1709 - Military defeat leads to banking crisis

The Battle of Poltava

While the war was going well, many people deposited money in the bank. But when they attempted to withdraw it, following the defeat at Poltava, there was no money to be had. The Bank simply froze its depositors’ accounts.

During the reign of Charles XII, 1697–1718, there were a lot of wars. This cost a lot of money and the king forced the Bank of the Estates of the Realm (Sveriges Riksbank) to grant him large loans. He considered this to be simpler and fairer than imposing heavy taxes on the people.

Many people had deposited money in the bank, but they became scared after Sweden suffered the crushing defeat at Poltava in 1709. They rushed to the bank to withdraw their savings. But, as the bank had lent so much to the king, there was not enough money left. The bank simply closed its counters and froze the depositors’ accounts with the justification that everybody needed to contribute to the war effort. This money remained frozen and it would be several decades until it became possible to withdraw it again.