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mainly of mortgage loans on urban and agricultural property. Aided by tax treatment more favorable than that accorded to the commercial banks, the savings banks usually pay a higher rate of interest on time and savings deposits. The savings banks have their own commercial bank, the Savings Banks Bank (Sparbankernas Banken AB), which acts for them as a correspondent bank.
The Investment Bank of Sweden, established by a 1967 parliamentary resolution and wholly owned by the government, provides capital for some of the larger, longer-term, and riskier investments in industry and commerce. The bank does not accept public funds, but obtains funds primarily by borrowing from the National Pension Insurance Fund.
The Post Office, in addition to its postal functions, receives deposits on savings accounts and maintains a checking service. The primary purpose of the Post Office Savings bank is to serve small savers. Growth of this system has been rapid during the last decade, due in part to the government's guarantee of deposits and in part to the numerous branches that allow customers to deposit or withdraw funds at hours when the commercial and savings banks are closed. The Postal Check Service was founded in 1925 to provide facilities for the ready transfer of money through a system of postal checking accounts. Nearly all business firms and many individuals maintain Postgiro accounts as a matter of convenience. The government, local authorities, and state corporations also make extensive use of the system, and the large banks collect funds from branch offices through their Postgiro accounts. The system is widely used by people who do not have checking accounts elsewhere in the banking system.
Although the commercial and savings banks have traditionally supplied part of the credit requirements of agriculture, a number of credit institutions are organized especially for this purpose. Rural mortgage, associations, local associations that make loans exclusively against first mortgages on farm property, are the most important institutions for supplying long-term finance to agriculture. The Union of Agricultural Credit Associations (Sveriges Jordbrukskasseforbund), through its district and local societies, conducts a banking business in the agricultural field, accepting deposits and supplying credit to farmers through loans, overdrafts, and the discounting of bills.
The influence of the central bank — the Swedish National Bank — extends to most of the financial activities in the economy. The bank issues currency notes, serves as a banker's bank and "lender of last resort," and regulates the country's monetary and credit system. In addition, the bank is a depository for government funds and grants, advances, or credits to the government as needed. It also has custody of the country's reserves of gold and foreign exchange. The bank is custodian for the cash reserves of the commercial banks and, through its offices in Stockholm and Goteborg, serves as a clearinghouse for the commercial banking system.
Private insurance companies, the National Pension Insurance Fund, and the numerous mortgage institutions provide specialized financial services. The insurance companies, administering capital of US$6.471 million in 1970, invest chiefly in blue-chip securities and in real estate mortgages. The National Pension Insurance Fund, administering $7.953 million, invests employer's pension constitutions and voluntary contributions by employees. The fund's portfolio includes bonds and unsecured debenture loans publicly tendered by Swedish banks, government securities, issues by credit institutions, and special loans to employers of up to 50% of their pension contributions during the preceding year. The majority of mortgage institutions and credit companies are active in the housing loan market. The largest of these are the Urban Mortgage Bank ($5.380 million in loans outstanding in 1970) and the Housing Credit Bank ($1.851 million), which grant primary and secondary loans for real estate in towns and urban communities.
Swedish monetary policy relies mainly on traditional techniques to achieve its goals, such as changing the official discount rate, conducting open-market operations, altering reserve requirements for commercial banks, and moral suasion. In addition, the authorities influence the level of credit and bank liquidity through debt management policy (primarily the borrowing and lending activity of the National Debt Office), investment ratios for other financial institutions, penalty rates for continued or excessive discounts by commercial banks with the Swedish National Bank, and bond issue controls. Since 1967 annual agreements between the government and commercial banks have determined the credit level for housing construction.
In 1969-70, monetary policy was increasingly restrictive to cope with a rising balance of payments deficit and increasing inflationary pressures. This restraint continued in 1971 despite a dampening of domestic demand. Credit was eased for industrial investment, however, while restrictions on other credit extensions, particularly to consumers, were maintained.
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