Early Development of the Romania's Banking System and the Role of Foreign Banks
Universita Degli Studi di Milano Working Paper No. 2008-35
19 Pages Posted: 13 Nov 2008
Date Written: November 12, 2008
The paper presents an historical synthesis of the rise and early growth of banking industry in Romania from mid-XIX century to the outbreak of World War I and concentrates on the last decades of this period. The idea of a single national bank of issue under the control of the government had been raised during the 1848 revolution, but it was for years just a topic for study and discussion without any concrete development. Therefore, the most significant step in building the foundations of a banking system was the establishment, in 1880, of the National Bank of Romania. Only one-third of its shares were subscribed by the Government whilst two thirds were in private hands, both domestic and foreign. Then, the study highlights the substantial input, both in terms of capital and know-how (modern operating standards in commercial banking and investment banking), provided by financial institutions of industrial advanced European countries to the establishment of domestic financial intermediaries and, by this way, to support the development process of Romanian banking system. The role of banks in promoting the growth of the Romanian economy in the turn of the century by gathering huge amounts of financial capital and by directing funds into the most promising investment projects has been widely recognized. The economic development of the country was, in fact, the result of capital inflows and of improvements in exploiting domestic natural resources. Finally, the paper examines the development of banking in Transylvania in the time when this region was under Austro-Hungarian rule.
Keywords: History of financial development, banking, Romania, Transylvania
JEL Classification: N23, G 20, G21
Suggested Citation: Suggested Citation