In 1661, Johan Palmstruch’s Stockholms Banco began issuing paper "credit notes" that could be used in payment. The notes solved a practical problem: Sweden’s copper money could be extremely heavy and hard to transport. This early experiment with paper money created new risks when too many notes were issued compared with the bank’s reserves.
Stockholms Banco expanded credit and issued increasing amounts of notes, which undermined confidence in the bank’s ability to redeem them for coin. As more people demanded redemption, the bank could not meet withdrawals and failed. The crisis became a key lesson for how Sweden’s next public bank would be designed and supervised.
On 17 September 1668, the Riksdag of the Estates established the Bank of the Estates of the Realm (Riksens Ständers Bank), the institution that later became Sveriges Riksbank. It was created from the ruins of Stockholms Banco and placed under parliamentary oversight to reduce the chance of another note-driven collapse. Early rules also reflected a goal of keeping the value of money stable.
After the Stockholms Banco failure, Sweden’s new public bank was shaped by caution about paper money. The experience encouraged tighter control over note-like instruments and closer political supervision of the bank’s operations. This helped establish the Riksbank’s long-running identity as a public institution balancing lending needs with monetary stability.
In 1701, the Riksbank received permission to issue "credit-notes," often discussed as early transfer or "transport" notes. These instruments worked in a more limited way than the earlier Palmstruch notes, helping people transfer value without moving heavy coins. The return of paper-based claims also brought new challenges, especially fraud and counterfeiting.
By the mid-1700s, Sweden struggled with inflation and the credibility of paper claims. A key turning point came when notes ceased being reliably redeemable in metal coin, which made their value more dependent on trust and policy choices. This pushed "realisation" debates—how to restore a stable link between notes and metal—into central economic politics.
Counterfeit notes became a serious problem in the 1700s, especially when high-quality imported paper was used by forgers. In 1755, Riksens Ständers Bank moved to produce its own banknote paper by establishing a paper mill at Tumba (Tumba Bruk). Controlling paper quality and security features made Swedish notes harder to fake and strengthened trust in the currency.
In 1776, Swedish leaders announced a major reform to reduce confusion from many coin types and to stabilize value. The reform centered on the riksdaler as the main unit and aimed to bring Sweden back toward a silver standard. This was an important step toward rebuilding confidence in money after long periods of unstable paper value.
On 1 January 1777, the new currency system came into force, putting the earlier reform into daily use. Sweden’s return to a silver standard meant the Riksbank’s banknotes could again be redeemed for silver at a set value, at least in design. Even so, acceptance took time, showing how monetary stability depends on both rules and public trust.
In 1789, Sweden created the Swedish National Debt Office to manage state borrowing and help fund war costs. The office issued interest-bearing debt instruments that quickly circulated like banknotes, creating a second major paper money stream alongside the Riksbank’s. This split the currency into "riksdaler banco" (bank) and "riksdaler riksgälds" (debt office), complicating prices and payments.
During the Russo-Swedish War (1788–1790), Sweden’s fiscal needs increased sharply, and paper instruments were used heavily to raise funds. The debt office’s large issues contributed to instability between different kinds of riksdaler and made convertibility harder to maintain. The episode showed how war finance could overwhelm attempts at stable, metal-backed money.
In 1809, King Gustav IV Adolf was deposed and Sweden adopted a new Instrument of Government on 6 June 1809. The new constitutional framework curtailed royal power and strengthened the rule-of-law approach to governing institutions. For central banking, this political shift mattered because it reinforced the broader trend toward public, rules-based oversight rather than personal royal control.
Sveriges Riksbank (1668–1809)