What are Danmarks Nationalbank's tasks?
Danmarks Nationalbank has three main objectives, which are ensuring that we have
• stable prices
• safe payments and
• a stable financial system.
Stable prices are another way of saying that inflation is low. Danmarks Nationalbank ensures stable prices by conducting a fixed exchange rate policy under which the exchange rate of the krone is pegged to the euro. Denmark has been conducting a fixed exchange rate policy since 1982.
The safe payments objective is achieved e.g. by ensuring that the security features and design of Danish banknotes and coins are of a high quality so that people have confidence in them. Danmarks Nationalbank also promotes safe settlement of electronic payments, for instance settlement of Dankort payments.
A stable financial system means that potential problems e.g. at a bank do not spread to other banks or the entire financial system. Danmarks Nationalbank monitors and assesses financial stability in Denmark by preparing regular analyses, assessments and recommendations.
How are Danmarks Nationalbank's tasks determined?
Danmarks Nationalbank's tasks are determined by the "Danmarks Nationalbank Act" of 1936, see link. The first section of the Act states that the objective of Danmarks Nationalbank is to "maintain a safe and secure currency system in Denmark, and to facilitate and regulate the traffic in money and the extension of credit". This description still fits the tasks of Danmarks Nationalbank today.
Is Danmarks Nationalbank independent?
Yes, Danmarks Nationalbank is an independent, self-governing institution established by law. Danmarks Nationalbank's independence dates back to its establishment in 1818. This independence is incorporated into the Act of 1936 in that Danmarks Nationalbank's Board of Governors is solely responsible for determining monetary policy interest rates, i.e. without interference from the Danish government or the Folketing (Parliament).
When and how was Danmarks Nationalbank established?
Under a royal charter of 4 July 1818, 'Nationalbanken i Kjøbenhavn' was established on 1 August 1818 as a private limited liability company. The shareholders were mostly Danish property owners. Under the charter, 'Nationalbanken i Kjøbenhavn' was granted a monopoly on issuing banknotes for 90 years. The rationale for establishing the bank was that experience had shown that it was not recommendable for the state to handle the issue of banknotes. Following Denmark's participation in the Napoleonic Wars, this had led to war inflation and finally state bankruptcy in 1813. Danmarks Nationalbank retained the monopoly on issuing banknotes on its reorganisation as a self-governing institution in 1936.