History of Banking in Romania: First Part

Abstract

Romania has been selected among the 10 Central and Eastern European candidates for EU membership, ranking second as importance after Poland and is expected to join the Community in 2007. Romanian financial institutions have to face today adaptations and opportunities and banking business in the country seems fairly attractive to foreign banks. The paper highlights the rise and the development of banking in Romania and covers the period going from the peace of Adrianople (1829) up to the end of World War II. At the time of iron wall all Eastern Europe fell under Soviet control. Therefore also in this country was enforced by the ruling power the socialist banking by means of nationalization and concentration of banking industry. Prior to that event Romanian banking industry had achieved a satisfactory level of development and adequate operational standards. The financially powerful and industrial advanced countries of western and central Europe (i.e. Britain, France and Germany) had supported the development of Romanian banking, a process started in XIX century and continued in the first part of XX century with a few years interruption during World War I. In the period between the achievement of national unity (Romania Mare) in 1920 (Treaty of Trianon) and the great world depression this country played a remarkable role in international political relations and enjoyed an age of social and economic progress that reminded the Dacia Felix of the Romans. Inflow of foreign capital and financial know-how gave a substantial contribution to growth, deepening and diversification of banking industry and financial sector in Romania. The position of relevant supplier of raw materials in Europe allowed Romania, on the one hand, to gain a quick economic recovery in the years before the outbreack of World War II, but, on the other hand, gave rise to foreign appetites and domestic political instability. Weakness of Franco-British guarantee of Romanian territorial integrity after surrender of France (June 1940) was the cause, firstly, of the loss of territories (Eastern provinces of Bessarabia and northern Bucovina occupied by Red Army; northern Transylvania and southern Dobruja ceded, respectively, to Hungary and Bulgaria) and, secondly, of the fall of the country under the German control. Participation to the invasion of USSR as Germany's ally in 1941 involved the Romanian banking system in financing war expenditure. Eventually, military defeat followed by capitulation brought up the political and economic collapse of the country under Soviet rule.