The tasks of Danmarks Nationalbank NNationalbankens-opgaver_UK.inddationalbankens-opgaver_UK.indd 1 229-08-20089-08-2008 110:29:270:29:27 This publication closed for contributions in mid-May 2008. The Tasks of Danmarks Nationalbank can be found at the website www.nationalbanken.dk. A free printed copy can be requested by fi lling in the or- der form under ”Publications”. Text may be copied from this publication provided that Danmarks Nationalbank is specifi cally stated as the source. Changes to or misrepresentation of the content are not permitted. Questions and comments on the publication should be addressed to: Danmarks Nationalbank Communications Havnegade 5 DK-1093 Copenhagen K, Denmark E-mail: [email protected] Tel.: +45 33 63 70 00 Daily offi ce hours: 9.00 am-4.00 pm. Edited by: Danmarks Nationalbank Layout: Anja Segebrecht Photos: Scanpix, Søren Nielsen, Rigmor Mydtskov, Martin Mydtskov, The National Museum of Denmark/Niels El- swing, Danmarks Nationalbank. ISBN no.: 978-87-87251-67-9 (Online) ISBN no.: 978-87-87251-69-3 NNationalbankens-opgaver_UK.inddationalbankens-opgaver_UK.indd 2 229-08-20089-08-2008 110:29:350:29:35 Preface Danmarks Nationalbank is the central bank of Denmark and plays a key role in the Danish economy. The Tasks of Danmarks Nationalbank is an overall presentation of what Danmarks Nationalbank does and what its main objectives are. The publication is aimed at a wide audience – including people with no previous knowledge of economics. We hope you will enjoy reading it! Nils Bernstein Torben Nielsen Jens Thomsen Governor by Royal Appointment Governor Governor Chairman PPhoto:hoto: TThehe DDanmarksanmarks NNationalbankationalbank bbuildinguilding wwasas ddesignedesigned bbyy tthehe DDanishanish aarchitectrchitect AArnerne JJacobsenacobsen aandnd wwasas ccompletedompleted iinn 11978.978. NNationalbankens-opgaver_UK.inddationalbankens-opgaver_UK.indd 3 229-08-20089-08-2008 110:29:400:29:40 NNationalbankens-opgaver_UK.inddationalbankens-opgaver_UK.indd 4 229-08-20089-08-2008 110:29:520:29:52 Contents Objectives and tasks Objectives and history . 6 Organisation and management . 7 Accounts and profi t . 8 International cooperation . 9 Stable Prices First main objective: Stable prices . 10 Infl ation . 11 A fi xed exchange rate to keep infl ation low . 12 The foreign-exchange reserve . 13 Monetary-policy interest rates . 14 Danmarks Nationalbank is banker to the banks . 15 Safe payments Second main objective: Safe payments . 16 Production of banknotes and coins . 17 The history of money at a glance . 18 From sketch to printed banknote . 19 Putting cash into circulation . 20 Payments between banks . 21 A stable fi nancial system Third main objective: A stable fi nancial system . 22 Financial stability . 23 Oversight of payment systems . 24 Management of central-government borrowing and debt . 25 Statistics . 26 More information . 27 NNationalbankens-opgaver_UK.inddationalbankens-opgaver_UK.indd 5 229-08-20089-08-2008 110:29:520:29:52 Objectives and tasks Objectives and history Danmarks Nationalbank is the central bank of Denmark as in that the bank’s Board of Governors is solely responsible defi ned in the Danmarks Nationalbank Act of 1936. Under for determining monetary-policy interest rates. the fi rst section of the Act, ”Danmarks Nationalbank … The principle of the independence of central banks shall as the Central Bank of this country have the object is also stated in the Treaty establishing the European … to maintain a safe and secure currency system in this Community (article 108), which says that neither the ECB country, and to facilitate and regulate the traffi c in money nor a national central bank shall seek or take instructions and the extension of credit”. This description still fi ts the from Community institutions, from any government of a tasks of Danmarks Nationalbank today. member state or from any other body. Three main objectives Under the Act, Danmarks Nationalbank has three main objectives: Establishment of 1818 ♦ Stable prices: Danmarks Nationalbank helps to main- Danmarks Nationalbank tain stable prices, i.e. low infl ation. This is done by pursuing a fi xed-exchange-rate policy against the euro. Danmarks Nationalbank was established as a pri- ♦ Safe payments: Danmarks Nationalbank promotes safe vate limited liability company with the task of putting settlement of cash and electronic payments. This is the Danish monetary system back on track. It was there- done by issuing banknotes and coins and ensuring that fore given the sole right to issue banknotes in Denmark. payments can be settled between banks. Previous experience had shown that it was not a good ♦ A stable fi nancial system: Danmarks Nationalbank idea to allow the state to be responsible for banknote helps to maintain the stability of the fi nancial system. issue. On several occasions, the King’s expenses for e.g. This is done by assessing fi nancial stability, overseeing wars had been paid by putting too many banknotes into payment systems, compiling fi nancial statistics and ma- circulation, which led to inflation. naging the central government’s borrowing and debt. An independent, self-governing institution f More information Danmarks Nationalbank is an independent, self-governing The Danmarks Nationalbank Act of 1936 lays institution established by law. Its independence dates down the foundations for Danmarks back to its establishment in 1818. The independence of Nationalbank. The Act can be found at Danmarks Nationalbank is incorporated in the 1936 Act, www.nationalbanken.dk. ”Nationalbanken i Kjøbenhavn” (the National Bank in Copen- Danmarks Nationalbank’s main building from 1870 until the early hagen) was established in 1818. Its fi rst domicile was next to 1970s. It was demolished to make room for the present building, Christian IV’s old Stock Exchange. which is emerging to the left. 6 NNationalbankens-opgaver_UK.inddationalbankens-opgaver_UK.indd 6 229-08-20089-08-2008 110:29:520:29:52 Organisation and management Danmarks Nationalbank employs around 500 people in Folketing (Danish parliament) from among its members, many different jobs, e.g. economists, banknote printers, plus two members educated in economics and law, who bank clerks and guards. are appointed by the Minister for Economic and Business Affairs. The Minister is the Royal Bank Commissioner and Danmarks Nationalbank and The Royal Mint the formal link between the government and Danmarks Danmarks Nationalbank is located in Havnegade in central Nationalbank. Copenhagen, except for The Royal Mint in the suburb of The remaining 15 members of the Board of Directors Brøndby. Danmarks Nationalbank used to have branches are appointed on the basis of their insight into business in different parts of Denmark, but the last two – in Aarhus matters. They should preferably come from different and Odense – were discontinued in 1989. The branches geographical areas and professions. In the Committee of were Danmarks Nationalbank’s local cash centres and Directors, the two members appointed by the Royal Bank were responsible for the supply of cash outside Copenha- Commissioner are permanent members. The remaining gen. five members are elected by the Board of Directors from among its members, for one year at a time. Danmarks Nationalbank has three governing bodies Danmarks Nationalbank’s management comprises a Board Organisation of Governors with three members, a Committee of Direc- tors with seven members and a Board of Directors with 25 Board of Directors 25 members members. The three governors are charged with the day- to-day management of Danmarks Nationalbank and hold Committee of responsibility for the formulation and ongoing adjustment Directors of monetary policy. As Governor by Royal Appointment 7 members Audit Mr Nils Bernstein is Chairman of the Board of Governors. Jan Birkedal The two other members, who are appointed by the Board Board of Governors of Directors on the recommendation of the Committee of Governor by Royal Governor Governor Appointment Torben Nielsen Jens Thomsen Directors, are Mr Torben Nielsen and Mr Jens Thomsen. Nils Bernstein Committee of Directors and Board of Directors The Committee of Directors and Board of Directors have Accounting Economics Henrik Larsen Hugo Frey Jensen organisational and administrative functions. Their mem- bers come from outside the bank. The 25 members of Administration Financial Markets the Board of Directors include eight MPs elected by the Karsten Biltoft Anders Møller Christensen Banking Services Market Operations Lars G. Sørensen Jesper Berg Staff groups Banknote Printing Works 14 per cent Jørgen Strandgaard Petersen Facility Services 37 per cent Erik Lundgreen 16 per cent IT Jens Dalsgaard Payment Systems 17 per cent Kristian Kjeldsen 16 per cent Statistics Academic staff Bank staff IT/clerical staff Bent Christiansen Service staff Craftsmen/technicians Gender distributin: 54 per cent men and 46 per cent women The Royal Mint Hans Denkov (end-2007) 7 NNationalbankens-opgaver_UK.inddationalbankens-opgaver_UK.indd 7 229-08-20089-08-2008 110:29:540:29:54 Objectives and tasks Accounts and profi t Danmarks Nationalbank profi ts from its role as central gold has been less and less important to Danmarks Natio- bank. Most of the profi t comes from ”seignorage” and nalbank – and to many other central banks. from return on the bank’s equity. Danmarks Nationalbank also makes/loses money when exchange rates and bond Allocation of profits prices fl uctuate. The allocation of profi ts is determined every year when the accounts are presented. Since 2002, 80 per cent of the Equity profi t for the year, excluding value adjustments, has been Confi dence in a central bank’s fi nancial soundness is paid to the central government. In this way Danmarks important. Revenue considerations must not impede its Nationalbank’s profi t ultimately benefi ts the Danish society conduct of monetary and foreign-exchange policy. This as a whole. The remaining 20 per cent of the profi t is means that the bank should have considerable equity and allocated to the General Reserves, which are part of Dan- ensure ongoing consolidation.