5 The Riksbank’s exclusive right to issue banknotes entered into force in 1904. 5 [15]  could meet for lunch at the Five Bells to exchange cheques – and the ‘modern’ clearing house was born.6 Over time, procedures improved markedly. While settlement of banks’ obligations had for many years taken place in coins, the Bank of England’s notes now allowed for a safer and more efficient process. Later, the Bank of England started to offer account settlement, for many years on physical ledgers and later in digital form. Moving from pub clearing and settlement in coins to highly advanced electronic systems may not have entirely eliminated risks. Yet, few – if anyone – would deny that the efficiency gains have been enormous. Central banks around the world followed suit and set up similar arrangements to clear and settle payments. In the United States, the Federal Reserve System in 1918 established the first version of Fedwire, its system for transfers of funds between banks. What was special about Fedwire is that it used the telegraph lines which now connected the entire country. This technological innovation made it possible to settle payments within a short time, even between banks that held accounts in different regional banks in the Fed system. In Sweden, the establishment of Postgirot was an important step. Postgirot was, in essence, a public bank within the Swedish postal service.
The ‘experiment’ was ended by the outbreak of the Civil War when a national banking system was established. Sweden also provides a case in point. Following the collapse of Stockholms Banco, the newly founded Riksbank was not allowed to issue banknotes until 1701.4 Then, as commercial banks started to emerge in the 1830s, they were granted similar concessions. Over a period, notes from ten to fifteen issuers were in circulation, causing much confusion. This was brought to a halt with the Sveriges Riksbank Act from 1897, which ensured the Riksbank its current monopoly – with a unified national currency as a result.5  The rise of financial infrastructures As the number of banks surged, so did the need for structure. In London around 1770, ‘walk clerks’ ran between banks to clear and settle cheques. One day, the story goes, two of them were having lunch at the Five Bells tavern in Lombard Street. Tired after a busy morning, one came with the suggestion that all clerks  3 See Gunnar Wetterberg, ‘’Money and power”, Sveriges Riksbank, Atlantis (2009), and Klas Fregert, ‘’Sveriges  Riksbank: 350 years in the making’’, in Sveriges Riksbank and the History of Central Banking (2018): 90–142, for more about the history of Sveriges Riksbank. 4 From 1701, the bank issued transportsedlar (transport bills). While notes-issuing was authorized in 1701, they became accepted for tax payments in 1726. Notes with a fixed nominal value that did not need to be transferred in writing were issued from 1745.