Managing to compete: the Swedish state-owned banks and competition, 1960–1985

How do policymakers and management in state-owned enterprises (SOE) handle the tension between original policy goals, government short-term needs, and the pressures associated with operating in a competitive market? In this paper, we examine the history of Swedish state-owned banks between 1960 and 1985 to answer this question and analyse how changes in the goals of an SOE originate and evolve, and how this varies between different state-owned firms. We find that as original policy goals become outdated, management and policymakers' attention may shift to meet government needs and market demand. During the 1960s, the Swedish government's need for additional housing loans led to a shift in lending priorities within Kreditbanken. Simultaneously, Postbanken's leadership reinterpreted the bank's original goals, from increasing the number of savers to promoting savings in general. This reinterpretation allowed the bank to pursue strategies focused on gaining market share and increasing profitability while still adhering to original mandates. When the two banks merged to form PKBanken in 1974, it represented a drastic change at the policy level by creating a state-owned bank explicitly focused on competition and profitability. However, this change only reaffirmed the more market-oriented approach that had originated within Postbanken the previous decade.