The Deutsche Golddiskontbank (also Golddiskontbank , and abbreviated Dego ) was a state-owned special bank founded in 1924 to promote German export industry by financing raw material imports. It was liquidated in 1945.
106-465: Reichsbank President Hjalmar Schacht founded the Goldnotenbank, the first name of the later Deutsche Golddiskontbank, on 19 March 1924 to draw foreign exchange to Germany by issuing shares to foreign banks. The Golddiskontbank also was given the right to issue notes, but it never used it. The bank saw itself not as a currency bank, but as a discount and credit bank. The primary tasks and goals of
212-624: A "run on the Reichsmark " and a run on the banks viewed as "two independent causes". Schnabel thus similarly de-emphasized the centrality of foreign-currency aspects, and noted the absence of currency mismatch in large banks' balance sheets despite high shares of foreign deposits. Schnabel also argued that the large Berlin-based universal banks were made to feel too big to fail by the Reichsbank's liquidity policy stance, contributing to moral hazard and uncontrolled balance sheet expansion in
318-524: A 69-percent stake in Commerzbank (into which Barmer Bankverein [ de ] was similarly merged), and a 35-percent stake in Deutsche Bank und Disconto-Gesellschaft . By contrast, the non-branch banks, Berliner Handels-Gesellschaft and Reichs-Kredit-Gesellschaft , neither requested nor received public financial assistance, although the latter was state-owned. The unraveling of
424-655: A central bank instead of a mere board bringing together the Landeszentralbanken for joint policy decisions. An agreement on that concept was reached among the three Western occupying forces on 30 October 1947, resulting in the establishment on 1 March 1948 of the Bank deutscher Länder . On 21 May 1948, the Soviet occupation authorities replied by establishing a Deutsche Emissions- und Girobank in Potsdam , which
530-538: A central committee ( German : Zentralausschuss ) of 15 members, which met at least every month under the chairmanship of the Reichsbank's president and could scrutinize the management but not change it or influence policy decision. Three deputies of the Zentralausschuss were allowed to attend all meetings of the Direktorium and to examine the books of the Reichsbank. The initial shareholders included
636-545: A conference in London on 20-23 July. The general bank holiday was lifted after three weeks on 5 August 1931. The Hoover moratorium, which aimed to protect longer-term exposures by imposing a standstill on short-term repayments, disproportionately impacted British merchant banks involved in trade finance to German counterparts, but also triggered a collapse in the value of German bonds, many of which had been underwritten by American institutions. Political constraints linked to
742-625: A considerable discount to market prices. Movable goods and other assets were only allowed to be brought abroad with the permission of the responsible foreign exchange office. The authorization was only granted if a so-called Dego levy was paid to the Reich Ministry of Economics, which maintained an account with the Golddiskontbank for this purpose. During the war, the Golddiskontbank continued to trade in solas, and it also increasingly took over price hedging transactions. To this end,
848-717: A context of increasing competition among banks. In 2014, economists Albrecht Ritschl and Samad Sarferaz found empirical evidence "consistent with the claim of Schnabel (2004) that Germany's 1931 crisis was causally a banking crisis, whereas monetary transmission under the Gold Standard played only a limited role." The long-accepted causal link between the Creditanstalt collapse and the events in Germany has likewise been questioned in more recent historiography. Separately, recent research has demonstrated that France
954-479: A crisis of confidence in the domestic financial world, which led to a credit shortage, which in turn led to an increased demand for low-interest loans from the Golddiskontbank. Its annual report of the year speaks of an "unprecedented crisis". In order for the Golddiskontbank to be able to inject more capital for this task, shares of Group C were issued, which increased the share capital by 200 million Reichsmark and which were completely bought up by Reichsbank. This money
1060-479: A currency bank, this did not happen. All positions and positions in the administration as well as on the supervisory board were filled by employees of Reichsbank. The Golddiskontbank received the additional task of currency stabilization. In 1926, for example, the Golddiskontbank purchased medium-term Pfandbriefe (3–5 years) from the Rentenbankkreditanstalt at a very low interest rate. However,
1166-473: A decree established the office of Reichskommissar für das Bankgewerbe ( lit. ' Imperial Commissioner for Banking ' ), for which Chancellor Heinrich Brüning appointed Friedrich Ernst [ de ] . In 1934, this was transformed into the Aufsichtsamt für das Kreditwesen , by new comprehensive banking legislation ( German : Kreditwesengesetz of 5 December 1931). Initially
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#17327662351441272-693: A dramatic episode of hyperinflation that rendered the Mark practically worthless. The Reichsbank only started raising its discount rate in July 1922, reaching 40 percent per day at the hyperinflationary peak in November 1923. By decree of 15 October 1923 on the initiative of finance minister Hans Luther , the government created a separate bank, the Deutsche Rentenbank , endowed with the right to issue notes ( German : Rentenbankscheine ) redeemable in
1378-547: A financial statement. . On 6 June 1931, the German government announced it would be unable to pay reparations as previously planned, triggering a parliamentary crisis. On 20 June 1931, U.S. President Herbert Hoover announced a one-year "holiday" or moratorium on the payment of political debts, known as the Hoover Moratorium , which brought some relief even though it was initially opposed by France. On 22 June 1931,
1484-569: A general panic as the public felt the Reichsbank was reaching the limits of its liquidity assistance capacity. The government declared a general bank holiday, starting on 14 July 1931. On 15 July 1931, the Reichsbank suspended the convertibility of the Reichsmark, effectively taking Germany out of the gold standard , and imposed capital controls . From 16 July 1931, some banking transactions were again authorized but with severe limits and restrictions, partly loosened on 20 July. Meanwhile,
1590-577: A kind of non-interest-bearing mortgage bond, the Rentenbrief , denominated in gold Mark and theoretically backed by a collective mortgage debt imposed upon German agriculture and industry. That confidence-building initiative succeeded against all expectations, even though the Rentenbankscheine only had the status of "legally-admitted medium of exchange" while the Reichsbank's devalued paper notes remained legal tender. No fixed exchange rate
1696-543: A large scale from small and mid-sized banks, for which no deposit guarantee existed, to cash, direct deposits at the Banque de France , and accounts at the de facto state-guaranteed savings banks . Several joint-stock and private banks failed as a consequence, such as Banque Oustric in October 1930 and Banque Adam [ fr ] in November 1930, and a severe credit crunch ensued. In Austria, Creditanstalt
1802-604: A law was passed that forbade the formation of further Notenbanken in the North German Confederation . Following the promulgation of the German Empire that law was extended to all German lands, with entry into force on 1 January 1872. These Prussian initiatives precipitated action by the Grand Duchy of Baden and Kingdom of Württemberg to create note-issuing banks of their own, respectively
1908-555: A lesser extent Romania , and much less so Czechoslovakia . The large Berlin-based branch banks also made a large number of acquisitions of smaller competitors, a trend which contributed in the rapid increase of their market share from 12.6 to 23.3 percent of total assets between 1913 and 1928, and culminated in 1929 with two large-scale transactions, Commerzbank 's acquisition of Mitteldeutsche Creditbank [ de ] and Deutsche Bank 's acquisition of Disconto-Gesellschaft . The long-standing practice of self-regulation in
2014-460: A major contributor to the global economic depression of the early 1930s. In the early decades following the crisis, it was often described as a somewhat serendipitous crisis of confidence, in which the key mechanism was the withdrawal of short-term foreign deposits or " hot money ". Joseph Schumpeter described the crisis as triggered by "vicissitudes [that] would have to be explained primarily in terms of accidents and external factors". This narrative
2120-586: A major shareholder through the Anglo-International Bank , the former Anglo-Austrian Bank which had sold its Austrian operations to Creditanstalt in 1926 in an all-shares transaction. In 1930 and early 1931, the project of an Austro-German Customs Union generated additional friction, restricting the willingness of Austria's international creditors and especially France to support the country in moments of turmoil. On 11 May 1931, Creditanstalt publicly announced that it would not be able to publish
2226-655: A note-issuance privilege (the Berliner Kassenverein [ de ] , Kölnische Privatbank , Magdeburger Privatbank , Ritterschaftliche Privatbank in Pommern at Stettin , and Städtische Bank in Breslau ), but that was still insufficient to sustain adequate monetary conditions. By 1851, 9 banks in the whole of Germany (not including Austria) were chartered to issue banknotes, known as Notenbanken . In addition, most German states - with
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#17327662351442332-518: A sufficient mechanism to ensure the soundness of the banking sector, not least as German banks published balance sheet data on a monthly basis, and also confidentially reported foreign debt data to the Reichsbank . By contrast, the Bank of France only gathered balance sheet information from the largest four commercial banks ( Comptoir National d'Escompte de Paris , Crédit Industriel et Commercial , Crédit Lyonnais , and Société Générale ) before
2438-406: A supervisory regime was first introduced in 1941. In June 1931, Reichsbank President Hans Luther assured his American counterpart George L. Harrison that "periodical publication of German banks' statement provide safe means for judging their situation which is safe despite large foreign withdrawals." In spite of the apparent abundance of data, however, German public authorities' knowledge about
2544-468: The Grossbanken , the four largest ( Deutsche Bank , Danat-Bank , Dresdner Bank , and Commerzbank ) maintained extensive branch networks, while others (e.g. Berliner Handels-Gesellschaft and Reichs-Kredit-Gesellschaft ) had no branch network and were comparatively more active lending to other banks than to industry. There was no simple correlation between bank type and risk profiles; for example,
2650-714: The Badische Bank in Mannheim (est. 1870) and the Württembergische Notenbank in Stuttgart (est. 1871), bringing the total number of Notenbanken to 33. The panic of 1873 further stimulated discussions on the creation of an integrated monetary system, which pitted advocates of centralization led by Ludwig Bamberger against the incumbent local banks of issue and defenders of state rights, led by Ludolf Camphausen . The political compromise
2756-687: The Bayerische Notenbank , Bank of Baden , Bank of Saxony and Württembergische Notenbank as residual note-issuing institutions by 1906. Until World War I , the Reichsbank produced a very stable currency, fully convertible into gold and thus known as the German gold mark . In 1909, an amendment to the Banking Act of 1875 made the Rischsbank's notes legal tender and redeemable at the rate of 2790 Marks per kilogram of gold . In
2862-640: The Berlin Blockade . Only after the blockade ended was the Berliner Zentralbank established on 20 March 1949, and initially operated under an association agreement with the Bank deutscher Länder. It was eventually converted into a Landezentralbank in 1957. The Reichsbank itself went into a protracted process of liquidation. In 1955, a Federal German Law allowed holders of Reichsbank common stock to exchange it for interim certificates of
2968-483: The Deutsche Golddiskontbank (a Reichsbank subsidiary, 10 percent), Deutsche Bank und Disconto-Gesellschaft (10 percent), Deutsche Zentralgenossenschaftskasse , Bank für Industrie-Obligationen , Deutsche Rentenbank-Kreditanstalt , Prussian State Bank , and Dresdner Bank (6 percent each), and other Berlin-based joint-stock banks (10 percent). The Akzeptbank's early activity was mainly focused on
3074-767: The Imperial Chancellor and included four additional members, one appointed by the emperor and the other three by the Bundesrat ; it was to meet every three months. The Direktorium was led by the President ( German : Reichsbankpräsident ) and all its members were appointed for life by the emperor, upon nomination by the Bundesrat. The law specified that the Direktorium must obey the Chancellor's orders at all times. The shareholders were represented in
3180-911: The Landesbank der Rheinprovinz had expanded its lending to municipalities without proper risk management, whereas its peer the Mitteldeutsche Landesbank had behaved more prudently. Harbingers of crisis started to accumulate at the end of the decade. German stock prices started declining with the "Black Friday" of May 1927, and GDP growth slowed substantially in 1928 and turned negative in 1929. Industrial production started to decline from mid-1929. A cyclical credit crunch started in May 1930 and resulted in German money supply, defined as currency and bank deposits, contracting by 17 percent from June 1930 to June 1931. German policymakers displayed excessive confidence in market discipline as
3286-576: The Prussian State Bank , either directly or via their own bank. These banks in turn transferred the securities to a blocked custody account in favor of the Prussian State Bank. The emigrants lost all rights to the securities once they had been transferred to the special custody account "Reich Ministry of Economics - Export Promotion Fund - Capital Transfer" at the Prussian State Bank. The Prussian State Bank, acting as trustee of
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3392-515: The Reich ' ) was the central bank of the German Empire from 1876 until the end of Nazi Germany in 1945. The monetary institutions in Germany had been unsuited for its economic development for several decades before unification. In the Kingdom of Prussia , the Bank of Prussia had been established in 1847 and, in the aftermath of the revolution of 1848 , five additional banks had been granted
3498-595: The Socialist Unity Party of Germany in the 1960s, 1970s and 1980s. In Prussia, the Reichsbank kept the branches it inherited from the Bank of Prussia , including buildings it had purchased from others (e.g. the palace erected by David Schindelmeißer [ de ] in Königsberg , acquired in 1843) and those it had built for itself (e.g. in Bromberg in 1864). Elsewhere, it did not take over
3604-479: The gold standard continued after Germany's exit in mid-July, immediately followed by Hungary . The UK abandoned gold parity on 19 September 1931, and Austria did so on 8 October 1931. France remained in the gold standard until 1936, with severe deflationary effect. Significant banks collapsed in other countries as well. In Hungary, in addition to high foreign indebtedness, several banks had significant exposures to Austrian banks and were thus directly impacted by
3710-872: The reparations negotiations; July 1930, due to governmental crisis; and September 1930, due to the Nazi Party 's strong showing in the Reichstag election . These episodes, however, were kept under control by the Reichsbank. Similarly, the collapse in August 1929 of insurer Frankfurter Allgemeine Versicherungs-AG (FAVAG) due to fraudulent management, known in Germany as the FAVAG scandal [ de ] , turned out to be an idiosyncratic event and perceived as such by depositors. In France, an early wave of deposit flight occurred from October 1930 to February 1931, during which retail savers transferred their holdings on
3816-451: The 1880s and 1890s in Berlin , Frankfurt , Stuttgart , Cologne , Leipzig ( Petersstrasse ), Dresden , Hamburg , Breslau , Bremen , and Elberfeld . 15 of the 32 Notenbanken (other than the Bank of Prussia) relinquished issuing their own banknotes shortly after the Reichsbank's creation; four more did so in the 1880s, six in the 1890s, and three in the early 1900s, leaving only
3922-416: The 1880s to the early 1900s, Havestadt & Contag [ de ] in the 1890s and early 1900s, Curjel and Moser in the 1900s, Julius Habicht [ de ] and Hermann Stiller in the 1900s and 1910s, Philipp Nitze [ de ] in the 1910s and 1920s, and Heinrich Wolff [ de ] in the 1920s and 1930s. Due to Germany's territorial losses following World War I ,
4028-625: The American forces overran the area, the reserves and money disappeared. Funk would be tried and convicted of war crimes at the Nuremberg trials , not least for receiving money and goods stolen from Jewish and other victims of the Nazi concentration camps . Gold teeth extracted from the mouths of victims were found in 1945 in the vaults of the bank in Berlin. The explanation of the disappearance of
4134-553: The Austrian banking turmoil. In the Kingdom of Yugoslavia , a number of banks became insolvent and were liquidated, acquired or nationalized. In France, a new wave of deposit withdrawals from small and mid-sized banks occurred between July 1931 and January 1932, albeit on a slightly smaller scale than the previous one in late 1930, , and triggered the collapse of a significant bank, the Banque Nationale de Crédit which
4240-581: The Bank Deutscher Länder. The Bank of Prussia had commissioned a new head office in the late 1860s, which replaced its previous building dating from the late 17th century. The structure designed by architect Friedrich Hitzig was completed in 1876 as the Reichsbank started activity. In 1892-1894, the Reichsbank erected a palatial southward extension on an adjacent lot facing Hausvogteiplatz, designed by its architects Max Hasak [ de ] and Julius Emmerich [ de ] . In
4346-971: The British authorities were initially reluctant, but gradually aligned with U.S. views following the establishment of the Bizone on 1 January 1947. Thus, Land central banks ( German : Landeszentralbanken ) were created on 1 January 1947 in American-occupied Munich (for Bavaria ), Stuttgart (for Württemberg-Baden ), and Wiesbaden (for Hesse ), followed in March by French-occupied Tübingen (for Württemberg-Hohenzollern ), Freiburg im Breisgau (for South Baden , and Mainz (for Rhineland-Palatinate ), then American-occupied Bremen on 1 April 1947, and eventually British-occupied Düsseldorf (for North Rhine-Westphalia ), Hanover (for Lower Saxony ), Kiel (for Schleswig-Holstein ) and Hamburg by
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4452-494: The Economy, namely Hjalmar Schacht from August 1934 to November 1937 and Walther Funk from January 1939 to May 1945. On 31 December 1935, the Reichsbank's note issuing privilege became exclusive, bringing an end to the residual central banking roles of the Bank of Baden, Bayerische Notenbank, Bank of Saxony, and Württembergische Notenbank. The Reichsbank benefited from the theft of the property of numerous governments invaded by
4558-619: The German banking sector measured by total assets; large Berlin-based universal banks ( German : Grossbanken ), another 20 percent; cooperative banks , about 10 percent; private banks , about 6 percent; the rest being mainly provincial (e.g. Bayerische Vereinsbank and Hypo-Bank in Bavaria , Barmer Bankverein [ de ] in the Ruhr , Allgemeine Deutsche Credit-Anstalt [ de ] in Saxony ) and other joint-stock banks. Of
4664-564: The German banking sector, with the exception of local savings banks ( German : Sparkassen ), implied that this increase in leverage was not kept in check by public supervision. Even at the time, self-regulation was not obviously effective to keep risks in check: for example, Deutsche Bank was impacted by a series of scandals related to poor credit risk controls in the mid-1920s. By the late 1920s, public banks ( Staatsbanken , Landesbanken , Girozentralen , Kommunalbanken , and Sparkassen ) represented more than one-third of
4770-599: The German debt problem would only be settled in 1953 with the London Agreement on German External Debts . At its low point in 1932, German economic output had declined 39 percent from its level in 1929. The large joint-stock banks were fully reprivatized in 1937. Capital controls were kept for an extended time period. The crisis had major consequences for the development of prudential banking supervision in Germany, which had been essentially nonexistent (except for savings banks) before 1931. On 19 September 1931,
4876-491: The German financial system was a direct legacy of the hyperinflation of 1921-1923 , which durably impaired the role of capital markets and made the country abnormally dependent on short-term foreign lending. Many German companies routinely parked their money in foreign subsidiaries that in turn lent to their German parent. Similar patterns could be observed in other Central European countries that had suffered from hyperinflation, particularly Austria , Hungary , and Poland , to
4982-566: The Germans, especially their gold reserves and much personal property of the Third Reich's many victims, especially the Jews . Personal possessions such as gold wedding rings were confiscated from prisoners, and gold teeth torn from dead bodies, and after cleaning, were deposited in the bank under the false-name Max Heiliger accounts, and melted down as bullion . In April and May 1945,
5088-498: The Golddiskontbank also played a role in arms financing. The Mefo exchanges specially created for this purpose were not financed directly on the money market, but indirectly placed in the form of block and sola exchanges of the Golddiskontbank. The Dego also became associated with implementing the foreign exchange regulations imposed by the Nazis on Jewish refugees. Jews who intended to emigrate had to transfer their securities holdings to
5194-491: The Golddiskontbank granted loans to secure claims that were unlikely to be paid because of the war. Both the Deutsche Reichsbank and Deutsche Golddiskontbank were shut down in 1945 and their functions were transferred to successor institutions. The draft law on the liquidation of Deutsche Reichsbank and Deutsche Golddiskontbank provided for the dissolution of the institutions and compensation of shareholders under
5300-485: The Golddiskontbank were to aid the restarting of the German economy by lending to support export trade and the purchase of raw materials and other goods; to generate the necessary funds for the Reich to pay for Treaty of Versailles reparations ; and to ensure the stability of the German currency. The bank's main mission was to grant loans to German exporters. The loans were made available at interest rates that were far below
5406-849: The Oesterreichische Nationalbank was re-established by the Central Bank Transition Act of 3 July 1945 of the Second Austrian Republic . In line with the Morgenthau Plan , the American authorities in November 1945 proposed a radically decentralized plan that would have organized a separate financial system in each of the Länder , with minimal central coordination. After some hesitancy, the French authorities rallied that vision;
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#17327662351445512-428: The Reich Ministry of Economics, sold the securities and transferred the proceeds to an account with the Golddiskontbank in favor of the Reich Ministry of Economics. The Golddiskontbank, working on behalf of the Reich Ministry of Economics, reduced the foreign exchange raised from the sale by a discount specified by the Reich Ministry of Economics. The funds reduced by this amount were then transferred in foreign currency to
5618-494: The Reichsbank and a standstill committee of the German economy. The agreement guaranteed that foreign banks would not call in German banks' loans. The Golddiskontbank guaranteed part of the loans, which in turn were covered by guarantees from the German government. The standstill agreement was supplemented by a further credit agreement in 1932 and renewed annually until 1954. After the National Socialists took power,
5724-660: The Reichsbank introduced restrictions to its domestic bill discounts, with the aim disincentivizing transfers of money abroad by German firms - but this had catastrophic effect by creating financial squeezes even for essentially sound firms. From mid-June, concerns arose around a loan of 48 million Reichsmark that Danat-Bank had granted to struggling textile company Nordwolle , corresponding to 40 percent of its equity. On 4 July 1931, Danat-Bank ran out of discountable bills. The Reichsbank had to discontinue its liquidity assistance on 10 July 1931, and on 13 July 1931 Danat publicly disclosed its inability to meet commitments, triggering
5830-443: The Reichsbank reserves in 1945 was uncovered by Bill Stanley Moss and Andrew Kennedy , in post-war Germany. In line with decisions made at the Potsdam Conference , the Reichsbank was placed under joint Allied custodianship pending its liquidation. The four occupying powers ( France , the Soviet Union , the United Kingdom and the United States ) initially continued to issue Reichsmarks and Allied military marks . In Austria ,
5936-404: The Reichsbank sponsored several mechanisms to facilitate the revival of interbank transactions. On 18 July 1931, it established a temporary Transfer Association ( German : Überweisungsverband ) to allow the system's core banks to transact among themselves without being bound by the general restrictions on payments: this started with 11 institutions, and expanded to 44 by 4 August 1931, after which
6042-410: The Reichsbank was associated with the supervisory process through a newly established Supervisory Office, but that role was transferred to the Economics Minister German : Reichswirtschaftsminister upon a legislative revision in 1939, and the Aufsichtsamt für das Kreditwesen itself was dissolved in 1944 with its duties taken over by the economics ministry. After World War II , banking supervision
6148-419: The Reichsbank, and only a few months after the foundation of the bank the Reichsbank Act revoked the right to issue banknotes. The Dego was exempt from any Reich, state and municipal taxes. It claimed independence from political influence, and its business was to be subject to strict separation from public finances. No loans were allowed to be granted to the Reich, the states or the municipalities. However, after
6254-561: The Spring of 1948. In the Soviet occupation zone , ostensibly similar entities dubbed Emissions- und Girobanken were established in May 1947 in each of the zone's five Provinces, namely in Potsdam for Brandenburg , Rostock for Mecklenburg , Dresden for Saxony , Halle for Saxony-Anhalt , and Erfurt for Thuringia . Each of these was fully owned and controlled by the respective provincial authorities. In 1947, newly appointed U.S. Military Governor Lucius D. Clay decided, against directives from Washington, that Germany needed
6360-463: The United States which were uniquely exposed because of the structuring of German post-WWI reparations. At the Lausanne Conference of July 1932 , an agreement was outlined on a three-year suspension of German reparations, but that was rejected by the U.S. Congress in December 1932, triggering defaults by France and the UK on interallied war debts. Ultimately, losses of U.S. investors into German debt amounted to 13 to 16 percent of U.S. 1931 GDP, and
6466-403: The bank holiday restrictions were fully lifted and the Überweisungsverband was disbanded. Then on 28 July 1931, the Akzept- und Garantiebank AG (later known as Akzeptbank ) was set up to make interbank bills acceptable as collateral by the Reichsbank through credit enhancement. Its capital of 200 million Reichsmark was subscribed (albeit at 25 percent) by the government (40 percent),
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#17327662351446572-414: The collapse of several major banks in Austria and Germany , including Creditanstalt on 11 May 1931, Landesbank der Rheinprovinz on 11 July 1931, and Danat-Bank on 13 July 1931. It triggered the exit of Germany from the gold standard on 15 July 1931, followed by the UK on 19 September 1931, and extensive losses in the U.S. financial system that contributed to the Great Depression . The causes of
6678-563: The controversies over war reparations, implying that the "appearance of prosperity" and visible public investment should be avoided, weighed negatively on key economic sectors such as the automobile market and infrastructure works. Economic historian Peter Temin concludes that Brüning "ruined the German economy — and destroyed German democracy — in the effort to show once and for all that Germany could not pay reparations." It remains debated, however, to which extent an alternative strategy of expansion would have been viable. Harold James notes that
6784-457: The crisis included a complex mix of financial, fiscal, macroeconomic, political and international imbalances that have nurtured a lively debate of historiography . Germany's banking sector shrank dramatically from 1913 to 1924 but expanded rapidly again in the later 1920s, with fivefold growth of aggregate bank assets between 1924 and 1930. The banks were generally undercapitalized and overstretched following rapid balance sheet expansion in
6890-411: The currency reform of 1948. The Dego, which had been dormant since 1945, was dissolved on 1 October 1961. The private shareholders who were compensated were mostly foreign institutional shareholders who held 1/7th of the shares. Liquidation deadline was on 30 September 1969. The shares became the property of the Bundesbank; the Oberfinanzdirektion Berlin was appointed to managee of the remaining accounts of
6996-410: The disappearance of the Reichsbank in 1945, a number of its former branches were taken over by its successor entities, namely the Deutsche Bundesbank in West Germany , the Staatsbank der DDR in East Germany , and the National Bank of Poland in Poland ; some in East Germany were demolished later on, such as the Chemnitz branch in 1964. Many other branches have been repurposed for other uses over
7102-457: The discount rate could be gradually lowered, reaching 56 percent in January 1927. In 1930, legislative amendments in line with the Young Plan brought an end to the involvement of foreigners in the Reichsbank's governance. The General Council was reduced to 10 members, all German, and the role of Currency Commissioner went to the President of the Rechnungshof des Deutschen Reiches [ de ] . The Nazi regime promptly put an end to
7208-399: The early 1930s, the Reichsbank erected a large new facility on the other side of Kurstrasse, designed by its architect Heinrich Wolff [ de ] . While the main building was heavily damaged during World War II and eventually demolished in 1960, the 1930s extension survives as the Haus am Werderschen Markt , hosting the German Federal Foreign Office after having been the home of
7314-429: The efforts of Reichsbank President Schacht, the business of the Golddiscount Bank was expanded, so that it was used to manage public money from the spring of 1927. The organization of the Golddiskontbank consisted of the Executive Board, Supervisory Board, and the Advisory Board, all subject to the shareholders' Annual General Meeting. The Reichsbank provided its organization and administration. The legal requirements were
7420-422: The emigrant's personal bank. The Golddiskontbank was also involved in transactions concerning cash and other goods of Jewish emigrants. For example, if cash amounts were to be transferred, the Jewish emigrant's bank had to transfer the amounts to the Golddiskontbank, which then credited it to an account of the Reich Ministry of Economics. The Golddiskontbank, in turn, then exchanged the cash into foreign currency at
7526-403: The fear of becoming dependent on foreign countries and thus giving them a greater say in financial and economic matters. The share capital of the bank was 10 million pounds, which corresponded to 200 million gold marks . The Golddiskontbank's share capital was issued in pounds sterling , since the pound was a strong currency, respected in the banking world, and that ultimately the German economy
7632-519: The former Golddiskontbank. Rudolf Löb, Member of the Supervisory Board and Working Committee of the Supervisory Board from 1924. Georg von Simson, Member of the Supervisory Board and Working Committee of the Supervisory Board from 1924. Hermann Kissler, Member of the Supervisory Board from 1924. Hermann Junne, CEO 1939 to 1945. Reichsbank The Reichsbank ( German: [ˈʁaɪçsˌbank] ; lit. ' Bank of
7738-616: The former Reichsbank branches in what became the Second Polish Republic were taken over by Bank Polski , and the one in the Free City of Danzig became the Bank of Danzig . During World War II , a number of branches were destroyed and not subsequently rebuilt. The one in Munich , whose construction had started in 1938 on the site of the former Herzog-Max-Palais demolished that year, was only completed in 1951. Following
7844-436: The former shareholders of the Bank of Prussia (except a few who opted for selling their shares) and new subscribers. The bank was exempted from all income and trade taxes, but also had to act as the Reich's fiscal agent without compensation. The Reichsbank operated throughout the Reich's territory through a network of branches, which numbered 206 at its inception in 1876 and expanded to 330 by 1900. A formal distinction
7950-579: The independence of the Reichsbank and made it an instrument of their policy of directing Germany's resources towards rearmament and military expansion. By amendment of 27 October 1933 to the Banking Law, the General Council was abolished and the Direktorium, including the President, were henceforth to be directly appointed and dismissed by the Führer. On 30 January 1937, Hitler publicly proclaimed
8056-597: The largest problem banks, namely Danat-Bank, Dresdner Bank, Landesbank der Rheinprovinz as well as Bremen 's Schröder-Bank [ de ] , and lent to the Deutsche Girozentrale to support the network of savings banks . The Reichsbank's subsidiary Deutsche Golddiskontbank acquired equity in the ailing joint-stock banks, and consequently became the owner of a 91-percent stake in Dresdner Bank (in which Danat-Bank had been forcibly merged),
8162-450: The late 1920s, with a preponderance of short-term debt, much of it foreign. Germany was the world's largest capital importer between 1924 and 1929, with U.S. banks lending massively to German counterparts and U.S. investors buying German bonds in large volumes. By mid-1928, 42 percent of deposits at joint-stock banks were foreign, and the share was 18 percent of all deposits in the German banking sector in 1929. This unusual feature of
8268-454: The legacy of the hyperinflation episode of the early 1920s implied that public borrowing and spending could not be an appropriate strategy for crisis resolution, in Germany as in other Central European Countries including Austria, Hungary, and Poland. The financial crisis sharply exacerbated the economic downturn that had started before mid-1931. The German turmoil of July 1931 generated powerful spillover impact on other countries, particularly
8374-525: The main field of activity was still the granting of credit to German exporters of industrial products. The funds for this were generated by the Golddiskontbank by concluding rediscount agreements. From the end of that year, the Golddiskontbank also issued so-called sola bills to relieve the crowded short-term money market. In the law of 1 December 1930, the Golddiskontbank was reorganized. The European banking crisis of 1931 increased credit demand. Disproportionately many loans were called in from abroad, creating
8480-519: The only exceptions of Lippe and the Hanseatic cities of Bremen , Hamburg and Lübeck - issued government paper money without the intermediation of an issuing bank. Several pan-German conventions were held with the aim to simplify and rationalize the German monetary system, e.g. in Vienna on 24 January 1857, but to no avail. Instead, the number of Notenbanken kept growing, reaching 31 (in
8586-465: The period immediately before the war erupted, the Reichsbank greatly increased its gold reserves, as also did the Bank of France , Bank of Russia and Austro-Hungarian Bank , from an equivalent US$ 184 million on 31 December 1912 to $ 336 million on 30 June 1914. At the outbreak of World War I , however, the link between the mark and gold was abandoned, resulting in the Papiermark . The expenses of
8692-476: The prewar parity of 2790 RM for one kilogram of fine gold; the pre-reform notes ceased to be legal tender on 5 June 1925. In the subsequent period of deflation , the Reichsbank became practically the only source of short-term banking credit in the German economy, which it chose to ration (maintaining a discount rate of no more than 10 percent) rather than lending to high market-determined rates. The Reichsbank's credit rationing only ended in early 1926, after which
8798-473: The properties of banks whose monetary role it replaced, and erected new branch buildings instead. By the end of the 19th century, it had newly built branches in most of Germany's significant cities. In some cases, these branches were replaced by more modern ones in the interwar period. The Reichsbank employed a number of specialized architects for branch design, including the prolific Max Hasak [ de ] and Julius Emmerich [ de ] from
8904-653: The remaining reserves of the Reichsbank – gold (730 bars), cash (6 large sacks), and precious stones and metals such as platinum (25 sealed boxes) – were dispatched by Walther Funk to be buried on the Klausenhof Mountain at Einsiedl in Bavaria, where the final German resistance was to be concentrated. Similarly, the Abwehr cash reserves were hidden nearby in Garmisch-Partenkirchen. Shortly after
9010-486: The same as for the other German central banks. When the bank was founded, there was a fear that foreign bank shareholders would demand representation on the supervisory board or in the administration of the bank and thus indirectly or directly influence German financial policy. Although this was actually intended at the beginning by the Allied powers, which saw the Golddiskontbank only as a temporary solution pending creation of
9116-466: The shares at home and abroad for public subscription. In order not to lose majority voting control, Reichsbank also acquired part of the B share package. In order to raise those £5 million, Reichsbank took out a long-term loan from the Bank of England . In theory, the bank also had the right to issue banknotes for a total amount of £5 million (100 million gold marks), a right that the bank never made use of. The right to issue banknotes could be withdrawn by
9222-861: The stabilization loans orchestrated by the Economic and Financial Organization of the League of Nations that had entailed the creation of the Oesterreichische Nationalbank in January 1923 and of the Hungarian National Bank in June 1924. It comprehensively reformed the Reichsbank and made it, for the first time, an explicitly independent central bank. Its Kuratorium was replaced by a General Council ( German : Generalrat ) consisting of 7 German and 7 foreign members, which
9328-555: The territories that would become the German Reich ) in 1870. They were typically private-sector entities, albeit often under hands-on government oversight, except the Bank of Bremen and Frankfurter Bank which were comparatively independent. Twelve of these were in Prussia, four in the Kingdom of Saxony , one in the Kingdom of Bavaria , and the other 14 in various duchies, principalities and free cities . On 27 March 1870,
9434-575: The true state of banks' financial condition was systematically deficient. Conversely, the issue of foreign lending was heavily politicized in Germany and its importance correspondingly overestimated, not least because much of the "foreign capital" invested in Germany was actually round-tripping by German investors e.g. via the Netherlands and Switzerland for tax avoidance . Incipient financial instability occurred in Spring 1929, due to frictions in
9540-480: The unlimited sovereignty of the Reich over the Reichsbank, and a lew of 18 February 1937 formally abolished the Reichsbank's autonomous status. Another law of 15 June 1939 stipulated that the President and Direktorium should directly receive their instructions from the Führer, and renamed the bank as Deutsche Reichsbank . During most of the Nazi period the same individual was President of the Reichsbank and Minister of
9646-416: The usual rates. The Dego raised the necessary funds by conducting rediscount agreements abroad, and by lending its own share capital. In the run-up to its founding there were many discussions regarding the payment of reparations. There were fears that a gold central bank would only be a reparation bank. The bank's mission to provide itself with gold and foreign exchange from abroad aroused, among other things,
9752-483: The war caused inflationary pressure and the mark started to decrease in value. . Following Germany's defeat and the 1919 Treaty of Versailles , the German government was unable to meet its expenditures and commitments by taxation and borrowing from external sources, and instead turned to the Reichsbank for monetary financing . Combined with its reaction to the occupation of the Ruhr by France and Belgium, this triggered
9858-664: The years, such as the Bucerius Kunst Forum in Hamburg or the Dommuseum Ottonianum [ de ] in Magdeburg . The addresses indicated below are the latest ones, which sometimes differ from original addresses due to street renaming and/or renumbering. European banking crisis of 1931 The European banking crisis of 1931 was a major episode of financial instability that peaked with
9964-478: Was a major monetary anchor in Northern Germany. The Reichsbank was technically a private-sector company with individual shareholders, albeit not in joint-stock form, and operated from the start under the close control of the Reich government. The bank was managed by a management board ( German : Direktorium ) reporting to a supervisory board ( German : Curatorium ). The Curatorium was chaired by
10070-452: Was dependent on the British financial markets. In addition, this made it more attractive for foreign banks to invest in the Golddiskontbank. The shares were issued at £10 each, divided into two groups, A and B. Group A subscribed for half of the share capital. This part was purchased exclusively by the Reichsbank. The £5 million comprising the shares of Group B were bought by a banking consortium consisting exclusively of German banks, who offered
10176-735: Was devolved in West Germany to the Länder , until a national banking supervisor was re-established in 1962 as the Bundesaufsichtsamt für das Kreditwesen [ de ] , which again cooperated closely with the Deutsche Bundesbank . Another decree on 6 October 1931 granted legal personality to the Sparkassen and reinforced their public supervision. The financial crisis of 1931 has long been identified as
10282-557: Was echoed in reference works such as those by Karl Erich Born [ de ] or Gerd Hardach [ de ] , and more recently by Thomas Ferguson and Peter Temin . By contrast, historian Harold James has argued in 1984 that a domestic crisis of public finances was at the core of the German sequence, noting that domestic deposit flight predated the exodus of foreign investors in Germany by several critical weeks. Isabel Schnabel in 2004 identified it as twin crises in currency and banking markets respectively, namely
10388-452: Was made between main branches ( German : Reichsbankhauptstellen ), whose head was appointed directly by the emperor, and other branches ( German : Reichsbankstellen ), but that difference of status was insubstantial in practice. The bank's employees had the status of civil servants of the Reich, even though they were paid by the Reichsbank. The Reichsbank also sponsored the establishment of clearing houses which were established in
10494-411: Was not spared by the banking crisis, against a long-established view that the country had been spared. That view was distorted by the lack of accessible data beyond the country's four largest banks which were comparatively unscathed, and could only be corrected with the rediscovery of a unique collection of balance-sheet data of most French banks gathered by Crédit Lyonnais between 1901 and 1939, known as
10600-479: Was renamed Deutsche Notenbank in July, later relocated to East Berlin , and in 1968 was rebranded the Staatsbank der DDR . Given Berlin's special situation, no Landezentralbank was initially established there. Plans for a separate currency for all of Berlin were considered up until June 1948, when the situation came to a head and the introduction of Western German marks into West Berlin precipitated
10706-450: Was restructured in early 1932 as the Banque Nationale pour le Commerce et l'Industrie . In Spain, Banco de Cataluña [ es ] failed on 7 July 1931 together with two subsidiaries, Banco de Reus de Descuentos y Préstamos and Banco de Tortosa [ es ] , causing a credit contraction in the whole of Catalonia . Germany made "standstill agreements" with major creditor countries in August and September, following
10812-526: Was set by law, but the " Rentenmark " became interchangeable with paper Mark at the rate of one to one trillion. The Rentenmark was thus in effect a transitory domestic currency, which was never convertible internationally. The success of the Rentenmark, followed by the Dawes Plan on war reparations, paved the way for a restoration of monetary order. The Banking Law of 30 August 1924 was inspired by
10918-482: Was to allow the latter to keep issuance activity but under such restrictions that they rapidly fell into monetary irrelevance. The Reichsbank was established by legislation of the Reichstag of 14 March 1875, and assumed its new role on 1 January 1876 when it succeeded the Bank of Prussia. Meanwhile, between 1873 and 1875 the Bank of Prussia assumed all the assets and liabilities of the Hamburger Bank , which
11024-496: Was to elect the bank's president subject to approval of the President of Germany . The General Council also elected one of its foreign members to serve as Currency Commissioner ( German : Komissar für die Notenausgabe ) supervising note issuance. The ability of the reformed Reichsbank to extend credit to the Reich government was strictly limited. The new currency, the Reichsmark (RM), was set at one trillion paper Mark, restoring
11130-502: Was used to rehabilitate banks in difficulty. Golddiskontbank drew on standby loans, e.g. a loan of 50 million dollars from the International Acceptance Bank (New York), which was then made available to the Reichsbank via the Golddiskontbank. In this crisis year, a standstill agreement was concluded with foreign banks with the participation of the Golddiskontbank. The contractual partners on the German side were
11236-468: Was widely viewed as a pillar of financial stability given its history of market dominance and prudent management led by the Rothschild family . Its traditional strength, however, ironically became a vulnerability as the government leaned on it to absorb struggling banks, including Allgemeine Bodencreditanstalt and Union-Bank. Its governance was also disrupted by the emergence of the Bank of England as
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