The history of central banking goes back to the seventeenth century when the first institution, ‘the Riksbank’, recognised as a central bank was set up in Sweden in 1668. Set up as a joint stock bank, it was chartered to lend funds to the government funds and to act as a clearing house for commerce.
Later on, the Riksbank abandoned commercial lending and was granted a monopoly for issuing banknotes in 1897. Subsequently, several countries set up institutions that functioned as central banks. These early central banks like the Bank of England and Banque de France, though set up with private capital, helped sovereigns finance their debt and were engaged in banking activities.