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The Forgotten Capitalism: Listed Banks, Exchange Rate at „Mitita the Ruble Clipper”

27/04/2020 12 min read


The Forgotten Capitalism: Listed Banks, Exchange Rate at „Mitita the Ruble Clipper”

Reading Time: 12 minute

Let’s remind you, maybe you forgot: under 40 banks operate today in Romania. Is this few or is it many?

by Ionuț Bălan

Let’s open a book, „Banking – Systems, Operations and Practices” by Bogdan Capraru – and see. In capitalist Romania, on August 9, 1941 – after the crisis, in the midst of WWII – there were 410 commercial banks; in Bucharest only, there were 180 of them. And before the crisis, in 1928, the Bucharest Exchange listed no less than 45 banks (compared to three nowadays), generating the bulk of trading (46,93%). One wonders how capitalist our grandfathers could be.

Not to mention the real competition – banks going bankrupt others being founded. For instance, in the context of the interwar crisis, the number of Romanian banks halved. To  the difference, today they say competition in banking is a threat to financial stability, as it cuts the profit margins and diminishes the capital reserves! Thus, the competition must be controlled, i.e. regulations restrict the entry of newcomers on the market, to preserve the margins of old timers.

Let’s keep browsing Capraru’s work, published by C.H. Beck, we find that before the National Bank of Romania (BNR) there was a National Bank of Moldova.

In 1856, Ruling Prince Grigore Alexandru Ghica signed the concession for founding the National Bank of Moldova by F. Nulandt, a German Banker. Although supervised by two government commissioners, it went bankrupt less than one year after its first operations..

Another milestone for banking in the Romanian Principalities was the foundation of the Deposits and Consignments House in 1864; it was the first Romanian credit organization (later the Savings and Consignments House, known as CEC). It drew funds from private deposits and public sources (taxes and reserves of public institutions, local administrations, etc.).

Afterwards, other banking institutions were founded with mainly domestic capital: Bank of Romania (1865); Rural and Urban Land Credit (1873-1875); Marmorosch-Blank Bank (1874); in Transilvania, Albina (Romanian for ‘bee’) Bank (1872); Furnica (‘ant’) Bank (1883).

In 1867 the national monetary system was established on bimetallism, The leu was a coin equivalent 5 grams of silver or  0.3226 grams of gold.

On March 3, 1870, the State Mint was founded; before that, Romanian coins were minted in Britain.

The lack of national currency prior to that, taxes were paid directly in gold, using „roosters” – 20 French franc coins worth 20 lei), Turkish liras (22.7 lei), Russian rubles (20.6 lei) or pounds sterling (25.22 lei). Massive amounts of foreign currencies thus entered the Romanian Principalities, which prompted harsh measures by ministers such as Dimitrie A. Sturdza, nicknamed „Mitita the Ruble Clipper”, who forced a precise exchange rate and coin circulation.

 66 Years after Caragea’s Plague Came Carada’s NBR 

The Bank of Romania was established on October 17, 1865 by transforming the Bucharest subsidiary of the Ottoman Bank, and was given the privilege of issuing bank notes based on a 30-year concession, freely circulating and accepted in payment by public offices.

The bank’s main current operations were discounts, purchases of assets including Treasury bonds, advance payments including rural bonds, warrants, current account advance payments, paper and asset operations abroad.

In 1869, after Ruling Prince Cuza stepped down, the concession was voided in exchange of damages and the bank kept operating as a private company for 35 years, before becoming a subsidiary of The Bank of Roumania Ltd. based in London.

In 1873 the Rural Land Credit was established in Bucharest, after the passage of an act submitted months before to the Ministry of Finance by elected delegates of Romanian landowners requesting the concession of land credit. The organization was based on the principle of direct association and mutual guarantees of landowners.

Following the trail opened by the Rural Land Credit, the Urban Land Credit of Bucharest was founded in 1874, and the Urban Land Credit of Iasi in 1881.

The first mixed capital bank Marmorosch-Blank & Co, opened in 1874. Through its credit policy, it got involved in all the areas of economy – trade, agriculture, defense (especially during the 1877 war), railways, sewerage works, building of schools, covered markets and public squares.

It also contributed to the first two paper mills in Romania (Letea and Scaieni), to issuing a government loan (1895), founding the Romanian General Insurance Company of Braila (later the Romanian General Insurance Company by moving to Bucharest, thus becoming one of the most powerful and revered insurance companies).

On the other side of the Carpathian Mountains, in Transylvania, the Albina Bank was founded in 1872 exclusively with Romanian capital. The bank’s network included subsidiaries and agencies in many Transylvanian cities, such as Sibiu, Medias, Brasov, Lugoj, Targu Mures. Its main operations were credit merging, bond trading, medium and long-term mortgage loans, issuing land registrations, lending on current accounts, loans against guarantees in products, rediscounts, private loans for peasants.

It also placed capital in the General Insurance Bank established in 1912 as the first insurance organization with Romanian capital in Transylvania and financed the development of a network of banks with Romanian capital; their number doubled from 75 in 1900 to 152 in 1914. Albina Bank’s weight in the economy of Transylvania was also proven by its gradual evolution into a rediscount central for the whole finance and banking operations in the province.

By an Act of April 17, 1880, the National Bank of Romania (BNR) was established as a „discount and circulation” bank based on the model of the central bank of Belgium and observing the principles of the banking school, as wished by all the participants in the national economic life. The bank has both private (2/3) and government (1/3) capital. The main operations it could carry out under its statute were discount, advance payments on land registration documents, public bonds and other assets, issue of bank notes.

Between the foundation of the NBR and the beginning of WWI, there were 195 private banking organizatons in the Romanian provinces. The top nine were as follows:

–  banks with Romanian capital: the Agricultural Bank (1894), the Trade Bank of Craiova (1899),  the Discounting Bank of Romania, (1898), the Romanian Bank (1911);

–  banks with foreign capital: the Romanian General Bank (1897), the Romanian Credit Bank (1904), the Romanian Commercial Bank (1906), the Bank of Roumania Limited (1904);

–  banks with mixed capital: Marmorosch-Blank & Co.

Besides these large banking organizations there were middle-size bank operating on Romanian capital; their business was directed to farmers, traders and small industrialists.

In 1892¸ the Agricultural Credit was organized within the Ministry of Finance, following the dismantling of the counties’ Agricultural Loan Houses. To complete its operations, the following steps were taken:

– in 1908, the foundation of the Rural House, with mixed (public and private) capital;

– 1903, the legal basis for cooperative organizations, which later saw a great expansion;

– in 1915, the decision of establishing of County Guaranteed Loans for Farmers, under NBR.

Large banks had shares in other, middle-size and small ones, individually or by association. An important means of stockholding was through banking consortiums formed by a trustee bank that owned shares in several other banks called affiliated.

In financing through consortiums, major roles were played by the Romanian Bank and by Marmorosch-Blank & Co, who alongside other banks financed the establishment of new banks throughout the country: Viticola (winegrowers’) (1912), Bucharest Technical Credit (1918), Bank of Iasi (1910), Mining Credit of Bucharest (1919), Petrodava (1920), Bucharest Industrial Bank (1921), Peasants’ Bank of Bucharest (1919).

The major banks also held individual shares, helping the consolidation of provincial credit organizations and exploiting the resources in their areas of operation.

For instance, in 1922 the Romanian Bank owned the following individual shares: Dunarea Romaneasca (Romanian Danube) Bank of Braila, Bank of Bacau, Bank of Prahova Credit, Romanian Bank of Orient in Bucharest, Stefan cel Mare Bank of Falticeni, Bank of Suceava, Bank of Radauti.

Marmorosch-Blank & Co contributed on its own to the following important banks: Moldova Bank of Iasi, Central Bank of Ploiesti, Commerce and Deposit Bank of Bucharest and Thessaloniki.

The Agricultural Bank contributed on its own to the establishment of banks mainly operating in support of agriculture: Unirea Romana (Romanian Union) Bank of Iasi, National Commercial Bank of Chernovtsy, Romanian Bank of Satu-Mare, Bank of Dorohoi

The Discounting Bank of Romania also held individual shares in the following banks: Dacia Bank of Iasi, Bank of Braila, Bank of Oltenia in Craiova. 

But the biggest banks of Romania also directly contributed to the real economy, thus helping its development. In 1992, they had interests in more than 400 businesses, through banking consortiums or individually, with the Romanian Bank and Marmorosch leading, with shares in 75 and 61 enterprises respectively.

In 1923, the National Company of Industrial Credit is founded with government capital, under the supervision of the ministries of finance and industry and of the National Bank; it was meant to support the Romanian industry.

A major step in updating the Romanian banking system was the establishment of the Clearing House, in 1919, to facilitate the mutual compensation of debts from checks, promissory notes, consignment notes and other payment documents and rights.

The number of banks advanced from 215 in 1918 to 1122 in 1928, besides the 4743 popular banks.

Capitalism Means Options

When asked why most Romanian banks are not listed, present Romanian bankers nonchalantly answer that banking companies are subsidiaries of international groups and the parent banks are listed.

They should know, however, that in 1928 the Bond, Shares and Trading Exchange of Bucharest listed no less than 45 banks (compared to only 3 today), which accounted for most of the trading on the capital market (46,93% of the total volume): Romanian Commercial Bank, National Bank of Romania, Agricultural Bank, Romanian Bank, Albina Bank, Marmorosch Blank Bank, General Savings House of Sibiu, Central Bank of Ploiesti, Dacia Traiana Bank, Cereal Merchants’ Bank, Market Bank, Economia Private Company of Focsani, Viticola Bank of Odobesti, Fratia (‘brotherhood’) of Focsani, Podgoria (‘vineyard’) Bank, Bank of Putna, Discounting Bank of Romania, Foreign Currencies and Lombard Bank, Industry and Commerce Bank.

The list goes on: Trade Bank,  Bank of Roumania, Italian and Romanian Commercial Bank, Trade and Credit Romanian Bank of Prague, Mining Bank, Electrical Companies Credit, National Company of Industrial Credit, Rural House, Carpathian Bank, Colentina Bank, Romanian Bank of Credit, Romanian Credit, Danubiana Bank, Fortuna Bank, Franco-Romanian Bank, National General Bank, Moldova Bank, People’s Bank, Popular Bank of Ploiesti, Agricultural Union Bank of Braila, Agricultural Union Bank of Ilfov, Stambuliu & Co Bank, Peasants’ Bank, Union Bank, Urbana Bank, Romanian Winegrowers’ Bank.

The worldwide Great Depression of the 1930s also dealt a major blow to the Romanian banking system. Many small and medium banks collapsed or merged with stronger ones.

The distrust induced by the hostile economic environment resulted in the withdrawal of foreign credit and of domestic deposits, which shrank the lending capital. The collapse of the Oesterreichische Kredit-Anstalt bank of Vienna triggered a banking crisis in Central Europe in 1931. It was felt in Romania in the bankruptcies of three credit organizations: General Bank of Wallachia (June 1931), Berkovits Bank (July 1931) and Marmorosch-Blank. To save the banking system, the National Bank of Romania intervened with rediscount credit and by leading a special banking syndicate.

The May 8, 1934 Act for the organization and regulation of banking established the Superior Banking Council, an independent organization trusted, alongside the National Bank of Romania, with the continued supervision of compliance and the control of banking. The step was intended to strengthen the Romanian banking system, laying the foundations of banking supervision in Romania.

The concentration of banking capital resulted in the emergence of banks who held most of the country’s financial resources.

Between 1934 and 1941, there were five large commercial banks: Romanian Bank, Bank of Romanian Credit, Romanian Commercial Bank, Italian and Romanian Commercial Bank, and Romanian Banking Company. In 1941, they owned 52% of the total balance sheet assets, and the first three of them got 70% of the national financial resources.

When it came to bank placements, the Romanian Bank held a quarter of the total assets, approximately like BCR nowadays.

According to the „Nominal table of the banks of Romania registered with the Superior Banking Council” of August 9, 1941 there were 410 commercial banks, of which 273 with Romanian capital.

In terms of legal structure, 363 banks were private companies and 180 operated in Bucharest.

When the Nationalization Hit, 383 Banks Were Authorized to Rediscount 

After 1940, the Romanian banks helped supporting the economy and the national war effort. Several financial organizations were established during those years, some with governmental financial support. For instance, on April 29, 1941 the Romanian Credit Institute was founded to finance Romanian citizens taking over foreign industrial and commercial funds or founding such enterprises.

In 1941,the Loan and Savings Peasants’ Houses were established as private companies, to respond to the needs of credit for small farmers, craftsmen and merchants in rural areas, small towns, suburban villages and urban  communes other than county capitals.

Up to 70% of their capitals was provided by BNR and the remaining 30% by public subscription of farmers, agricultural companies and any individual in their area of operations assigned by BNR.

Over this period, the Deposits and Consignments House and the Autonomous House for Financing and Amortization did a remarkable job financing the country’s war effort through their placements.

Among the large banks, the Romanian Bank of Credit and the Romanian Bank were noticed for their massive placements in government bonds, which financed the increasing needs of the public budget to support the war effort.

Before the nationalization of the National Bank of Romania, there were 383 banks authorized to rediscount at the issuing bank, including 183 head offices and local banks, and 200 subsidiaries of big banks.

The total number of banks, subsidiaries and credit cooperatives upon the nationalization was 2661.

What happened after the nationalization? Let’s browse further Bogdan Capraru’s work.

The transformation of the Romanian banking system along the guidelines of centralized planned economy was a three-stage project:

– nationalization of the National Bank of Romania on December 28, 1946, when it became the Bank of the Popular Republic of Romania;

– the second stage was linked to the nationalization of the main production means in June 1948. This act transferred to the state the strongest long-term credit bank for industry – the National Company of Industrial Credit;

– the third milestone was the provision of the Decree No. 197 of August 13, 1948, which turned the joint stock banks into state-owned enterprises.


On July 14, 1947, the Credit Use Control Act was passed. It was meant to direct credits to the purposes set by the state.

By implementing the credit control, the National Bank of Romania excluded from rediscount the promissory notes presented by private banks. Suppressing the commercial credit and the discounting mechanism simply choked the refinancing of private banks, making them unable to continue their operations.

The provisions imposed to the National Bank of Romania by the Communist doctrine about directing and targeting the credits resulted in a disturbance of the banking capital, stifling the private initiative and turning credit into interest-free means of operations dictated by the state, against the banks’ institutional interests.

As regards the switching from the capitalist monetary system to the Socialist one, the conditions were set up by the monetary reform of August 1947. Under these circumstances, the financial power of private banks was weakened and BNR became the almost exclusive source of credit for the economy.

Loans by private banks from their own resources accounted for approximately 4% overall, whilst loans issued by BNR stood in August 1947 at 56.8% for the industry, transportations and craftsmen, 28.7% for the agriculture and tax collection, 4.13% for trade and other operations.

Nevertheless, the industrial output was at 75% of the 1938 level, and the impact of priority loans for industry and agriculture fell short of the expectations. The cause was found to reside in the fact that most of the production means were still privately owned, which prepared the ground for the second step of transformation: the nationalization of those means.

 After the third stage of transformation of the Romanian banking system, several private or government-owned banks were foreclosed or dismantled. Only the Credit Bank for Investments (formerly the National Company of Industrial Credit), the National House of Saving and Postal Checks, and the Savings and Consignments House survived.

The latter two merged into the House of Savings, Checks and Consignments, which in October 1949 was baptized as House of Savings and Consignments (CEC).

This organization has de monopoly of private savings until the end of 1989.

In September 1948, the Credit Bank for Investments was renamed as Bank of Investments (after 1989 the Romanian Development Bank, BRD). In 1967, two new banks were established: the Bank for Agriculture and Food Industry (Agricultural Bank) and the Romanian Foreign Trade Bank (Bancorex).

Bancorex had several subsidiaries: Banque Franco-Roumaine, Anglo-Romanian Bank, Misr Romanian Bank, Frankfurt Bucharest Bank and Banca Italo Romena. In Bucharest there was also a subsidiary of a foreign bank: Societe Generale.

But until the Bank for Agriculture and Food Industry and the Romanian Foreign Trade Bank were set up, all banking was concentrated into one institution: the State Bank. It operated as a collection and cash control center.

500 gold lei

After 1967, the National Bank was reorganized, and the changes brought a certain opening, although the system was still centralized.

The conditions for building a two-level banking system, like in advanced economies, had to wait until after 1989, when the transition to a market economy began.

The weirdest post-Communist bill

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