Jan F Qvigstad: What is a useful central bank? Speech by Mr Jan F Qvigstad, Deputy Governor of Norges Bank (Central Bank of Norway), at Norges Bank’s Symposium “What is a useful central bank?”, Oslo, 18 November 2010. *  *  *  It is a great pleasure for me to welcome you to this symposium. I would like to extend a special welcome to those of you who have travelled a long distance to be here today. November probably does not do justice to Oslo. To do that, we would have held the symposium in February or March, to show you the winter landscape, or in June or July, so that you might experience light summer nights. But November it is, and not without reason. You all know that the Governor of Norges Bank, Svein Gjedrem, will soon have served his two terms. The governor will step down at the end of the year. The Governor has always believed that too much attention is paid to persons and there is too little focus on the position that the person holds. By organising this symposium on a theme of keen interest to the Governor, we have tried to combine the strictly academic with respect for the way the Governor has filled his role.
For that reason, Norges Bank’s initial activity was to enter this market. Norges Bank provided loans secured by real property. At its birth, the Bank was, to use current terminology again, “market maker of last resort”. A private banking system gradually took shape. The first savings bank was founded in 1822 and the first commercial bank in 1848. In 1852 the first state mortgage bank was established. These developments allowed Norges Bank to withdraw from the mortgage market and concentrate instead on providing liquidity to the short-term money market. However, it was not until the 1860s that the Bank’s predominant task was supplying short-term liquidity. Much digging and research remains to answer the question of how Norges Bank dealt with the challenges during the 19th century. So far, scholars have not found that the Bank took emergency action when a financial crisis affected Norway in 1847. But when the crisis hit again ten years later, the Bank sent silver abroad to Hamburg, which was the financial centre of the Norwegian merchants. This support was important to enable Norwegian industry to carry out international payments and have their bills of exchange discounted. In 1892 a new Act was passed whereby Norges Bank became the bankers’ bank. As the Governor mentioned in his speech yesterday, this made Norges Bank a modern central bank in a legal sense. In 1899, Kristiania (as Oslo was called at the time) experienced dramatic fall in house prices.