct the
correspondence between the branch office and the head
office, the whole in accordance with the instructions
issued, or which may be issued, by the directors as a
whole or by the managing directors.
§ 55. (1) The branch committees meet for the consideration of general business once in each month, or
more frequently if the nature and pressure of business
so require, and at such meetings all the members of the
committee are required to be present. At the meetings,
a record of whose proceedings shall be kept, in case of
differences of opinion, the majority of votes shall prevail,
and, in case of equality of votes, the chairman is entitled
to give the casting vote.
(2) For the consideration of business relating to loans
and advances, the committees meet every ordinary week




207

National

Monetary

Commission

day. No decisions may be reached unless three members
are present, and no application for a loan may be approved
unless three members of the committee are agreed thereon.
§ 56. (1) The accounts and administration of each
branch office shall be inspected yearly by four persons
who, as well as an equal number of substitutes, are
selected by a nominating committee composed of forty
members. These latter shall be appointed in a manner
identical with that prescribed in § 71 of the standing
orders of the Parliament for the committee charged with
the appointment of the directors of the bank and of the
national debt office.
(2) The branch committees shall report to the auditors referred to (clause 1) when they meet, such report
to cover the lending operations and the connected supervision and proceedings for recovery of debts; and also
to the banking committee of the Parliament and the
official parliamentary auditors of the treasury, riksbank,
and national debt office, this report to cover the business
of the branch as a whole. These reports are required
to be forwarded to the directors, that to the banking
committee not later than the day previous to the opening
of the Parliament, that to the parliamentary auditors at
least fourteen days before their meeting.
§57. (1) The salaries assigned to the members of
branch managing committees are specified in the salary
scale fixed by the Parliament.
(2) So long as a substitute who has been summoned
to serve on a branch committee performs the duties of
an ordinary number of the committee, he shall receive




208

The

Swedish

Banking

System

the amount of salary assigned to that member calculated
according to the time devoted to the management and
supervision of the branch.
PART 5.

[§§ 58 to 84 relate to the number, grades, salaries, and
pensions of the staff of the head and branch offices. As
in the case of certain earlier sections, it has not been
judged necessary to present them here.]

22150—10




14

209




APPENDIX

SWEDISH

III.

LAW RESPECTING BANKING COMPANIES WITH
UNLIMITED LIABILITY.
(SEPTEMBER 18, 1903.)

CHAPTER

I.—Of the formation of the company and of its
capital.

§ 1. Those who, for the purpose of conducting the business of banking, propose to establish a company with
personal responsibility for its shareholders, and seek to
secure for themselves the enjoyment of those rights
which are granted by this law, are required to make an
application to that effect to the Crown, accompanied by
a copy of the proposed articles of association.
The founders must be Swedish citizens residing in this
country, and at least twenty in number.
Should such a company be judged to be for the benefit
of the country, the articles of association shall be examined
on behalf of the Crown, in reference to their agreement
with this law and with the general laws of the country,
and also with the purpose of determining what further
special regulations may be desirable, having regard to
the extent and nature of the business to be conducted.
In case the articles of association are approved, the
permission to conduct a banking business shall be notified
by the Crown, such permission (charter) to be for a term
not exceeding ten years and till the end of the calendar
year then next ensuing.




211

National

Monetary

Commission

The company shall be registered in accordance with
later provisions of this law.
§ 2. When the founders have received notification of
the grant of the charter, they shall issue an invitation to
subscribe to shares in the capital.
This prospectus, which shall be signed by the founders,
and be accompanied by an attested copy of the decision
of the Crown as to the establishment of the company,
shall contain a statement of the limit of time, not exceeding six months from the date of notification of the grant
of the charter, within which a meeting of the subscribers
shall be held to decide the question of the formation of
the company, and a statement of the mode of distribution of shares among subscribers which is to be adopted
in case of oversubscription.
^
Subscriptions secured otherwise than by the issue of
such a prospectus as is here specified shall be invalid.
§ 3. Any rights or advantages reserved to themselves
by the founders shall have no effect as against the company unless they are completely specified in the prospectus.
§ 4. It is incumbent on the founders to summon the
general meeting for the determination of the question of
the company's formation within the time specified in the
prospectus and in accordance with the rules which are
to apply for summoning ordinary general meetings. In
case such a meeting is not held within the prescribed
time limit, subscriptions shall cease to be binding on
applicants for shares.
§ 5. At the meeting referred to in § 4, in case the subscription lists show that the capital, as specified in the




212

The

Swedish

Banking

System

prospectus, is fully subscribed, and that the subscribers,
inclusive of the founders, amount to at least the number
specified in § 9, and after any oversubscription has been
adjusted between the subscribers and the excess declared
void, the question shall be decided whether the company
shall be formed. The majority of those present, however,
shall have the right to defer the final decision of the question to an adjourned meeting to be held within a month
thereafter.
If a resolution to establish the company be passed
unanimously, or if, on a vote on such a resolution, the
majority are in its favor and comprise at least one-fourth
part of the entire number of subscribers, inclusive of the
founders, and represent an aggregate subscription of at
least one-fourth part of the entire capital, the company
shall be regarded as formed. In the contrary case, the
resolution in favour of its formation shall be deemed to
be lost.
Founders who, as referred to in § 3, have reserved to
themselves special rights or advantages, may not take
part in the voting treated of in this section, nor shall any
such founder, or the shares which he has subscribed, be
taken into account in the voting.
§ 6. In case the founders amount to atTeast the number
specified in § 9, and take up the entire amount of the
share capital, the company shall be regarded as formed
by agreement between them.
§ 7. On the formation of the company, the election of
directors and auditors shall take place without delay.
§ 8. The capital of a banking company shall amount to
not less than 1,000,000 kronor. Nevertheless, in case the




213

National

Monetary

Commission

detailed provisions of the articles of association respecting
the nature of the business to be undertaken clearly show
that the company does not purpose to carry on the business of banking on a large scale, but only to facilitate the
moderate exchanges of a defined locality, the capital may,
should the permission of the Crown be secured, be fixed
at a sum smaller than i ,000,000 kronor, though in no case
at less than 200,000 kronor.
§ 9. A banking company shall be composed of at least
thirty ordinary shareholders, who shall be Swedish citizens. These shareholders shall provide the company's
capital, and shall be responsible for the fulfillment of all
the obligations of the company, each for all and all for
each.
The responsibility for the company's obligations which
is, by this section, imposed on each ordinary shareholder
over and above his share in the subscribed capital, may
not be enforced by the creditors of the company in a manner other than that provided for in the law relating to the
bankruptcy of banking companies and savings banks,
so far as that law relates to banking companies with
unlimited liability.
§ 10. In the official title of a banking company the capital of which is not less than 1,000,000 kronor, there shall
be included the words " enskild bank." This title may not
be used by any others.
Should the banking company's capital be less than
1,000,000 kronor, its official title shall include the words
" people's bank " (folkbank).




214

The

Swedish

Banking

System

No private individual or other private financial institution which is not a company such as is dealt with in the
present law, or a savings bank, or a banking company with
limited liability, may use in its official title (firm name)
the word "bank."
The official title of a banking company shall be distinct
from that of any existing company previously registered
in legal form, and also from the designation of any foreign
banking institution which is generally known in this
country.
§11. The capital shall be divided into shares of equal
amount. The amount to be paid by the subscriber of any
share shall not be fixed at a sum less than the face value of
the share.
Bank shares shall be indivisible as against the company.
In case it is provided that the capital may, without a
change in the articles of association, be altered in amount,
the lowest amount at which it may be fixed shall not be
less than the half of the highest amount permissible.
§ 12. Share certificates shall be issued, which shall specify
the numbers borne by the share or shares to which they
refer. Such certificates shall be made out in favor of a
person named in them.
§ 13. At least 20 per cent of the capital shall be paid
up before the banking company commences business, a
further 20 per cent at least within three months, and the
remainder within eight months from the commencement
of the company's business.
Share certificates shall not be issued before the company is registered and the capital fully paid up.




215

National

Monetary

Commission

§ 14. Any subscriber of ordinary shares who has not
paid up his shares in full on the formation of the company
shall be required to deposit adequate security for the fulfillment of his obligation to pay the balance due in accordance with the provisions of § 13.
§ 15. Any subscriber failing to make the payments on
his shares within the limits of time fixed for the same shall
be required to pay interest at the rate of 6 per cent per
annum from the due date.
Should payments not be made at the dates at which
they are due before the security mentioned in § 14 has been
deposited, or should a subscriber neglect to deposit such
security, the directors shall, in case the matter is not set
right within a month after warning given, declare the
right to shares in the company annulled. The same procedure shall also follow any subsequent failure to make
payments within the time prescribed if the security deposited prove insufficient to provide for the payment due.
Notification of the time for the payment of calls, and
such warning as is referred to above, shall be regarded
as duly given when it is made in such manner as is required for the summons to an ordinary general meeting
or, in case a shareholder's address has been notified to the
directors, if it be sent to him in a registered letter.
The annulment of the right to shares in the company
does not confer the right to the recovery of sums already
paid up on shares or of what may be realized on the
security deposited.
§ 16. The capital may not be increased by a new subscription before the payment of what has been previously




216

The

Swedish

Banking

System

subscribed has been made in full. A decision in favor
of such increase may not be carried out before it is registered.
Share certificates may not be issued in such a case
before payment is completely made for the share or
shares covered by the certificate.
The time for the completion of payments on new
shares may not be so fixed as to exceed one year from the
date of the registration of the resolution authorizing
their issue.
§ 17. The provisions of § 15 in regard to neglect of payment of calls on shares subscribed, and warning to complete such payments, shall apply correspondingly to the
case of new subscriptions.
§ 18. The ordinary shareholders shall have the option
of associating with themselves shareholders en commandite. Such shareholders shall not be responsible for
the obligations of the company to an amount exceeding
what they have paid in to the company or undertaken
to pay in. Shareholders en commandite may not be
included in a company for amounts exceeding the half
of the ordinary capital. The fund subscribed by shareholders en commandite shall be available equally with the
ordinary capital for meeting all the obligations of the
company, but, on the liquidation of the affairs of the
company, the shareholders en commandite shall have the
right to the repayment of their subscriptions before any
distribution to the ordinary shareholders may take place.
A share en commandite shall have the same face value as
an ordinary share, and shall be issued in favor of a definitely named person.




217

National

M on et ar y

Commission

Shareholders en commandite may take no part in voting
at general meetings on matters other than the election
of auditors, and they shall be eligible for election as
auditors.
§ 19. Every ordinary shareholder shall furnish to the
company a declaration, signed by himself and witnessed
by two persons, setting forth the shares he owns in the
company. Before such a declaration is supplied, he may
not receive any share of profits from the company or exercise any other of the rights of a shareholder.
§ 20. An ordinary shareholder shall not be entitled to
withdraw from the company during the term of its charter, unless the company assent thereto.
The same holds of the estate of a deceased shareholder.
When, however, the shares belonging to such an estate
become, through inheritance or marriage, the property
of a successor in title who is qualified under § 9 to be an
ordinary shareholder, and he has made such a declaration
as is specified in § 19, the other heirs to the estate are discharged from the company.
Shareholders en commandite may transfer their shares
to others, after notice to the directors of the company,
and by the observance of those forms which the company
may prescribe for such transfers.
§ 21. Should an ordinary share have been transferred,
otherwise than by inheritance or marriage, to a new
owner, the latter may not exercise any of the rights of a
shareholder before the company has approved the transfer, except that he may, if § 9 places no obstacle in the
way of his acceptance as an ordinary shareholder, after




218

The

Swedish

Banking

System

making such a declaration as is specified in § 19, draw such
share of profits as falls to t h e shares he owns and similarly
the share arising out of the liquidation of t h e company.
I n t h e interval between an ordinary general meeting
and t h e next following ordinary general meeting of the
company, the rights of the company in the m a t t e r of the
transfer of shares are assigned to the board of directors,
except in the case treated in the third paragraph of this
section. A summons to a meeting at which such questions
of share transfer are to be dealt with shall contain a statement t h a t questions of t h a t character will be brought
forward. Should the transfer fail to be approved unanimously b y t h e members of t h e board present, t h e question
shall be referred for decision to the ordinary general
meeting. Transfers approved by the directors shall be
notified at t h e next following ordinary general meeting.
Should an o r d i n a ^ shareholder desire to transfer the
last of t h e shares he holds, or should a director desire to
transfer any of t h e shares he held when he was last elected
as a director, such transfer shall require t h e approval of
an ordinary general meeting.
§ 22. The board of directors shall provide for t h e keeping of a special book at the head office of the company, in
which all shareholders, whether ordinary shareholders or
shareholders en commandite, shall be registered and a
record kept of t h e shares each holds.
On t h e transfer of a share to a new owner and t h e
approval of his entry into the company, a record of t h e
fact shall be entered in t h e register.
I t shall be incumbent on t h e board of directors to permit any who desire it t o consult t h e register of share-




219

National

Mo n etary

Commission

holders during the hours at which the bank is open to the
public, and, on payment therefor, to obtain an extract
from the register duly attested by the proper official.
§ 23. So long as a banking company endures, the
paid-up ordinary capital, and the special fund provided
by shareholders en commandite, may not be diminished by
division or other repayment to ordinary shareholders.
§ 24. Of the yearly profits of the bank, at least 15
per cent shall be assigned for the formation of a reserve
fund. When the reserve fund amounts to 50 per cent of
the company's ordinary capital, further assignments to it
may cease; should the reserve fund be reduced below the
amount named, assignments to it shall be resumed.
There shall always be assigned to the reserve fund such
amounts as may be secured on the subscription of shares
over and above the face value of the shares, and also, in
case the right to shares have been annulled, whatever may
have been paid up on such shares or may be realized on
the security deposited in respect of them.
The reserve fund shall only be applied to meeting losses
which have occurred in the conduct of the bank's business
as a whole .and which can not be met out of other funds
assigned for future disposal.
§ 25. In case a division of profits has been resolved on
and carried out while a banking company continues in
business, but, in accordance with the latest duly audited
accounts, the funds for the same can not be provided
without the transgression of the provisions of §§ 23 and
24 in regard to the funds of the company,* those shareholders who have received any part of such profits




220

The

Swedish

Banking

System

shall be required to refund the amounts received, and
those who took p a r t in the decision to make the division
shall be responsible, each for all and all for each, for any
losses which m a y arise in connection with such repayment.
§ 26. Before a banking company is registered, it can not
secure rights or incur obligations, nor can it appear in any
capacity before a court of law or other authority.
Should any obligations be incurred on behalf of the
company before its registration, those who incurred such
obligations shall be responsible for the same as for their
own debts, each for all and all for each.
CHAPTER

II.—Of the business to be transacted.

§ 27. A banking company may not trade in other
things t h a n gold, inland and foreign bills of exchange, and
interest-bearing paper.
Real or personal property, pledged or mortgaged in
favour of the company, which may be sold by auction,
may be bought in by the company in order to protect its
claims, b u t shall be disposed of again as soon as this can
be effected without loss.
A banking company may acquire real estate needed for
its office accommodation.
A banking company may not accept as security either
its own share certificates or the certificates representing
ordinary shares in any other banking company.
§ 28. A banking company may not issue, on printed or
engraved forms, its promises to pay, whether to a specified
person, to order, or to bearer.
§ 29. On the deposit of money with a bank to remain
for a defined period of time, with or without interest, the




221

National

Monetary

Commission

receipt issued by the bank in respect of such deposit shall
be in favour of a person named therein, and shall contain
the statement that the receipt may be transferred only
to a person specified by name, the transfer being required
to be notified to the bank for the security of the new
owner.
On funds deposited on accounts designated as savingsbank accounts, or on accounts of a similar character,
interest may not be paid on a greater sum than 3,000
kronor standing to the credit of any one depositor.
Further, the bank shall not enter into any obligation to
repay such deposits otherwise than after a specified term
of notice, which term shall not be less than one week;
should it appear to the directors that such a course involves no inconvenience, they may, in special cases, grant
repayment without waiting for the termination of the
period of notice.
CHAPTER

III.—Of the administration and management, and
of general meetings and audits.

§ 30. The ordinary shareholders shall elect from among
themselves a board of directors consisting of at least
five members, to represent the company. These directors shall be resident in Sweden. The term for which a
director is elected may not exceed five years. A director
may resign his office, even though the term for which he
was elected has not expired, if his resignation be accepted
by a vote of a general meeting of the shareholders.
Any limitation of the rights of the directors to represent
the company shall have no force as against anyone who is




222

The

Swedish

Banking

System

not proved to have had knowledge of such limitation.
A resolution containing any such limitation m a y not be
registered.
§ 31. The company m a y empower, or m a y authorize
the directors to empower, a person to affix t h e signature of
the company, even though he be not a member of the
board of directors.
As to t h e limitation of such power to sign fo/ the company, the law shall be as is stated in the second paragraph
of § 30.
§ 32. Written contracts, made on behalf of the company, shall be signed on its behalf with its official title.
In signing on behalf of the company, those who are empowered to affix its signature shall also sign their own
names.
In case any contract, made on behalf of t h e company, is
not duly and properly signed on its behalf, for the consequences of such defect or omission those who signed the
contract shall be responsible, each for all and all for each,
as for their personal obligations.
§ 33. The directors may appoint an official who shall,
on behalf of the company, enter and defend actions at
law, conduct cases in which it is involved, and act as its
advocate on the trial of such actions.
Such authority as is specified in § 31 may, however, not
be conferred except on the direction of the company.
§ 34. At meetings of the board of directors, t h a t shall
be the valid decision of the board in favour of which a
majority of those voting are found in agreement, so far
as it is not otherwise provided in the articles of association,




223

National

Monetary

Commission

but in case of equality of votes, the chairman's casting
vote shall decide.
A director may not take part in the decision of any
question in which his private rights are in conflict with
those of the company.
§ 35. It shall be the duty of the directors, in the performance of their functions, to observe those special
instructions which may have been given by the company
and are not in conflict with the laws or constitution of
the country or with the articles of association.
§ 36. The rights of the shareholders to take part in the
affairs of the company shall be exercised through general
meetings.
It is forbidden to any to take part, whether on his own
behalf or acting on behalf of others, in the decision of any
question in which his private rights are in conflict with
those of the company; and in particular a director may
not take part in the decision of a general meeting regarding freedom from liability for acts of management for
which he is responsible, nor may he take part in the election of any auditor.
There shall be provision made by the directors for the
preparation of a report of the proceedings of general meetings, showing who of the shareholders have taken part in
the business of the meeting, and the number of shares
for which each of them has the right to vote. Not later
than fourteen days after the meeting this report shall be
accessible to the shareholders.
§ 37. A decision to alter the articles of association or
to wind up the company for any reason other than is




224

The

Swedish

Banking

System

specified in §§ 49, 50, 52, or 59 shall not be valid unless
all the ordinary shareholders have agreed thereto, or
unless it be carried at two consecutive general meetings,
of which at least one shall be an ordinary general meeting,
and be supported by at least two-thirds of those voting at
the later of such two general meetings.
If the articles of association impose any further conditions on the validity of such decisions as are now in
question, these shall also be fulfilled.
Alterations in the articles of association shall not be
valid unless they receive the approval of the Crown.
§ 38. In regard to votes and decisions at general meetings referred to in §§ 36 and 37, in case other provisions
are not contained in the articles of association, the following shall apply: Every share confers the right to one
vote; the vote of absent shareholders may be given by
proxy; that shall be held to be the decision of the company for which the greatest number of votes is given;
and in elections, in case of equality of votes, lots shall be
drawn to determine the result, but in other questions that
view shall prevail which is supported by the majority of
votes cast, or, in case of equality of votes, by the chairman of the meeting.
§ 39. The ordinary general meeting shall be held within
four months after the close of each calendar year. At
the meeting the board of directors shall present its report
and the accounts for the year last closed, together with
the report which, in accordance with § 46, is required of
the auditors.
At least eight days before an ordinary general
meeting the directors shall ensure that a statement of
22150—10—15




225

National

Monetary

Commission

the business to be brought before the meeting shall be
available at the bank's head office to the shareholders.
Business which is not specified in this statement may
not be decided at the meeting unless with the concurrence of all present, unless it arises directly out of the
annual report, the accounts, or the auditors' report, or
it is provided in the articles of association that it shall
be decided at the meeting.
A shareholder desiring to bring any business before the
meeting shall send written notice thereof to the directors at least fourteen days previous to the meeting.
§ 40. The annual report required in § 39 to be made by
the directors and submitted to the general meeting shall
expressly state the amount of the profit or loss which has
resulted from the business of the year.
The accounts referred to in the same section shall
exhibit, respectively, the income and expenditure of the
year covered by the accounts, and the assets and liabilities at the close of the year. The assets may not be
entered at amounts in excess of their actual value. In
particular, doubtful claims shall be entered only at such
amounts as are estimated to be realized on them, and bad
debts shall be written off.
The report and accounts shall be placed in the hands of
the auditors at least one month before the meeting, and
the report and accounts, together with the auditors'
report, shall be made accessible in adequate numbers of
copies to all ordinary shareholders at the head office of
the company.
§ 41. At the meeting at which the annual report of the
directors, and the accounts, together with the auditors'




226

The

Swedish

Banking

System

report, are presented, there shall be considered the question of granting to the directors freedom from liability
in respect of the period covered by the report. If a
motion to defer the decision of the question be supported by holders of shares amounting to at least onetenth part of the entire ordinary capital, such deferment
to an adjourned meeting to be held within two months
may not be refused.
If the discussion of the administration of the company
during the period covered by the report be not concluded
within a year from the date of the presentation of the
report, the effect shall be the same as if freedom from
liability had been granted to the directors.
Without regard to the grant of freedom from liability
the company shall be entitled, within two years from the
date of the presentation of a report to a general meeting,
to institute proceedings against any director who may be
shown to have knowingly made false statements in the
report, in case these can be regarded as bearing on the vote
of freedom from liability.
§ 42. The directors may, when they find it desirable to
do so, summon a special general meeting.
Such a meeting shall be summoned when shareholders
representing at least one-tenth part of the entire ordinary
capital, or such less part as may be specified in the articles
of association, make a written demand to that effect, specifying the purpose of the meeting.
At a special general meeting no business shall be decided
which was not specified in the notice summoning the
meeting.




227

National

Monetary

Commission

§ 43. In case the directors have neglected, within fourteen days after the presentation of a demand such as is
specified in § 42, to summon a general meeting to be held
within one month, unless otherwise provided in the articles
of association, or in case the directors neglect to summon
the ordinary general meeting in the regular course, the
local representative of the Crown shall, on demand made
by a shareholder, at once issue notices summoning a
general meeting.
§ 44. If, in the opinion of the board of directors or of
any director or shareholder, a decision arrived at by a
general meeting has not been made in proper order, or is
in conflict with the laws of the country, or the constitution,
or with the articles of association, they or he shall be
entitled to take proceedings against the company within
two months of the date of such a decision. If this be not
done within that period the right to take action is lost.
What is here provided in respect of the challenge of a
decision of a general meeting shall also apply in case a subscriber of shares desires to challenge the votes of a meeting
such as is treated of in § 4.
§ 45. Regarding the right of a director to accept service
in such proceedings on behalf of the company the rules of
civil procedure shall apply. What applies in such a case
shall also apply equally in the case of agents of other
public authorities in their relations with the company.
Should the directors desire to challenge a decision arrived
at by a general meeting, or otherwise proceed against the
company, the shareholders shall be called together to appoint a representative to appear on behalf of the company




228

The

Swedish

Banking

System

in the matter at issue. The writ shall be regarded as duly
served when it is laid before the meeting; but in such cases
as are dealt with in § 44 the right of the directors to proceed is preserved if within the time there specified the
notices have been issued calling a meeting without delay.
§ 46. The shareholders shall elect auditors yearly for
the consideration of the administration of the company
by the directors and of the accounts of the company. At
least each second year one of these auditors shall be
changed.
An auditor elected by the shareholders may resign his
office, although the term for which he was elected has not
expired, if his resignation be accepted by a general
meeting.
§ 47. Auditors shall have the right to have access to all
the company's books, accounts, and other records; and
the directors may not withhold any information regarding
the management of the company which is demanded by
an auditor.
Should the examination of the affairs of the company
afford occasion therefor, the auditors may demand in
writing, with a statement of the reasons, that a special
general meeting shall be summoned by the directors. In
case such a demand be made, the provisions of § 43 shall
apply.
§ 48. Should the auditors in their report have knowingly
made a false statement, or deliberately avoided calling
attention to any such statement in the report or accounts,
or in the performance of their duties have shown grave lack
of care, those who are at fault shall be liable to the com-




229

National

Monetary

Commission

p a n y for t h e resulting loss, each for all and all for each.
Actions in such cases m a y not be brought after t h e lapse
of two years from the date of laying t h e auditors' report
before the general meeting.
CHAPTER

IV.—Of the winding up of a banking
and of the renewal of its charter.

company,

§ 49. Should a banking company be shown, b y its duly
audited accounts, to have incurred such losses t h a t t h e reserve fund and 10 per cent of t h e ordinary capita! is
lost, the directors shall, not later t h a n t h e day on which
t h e auditors' report is presented, summon a general meeting to be held on t h e earliest day permitted by the articles
of association; and t h e directors shall send a notification
of such meeting without delay by registered-letter post to
every ordinary shareholder whose address is known.
T h e summons to t h e meeting shall contain a s t a t e m e n t
t h a t such losses as are here specified have been incurred.
Should the ordinary shareholders subscribe, either before or at such a general meeting, such a sum as m a y restore t h e capital to its prescribed amount, t h e company
shall be entitled to continue its operations; should this
subscription not be secured, or should t h e amounts subscribed to replace the lost capital not be paid in within
three months from the date of the meeting, t h e company
shall be dissolved, and proceedings in liquidation shall be
taken.
Those shareholders who have t h u s subscribed shall be
entitled to be repaid t h e a m o u n t of their contributions,
with interest at 6 per cent per annum, out of t h e realized




230

The

Swedish

Banking

System

profits of the company before any further dividend is
paid on the ordinary shares. Should the company be
wound up before the repayment of such contributions
has been made in full, thereafter the payment of the
debts of the company, and of the sums contributed by
shareholders en commandite, if such be included in the
company, the balance of the amount contributed as above,
but without interest for the time subsequent to the cessation of business, shall be paid out of the assets of the company, so far as they may suffice to cover it, before any
other division of assets among the ordinary shareholders
is made.
Should it appear in the course of any financial year that
there is reason for believing that such losses as are dealt
with in this section have been incurred, it shall be the duty
of the directors to cause the accounts to be made up without delay and a balance sheet prepared, and to summon
the auditors to take the same under examination.
§ 50. A banking company shall also be dissolved and
proceedings in liquidation be taken—
In case the company has not commenced business
within a year from its formation; in case the ordinary
capital has not been fully paid up within a year from the
date of the commencement of business by the company;
in case the number of ordinary shareholders has been
reduced below the number specified in § 9 and an adequate
number of new shareholders has not been admitted within
three months; or in case the period for which the charter
was granted expires without the grant of a new charter.
§ 51. Should a banking company not be dissolved
although the conditions have arisen which in accordance




231

National

Monetary

Commission

with § § 4 9 and 50 require dissolution, those who, with
knowledge of those conditions, t a k e p a r t in a decision t o
continue t h e operations of t h e company, or act on its
behalf, shall be liable for the obligations which m a y be
incurred, each for all and all for each, as for their own
obligations.
§ 52. Should the King declare t h a t a banking comp a n y has forfeited its charter, the company shall be
regarded as dissolved from the day when such a declaration is made.
§ 53. I n case a banking company is dissolved for reasons other t h a n those specified in § 59, its liquidation shall
be conducted by the directors acting as liquidators, unless,
as a consequence of provisions of t h e articles of association, or of a resolution of the company, one or more
special liquidators are appointed. The liquidators shall
hold office as such until the liquidation is completed, b u t
m a y be removed from their office at any time by the
company itself.
§ 54. I t shall be t h e d u t y of the liquidators to summon without delay a meeting of the company's unknown
creditors, to schedule its assets and liabilities, and t o
draw u p a balance sheet.
As soon as it m a y be effected without obvious injury,
t h e property of t h e company shall be realized in cash.
§ 55. The powers of the liquidators to represent t h e
company and their obligations shall be determined in
t h e same manner as applies to t h e directors.
§ 56. The official title of a company in liquidation shall
be used with the addition of the words " i n liquidation.''




232

The

Swedish

Banking

System

In general the provisions of § 32 in regard to the signing of contracts which are entered into during the regular
existence of the company, and in regard to the consequences of neglect in respect to these formalities, shall
apply in like manner during a company's liquidation.
§ 57. Until the period fixed for the presentation of
claims has terminated, and all known debts have been
paid or the funds necessary for their payment have been
reserved for that purpose, the assets of the company may
not be divided among its shareholders. Should any such
division be made, in the event of the company's incapacity
to fulfill its obligations, repayment by shareholders of
what they have thus received shall be required.
§ 58. If a shareholder is not satisfied with the conduct
of the winding up, or the arrangements made in the course
of the liquidation, he shall commence 'an action before the
appointed court within a year from the date of the completion of the liquidation. If this be not done, the right
of action is lost.
§ 59. In case of bankruptcy, the company shall be
deemed to be dissolved on the day on which its petition
in bankruptcy is filed, or if its creditors present a petition
from the date of issue of public notice thereof. Information of proceedings in bankruptcy shall, concurrently
with their publication, be sent for registration at the
direction of the court or judge concerned.
§ 60. In the course of bankruptcy proceedings, the company shall be represented by its directors, or, in case it
have been dissolved before the commencement of proceedings in bankruptcy, by its liquidators. New directors




233

National

Monetary

Commission

or new liquidators may, however, be appointed in the
regular course during the continuance of the bankruptcy
proceedings.
§ 61. Should a banking company be made bankrupt
within two years of the presentation of any annual report to a general meeting of the company, the bankrupt
estate shall have the right to proceed against the management in respect of the financial year covered by that report.
Should bankruptcy occur within two years from the
presentation of any auditor's report to the company, it
shall be open to the bankrupt estate to take such proceedings against the auditors as are specified in § 48.
The proceedings treated of in this section shall be commenced within a month from the declaration of bankruptcy, or such further period as may be fixed by the company in accordance with the foregoing provisions. In
case they be not so commenced, the right to take them is
lost.
§ 62. A banking company desiring the renewal of its
charter is required in accordance with § 1 to make application for renewal not less than sixteen months before
the expiration of the term of the then current charter.
A resolution in favor of such application must be
adopted at an ordinary general meeting held at least
twenty months before the expiration of the current charter.
§ 63. Ordinary shareholders who may not desire to
continue as such under a renewal of the charter shall be
entitled, on giving notice to the directors before the general meeting referred to in § 62, to withdraw from the




234

The

Swedish

Banking

System

company on the expiration of the term of the then current
charter, and to receive t h a t share of the company's net
assets which falls to them as shown by the duly audited
accounts.
CHAPTER

V.—Of

registration.

§ 64. T h a t registry, a t which those particulars shall be
recorded which are required by this law to be supplied for
the purpose of registration, or the inscription of which in
the register is or shall be otherwise required, shall be determined by t h e Crown.
§ 65. Application for the registration of a banking company shall be made by the directors, and shall contain a
statement b o t h of t h e full names and addresses of the members of the board of directors, and also of those who are
authorized to affix the company's signature, and shall be
accompanied by—
1. The royal approval of the articles of association in
two attested copies.
2. A record showing t h a t a board of directors has been
elected.
3. A statement of the board of directors, duly signed by
them, of t h e amount of the subscriptions to ordinary shares
with a deduction for oversubscription should t h a t have
occurred, and of the amount actually paid up both of the
ordinary capital, and also, in case shareholders en commandite have been admitted into the company, of the amount
paid up by t h e m on the fund which they have subscribed.
4. A list of the ordinary shareholders, with a statement
of the number of shares held by each of t h e m .




235

National

Monetary

Commission

There shall also be attached to the application—
In case subscriptions have been invited to the capital
fund, all the subscription lists in the original and an attested copy of each, with a record showing that the resolution in virtue of which the company has been formed
has been passed with the required formalities, or
In case the founders have taken up the whole of the
shares, the agreement made in this respect either in the
original or in an attested copy.
§ 66. Not later than four months after the termination
of the period fixed, in accordance with § 13, for the final
payments on the ordinary shares, if a notification to the
effect that the capital has been paid up in full have not
previously been made, the board of directors shall furnish
for registration a declaration signed by the members of the
board of the extent to which the capital has been fully
paid up.
§ 67. Any resolution authorizing an increase of capital
by a new subscription shall, whether it involve any alteration
of the articles of association or not, be reported for registration by the directors. Its registration may not be
granted unless the registry have been notified that the
capital previously issued has been fully paid up.
Not later than one month after the time fixed for the
final payments on the new shares, the board of directors
shall furnish for registration both a statement of the
amount paid up on the new shares, which statement shall
be signed by the members of the board, and a list of the
proprietors of the new shares.
§ 68. When any record of a change in the ownership of
any ordinary share has been entered in the book referred




236

The

Swedish

Banking

System

to in § 22, a statement of t h a t fact shall be furnished
without delay by t h e directors for registration.
§ 69. In case shareholders en commandite have been admitted t o the company before the filing of the application
dealt with in § 65, immediately after the conclusion of t h e
period fixed for the completion of payments on t h e shares
en commandite, unless a notification t h a t they have been
fully paid up be previously furnished, a statement shall be
furnished by the board of directors, which shall be signed
by the members of the board, of the amount paid up on
these shares.
§ 70. If, after the filing of t h e application dealt with in
§ 65, a resolution be passed for the admission of shareholders en commandite, this resolution, even if it do not
involve any alteration of the articles of association, shall
be reported for registration by the directors without
delay.
Not later t h a n one m o n t h after the termination of the
period fixed for t h e completion of payments on the new
shares a statement shall be furnished by the board of
directors, which shall be signed by the members of t h e
board, of the amount paid up on the new shares.
§ 71. Alterations in the articles of association shall be
registered. The directors shall, without delay, file an
application for registration, accompanied by two attested
copies of t h e royal approval of t h e alterations in question.
§ 72. Changes in t h e membership of t h e board of directors, and of those empowered to sign on behalf of the
company, shall be immediately notified b y t h e directors
for registration.




237

National

Monetary

Commission

§ 73. A dissolution of the company, in accordance with
§ 53, shall be immediately notified for registration by the
liquidators, with a statement of those who are empowered
to conduct the liquidation and of those who are empowered to sign on behalf of the company. If any liquidator
ceases to act, or a new one be appointed, or there be any
change in those empowered to sign on behalf of the
company, information in respect of such changes shall
be immediately furnished for registration by the liquidators. When the liquidation is completed it shall be
the duty of the liquidators to furnish a record of that
fact for registration without delay.
§ 74. Records for registration shall be furnished in
writing and be accompanied by the fees fixed for registration and for the public notice thereof. In case records
be sent by a messenger or through the post the signatures
to them shall be attested by witnesses.
When application is made for the registration of a
banking company, each of those who are empowered to
sign on behalf of the company shall at the same time
write the official signature in the register or in a special
supplement thereto, unless the signatures are affixed to
the form of notification and duly attested by witnesses.
A similar procedure shall be followed when a notification is made that any person is authorized to sign on
behalf of a company previously registered.
§ 75. Should registration be refused, anyone not content to accept this decision shall be entitled to appeal to
the King not later than 12 o'clock on the sixtieth day
from the date of the decision.




238

The

Swedish

Banking

System

§ 76. In respect to banking companies, in addition
to the preceding provisions of §§ 64-75, there shall apply
the provisions regarding registration in §§ 24 and 68-75
in the law respecting joint stock companies.
CHAPTER

VI.—Of inspection.

§ 77. Before a banking company commences business
there shall be produced to the local representative of the
Crown a proof—
That the registration of the company has been publicly
advertised as required in § 71 of the law respecting jointstock companies; that at least 20 per cent has been paid
up on the ordinary capital, and that a contract has been
entered into*and a pledge of security, approved by the
local representative of the Crown, has been provided for
the payment of the remainder; and that each of the
ordinary shareholders has furnished the company with
such a declaration as is specified in § 19.
§ 78. It shall be notified by advertisement in the Official
Gazette when a banking company begins its business and
also when a banking company is dissolved for other
reason than bankruptcy; information of these dates shall
also be sent to the Department of Finance.
§ 79. The bank inspector appointed by the Crown shall
be entitled to summon a meeting of the board of directors
when he judges it to be necessary to do so. In like manner the bank inspector, on the authority of the head of
the finance department, may summon a special general
oThe rendering "district governor" may perhaps convey more clearly
the position of the official designated here and previously as the "local
representative of the Crown."




239

National

Monetary

Commission

meeting of the company if the board of directors have
failed to issue a summons for such a meeting at the request of the inspector. The bank inspector may attend
the general meeting, and also the meeting of the board
which he has summoned, and may take part in the discussions thereat.
§ 80. It shall be the duty of the board of directors:
At all times to place the accounts and records of the company at the disposal of the local representative of the
Crown, of the officer appointed by him for making such
inspection, of the bank inspector, and of any special investigators who may be appointed, if they deem it desirable,
by the Crown or by the head of the finance department.
Immediately after the close of each month-, in the presence of an officer appointed by the local representative
of the Crown, and in accordance with a schedule determined by the finance department, to draw up a summary
showing the assets and liabilities of the company, and a
statement of the rates of interest on deposits and on loans
and the discount rates of the company on the day to which
the summary applies, and to forward this summary without delay to the finance department for publication by
that department.
In general to supply to the head of the finance department, to the bank inspector, to the local representative
of the Crown, and to the officer appointed by him, all the
information regarding the company which they may demand; on the completion of the audit, to forward without
delay to the finance department the report of the directors,
the accounts and the auditors' report, and to cause the last-




240

The

Swedish

Banking

System

named report to be inserted in the Official Gazette; and
in case the head of the finance department finds reason
for supposing that the company has incurred such losses
that the reserve fund and 10 per cent of the ordinary capital is lost, on demand made by that official, to cause a balance sheet to be drawm up and to summon the auditors to
examine the accounts.
§ 81. It shall be the duty of the officer mentioned in
§ 80 (as appointed by the local representative of the
Crown) to communicate to the bank inspector all the
information relating to the company which is secured by
him.
§ 82. In that examination of the administration of the
board of directors and of the accounts of the company
of which § 46 treats, there shall also take part an auditor
appointed by the local representative of the Crown.
§ 83. If the board of directors or the general meeting
decide on a course of action which is in conflict with the
law or with the regulations applicable to the company,
the local representative of the Crown shall have power to
forbid the carrying out of the resolution. He shall also,
in case such a course of action has been entered upon as
is here in question, have the right to require the directors
to correct the improper procedure, and also have the right
to carry out what the law and the company's articles of
association require of the directors. Such a demand on
his part may, however, not be made in cases in which
the breaches of the law which are in question are punishable under the criminal code, and in questions relating
to the management or bookkeeping of the company the
22150—10—-16




241

National

Monetary

Commission

prohibition or demand, to which reference is here made,
may not be issued by the local representative of the
Crown except at the instance of the bank inspector.
In more serious cases of deviation from the provisions
of the law or of the articles of association of the company, the King may declare the company's charter
forfeited.
§ 84. If a breach of the provisions of § 10, paragraph
3, take place, the local representative of the Crown shall
have power to require its cessation.
§ 85. When communicating any caution or prohibition
under this law, the local representative of the Crown shall
have power to determine the amount of the fine in respect
thereof, and to impose the same.
§ 86. Appeal may be made to the King in respect of
any decision of his local representative in matters arising
out of this law, but the decision shall go into effect unless
the King orders otherwise.
§ 87. If a banking company be dissolved for any
reason other than is specified in § 59, the head of the
finance department shall appoint an officer who shall
attend the meetings of the liquidators, with the right to
take part in their discussions and generally to watch the
course of the liquidation.
§ 88. The banking company shall be required to remunerate the officers appointed in accordance with § § 80 and
87, and the auditor mentioned in § 82. The authorities
which appoint the said officers or auditor shall have the
determination of the amount of such remuneration.




242

The

Swedish

CHAPTER

Banking

System

VII.—Regulations in regard to penalties.

§ 89. Whoever in a notification for registration shall
knowingly make a false statement, shall be liable to a fine
of not less t h a n 50 nor more t h a n 2,000 kronor, unless
t h e offense be one for which punishment is provided in
the criminal law.
The same shall hold in case a director knowingly causes
false entries t o be made in the book referred t o in § 22.
§ 90. Anyone offending against t h e regulations laid
down in § 13 (par. 2) or § 16 (par. 2) or any director failing to regard the notifications made under § 22, § 66, § 67
(par. 2), or §§ 68, 69, 70, 71, or 72, shall be liable to a fine
of not less t h a n 5 nor more t h a n 500 kronor.
The same shall hold for a liquidator who does not fulfill
t h e duties laid upon him by § 73.
§ 91. Fines and penalties which are exacted under this
law shall be paid t o the Crown. I n case of inability t o
pay such fine or penalty in full, t h e substitutionary punishment shall be such as is fixed in the ordinary law.
CHAPTER

VIII.—Special

regulations.

§ 92. Should the directors, liquidators, or shareholders
transgress the provisions of this law or of the articles of
association, they shall be liable for all the injury resulting
therefrom, each for all and all for each.
§ 93. The articles of association of a banking company
shall specify—
1. The official title of t h e company.
2. The classes of business which may be undertaken b y
t h e bank.
3. The place in which the administrative offices shall
be situated.
4. The amount of the ordinary capital or, in case the
ordinary capital may, without alteration of the by-laws,




243

National

Monetary

Commission

be fixed at a greater or less amount, the minimum capital and the maximum capital.
5. The amount of the face value of each share.
6. Whether shareholders en commandite may be admitted to the company, and if this be permitted the
amount of the share in the profits to which such shareholders shall be entitled, and in general those regulations
which are found desirable for such a case.
7. The number of directors, and of substitutes for them,
the time of their election, and the powers intrusted to the
board of directors.
8. Whether more than one ordinary general meeting
shall be held yearly, the time and place for holding such
meetings, and the nature of the business to be transacted
at the ordinary meeting or, if more than one be held, at
each of them.
9. The manner in which general meetings shall be summoned and other information communicated to the ordinary
shareholders.
10. The regulations for voting at general meetings and
for decisions of such meetings so far as they may differ
from what is laid down in respect to these matters in §§
37 and 38.
11. The number of auditors and of substitutes for them,
the time of their election, and the time at which they shall
audit the accounts.
§ 94. In questions not otherwise provided for by law, a
banking company shall be within the jurisdiction of the
lower courts in the place in which, in accordance with the
by-laws, the administrative offices are situated.
§ 95. The relations of clients to a banking company may
not be made public.




244

The

Swedish

Banking

System

§ 96. [Contains a list of laws repealed by the present act.]
§ 97. This law shall be in force from January 1, 1904.
Nevertheless the provisions of § 10 (par. 3) shall not apply
to companies which have obtained the royal approval of
their by-laws before this law shall be in force, and §§28
and 29 in the royal ordinance of June 21, 1874, respecting
enskilda banks with the right of issuing their own bank
notes and the second paragraph in the law of May 27,
1898, respecting enskilda banks which have resigned their
rights of note issue, shall continue in force as regards each
such bank until the liability of the bank in respect of
outstanding notes shall cease.
Questions regarding rights and obligations arising before
this law goes into force shall be decided in accordance with
previous statutes.
The Crown shall issue the transitional regulations which
may be found requisite in regard to the registration of
banking companies whose by-laws have been approved
before this law goes into force.
On application from any enskilda bank which has had
the right of note issue the King will, unless the bank is in
the hands of a receiver, issue a proclamation notifying
everyone who may be in possession of any note of the bank,
to present such note for redemption at the bank within
two years from the date of the proclamation, or lose all
right to payment thereof. At least four times in each of
the years the proclamation shall be read in the churches
of the Kingdom and inserted in the Official Gazette.
NOTE.—The law of the same date respecting banks with limited liability
follows closely the terms of the above law, except in regard to those matters
in which the differences in the extent of the liability of shareholders requires
differences in the terms of the statutes.




245

APPENDIX

IV.

FORM OF MONTHLY RETURN REQUIRED FROM BANKS.
Summary of the

Banking Company's status on the

ASSETS.
Real estate
Furniture and fittings
Cash:
(a) Lawful gold coin of Sweden
(b) Other gold coin and gold bullion
(c) Other coin, notes of the Riksbank and deposits at the Riksbank
Due from other banks in Sweden
Due from foreign banks and bankers
Sight drafts and short-dated bills and foreign bank
notes
Interest-bearing securities
Shares
Bills discounted and purchased:
Inland bills, No
.value
Foreign bills, No
, value
Outstanding loans:
Secured on real estate, No
, value
Secured on bonds,
No
, value
Secured on shares,
No
, value
Secured on merchandise or material security not
specified above, No
, value
Secured on notes with personal security only,
No
, value
Secured on guaranties, No
, value
Outstanding on credits opened
Credit granted
Number of accounts
Outstanding on overdrafts
Credit granted
Number of accounts
Other assets
Overdue debts on which proceedings have been
taken
Due by bankrupts or firms in liquidation




Total.

LIABILITIES.
Outstanding circulation (this item no longer needed) _
Outstanding bank post bills
Deposits on savings accounts
Number of accounts
Balances of current accounts °
Number of accounts
Time and notice deposits
Number of accounts
Loans
Due to other banks in Sweden:
On deposit accounts
On other accounts
Due to foreign banks and bankers:
Deposits
Loans
Other liabilities
Ordinary capital
Number of shareholders b
En commandite fund &
Reserve fund
Available surplus (includingspecialfunds or suspense
accounts)

&

<-5

Total.
a Two varieties of such accounts are separately specified, one generally bearing interest, the other not.
b These details are not required to be stated by limited liability banks.

The

Swedish

Banking

System

The following is appended to the monthly account:
I hereby declare that the cash in hand of the
Bank
at the close of business on
was verified by me and found
both as a whole and as to the different items specified to be in agreement
with this summary, and that the other statements therein are in agreement
with the bank's accounts, having examined and investigated the same.

(This certificate is signed by the official appointed as
required in §80.)
Rates of interest paid:
On savings accounts
On current accounts
On deposits at—
One month's notice
Two months' notice
Three months' notice
Four months' notice
Six months' notice
Rates of interest charged:
On loans secured on—
Real estate
Other collateral or on guaranties
On open credits—
Interest
Commission
On discounted bills—
Of not exceeding three months' currency
Of longer currencies

(The rates are to be those in force on the last business
day of the month.)
NOTE.—The monthly summary should be forwarded to the department
of finance as soon as possible, and it is desirable that it should be despatched
early enough to be received by the 6th of the month next following that to
which it refers.
In the preparation of the summary it is of special importance that no
variation be made from the prescribed form. The items should be specified
in the order therein set forth, and if any of the headings do not apply to a
bank, they should not be deleted, but inserted with a space for the amount
left blank.




247

National

Monetary

Commission

FORM FOR THE ANNUAL SUMMARY OF BANK ACCOUNTS.
Statement of the
of the year

Banking Company's position at the close
, after the disposition of the profits for the year.
Kronor.

Kronor.

Ore.

The capital of the bank on January
i, i 9 _ _ _ _ :

Ordinary capital
En commandite fund«
Reserve fund
Available surplus (including
special funds or suspense accounts)
Gross profits
Applied from capital resources in
the course of the year
Management expenses
Management expenses as a
percentage of gross profits
Management expenses as a
percentage of ordinary capital and en commandite fund
Written off
Net profits
Net profits as a percentage of
the capital on January i, 19
Applied by the bank to—
Reserve fund
Surplus
Dividends—
On ordinary capital
On en commandite fund__.
Percentage dividend on ordinary capital
Increase of funds by issue of new
shares
The capital of the bank on Decemb e r 3 i , 19
Overdue debts in respect of which legal proceedings have been
taken:
Number
Amount
a This item is not applicable in the case of limited-liability banks.




-9
248

MHIIM MIU..
Do t i t Kronor

t 55|

1 9 0 4

J i n . r-sw. M i r . April

May June

;

M

July

Au£. *i< *r. 5cir.

Novr. C«cr.

Jan. Felir.

1905
May June July

Mar. April

Aug. Sepr. Oetr. Novr. Deer, Jan. Febr.

1906
May June July

Mar. April

Aug. Sepr. Octr. Novr. Deer. Jan. Febr.

Mar. April

1907
May June July

Aug» Sepr.
•

Octr .

Deer. .Ian.

NOV!

Febr

Mi i

iI

I IIII IIIII II I III I ' I I

[ J | | | iocj ir t "I I—fi—H—I—'—I—I—l—I—| • ["'•[" j — j — | — j " " | ' J—\—j—|—p~-j—j—j—{—pj-j—p'j" j—j—j—j—{—j—| j j [—[ J- {—|—f—[—j

A
1
M
M
f\
M M »M MM
H MN
A
•
I i i-'fl I I I I i I I i I I I I I I - I I I I I
I
I III I I I I I I I I ! I I I I
I
\\ A N
/
\
A
I
M MM M M'M
'
I 'I I M I I
I
I
L
MM Ml
M M \\\k
M
M/K W\ \
L \ M MJ \\\ // s/
1
; . ]|!(
—!•• 1-4
— — •- 1 -\—\1 1 "I 1 1 1 1 1 1 1 1 i 1 1 1 1 1 1 1 1
M
1
1 rM T \
1\ \ iN \ n"4>» /
A
n
M
f\
1
'"i 1 • ! 1
i"
M'M
" Mfl i! l l
1
M
1 i M M N L1 11 - Ml \\\Ki IVM n i nKlN' /
//
I
fi n iN Ni/N/ Mi V \ iT\ /
H /
441w " t l
\\ N I / 1 i
M /M \
M
M
Mi 1 i l l
iM
'
I 1 MA M
M
M
'
\i L n N i\ \ M
/
\\\w
f i M
:
i | 1
l
41
1
iM 1 n
LI N
1y
M M
M t1 ••'•4-11 M \\\l\
1 M 1
MA
in 4N\\
1
\\\l
M4M U M/
ui^
M
\rw M nn
if 1
N/
N
M
4M
x
1
iA
\ \A A r 1
1l
ll
i
Mi
\
1
n M
i
rli
r
M/
1M
M 1
x t r0 i=d- I s h1W H ' ' tn M/M n MlM M4* flNM mM ' M irU' M 1 1 1 |Y r
n
AL \
\ /
KrMi
I
1
1
1 ! ft
1
1 MM M M
Ll\1
M
•fin
v I T1 Y A / I r i M - M
1M
i
l
Mi l i l !
i
'
r t l i M4J \ / M H N! AJ I
M 1
•M
I I f i 1 1 1 1 I I i l i t 1 1 1 1 1 1 i 1 1 1 1 1 1 I 1 1 1 1 I l I t I I 1 1 i i 1 ii 1 1 1 I 1 1 ' 1 "*] i 1 1 I I i 1 1 1
I
'M r
M N
I
YHJ
i
i' M\M M i l I > M 1 J
M \
M 4
— i i
1
KC| (I | ¥ | ^ I j i | i | | | i | i j | | i i | | | [ | | i i i | M| | |r i ( i | j i 1 | | i | i i l l
yM .
|| i i |
M 4'
n MM M
•
M r . N
1
J
13
n
1M
' 1
>4 • I M KM
'M
Mi 'M '
l
M
- r- - •' i« '
4 '
M
A
M *M vr iI\ Y
r M
r4
M
i I I I I I 1 I I I 1 1 I I I 1 I I 1 1 1 I 11 i
• M
f*

1

!

LT
TL
\

1
_|. j

Apri 1

May

1908
June July

Aug. 1
Sepr.

f\
1 f/ \ l1\ U
|\
I

\) */ \
t rJ
\ T/

I

\
i
t

\i
>'
>

>--!

t ~~A

>r l

i

1

\ l \ Par
\th. v ff
\ \J
w \
\J\
\

i'l

lI \i\

i

V

1

A

/
(
\
\
\ Ki

h4
i

••' M
L'f M 4 i i T~\t T M t i ' i i i
H i
1

so
,[ 1
f 1 \ \i I

1j

j lop •

i
i

4

!

S1
M

1

|1

1'

(
1

M

j

m

1 •I

M
. .

l ' no! II1 1 1 1 1 K M
i 1
1
M
i

M

4 M
N N i/f

M

1I

\U

h \ \i

\'\

P
v

1 M M- M M
44 M
J

I M FT) A 1 T l T l

1
K
Q
| 1j I j 1 I
— — —
— — i
Hi

| " j—|—|—i———
i

ll

i-1 1 1

m

lj

j

M
I M IM1 M I
M

Ml 10 M*°l 1
MM
I I ' MM M M
I M
I ! ! I I I i 'I I i i i I I I I i I I
i l l

r
i

rT 1 f

!

I 1 p
M 1 I { ]" I

h
o

M r\

r

N in M
MM

l j l

r f

n

t f 4
1--4-4 1 '
11 1 -r-1
11
t
i
l M
l
I 11 t 1 '
—
i
H i — 1 —H———————TH
—1
r H — M M
•
]
r
M

• lI [is M i
M

I ! M r 1M

i

HI i

i

.

|

MH^hH
11 M

III i !!II!IIII
I

MM 1

M

M

M

1i

M

11 I

M

M

1

1

[

|

I

!'"[' TH—ri—H—i——'—i——

H>T -

M
II

s|

fi

:|Mpv

k / i rn

ki M
H

v

i
11

N

M
M I M M M
!l i !Ii1 Ii i II Ii I i II

!

-

—I—s—1—'——fcTrl—-114————1—1———M4—i———i————I—f-4—f—M4—————l— — •' • 1

i

I.

M

'

I

t } 1t i 1 ! J 4
1

l ' i | | | | 1 M M

M
MM

M

'

1

1

11

I

1

1 1

1 M M 1

11 I 1 1

' 1 111 I I I { I I I

1

N

I

i

MM 1 1 Ml

i

M M rT M

rn

n

rj

1

!

1

MT

1

1 Ii

1M

[140

|

M
I I I I l\ J I f\I I 1 *T 1 1 1 I I '1 "t~'l I
1. I ' 1 M 1 P8y ' I
1
I

N

M
WM
M
M 1 '• !/ VJr\• \ M M
H
1
M I I I L' 1 1 1 M M t 1 f I 1 N I
1 i\i i r f M i I 1 I I I 1 1 hv 1 1 1 1

IT

1 _\_ ..{••{

i

—•{ •) '

1

| i 1 iQffl M

l

1 !

1'

X=/ _
I t i i i ' t Mr ^
I! 1 1 1 r

M

1

1
1

~ I M l I 1 1 i l l '1 1 1 i^l"'t i
T

i I I

1

—\ 1
1

Mil—

*\

Ml

I

M

CHART

| | | | | | I I I 1 1 ll
j | | l l I I 1 M 1llll I I 1

M

1

1

M

I
1

I

l

i
l
1 1I I I I

SHEWING

l —Ml—Ml

j j I j [ M [ rj i I j }j j H

BANK OF SWEDEN

I

pr

1 I

M I I I I I I I I 14 M I 14 — I 1
*- 1
1
M 11II1M T T 1 ITM1' "

THE
NOTES I« CIRCUUTION
I N L A N D B I L L S DUCQUNTCD

!

•'
HIH
1 [ 1 M M 1111 111 M i 1 h r
T M l I I I M M i7ct 11 M
1
1 11 1 11 1 M 1 H 1 1
""J"
M
M
j 1II f I M M M M M M M

IH— KlT M

44i

1

M t i 1111111 1

——t—J———-i- ———Mi

1

1

1 T l vMI lI

M i i

1 1 1 1 1 111r 11 1

(Upper Line)

I

illr '

I M

(Middle Line)

1 4—1— -1— L -• i
—

I | _M 1 I 1 1 J | 1 | | 1 | I 1 | | 1 | 1 I 1 j ! | I | 1 | I 1 j | 1
1

I

GOLD HELD IH SWMCN

1 I

1

j1

|, M

I

M

! i1

j

P X - I- M

H TT 4 T
44T
'

M

i

FCHEPtT L.THO. 'iO., W*3f..,i

j | M | | M j i { M' M "!H jj "MMISMI
l
i f
[
r r [ [ |

. (Lower Line)

ON TMt LAST l U S l N l l S B*Y OF IACH WtEK AHO OF EACH UOWTH

i I M I I -i- 4—!

m THC YEARS 1904-1909

1

i
M
i 1
M 1I
M M
M i1 M ! M
i
MM l
M
MM
1
-M U M,l 1M M i M M M 1 M M M i M 1 I M M M MIM M M M M i M M 11 iIM M M M M M ' I 1 1 1 i M M | 1 M M 1 1 M 11 1 1 M 1 M 11 M 1 1 M 1 1 I I I I 1 1 M 1 1 1


Million Million
http://fraser.stlouisfed.org/
Dollars Kronor
Federal Reserve Bank of St. Louis

Y

i

M
111 11 1

4

'

M

1 Hr

i y

M

l BI

1

M

/I M
l | W LJ
t \\y\ M
X l ' 1 I II l \ l I I I I \iH I I I I I I I I
n
•
MM
M
II
1 1 1 1II 1 l\l I I I---1 1 M 1 1 1 1 1 1 I I t 1 M I I M I i \ I I M M
W
M M MMM I| MI1 M 1M1 1 |M1 M M /II |Mksi -| M |
n * M | I | M
M
Mi4

i

M

M J

M1i

N

FOR THE

H M \ I M i l T T T T M TTi i
M
MI M M 1M M M
M MIIM 'i l- '11-1 1 1 1 —i— {J 1t-1J i| " |M |—|—i—i-L) -| 1 1 |-|M|-| --I--HILN—1 |11 14-1iIM11I1I1 '1 M M -1I I
1 M M -1 • -1 i | | M
1 11 M 1 1 1 1 M |
1
1II I
io | I
M '1
M

K

T

MM

1 MM 1 1 1 1 M 1 1 1 1 1 1 1 I I
M ' 1 h 1 M 11 I I i 1 I I 1 I I
II

M
i M
1 I 1 1 1 1 i i 1 1 1 11Ii 1 i

"—M—r

1
iI I

/
i L

""i r

MrM
M N W ly\h
fi K

\

v

'^. .H————rHMMM1
i

•
III III

•MM
/

\\'~\"

M
i ——Ml—'——————1—I—1—I——MMM4"n*" i " t
MM 1
i——ii————^*i——rTi——————1^————H—I———|—H—j
"1
n
rti
1
M
1 Ml
• 44444444^Mi r 1 i M riM 1 / M r l Pi
m
ITT
: 1 ]

M
M
MMMMMMMM I

j—i 1 i 1——H———H——

/I \
M

LJ

ft TT l i n1
rr
\

M

h,'\i

M
I 1 1 1 1 1 1 1 I I 1 l / n I I 1 I M l ! \l I 1 1 1 MIM-MMM U»'l 1 1 FT i M
/ \K
M/ M
/l M T ' 4\ k v
M 1 I 11
!
u 4\M
h t r \\AA I
> \V
NM r h

i

M

i

n
M

U
M \ M H f LJ I 1
1 1
Mi \\\-i-f~\ \T\A 1 1 1 1 1..1 i 1 1 1 1 M 1 y 1TL l - t
M f M/l
1 M
•
l-r\
.4' -i
I
1 y M H1 m1 11 f11 1 i 1 1 1 1 1 1 i I f 1 I I I I 1 1r I t MI 11 1 1 I If 1 1 1 1 1 ! 1 1 I I 1Mi M M
M 11 11
M'Tl
i
1
II I
II M T

•I

H—'—
i T
'
4M
t
M '
J
4'
1 i 1 1 1 i 1 II 1 I 1 1 1 I 1 1 t I I 1 1 1 1 1 1 I 1 1 ! • I 1 i I ! 1 1 I I FI * 1 1 1 1 1 1 1 1 1 1 f 1 i 1 .vAt ! 1 t
[?KI _ L .
1i
H
'
i I i
Mi
^ 11 \
^
I
I
I
/ M r N)
1
r
l
l

!

PI \

J

'

I'lil ' M M M 1 I I M i 1 1 1 1
1 1 1 I'll 1 1 i 1 1 ! 1 1 1 1 1 1 1 1 1 I

r

I

Million Million
Aug. Sepr. octr. Novr. Deer. Kronor Dollars

i I

i\

iP- M
1 1 1 1 t 1 1 1 i 1 1 f I 1 1 1 1 1 1 1 I I 11 I k M1 1 I U ! U 1 M'T i1 1 1 IM 1 F 1 1 1 I 1 1 1
t T
v [
1

1QOQ
™*
May June July

M
1
H.
M1
M \ A M M MIMm\M kMh U
III \ V 4 LMi
i\\
l
I III i \
\
\\\\ K/Y Ll1
\ \\A\\\M
M\ I / 1 \
Mixiii n \ i w l
\
IN/
\VI1 I Mnvl 1 1 \vH 1vl A I J A 111 m
IY
I
Y
\\\
TM
fi,
^
\A ykJJ
M l 1 M/! n \\ H 11 p r i
\\R\U
\\l F { J
1
1
M v
VM 11M I I 1 IY I I11 I I 1
i" 1 m\
\
MM
I1
\\A \
\\\
M
P
y M
1 Mv \Y
Ml

i

f 1 1 11 I I 1 ! 1 Il
v\

! IM
A

I fi

\l\
\\\\ u *

l\

K\

A 1

Mar. April

58

h\
I\\A

A

Jan. Febr.

!

Ii

v

Octr* Novr. Deer.

i '

w l\
\\

r •J^ i

f^ar.

1

Mi

II11111111M1111M

i

J

i

HIILL

t I I I I Hd

} _1 1

i i

I M 11 i i n 11 11 i i i i i i i i i i i i

il M 111 M 11111IJ 1,11IJ i
Million Million
Kronor Dollars