Central Bank Liquidity Transformation and Collateral Frameworks – Lessons from 1682

Central bank collateral frameworks and the liquidity transformation they allow for play important roles for financing long term economic projects (and thereby economic growth) while preserving financial stability. To shed light on early central bank collateral frameworks, this note analyses a document of the Riksens ständers lånebank of 1682 which pledges real estate to serve as collateral for a loan of the Riksbank to the farmer Olof Olofsson. A transcription and translation are provided and the document is analyzed in the context of the 17th century operations, balance sheet, and mandate of the Riksens ständers lånebank and the related literature. We recall the role of central bank credit to private debtors in early central banking, and that, contrary to some prominent views, government financing was more the exception than the rule as key reason to establish and operate central banks before 1700. We also derive lessons for today’s central bank collateral frameworks and their role in liquidity transformation.