Did you know?
Stockholms Banco also known as the Bank of Palmstruch or Palmstruch Bank in Sweden was the first European bank to print banknotes. The said bank was founded in 1657 by Johan Palmstruch. This bank was to be the precursor to Sveriges Riksbank, the central bank of Sweden.
The story behind Europe’s first banknotes is quite interesting. It so happened that in 1660 the central government had minted new coins of lighter weight than the older ones. This made many depositors want their old, heavier coins back, as they had a higher metal value. This led to a coin shortage problem. To counteract this, Johan Palmstruch, the founder of the bank, started to issue deposit certificates that were issued as a security given to the owner as a right to withdraw the deposited amount in coins at a later date.
These deposit certificates were called as credit notes. They were handed out as loans from the bank and they could be used to purchase anything. Thus in all its utility values, the first banknotes in Europe were invented!
The banknotes quickly became popular as they were more convenient to carry around than the heavy copper coins. As the notes continued to be printed without a reserve backup of money, this led towards a phenomenon we now know as inflation. This culminated in liquidation of the bank and Palmstruch was imprisoned, blamed with the bank's losses.
The government, Riksdag (Swedish Parliament) and Riksen Standers Bank were forced to take over the working of the bank. Due to the failure of Stockholms Banco, this new bank was not permitted to issue banknotes until the 18th century. The bank was later renamed as ‘Sveriges Riksbank’ and remains the central bank of Sweden to this day.
Isn’t it interesting?
Image Courtesy: Risbanken
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