However, Stockholms Banco, the world's oldest note-issuing bank collapsed as a result of the issuing of too many notes without the necessary collateral. Palmstruch, who was considered responsible for the bank's losses, was condemned to death, but later received clemency. On September 17, 1668, the privilege of Palmstruch to operate a bank, was transferred to the Riksens Ständers Bank and was run under the auspices of the parliament of the day. Due to the failure of Stockholm Banco the new bank was managed under the direct control of the Riksdag of the Estates to prevent the interference of the King. When new Riksdag was instituted in 1866, the name of the bank was changed to Sveriges Riksbank.
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Having learnt the lesson of the Stockholms Banco experience, the Riksbank was not permitted to issue bank-notes. Nevertheless, in 1701 permission was granted to issue so called credit-notes. Some time in the middle of the 18th century counterfeit notes began appearing which caused serious problems. To prevent forgeries it was decided that the Riksbank should produce its own Paper for bank-notes and a paper-mill, Tumba Bruk, was founded in Tumba, on the outskirts of Stockholm.
A few years later, the first commercial banks were founded and these were also allowed to issue bank-notes. The bank-notes represented a claim to the bank without Interest paid, and thus became a considerable source of Income to the banks. Nonetheless, security in the form of a Deposit at the Riksbank was required to cover the Value of all notes issued.
During the 19th century the Riksbank maintained a dominant position as a Credit institution and issuer of bank-notes. The bank also managed national Trade transactions as well as continuing to provide credit to the general public. The first branch-office was opened in 1824, later followed with subsidiary branches opening in each county (län). The present operational activities as a central bank differ from those during the 19th century. For example, no interest-rate related activities were conducted.
The position of the Riksbank as a central bank dates back to 1897 when the first Riksbank Act was accepted concurrently with a Law giving the Riksbank the exclusive Right of issuing bank-notes. This Copyright concluded its role and importance regarding monetary policy in a modern sense, as the exclusive right to issue notes is a condition when conducting monetary policy and defending the value of a Currency. Behind the decision were repeated demands that the private banks should cease to issue notes as it was considered that the ensuing profits should befall the general public.