Stockholms Banco

==The founding of Stockholms Banco==

==The founding of Stockholms Banco==

[[Johan Palmstruch]] had made two failed proposals for the creation of a banking institution in the 1650s before his third proposal, with the addition of a promise to pay half of the bank's profits to the crown, was accepted. [[Charles X Gustav of Sweden|King Charles X Gustav]] thus signed two charters on November 30, 1656 to create an exchange bank and a loans bank. The first of these (which opened in July 1657) took deposits for a fee (and accruing no interest) with the account owner later able to withdraw the money as cash or to write cheques. The second (which opened at the beginning of 1659) provided loans, financed by the bank owners and secured against property. These two departments were combined into Stockholms Banko with Palmstruch as general manager.

[[Johan Palmstruch]] had made two failed proposals for the creation of a banking institution in the 1650s before his third proposal, with the addition of a promise to pay half of the bank's profits to the crown, was accepted. [[Charles X Gustav of Sweden|King Charles X Gustav]] thus signed two charters on November 30, 1656 to create an exchange bank and a loans bank. The first of these (which opened in July 1657) took deposits for a fee (and accruing no interest) with the account owner later able to withdraw the money as cash or to write cheques. The second (which opened at the beginning of 1659) provided loans, financed by the bank owners and secured against property. These two departments were combined into Stockholms Banco with Palmstruch as general manager.

The bank itself was no great innovation, as it was a botched imitation of the large and successful banks in [[Amsterdam]] and [[Hamburg]] that had been founded earlier in the 17th century, but it was hoped that the bank would help to stabilise Sweden's currency. Sweden at that time did not have a single currency, rather there was one [[Riksdaler|''daler'']] minted in [[copper]] (''kopparmynt'') and another minted in [[silver]] (''silvermynt''). As the metal content of a copper ''daler'' had to be worth as much as that of a silver one, this meant that copper ''daler'' were large and heavy plate-sized coins. In practice, however, the silver ''daler'' was worth more and these were often hoarded, so generally only these large ''kopparmynt'' daler were commonly available.

The bank itself was no great innovation, as it was a botched imitation of the large and successful banks in [[Amsterdam]] and [[Hamburg]] that had been founded earlier in the 17th century, but it was hoped that the bank would help to stabilise Sweden's currency. Sweden at that time did not have a single currency, rather there was one [[Riksdaler|''daler'']] minted in [[copper]] (''kopparmynt'') and another minted in [[silver]] (''silvermynt''). As the metal content of a copper ''daler'' had to be worth as much as that of a silver one, this meant that copper ''daler'' were large and heavy plate-sized coins. In practice, however, the silver ''daler'' was worth more and these were often hoarded, so generally only these large ''kopparmynt'' daler were commonly available.

Palmstruch's first major innovation in combining these two banks was to use the money deposited by account holders to finance the loans rather than requiring capital to be provided by himself or the other bank owners. This soon became a problem, however, as deposits were usually short-term and the loans long-term, meaning that deposited money was unavailable to be withdrawn by account holders. This problem was rendered more acute when the copper content of the coins was lowered 17% in 1660 as account holders demanded the return of the copper ''daler'' they had deposited since they were now worth more as metal than as coins. It was impossible for the bank to fulfil these requests as the money had been paid out as loans.

Palmstruch's first major innovation in combining these two banks was to use the money deposited by account holders to finance the loans rather than requiring capital to be provided by himself or the other bank owners. This soon became a problem, however, as deposits were usually short-term and the loans long-term, meaning that deposited money was unavailable to be withdrawn by account holders. This problem was rendered more acute when the copper content of the coins was lowered 17% in 1660 as account holders demanded the return of the copper ''daler'' they had deposited since they were now worth more as metal than as coins. It was impossible for the bank to fulfil these requests as the money had been paid out as loans.