Financial Institutions in Interwar Romania (Le Istituzioni Finanziarie Della Romania Nel Periodo Infrabellico)

Universitá Degli Studi di Milano, Dipartimento di Scienze Economiche Aziendali e Statistiche Working Paper No. 2010-03

48 Pages Posted: 4 Mar 2010

See all articles by Claudia Gabriela Baicu

Claudia Gabriela Baicu

Universitatea Spiru Haret

Arnaldo Mauri

Università Degli Studi di Milano

Date Written: February 2010


This paper provides an historical account of the development of Romania’s banking system and covers the period going from the outbreak of World War I to the end of World War II. In addition, the study investigates the role of historical and political circumstances affecting the structure of banking industry as well as the banking legislation in Romania during these turbulent decades. Thanks to the establishment of foreign financial institutions (mainly of Central European countries) the Romanian banking system had attained a diversified structure and adequate operational standards at the turn of the century. However, a dangerous behaviour in bank management, inspired to mixed banking in the style of German universal banks, began in these years. It is worth noting that both a lax banking regulation and supervision as well as deposit-taking institutions’ direct involvement with industry, agriculture and commerce, were two phenomena considered at that time to be rather positive for speeding up economic development of the country. In 1916 Romania entered the war on the Allied side in return of promises of territorial gains and, as a member of the victorious coalition, had a place at the Peace Conference of Paris, but, disappointingly, obtained less than had been promised. However, with the unexpected annexation of Bessarabia, Romanians were able to fulfil the old dream of building a nation-state encompassing most of Romanian speaking people of the Carpatho-Danubian area (România Mare). Once national unity had been achieved, Romania, thanks to well conceived reforms, could enjoy an age of domestic political stability as well as of social and economic progress. Although still placed among less developed countries in Europe, Romania played a remarkable role in international relations, as it was considered a regional bastion against both defeated countries’ revanchism and Soviet expansionism. Nationalisation of banks which had connections with financial groups of Central Europe increased the share of Romanian capital in domestic banking industry. In addition, inflow of foreign capital and financial know-how from a number of western industrialised countries gave a substantial contribution to change in the financial environment, by increasing financial deepening and financial inclusion, and finally to further growth and broadening of the Romanian banking system. The great depression hit severely Romania’s economy and financial system and, as a result, many bank failures occurred. Furthermore the crisis caused social unrest and political instability. The financial reconstitution followed to the crisis resulted in more power given to the Banca Naţională a României also in terms of banking regulation and supervision, but the enlarged functions of the central bank were integrated into a new framework of steady and generalized government control. The position of relevant supplier of raw materials in continental Europe allowed Romania, on the one hand, to gain a quick economic recovery in the years before the outbreak of World War II, but, on the other hand, gave rise to foreign appetite and intrigues as well as to domestic political turmoil. The default of guarantee of Romanian territorial integrity after the collapse of France resulted, first, in the loss of territories (ceded to Soviet Union, Hungary and Bulgaria) and, second, in the shifting of the country into the sphere of German hegemony followed by the conferment of its natural resources into Germany’s wartime economy. The political and economic dominance of Germany was reflected also in the Romanian financial sector where some leading institutions changed governance accordingly. Participation to the invasion of Soviet Union in 1941 with the aim of recovering the lost territories brought about the direct engagement of the country in the Second World War. Romanian banking system was fully involved in financing the war effort. Military defeat, followed by Romania’s capitulation, caused the surrender of Bessarabia, Northern Bucovina and Southern Dobruja and, eventually, the fall of the country itself under Soviet rule. A Soviet-type government-owned and centrally planned economy was established in Romania and, consequently, a socialist banking was enforced by means of nationalization and concentration of financial intermediaries. The socialist banking system established in the country, although usually called monobanking, in reality had three financial institutions: (1) a state bank performing central and commercial banking functions as well, (2) an investment bank and (3) a savings institution which provided rudimentary banking services to the public and channelled savings into the state budget.

Note: Downloadable document is in Italian.

Keywords: Banking system, Romania, financial development, banking

JEL Classification: G01, G21, G28, N24, N44

Suggested Citation

Baicu, Claudia Gabriela and Mauri, Arnaldo, Financial Institutions in Interwar Romania (Le Istituzioni Finanziarie Della Romania Nel Periodo Infrabellico) (February 2010). Universitá Degli Studi di Milano, Dipartimento di Scienze Economiche Aziendali e Statistiche Working Paper No. 2010-03, Available at SSRN: or

Claudia Gabriela Baicu

Universitatea Spiru Haret ( email )

Ion Ghica Street nr 13 sector 3
Sector 6
Bucharest, 030045

Arnaldo Mauri (Contact Author)

Università Degli Studi di Milano ( email )

Milan, 20122

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