Brief history of Norges Bank
The first known Norwegian coin is a penny attributed to Olav Trygvason, around the year 1000. Minting of coins was a royal monopoly. For long periods no coins were minted in Norway, and monetary needs were then satisfied through import of foreign coins.
4 mark, 1678
A mint was established in Christiania (now Oslo), using silver from the mines and works at Kongsberg. As a memento of that era we still have Myntgaten (Mint Street) in Oslo, c. 100 metres from the site of the royal mint.
Coin production was moved to Kongsberg, where the Mint of Norway (Det Norske Myntverket) is still located, Nybrofossen.
The first Norwegian banknotes. King Christian V granted the Bergen merchant Jørgen thor Møhlen the right to issue and pay with notes, which were supposed to be legal tender from the Åna-Sira valley (Flekkefjord) and north up the coast. The notes were meant to cover a transition period before being redeemed in coin, but were met with distrust and demands for rapid redemption. Møhlen could not meet the demands and went bankrupt.
5 Rigsdaler Courant, 1790
The first issuing bank in Denmark-Norway was established: the Assignations-, Vexel- og Laanebanken - also called the Courantbanken (after the name of the current coin of the realm, Rigsdaler Dansk Courant). It was a private bank, but subject to royal regulation. Apart from issuing notes, it also lent money to the government. There was, however, no restriction on the quantity of notes issued, and far too many were put into circulation. In 1745 the bank had to abandon redemption in silver, and the value of the notes fell. That the state took over the bank in 1773 and continued using it to finance the Treasury was not a great help.
1791 and 1799
In order to clean up the monetary system, in 1791 a new issuing bank was founded, Den Danske og Norske Speciebank, with regulations that were ahead of their time - and three branches in Norway. The regulations did not help, however, as the government used this bank as well to finance its expenditure. In 1799 it was replaced by the Deposito-Cassen, but the same policy continued.
"The state bank collapse" is what the Danes still call the events in connection with the foundation of the Rigsbanken as a new issuing bank on 5 January 1813, in order to put Danmark's monetary house in order. For simultaneously with the establishment of the bank, the currency was sharply depreciated. The Rigsbanken, too, was used to finance the government.
Norway was now as good as separated from Denmark, under Prince Christian Frederick as viceroy. There were bad harvests, and the state was short of money. To raise revenues he issued his own currency, the so-called "Prince's Notes", to supplement the notes from the Rigsbanken branch in Christiania. After Norway passed under Swedish control in autumn 1814, Carl Johan (Marshal Bernadotte) of Sweden regarded them as false, and declared that possessors of such notes would be treated as counterfeiters. For a while the Courantbanken's notes, the Assignation certificates, the Treasury certificates, the Rigsbanken's notes and the Prince's Notes all circulated together, to general confusion.
After a fierce debate, the Norwegian Constituent Assembly of spring 1814 passed the so-called "Eidsvold Guarantee" by 79 to 29: the Rigsbanken was to issue 14 million rigsdalers in new notes - and the Assembly guaranteed the rate personally. Minister Carsten Tank called the decision a national catastrophe and resigned. He was proved right: the guarantee was a broken reed. But in the light of the experience of the issuing banks described above, it was hardly strange that the framers of the Constitution emphasised that a future Norwegian bank "should not advance monies to the State", that is, not lend to the government.
Two years after the separation from Denmark and the union with Sweden, Norges Bank was established by Act of the Storting (the Norwegian parliament) of 14 June 1816. This bill followed work in several committees that replaced one another. The monetary unit was to be the speciedaler (rixdollar), divided into 120 skillings or five ort ("rigsort") of 24 skillings each.
The bank's silver fund of two million rixdollars was in principle to be obtained by voluntary subscription, but this was a huge fiasco. Over the subsequent years, therefore, the fund had to be financed by compulsory levies of coin or noble metals - the so-called "silver tax". Share certificates were issued for the contributions. The Storting had resolved that the headquarters would be located in Christiania if the silver fund could be created by voluntary subscription - if not, it would be sited in Trondheim with district offices in Christiania, Bergen and Kristiansand.
The latter turned out to be the case. The operation started up in small, leased premises in the Stiftsgaarden, Trondheim's old gubernatorial residence, in January 1817. Opening hours were one hour every day for exchange of notes, two hours for disbursement of loans and dividend on the shares. One of the five members of the Board of Directors was to be present two hours a day. The Board met twice a week, chaired by the most senior member; not until 1983 was there a permanent chairman. Most of the bank's management were immigrants or the sons of immigrants from Denmark or the German states. The first year the notes were printed in Christiania and transported to Trondheim for numbering and signing, a journey of 12 days.
The rixdollar note was supposed to correspond to "one Cologne mark of fine silver", that is, 233.85 grams, and to be freely redeemable for silver in 1819. In the period after the establishment of Norges Bank, however, the dollar fell in value, and by Act of 13 August 1818, the right of redemption was suspended. The rate fell further after that.
On November 15, 1822 the Storting resolved that silver redemption at rates below the previously decided par value should begin from January 1, 1823. An interval for silver redemption was fixed, which was gradually adjusted nearer par until 1842.
The rixdollar was finally pegged to silver at par in April 1842.
In the Money Act that became law on 4 June 1873, the Storting decided to go onto the gold standard and to use the terms krone and øre in parallel with daler and skilling, one rixdollar equal to four kroner. The silver was replaced by the gold standard from 1 January 1874. The gold standard had been recommended by an international money conference in Paris in 1867, in which Norway also participated. The intention was partly to achieve a more stable money value - gold was regarded as more solid than silver - and partly to achieve an international system based on fixed exchange rates vis-à-vis gold.
Under both the silver and gold standards the right to redeem notes for metal was suspended for long periods. The right was abolished forever in 1931.
1000 kroner banknote, 1877-1901
The Money Act of 17 April 1875 discontinued the terms daler and skilling, and it was decided that "The monetary unit shall be a krone, divided into 100 øre." This was done to prepare for Norway's entry, on 16 October that year, into the Scandinavian Mint Union. This union had been established between Denmark and Sweden in 1873 on the recommendation of a joint commission (in which Norway participated) to establish a common Scandinavian coin based on gold. It meant that the other countries' coins were to be legal tender on the same basis as those struck at home. The union functioned until 1914; thereafter it lacked all practical significance, but was not formally abolished until 1972.
A new law governing Norges Bank became law on 23 April 1892.
|Bankplassen 4, Norges Bank's offices 1906-1986.|
On 1 January 1897 the seat of Norges Bank was moved to Kristiania (Oslo), and in 1906 a new headquarters building on Bankplassen was opened - for 80 employees including the workers in the banknote printing plant.
The duty to redeem for gold was suspended on 5 August 1914 and the krone floated. Export of gold and silver was prohibited. During the war the volume of notes increased fourfold, but the krone nevertheless appreciated - in consequence of the sharp rise in revenues generated by the merchant marine. Gold redemption was reintroduced in 1916, but because the notes were now worth more than the official gold rate, in April 1916 the bank was exempted from the duty to buy in gold for the notes.
Gold redemption was suspended yet again on 19 March 1920. Inflation and a high volume of imports led to a crisis of confidence in the krone and a sharp fall in its value. The "par policy" led to a rise in the rate, and by 1926 the krone was par with the pound sterling.
The krone was pegged to gold at par on 1 May and gold redemption reintroduced.
On 27 September the gold standard was abolished, after the United Kingdom had left it seven days before. Norway and the other Nordic countries followed suit and let their currencies float, but were determined to prevent harmful fluctuations.
Banknote production, 1930
A fixed rate vis-à-vis the pound of NOK 19.90 was adopted.
The exchange rate is fixed in relation to the dollar, at NOK 4.40. Since the dollar was tied to gold, this brought Norway back onto the gold standard.
In 1940 the seat of Norges Bank was temporarily moved to London, in that the Norwegian government-in-exile established a new Board. The bank's gold reserves were evacuated via Åndalsnes, Molde and Tromsø to London, and thence to New York and Ottawa. This gold and the bank's other currency reserves were under the control of the London Board. The so-called London krone was fixed at NOK 17.70 to the pound.
At the same time, the bank continued its operations in Norway under the direction of the Occupying Power until the war was over and the London Board stepped down. A commission of inquiry after the war concluded that the Bank's Oslo management had taken a firm and correct attitude vis-à-vis the Nazi authorities.
A currency reform was implemented on 8 - 22 September 1945 to dispose of excessive notes in circulation and thereby prevent inflation.
Norway joined the Bretton Woods system of fixed exchange rates from 15 September 1946. The par value vis-à-vis gold represented a rate of NOK 20.00 to the pound and NOK 4.03 to the dollar. The maximum permitted fluctuation was 1 per cent.
Up to 1949, Norges Bank was formally organised as a company limited by shares. By Act of 8 July 1949 private shareholders were bought out and the shares taken over by various state funds.
The pound sterling was devalued by 30.5 per cent, and like several other European countries, Norway followed suit. The new core rate vis-à-vis the dollar was NOK 7.14.
Quality control of banknotes, 1955
The Mint Supervisory Authority and the Royal Mint were transferred from the state to Norges Bank.
The Bretton Woods treaty system of fixed exchange rates broke down on 15 August, and the Norwegian krone floated. On 21 December a new system was created, the Smithsonian Treaty, with new parities and fluctuation margins of 2.25 per cent. The Norwegian (and Swedish and Danish) krone was devalued by 1 per cent.
On 23 May Norway joined the "European snake", in which the fluctuation margin was half of that laid down in the Smithsonian Treaty. There was thus a narrow margin of fluctuation inside a larger, and the combination was called "the snake in the tunnel".
The Smithsonian Treaty collapsed, but the European snake continued. This meant that the krone floated vis-à-vis currencies outside the snake, such as the dollar. The krone was revalued by 5 per cent within the snake on 16 November.
On 10 October 1976 the krone was devalued by 1 per cent, on 4 April 1977 by 5 per cent, and 29 August 1977 by 8 per cent. The reason for this was different trends in prices and wages in the countries of the snake, and adjustments were generally made for several countries at the same time.
On 12 December 1978 Norway left the snake and instead linked the krone to a "basket" of currencies, which were weighted according to the various countries' trade with Norway.
On 2 August 1982 the weightings of the currency basket were changed in accordance with the IMF's weightings for export industry competitiveness, which meant a downwards adjustment of 3.5 per cent. On 6 September 1982 the krone was devalued by 6 per cent.
On 2 July 1984 the currency basket was calculated on a geometric average instead an arithmetic, which meant a 2 per cent devaluation, and on 22 September it was decided to keep the krone 2 per cent weaker within the applicable fluctuation margin.
A new Act of 24 May 1985 on Norges Bank and the monetary system etc. (the Norges Bank Act) entered into force on 9 September 1985. The bank ceased to be a limited company and became a separate legal entity owned by the state.
Bankplassen 2, Norges Bank's
On 11 May the krone was devalued by 9.2 per cent.
On 1 September 1986 Norges Bank's headquarters and banknote printing plant moved to a new building at Bankplassen in Oslo.
The Storting decided to close eight of Norges Bank's 20 regional branches, those in Arendal, Drammen, Gjøvik, Halden, Hamar, Haugesund, Kristiansund N. and Skien.
The krone is pegged to the Ecu - the European Currency Unit, the precursor of the Euro.
Following turbulence on the international currency markets in November and December, the link to the Ecu was abandoned on 12 December and the krone floated. The same had happened to the Swedish krona, the Finnish markka, the pound sterling and the lira earlier in the autumn.
Guidelines for the floating exchange rate regime were issued on 5 May in government regulations on the krone's exchange rate.
Norges Bank was entrusted with the management of the Government Petroleum Fund.
A new settlement system between Norges Bank and the banks was commissioned. Norges Bank's settlement system (NBO) means settlement several times a day, with a facility for separate settlement of large sums. This was a step towards greater security and reliability in payments transfer.
The replacement of the coin series was completed, the first complete replacement since 1875.
The Act relating to Payment Systems, etc., enters into force. The Act introduces authorisation and supervision of payment systems and assigns these responsibilities to Norges Bank.
Den Kongelige Mynt (the Royal Mint) in Kongsberg is spun off as a separate limited company as of 1 January.
Norges Bank's Supervisory Council decides to close the regional branches in Bodø, Fredrikstad, Hammerfest, Vardø and Ålesund.
Norges Bank establishes an office in London to further develop the Bank's investment management activities.
The new Regulation on Monetary Policy was established by the Council of State on 29 March 2001. Norges Bank shall set the key rate with a view to maintaining low and stable inflation. The inflation target is set at 2½ per cent.
Together with other banks, Norges Bank establishes Norsk Kontantservice AS (NOKAS) on 1 July. The company will be responsible for cash handling for banks in Norway as well as for some of Norges Bank's statutory responsibilities in the area of cash handling. At the same time, Norges Bank's remaining regional offices are closed.
Den Kongelige Mynt AS (the Royal Mint) is sold to Samlerhuset AS Norge and Mint of Finland. The shares are transferred to the new owners on 30 June.
The Shanghai office
An agreement concerning the sale of Norges Bank's shares in NOKAS is signed with Hafslund Sikkerhet AS on 9 December. The shares are transferred to the new owners on 6 January 2006.
Norges Bank’s Printing Works was closed down in June 2007 in accordance with a decision taken by the Executive Board in 2002. From 2008, Norwegian banknotes will be delivered by commercial security printers in France and the UK. Read more about the history of Norges Bank's Printing Works.
In November the Shanghai office of Norges Bank Investment Management (NBIM) was officially opened.
In June the Singapore office of Norges Bank Investment Management (NBIM) was opened.