ARMY SERVICE FORCES MANUAL

L~J II11U~
CIVIL AFFAIRS HANDBOOK
BELGIUM
SECTION 5; MONEY AND
BANKING
Disserintion of restricted matter. - The information con-
tained in restricted documents and the essential characteristics of restricted
material may be given to any person known to be in the service of the United
States and to persons of undoubted loyalty and discretion who are cooperating
in Government work, but will not be communicated to the public or to the press
except by authorized military public relations agencies. (See also par. 18b,
AR 380-5, 28 Sep 1942@)
HEADQUARTERS, ARMY SERVICE FORCES,
-- C I 11 3- -- C- II - __ I- --
15 JUNE 1944
ARMY SERVICE FORCES MANUAL M361-5
Civil Affairs
CIVIL AFFAIRS HANDBOOK
BELGIUM
SECTION 5; MONEY AND
BANKING
HEADQUARTERS, ARMY SERVICE FORCES, 15 JUNE 1944
N .. * Dissemination of restricted matter. - The information con-
tained in restricted documents and the essential characteristics of restricted
material may be given to any person known to be in the service of the United
States and to persons of undoubted loyalty and discretion who are cooperating
in Government work, but will not be communicated to the public or to the press
except by authorized military public relations agencies. (See also par. 18b,
AR 380-5, 28 Sep 1942.)
I -- I---~ - ---- pm~--- Is -I - L I
I-I -- -I I - - -I -I I - I -
------ ~--,---- I~,~ --
NUMBERING SYSTEM OF
ARM! SERVICE FORCES MANUALS
The main subject matter of each Ariq' Service Forces Manual is indicated
by consecutive numnbering within the following. categories.
Ml - M99
1100 - 1199
M200
1500
1400
1500
M600
1700
M800
M900
- 1299
- 1599
- 1499
-M1599
1699
1799
- M899
- up
Basic and Advanced Training
Armyr Specialized Training Program and Pre-
Induction Training
Personnel and Morale
Civil Affairs
Supply and Transportation
Fiscal
Procurement and Production
Administration
Miscellaneous
Equipment, -Materiel, Housing and Construction
HEADQUARTERS, ARMY SERVICE FORCES
Washington 25, D. C. 15 June 1944
Army Service Forces Manual M 361-5, Civil Affairs Handbook, Belgium -
Money and Banking has been prepared under the supervision of the Provost
Marshal General and is published for the information and guidance of all
concerned.
[SPX 461 (21 Sep 45).]
By command of Lieutenant General SOMMERVELL:
W. D. STYER
Major General, General Staff Corps,
Chief of Staff. uk
OFFICIAL:
J. A. ULIO,
Major General,
The Adjutant General
This study on Money and Banking in Belgium was prepared for the
MILITARY GOVERNMENT DIVISION, OFFICE OF THE PROVOST MARSHAL GENERAL
by the
BOARD OF GOVERNORS OF THE FEDERAL BESERVE SYSTEM
OFFICERS USING THIS MATERIAL ARE REQUESTED TO MAKE SUGGESTIONS AND
CRITICISMS INDICATING THE REVISIONS OR ADDITIONS WHICH WOULD MAKE THIS
MATERIAL MORE USEFUL FOR THEIR PURPOSES. THESE CRITICISMS SHOULD BE
SENT TO THE CHIEF OF THE LIAISON AND STUDIES BRANCH, MILITARY GOVERNMENT
DIVISION, PMGO, 2807 MUNITIONS BUILDING, WASHINGTON, D. C.
INTRODUCTION
Purposes of he Cil ffair Hadbook.
The basic purposes of civil affairs officers are (1) to assist the
Commanding General by quickly establishing those orderly conditions which
will contribute most effectively to the conduct' of military operations,
(2) to reduce to a minimum the human suffering and the material damage
resulting from disorder, and (3) to create the conditions which will make
it possible for civilian agencies to function effectively.
The preparation of Civil Affairs Handbooks is a part of the effort
to carry out these responsibilities as efficiently and humanely as possible.
The Handbooks do not deal with plans or policies (which will depend upon
changing and unpredictable developments). It should be clearly understood
that they do not iven offciaroj am of action. They are rather
ready reference source books containing the basic factual information needed
for planning and policy making.
ylir'r
CIVIL AFFAIRS D..QQOON
TO P I"G A L 0 UT IN
1. Geographical ard Social Background
2. Government and Administration
5. Legal Affairs
4. Government Finance
5, Money and Banking
6. Natural Resources
7.' Agriculture
8. Industry.. and Commerce
9. Labor
10. Public Works and Utilities
11. Transportation Systems
12. Communications
15. Public Health and Sanitation
14. Public Safety
15. Eaducation
16. Public Welfare
17. Cultural Institutions
This study on Money and Banking in Belgium was prepared for the MILITARY
GOVERNMENT DIVISION, OFFICE OF THE PROVOST MARSHAL GENERAL by the BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.
PROVISIONAL EDITION
::..NORTH'f
SEA
:::
::...
Bruges
G
O Ghent
EAST FLANDERS
0
Brussels
'" ".: "1 BRABANT
HAINAUT
0
Mons
WEST FLANDERS
NAMUR
F R
FROM: PHILIPS'
DRAWN IN THE BRANCH OF RESEARCH AND ANALYSIS, OSS
LITHOGRAPHED IN THE REPRODUCTION BRANCH, OSS
LIMBURG
0
F RA N
O Liege
LIEGE
PROVINCES OF
BELGIUM
o Provincial Capital
Provincial Boundary
0 20 40 60
MILES
0 20 40 60
KILOMETERS
NO. 3258
8 APRIL 1944
ANTWERP
TABLE OF CONTENTS
Page
PART I BACKGROUND INFORMATION
A. Formnetive Stage Before the First World War 1
(Currency, nd central banki ng--Commercial' and
'?mixed" banking-- Other banking and financial
organi zations: Financ ial ho 1lding companies;
Mortgage bankixng; Savings and cooperative . c.redit
institutions; Rural credit cooperatives; Credit
Communal)
B. From the, Firstto the_ Second _ World War 11
(Currency and central banking: The stabilization
of 1926; Renewed difficulties in the 'thirtes--
Comercial and mixed banking until 1.935: Societe
Generale; Banque de Bruxelles; Algemee ie Bank-
vereeniging; The banking crisis--Banking reform
of 1935: Abandonment of mixed banking; Regulation
of banking activities; Control. of security issues;
They Banking Commnission; The reviseurs--Commercial
banking after 1935: Credit Anversois; Cai sse
Generale des Reports et des Depots)
PART II. MONEY AND. CREDIT INSTITUTTONS IN 1939
A. The Mono tary Sys-tem 36
(Notes and coins--Deposit currency)
B. The National Bank
140
(Management--Operations -- Disposition of profits)
C. Commrcial Banks .48
(Three leading banks--Other domostic banking
corporations--Private. banking houses--Colonial
banks--Belgian banks operating abroad--Belgian
participation in foreign banks--Foreign banks in
Belgium)
D. Savings and Cooperative' Credit, Institutions 71
(Caisse Generale d'Epargne--Private caisses
dtepargne--Other cooperative organizations)
E. Mortgage Banking
76
Page
F. Official Credit Institutions 85
(Institut de Ree.compte et de Garantie--Societe
National de Credit a l' Industrie---Office National
du Ducroir -- Office Central de la. Petite ;Epargno--
Loans for Ismall busiress-'Office Central du Credit
Hypothec .ire -- Institut National do Credit Agricole--
The Credit Comaiunal)
G. Financial Companies 93
(Leading "general" financial companies--'Special"
fiinancial companies)
H. Stock iExchanges 105
(Organization--Operations: Thee cash market; The
term market)
I. Insurance companies 110,
(Insurance law -- Life insurance operations--
Leading life companies--Other' insurance branches)
PART III. DEVELOP IENTS SINCE THE INVASION 118
(The invasion crisis and the exile of the National
Bank--German financial exploitatio-- Central banking
and the financing of the tribute--Inflation and prices--
Conmercial, banking--Official credit institutions--S tock
oxchangos--Insurance companies)
Iii ; -- iii - :-
STJ ASMR
Th following report is divided into three principal parts deal-
ing vrdth I, Background Infon'nnation; II, MVoney and Credit Institutions in
1939; and III, Developments Since the Invasion. Part I reviews briefly
the development of currency anld banking institutions in Belgiuaim; &iphasiz-
ing factors necessary for an unrderstadriing of 'the present system and
events which may find a parallel d'uring thy, period follouvaig the present
war. Part II gives a detailed description of the pre-invasionaiZitng
system which, in all of its essential elements, has_ been preserved under
the German occupation., The lack of adequate statistics for the war period
also makes it nece ssaary in many cases to go back to the pre--war years for
full information. Part ITI reriews monetary and banking developments dur-
ing the occupation period., emphasizing the financial consequences of German
exploitation of the country.
Part I
The stage of rapid industrial development which Belgium experienced
before the First World Wir was the formati-v'e period for Belgian-monetary
and banking ins ti-tutions. A central bank, :the BEngue Nationale de Belgicue_,
was established in 1350 with the exclusive right to issule bank notes.
Although the Govemnment was given certain powers over this institution, the
,Bank was forbidden to finance, -the Govremment beyond narrow lmits and in
practice 'concentrated upon' discounting anid rediscoun ing short-term commer-
cial bills. The support which it afforded to the rest of the banking 'system
allo' ed the private banks to play an important role in financing industrial"
expansion. Belgium adhered to a bi-mtallic monetary stndain d before the
First World War although a fall in the world price of silver in the 1g,70' s
had caused the suspension, of free coinage for thi-s motal and had in effect
left Belgium on a gold standard.
Belgiumt's odet and largest banking corporation is the Societe
Generale de Belgigue, -established in 1S22. 'Other banking corporations
appeared on the scene following the revolution in which Belgium gained its
national independence, and following a. series of early banking crises, these
banks entered a period of almest uninterrupted exansion in thewa&sj half
of the nineteenth century. They took a prominent part in financing indus-
trial enterprises not only by loans but also by operations in corporate
securities. Their investnent banking activi ties', including the. holding of
large portfolios of industrial securities, -becoe so important that these
institutions came to be called "mixed" banks rather than commercial "banks.
During the same period Belgium tia building up large foreign investments,
a' pro cess in Which the banks participated on a large scale. A boom in the
early ' seventies marked the appearance of several new banks, including the
Ban cue de. Bruxelles which was subsequently to become the second. largest
banking instituition in the country. By 1913 Belgian banking corporations
(excluding private bankers, etc.) held deposits, of around 3' billion francs
and dominated most lines of Belgian industry by reason of. loans to or
investments in securities of Belgian industrial enterprises.
-iv - _
Other types of financial institutions developed before the. First
World War included financial holdinug companies (financial trusts); mort-
gage banks--many organized for operations abroad--which rrade most of their
loans-on urban real property; and, various savings and cooperative institu-
tions.. A dominat role in the celloction of small savings: was played by
an official institution) the Cirgac s Gel.e dlLXpa7n (Posal Savngs
Bank), founded in 1365., .side from this organization and the National
Bank, the only official credit institution in e~dstence before ,the First
World .War was the Credit Communal, a kind of cooperative association of
provinces and municipalities whi ch issued bonds to finance local government
expenditures.
ith the German invrasion of 3elgiumi in 1914 the o - rtions'
the National Bank 'sore. sum !'4% cni? and the Sociote Generale issued notes to
finance the paynent of tribute to the enemy. In addition large .;amounts of
German marks were put into circulation by the occupation forces. After
the Armistice the German currency was exchanged for motes of the National
Bank, -which thereby .acqu ired large claims on the Government. The c ess
money. supply created in this mar ner laid the basis for a serious inflation
in the post-vvar years which, ' together with some rise in prices during the
-var itself, brought price indexes in Belgium in 1926 to 6 or 7 times their
pre-war level.. The franc was meanwhile depreciating on the international
exchanges amid ridespread spe culation. Finally in October 1926 wMith the
aid of a f'oreign loan, a new monetary unit, the r'
T
elga" (equal to 5 francs),
was established, the gold value of the franc being reduced to nearly one-
seventh of its. pre-war level. Belgium returned to the gold standard on
this basis and built up extensive geld reserves, in the following years as
a result of. a favorable -trade posibion e nd an in.f-Lux of capital funds.
The abandonment of the gold standard by England in September 1931
caused a severe loss to the National Bank on its holdings of sterling funds
and gravely affected the competitive position of Belgium in world markets.
After a. period of attempted domestic deflation,. the pressure on the Belgian
franc in the exchange markets be come so heavy that a devalu tion of th a t
currency proved inescapable. .This wras effected in March 1935, the gold
value of the belga being reduced by 23 per cent. ' Thereafter. the currency
'wa -aintained without exchange control--i.e. on a freely convertible basis--
until ' the--German invasion. There were indeed periods of strain during the
political crises of the late 'thirties but at the time of the invasion
Belgium still retainied a very substantial volume of geld reserves (23.7
billion francs or more tam 800 million dollars).
The successive "rprofits"'' on the National Banka's gold reserves'
resulting' from devaluations of the currency had accrued to the Government
and been used to pay off, gdvernment debt to the Bank, most of which had
thereoby been discharged. With the outbreak of wvar in 1939, howrever, the
central bank again was authorized to extend large emergency credits to the
Government while at the same time a wave of currency hoarding in the country
brought about a marked expansion in the note circulation.
Meanwhile banking institutions had greatly expanded during the
inflation of the t tenties and. had' sufferer from. a severe crisis in the
critical period of U re iearly thir-(G es.. "The first ha lf of thqe e.nties
vas characterized by great .speculativre acivity in industpry and commerce
as v ell as in the foreign exchanges, in which the banks played a leading
role. 'btal deposits with bankirg corporations increased 11 times from
'1913 to 1930 reaching 33 billion francs in the la ter year. ' The mixed
banks continued to give close support to industrial enterprises, and the
big banks iin Brsse ls, ag ressiv ly -expanded their organizations by absorb-
ing smaller banks, especially in the provinces.
With the in.mpa t upon Belgium of the for"_d depression, banking
loans and discounts dropped from over' 30 billion francs at the end of 1930
to 19 billion at the end of 1932. An, acute banking crisis vas then precipi-
tated by the monetary panic in 1934-35 and the ;uithdr. awa l of bank, doposits
for, hoarding purposes or for financing the flight of capital f..rom the
country. The banks were enabled . to surmiive this period only by the liberal
support lent them by the Gove nment and they National Bank. The devaluation
of the currency in March 19:35 put an end, to the crisis but later in the
year a thorough-going refon.. of Belgian banking ,was introduced, la rgely as
a result of lessons learned in the earlier years.
The new banking legisla-tion est ablished gov e~mnent con trol over
banking and the' capital market and divorced investment from commercial
banking. In princinle it became unlawful for any banking corporation to
owan industrial securities, while bank officers weore forbidden =to act as
directors of industrial corporations. In. most cases the mixed banks con-
tinued~ as f'inan cial companies and organized subsidiaries to carry on
straiht coie rcial banking operations. Tlhe new comme rcial banks weore
placed under the supervision of. a Banking Co nmnission and poevision was made
for the issuance of rgulations governing reserve requirements and credit
policies of these institutions. Such regulations wore nevIer act- ally pro-
mulgated, but the Banking Commission nonetheless exercised great influence
in . assuring sound commer cia l banking practices. Security issues, which now
had to . be handled, by th Lfinan cial companies or by private, bankers (not 1iarred
thre crrn by. te-ebenkin g regulations), re also subj ected to close con-
trol by' the Banking Commission.
In the remaining years befoe the Gerxian invasion bank deposits
wore subject to erratic fluctuations wJh ch wore closely rel.dted to the out-
ward and re;turn flows of "hot money" stimulated by the successive political
crises. On the whole,, fron mid-1937 to the end of 1939 deposits declined
from 21 to 13 billion francs, but vvith assistance rendered by the National
Bank, this strain was withstood by ti "banks cxtrernely 'well except in
isolated instances. By the 9nd of 1939 'the; com mercial banks were still in
a reasonably liquid postidn.
Other 'fin cial ins tuti.s folidwed the sanre general pattern of
development' rdiling the inter-ar erod. 'The Cisso One le danpar e
continued t5 be much the most proine nt cello ctor of small savings, especially
since private 'savings and cooperative {ns titutions. suffered severely from
the crisis in the early 'thirties. These institutions were also brought
-vi- -
under' strict .govea-Ment contro after the crisis. T: he late tirties were
marked by a conside rabhle e ipan s n in .the .:number and s cope of official
credit institutions, organized to support variou s. ectors of economic
activity..
Part TI
The circulating medin of the country consisted primarily of bank
notes issued by the National Bank. Subsidiary currency in the fo m of
notes and coins in denominations up to 50 francs was issued by the Belgian
Treasury. Although -Belgium was still on the gold:. standard, no gold coins
were in circulation. In addition demand deposits were held by the pubLic.
mainly with the comnecial banks but also with the National Bank and the
Office des Cheques 'Postaux. The latter office, operating through the post
offices, provided facilities for persons desiring to maintain a deposit for
checking or transfer purposes. In general, however, the volume of demand
deposits was much smaller in relation to note circulation than in Ahglo-
Saxon countries and a much smaller proportion of payments was effected
through banking channels.
The Na-tional Bank was a prive tely-ownied corporation which ma in
tained considerable independence of -action despite the fact that its
Governor was a govonnnent appointee. It was not operated for profit, how-
ever, the Goverment receiving a major shamr of the bank' s earnings. It
had gradually uncrtakoe n bread responsibilities in the administration of
'the whole money end credit system and by force of circumstances had become
intimately concerned with fiscal policy and the Governiment;
t
s finances. It
acted as banker to the State in the sense that it held the Treasury' s
deposits and made end received oayncnts on its behalf. It also extended
credit to the Goveimment in times of stress and was called upon for this
purpose on a large scale during the period from the outbreak of the war to
the German invasion, It held part of the cash reserves of commercial banks
and also received deposits from leading commnercial and industrial firms.
it was required to hold a 40 per cent reserve in geld and foreign exchange
against its notes and other demand liabilities; in practice, after the losses
incurred on. its holdings of sterling in 1931, almost all of the reserves
were held in gold. The bank' s commercial credits were extended by discount-
ing and redis counting _ commercial bills and by makirg loans oi collateral.
gon~isntig of agovo vont' bonds.
Commrcial banksl most of which hadt emerged after the banking
reform of .,1930, were strictly limited in their operations and confined
themselves to what sere, at least nominally, short-trm. operations. How-
ver, . they were accustomed to make loans which were constantly renewed end
wcfhich became in effect long-term comithents, They also held a substantial
security portfolio but this consisted largely of government bonds eligible
as collateral on loans f ru the National Bank.... Their cash reserves wore
maintained at a. reasonably high level as were, their capital and reserves in
relation to deposit liabilities. The. bulk of their deposits were on demand
and at short-term. t at substantial volume of time deposits was also
received.
- vii -
ne bank alone--the Banque de la Societe Gene rale--held. nearly
one--t 3r. of all banking assets in Belgium, and in addition had an :important
affiliate in An twerp, the Banque d' Anvers, The Banque de Bruxelles was the
second largest banik and two others had asse bs exceeding one billion francs,
the Kredietbark operatin.g in Belgium anci the Banqiue Italo-Belge, connected
wi._th the Societe Qeneral.e and operating mainly in South. Amnerica. At the.
end of 1.939 there. were 64 other. Belgian ba.king corporations, 34 private
banking houses, and'9 foreign banks with !:)ranches in Belgium. The private
banking houses included some small firms engaged in commercial banking
operations but the leading houses located in Brussels and Antwerp engaged
in "tfinancial operations" and had an important influence because of their
intimate relations with powerful industrial and financial groups. Belgium
was the domicile of a number of banks operating in the Colony and in foreign
countries, the most important of which, aside from thpe Banque Italo-Belge,.
arras the Banque du Congo Belgo, the bank of issue: for the Congo. In addition
Belgian financial groups had impor tnt participations in foreign banks,
especially in France and in Eastern Europe, whle a few banks in Belgium
were controlled by foreign interests.
Savings and ooerative credit institutions were headed by the
Caisse Generale dt Epargne (Postal Savings Bank) which collected small
savings on passbooks through the post .offices and had a very large volume
of .funds- which it invested mainly in government and other bonds. It also
undertook various other investments in the oublic interest, often placed
through cooperative institutions. THere were a few private savings insti.-
tutions which were subject to strict govern-:-Lent control; there were also
various types of local cooperative institutions of which the rural organiza-
tions--tho caisses agjricols--were the most important.
Mortgage b:ann . was highly- developed in Belgium, especial ly for
loans on urbn resi cientina- property, -which, were also made bey other institu-
tions. An important group of mortgage institutions was engaged in foreign.
operations which often included realty. transactions, land improvement
schemes, etc.
Numrerous offi'cil crei t institutions existed in addition to the
National "-An and the Caisse Generale d
t
Epargno. Those engaged in a great
variety of acti vities covering in general almost every important sector of
economic act vi ty. eHowevr, some o f ti errl we-e'of quite; recent origin and
had not yt developed important operations. 'o committees coordinated
their activrities, one for all official credit institutions and the other
for a group of them serving the Tshall business" field.
Financial companies included those of a general character, most
of which were formed after the 1935 refor. to take over the investment
business of the mixed banks; and special organizations, which acted as
holding companies in particular industrial lines. The gener'al companies
were dominated 'by the Societe. Gnerale do Belgique which controlled the
Banque do , la So ciete Generale and held very extensive interests in Belgian
,.ndstry as w,-,Tell as important colonial and. foreign investments. The next
largest company in this category, although falling far short of the ,Societe
Gencrale, lias "Brufinalt, affiliated with the Ba nque de Bruxelles. Much the
largest of tho special financial companies was HSofinali, which held ide-
spread interests in public utilities, especially in Spain and Latii America.
There were 4 stock exchan es in Belgiu, of which the one in
Brussels was much the most imniportant. The, organization of the stock exchanges
was regulated for the first time in 1935, brokers being given a semi-offic.ial
status and a monopoly for transactions in listed securities. Most of the
transactions on the e::Cchanges were negotiated in the .cash market, i.e. in
principle for imediate settlem nt; 1 "tern
1 1
transactions for settlement on
semi--monthly dates had once been important but were greatly restricted by
the 1935 regulations on speculative activities. Most stock exchange o 1ers
were placed through banks, which shared commissions with the 'brokers.
Insurance companies engaging in life operations were subject to
government supervision but those in non-life lines were governed by no
special regulations. There were ccrtain legal prescriptions for life
insurance company investments but they wore of a very elastic character;
in practice securities and mortgages wore the principal investhment media
By far the largest Belgian life insurer was the Cic. Belge cit Assurances
Oen rales sur la Vie. Foreign com panics had a very important share of the
Belgian life. insurance market. The non-life sector was highly competitive,
there being a very large number of companies in the field: There were some
Belgian reinsurance companies but m ost ' cossions were placed with well--
kno vn British, Swiss, and Gem an reinsurors.
Part III
With the 'Gelman invasion thi Belgian Coverment introduced a
number of emergerincyr wrC measures suspending the convrtibili ter of the cur-
rency, abolishing limitations on central bank loans to the Goverrnnent,
delcaring a banking moratorium, etc. Within three weeks, however, the
Genrans had completed the conquaest of the country and the Belgian Gov ern-
ment had been driven into exile, follo-wed by the National Bank. In July
1940 a new bank of issue wa s set up in Brussels (the Issue Bank) but it
never undertook the function of currency issue since shortly thereafter
the National Bank administration headed by, Governor Janseen returned to
Brussels. Some of the Bank! s officials remained abroad with p rwrer to
administer the Bankt s fo reign assets and in 1941, when Governor Janssen
died, the Belgian governmient-in-exile estabished in London set up a full
administration--in-exile for the National Bankc aMeanwh.ile in occupied
Belgium the National Bank continued to discharge all central banking
functions, using the Issue Bank as an adjunct for perfoning special duties,
especially the management of clearing operations i th Germnany.
Financial developments in Belgium under the occupation have been
dominated by the effects of the tribute excted by 'the Gennan authorities.'
At first this took the fom of the issuance of occupation currency but
this device wi;a.s superseded as 'soon as mo thods for collecting "1occupation
costs" in local currency could be designed. The first payment of this
character is believed to have been made q n August 20, 1940, when the
Issue Bank opened a credit in -favor of the CGeian au-thorities, using funds
supplied by the ''National Bank. The German occupation Curren cy w a s there--
after withdrav: from: circulation by the National, Bsak and. Issue Bank and
is hol. by the latter as a claim on Germany.
-ixi
Belgian payments of "occupation costsa" have greatly exceeded any
legitimate German demands, rising from about 16 billion francs in 1941-.to
an .estimated 22 billion in 1943.- These figures .greatly exceed -total. pre-
war. Belgian goverment expend.i tur es. In' addition, the Issue Bank) , using
funds supplied mainly by the, National Ink, has been forced to finance huge
clearing claims on Germany, arising :for the most part from .Belgian, shipments
of goods to the Reich. By the end of .1943 these clearing claims totaled
nearly 50 billion marks ard the increase inh 1943 exceeded payments of
occupation costs. The total amount of financial tribute exacted in various
forms through the end of 1943 comes to . sme .114 billion francs, aside from
any outright pillage (indludin.g the seizui-e bythe Gemans of 6.7 billion
francs of gold. beonging to the National Bank),
The National Bank has had to finance----through advanced to the
Issue Bank--aJmost .all of the claims on Gexrmany arising fraom. the redemption
of occupation currency and from the clearing operations. A small: portion
has been financed by the Issue Bank out of independent rosourccs, ie..
deposits mainly from Germailan agencies) and funds placed with it by the
Office des Cheques Postaux. In addition, until 1943 the National Bank
had to finance a' substantial portion of the deficit incurred by the Belgian
administrationi in occupied territory, most of which was attributable to the
burden of n ccupation costs". In 1943 the Belgian administration was able
to borrow from the commercial banks and the public an amounit substantially
exceeding its current requiremonts; so that a;, large part of the credits
from the National Bank were repaid. However, including advances to the
Issue Bank, the total amount of credit created by the National Bank for
or on behalf of the State frofi mid-1940 .to the end 9f 1943, was. more. than
54 billion francs. fIts credits to the "private economy" almost disappeared
during this period and there was a net increase in the currency issue of
nearly 50 billion francs
0
From the end of 1939 to the end of 1943, the
amount of currencry in circulation rose approximately 200 per cent while
the publicT s holdings of. demand deposits with commcrcial banks and other
institutions increased in much the sae proportion.
The great expansion of money in the hands of the public has
created great inflationary- pressure on the [price'. level, especially in
view of the acute shortage of consumablo goods. Price inflation .has been
combattcod =with some measure of success by stringent rationing and price
.control measures. ,official prices for rationed goods in the middle 'of 1943
averagoed only ,about double,.. the 'pr- war level. However, black 'market prices
for goods dealt in illicitly have soared to fantastic heights.. Wrgcs 'have
not kept pace even with official prices.i Pears of further depreciation in
the currency- have induced many persons to try to 'convert their- money claims
into Ireal 'values'"; one aspet of this, speculative movement' has been a
great rise in the '..price of equity securities despite poor corporate: earnings
and harsh. restrictions on sto k exchange cbaings. , Notwithstanding the
interral deprecia tion of the. currency, the exchange rates of the Belgian
franc vis-a-vis the Reichsmark and:: other European currencies havc beri
rigidly maintained at the level introduced at the time of the German inva-
sion.
-x -
Commercial banks have operated under strict Genman control and
have lost most of their interests in the rest of Europe to German banks.
However, German banks have not penetrated into the Belgian system. beyond
establishing subsidiaries in Brussels to develop, German-Belgian economic
relations, Commercial banki ng operations have been characterized by a
great expansion of deposits and of loans to the State and a marked falling
off of commercial business. Essentially the commercial banking' process
under the German occupation has been simply to receive, on deposit part of'
the funds pupped into circulation by the central bank and to. rolend these.
funds to the Treasury, mostly through purchases of 'short--tem Treasurye bills,
By the end of 1943 credits to the State constituted nearly 70 per cent of
commercial bank assets as compared vith less than 20 per ce'nt at the end.
of 1939.
The Banque de la Societe Generale has maintained its commanding
lead anong Belgian banks but the other two largest banks, the Banque do
Bruxelles, anid ,the Kredietbank have greatly improved their relative position
at the expense of the smaller banks.
f ery li ttle information is availaole concening the development
of other credit ijnsti tutions during the occupation period.. I mong' the.
official orgni.zations . the Caisse Generale d' Epargne, after losing deposits
through 1941, rocqived small net de posits in 1942 and a large inflow of
funds in 194.3. Tere has. been a very large increase in private deposibts
oith the Office des Cheques Postaux. , The official credit institutions
serving ecial sectors of economic actiityL have found little demand for
normal business loa;? ns, However, seine of then have participated. in projects
for the .reconstruction of war demaage, making leans for this purpose at 16w
interest rates under government guarantee.
As noted above, the sharp rise in share quotations has ;led to
severe rgstrictions on stock exchange- operations. Trnsactions in listed
securities have been forced, to pass through the exchanges in order, to pre-
vent evasion of the controls. The general index of share prices, which
showred sharp fluctuations in 1943, primarily as a result of changing antici-
pations as to the progress of the via r, ended the year about 3-1/2 times
higher than on the eve of the invasion. The abundance of liquid funds
seeking investmlent has caused 'even fixed- interest securities to enjoy
great demand,' even though they, offer no protection a gainst. depreciation
of Thhe currency. The. general :trend of interest rates has therefore been
doinwa rd.
After an. initial period of disruption, life_ insurance sales. have
recovered under the stimulus of monetary inflation and in 'recent years
have greatly surpassed those of pr-wa r years. Nqn-life. insurance, business
has also expanded, especially as a result of the appreciation in the proper-;
values; British reinsurers have been replaced by German' interests and
corporative organizations on the German model have been ester icshed for
'the Belgin- insurance business, largely in order ,to: provide a . channb1 for,
officiol control of insurance activities.
CIZIL AFIYAI 6 NDBOOK
on
B E L G I U M
Section Five
on
M 0 N E Y AND BANKING
PART I
The nineteenth centurf was a period of dynarmic economic expansion
in Belgiiu in wh ichi the leading barks played an outstan ding role
in financing industrial development. The war anrd post-war infla-
tion brought about serious instability of the currency and
encouraged speculative activity in which the banks shared. The
world depression of the eary t thirties finally precipitated a
severe banking crisis in Belgium, which lad to the enactment in
1935 of a. thorough-going banking reforn. Commercial banking was
purged of inves tment banking activities and this and other types
of banking were subje cted to regulation. There wais also a marked
expansion of official credit institutions serving the needs. of
different economic groups.
Now*
PART I. 3 CKC-BIONUD INIMPMA T0_N
A. For ativeStageBe fore the First World War
Currency and Central Banking
WVhdn modern Belgium emerged in 1830 as a result of a national
revolution, the bulk of the currency in the country consisted of French
coins which even under the preceding Lutch regime had been in practice
the frionetary unit of the Southern (or Belgian) provinces of the Kingdom
of the Low Countries. Consequently the Belgian nonetary lawr of 1832
/ copies a~ihmost literally the French law. of 1303. The bimetallic system
wrrith the gold-silver ratio of 1 to 15.5 was introduced; gold was to be
freely coined on the basis of 3,100 francs to one kilogram and silver on
the basis of 200 francs to one kilo gram, both nine--tenths fine. Both
kinds of coins enjoyed unlimited legal tender status. The French ne e of
the monetary unit, the franc, was retained. so that Belgian coins became
faithful duplicates of French coins except for their different design.
This early legislation was concerned only with metallic currency,
bank notes being considered by the government as ordinary credit instru-
ments like bills, promissory notes, etc. Consequently, in principle any
bank was free to issue the., although of course they did not enjoy any
legal ten der capacity. However, the Belgian population distrusted paper
money, having had ill_ experience with the Fro .ch '
T
assignats
t t
, which were
imposed upon the country & ring its annexa:ition to Fran ce and which even-
tually became worthless. As a result, notes issued by institu.tions like
the Societe Generale (the largest bank and indeed the only large corpora-
tion in the country in 1830), and the 'anque do Belgique end other banks
founded after the separation from the Netherlands, did not have a very
extensive circulation. In 1343, following the U"February Revolution'? in
Paris, there was a panic among note holders, as a result of which the banks
had to suspend redemption of their notes in coin. However, the goverment
saved 'the notes from depreciation by giving them legal tender status while
at the sane time imposing limitations on their further issue.
These events, and. earl..ier banking crises, had made it clear that
a ,reform of issue banking was necessary. Consequently, pursuant to. the
Lars of May 5, 1350, the Banque Fa tionlae de Belgigu.e was established as a)
central bank of issue, wwith the exclusive right to issue bank rnotes in
Belgim. The new institution took the form of a private corporation,
subject to government control, with its scope of operations strictly
limited by law. Its original capital of 25 million francs was subscribed
by the two leading banks (Societe Generale and Banque do Belgique), although
they subsequently sold the shares to investors all over the country. ThQ
management of the Bank was entrusted to a Governor appointed by the King
and a Board of hManagers bhosen by the shareholders. here was also a
Board of Censors .(audjtors) chosen by the shareholders to protect their
interests in the administration of the, ank, and a Government Commissioner
who was responsible for continuous supervision of the Bank's operations.
In practice, the -Bank enjoyed almost complete autonomy. Even the Governor,
although appointed by the King, was virtually a representative of the
shareholders, since at least until the 19201 s, he was traditionally chosen
from among the Managers.
-2-
The law established no maximum figure for note circulation, but
required that notes be backed by "'valeurs
1
' (bills) which could' be easily
converted into cash, and that the, Bnk 'aintain a metallic reserve. By
the Bank' s statutes, the amount of this reserve was fixed at one-third of
the Bank' s note and other sight liabilities; the Minister of linance was
authorized to relax this requirement in emergency circu .stances, but he
never had to exercise this powrer before the First World War. Alnost since
its indeption, however, the Bank was allowed to include its holdings of
foreign exchange in this reserve.
The basic law defined in general terms the authorized opnerat ions
of the Bank. Aside from issuing notes, receiving deposits, and performing'
routino banking services, the Bank was authorized. to deal in and make
loans against gold and silver, to discount bills of exchange and other
documents resullting from commercial transactions, to purchase Ttreasuxry
bills within the limits. determined by the statutes, to make short-tenn
advances secured. by bonds issued or guaranteed by the govemment and to
invest in government bonds an amount equal: to its capital and reserves.
The statutes ruled that only commercial bills resulting from genuine busi-
ness transactions, having ro more than one hundred days to run., and bearing
three solvent signatures,) could be discounted. Furthermore , they proidced
that the Treasury bills discounted should also have no more than one hundred
days to run and. that the Thrik could. not hold more than 20 million francs of
such bills in its portfolio. Thus the lun, as reinforced by the statutes,
largely restricted the Bank' s lending activities to the discounting of
short-te m1 self-liquidating. paper, and set up strict barriers. against any
"excessive"I lending to the Stete, whether in di~rect or indirect form. At
the same time, tne nk became the banker of the government in the sense
that it handled all the government' s financ:ial transactions.
By a happy coincidence, the National Bank was founded at the
,beginning of a period 'of great economic expansion in Belgium. It pursued a
vigorous policy, establishing agencies in all the principal cities of the
country, keeping the discount rate as low as possible, and discounting
rather freely the bills presented by cemercja1 houses and banks. In the
early days of the Bank' s existence, commercial banking was still. relatively
undeveloped, particularly in the provi.nces. The Bank therefore sot up in
connection with each of its agencies a "comptoir d' escompte " (discount
office), i.e. an association of a few approved individuals in the local
community--with substantial financial backing--wrhich Vould endorse bills
drawn by merchants and 'manufacturers, thus making then. eligible for discount
with the National Bank.
As a result of thi s vigorous 'credit, expansion, the total note
circulation in Belgium rose rapidly.. WhJnereas before 184 the circulation
of bank notes had not exceeded 20 million francs-, by 1C55 it had risen to
100 million,, by 1900 to over 500 million, and by the eve of the First
World W ar to more than one billion francs. It 'should be noted that in
Belgium, as in other Continental countries, bank notes were the principal'
1 However, bills with ti o signa tures -wore acceptable if secured by collat-
eral or if meeting other requirements as determined by the Board of
Managers of the Bank with aprovaLl of the Miiniste:r of Finance. In prac-
tice, a large proportion of the bills discounted had only two signatures:
that of the drawer and the endorsement of a rank or a lcomptoir d' escompt".
-3-
medum f cr~,lat~o . e pers onsa carried deposit a ccouhbs writh bank s,
especially before the k - st World War. 1wvn iempotrtant indu~strial, an~d
commercial concerns effected~ a large- part ci, their paymnents bymneans of
bank notes, Thus tI e inc 'eas e of the note circulation .fairly represented
the general monetary. e Dans3ion which a ccomlnonied -the rapid growth of
Belgium' s incdustrial and commercial tactivity in the decades before 191/4.
The 1 i etllic standard introduced in. Belgium. on the French model,
and also ad.ered. to by Sw ,itzerland and Italyr, encountered serious dificul-
ties from~ time to time be cauee o f the tendency of the: market prices for gold.Is
l er t e a t f om t e e a'l f x d r t o ,In 1 5 e g u
initiated thr? so -called Lfa tin conetVar y- Union, in -which it was joined by
France, Ita 7., and Switzerland ( Greece sub eqven tl y participa Lted); th~e
members agreed to issue gold; and. silver coins of a. unifoim volight and
fineness which wmould circulate freely. at par in all member countries .
However, a fall in the weorld price of- silver in" the .: lE7O? s threatened to
flood the countries ofa: the 'Union wid-th. silver an d to drain away their, gold
reserves. Accoringly, free bcoinage of sl~i .r was suspended end, although
existing silver coins of 5 franc denomination retained *heir legal tenider
status, the .tonta r stanrdard, w as taci~tly shifte d to agold basis.
Commercial end. fryI xdT .Bankdiq
Bel giumi'' s.; first banking corporation the Societe Generale,J vv
established in l82~ b, Wlilli m I , Kin~g of. the Netherlands, who. was by far
its. mo st imrpo rtamt. sha reholder. Th.e cprtion had an ambitious program
covering all fieolds o '. finean cial activitv, inceluding note issue; however,
its principal opr'at QflS in thbe early, cal!-, are the managcment of landed;
properties .etl stca to it by the .~ :, end . li nc's in go Ve r.c nt se curi-
tie s and foreio - exch.r ne .:. B/ .Terrc. 1. G were were also some private banking
houses in the.eiciel ciis ioZ~c ,ctiwtie. ,:c ,onsiste . mainly in co~rlcct-
ing hills,, m k ing rc iittances. and: dcc fing.!-'. a very : mail s caloe--in go vern-
ment securi-tier.sI, Theydid' some dLscrcnt .ng hi sinescs, oeecra tini~ mainly.wt
their ow n funds but sometimes rcditscouinting wvii th the Societe Gecnce ale.
Somze neWr.ba nkinc corveor tions were establdishe~d during .the first.
d~eca4de .follow--ing the iTevolution,." the most impoertant of which was. :bhc:.Banauo
do Belgique (125). . I.t as.: :s tablisheda with a, capital -of: 20 mill ion francs
part of '-.fhich wras Thi,-ished: by French capitalists, particularly, the;1?thehd~s
of Paris, :who also floated loans on behalf of the. now kingdom. ,The, charter-
of the bank -was very broad; it vas an~thorizod, to i sue notes and to on. ga 9o
in all fields of comjneorcii al and invostLment
banki -,..
A fer.123Q,. Thl gr in jt'i1.w ars.,. alwady manoifes t in the
first quarter of th e century, began tc. cijyeej~o on at an. a cclera ted pace. Many
privatec nter pri s s: -or per-tn e r -?. ap . rerc; c~in (;e irte co.rrat ions , and
fresh capital . e btein:e -by t h i nnO ic :f harce The:. two lea7ding
banks,. Societe Gener ale' end. a guc J!'do 'b.CLg OL C cDw ;Tod a prominent role in..
financing thip x _ e as cn.. In i :1rjnnr c e -t ~c~y . 1 d v ac. as: rmete rs , sui~bs crib-
ing to shares in the . newi ceio'rtj qns anid. s cu!ring .,represents tion on their,
l7ts original sre wams "Scie,ate Generale pour f uvzori e 1' indutlie
nati oaL "q. I n JfjO5 only, .I"L wais brid d t o llbt uieneraled
Del1gicue I.
boards. They also granted extensive loans on current account to the indus-
trial cor ,o rations.: ithi which they 'i'e came affili=ted. They ' ra th er n egle: -
ted discount business in favor of these promoting ventures, but, by puisuing
both cornnecial. and investrarent : banking activities became the first 'repre-
senttives of wh~t later boc~e kneu1~ aLs "m~ixd baking".
eIn
part, the industrial commitments which the baks assumed were
cue to the markedl hesitancy of the public to buy the shares of industrial
undertakings. The -banks tried to organize public issues of industrial
securities, but without nuch success even when they stood. ready to make
loans against the 'collateral of. such securities. They even established
affiliated financial holding companies whose purpose wras to promo te indus-
trial corporations in the hope that shares in such companies would be more
attractive to investors than those of specialized, entorprises with a rela-
tively small capital. This device dig not help, however, because people
distrusted the holding companies . as much as the industrial corporatins.
The result was that banks continued to have a' heavy proprietary interest
:in industry, and early banking crises reflectod the il.liquid nature of
their assots.
In the third quarter of the 19th centary Belgium became, next to
England, the most industrialized country in the world with ' an active capital
market concerned with both domestic and foreign investment. This develop-
ment was encouraged by the government' s obediennc to the principles, of
extreme economic liberalism. There ras no govorn ncnt inter vention in
economic life and. complete liberty prevailed for promoting, issuing, and
dealing in securities of . any kind. ;Indeed by a lawr of 1873 the incorora-
tion of enterprises, which until then had -recuired specific authorization
by the, government became scarcely more than f'oxr ality. While stimulating
the expansion of legitimate business, this extreme liberality also. encouraged
abuses and exposed the public to the activities of unscrupulous company
promoters. Nonetheless, the investing public gradually developed familiar-
ity-with and a taste for industrial securities, and the public flotation of
corporate shares became commonplace. Betwoen 1830 and 1873 there erre 453
incorporations; frem 1873 to the close of the . century more than 4,000; and
in the years 1900-19J4 alone some 4, 400. About 1375 the total amount of
securities issued in Belgium--including
government and municipal bonds--
ws prbaly in thel noihiorhood of 4~ bilion! fracs, in 1900 ~mting
like 8-1/2 - 9 billion, and in 1914 between 15 and 16 billion. Of this
latter 'amount about 5 billion consisted of bonds of pubiic authorities
(mainly government obligations issued for iilding or purchasing railwa"ys),
1-1/2 billiiop o f corporate bonds, and the remaining 3-1/2 - 9 -1/2 billion
of,, shares.
1
J
An important poortion of the share. issuesi were on behalf of "tBelgO-
:foreign" companies organized in Belgium .for operations abroad, especially
in the field of railwayrs, metallurgical, plants, electricity enterprises,
etc.., in other parts of Europe, in Asia, and in South AEmerica. Some of ;
these companies were es tablished-with the collaboration of foreign finan-
cial groups (French,. German, etc.),, and some, even w..,hen entirely controlled
by Belgian bariks and businessrren, sold part of their shares in neighboring
countries, particularly in France. Much of the cxport, of c apital from
lJThose are gross figures, not adjusted for inter-corporate holdings, etc.
Be .gi to foreign countries, which commenced on a large scale as earl y as
th& sixties, flowed abroad through 'c opanies of this type. In addition,
th "arnunt of 'foreign securities proper held by Belgian investors in 1914
has been estimated at 5-7' billion francs: In short, the Belgian capital
market had. numerous' interconne ction~ with those in foreign countries, and
as a consequence Belgian banking organications became prominent in the
field of international finance.
The thriving capital market in Belgium in the last half of the
century provided a very favorable milieu for the development of the banking
system.: Wi~hile before 1850, banking 'as hampered by public distrust. of
paper money and corporate securities, the establishaent of the National
Bank in that year gave a firm foundation to the currency and credit system.
Its 'notes soon gained public confidence and its liberal rediscount policy
encouraged com~ercial banks to expand their loans. During the third quar-
ter of- the century the leading role remained with the So ciete Generale and
the' Banque de Belgique, which both expanded their commercial banking
activities as well as their "financiallt operations. A number, of other
institutions appeared with a similar sphere of operations; these were
usually, formaed at the initiative of private bankers, often with the
cooperation of foreign bankers.
Several new banking corporations were formed during the boom of
the early !seventies, among them the Banque de JBrux-,elles which Was later to
become one of .the: leading -organizations,, second only to the Societe Gonerale.
In 1875-76, however, there was an international crisis 'and an acute fall of
security prices which threw several of the new banks into receivership, and
required others to write off part of their capital. Among the vrictims .of
the crisis was the Banque de Belgique, which had to go into liquidation
because of its excessive commitments in s ecu _a t"ivc railway ventures; no*
losses were incurred, however, by the bankt s depositors.
*In the last decade of the centur-y, a new period' of rapid economic
progress began, which was again accompaied by intense financial expansion.
Many new banks were established., amnnp which ir, cere several relatively largo'
organizations. The crisis of 1900--Ol again : brought banking difficulties,
and again some of the new banks had to write off part of their capital.
On the whole, however, irresponsible banking gaave way to me ro soundly
managed enterprises,. and in 1914, on 'the eve of the First World W ar,
Belgium had a strong banking organi zation rf'oning an important role in,
the economic life of th . counitxr.
By 1914 Belgium had about sixty-seven banking corporations.
Although the movbment of banking amalgamation: had been under way in England,
'France, and Germany for nearly tyro decades it began in Belgium only a few
years before the, war. Indeed nearly all Belgian banks had only. one operat-
ingoffice,, the only .important exception being the Societe Gei erale, which.
had Bighteen affiliated banks, each with oa. few branches. in its respective
region. The Societe Generale group was represented in sixty-one localities.
.The fo'llowing table contains figures' drawAm from a private survey 'shoing
the position of Belgian banking cororations in 1913 with comparative, data
for 18'75 and 1900. The Societe Gonorale, with total assets of 488 million
francs, as by far. the largest bank in Belgium; in addition, there; were,
-6-
about a dozen m
1
edium-sized banks tiith resources in excess of one hundred
million francs each (some of these were affiliated with the Societe
Generale) and, about fifty small banks.lJ
Belgian Banking Corporations"
End o f Year--1375, 1900; and 1913
(illion fran cs),
293
X11 bank- L~ea~ing
Balance sheet item 175 1900 ing cor- corpora-
'Number of banks 46 59 67 13
Assets:
Cash reserves 27. 53 172 110
* Bills 157 312, 777 5'75,
Loans and overdrafts 247 576 1,26 1,090
Securiti es 224 402 7 17 610
Other assets 13? 34 843 40
Th tal 737 1,673 3,302 2,425
Liabilities:
.Deposits (sight or undetermined) 355 893 2,330
hme' depo'si ts' 120 2 5 673 ( 1,830
Capital paid up 248 333 496
Surplus
64 118 235 (
Pro fits
-- 41 63 47
Total 787 1, 67 3502 2,4.25
1/. Excluding savings banks, pri ate bankers, and similar organizations.
I Including bonds issued by some of' the banks, especially those specializ-
ing in mortgage business.
Thus- in 1913 all Belgian banking corporations (excluding sa-vings
..banks, etc.) had some three billion francs of deposits, or around 400 francs
($80) per capita 'as against ;141 in the United States (U.S. figure from
depdsits'in all cormnerciel banks). This disparity reflects not only a
difference in wealth between the two countries but also the more restricted
ulse of bank decosits as compared with bank. notes in Belgium.
Belgian banks' before the war were characterized by a high capital
but low cash ratio. sThe capital and surplus in 1913 of all banks shown in
the table smounted to abut 20 per cent of their total liabilities (in 'the
case of the eighteen leading banks, 23 pci- 'cent), or doulble the convortional
.ratio in 'many other countries. This phenomenon was due.; to the "financial"'
operations of Belgian banks, it }eihg considered that in. principle only a
bank's own resources should be tied up in pennanehb holdings of industrial
securities. On tho other hand, cash rdservcs mnounted to only 7.4 Par
1/._ The re 'were also num;rous 'private banking houses, some of which had an
important role in the :'ield of 1'fin ncial operations "r.
cent of demand deposits (plus 'those of undetermined maturity), anid 5 07:
per 'ent. of all deposits, ratios far lowr thanthose .p evailing' in many
other cotuntries. There were no legalrequirements for cash reseres,. nor
even customary reuirements as in England, and the banks felt it unnece ary
Sto 'keep a high unproductive cash reserve when their commercial po rtfolios
could be' so easily turned into cash by 'resgrt to the rediscount facilities
of the National Bak.
* The table also shows that loans by Belgian banks were much higher
than their discounts, just the reverse of the position in e.g.' French'.
banking. This feature- resulted from tl close ielationships existing in
Belgium between'banks and industrial enterprises. The 'latter received most
of their bank financing in the form of
tt
advances on current account",
comparable in a general) way with overdrafts but usually assured: 'in advance
like a line of credit. It is likely that' many of these adnces did not
-reflect teporari'y (or- seasonal) accommodation. They often, served to increase
the pe rnanent working capital of the borrower,' or to finance the purchase of
industrial equipmenit, until .the debtor corporationwas 'able to issue = new
shares or bonds and pay off s obligation. :In fact,' banks frequen-tly
undertook to' i~iarket new security issues on beh behalf of their 'debtors; often
in association- wii th other banks, in order to provide funds for the repayment
of their loan s
Als& oin the case of securitty portfolios, :Belgan practice differed
from that in 'the Anglo-Saxon countries because of the special relations
between banks and industry. In Belgium the major part of the securitiesin
the banks
t
, portfolios' was composed not of bonds 'held merely for investment
purposes but of shares representing initercests in affiliated enterprises.
In 1913' the portfolio 'of all banking corporations consisted-of about 2Q0
million francs of Belgian industrial shares,, 100 million. of foreign indus-
trial -shares, 75 million of banking shares,. 100' million ,o.f corporation bends.
(Belgian and forei n), and 200-250 mil Lion of government bonds. The .bufl
of these :share holdings were acqire d ii order to estabolish, control over,
or at least a substantial -intrest in,, promising enterprises. Such holdings,
although involving same' ris s,. generally yieldd good dividends. and: also;
brought business to the' bank in the foim of a demand for loans and 'discounts
or fo banking services (issuing, neuw securities, collecting bills, paying
dividends, 'etc.). . Thus many industrial corporations were controlledby
banking interests,, sometimes by one bank but' often' by a banking group The
Societe Generale 'paticularly had a prominent role in coal mining, in the
metallurgical industry,. in electricity enterprises, etc. The degree of
control varied, of course,' according to the aemount of shares held :by. the
bank the importaice of its loans to the company 'concerned, and also. personal
factors. A conspicuous expression of these: connctions was to be 'found in
the numerous directorships held in industrial corpor'ations by bank director
Or off"ibers."
Other Banking and inancial 0r-anizations
Besides the o rganizations . de.votbd to commercial" and investment
banking dealt with in hte preceding section, other oranisations were
developed to" "serve.. various economic a ctivities &nd social needs..
8-
Financial holding companies. Institutions of this type came into
avor in connection with the expansion of Belgian indus try and finance
abro.d, particularly in. the field of railroads, "street railways, and elec-
tricity' companies. - As it was hard to sell to Belgian investors shares of
corporations ape rating.-in little-known. or remote countries, the financing
of such corporations >was entrusted to folding companis rhich ,in turn were
able to market their own securities among the public because they. of ered
diversification of risk" anid a management which inspired confidence.
These companies (often called "trusts financiers" in Belgium) not only
financed the operating companies but also provided" them with various mana-
gerial services such as technical assistance., purchase of .supplies, etc,
In the i8
9
0'
5
many holding companies were established by- Belgian.
banks and financiers, often ith the collaboration of foreign banks (mainly
French or German) in order to finance companies operatinlg street railways
and ele ctricity 'companies. Later other fields (gas, water, rnibber planta-
tions,. etc.) were "invaded by the movemnt, but usually all the operating
companies in a' partocular group ere, engaged in the same type of activity.
Among the financial companies founded before the First World' War, the best
known is the Societe Financiere do Tharisport et d'Bntreprises' Industrielles
(Sofina), which wa's dstablished by an international group. Most .of the
others were reorganized :or merged during. the inter-war period.
From .the outset, there wore strong ties betwccn the banks and
most holding companies. Somc companies wore controlled by one or several
banks, while in other 6ases, friendly relations, not really amounting to a
control, existed. These relationships had their dangers, and some banks
were accused of using' affiliated holding companies as a dumping ground for
securities they could not get rid 'of othrwise . When opcrated in a legiti-
mate manner, however, .the companios' played an importan t and useful role in_
expanding Belgium' s financial and industrial interests in foreign areas.
Mortgage banking. The first mrortgage banks were established as
far back as the 130' s., as affiliates of the two,. ding banks of that time,
but their activities we: 'very limited. lMortgage bank operations became
significant only in the second half of the ,past century, as a result of
the simplification. of 'mortgage 'legislation and expansion of such banks into
the fields of residential building for the midclie classes, loans to indus-
try, and loans abroad; On 'the Continent, the characteristics of a mortgage
bank proper are that it -obtdns funds by issuing .long-term bends aid. that it
grants mortgage loans on real property. which are pby ;dged to, secure its bond
issues. In Belgium, however, some mortgage banks developed the practice of
accepting time deposits and sometimes oven deposits payable' on demand. On
the other hand, many o'f theni departed from their traditional functions by
making loans to and even participating. in industrial corporations. ] .irther-
mere, a special category of mortgage banks appeared toward the end of the .
century' organized for operations abroad *(in South America, Egypt, Canada,
'etc.). Some ware devoted exclusively to mortgage loans, while ethers also
engaged in real estate operations and even other financial, activities.
l The first company of this type was the Societe Generale do Tramways, es-
tablished, in 18'74 by various banks nzdd bankers. It f'inanced and. controlled
Streetcar companies in foreign countries, particularly "in Italy. . In 1882
it was merged with Cia des Chemins 'do fer Economiques, which in its turm
was merged in 1929 with the Electrobol, oie of the strongest holding
companies existing in. Belgium.
Mortgage loans in Belgium were also g ranted by the Postal Savings
Bank (see below),' either upoi residential buildings or on farm' lands; by
insurance companies (generall y combined wih a life insurance_ poli cy),
mainly on residential buildings; and by private investo ra.
Savings and cooperative credit institutions., The first savings
institutions in Belgium were established le ss for the purpose of mobiliz-
ing small savi ngs 'for, productive uses than. i order to foster thrift among
the general public. In the lS201 s, savings offices (cai sses d' epargre)
were established by the local government authorities in some communiities;
almost all of them disappeared 'after 830, however, when such office.s were
established: by the Societe Generale and by other banks. 'Most banks even-
tually set up a "tcaisse d'epargnelt, functioning like a :savings department
of an American bank. Many cooperative organizations also established such
offices, among -hich those in rural sections (the Ucaisses agricole")
became the most important. As early as l865 an official organization w as
established, the Caisse Generale d' Bpar i-ie (Postal Savings Bank) rhichy
operating mainly through the C post offices, collected small savings on pass-
booksl
In order to meet the needs of small traders and. craftsmen not
adequately servred by the commercial benks, opompl s anks (banques popu-
laires) beganr to develop in the second half of the nineteenth century
These institutions, organized on a cooperati wa basis, carried1 the principle
of joint liability very far; some even establ shod unlimited liability of
members for all the debts of the association. While this principle worked
remarkably well in agricultural regions it seems to have contributed to
the failure of the urban ins titutions. About seventy banks of this kind
were established but hardly half a dozen have survived. The urban small.
bourgeoisie proved to be too individualistic for the application of joint
liability; moreover, economic. conditions were too uncertain in the cities,
and there was generally a lack of leadership.
The rur.l credit cooperatives (ti caisses agricoles") had much more
success because of the more c .o-sely-knit character of village society. A
"ccaisse"c of this type was generally established as part of the "agricultural
guild"t,, a wider cooperative organization in the same village providing the
members. with various services such as the purchase of fertilizer and imple-
ments, the marketing of products, the provision of a dairy,, etc. Most
agricultural guilds had a strong religious character, being associated withm
the Catholic church. The local caisses were affiliated. with federations
which operated so-called "central caissesti, regional institutions which,
when the movement started..in the 1S90's, were excected to lend to the local
c isses funds borrowed fromri larger financial organizations (particularly
the Caissc Generao dMEpa~rge) ost of the local caisses, however, soon.
attracted sufficient deposits to become self-supporting, and some even
developed an excess of funds which was deposited with the regional caisses
and used for. leans to local caisses short of funds. On the whole, there-
fore, there was little recourse to the Caisse Generale d'Epargne. On the
l Post offices"also fulfilled some other banking operations, such as
selling money orders and collcoting' bills. Shortly before the First
World War, a system of' postal checking accounts was established.
eve .of the :rst' World Warthere were about :.650 -caisses agricoles, of
which. soiee 300 were affiliated rith the Jerenbon d, the most important
federation in the Flemish part of the country~, 'I e Caisse Centrale du
:oerenbond, although. then holding only same '13 iillion francs of deposits,;
subsequently became one of the strongest financial organizations of ..the
country.
The Credit Communal. Before .the Frst ,World War, there were,
only a few "rpublicf or, "official" credit instituti ons managed in the
general interest, on a non-profit basis. Beside the National 'Bnk and
Postal Savings 'Bank there w1,5s the Credit .cm l founded 'in l860.
Athough established in corporeate form, it was actually a kind of coopera-
tive association-'of pro.vinces and municipalities (in Belgiam called, rcommunesll)r
The Credit made loans to members,. financed by the ' issuunce of its bonids;-
These bond's were serviced from the proceeds of certain taxes, cole cted by
the State for the provinces and communes; the State :reasury remitted such
taxes directly, to. the Credit Communal, which . ,wi tlhhold the amount ,due for
kntrest and amortization on its loans. This practice gave the bondholders
a supplementary guarantee,, and made the bonds of the Credit Communal.
readily marketable: Small communities which could not sell their om
bonds in the market at a reasonable rate- of interest were; the principal
beneficiaries of the opera tions of this intitu tion, In 1914, the Credit:
Communal had bonds, outstan ding i the amount of 3S2 million fran cs.
B. Fr om -the .First to the ,'-Second WTor ld War
Currency and Central Baniking
War and .inflation. At the outbreak of war in l9LL,., there was a
run on the banks and the National Bank was induced to increase its redi.s-
.counts in order to meet the banks? cash requirements. r om July 23 to
August 6, the bank !note circulation rose from 976 to 1295 million francs,
and the private ,current accounts (mainly bankers? deposits) 'at the National
Bank from 67 to 189 million. The bank rate was rais'ed to seven per cent.
On 'August 3, on the eve of the German 'invais'on; a moratorium on deposits was
proclained, 'withdrawals being limited to. 1000 francs, a fortnight. Next-day,
the convertibility' of bank notes was discontinued, and as coins were dis-
appearing from -circulation, notes, in five frcdnc denomination began to be
issued; they were later followed by two- and one franc notes.
One of the first measures taken by. the invader was to deprive the
National Bank of its note issue privileges, as, a punishment for having
evacuated its metallic reserves end printing plates to England.; But an issue
bank was necessary,, not only for ordinary domestic purposes but ,also to finance
the "war contribution" demanded by. the invader. After negotiations between
Germnan authorities and banking leaders (who consulted with political leaders
remaining in. the country), an issue department was set up by the Societe
Generale. Secretly, however, the Societe Generale concluded an agreement
with the National Bank by which the new issue department was to function
entirely:for the account of the latter; in fact, when the armistice arrived,
the National Bank took over 'all liabili tie, and assets of that department.
In addition,, the German authorities proclaimed the German mark as
legal tender on the basis of o'e mark equalling. 1.25 francs (the pre-wad
parity was 1.23). As. a resul.t, there were three kinds of paper currency in
circulation: (1) notes formerly issued by the, National Bank, (2). notes
currently put in circulation by the issue department of the Sociote Generale,
and (3) Genan marks identical with those circulating in Germany itself.
Imirediately after the invasion, the German authorities demanded the
payment of a monthly "war contribution" of ho million francs (later increased
to 50, and eventually to' 60 .million). rn the absenice of a central government
the provinces agreed under pressure to pay..the 'contribution, raising the
necessary funds by issuance of joint bonds ' (bons linter-provinciaux). The
first twelve monthly installments were financed by the issue department of
the Societe Generale, but thereafter commercial banks subscribed to the "inter-
provincial" bonds,' placing part of them with private investors. Notwith-
standing the fact that marks were put in circulation in large volume, and were
used by banks and private investors to pay for the "interprovincial banks" the
German authorities required that a high proportion of the monthly war contri-
bution be paid in francs. The marks, accumulated in the issue department of
the Societe Generale, from which they were taken over by. the German authorities-
against a' credit on the books of the Reichsbank. In effect, an.additional war
contributions was exacted in this manner. On the eve of the armistice, the
liabilities 'of the issue department of the Societe Generale amounted to around
1.9: billi6n francs' (1.5 billion notes and O.h. billion. deposits), while 'thO main
item -of ass'ets (1.2 billion) was represented by "balances abroad, i.e. the
forced dpdsits at the RCichsbank.
- 12 -
At the moment of the armistice, the amount of Bel., ian notes issued
was 2.75 billion (l.25 billion issued by the National Bank and: almost entirely
boardedi, and 1.5 b illi n issued by the Societe Gnerale), besides an unknown
amount of 0erman marks in c rcu~lation. The government decided- to. reedeem all
marks at the exchange rate at which they had been put into circulation (-1 mark-
1.25 francs). The total amount of marks presented.for exchange amounted. to
7.6 billion fr:anz.sLj, of which 1.8 billion were paid by a special issue 'of
treasury bills and. 5.8, billion by a ::loan from the, National Ba~k, Consequently,
after the issue department of the 'Soc ite .Generale had. been tak en over by the
National. Bank and the exchange of marks had. been effected (about, the middle
of 1919), the situation of the central bank was completely d-ifferent from
what it had been in July 191 . The. iabilities of the Nat1onal Bank had, then
amounted to one billion frarcs, covered roughly 'by 400 million f. gold a .nd
foreign exchange and 520 million. of commrer cial 'bills. In 1919., the liab ilities
amounted to 7.2 billion francs' (notes 4.7 billion, aeposits 2.5 billion),',
covered up to 6,3 billion by claims on the government arising from the loan
to redeem marks and the payrmont of the first year's war contribution.
In the following years, until 1926, the { overnment not only re-
fraied from using the credit facil;ties of the central bank but even .repaid
600 million franc's of its debt. Nonetheless, the pressure of the mass of
purchasing power created. during and just after the war, complicated by an
"unfavorable'; balance of foreign trade, resulted in a steady depreciate:on of
the Belgian franc until 1926, both internally in terms of prices, and ex-
ternlly~ in ters of forign $xchige. Te couse o 'this' ~.recion is:
reflected. ih the follo' ing table; the w.ide fluctuations in the external value
of the franc resulted primarily, from political and psychooIca l factors, re
flecting in -particular the changitig prospects of .getting Germany to. pay re-
parat ions.
Price of the Index of Index of
U. S dc~olllr :::Thholesaiz e retail~.
Year Low nigh prices prices
:par5.18 ter.) ( ealy averages;
April 1914 100)
1919 1/5.65 11.00 -- -
x1920 10.82 16i4l -- -
19211 1.50 15.17 566 4.00
1922 11.48 .17 84 367 374
1925, 166 22.82 497 428
14 17.47' 24.7 575 501
1.925 19.11 22.46 ' 559 51
1926 21.97 45,507 74 4 618
Eary in 1919, the exchange value =of
the fran c as s till sustaIne by American
loans but it slumped badly when. ttaese
Loans were cut off.
The 'stabilization of 1926. Unti l' alrmost 'the midd.e of the, twen-
ties- official circ les considered. that the cdeprec iati on of the franc-was
a teapondy heno~non and that there should be an early return to pre-ar.
parity. It was finally reali.zd., however, that such a solution., even if .
/ This figure is believed. to have been swollen by the' importati?_on of marks
from neighboring countries (especialy .the-'.Netherlands and. Germany itself)
during the period of 'excha-nge; as a result 'of the general deisorder
immediately after the war',' it was not possible entirely to prevent. this.
- - s-: P-
possible, would result in aa tremendous deflationary crisis. As shown in
the preceding table, prices had reached'by 1926 six to seven times their pre-
war level, while even early in the year, the franc was quoted at less than
one-quarter of its former gold parity. In the last months of 1925 and the
first months of 1926, an abortive, attempt was made to stabilize the gold value
o:f the franc at about 22 francs to the U.S.. dollar. Short-term foreign oans.
were negotiated for the purpose but it provred impossible to fund them on a
long-term basis partly because of, internal political difficulties. In March
1926, the National Bank, acting for the account of the Treasury, had to' stop
it's. "intervention" on the foreign exchange market, and in the anic' wrhich
ensued, the franc fell to scarcely' one-ninth of it' 'old gold parityin inter-
national markets. The panic was intensified by the refusal of holders of
short-term Treasuzry bills to renew them on maturity, forcing the governrmrient
to borrow a billion francs from the National Bank and there was a la L rge-scale
flight of capital from the country.
A new government of "national aion" was formed in July including
two:non-political members (both bankers)., who, in fact, directed the financial
and monetary policy of the cabinet. Under emergency powers. granted by
Parliament, the government rapidly undertook a series of measures, such as
the forced consolidation of the floating debtl/ establishment of a Sinking
Fund for the government debt, and issuanoce .of. a foreign loan. equivalent to
100 million francs through an international syndicate including . B. Morgan
and Company. On October 26, a decree-l1awr cwas promulgated, cryoat ing a new
monetary unit (the "belga") equal to 5 francs, 2 and; fixing the legal weight
of :the nezwr unit at 0.209211 grams of pure gold. At the ne/gold pawrity,'the
Belgian franc was quoted at. 35.95 to the U.S. dollar (175 francs to thie pund ,
sterling) so that its external value wa.s reduced to nearly one-seventh of its
pre-war level. This stabilization was, consequently, made at a much lower rate
than the unsuccessful stabilization attempted a few. months before, although at
a higher level than had been reached in the exchange market, during the panic
that summer. In somiie quarters. it was felt that too low a rate for 'the franc
had been adopted. in the light of the domestic price and wage structure.
By the decree of 1926, the National, Bank was required to maintain
a reserve amounting to forty per cent of its note and other demand liabili-
ties . of this reserve at' least three-quarters (or thirty.per cent of the
demand liabilities') had to. be held in gold, and the remainder in foreign ex-
change ireely 'convertible into gold. 'The convertibility of bank notes was
reestablished on the same basis-;i.e.. in gold or in "free" foreign exchange
at the Banck? s option. With the aid of the foreign loan and the "profit" re-
sulting. from the revaluation of the National Bank's gold and exchange reserves
- 1/: Holders of Treasury bills wore obliged to convert them into preference
shares of- the. Nation4 lRailways Corporation, on which a minimum dividend
ofssix per 'cent" was. guaranteed ,,by the government.
2/ The: introduction of ' a new unit was int ended to stress the r eform character
of the newr measure .and 'also -to make more apparent the difference between;
the Belgian and Fdench currency. In fact,, the belga was not used even
for" accounting purposes except in foreign. exchange transactions; the 'franc
remaned in practice the monetary unit of' the country.
- ~ ~~ :L - 32
on the basis of the new gold parity, the government was able to reduce its
debt to the Bank from 6.7 billion francs to 2.0 billion..] On the day
following the decree, the Bank had a reserve of.5.2 billion francs (2.8
billion in gold,, and 2.4billion in foreign exchange) against sdarewhat less
than 10 billion francs of demand liabilities; its technical position was
consequently very. strong.
Even before, the legal stabilization of the franc; the intorna-
tional flow of liquid funds had been reversed; funds which had fled the
country were repatriated, and foreign "hot, money+ came in on a large scale.
These tendencies continued after the reform while the new low rate of the
franc gave a stimulus to. Belgian exports which only gradually disappeared as
prices and wages in Belgium rose. As a result of these factors, gold poured
into the country; total reserves of the National Bank rose from 7.2 :billion
francs at the end of 1926 to 1i.6 billion at the end of 1929 and 15.1 billion
at the end of 1931. The National Bank was able gradually to reduce its dis-
count rate from a high point of 72 per cent in 1926 to 2, per cent in 1930..
However; an. important part of the reserves was held in foreign b.alances
'(particularly in sterling)., as can be seen from 'the table on the following
page,, and this. was shortly to- become a source 'of ser iou s. trouble.
Renewed difficulties in the
t
thirties: The financial crisis of
1929 and the ensuing world depressioi did not immediately affect the monetary
situation in Belgium, which indeed became the refuge of foreign funds. But
the abandonment of the gold standard by England in September 1931 had
'calamitous results. The immediate effect was upon the situation of the
National Bank,. which held sterling at this time in the amount of fXl2,643,000
equivalent to mo-e than 2.2 billion francs. The .drop of around 25 per cent
in the value of the sterling which occurred in the fall of 1931 represented
a, loss of mor e than 500 million francs on. these holdings,. while the National,-
Bank's capital and surplus accounts were below 300 million francs. To. meet
this situation, the government delivered to the Bank a non-interest-bearing
government bond, representing the amount of the loss. It was, agreed that the'
bond should.be amortized by use. of (a) part of 'the yearly profits of the Bank,
and (b) interest on foreign bonds of the; Belgian government (the Stabilization
Loa.n of 1926) to be purchased with the Bank s sterrling: Th2s the loss was
eventually to be 'ortized by the Bank, itself. As a rosult of this, unfortunate:
experience, ' the,' Bank .thereaftrr held-:foreign currencies only in such trifling
amounts as were necessitated by the activities ,of its Foreign Exchange Depart-
ment.
The fall in the gold value of storling had other more far-reaching
effects upon the Belgian economy. England aas .oot of Belgium's chief customers,
and- the franc prices on Belgian exports now had to be cut if Belgian ,goods were .-
to be saleable in England. Furthermore, England was one of. Belgium}'s .. principal*-
competitors and English exports now obtained an important, competitive advantage
on the world market. It therefore became the aim of Belgian economic.policy.
to obtain a reduction in wages and costs in order.to restore the competitive
1/ A small part of the government debt, to the Bank was also discharged when
the government assumed. liability for 5 and 20 franc hank notes- which were
thus assimilated to existing fractional currency (coins).
lff~3 I)
1 - - Govt.
Collat- holdings
End of the month Gold ' Foreign Bills oral Notes Deposi.ts of gold
oxchangoi loans issued and for.
exchange
December 1926 31,101 4,l1p3 676 165 9,100 1,158 1,013
i 1927 3, 66 .4,1o9 932 185 10, 382, 944 1,301
1928, 4,519 4,5396 .1 P527 14 11,S965 5 3,202
1929 5, 876 4,700 2,537 15 13,933 1,196 ',,o050
f' 1930 6,864 6,886 1,807 165 16,287 1, 230 1, 523
August 1931 8, 120 6,735 1,16 17.5 16,809 1,9291 '1,58
December ,19 31 12,812 2,273 2, 67, 292 18,546- 892 - 192
" 1932 13,381 2, 663 18,55 53
" 1933- 15., 371 1, i8}6 192 17, 329 3,009. 371.
1934 13,130 -- 616-1 17,975.. 1, 512 710
March 19352 13,539 -- 4498 974 19,125 1,288 . X ,801
December .1935 22,640 -- 1, 264 434 20,864 4,40 2,554
" 1936. 23, 929 - 922 269 22,695 4,59 3,248
1937 22,564 - 1,047 174 21,825 3 698 1,996
f 1938 21,747 -- 1,07196 21,989 2,770 286
1939 21,132 ?4,829 1,042 27,897 966 5o
May 1, 1940 23,248, - ,924 143 *29,776 905 506
/ Revised figures for the Period. 1926- 38, as published by the Bank ear ly in :1939.
In the current balance sheets during that perod, part of the gold and e xchange
assets were included as a hidden r-Dserve under other asset items. The gold
figures after 1931 include smiall e ount's of frein exchange hold, for qperating
purposes.
2/ Last end-of-month report date before the 1935 devaluation of* the -franc.
Banque National o do Bolgique
(Millions of francs)
- 16 -
position. About 1935, however, especially after the dollar itself began to
depreciate, the conviction commenced to grow in business circles that a
devaluation, of the franc was unavoidable. Buying of foreign currencies in-
creased;- balances owned by forigners began to be w rithdrawwn; and there
followed a f all in the gold r serv s of the National Bank which' became.
critical in the first months of 1935. The table on page 26 doos not
adeq uately .reflect the gold, losses of the Bank in 193L4-35 because of tho
fact that external loans were co ,tiactea during that period. From the
beginning of 193-4 to March 17, 1935, when control of foreign exchange trans-
.ctions was instituted, the Bank actually lost around four billion fraics of
go-ld.
The institution of exchange control was eqivalot to suspens ion-
of the gold standard, and. ':'he franc immzediately depreciated on foreign mar-
bets. In the last. days of March, a new ministry -was formed, under the
presidency of 1. r. Faul vany Zeelard, and on March 50, 1935, Parli ament
authorized and ordered. devaluation of the currency by, 25 to 30 per cent
in terms of gold.., The actual devaluation (effecte d -provisi onally by the
goverrnent' s decree of March 31, 1935, and made definitive by decree of
iMalrch 31, 1936) was by 28 per cent, a proportion calculated to remove the
disparity in the pui-chasing power of the franc and the pound ster3:ir,, on
the basis of cost of living indexes in the two couritries.. The weight of the
new belga, which remained unchanged until the present war, as fixEJd at
.0.150632 grams of pure gold, giving the franc a gold content of ono-,tenth of
that of the l91. 4 franc. The gold parity with the dollar, which had dropped
from 35.95 to 2l.24 when the dollar was devalued in 193. now rose once more
to 29.50.
The law of March 30, 1935, authorized. thee Bank to revalue its gold
and exchange reserves on the basis of the minimum devaluation envisaged by
the lawe (25 per cent). This revaluation yiolded a "profit" of 4,.350. mlion
francs, which was handed over to the government, in- the, form of gold. Patt
of this gold was, used to repay some of the earlier loans,,ron the a ,
but most of it entered into the assets. of the Treasur7r.>-/ It wuas then resold
to the Bank from time to tine to meet the gover nnt' s budgetary needs (for
data on government's 'holdings, see _last column in "able on page :15). T
A1arch 1936, when he 28 per cent devalution became definitive,e thy: Bank again
revalued- its -gold and exchange re s. rves slightly, to conform to this basis; the
resulting "profit" once more accrued to the gover'nment.
The convertibility of, bank notes into, gold actually ceased with
the establishment of exchange control :on March 17,1935, but -ras not forral-
ized until the legislation of March 30. Immediately thereafter, however, the
ational Bank resumed de facto cdnvertibili ty by> deal ing; freely in foreign
currencis and gold on the basis of the now parity. The legal convertibility
.1/ . Government debts to the Bank were also reduced by 525 million francs. when
the State assumed liability for the fifty franc bank notes.
2/ 1,125 million francs of the -gold was use.d temporarily to endow an Exchange
Stabilization Fund, but this Fund was liquidated in 1936.
-17-
of notes into :gold was reestablished by the decree of March 31", 1936.
Meanwhile, immediately after the devaluation, a repatriation of fuids again
occurred and the gold reserves of the National Bank rose strongly. The'
Bank's dis 'ou nt rate, which had been as high as 3 1/2 per cent in .193234,
was fixed at a new low level of -2 per cent in May 1935. Moreever; the " gold
handed over to the gowrnment gradually: came back to the Bank. Belgium adhere(
on September 26, 1936, to the principles of the tripartite declaration on
currency policy ' i ssued by the United States, ngland,: !and Fiance on September
25 of ,that year, and by June 1937. Blgium
t
s totaliofficial gold holdings
reached 'a peak of 27.9-billion francs.
The followuing years of incrdasing political instability brought
several periods of stress on the international exchanges, involving at times
large gold losses, but the exchange value of the, currency was successfully
maintained up to the German invasion. Exchange restrictions- were sedulously
avoided although at times the National: Bank brought pressre on commer'cia
banks to restrict Aloans for speculative purposes, and even ,intervened in the
forward. exchange market by selling foreign 'currencies for future delivery
whenever too high a premium on forward contracts was developing. An 'outflow
of gold on a moderate scale in the second half of 1937 was followed by sevrc
losses in the spring of 1938, when -the Anschluss between Gernmany and A ustria
stimulated a flight of "hot money" from Belgium, especialy 'to the United'
States. , Total .gold reserves in Be'l4ium declined to 18.5 billion francs 'in
Iay 1938. Confidence subsequently revived somewhat, and despite further.
,shocks (especially. during the successive crises in Czechoslovakia and when
war broke out in August 1939), Belgium's gold hqldings recovered to 21.7
billion francs at the end of 1939 and even to 23.7 bill:ion 'by May 1, 1940.
Faith was still held in the maintenan e of Belgin. neutrlity, and s a
result when the blow fell in'May 1940, Belgium still retained a very
substantial volume of gold reserves.
.-In 1937, a significant change was ;made in the statutes of the
National Bank to -enable it to finance the Treasury more freely and to en-
gage in open-market. operations in goverment. securities as an instrument of
credit policy. By its statutes,' the. Bank wras' authorized at th6it time to .hold
only 100 'million francs. of Treasury b ill s increaced from 20 million in 1926)
and an amount of government. ,bonds equal' to its capital and surplus. It is true
that it. had 'extended large : nergency loans 'to the government after 'the First
World Wear; however, most of these -had. been. disbchar'ged with the "profits"
from the successive devaluations and otheris, leavinig oh.ly 500 miion franc
outstanding. Also, of coiurso, 'it hhld the 'government sccuritios' transferred
to it in 1932 in compensation for its losses on sterling. By a 'decree of
July 27, 1937, however,'the'maximum'amount'of treasury bils' which could be-
held by the National Bank was raised from 100 to 500 million francs, and" the,
Bank .was authrized to add up to .one billion francs to its "existing" portfolio
of government bonds :;These limits were believed to be sufficient \for a loig
"time" to come, but. in the following years, economic depressi6n and, the growing
military expenditures unbalanced the budget, while uncertainty in the fi-
nancial markets made impossible the. issuance of long-term goyernment bends.
in the market. ' In August " 1959, the maximum amount, of government paper
(Treasury Vills and bonds. together) which the Bank could acquire over and
above 'the' securities representing the capital and the earlier emergency loans,
was raised to 5 billion francs. Fiurthermore, a requirement in the decree of
1937 that bends bought by the National Bank should be at le'ast two years old
- 18
was repealed, thus permitting the govern-ent to sell bonds direct to the
Bank rather than through the market. The government was forced to take.
advantage of these facilities on a-large scale; the marked increase in the,
bill holdings of the Bank in 1939 and the first months of 1940 (see' table
'on p;.15') partly reflects the acqui sition -of "t~reasury :bills. .F'rthe rmre
3
the government.'s expenditure of these newly-created funds, together with wide-
spread hoarding of currency because of the thrt atoning political situation,
caused a sharp rise in the ,note circulation in 1939-40. This quantity,
which had shown a gradually rising tendency for some years, jumped from
22.2 billion francs in.mid-1939 to nearly 30 billion on May 1, 1940, t o
-last date before the German invasion for which a report. is availabloe.'
The decree of 1937 also liberalized the ordinary lending powers of
the National Bank. ..The aturity limit for eligible bills was. raised from
100 to 120 days, more latitude was given the Bank as to the form and charac-
tar of, the paper it discounted,,: and it was to be allowed thencoforth.'to
grant discount credits for financing iedium-term :indu strial commitments.
Bills representing such credits could: still. hot exceed 120 days maturity,
but they were issued on the unders tanding that they would be renewed! The.
1937 decree also authorized the '\National BG.nk to subscribe to shares issiued
by public credit institutions up; to an amount equal to one fourth of its
own capital and surplus: the, 1939. decree; rai sed, the maximum to, the full
.mount of the capital and surplus, but the Bank did not'actually exercise
this power.
Se veral_ changes were made in the Bank' s discount rate during 1938-
39. The '2 per cent rate.. established' in 1935.was temporarily abandoned--a
rate as high as per cent prevailed in May 1938 (Austrian crisis) and April
1939 (Czech crisis)--but was restored in January 1940.
Conercial and Mixed Banking until 1935
Deposits with commercial (mixed) banks expanded markedly .during
the First W Zirld. Yar as a result of' the out-pouring of new currency (German
marks and notes .of the Societe Generale). The general liquidity associated
with this oxcess ve injection of cash into the economic system greatly re-
duced the demand for bank credit for business purposes, .and the principal
outlet for banking funds was subscription to public bonds issued to finance
the war .indemnities, unemployment assistance, etc.- Even*in' 199 when busi-
ness loans again. expanded, the banks continued' to add to their portfolio of
public 'bonds.
Belgian banking unerwent a very complex evolution duripg the
'twenties, the main features of which can be -summarized a's (a). an enormous
expansion, in' the volume of banking assets with accentuation of industrial
interests, and (b,) conce'ntration of banking organization and banking leader-'
ships This' period, marked i'n its, early :stage's by"' a serious inflation of the
1/ About half' of this increase occurred in the nnonth of August 1939 alone,
a clear indication of the role played by panicky hoarding of the currency.
- '9--
currency, wras characterized by great speculative activitv in industry and
commerce in which the banks played a leading role. JiLYany new banks were
established to take advantage of -hese opportunities, whii le the old ones
with aggressive management becare more and more p owerfJl_ in the Belgian
,c nomy.
The. following table gives figurres illustrating the expansion of
Bel ian banking until the banking crisis and reorganization in the early
thirties.
Principal Assets and Liabilities of l3elgian Banking Cornorations
(Millions of, franc s)
No. I Cash Loans Capital DQposits
Year of re and di s- )ec3.r- Dni Deferred (on s'i;ght and
bak seve .s li.abili ties !
Ianks serves countsl/ surplus undetertmined)
1913 67 172 2,911 .717. 731 674 2,335
1920 72 1,23 6, 636 2, 845 1,388 991 8,270
1925" 96 1,354 i3;175 , 231; 2,652 4,532 11, 26'
126 94 2,037 15411 4,34 2,765. 3,680 1 ,2j4
1927 101. 3,030 20,x'71 4,198 3,707 4, 811 . 11, 692
1928 91 3, 3L1 23,989 5,097 5,656 4,866 21,461
1929 90 4, 067 28,710 5,956 7,825;, 8,239 22, 99
1930 92' 4,346 30', 6L 7,2C1 8,739 33,152
1931 66 4;1.18 25 28 7,651 7,117 29,0863
1932 66 5,642 19,104 7,568 7,015 25,367
1933 63 6,837 18,127 7,45 2 7,242 .25, 254.
1/ Figures for 1913, 1920, 1925; acd 1926,i nclude small amount of other
as sets.
From .1913 to 1930 the total deposits of' commercial (or mixed) bnks
increased eleven times (from 3 to 3 billion) while bs.nk note circulation
increased sixteen times (from 1 to. 16 bi llion) .' In large part , of course-,
these increases rof1 octd depr'ciati on in the value of the currency:but
the. fact remains that the money .supply of the counrrtry greatly 'expanded. On
the assets side, the -most conspicuous feature o:f the ttwenties weras the in-
crease in loans on current account' which, still more than'before the war,,
became the closest link between banks and industrial enterpri ses. 'The denand
for industrial loans, was constan-tly large, first for recpnstruction and then
for; expansion. There was also, howiever, a marked "increase in' thee bank's
holdings of indastrial securities. Lost 'of the public bonds acquired during
the war period and immediately after the 'wa r wfere liquidated by the b ks
during the
t
twenties and byI 1929 comprised well.' under one-fifth of the1 'total
securities xportfolio. The bulk of* the_ securities then held by. the pank.s con-
sisted of industrial shares,- and of shares in affiliated banks and holdi-ng
companies. The large incrc as, in ho ld ings of i:dustrial 'shares reflects the
extremely active new issue business during thiz s. period; while, in 1913, ,ital
- 20"-
issues of corporate sec rities amounted, to 803 mil lion francs, they amounted
to 6.5 billion in 1927, 12.5 billion in 1928, and 15.0. billion in 1929
(gross figures).
The expansion of banking actvity, whi5-le encouragn.rig the formation
of new banks, was also accompanied by an extens've concentration movement.
There were many important :mergers between banking organizations, large banks-~
es'peci lly in Brussels--tendinxg to.absorb smaller ones. Also, lar:ge banks
in the Capital frequently took the opportunity to acquire interests in
provincial b arks when the -latter increaso':. their capital to in -,h their ox-
pand.ing deposits. In such case directorships in the
4
rovinciai banks were
assigned to the directors or- hiher' officers of the )Brussels institution. As
a result, at the end of 1930, when deposit's and banking assets were at their
peak, nearly half of the banking funds -wore, controlled by two big bankking
groups, as shown by the following table:
Capital and Other Liabrilities of. yanks
En. of 150
1Capgal pi-i-n Banking
Baning arc surplus Liabilities o .::icos
groups Viions Per illions Per . urdFer
_of francs cent of franc -con berj cat
Societe Cenc r ale 2,712 51.0 10,942 52.9 40 22.
Banq ae de Lr zxelles 1,897 21.7 J , 116 124E 4 23:5
Al ge. rne- Bar.vereeniging 2L_3 2.8 ,632 c.9 .2 7.2
Credit A .nvrersois 226 2.6 806 2. 169 9.6
Other banks 568 41.9 15,72 667.8c 41 0.9
Total i74h1 100.0t 0.0 13 2 10.0
The Societe Generale continued to remain at the head of Belgian
banking. In 1928, it absorbed the Hanna d'Outremnr, which possessed an
important portfolio of shares issued by colonial' corporations, and became
the controlling ,factor of the Belgian Congo econom.y. Besides, the regional
banks affiliated wvith ,the Societe Generale multiplied their branches,
absorbing several old country bal.-ks. In 1913, the group had. consisted. of
18 banks with about'60. offices; bar 1930, the number of aff'ilia ed. banks had
been reduced. by mergers to 16, but th e nuimber ".of offices exceeded 4-00. Thi s
group alone controlled nearly one-third o. the banking resbur; s of the
country. M~oreover, the Societe Gonerale was the controlling factor in a,
large number of industrial corporations ( in coal mining, ietall'urgy,
electricity, chemicals, glass, colonial. enterpriscs,, etc.).
The, Banque de Bruxelles had formed its group only in tha years
following the war, ahid controlled banks with substantially less resources
andl. f ewer connections than the Societe Generale. In 1930, it consisted of
20 barks tivrith, about 400 offices. It wjas rapidly expandig;g however, and the
'struggle for influence between it and :the Societe Generale cave impetus to
the amalgamation movement in general.
The Algoineene-Bankvereeniging gro,-w up from a small bank : sta.blished
at Louvain by sorry Catholic politicians. Part of its capital was .,eold by
the Caisse- Centrale of the Boerenbond, the federation. of Flemish i asants,
21-
with which were affiliated more than cue thousand local "ca.isses agricoles".
t' headed a group of seven regional banks,, almost exclusively, in the .'Flemish
section of the country.
The Credit Anversois was not at the head of a group; it was a bank
with about 170 offices scattered across 'the whole country, nearly all
established after the First W7orld War. Yhen it ras founded, in 1898, it
had participated in some industrial corporations,, but as a result of losses
in the crisis of 1900-01., had turned its attention largely to commercial
credits. In the 'twenties, however, the bank again established connections
with some industrial enterprises, especiailly in the textile industry.
Whereas, by the end of tha_ 'twenties Belgian banking was largely
controlled by groups of regional banks headed by the big banks of the
Capital, a new phase in the evolution then began. The Allgemeene commenced
the process in 1930 by absorbing all of its subsidiary banks but one; in
1931, the Banque de Bruxelles absorbed all of its, affiliated banks without
exception; and in 193 j, the Societe Generale climaxed the movement by
absorbing all of its affiliates except for the. Banque. d'Anvers and subsidiary
institutions' operating abroad. Two major reasons explain those mergers: they
achieved simplification; and they made it, possible to write off losses re-
suIting from the crisis without attracting too much attention. The result of
the c'oncentration movement can be' sumnarized very briefly: in 1913,, the.
typical Belgian. bank was a unit bank; in the late 'twenties, it was a regional
b-ank affiliated with a leadiig bank of Brussels; and since the early 'thirties
it has been the big nation-wide branch bank.
The banking crisis. Banking assets and liabilities reached their
peak in 1930, but in 1 d 1932 loans and discounts dropped from over 30
billion francs to scarcely 19 billion, reflecting the impact upon Belgium of
the world depression. Deposits also fell 'off shar'ply, but the banks had to
write off over 1,700 million francs (or 20 per cent) of thoir bapital sand
reserves. Although some small banks had to close, the banking system as 4
whole bore. the strain of this first phase of the depression fairly we11.1/
But in 193Li and 1935 a second and acute phase 'of the crisis developed,
primarily, if not exclusivelJy, under the influence of the monetary.- panic
culminating in the devaluation of the currency in MLarch 1935. People
hastened to withdraw their deposits in order to buy gold or foreign curren-
cies. The movement came to a head in the first months of 1935., when a violent
run on the banks occurred. On the -ruole, some seven to eight billion francs
of deposits were, wr-ithdraiwrn in l93L-35 before the panic was brought to an end
by the devaluation.2/ This second phase of the crisis was also met without
1/ During this phase, before the msonetary panic, the deposits of the Postal
Caisse d'Epargne were still increasing. Partly under the piessure of
the government, the Caisse bought bonds of domestic industrial corpora-
tions, which used most: of the funds to repay bank advances.
No precise calculation of ithdrawals is possible. Because of banking
-reorganizations ;which occurred at the end of 193L and in 1935, the
balance sheets of 1935, cannot be compared with the earlier ones. On
the other hand, the amount of deposits withdrawn is not a sufficient
index of the gravity of the crisis. A good many customers, particularly
corporations and business men, did pot withdraw their deposits but simply
crave orders to transform. them from francs into fore-ign currency deposits
Zdollar, sterling, French franc, etc.). To this extent, deposits remained
unchanged in amount, but the bank had to: sell' some of its franc assets in
order to get foreign currency.
22 -
major 'failures, partly because of the very liberal policy of the National
Bank (which irnreased its discounts and collateral loans by more than 3
billion francs from the end of 1933 through Ma ch 1935), and partly because
of extensive support lent by the goverl nent.
As previously explained, the devaluation of the pound sterling
in 1951 created grave difficulties for Belgium which the government at first
resolved to meet by a policy of domestic deflation aimed at restoring
Belgium's competitive position in world markets by cutting domestic costs_
of production. This program relied partly upon the provision of cheap
credit to Belgian industries. Thus already in 1933 the government had
intervened in the credit field by setting up a committee composed of the.
Treasury, National Pank, and. Postal Savings Bank which was authorized to
guarantee loans to "worthy' borrowers up to an amount of 780 million francs.
Such loans were to be made for the most part by the Societe Nationale de
Credit a l'Industrie (S.N.C.I.), a semi-official bank for industrial loans
founded in 1919 (see below).
In August 1934, with the financial crisis becoming more acute, the
S.N.C.I. was given a new and larger task, being authorized by decree to take
over from the banks (with recourse) industrial loans up to an amount of two
billion francs. Payment was to be mlade, in S.N.C.I. bonds guaranteod by the
governent and therefore eligible as collateral security--up to eighty per
cent of their value--for advances from the National Bank. The rate of
interest on loans taken over by the S.N.C.I. was reduced to a uniform Li: 1/4
per cent, and the difference between this rate and the 3 per cent paid by
the S. N.C.I. on its bends was allocated to a special fund for the ' amortization
of eventual bad debts. The position of the indusirial debtors was greatly
improved by the reduction of interest, .r in most, cases by thu extension of
maturity on their debts. The bankrs sustained a loss of interest, but were
compensated by improvement in the liquidity of their .assets, which at that
moment was their groat need.
As the monetary panic reached its climax early in 1935, however,
the situation of several barks became critical and the government .eras obliged
to intervene again. A decree of March 18, 1935, increased by 500 million
francs the amount of assets which the S.N.C.I. was authorized to take over.
from the banks. On the same day, by another decree, the governmelt. handed
over 500 million francs of Belgian Railway Corporation preference, shares to
the "guarantee" committee formed in 1933 for use in re--funding creits owed
to banks in particular difficulties. These measures, coupled with the
liberal lending policy of the National Bank, prevented a compl.ete collapse
of the banking system. 17hen at the end of March 1935, the franc was de-
valued, money backed poured into the country and the bankring crisis came to
an end.
The total mount of loans guaranteed by the government through
those devices ewas around three billion francs. In 1936, when the industrial
and financial position of the country improved, the government decided to
hasten the liquidation of these loans. A decree of March 31, 1936, provided
1/ Crises during 193. in the affairs of various institutions affiliated
with the cooperative movement, including a large bank in Brussels,
are discussed in-_a following section.
-23
that loans guaranteed during the depression should be taken over by. a
special body called the Office de Liquidation des Ttervent ions de Crise
(O.L.I.C.), which was to arrange with debtors for rearment of the debts;
or for their retransfer to the banks which had made the original loans.
When the OLIC was established, the amount of guarantees outstanding had
already been reduced to 2.5 billion francs and by the end of 1930, it wma s
down to 900 million. When the OLIC was finally liquidated at the end of
19142, a loss was established of 46 million francs, an extraordinarily lowi
figure coni dering the large volume f 'the operations and the service
rend red)1
Banking Reform of 1935
The year 1935 is 'a landmark in the history of Belgian banking,
not only because of the banking crisis but also because of the. reorganiza-
tion of the banking system and the introduction of a system of government
regulation and control over banking
9
Whriile the crisis wras not the oxcl asive
reason for the banking reform, it w as the ime~iate ahd decisive factor -Mi ch
occasioned the Decree No. 185 o July 9, 1935 , es tablishirn]g control over
banking and the capital market.
T6vo preliminary decrees issued a few months before had already
broken the -tradition of financial "lai sser faire": one dated August 22, 1934,
had' laid down the principle of separating commercil from inv: s rent btanking,
and a decree of October 2;4, 1934::, had nrohibit ed n.ividial s guilty of
certain delinquencies, such a's false bookkeeping, forging or .f'alsifying
bank notes or securities, bankruptcy, theft, etc:, from acing as directors
or business executives in any corporation., as stock brokers, or as bankers.
The basic decree of July 9, 1935, contained far-reachig re ga-
tions concerning the structure and operations of banking instituti ons, the
activities of banking officials, and the issuance of securities. It estab-
lished a Banking Commission with broad powers to enforce the terms of the '
decree, and created a new type of semi-public servants--the "reviseurs "--
who supervised the activities of individual banks as representatives- of the
Commission and the public interest. The jurisdiction of the Commission ex-
tended to all banks,/ except official or semi-official institutions and
the "caisses d epargne" (none of wfich--except the N'ational Bank--had the
word "bank" in its title). Any company or individual desiring to engage
in banking business had to register with the Commission, 'but registration
could not be withheld if the application were: bona fide and the applicant
possessed the minimum 'capital required. The paid-in capital of banking
corporations had to be at least 10 million francs, and of private bankers
or partnerships, 2 million. Foreign banks having branches in Belgium had
1/ Especially so since in 1941 72 million francs was drawn from reserves
of the OLIC to assist in the liquidation of the Credit Anversois (see p.31).
2/ This decree was issued on the same day as the decree authorizing S9.N.C.I.
assistance to the banks (see above).
3/ Defined as "any' enterprise which receives deposits payable on demand or
within two years, in order to use them for its own account in banking,,
credit,, or investment operations.
to ass'.gn at least 10 million francs of their own capital for the11. r opera-
tions .in that country. No merger betreen banks could be carried out without.
authorization of the Banking Commission, and ;the commiss lon later ruled that
authorization was necessary even for the transfer of an a sncy.or.branchi fom
one.. to another bank.
Ab ta ndemoent of mixed banking. Althouh it wi s recogized by the
authors of- e ere c7-b king part ';ci paltions in industry had.
rendered considerable service to the Belgian economy in the past, the
practice was consider'ed responsible for many frozen assets and banking
l.osse s. Accordingly, mixed bankinge was to be abandoned, and in principle
it was made unlawful for any banking corport.oio to own stocks or bonds
issued by other corporations (except banking corporations)./ TWo exrcep-
t Jios were allowed, however, to this general rule. Banking corporations
were allo-oTed to underwri.te corporate secu rities' ith the understanding th
they wrrould be offered' to the public and disposed of w'it1i1n six m~tonthsg.; thas
in principle Belgian banking corporations co ulc continue to engage in invest-
mont banking business, -but the six months rule made such business very diffi-
cult, Secondly, securities could be accepted by aank in s ttlenont of a
frozen or doubtful debt, but they had to bo d 3osed of withn two yFiars.
In! order to prevent evasion of the ;1.c r qu rcment, t hu, 1"33
decree also placod strict limtatons on holdinrs oft dmiareore , -r
directors and' officers of banking corporations , (though not by vriate baners)
In principle 'such director-sis whrp forbidden unless they v r.; h' Ld in eortair
categories of financial corpor attions (b aning, insurance, . a yid nori ":iTJ' : c'edit).
As an exception to the rule, hcwever, a bank director or, of'ier cond per-.
forma directorial or managerial function in one "prohibited" co ' orat on--
or in two if he did not take an active part in the. current wana gement of the
bank. The Banking Co mission coud authorize further special exceptions.
Since all garre Belgian bank:.s had been engaged in "nixe-ld backing"
and owned important amounts of industri.l. securities, the carrying out of
these provisions of the decree posed a considerable problem. The outright
Sale of such a large volume of securities was out of the question. The
solution was to split each mixed bank into two distinct corporations, one to
discharge comercial banking functions and the other to take over the securi-
ties portfolio and continue in. "financial_ op erations". In most cases, the
old bank became a "financial (or holding) corproration' and 'fogundei a n-ew
banking subsidiarywhase capital it subscribed. Thus the Societe Generale
founded a new corporation called the 'Banque do la Societe Generale", wile
the .Banque de Bruxelles, Chari n; its name to "Societe : ruxelloi se pour la
Finance et
t
Industrio (Lrufina)" in order to avoid tvce wrord "bank"in its
title, founded a now corporation called the "Banque do Bruxelles'. he
deposits formerly held. by m L ned banks we mre transferred to the now barks
together with an armount of assets sufficient to covrer them as well as the
capitua. of the fine . ba.nks Thos c; asse ts il d to be eijlef undetlr the ter ms
of the banking legisP:dticn, i.e, they could not -include corporate secuities,
1 a. M+ r t , bar _Ir or art
1/ This prohi tionwas not etended to pr~vato baes or partnrsaips
however, the Banking Commission ruled thae ,r could invest in cor;por-
ate su rities only their own funds; and funds originaing from long--term
deposits.
and they had to be "sound". .ctually none of the old banks had a sufficient
eamount of eligible assets, and the deficiency wa.s covered by giving the new
banks open claims against the holding corporations". The curious result
was that the hciding corporation held the entire stock of the banki/ but
at te same t ime was indebted to it usually for an amount much larger than
its capital. In 1936-37, when the' ca ita.l ?maif rket revived, some financial
cornr'rationjs (pat rticularly the largest) were able to sell part of their in-
J. &strial securities and pay off the debts owed to the banks. This trend
~ a.S teal-ted by %- r re ewred stagnation in the caPital marrket as a result of the
oii~ial and1 finanial difficulties of 13.8-39. In any case, the liq ui-
d.' hi.c of mixed ba ning was not fully Carri 1. d' out, since all large commrercial
banlr continued to be controlled by the holding corporations. In one respect,
fIo~wOV1r th, Ye seoaration was complete; officer s in the new banks were
spcifically forbidden, to serve as officers in the related financial corpor-
a~ions.
Reglation of bani ng activities. The abamdonment of mixed bar-
ing was intended to m.ake wv-ay for a greater liquidity of the banking system.
Minimum liquidity ratios were not established by the 1935 decree but. the
Banking Commission was authorized, wvith" the approval of the Minis ter of Fi-
nance and the Minister of Economic Affairs, to "estab2.ish (periodicall.y) the
ratios vwhich must be maintained (in different cat egori :,s of banks) between
the liquid and mobilizable assets (or some. component parts of these assets)
on the , e hand, and the liiabiliaties en sight and on short notice on the
other. , (Words in parentheses zdded by a decreo of N' ove ber 90, 1939).
Theose ratios could also be changed by the Communission, when nece;ssary, subject
to the approvl of the two minsers. Thes(, ext ms ion of t -he Commission's
broad powers, in the 1939 amendm,; .eent, to the fixing of rules regarding the
"com-ponent parts" of liquid and mobilizabhle assets gave the Comnmission power
to regulate the distribution of these assets, and in :articular to limit
loans to a single customer. The Ban kin.g Co mission was also empowered to
establish ratios betweeo 1 n ""n the amont of a bank: 's denosits and its own- re-
sources (captcal and surplus); these r zia t vary a ccordig to diffre nt
categories of barkso
twig toc u.settld economno and financial c ondtions, the Banking
Commission never ac tusJ.Iy establi shed compulsory ratios, although it is
kncvn so ha .ve: scrut inized wiuth care the~ actual rai os ml"aintained by the
banks, In one of its last annumal reports, it observed that it was not
strictly necessary to issue ormal reglations in order to assure sound
bunking practices since thie Co:'mmission could act itby way of r commrendattion,
,judgin.g each case on its own merits ". In its an nua.l reports, the Commission
stated the principles upon which it had made "recoimendations" during the
year, and thus gradually built up a sort of bNanking "code".
1/ On one or imo occasions, the filnancial corporatiLon s, wihile retaini ng
control, have sice. disposed of a certa.in number of shares in the new
banks. For intanc, the Societe Ge -Fraler g, rave it: shareolders the
privilege of exchanging their shares into shares of the Banque do la
Societe 0-oneralo.
2/ By "liquid assets" the decree means cash restrves (i.e. till money and
balances at the N11ational Bank and the Postal Checking Office), whereas
"mobilizable assets" moans "liquid assets" in the Angl.o-J merican sense,
consisting in practice of bills eligible for rediscount at the National
Bank, government bonds (at 80 per cent of market value), balances with
ordinary banks, and other receivables of no more than thirty days? maturity.
___, L,_L-~C~ILL-
-26-
Several other. provi-sions of 'the '1935 decree concerned banking
operations.. Banking corporations were obliged. to invest their "legal
reserves" l/in bonds 'issued or guaranteed by the gover ent-tor by other
public bodies. Loans to their own directors or officers were prohibited
in any fornn, and if a bani: failed., profit bonuses raid to directors in the
two preceding years had to be refunded. Also banks were prohibited fom.
using their resources to influence pulic opinion directly or indirectly,
c.g. by allowances,' options,, etc., to editors or publishers of financial
end political papers. Only normal co mmercial advertising was allowed. Banks
were obliged to submit each month tQ the National Bank a special and detailed
account. of t:eir advertising expenses aid of all subsidies or gifts which
theyr had disbursed.,
hu decree of 35 provided maximum in.formation for the banking
authrith ie (aional Bank and Banking Corr ission), in the form of balance
sheets an, periodic statements, but much less information for the general
public. It required all banking organizations (even private firms) to
transmit at monthly, stattornSent to the National Bank, which was obliged to
publish periodically (at least four times a year) a consolidatedd and con-
densed statemlient f or all banks. A decree of Novmanber 2L, 1937,. 'estab li shed
a Veryvdetai led form for the monthly statements to the National Bank, which
had to be accompanied by a special statemenat on the foreign assets of the
bank concernd. A form for the annual balanfote sheets of banking corporations
was al so provided.
Control of security issues. Sinrce it seemed elpediert to entrust'
supervision of' the capital market t the same body that was charged with
enf orcement of bnkfing regulations, the Bankling. Commission, was also allotted
functions analogous in part to those of the-,Securities and Exchange Commis-
;sion in the United States. These powers were introduced primarily as a
result of speculative excesses i.n the 'twenties and their first objective
was to assure full and honest disclosure, of information: about 'new issues.
The' Bank;irrg Commission-1 had. to be notified, fifteen dlays before the publi c
offering/ . f any stocks or corporate debentures, and a proseOctus had to
be submitted by the issuer givi ,ng extensive information about the character
of the securities, the interest of the -issuer in the corporation whose stock
was to be offered, the issue price, purposes of the issue, etc. If. the
Comnmission held. that th.e infomation gi n by the prospectus was incomplete
or misleading, it could request supplementary data. if the requested inf or-
mation was not forthcoming, the Commission could prohibit the issue for three
months and rouest the _MMiinister 'of Finance to forbid the listing of the
securities on the stock exchanges. A denial of listing privileges would have
been .fatal to any public offering.
/ TIhe_ general corporation lwF rquired all corporations (including banks)
to put aside each year in "legal. reserve at least 10 per cent of their
profits until the reserve: an ount ;d to 10 per cent of their capital.
2,/ "Public offering" was interpreted so broadly as to include over-the-
counter offers, admlission to listing on the stock exchange, and even
i ssuance of new shares reserved to- existing share holders.
-;-
-' ' - 27-.
Bvenif the issue was unobjectionabie in itself, the Commission
still had. certain powrs to, delay the public offering'if in its judgment
the capital m arket was overloaded. with new issue s--.. enot in "equilibrium".
te concept of. "equi librium" was rather vague ard was adopted as a criterion
for thy Cormi.ssion s action as a result of a compromrise among those wanting
different degr;ees of regulation of the 'capital market. There was agreement,,
howver, that financial. stability might be threatened by an excess of now
issues at any one time, and on this ground the Commission was authorized to
require the postponement of any, public, offering; for a period of not more than
three. months.
In the second half of the 'thirties, there were not many flota-
tions of securi .ties, and the Coris siol did not have occasion to exercise
its ,power of postponing an i.ssue for reasons of market equilibrium. But
it did make extensive use of its right to request additional information.
about projected is sues, .. which vas almost always .furnished at once. Very
often the is suer, asked the ;advice of the Commission oven before -givi ng
official notice of a projected issue. As. a result of these proceduros
issues of corporate securities came to. be accopanied by much more infor-
mation than had previously been cuals'tomary. Al'o the Coawnission took tho
initiative in suggesting chantges in corporato financial pzograms when these
semrned desirable in the interests of investors. For example, it would advise
a corporation to. issue shares rathr than bonds when it appeared that regular
payment of interest might encounter difficulties, or it ould frown upon an
issue of medium-term bonds . if the proceeds were to be irnobilized for a'long
period. In short, it exorci sed a general influence, usualiy in an informal
way, for sanity and congervatism in security issues.
The Ban king Cormission. The enforcem.ent of the 1935 decree was
entruste.d to an independent agency, the Banking Commission, which was 4uite
an innovation in Belgian legal and, adminis'trative practice. The- Commission)
consisted of a presiden.t and six members, all appointed by the government
for- a term of six years. Two of' the members were to' be chosen by the
goverment from a list of 'candidates subiutted by the banksT and two from.
a ist submidtted b the Nati ona l Bank, jointly with the Institute de
R, scom'pte' et doJ, Garantie (see p.:.31.). No member couldbe a director,
officer, or proprietor of a bank. The 'first six mmbers were chosen in
such a manner as to ta:ke acco t 'of different sectional and political
interests, and Mr. G. Jansson,, a lai'qer by training and formerlya director
of a lerge banking, corporation, was appointed 'president. Th practice only
the position of the president became a full-time job; the other miembers only
attended the periodic meetihgs and took no part in the current activities
carri ed out by the staff under the directionr o f the president. .From the out-
set, one member of the Comission was always a director *of the National Bank,
and the.n, at the beginning of: 1938,. l Jan-ss en becambe Governor of the
NJational Bank, 'the Bank and' the Commission catfe to have a common head. The
view, was expressed in mniany quarters that this situatibn should be maintained,
but in September 1938 Mr. Janssen resigned as president of: the Banking
Cormission in favor 'of Mr.. L. Frere, an- offic'iaal of the Treasury who also
had had broad international,' 'experience '.
-28 -
The Commission was entrusted by the 1935 decree with ext$sive
p-.wers. Besides the general power "to enforce this decree", it -as given
charge of the registration of banks, estabishment of liquidity ratios,
control of banking mergers, control of the capital market, etc. However,
the. decree categoric'a.lly forbade the Commission to interfere with the'
granting or refusal of individual loans., In principle reports to the
Commission ,by its r.reprsentatives, 'the "reviseurs", were supposed not to
mention the names of debtors but merely to exhibit the general position of
the bank; however, transactions between a-bank and an individual customer
cotild be reiported when they were contrary to laws and decrees, when a
customer was 'insolvent or of doubtful insolvency, or (added in 1939). when
a bank had granted loans putting its liquidity in danger. In general, .the
texts of the relevant decrees give quite an inadequate impression of the
functions actually performed ' by the Banking Commission. It came to' exorcise.
a pervasive influence in Belgian banking, not :so- much by .rogulations and
orders as by personal contacts, advice, and recommendations.l/
The "reviseuins
1
. The poers of examination and control vested in
the Commissi on were not exercised by it directly but rather by a special
group of semi-public servants--the "reviseurs", or supervisors--one or more
of which was employed by each bank from a panel of persons registered with
the Coaission,- These reviseur s maintained close watch over the activities
of the bank with which they were connected, and reported thereon to the
Commission at quarterly intervals (or more frequently when necessary).
Their pomers were not clearly defined by lave and much depended upon the
personal relations which they established with the bank management . They
were given full access to all. records: and documents.of the bank, but could
interfere actively in banking operations (by veto and report to the
Comission) only if the contemplated action would constitute a penl
offenseq2/ They also audited the accounts of the bank and approved the
balance sheets and profit and loss statements submitted to the annual
meetings of shareholders.3'
The qualifications of 'a reviseur were established by a special
regulation of the Banking Commssion. In principle, he must have had at
least four years of university, study and five years of experience in; bank-
ing, business organization, and accountancy however, the length of. the re-
quirod university-studies was reduced or even dropped for candidates having
had' more. thanf fve years of exceptional experience. Admission to the
register of revisurs was granted for only one year at a time; the Coia
missionss action .on applications was final, and did not need to be sub-
stantiated. A reviseur was forbidden to be Et directory commissioner,, or
officer in any corppration other than the bank under his supervision,' and
except with'the authorization of the Banking. Cormmission,' he could not hold
any position paid with public f\unds.
1/ Th Oexpen&sG of; e Commission were covered 'by' a' levy on the controlled
banks, by a tax or the rogistration of security issues, and by a con-
tribution from the National Bank.
/ owever, the rev'iseur was, not authorized to report tax irregularities.
In this capacity, they acted al so as- representatives of the shareholders'
interests, replacing the former "boards of c'ommissioners" which had been
elected by 'shareholders to. keep, a check on. the activities of their bank's
management.:
29
Each bank, including branches of foreign banks, had to employ one
or, more reviseurs, from the registered candidates, and to pay them salaries
agreed to by the Comrlissi-on. Most ' bankrs chose oily one reviseur and often
the -same person served in this capacity for several banks, especially small
ones. The work wras: not full-time,, and frequently the position was-held. by
Suniver-sity professors, certified accouhtants, etc. Th. fact that the banks
had some freedom in choosing--and paid compensation to-thei:r revisours gave
rise to some question, concrning the independence of these officers-, -and the
S Banking Coi-nisslon itself expressed its preference for a systemwhy rweby the
reviseurs would become exclusively its 'appointees. Actually, an iimpo2rtant
. step was taken in this direction by the decree of October 20, 1939, which
allow1ed the Cornission. to restrict the number of revisefrs to those actively
functioning at that time. At the end of 1958, 205 individuals were registered
with the Commission, of wQm, around 60 actually were ,'perforing the functions
of reviseur. By the end of 1939, the number registered had been reduced to
57, and., by 19140 to 36, all of whom were active. The principle of free choice
:by banks was raintained,- but in practic it ali st, disappeared.
Co
1
tarcial Banking after 1935
The second half of the 'thirties was characterized first 'by'
changes in the banking system resulting from the .1935 reform, which for the
first time gave Belgium a group of genuinae 'tcomercial" banks; and secondly
by the extremely unstable cond tions ' in which the banin system had to
function. Large movements .of' funds into -an ou t of the country,. pro-cced
primarily by the international situation, had an rIm.ediate repercussiLon on
the., volume of bank deposits. The table on th e foil owing page shows the
situation on certain significant dates.
The figures in thi s table ar"e those compiled by the Baning,
Commission fdr all banks under its iurisdiction. They are not threfore
comparable with banking 'statistics for -earlier years, which covered only
:Belgian banking corporations.. At--the end of 1935, the 2L barl:s registered
with the Ban ing Commission held 21.6 biillion francs of deposits (including
inter-bank balances), of vhich 17.5 billion were held by Belgian bankin
corporations, 2 .3-bil ion by foreign banks, and 1.8 bsillion) by'&th or banks.
The figure of 17.5 billion francs is rou ghly' "coiarable with earlier figures.,
indicating a loss of 7 to 8 billion francs of deposits since the end of 1933.
The. erratic, fluctuations in deposits during 1935-3 were closely
relted to the outward and re-turn flors of "hot money".,l / as w-1ell as to
changes in the extent' .of currency hoarding, both 'factors being influenced.
1/ The deposit statistics do nod fully reflect the impact of international
caital miovemenrts on the banks since. they do: not show foreign currency
deposits. separately. The banks had to liquidate franc assets not only
to meet withdrawals by customers who desired to buy foreign exchange
direct, but al so to meet the,, requiri~ments of customeors ho. ordered the
conversion of franc3 into forei currency deposits (of. footnote p.21).
DI
30
ASSETS AND LIABILITIES OF BELGIAN BANKS, 1935-39
(In millions of francs)
De Cem June Septem- . Decem [ecem--
Balance sheet i tens boer 31, 3, ber '30, 'ber5 1,~ ber 31,
1935 1937 1938 1938I 1939
Assets'.
Balances with banks
Receivables at short notice
Bills
Loans and ,overdrafts
-Customer's liabilities for
acc eptanc es
Povo-rnment bonds
Other. sequuriti-es
.Miscellaneous
Immobilized. assets
Total
Liabilities
Deposits, deua nd and short tdrm.
Deposits exceeding one month
Bankers balances
Due on shortnotice
Acceptances
Miscellaneous
Capital accounts
Total
41, 455
3, 135
47'56
8,267
1/
3,x3
974.
392
16,067
3, 036
2,528
4/
1,91
3.314
2, 962
4 ,1.4o
'2/
4,798
X8,L.+29
1,193
2,415
578
:7,881
3,377
267
2,'52
3, 387
1,493
3,647
21509
/2.9190
6,794
895.
4,166
1,008
336
642
2,106 1 ,634
3,782 ,16
1,539 1,135
3,77' 13/2,903
6, 565 5,717
*872
3,853
983
220.
6314
767
3,161
1,326
588.
610
2 j30 , 21, 037
1i2,868
1,
742.
1,4-69
459
895.
1, 939
3,309
26,66 93Ti 22
14,592 11,934
1, 721 1, 221
1,o783 1,3145
389
1404.
872 774-
1,64.0 2,029
3,308 3,330
24.,3 21,037
1/ Cash, and' deposits at the Na6tional Bank and at the Postal Checking Office.
2/ Included generally under,
t
riiscellaneous."f
3/, The drop is due to rediscounting with' the Central Bank.
4/ ot included in' the 'assets or liabil iis.
- >31 "
less by economic ,cons'ideratioris. than by fears of threatening political
developments. " Growing tension: in Europe "after mid-1937 .caused severe losses
of deposits uintil the Munich crisis, following which there was a few months
respite and actually a substantial return flow of funds to the baks. The
banks jere- again hard hit 'by the Czech crisis in?. March 1939 and the outbreak
of war in September. On the vvhole from mid-1937 to the end of 1939, total
denosits with the banks covered in the. table. (cxc~luding inter.-bank balances)
declined from 21.3 to 13.2 billion francs, or by nearly L4D per cent.
This severe strain was ithstod by the system extrenely well.
Banks drew heavily on their cash reservos and balances with. foreign bank ers,
sold government bonds, ,and rediscounted large gianhtities of bills with the
Nlat ional Bank in times of particular stress. In fact, since much of the
pressure on the banks--especially in the autumn of 1939--aro s from the
public's desire to shift its liquid holdings from bank deposits into; currency,
it was natural for the National Bank to take over and hold against its in-
creased note issue part of the assets which the banks had previously held
'against their d posits. In addition, help was forthcoming on various
occasions from a new -institution born of the 1935 crisis, the Tnstitut de
Reoscoipte ot de Garantie (I.R.G.) .., Thmi s organization, endowed with a small
capital by the banks, was authorized to incur liabilities up to 2 billion
francs under government guairantee in order, to assist banks -or other enter-
prises to liquidate assets in 't'im of need. During this period, there were
only two serious banking cast alties, both in institutions which had .
fundamental weaknesses whicoh came to light in the crisis.
The Credit _Anversois, already mentioned as one of the large branch
banks, was split up pursuant to the banking la , and the bank wa8 left with
a large claim on the new hol ding company (Societe de Participations
Industrielles et Financiois, or Sopafinin). The assets retained' by Sopafinin
were of such poor ;quvlity that f msTnable to sell any. substantial part of
them, so that its debt to the Credit anversois remained frozen and even in-
creased. The Banking Comission could have given,- instructions to the
revissur of the bank 'to, forbid the retention of this frozen claim, but since
such action would have put the Credit , -' rsois in receivership, it was post-
po'ned. .Although this policy' proved tq be 'successful with most other holding
companies, it became apparent during the '1939 crisis that the situation of
Sopafinin was fundamentally unsoutnd., In 'order to,' avoid suspension of payments
by the Credit Anverirsois there were ne gotiations. .between the Treasury and
representatives of the Banking AssoOiation' for raising a joint fund to aid
distressed banks., Apparently the barks were willing to make a contribution
to such a'f nd, but the Theasury finally. refused to participate, partly
because of its own financial difficulties. In December 1939, the Credit
Anversois obtained from the courts *a, "temporary pbstponement of payments"
pending arrangements with creditos., 'The 'suspension arouseo. much public
agitation, and the Institut do R:eesqompte et do 'Garantie intervened to offer
,'the depositors of the Credit Anversois payment of 75 per cent of deposits not
exceeding 10,o00 francs and 25 per 'ce nt cf other deposits.. In 1941 the bank
was finally liqidatoe. w ith the help of 72 million francs draw~n from the
reserve of -the QO (se p.
2
3)..
_ 32
The Caisse Generale des Reports et des Depots, an old establish-
ment which specialized in collateral loans to stockbrokers, was another
prominent victim of the, 1939 crisis. Its condition was impaired primarily
by the failure of the Bank Mendelssohn. of .Amsterda , to which excessive loans
had been made without adequate cover. The deposits were safe but by far the
major part of the capital (320 million francs) was lost. There was again
great public agitation, for the Caisse had a large number of small share-
holders. At the beginning of 194.0. its liquidation was, decided upon, and
another corporation under the name of Banque do Reports ot do Depots was
established in order to take over its busnss. The capital of the new bank
was subscribed by the receivers of the former bank, who brought in the
"salvaged" part of the old capital-. 30 million francs--and by the Banque de
la Societe Generale, the Banque do Bruxelles, and the Societe Belge de Banque,
which together supplied 20 million.
After 1935, follo, ig the banking reform, there was a considerable
reduction in so-called "financial, operations." Of course banks could no
longer take participations in corporate undertakings, and even their under-
writing actiities, authorized in a limited measure by the 1935 decree, were
restricted largely to issues of public or corporate bonds, Although in
1936-37, there was a .revival of economic activity, corporate financing and
new inve stments reir :.ined very moderate, most security issues in those years
being intended primarily for coiversion purposes, for mergers, incorporation
of surplus in capital, etc. The first column of the following table shows
the figures of gross financing (i.e., the total amount of shares or bonds
issued by all Belgian corporations., whether held by the promoters or sold to
the public) in the years 1927-39. The second column shows the not amunt ;Qf
n~w securities 'issued for cash ( 'Xo.Uditg those i.ssd against other assets,
shares issued to capi liz e reserves, and bonds, issued for refunding purposes)/
Corporate Securities Issued in Belgium
(Millions of francs)
Year Gross financing Net financing
1927 6,528 3,925
1928 12,263
6,333
1929 14966932
1930 51356 2,898
1931 4.,o4o 2,025
1932 2,152 632
1933 1,715
818
1934 2,167 437
1935 3,082 917
1936 3,6o
687
1937 6,498 1,255
1.938 203 676
1939 1,17 287
Some observers held that the reduced rate of financial operations
and of new investments was due primarily to the restraining controls of the
Snf order to void double cou'ning, shares ipsued y inancial corporations
are also, deducted, a's the fun4s raised in'i this manner were used mainly to
buy securities issued by other Belgian: corporations,
- 33.-
Banking Commission over banking operations and security flotations. The
Banking Comission, in its last ..:pre-invasion .report, answered these criti--
ctismsr by declaring that the cautious policy of banks and financial corpora-
tfons was actually due to the instability of the international' situation
and, still more, to the fact that, after a prolonged depression, these-
organizations were "much more concerned with. the restoration of their
liquidity and the reestablishment, of their financial position than bra ith
promotion of new ventures.",
Savin si and 'Cooperative Credit Institutions
The inter:-war perio.d was 'also characterized by a marked expansion
of various institutions collecting "small" savings or granting small loan.
Although th'e same institution.s were dften devoted to both purposes, . in'solmle
cases the e phas'is was put on the collection of small savings (used for in-
estn~nt'purposes). while in others a prime objective was the granting of
small loans- with funds received on deposit or obtained from official insti-
tutoris
The off'ijcial Caisse Generale d+ Epargne (Postal Savings Bank) con-
time d to be much the. most promi ent collector of small savings. However
during the 1 twTrentie' s, there was a .larg e expansion of private "caisses d'epar-gne'
operated by commercial or mortgage banks, or by urban cooperative groups.
Those organized by 'S cialist consumer cooperati vs in trban centers held
deposits of some half .abillion francs in th enarly ?thirties; arnd others
(including those servting publlic officials, etc.) accounted for' n equal
amount. A further outgrow th of the Socialist cooperative niovemont was the
foundation of the BaLnque Beige. du Travail by the well 'known'
4 t
'Vooruit:" (Forward)
cooperative society in Ghent. This institution, establisned in corporate form
with a capital of 50 million francs, and having total assets df.550 million
francs in 1930, bocame the banking insttution of trade unions,, cooperatives,
etc. affiliated wwith the Belgian Labor Party. - It established branches in
several industrial ceonters and acquired substantial industrial' investments,
especially in textile copanies.
Meanwhile, the rural credit cooperatives (caisses agricoles) were
undergoing a most striking development. puring the war and the post-war in-
flation the agricultural community was relatively prosperousand accumulated
large money savings. The number of caisses agricoles .was greatly expanded
*and surplus deposits flowed in large quantities to the regional caisses. By
1'3,' hHerenbond alone had. som-e 1,000 affiliated caisses which had surplus
funds w-ith: the Caisse Centrale du : Boerenbond amounting to 1.6 billion-francs.
Other central caisses had deposits of' around half a billion francs.,
The savings and cooperative credit movement received a severe shock
in the -monetazy a.nd banking crisis of 193-35. Cash. w'thdrawals 'from:- the
local organizations found several. of the central ins titutions in-an' in-
sufficiently liquid position. One of the first casualties was the Banque
Beige .du Travail, whose appeal for govern nt. assistance precipitated sharp
'politic-al debate. Finally,; the government, suthori.ed the Caiss6 Gene rale
Bpargne to make loans, not to the bank but to the' c redit >coopratives in-
.vo1ed, against mortgage s . njtheir real property. A; general breakdown was
thereby avoided but- th'e Banque Beige du. Travailwa iv s .f'ce'd rinto li quidation.
The Ca'isse Centraledu' Foe'rlenbond also fell intodifficulties and
most, of the caisses aricoles affiliate-d with it were obl ied to restrict
deposit withdrawals. It became apparent :that drasti c action by tie govern-
ment was necesaryr in the jrinterests of the very., large numbor 'of small deposi-
tors :vhose savings were threatened bo impeniding collapse of the savings and
cooperative credit mhovement. Accordingly, a la was passed in December 1934,
establishing an Office Central de la Petite Epar'gn ivwhos role was first to
provide assistance to 'these institutions and then to reorganize them and to
suervise their subsequent openations.. The. help of the Office was requested
by 1,145 caisses, holding 2,250 million francs of deposits, belonging to
around 200,000 depositors. The Office opened credits amounting to L410million
francs, _of, which only 347 million was actually utilized. Of the 200,000 de-
pos itors, 100, 000 were completely reimbuirsed, and 60,000 imnediately got a
relabtively large proportion of their deposits. The others, generally dec-
posi tor's holding more than. 2Q,OO0 francs, were to be paid off gradually.
In order to avoid a recurrence of this kind of trouble, a decree
No. 4i2 of Decerber .15, 19314, (Section I) laid down rigid rules for the
operations of all institutions collecting small savings./ Thenceforth such
institutions had to be licensd by the governmient and to accept the super-
vision of the Office Central. do la Petite Epargne.'Tho permissible types of
investments 'which thoy might hold wore also specifically prescribed. Enter-
prises combining the collection of sav-ings deposits with other businss
(e.g. commercial. or mortgage banking) had to sernegate the assets held for
account of their savi bgs departments. All commercial and most mortgage banks
thereupon abandoned the _is suance of pass-books (although they continued to
accept time deposits) 'and-:where necessary--changed their names to avoid the
word !epargne?.
Section TI of the same law governed' companies which were neither
banks nor "snail savi ng~s institutions. Such compenie s were allowed to
accept deposits ma turi ng in more tha;n two years, abut the decree prescribed
the minimum capital for such compani es and the manner in which they had to
invest their deposits.
Expansion of Official Credit Iiistitutions
The National Baxik, the Caisse Generale d'Epargne, and the Credit
Communal were the only offi.ciOal credit institutions before the First ,'World
War. A semi-official bank for financing industrial recon'structioniwas
established just after the war (the Societe 'Nationale do Credit a lftndustrie),
which as noted above playd a big role in the banking crisis- in th.e 'thirties.
Other public institutions for granting cheap credit to small business appeared
as early as the late 'twenties. Howeve r it ws 'the1 crisis of the 'thirties
which, together with the icreising role of governme nt in all aspects of
economic life, stimulated the much' greatr gowth of official credit insti-
tutions in the 'thirties. Aside from thie' Office Contrbol de la petite Epargne,
there appear od the Institut d. Rescmpte e.t do Garantie (Juno 19 35--a re-
discount institution owned by the banks but' backed by, a government guarantee),
1/ Defined' as institutions'u ts.n the word " p rgne"in their title or issuing
pass-books similar to those of the Cais ,o Genorale dt )p rgne; in practice
this covered. almost all savings and coop rative' credit institutions.
- 35-
the Office Central du Credit HIypothecaire. (January 1936--a national mortgage
inhstitution), and the Institut' Nati onal du Credit Agricole (September 1937--
aZ institution for the support of the caisses agricoles). Credit to small
business also received iicreasing attention, three official institutions
being active in this 'field by 1937. Thus almost every sector of economic
:activity came to be supported by some sort of public credit institution, and
official cofinniittees wa-ore set up to coordinate the activities of these various
agenci es.
CIVL ~-J4JII3 T'D .BOOK
on
S ecti.on Five
*lpMNZ Y AND BA 1K I N
P 'R T II
On the eve of the .invasion, Belgium had a sowndly conistructed and W..ghly
liquid banking' system. The cqntira 'ibank, which had the exclusive note
issue privilege except for subsidiar Treasury notes, assured' the liquidity
of t~e commercial banks and was a' source of enmer gen-y- credit for the
govemnnent in tnes of stress such as followed the outbreak of war in
Europe. The commercial bns-fter the ban kinig reforrr of 19)35---con con-
trated on shortT-tenrn credit s, wirhile financia (or hol ding) coranics
carried on investment bankcing a ctivi, ties an.:d' long-term. industrial finan cing.
The collection of small savins w as p rima rily in the hands of an 'official
institution, the Caisse Gone rele d' Bpargnc Pose a, ing Banks). Thero
weM~re also a fewz local savngzs ins t titutions and credit, cooperativ. Iort -
gag bankin~ mu-s highily deovelopedi, many such institutions operating
mainly .abroad. Other .official credit institutions sup ported various lines
of o 'conomic 'activity, 'while insuranceo coin anies were an impo rtant source of
invesment funds, ,flie sto ck, exchanges. pro 'ided machinery for financing
.1industrisa expanision and: mobilizing the liquid funds of the investiig
public.
PAI.RT TI * MONEYI AND CREDIT yIS TY Tt1TT , S TN 199
A. Te TMonetary Sys tem
After October 1936 ven France, Si tzerland, and the Netherlands
discontinued the convertibility of bank notes into gold, Belgium was prac-
tically the only European country with a monetary system based on the gold
standard. No gold coins "ere in circulation, but the central bank was.
freely buying and selling gold at the legal pice,i/ and foreign exchange
transactions werc not subject to any regulation. Since March 1935, the
Belgian franc had been maintained ip the foreign exchange market' at a;DeroL-
inatoly its gol.d parity, i. e. 29, 5 fr -cs to 'the U.S. dollar or 3.39 cents
per franc (16.95 cents per belga).
Notes and Coins
The currency of the country consisted primarily of notes issued
by the National Bank, which had the exclusive right of issuing bank notes,
These notes were supplemented by a, small volume . of subsidiary currency
(small denomnine.%ion notes and coins) 'issued by the Belgian Treasury.
*.The National Ban1k issued notes in denominations of 100, 500, 1,000,
and 10,000 francs, all of which had unlimited legal tender status. As nay
be seen from the follomihz g table, 1, 000 and 1a, 0, franc notes constituted
by value nearly 60 per cent of -the total in 1938 and almost two-thirds of
the total on December 25, 1939, 'These high proportions are presumptive
evidence of a considerable volume of currency hoarding by the population.
Note Circulation of National t snk of Belgium
(Iillion "francs)
.Renomination 1938 1939
,fraics) (Averad ry Y ae) Deceber 25
10, 000 2,195. 3., 298
1, 000 10, 434 13 ;395
500 3,079 4, 101
100 62"
TTb tat ,931 27, 398
3ubsid,ry curren cyr -issued by the Bolgian Treasury took the form
of ote2/ and, coins in, denominations of 50, '20, and 5 francs, all with
Thull Igal tender value, and lesseroins ranging demn to lcen time (one-
hundredth of a franc), constituting legal -tender .only for himted mounts'.
I' The selling price was 33,193.50 r. per kilogre of fine gold, and buy-
0ng price 33,077.30 fr. per kilogr. Gold was, delivered 'or re eiveod
in bars of abdut 12,5 kilogr ais, nine-tenths fine or above.
J Notes of the National Bak wore, also lg4J tender in the Grand Duchy .of
Luxembourg, whe crq a small amount of them circulated at the rate of 1.25
Belgian francs to 1 Luxembourg franc..
3/ The notes wre printed by the. National Beonk for the account of the
Treasury.
-37-
Mhe -maxdinmum pennitted issue of subsi.diary currency with fIull legal tender
value s, raised by decree qf January 2, 1940, from 1,500 to 1,750 million
francs. Governmeht bonds equivalent in value to the outstanding amount of
all subsidiary currency vwere held by the Fonds Monetaire, managed by the
Caisse d' Amortissements which handled sinking funds on tI-t government debt.
As may be seen from the following table, 50 franc notes consti-
tuted the bulk of the TeeaBury note issue.. Most of 'the outstanding currency
in smaller denominations took the foam of coins.
Treasury Nate Issue!
(Million francs)
Denomination 19338, average December 25, 1939
50 francs
20 francs
5 francs
473:
19
44
(
(610
(
1/Including amounts held by the National Bank,
amounting to 66 million francs on December.
25, 1939.,
Coins were minted from silver,. nickel,; copper, or nickel-copper
alloy. The silver coins issued before' the Fiarst World War had disappeame
from circulation;' having lost their l: gal tender capacity in 1932. lHow--
ever, there-* was a iew issue of such coins in the 'thirties in 50 'a,-d 20
franc denominations. Tho, foxmer, ovirng to, their weight, were not very
popular, but the latter constituted by vuluie nearly two-thirds of tho total
coin issue.. Details concerning these and smaller coins minted from base
metals are 'sho n in
available).
the following tblle 'for' the end of 1937 (latest date
Coin Issue,, December 31, 193711
etal
co po sitior
Silver
(0.630 fine)
Nickel
(1.000 fine)
Cupro-nickel:
(75 per cent
copper, 25 per
cent nickel)
Copper
Denomination
50 francs
20 francs
5 francs
1 f ran c
50 centimes
25 centics
10 centines
5 centimes
2 centimes
1 centime
Lt
Weight legal ten-
in gra der poer
22
11
15
5
2
Unlimited
Unlimited
Unlimited
Up to 50 frs.
Up' to 50 frs.
6.5 Up to 5 frs.
4 Upto5frs.
2.5. Up to 5 frs.
Total value
(million .
francs)
14.0
740.0
191,2
125.3
33.3
30:3
20.4
11..5
.4.7
1.3
T179 5
lJ Includes amounts hold by the National Bank: 166 million fran cs
in silver coins and 17 .mllion ,in other pieces.
- .38 -
The official figures for Ithe coin issue overstate considerably,
the amount in actual :circulation. They represent the .total amount issued
less .that -demonetized or called in for remelting. They therefore include,,
not only amounts held by the National Bank but also coins lost, melted
down by private persons, or exported. The officia l table. for the end of
937 includs near"y 600 ibl.lion fran cs of .20-franc gold pieces although
gold had ceased to circulate..
On December 23, 1939, when the total authorized issue of subsidiaiy
currency itth full legal tender status, was still only 1,500 million francs,
the outstanding Treasury note issue was .610 million. On that date, there-
fore, the mLiaximum. figuro for coins in 501 20, and 5 fr~ rc denominations
would have been 890 million fran os, as compared with an a tual figure. of
945 million at the end of 1937.. It may be presumed that the issue of lesser
coins had not increased substantially over the cnd-1937 figure of 228
million franacs, so that the total coin issu.e at the end of 1939 probably
amounted to around 1,150 fillion. Of this total, the National Bank hold
142 million, 77 million in silvor coins and 65 million in other pieces.
Deposit Currency
In addition to notes and coins, the public held demand deposits
with corercil banks, the National ;finks nd the Office des Cheques Postaux
which in effect formed part of the circulating media in the country.. As m Iay
be judged from the follo ing table, hoe.ver, the total amrount of deposit.
curcrnacy hold by the public, probab ly came to little more than half of the
note issue of the National Bank alone. Although there. was an unusual amount
of note hoarding at this particular, time,, due to -widespread. fears of forth-
coming doveloJZxients, oven in nornal times bank notes formed a much larger
proportion of the circulating medium, in Bel gium than in Anglo--Saxon countries.
Currency and Deposits Held by the Public
(Thid of 193)
( Billion fray;cs)
Note issue of the National Bank 27.9
Issues .of subsid.iary currency 1.5
(less holdings by National Sank)
Deposits with the Office "des Cheques Postaux 2.9
(less govrrj .en nt deposits)
Deposits with the National Bank 0.6
(less goverment deposits)
Demand deposits with commercial banks 11.9
(less inter-bank deposits)-
Tbtal L4
Deduct: cash roese rvs of commiercial banns 1, 6
Not total held by the public 43.2
-1 Ignoring small amlounts circulating in Luxembourg.
~ These reserves are made ue pri ncipa lly of shares in the
first four items in the table, but no -de tailed b reak-
doi n is av abilbe .
- 39 -
The deposit facilities provided by the National Bank and the com-
mercial banks are discussed in the sections devoted to those institutions.
An indi cation of the importance of payments through the banking system is
given bythe 'following figures on the operations of clearing houses. Insti-
tutions of this character were established in Brussels and 37 provincial
centers in' connection with the regional offices of the National Bank.
Velocity of
circulation of
Year 'btal Brussels Provinces bank depositsli
(Billion r frncS
1938 386.4 291.5 94.8 6.56 times
1939 381.6 289.2 92.4 7.29 times
lJ Based on ratios of quarterly clearings to demand
deposits in the commercial banks at the end of
the quarter.
The Office des Cheques Postaux, established in 1913 on the model
adopted in many other European countries, also provided. facilities for
persons desiring to maintain a deposit for checking or, transfer purposes.
'Its administration Was entirely separate from that -of the Caisse Generale
d' Epargne (Postal Savings Bank) although they both used the facilities of
local post offices. Deposits received by the Office, which bore no inter-
est, et into the general fnds of the Theasury, against which the Office
held a corresonding claim. The Treasury held a special gold reserve
against this liability, anounting to 504 million francs at the end of 1939.
b tal deposits with the Office at the end of ;1939 amounted to 4.1
billion francs, of wrhich 1.2 billion were held for government agencies and
2.9 billion for others. There was a total of 447,267 accounts. Such
accounts were opened -with a deposit of cash or a. transfer from another
account by all sorts of business firms and indivtiduals. Withdrawals could
be made in cash, che cks could be dravm on the accounts, or--more commonly--
instructions could be given by a depositor for debiting his account and
crediting 'that of another person. A great volime of payments was effected
by the latter procedure, i.e. by way of tra nsfers or ilvire ontstt . Cash
deposits (and cash withdrawals after clearance through the central office)
could be made at 'any post office. In 1939, the aggregate amount of debits
and., credits to accounts- carried with the Office was 36.1 billion franics, of
which nearly 90 per cent involved simiply book transfers wirithout the use of
cash. The, velocity of circulation--or tumover---in these accounts (total
debits in relation to average volune of deposits) was 4.66 times in 1939.
-40~O-
B., The National ,ank
Originally, the National Bank was considered primarily as an
institution providing an elastic currency medium by. discounting short-term
commercial paper. It had little nnection ith the goverenent and still
less with problems of govenment, finance and tgeneral fiscal policy The
situation undervrent radical changes in the inter-war period, particularly
in the second half of the th irties. Although the ank remained a private Lf -
owned corporation, in principle devoted primarily to short-tens comnercial
loans, the attitude of the management and- the policy of the Bank became
much more infused vith considerations of pu.iisc policy. It took up new
responsibi lities in the admLxz istration of the, whole money and credit
systan, and bccame intimatel3 conceraed with fiscal policy and the govern-
ment' s finances,
Managoniont
The Bank was headed by a Goveeraor appointed by the King (i.e. the
govenment), ' and in practice he exercised a dominant influence in the; acd~hin-
istration of the institution. All other leading officers were elected by
the Genelr Meeting: of Shareholders. The ;Geioror together with four other
elected members forned the Comitoe do Direction (Board. of Managers), which
wlas the chief executive body of the Bank. This .group with the addition of
nine elected "r egents" fomed- the Conseil do Pegence (Adinistrative Couazcil).
Finally, all these .officers plus the members of the Colege 'des Censeurs.
(Board of Auditors) formed the Conseil General (General Council) of the
Bank; the members of the College des' .Censeurs-- to 10 in number--were' also
elected :by the shareholders.
Th1e activities of the General :M eeting of Shareholders wrere
rather perfunctory. This body met twice a yW ar to receive the balance sheet
and ;profit and ,loss accounts of the semester, to ''declare a dividend, and to
elect officers. Chang s in the Baank's statutes required the approal of
this body, : which could be convoked in special session for the purpose..
Ownership of at least thirty shares w as recquiredi for attendance at the
General Mee ting and for the exercise of a singe vote. Represntation by
prox eas permitted but no person might exercise more than five e otes as
shareholder and five as pr 'xy-holdor. In practice, only a small minority
of the shareholders participated in thze meetings.
Government influence over the ' ilk was' assured not only bfir the
appointment of the Governor but also by the ex stence of . Go veronent Com-
missioner at the Bank appointed by the King. The: Com issioner was author-
ized to supervise all operations of the institution and to suspend anm'd
,report to the 'Minister of Finance any decisions df the .ank' s' officers
which he deboed contrary to the lawrr the statutes,, o r the interests of the
State. If no ruling -as giv:n by the Minister writhin a week, the decisions
might be excouted.
The Govermor was appointed for a tenm of five years (renewia fle)
and might be susiendeci or removed by the Kin g. His duties included presid-
ing at the Gone ra l Mfee ting of 'shareholdh er's and at sessions of thie Admiinis-
trative Council, and General Cou cil. He wV;S .sbound. tio ensure the obsrvannce
of the lawirrs, statutes and regulations and had limited powers, to prevent
the execution of dscisions of the Administrative Coucil which he- deemed
contrary to the law or the interests of the State. The other members of
the Board' of Managers were elected for tenms of six years, a .- d one of them
was designated by the King to act as Vice-Governor. They assisted the
Governor in the administration of the affairs of, thc Bank. The Board of
Managers had power to take decisions. on all matters not expiressly rese-Jd
for .the Adjministr2tive Council and to perform- functions delegated to it by
the latter. It received and acted upon applications for discounts or
advances and supervised tlx discount offices (see below,). In emergencies
it might. alter the discount rate-.. The Govrnor, Vrico-Govemor and other
members of the Bard of Manaecrs received salaries -fixed by the General
Council but wre prohibited from receiving; any share in the profits of ith
Baik,, Their positions were full-time and they were prohibited from holding
any office in a private co rporation.
The ninet "regents" who, together with the members of the Beard of
Managers,' made up tQ Administrative Council, were elected, for terms of
three years. Three of. thorn sad to be : cho sen. from -candidates nominated by
the three. official State advisory councils (Council for Industry and Thade,
for: Labor, and for: Agricul ture, respective.ly). They received only atten-
dance fees and were expected to 'hold othe:r positions, but there e?'e strict
limitations, on the; number. of "regents " - (or of auditors) who could be connec-'
'ted. th commercial banks or -bank holding, 'corporations. The Administrative
Council was required to met at least once a week. It fixed the discount
ra toy reccived for a nproval' th, ainnual report to be prseonted by the giver-
Snor to the Gon ra.leting~ and inspected 'the situation of the Bank' s
branches, Beside matters specifically rscser ed to it, the Coun'cil ight
deliberate ;upon.geneir. quostions relating to the Bank, currency and credit
probleias, and the economic development of the country.
The members of the Board of Auditers, elected for tes o f "three
years,( three upon nomination by the State AddIsory Council), had to hold
meetings at least once a month:. They were' sunpo sd to safeguard the share-
holders' interests and had the right to supervise all operations 'of the
Bank and to examine .its books. Resolutions of the Administrative Council
altering the rite or* te s of disco unts and advances., had to be sumi ittcd
to the auditors, arnd at .tom instance of the Administrative Council the y
e,-,=-mined and appro#ed the ' balance sheets and profit and lss accounts sub-
mitted to tli annul meetings of shareholders.
The General Council met monthly to review the situation of the
Bank. On the basis of proposals by the Administrative Council it 'drew up
regulations fr "the conduct of the Bak and the organization of its various
agencies, which, howrrever, had' to be suJhnitted to the rinance Minis ter for
approval. Salaries of the .Govrnor, and the Board of imanagers, and a tten-
dance fees for the "regents" and auditors were fixed by the Council, and
it was responsible for final decision on distribution of the Bank's profits'
A ajprity of th e membership wras required fr sessions of the
Administrative Council and the Board of Auditors. For' the transaction of
business by the General-= Coincil, a najrtvt of the mebers of each of these
bodies had. to;'be prcsent No officer of th Bank might be a member of
either chamber of the legislature.
In May 1940",the Acninistrative Council way omposed of the follow-
ing, persons:
Governor: G. Janssen, since January 1
9
38. Fornerly 1aiwyer and
4director of /a 3russels bank, then President of the
Banking Commission (see above p. 27).
Vice-Governor: J. Ingenblek, formerly- secretary to King Albert.
Other
"tlager&s: A. Goffin, .fonnerly managing director of a pro vincial
bank;
A. Baudewrryns, fonerly an executive officer of 'the
Bank.
Regents: G. Theunis, formerly Prime Minister and Minister of
Finance,' director of various financial and incbj strial
corporations;
G: Laloux, industrialist at Liege;
C. Swolfs, director of commercial companies at Axintwerp;
A. Kreglinger, rnem'be r, of an old commercial fi rn. at
AntwJerp, having close relations with South America;
L. Frateur, specialist on agricultural qiestions,
President of the,, nstitut National de Credit Agri-
cote (see p. 35).;9
L. Canon-Legraid, director of industrial corporatiois
(metallurgical), Vice-President of the International
Chamber of Commzerce;
L. Bekaert, industrialist in the Flemish part of the
country (wirmills);
G. Laroche,- one o -the. leaders of the trade union
movement;
A. Peltzer, industrialist at Verviers (textiles).
The Bank had its main office; in T3russcls and forty-two branches
in the country, the most important being at Antvwrp. Connected ith 41,l: but
six of the branches liras a 11comptoir dtoescciniptet (discount office), i~e. an
association of approved individuals in the local. commirunity which after
'inspecting applications for discount would attach its' endorsement and .its
guarantee to the bills. Since 1936, there. had also been a branch with a
comptoir d'escompte at Luxembourg.
Operations
Te Bank' s prime ftnction of supplying a circulating medium xfor
the country was. the source of its credit-creating power. Over 90 per cent
of its' outstanding liabilitics (excluding contra items) at the end of 1939
were in the form: of bank notes hold, by the rest oaf the banking system and
the public. 'In addition it had & small capital and reserves, and held a
comparatively sall volume of demand deposits on behlf of public bodies,
commercial banks, and others. The Bank als6 held large ii>ands in trust
for the Caisse Generale d Epargne and for various govenimen t gencies, but
these were invested separately from its other assets and w-ere reported off
the main balance shet as contra items.
-
--
1 1 Tle pubic deo sits reported. in the balance sleet lepresented the
w TOring furds of the Treasury and va rious official bodies, includng the
; c' Zssise Gerle cit Epare. These funds were uisually maintained at , medst
7evel, c rtiino.l' t:3p were es eciajr low at' the end of 1939. in its ge.eral
capaci ty as banker to th'e State, the Bank jlo rendered wvithou t c rge all
kinds of se "cial services such as naking paynlQnts on behal f of the Theasuy,
colc cti Cn sums 'due the Treasur,
nndlin o; the issuance and servicing o?
ove-iniont loans, etc.
Doposits held with the National Bank by other banks consisted
mainly of cash reserves of commercial banks. There were no fixed reserve
requirements for commercial banks, although as noted previously, tho BankinLg
Co;missioh- saxK tc it that reasonable liui'i7 ty was presrved.
In any case,
till 'monney end deposits with the Offioc des Cheuus Postaux were also regarded
as cash reserves, and in practice co-:merial basks held only a fraction of
thei r reserves with the National Bank.
Other de posits w ere held mainly b1 load.ng commercial and indus-
trial fi. aris whdich partly for reasons of prestiz rmaintined accounts wa-ith
the central institution. A small volm e of deposits was held at the end of
1939 'for foreign clearing agencies. Forcign exchange restrictions in many
European a d TLatin 1k_ ri cn countries, it t- which Belgium). h d trade relations*
had force t;e elgia autoritie s to nog-t3.atei agreemeionts for the settlement
of payments with those countries thro igh of'fici 1al chanels. The sus owed
to the foreign clearing agencis appoared, a sdoosis itsh the National
Those lamounts were greatly exceeded, by the clams on the fo reign
clearing agencies, whicoh were held by h National. Bade ia trust for a
sp cial g 'vonvimcnt office, the Office do Compensation Z3lgo-LlAcembourgeois;
such claims w -ere reported off te ,main bcla cc sheet as a contra item.
The :i ank was required to hold a 40 per cent reserve in V old e d
foreign exchange against its notes a-.C othor demand liabilities. At the
end of 1939, as may be seen froim the t&51o on the following page, its
reserves were gratly in excess of the 'requi red .eamount, constituting in
fact nearly 75 per cent of its demand liabi_ liti d-es. T reserve had to
consist at least three--quar;.txers of geld, and in pactice; the Bn' s mnag ice-
mne, remembering the severe exchange losses incurred wv-then the pound star-
liig depre ciated in 1931, hold virtually" all of tin that form. In v~ ow of
th- e t hreatening international oitution at thu,.o end. of 1939, the bulk: of the
gold reserve was held under earmark with foreign central banks.
The rest of the Bank' s assts, a side from contra items, consisted
largely of cl a imls on the govenment. The ol.d claims on te State arsing
frog. the redoe tio n of Bieihsmark currency aflbr the I1rst t World "r and
the exchange loseds sufferied in 131 amountedto 1, 245 mil ion ri'an cs t
the end of 19391 (eight h to iih asset it s in th balace e t) Cur-
Crnt
opzrations in govrnment se c ritie s, wei re roe lected in the 'dnk' s
-holdings of 55 'ii.. lon fr'n'cs in goveviimont bonds an1d 3,059, zillion francs
in short-aerm bl ls issued' by the Troa-s'sir and ether 'U. )iC lo die . Ol y
in 1937 'had the Bak been authorized to engage in open-market. one raions
in go ver i nt onds, but since tha- time it hd intrvend in the' 4 nkt;
from time to time with the - dual puroose of stabilizing government oibnd
prices, nd of regulating the volume. of creit genee~h Its holdiLngs of
B~anqe National de Boigique
]alan ce ;Sh ect for JDecermber 25, 1 39.
(billionfran cc )
A'- see1. . ts
GoL6. and fo re i:n exchan ge:
Local mint nr
Ea*rces s
Snusi ct ar-y currencyr and
postal checks
Treasury bills, etc .l4
Other domes tic bil? 1s
Foreig n b:ills
Loans on public
securities
Governm~ent debt-.
* Treasury n~o to (Law of
Dec. 27, 19 30)
Special note (Law of
July 19, 1932)
Gove rnent bns
Acquired under agreement
of July 27, 1932
Bought pursuaont to the
statutes
Premises a .d fixtures
Than sito ry a c cor-ts
Total
LI, 346
9,506
209
3,059
1,17
1.,
Liabi1liti~es
' \otes is sued
Current accoun-ts:
Treasury
P bl _c intituitions
Bacnks
Private deposis
leari1gs
13 Total
04.2 Total demiand liabilities
Statutory reserve
500 Contingency and aoertiza-
tion funds
195 Transitory accounts
Net o ro fi t
550
Cr 56
160
35
29,527
Contra It as /
To tal
Deferred liabili/ties (forw yrd oxel. 2~go corlm itino its)
Bills in course of coi1.ecti on
Office do Compensation
Securities on, deposit (including collateral for
advcances)
Assets daeosited as bond. (by managers,
officersa, etc.)
Securi ties held for the account of, thie Treasury
Fends M ono taire (government bonds hold against
subsidiary currency issue)
Gold re se re for Office. des Cheques P o stdux
ci:ets of the (Daisse Genorale dt'. areneti
1
Pension -fund of the s taff
20
240
37C
234
34
966
2C, {64.
200
10'7
311
2 /95 27
60
95
142
103,677
55
34, 206
362
506.
1,36
166
t/ Those tv~o iteas grouped togetherj in origi nal b lanm-ce sho e t--ds t ribtu tion
shoni in text o-f annual report.
j/ Ti~s 'secti on somewhat abri.dged.,
j Shor t-tena assets only--long-termi assets iero held by- the C;aisse itse;lf.
' 'eaeurnr b'.ll1s wore at an xcep tiona lly high level at the end of 1939. In
fact it held no s}?. ch paper at the end of lQ38 al though it was th-en author-
ied to acquire up to 300 r1_1llio. fran S' ofl it. In Augtust 13,thpe a .k' s
po :ers to gra.nt cred."t -ito -th Se governmet re gr'. "eatly expene (se do 17
da.d the Tr~ arr.l udeed Gv" _- hea'v exoonditures and faced -viLth a' vorf
urea.s ',t:r.c. 'marI Et, fo g ovemont siecurities after the otbeak o f war,
roso (.l on a large s c le to the Sark. Finaltly the BankT s loans on
g'oie " .m .: se u7 r tic 'e, mo . stly m rade to blanks, were' - usa ly' -large tti
endc vv _ , 04? ilio fac), ref;lectLing the straine rdtsta
tion proced cier pol itical developments.
Corie ircie: pawper.N, once: thouoght of as th. classic tyr ee of inves,,t-
i fora central ak, fon ''d only , a a :aal fctio cf th .e Nationalbn
1Y~rs ,iit th xcrso of Te e^- mereio bakig ." facilities the. role of
radi coutso on. .. x'3 of bakig crstlt ;on to - incres.U Ofcusey h
but&c codiios Clho L '1uc oft ' a1 .. "1 as istance exeno to e ur i
ranis. rilt rs' of ~ erisin suc asniii the -. fal 'ofa.- 19,9 took te' fon o e adanf
iii..h roI- dsons di un aes inere i uraJ urnsfo allce terriers on each
class cof trsan ns The. rat fort act d. bill wrase O conidr te
svotndrd0 rte r hat for non-acceplt bills ensdi for dro pindong n o noas
a-wac higer generally t by onehal ~e cent thouh ixtnde te lte thirtie
th n re i as "!I:or~sd. to one force ll of 19K' tofoste th? for of accen-
rate 133 tk sn er u ,..1'L.i.l+t c e ; crY r e _i J.1 s sanciao.r f(.4ll
drcltainne xsot of Bclrian eru acn)Y.tures Th. raecr c ltrl
rae Hoevr afte July 1239, leans secu . _.red b osu7ils ithea
r :n-d to4t '" fostrr ucngof uchte bills by oria bans.1
7
o' "z:.
rate I~ for he best aer, bu ine pe time i of stnencyf7a the ake rat gnco-
an 13, hn hrewee1 g mvmet of fund frcrrL. ,d inoth .u
Aftr hawing;1 be.n Q..=a in. thei 4_ 'oc cent for.'"i by.r i- erio.du itg wa resore
ien Jnar 1940 tole the Or. corcn leve..' l ini'"tiae in 193 Th t dlla rian
rate theeoe wer 1i to'ooF en ne eveT of the itndasd io: rbi
dro ur t pianer e~ s for' cls ~iancng f cthe expoeyr frto c o ate nau
neea- no was th :,"~hrO ee yiO per cent ofnace 1_.tu on ' hoes niaurang inh e an
orte ~ yevr, afper Jl cnr s t e curing in 4 os 12 mots, ad9
b er cc gt on the Guying su h bills tain in 120e da or les./
2per cent for disco unts of accepted ills and warchoise raco'q't s,
for Moans on gover'E eet securi ties wilth a maturity up to 120 days,
and f or Cisco n is of' co uon s on go 1rnnent bo n ds> ~it'' a maturity
of no mnore than 120 days; and
3 per cent for non-accepted bills and promissory notes;, for
'os':'c
1
i hills, end for loans on goverbme'.nt se curi ties with a
Lat-c ri y exceeding 120 days.
Pi ' tion of Profits
Te net 'profits of the Br were dii strib uted in the followiung
mama r. The Shareholders first received dividends at the rate of 6 nor-
cent pe r s2inum. Of the remaininig profits, ten per cent w.as allocated to
the s to ttorvT reservec and 6 par cont to bouses for the s taff.I/ T'hree-
fiftvhs o f the balanco accrueod to theState and the tryaiing tvro-fi~h was
used to pa- u. s'uplem n tarv dividend to sh areholde rs in. an amount d.' etexmn ed
by the General 2ouncil, end to increase the Bank' a recseire.
The not proi ts yoe actually detemn inod for somi-anntia4l periods
and semi-ac'nnual di. v7_cThns 1 wEere aid. "The total net pro n.t fo the calend7ar
year' 3 was 50, million francsA (not profit for the second half. of tte ye.on,
,-2 i .l o -is S o i { 5 _c:ce s et n
onl--2 milio--i shwm n te blane seetonpage 44) and this s'und
was distributed in the following manner:
(: illlon francs )
Net U rofi t 50.
La'{ 'r .v C:: To = emi .- a .n~nal dividen'd Cs C at rto of 6 per can1-t 1.O
pnnmBalance I
380~
Les: 10 per cent of Balance I for statutory res;ervse3.
6 per cent of B3a!lance I for bonuses to staff 203
Pa hn e I
32 . 0
Les s : 60 pe . r cent O~ ic tof Balnj ;cL. 1 e Ii to the State., )
Supplementary di ,' iend 12.3
Residual to s tatutorv: reserves 0.5
Th1e sharchoid rs thus received dividends in 19'39 of 24,3 million
francs, or 121 .35 francs per share (net dividend 9 0 francs noar share, after
deduction of the tax on income from securities), The go rc xmuent received
19 2 milli on francs as its share in the not p -fit of the Bxank. in _d_-
tion -the. goverrennt was entitled to all income derived. from a is coun-t
rate ,. 1. exxceeding 3.5 per cent, richr in 14 39 am ou t ed to 3.3 million francs,
and to, the s tem p tax - pad 6 bx ho Bank on the ,-rodctIv ir circulation of
ba s -'z iQ v i
nk notesu (calculated; ;> dor itin g the e:..m ouit of carsh reserve~s en d ,of
non-interest-bea.rin g log :^ s o t he State from the to tal amount of circula.-
tion), which in 1939 lirem d' d35mlon fran~cs.
1CTh stf doeGs not _nclude the o <veYlreor 7ic-Govorn1C ,igrs
?Rgents!?, or -ud tors,
2,/ In the .event of th iqi!idation of tho Ban.', three-fifth .s o f the reserve
would belong to the State .
Me Banik' s s'tatutory' reserve, inomting to 107 mil1ion~ francs at
the end of 133had been bult "Lp out of allocations from nct profits in
tie' manner described aboove.. 1' locations to and. drafts upon thie contin ncy
and amortization accounts w-ere effected before the figures for net pro fits
were struck. These accounts were i ncreased. by 225 million francs in 19337
as a resin of reallo cations among the balance sheet items,. and Ares i-i bly
were fully adequxate in 1939 for all noxrmal. Pr2pOoe.
C. Cop mmercial : .,iks
r origin and development of the Celgian commercia bning
sustem has been outlined in Part I. Comercial banks proper eilrerged on7ly
~vith the eneral banking reform, of 1.935, which [brced the Hmiixed banks,
.qieh had c inated the banking struceture, to divorce their corrteial an-d
invelsxm nt ba king operations. Thereafter, from the legal point of vie',
the only true banks were co -iercial barks, although the largest of them.
were subsidiaries of financial companies carrying on the industrial invest-
men t and security operations of the foxmer, mixed
1
Tnks. Th-ese financial
companies are reserved for trea tient in a sopa ra to section below.
Combined balance sheets for all Belgian batks for the period
1935-39 are showvn i the table on pag.'e 0. Tis vas a period o f consider-
able strain on the s stem, especially because of the successive politi cal
crises indu cing lare movements of li-juid funds to and from the country.
Howr~rever, at the Cend of 1939, despite tcr-porary difficulties created by the
large-scale ?oaringr of e irrency, t he banks s a ?.TholO were still in an
exceptio illy liqui. position, as ?.at be seen fro.m the following -table.
Combine d Balance Sheet of Belgian Banks
End o f 1939
lion Per Tilron Per
Assets francs cent Lia bilities francs cent
Cash reserves 1, 635 7. Caital and reserves 3,330 15.8
lances wth banks 4,300 20.4 Deosits (deaand 11934 56.7
and e.all money sho rt-term)
Sills 2,903 13.8 Depocits fer -more thn 1, 221 5.3
Loans 6,514 3l:0 one month
Securities 4,47 21. 3 Due to banks 1, 345 6
Other assets 1,1' 5e 7 Other liabilities 320 ha.2
Total 21,037 100.0 To tal3 2l,0<3 100.0
The bulk of the baths
1
resources was dranrn, of course, from
denosits. Interest was paid on demand,10' de sos1its, usuallyT at t1he rto c, f X0.
per cent by the large. banks and 0.75 per cent by smaller ones. Thnie
derosits drewr higher rates: around 1.25 per cent for 15 day deposits, ich
,were ver common; 1.4 per cent for one months' .6 per cent for three months;
and up to 2.5 per cent for six month deposits. All these rates were gdtnher-
ally paid free~ of the tax levied at te source on incoe of: th-is chara-cer,
such "tax being borne by the ba nk. The baths
T
capital and reserves at thAe
end: of 1939 stood at the reasonaly high figure of 23.0 per cent of their
deposit liabilities.
Cash reserves, consisting largely of till money b a t also includ-
ing de osi ts 'waith the National Bain and the Office des Cheques Postaux,
were equal to 7.U nor cent of total assets anrd 11.3 per cent of deposi t
liabilities. They were s upplened by a strong socondary reserve of
balances ;tn bnks and. call money. Tis reserve consisted mainly of-
deposits wpith foreig banks held as cover for deposit liabilities statod
in foreign currencies; the volume of inter-bank dopo ts and. call money
tomns bet goen Belgian- banks wuas never very linpor tant.
1 For i nformation. on banking legislation, bank superv rision, etc. see sec-
tion on F1ahnking Reform of 19 35 f in Part I.
-49
Bills di s ount 1ed wer an iraportantbrkn se~ anejod
the lowest interest rate.p of f Eorn ofc oarIk creedit Ia nornmal time s, thea
private discount rate for the best pa de r was us l. aly belowi the di s cont
rate of t e ati-onal B~ank, but t>o ordilary:7 customers the banks fifered
rates u p ~o Iper cen';t hisher -than the official rateO. The whole stre.c tire
of ;private discou~nt rates vwas intimat lw dependent upon. changes in the
National T32c1 ^t re3to . It was also custorarr r to ci arge a itCOm;m.i ssio~n of
one-qua rter of. one per .cent on c lsounted bills.i
xT' range of rates for loans on current' acco12n't, t he largest
singl e c abegory of banking asets, .wa s much wider. It wjas generally Il or
2 per cent hi hee t
1
an. the rate of the National Bank for col lateral loans.
Atthe end of 193 9 when rates were rathr ig, the! minimum for good
customers was gteneraully 5.5 per cent, to -whichwa added a quarterly cor.--
mission based either on the line of credit op ened or on t he amount drawn
thereundCer, or on. the tota~l amount of debits tod + he account. (in which case
the. rate wa. s mnuchi lowvjer Thse , thre knds: of commission , e. sye
1 t
sur credit accords"I, 'spar docou Ter t t, ax d usur mouvem.e t" .
As a result pf the narrow re strictiori s under w-hi ch the securities
operations of the bankts were conducted after 19 5, the securities hold by
the banks, at the en of 1939 consisted very largely o f govearrnent bonds
eligible as- collateral on, loans from.. the Nati ona1 Bank. Thus altogethere-ffteo
aniga CtaU0ed
f13 er nhg.
liquid fo rm s~o onc as thew cam.tionQ+al Bank stood reoady to make its credit
avaalabl on the usual toerms.
_:r 19.399 as a rosi2lt of the gee on' ol iation. movement during
the int(or,-ur period < wich was d es cribied in Par t _w, B("3 la bpn7.king had
be come hi friv concentrated. One bank alne (the i Den do I"' So cie to
Generals) hold nearly on -th' ird of all banking as s in ou
1
giwnm, including
tho.7so of forC? 'E_ banks c:n1d branch as in that cc.ountr.y end oi oxin corno rated
DrJat bakn ho.s A urhr 15 per cent vwas held 7 she second
larges t ins ti tution the n ance do r xelcos,. The f olowing table ,illus-
trates the Cob par-ative position of these es1d 110' other banks in thec general
banking structure.
Ttal Assets of Banks in Belgitra
Er r! of 193 9
abn quol dio la So cie to Gerne r als
Kredie tbank
Total for three leading banks
(Million francs)
11, 211r,
3 other corp orations w th assets exceeding. 500 million f'rancs
1
!' 2,.93
17corpora.tions with assets 'fit re n 50 an. 3 00 million fran-Ics_, 2766
46 small. corporations34
9 _fotreign corp~orations 1,5 22
34 priat banking houses l72
27., 037
iJBanque I-ta lo-Belge, Caisset G'nerale d s R- or ts . t. d .. s Dcco.t~i";s , and. -__ "noue
2 n c
1
udi r: twlo commercial banks operating rmainly in the Congo ( see below) .
1ice next page.
Te nxmiber of branch office I in Belgim rhich had reached 1,750
n ~ ~had fallen to 933 by the end of 1939; of these 740 belonged to the
three leadiimg banks and -193 to 36 othersJ in adition, Bel ian ban:ks had
31j4 branches in the Congo and 20 in fo reign cou n-itrie s.
Three Leading Banks
The Bancue de la Societe Generale (B.S.G.) had an outstanding
role in Belgian bak ing, not only because of the volume of its owran assets
biut also because of its link ;with the Societe Generale do Belgicue, one of
the largest coreorations in the world. The bark' s cai.tal of 500 million
francs was represented by one million shares of 500 francs each, of w rich
half was held by the Societe Generale an d the rest was diStrib u,,ted anion ,"
the general public. It was established in 1934 to take over the commercial
banking operations of the Societe end tmdelve of the thirteen regiona l banks
affiliated thiere-;rith (all but th eanque dtMr ne. rs). The B.S.G. had a great
number of customers, including both large and .small . industr _ al and trading
enterprises, and aintainod about 320 branches. 1-lowever, in Antrerp, the
trading center of the country, the Banue dAnvers acted as its representa-
five. The 12 affiliated banks absorbed in 1934 beca le branches =pat
retained a certain measure of administrative autonomy as regional o geniza-
tions, each ha ng a committee cemr prising mostly f'omer directors. In theio,
Grand Du~chy of Luxembourg, the bank' s functions were carried out by an
affiliate, the Banou enerale cu Luxembourg vii t 16 branches; in Francc,
it had close relat ion1s with the Bcnquo do It T n Qn Parisienno nd tho; CrBit
du Nord.21
On thec followring pag: appears the balance sheet of tine B .'S.G. as
of December 31, 1939, in the foam proscrib:ed for all comm"eral banks by th e
decree of 1937.
t oldings of Be g n n Buloic bonds, npriarailv govrmmntl, were
lthclargest sinle item. Ji;~W th e {- bloeg eds, they represented alost one-
quartr of thie to tol assets and 7,,rith short--tor T'easur bills (included in
the - bils) tey pro(bby exceeded one-quartr. Th e next largest item
was Ur"Tarious deb:;tors"t, reprosenting, general loans ared overdrafts. The-n item
!?Due from ban"kers" ilud red .. Glances wit 1 fore J gn Jank7rs, r ; rescnt-
ing thme coun,.terart of deposits in foreign currencies due the customers of
the B.S.G. The item "In es't.enl t of, the le gl surplus" reslcted sfro the
1935 decree, which required the i veos taent of surplus in bends issued by
public bodies, the bods to be listed in a special itm of the balance
sheet and not to ce rothecatd except as ar .lanst resort. The ite
tBaning shres" 1c'mised rrticiations in affiliated. bks, ofY wh7,ich. the
more iuortant Lwre the Bancue d'An;rS, th, .i.C anclue Gnera du Lux.'ie bourg,
1/ (See roced3i o .o.) in tis ofst, th normal rela .ti' onlshiiu s
were abandoned.. 'Thus, although the Iatonal ikar held to a rate of
2-1/2 per cent through the "war crisis in 1939 and even reduced it to 2
per cent in Januaary 1940, the pr1-v ate discount rate for the best paper,
which had averaged 2.24. per cent in augus-t 1939, stood above 3 per cent
during the rest of the year end had fallen to only 2.69. per cent in
April 194JS 0."
Tho se f? uree exclude sos 190 ~iianc a s oif te Credit Anvo rsois -wi;wjch
aispendedf ._ yr7ont late In 1939.
J For further information on the extensive colonial. and foreign banking
connections 'of the bank, see fell owing sections.
-)L)
Liabilities
Licuid and Mo. Dlizable:
Cash, at National1 Bank, and
at Office des Cheare s
P o staux
Call mioney
Thie frog , bankers
B lances ZAPth affil iated
bank s
Other receiables at
short-team
.Bills
Carr y-over and collateral
loans
Debtors per acceptances
Various de' tors
Sec crities:
Investment of 50.0
the legal
surplus
*Bonds o f 1,353,3
Belgian .pu -
ho ' powers
Bonds of foreign 96.2
puhhbic powrers
Banking shares 152.1+
Other securities 99.0
Miscelln~ua
Bills in course of
-oIle coion
Carlable, Liabili- ties:
70.6 Debts wvitat privilege
th~e tQbanlk
Balances of affiliated bank s
5.5.Acceptances,
7 61.4 Dueon short-ateItI
47.3 Creditors for bills to be
collected
237.3 Bepo sits and current accounts:
Due on demand or 4,3876.5
,197.0
169.
264.3
,393.l
I ithi n one mnonth
Tm deposits.
1t Calable
lia
bilit-
on
securities
Mis ceilaneotus
1913.
59.6
43.0
Ttal 6,30 1.6
r lxedl Assets:
Premise s
Particlp: Lions in rea. aflae elty
Debts of realty affihi-
.a tes
Tbtal a ss; ts
Pledged assets:
For our account at
- Non-callable:
52.1 Capital
I f ran c Legal7 rescrve s
Free reserves
1franc Contingevicy
Tndhvided profits
__ 1939 profi1t
6,333.7
Cont tm
Total lia bil
the National Bank (sanus6d)
For account ofT cuo er
Securities depcsited. as bond. for, our account
Guarantees recciftcd from third parti es
iRedis counted 'bills:
With the National Ban k
Bfith foreign7 correspondents
Forward exchange ope rations
Securities in custody ("open deposits")
1t;i-s cc-. Lane ou s
40. .1
1,6
2438.9
0.3
72.3
13.3.7
5.23 .6
102.9
59.2
Total 6,169.7
30.0
'70.0
10.6
l ties 6 C ! 17
1,260.3
101, 261.3
13.7
2,371.1
~..
32.3 34.2
'776.3
11, 163 .4
330.0
Assets
B r. ue de :La So ciete Generale de ,Belgique
F le ce Sheet as of Decemiber 31, .1939
(M:illlion francs)
- 2:
the Banque Belge pour 1' Et ranger (Paris), the Banq cta2 e c ge pour 1' Etranger
(Overseas), the Banque Ital.o-Bogc, the Banqupae -Beige at Itemationale en
Egy,-pte, the Banque di Congo Beige, and tho Banque Comnerialo e du Congo.
The item. "Other securitices" in~cluded ainly sha res of semi-official credit
institutions such as th Institut pour Reescoiute et Garantie and the
.N.C.l. The last two asset items resulted from.i the custom adopted by
most banks in the inte -wca.r period of -estqing thleiir p reTi?.i ses, whicht ere:
ex panding v17,ith the n umber of branches, in a special corpora tai on whose
shares wore owned bya the bank. Prior to the decree of 1937, these shares
had boon inclded in the item !Socurities
1
, altlough they were not mri,,ket-
abale, and any loans to these corporations were included among U arious
debtors". Under the new procedure, they had to be shlon separately.
;uon the liabilities, the first item represents debts h avng a
'rierty over other debts, and in partcuclar secured borrowings or s!ounts
due for taxes. "Creditors for bills to be collected" represents mo,.nnts
due for bills received from customers for clloction and included in the
assets either among "ils"4 or among "tBills in course of celd ctien .
4"Callable liability on securities" represents the amounts due on shares
held by the bar-k and only partly paid in.
The first of the contr. items represents the securities (govern-
ment bonds) o-ned by the bsmnk but done sited. vith the National Bank as
collateral for eventual loans; the notation "unused
1
' indicates that actually
no loas had beon incurred. The second represents assets, again mainly
govexmn-lent bends, given as bond for the account of customers (contractors,
etc.). The third represents securities decosited as bond for the bank's
own account t for purposes ether th an to secure liabilities; for instce,
as bend with thoi Thasuryg fr stck exchrigo opeatins, etc. "-$ crtics
in csstciv" were placed vwith the bank' not merely for safekeeping but also
for general admin- listration. In Belgium. most secur ties were in bearer, form.
and banks provided investors a wu lec-cme service by collecting interest and
dividends on deposited securities, tenierin. bonds called for redemp tion,
exercising rights"4 for subscription to 'new shares, etc. Most investors
took advantage' of these facilities for which they paid the ban a commis-
sion. These "-on" security deposits were sought by banks, not so much as
a direct, source of prof"it, but rather in order to attract cu stomcrs who
migh t then also opena deposit accounts, give the bank their stock excnange
orders, and busy secu-,rities sold by the bnk in the course of its underwrit-
ing ooerations.
is show7.' in the following ta:,.ble, e ne6t prfit on the. 19 39
operations alone was not suf fi cient to pU it 'i dond even of five per
cenat, though in 1938 there had booen on~u n .or frst dvidend of fi_ve
per cent, a second of six per cent an d. spec o distribution to 6irectors.
ThLe change was due to declines in many elds of activit r and to the n ces-
sity of forning a contingency rese rcve, prticii rl , to offset the sluop in
goveTnren t bond prices hich had follOi'e tihe outbreak.i of ar.
I Those securities are also included as assets in the balance sheet proper.
j Thei dirctors got five per cent of th-l -p of' ts after payment o~f ' first
dividend of fiv: per cnt. Those of theL directors, w ho participated in
the curient management of the bank: gt al sr a regular salary.
53 -
Banque de la So cie te Gene rale de Belgicque
Pro)fi t and' Loss Account 'or 1939
(Million fran cs)
Debit Credit
Interest and cOrLissions 70.7 Inerest and commurissions' 190.4
)aicireceived
General e xpenses: Income fromn securities E6.3
Operating costs 149.6 Miscellaneous 30,8
Social security 1r7. Profits brought forward 10.6
orgaizations of
the 01taff
Advert .sing expenses 0.8
Ttal 169.7
Rro-visions for contin- 40.0
gencies
Fnortization (on fixed 1.7
assn ts)
MMiscellaneous.
N et profit available for 34.0
distribution
a
ea
1.
KPPportionmn.eht of the net profit:
Dividend-.-5 per cent 25.0
Carried fowa rdy 9.
Ttal 34.0
In 19 39 'the board of drectors of the 1.S.G. ws presided over
Wa Myr. W. de Mr nck, foxrnerly director 01 the Societe General:e; the mice-
president and the di-revcors were also fonmer dir~ector~s of the
parent cor a-any. The other di rectors were e ther forner directors of the.
Societe Gcreele or imeni wh-lo, ha-,ring been: directors of tho rae rged baenks,.
T~ow presided over th-e regionaJ coin C~Ma1ittees.
Tho isancue de_3 des x raike d next to the 23. S . G. , mith a bout
half the es 7!ount of assets: It ? s contro..led by% the So ciete Broxel'.cloi s
p our a Fin an cc et It 'Indus trie ,(f;BrufinaI) , a sizable hold ing corporation
thoug~h not .nearly 5q twrng as the So cie to Goneraloe. The Banqule, de 3r eJes
and the Soryciete _3n:~os we re, foxme in Ja:nur 19135 to Suce the
fo naco r Banq"uC de Bru el es The capital of thb17 +1 now s'C Banqu d.c B,1 YruxellesG' 1, s
200 million f ran cs, represented by 200, 000 sharo s of 1,000o f rancs each; h
entire amoriat was originally subscribed by Truina which kept 14, 00
shares and sold the rest. '/tX1oen the division was mnade, thte banking, liabil-
ities transferred to tahc nowu Ia nocue do Jru: 1les exceeded the, bankin :g
assets, and tho d ifron ce in the farm of a cla i, on ' 3ru ifia ;as f inasl r
paid up in 193'7.
On the folloving pago is shown the b, lance shoe t of the i 'mue
de Bruxlles as of March 31, 194.
54
Banc~ie de -.. xele
iaace Sheet of March 31, 19/40
(M ilion 'fran cs.)
Liabilities As sets
U'-,
Liquid an d M obilizable :
Cash,, at National yank, and
at Office des Cheques.
Po stau~x
CJall money
Due from banks
Other re ceivable s on short--
teim
Bills
Carry-over and collateral
loans
Debtors per acceptances'
Various debtors
Securities:
Investhment of the 20.0
legal surplus
Bonds of Belgian 301.6
public powers
Banking sh ares 23'.2
Other. securities 58.3
Miis cellaneous
tai.:l
Participation. in thie Societe
Ihmo biliere du Parc
Loan to the same
Fu rniture and fixtures
Callsale Liabilities :
280.6 Debts with priiilege
Due to banks
ala}nces of afi tes
77.2 Acceptances
34'3:~5 Due :on short-ternil
137.8 Creditors for bills to be
colle cted
700.1 Depo sits an~d current a ccounts:
37.5 Due on demnand or 2, 075.7
w, ithin one month
160.6 Thne deplosits 314.3
85992~'
Callable liability on
securities
Mis cellaneous
x"03 i6
13.3
3,068.9.
Li
OT al
Nion-ca
1
lab e.
'70.,0
Capita
l
L gal rGee
7.2 Free reserve
rncContingency funds
3217..1
Contra Items
Pledged assets:
For our account at the National Bank (unused)
For account ofL cus tome rs
Se urs tics deposited. as bond for our account
Guarantees received :fom. third pa rtie s
Our, guarantees for customers
Peciis counted bill
Forward exchange operations:
Securities ini custody
Meis cellaneous
1.1
37'7.3
31.9
160.6
2,220.5
43.3
24.0
2,9703
2010 *0
20.0
7.0
1.8
3 _.231-7.1
107;2
7.3
231.9
7/.
337.E
10.2.
The differences from the :3.S
4
CT. sta tement already sh dwn are
obvious. Here "Various debtors"! is the most impiortan t item o f the assets,
"il"comies next, and go-rei ent h on'ds come third with about 10 peir cent
of the assets inseae. off 22 per cent as inthe case of the B.S.G. The
raain reason for the difference lies in the nrich larger am,,ount of del.,c,1is
hold by the B.S.x.", for which it could find an outlet only by purchasing a,
large volumne of government, securities.
The follo 1mg table -shows the prof-it and loss account of the
Barqcue do imxellos f or the financial year ending March 31, 1940.
anede3
es_
Profit
and Xtoss' Account
for Year Ending. March 31, 1940
(Millpion francs)
Debit
Credit
Interest v'ad commilssions 35.1. Itnterest and comnliss,.ons 111.4
pai d
received
General oe nses: Income from securities .23.5
Operating, costs. 100. Miscellanous 33.3
So cial security 7. Prftsbogh fo, rad
organizations of
the staff
1u:reo
1.3
a~dvertising 0.2
exeenses ___
Tb tal 109 . 4
Amnortization accounts ~ 3.
P roviso for conitin- 19 .3
gencie~s
1
1Includi n 6.1 mill ion francs for wri tin_:g offsa claim on the' def'aitech
fim of I Iendelssohn arid Co , Amsterda~m.
As a result of the transfery to coting ency resernves, thu re vass
no net profit ava ilabl e .for distribution. The absence of any diviz1dend i
understsndble, since the bal cc, sheet was dlra;wn as of March 31, 19 .0
auno a t. ~t the eve, of the inv asion, and since the shareholders, who should
have met i-n June, did not meet: till Au ust, after the occupation
Th e Banc de Bruxelles ha d around 220 bramnhs situated in 'all11
prdof thne countLry,- wir.th three principl eioa ceznters(Brusse l s,
Antwer, Lie' go) . Ihe bark had also ain affiliate for the Con o, the Panquo
Bel..ge ,dT Africpe (see p. ~ The nresid~ei.tI and Piancagi ng director of the
Ban 'ue de Bruxoll es was Tdr. M. r . Gerard, former Iinis or of TFinan ce and
fornier director of B!rafinia. M ost other directors wiere forme rly :onnccted
with the old Dixngqe de 2?ru xelles or Twit' the affiliated' bankcs whrlich were
absorbed in 1931.
Th , i? Kr edCiotn kt i0? I. O vee ane .n , vrhid (Credit 3nk f or
sn li 1 e7 Cea nT ethird large bank, wasr stalse in 19 to
take over commercial Jbanking functions for the former : ?,emecene-J3ankvreeni-
gun. P"ursucant' to. th ro raon za .on, the Krodietbank acquired a large
I
cJ.:aim on Creclit General Industril.f the company
bftndling the Algemeene> interests. Most of, tl1eassets of thiscqmpanyvvere
,frozen, anduJ
i1
ike . the Societe Generale.and . Bx:Llfina, the C.G.I. :had' been
Ul1able to li::iUidate its debt to i tsba:1kingaff:Lliate by 1940. The C.G. I.
had only aminori tycop ital interest in tlJeKreco_etbank, most of tbe stares
of which were held shareholders!, of the' Algemeene; Clnong them the
Central Caisse of the (see p.' >20).' ,The Kredietbank was thel"e-:
fore relatiyely le.ssdependent on' its holtling company the 'other two
looding baJlk:s,e:x:cept,ascredi,or.
!J:he bal-8J1ce sheet of tbe Kredietba.r.k" ,wbicha.ppears on thefoilovy
ing page, shovvs 2. position of mlich less strength tha'YJ. that of the 0 ther two
. J-arge banks just described. Its' deposits were much srn;allerand the recourse
to rediscounts. much ,T.ri8smallamount of socurities in custoct;; VIas
an indication of 'the modest investmonts' of its customers. On the
,side, the principal i temvvas HDebtors
H
, among 1'\Thich YiID.S included thecta:1.m,
of cifieLamOiJ.nt, on the O.G.I. Th.G onlyknoYffi affiliation of the.
was a.c"'1. inrere.stin the BanquG Diax:18.ntaire (see p. i 60).
Tl:,e, folloviingf.a.ble repl"Oduces tho last pre-ini,rasion profit and
loss account of tha\bank:

Profit and Loss Account fo.r the Year Ending March .31,1940
(Million fraDcs)
Debit Credit.
Interest, aDd COl1Tillissions 2.3.5 Intorost a.nd 44.4
paid 'rGcoivod
,General expenses: Inco1118 from", sGcuri ties 7.0
O})erating costs Mis ccIl8J1GOUS
("}..S;(
D.u
Social securi Profits( brought forward 10.1
orgarJizations
of the staff
.'Ib.XQS 0.6
Advertising' 0.2
oxpenpGS
'Ibtal
Amortizations O.i5
Miscellaneou.s 0.2
Net profit availabIG :t1i-.l
fo r di.stribution
Total 70.3 .Thtal 70.3 .
Apportiorunent of the Not Profit
'.,.
,Amertizatien offurnif,ul"o arid fixtul"es .0.6

1b reserire for, contingencies 5.0
'Carried forll'{ard (no di"'i.ridend being paid) 8.3
, 14.1 ,
- 57 -
-57Kre die tb snk
Balance Sheet of March 31, 1940
(Million fran cs)
L a o ljfries
ieuid and M'obilizabl e:
Cash, at- National Bank, and
at Off~lice des Cheques
Pos taux.
Due from banks
Other receivables on, short.
teirn
Bills
Carry-over and collateral
loans
Debtors per acceptances
Various debctors
Securities:
Investment of the
2legal surplus
Bonds of Belgi.an
public povers
.Banking shares
Other securities
12Mis
cellaneous
L.3
.
4.6
Callable Liabilities
33.3 Debts with privilege
Due to banks
A~cceptances
89.5 Due one short teem
34.3 Deposis and, current accounts:.
dhie on demand or 533.'6
83.1 within ono month-
11.3) Tine deposits 43.;6
123.A.
545,
:1.20.3
Cashiers notes
Callable. lia bilztyon
securities
vi s cella neous
L .9~
1b tal 1,101,.7
Fixed Assets:
Premises
Furniture and fixtures
42.*6
1.8
Total .I 1,146..1.
T tal
Non-callable :
Capita.
Nol-di spo sabole reserve
Legal reserve
i divided. pofits
M~et profit 1939-40
To tal
L'150.0.
630
1.3
10.1
4 1.0
Contra Items
Assets pledged to the National ank
*Assets' pledg ed as bones for ,our account
G Guaran tee s received friom third parties
Our guarantees fo r account of customers
edis :counted bills
Forwvard e.-:change operations
Steock exchange t" tei 2' operations
Securities in cu stody
Miscellaneous
83.9-
893.-5
325.2
295,6
208.5
1.2
176.0
60.0
1200, 000 shares without par value.
Assets
113.8
123,4
16.'5
632.,2
0.1
17.6
917'1.7
mwm .-
The K redietbank had about 220 branche s, located amo t e xc ui ely
in the femish section of the country, which ias relatively less industrial-
ized than the Walloon part. Its customers. were engaged chiefly in medium-
sized or small industry and trade; they 'were numerous, however, and provided
the bank a steady volume of business. The boa'd: of directors of the
Kredietbank was composed of business men. representing mainly medium-sized
and small enterprise, and of lawyers prohiminently engaged in organizations
formed on behalf of the mi .dle classes.
Other Domestic Banking Corporations
The three banks so far discussed overshadowed the whole banking
organization by the number of their branches and the a ount of their busi-
ness. There was, howrever,: a large number of other banking corporations,
operating primarily in the domestic field, the most important of which. are
described in the folllwing pa ragraphs.
The Banque d'Anvors .ewas the oldest affiliate' of the Societe
Generalo, having been established; as a branch in 1822 and incorporated-in
13M70. It had always specialized in 'commerci al bankin, Antw'+erp being" the
trading' center of the country and one of the largest ports in the world.
Ibt had never engaged to any great extent in so-called "1finan cial"1 , operations,
but it had sane participations in a few sound industrial corpbrations. In
1935, these interests were handed over to a new relatively small holding
cororation', the Credit Mobi ier d!Anvers, formed w tith a capital of 20
million francs. The sh-ares of the Credit M.obiJier were then . distributed
as bonus to the shareholders of the Bancue diAnvers, and the corresponding
20 illion francs wvas w ritten off from the resere.e accozunt of the ban.
The following tables treproduce the abridged balance shee t of the
bank for the end of 1939:
Sup dz'knvers
Abidged Balance Sheet for December 31, 1939
(Million francs)
Assets - Liabilities
Cash, at National Bank, 203.1 Deposits .396.3
and at Office des Due to banks 37.3
Cheques Posfaux M Miscellaneous 37.6
Due from ban ks 71.6 Capital 100 0
Bills ll2-6 Surplus 100.0
Debtors 132.7 Contingncar fund A .4
Securities ll28 Undivided profits .
Miscellaneous 49.5 Prof;it 1939 63
Premises 3 3
Ital 6 6. Ttal 636.1
l/ These sums were used to payr a 10 per cent dividend for 1939, requiring
10 million, francs and to. P' yT bonuses to directors recul ring n0,4 mild ion.
Net-profits in 1938 were much higher (17.3 million francs).
Mr, W. de Munck, the president: of the Banque de la Societe
Gnerale, was also president of the Banque d'Anvers, The other directors
were all connected in some way 'J'ith the Societe Generale group.
The Bancpze de Commerce was the next largest Antwerp bank. It had
imany customers in the export and import trad.e and also among local marnufac-
turers. It also had branches in Brssels and. Ostende, Barclays, Bank '-Ltd.
had :an interest in it and was represented on its board by three directors.
The president was Mr. A. Martougin, one of the principal chocolate manufac-
turers in Belgium.
Ban'c~u e de Comm.e rce
Abridged Balance Sheet for December 31, 1939
(Million francs)
Assets Liabilities
Cash, at National Bank, aznd !4. E# Deposits 2287
at Office des Cheques Due .from banks 47.0
Postaux Miscellaneous 0
Due from banks 55:5 Capital. 30.'0
Bills 45 Surplus. 11. 0
Debtors 2106,4 Profit 1939 3.0_
Securities
671
Miscellaneous
Total, 367.7 Total 367.7
The remaining institutions to be described are Brussels banks
controlled by industrial groups.
The first of these, the Societe Belge de Banu.e had its head
office -in Brussels and its only branch in Antwerp, It had a, relatively
smal2 number of customers, but its influence, based on connections with
strong indiustrial and 'inancijl groups, was considerable. It vase controlled
by the -Uion Chimiqie Belge, one of the largest chemical corporations. The
Union Chimiquie is practically controlled by the family of Baron E. Janssen,
tied by family and- business connections with the group Solvay, one of the
strongest factors in the world chemical industry. The " president of the bank /
was Mr. A. E. Janssen- fo-iner .Minister of Finance and relative of Baron B.
Janssen.
The Societe Belge 'de, Banque was - established in December 1934 to
take over the comrmrcial banking. business of -a forer institution of the
same name, which' became Cie. Chimi que et' Industriell, de Belgque nd dwa s
later merged with the Tnion Chii .ue. The Union Chimique thereby acquired
the mjor part bf the shares - of thee So cite Bolge de Banque, the others
being held mostly by the members of the Jans8en. group..: The Societe Belge
de Banque also has a controlling interost in the Banque Diamantaire
Anversoise (see p. 60).
The following table reproduces an abridged balance sheet of the
bank for the end of 1939:
-60- -
Societe BeLge d& Banque
A ridged Balance. Sheet for December 31, 1939
(Million
francs)
.Assets Liabilities
Cash, . at National Bank, 59.4 Deposits 273.8.
and at Office des Cheques Duae to banks 45.1
Po staux Miiscellaneous '60.0
Due from banks 56.9 -Capital~ 30.0
Bills 125;5 Surplus, and undivided 3.3
Debtors 87.1 profits
Securities .36.6 Profit 1939 5.1
Miscellaneous 71. g
Th tal 47.3 'b tal 437.3
The next two banks were controlled by the Dnpain interests.
Baron Ed. Empain was a great Belgian financier who had promoted many
Belgian enterprises abroad. He bilt many railways. in France, in the
Congo, etc., was the initiator of the Paris Metropolitain (subway), and
created Heliopolis, the fano'us, Egyptian resort. After his death, his
interests became divided between his sons, iwho formed tvo holding companies:
the. Companie Belge, dominated by Jean thpain, and the Federation d' Entre-
pretes Industrielles, dominated by Louis and Edouard Ethpain.
The Banque Industrielle (foraerly Banque E hyain) was con-
trolled by the Cie. BEge. Its customors and depositors- were mainly drawn
from among affiliated companies and., some connected families. Although
organized as a corporation, it, might rather be classified as a pr ivat
banking house. On December 31, 1939, the capital and. surplus were 19.4
million francs, deposits 188.7 million, net profit for the year 4.0 million,
and total liabilities 212.7 million.
The Banque Eel 'e pour 1' ndustrie was controlled by the Federation
d'Entrepretes Industrielles. and might also be described as a private banking
house...; -On ODecember-31, 1939, the capital and. sirplus were 11.2 million
francs, 'deposits 64.3 million, other liabilities 31.1 million, profits for
the. year 1.5 million, and 'total liabilities 10 8.1 million.
The Bangue Di.amantairc Anversoise catered only to customers
engaged in the, diamond trade, for which Antw'erp was the largest center in
the world. The. bankihdd close connections. with the Dimond Corporation of
London,, which practically controlled, the world production. of diamonds; the.,
Corporation was represented on the board by two directors. The president
of the ' Banque Diemantaire 'as Mr., .\. B., Janssen, also president of the
Societe BElge, de, Banque, which is believed.to have controlled the, Antwerp
institution. Interests in, the bank wrere also held b the Kredietbank, the
Banque Transatlantiq;ue (Paris), and Cofinin dus (group 3rufina-BEanque de
Bruxelles) and indirectly by the Societe, Gencrale through the Forminiere
(the Congo diamond mining, corporation). On Miarch 31, 1940, the bank had
capita. anid surplus of 6.40millior francs, deposits of 34..8 million,
acceptances of 43.2 million, and balance shot total of 183.8 million.
-- 61-
The Banque de Reports et. de Depot was established early in 140
to take over the business of the Caisse Generale des Beprts et des Depots
(see p. 32) .1 This bank, like its predecessor, engaged extensively in
financing .s to k market transactions b' y colat -era loan's to brokers. Its
.capitai of '50 millioj. 6 ancs was subscribed by the receiv rs of the earlier
institution--30 million francs--and by the Banque de Ia Societe enerale,.
the Banque de Bruxelles, and the So ciete Belge de Banque. Te,. deposits
taken over from tipE predecessor amounted to some 300 million francs.
The ,smaaller domestic banking corporations with assets exceeding
6. nmilion 'fran cs--excluding 'Belgian banks operating abroad or under foreign
control--are listed in order of size in the table on the following, page,
Private Banking Iouses
This .category of institutions, strictly spseaking, consis is only
of banking firms o ved by individials or by partnerphips or 'which there
were- about. 30. Actually, some- bankinig orpoations (e.g. the Emp i banks,
Banque Industrielle Belge and Banque Belge. pour 1 ttndustrie)' were so 6lo6ely.
held by family interests, etc.,_ that their sta tus was little different 'froom
that of private. banking houses.
Private bankers were not, subject to the: general r egulations
a~pplicable. a banking corporations. One reault is that' they did not pub-
lish balance sheets so that " almost no .. sta:tistica'l evidence may be cited
concerning their activities. They tdaere' not affected by the divoce .of
commercial banking. and investment banking effected by the .1935 refoxm and.
were free to engage h "1financial operations'
1
. Indeed such was the princi-
pal business of the half-dozen larger firms, which also seecialized in
arbitrage operations in securities and foreign exchange, financial services
to large corporations, etc. Some of the w. .all private bankers in the pro-
vinces did mainly a comrrciatl banking bus:Linss.
The leading private banking houses had played en 'important role
in the development of elgium' s industrial and financial structure, but
they were, by no& means so prominent as. the houses forming the so-called'
"haute banqueU in France. -Total assets of all private banking firms at the
end of 1939 came- to only 1.7 billion francs, or one-quarter of those held
by the Banque de la::Societe Generale alone. Nonetheless- the loading, houses
had an influence surpassing their limited size because of their intimate
relations with powerful: industrial and financial grous. They characteris-
tically catered to onlyr a- small and select clientele.
Probably the largest. of the private banking housoes was the
Miutue ,le Solvayr Solvay, Tourna, Hankar, ]el et a, co-pa rtnershp
established not so much for the baanking -operations qof Solvay et Cie., one
of" the largest; chemical concerns in the world:, as for ;thc management of
the private fortunes. of the members of the group' This banking fixm seems
to have had. diversified interests in Belgium and in' foreign industrial'
corporations.
- 62-
Saler Banking Corporations
Namne of bank
Banque H. Lamb ert
B~anque de. Credit Comme rcial
Comptoir ,1e Centre
VCaisse Tirlemnontoise de Depots
Banque Duoois
Banque de 1 'Union des Industries
Gewe stelijke Bank
Bank van Rousselare
Banque Sud Belge
Volksdepo sitkasJ
Bank van Sint-Mariaburg
Banque Anversbise: do Nantissernent et. d' Escornptd
Banque Connn .ercialc de Liege
Banque Vervietoisc. do Depots et do Credit
Credit Ostendais:
lMutulle do' Placement et do Gerance
Credit Hothecai o d' Ostende
Banque Indstrielle' et Gem...erciale do Cbarlcroi
Banque du Pays do Tennondo,
Banque de. Lie ge
Credit Commercial de Mons
Banque Co ime'rcialc do Bruxlles
La Centrale Financiere
B3anque veer. Uitbreitung van Groot Antwerpen
Banque 'de la Ste.=: .'iman ciere Bruxlloi se
L Ardenme Ban caire.
Banque Privee dog Ielgiqlue
Credit. GenQZral iBrgeois
Banque. do la Cie. Commerciale Belge
Banque Quviiere B3ruxelles
Location
of
head office
Brussels
Antwerp
Brussels
Tirlem~ont
Liege
Brussels
An t~rerp
Poulers
Charleroi
Ghent
A ntrrp
Antwerp
Liege
Verviers
Os tonc;.
Oistende.
Charlor oi
Termnonde
Liege
Mons
Brussels
Arit-vQrp
Antv'orp
Brussels
S tavelo t
Brussels
Bruges"
Antwerp
Brussels-
Date of
balance
sheet
Dec.31, ' 39
De .31, '39
Dec.31, 139
Sept.15, '39
June- 30,'40
De,-c '31,'.39
Dec., 1 39
De c.31,' 39
De c.31,' 39
Dec 31, '39
Dec.31,'3
June 30,1 40
De c.31, ' 39
Dec.-31,! '39
Dc .31;,' -39
Dec 31, '.39.
Dec. 31,' 39
Dec.31,1.39
De c.31,' 39
Sept.30,' 39
Dec.31, 139
Dec 31,' 39
De c15; '39
De c.31, ' 39
De c.31, ' 39
Dec. 31,'39
Dec 31,'39
Dec31, '39
Dec;31,.' 39
De c.31, ' 39
Capital
and
reserves
23.0
46.4
21.5
30:6
33.3
25.4
10.7
1.3
2.4
1.0
7.1
4.6
20;1
3.3
2.2
5.6
12. 2
6.5
5.0
4;2
100.1
3.2
4.3
5.2
5:3
1.6
1.1
s Deposits
(Miillion francs )
120;3
47.6
83.1
77 2
39.9
4:0.7
6.0
-34.4
17.4.
26.9_
10.0
16.9
16:1
17.4
20.2
2. 2
12.0
9.2
7.4,
f.8
3.8
6.3
5,2
3.3.
;2.9
5.2
153.0
120.8
110.3
109.9
86.0
69.,1
53.8
39.4
37.6
34.0
30:.1
29.9.
29.1
26.0
251.1
22.7
22.2
18.6
* 17.9
*17.6
14.4
14.0
14.0
1-.5
10.1
9.
.7.4
6.3
1JIn_1940_stopped' banking activities and became a "caisse d' epargne" subject to the Royal Decree No. 42.
Other large private banking houses in rssels were, ]Philippson et
Cie, Cassel et Cie, Banque Josse Allarr, Bangue llet et Cie, and H.
Lambert (athouiigh organized' in corporat.,e ford), all connected with various
industrial corporations. Na elmake:ors ls etCe,. Liege and -' ruelles, was
one 61f the oldest banks in. the wor..d, h hvihg. been established-at Liege in
1747. It was connected with industrial corporations in the province of
Liege and in the Congo. In ntwerp G. et C. Kreglinger was interested in
overseas trade and finance, particularl y in South lier ica.
Colonial Banks
The bank of issue and ''much the largest banking institution in the
Congo was the) Bangue du Congo Belge, established in 1909 as a Belgian
corporation with capital subscribed by a syndicate of banks and bankers
with interests in the Congo, especially-,. the Societe Generale group. Th&
new bank was granted the power of no t issue by a convention with the
Belgian Minis ter of Colonies in 191, , and in 1935 a further, convention gave
it th ~e::Excusive3 power odf coin: i~~ :in the3 Co~loy1 .and obligaed it otk
over ,thc liability for the outtanding coinage of the Colonial Government
against a _claiim on; that govern ent During the inter-war period; the, Congo
franc vas maintained at parity, wivith the franc. of the mother country. f ter
1935, the Banque du Congo' Belge was recuired to maintain a reserve of ,old
and foreign exchange equivalent. to 40 per cent of its note and coin liabil-
ities. One-half of this rosese had .to be 'held in gold. and in practice the
gold. reserve ratio alone wuas maintained at or above the required. level--i n
June 1939 the gold reserv ratio wvas', h4 per cert.
The Bank had broad powers to engage in banking operations and in
practice it pe rfo xmbd di r ct commercial banking functions while a t the same
time. offering rediscount facilities to the other two Belgian banks operat-
ing in the Colony. It acted as the fiscal agent of the Colonial Govcrnment
but had only re st-icd authority to extnd credit to that government; after
1935, its holdings of securitie s issued or guaranteed by the , Colonial
Goverment were iraited to bta~ice the amloia Unt of its capital and reserves4/
while it coald grant current credits to tha government up to ,5 million
francs at its Brussels and London offices or up to 5 per cent of its note
and coin circulation at its' Congo offices Holdings of Belgian Governent
securities were not sti'cted after 1935.
The head office of the Bank wiras at Brussels, and it, maintained a
branch in. Antwerp, one in London, and .24 in the Colony. It was administered
by a president appointed by the King for a six-year term and by a board of
directors elected by the shareholders, one member of which was designated
vice-president. These officers as well as auditors naned by the shareholders
had. to be of Belgian nati.onality. There was also a Govemnent Commissioner,
appointed by thUze King and' given broad superi sory powrers over the Banm k to:
assure . that' it adhered to the -relevant laws and regulations, including the
conventions with the 1,11inister of Colonies. The Bank
1
s resident in 19:39
was Mr. P. Charles, a.0-former high official of the Colony; the vice-presi-
dent,; Mr. F. Cattier; was a representative of.-the Societe Generale, group.
lJi at- ount equal to its, capital and 'reserves could be held in (a)% such,
securities; maturing writhin sixonts, anid. (b). such. securities maturing
in amore than six months' which had been issued for at least one year.
-64
-
The net profits of the Bank were distributed in the following
manner: after payment- of a basic 6 per cent dividend, the balance was
distributed 50, per cent to' the government, 15 per cent to thb directors';
and auditors, _a nd 35, per cent (less aouhts allocated to reserves for losses
or carried forward to the following year) as a -supplementary dividend to'
shareholders.
The foJlocing table reproduces the balance sheet of the Bank for
June 30, 1939.
Banque du Congo Belge
Balsa-ce Sheet for June 30, 1939
(Million
fraics,)
Assets
Gold coin and bullion
Cash and balances with
baniks
Bonds (Belgium and Congo)
Bills
Debtors
Miscellaneous
Premises
Material and fixtures
2E;
25
lEj
Tobtal . 1, 1
Liabi ities
0.9- Capital
Notes and coins issued
'76 Demand deposits and current
9.*5 : accounts
Time d.eposits
4.4 Acceptances
7;5 . Miscellaneous
1.0 .Dividends
Treasuryr s share in pro fits
Profits carried forward
5.4 Total
There were .two commercial banks operating in the Congo, . each
controlled by one of the leading' Belgian banks . The Bangue Comnerciale du
Congo was established in 1911 by the group interested in the Banqe du
Congo Belge in order to undertake operatiorjs not allowed to the issue bank..
The bank was mainly under the influence of thoe 'So ciete. Generale (its presi-
dent was Mr. E. Carton de Wiart of the Societe Generale)' and its funds .were
obtained primarily from other banks, presumably the Societe Generale group.
The head office was at Brussels with a, branch at Antwerp, 24 branches. in.
Congo, and one branch in London. Its operations never became verw 'eten-
sive, its main role being that of endorsing bills for rediscount with the
Bnque du Congo Belge.
Benquo Comerciale ,du Congo
Abridged Balance Sheet for June 30, 1939
(Million francs)
Assets
Cash 0.6
Duo. from banks 3.6
Bills - 150
Bonds '(Belgi m and 'Congo) 954
Miscellaneous 7
To tal 231.6
Liabilities
Duc to banks
Deposits
Mis cellaneous
Capital and surplus
Profits \938-39
149.5
38:1
33: 5
To)tal :2319:6:
20.0
41.5
527.4
110.3-
19 * 3
2.9
2.2
2..0
0:1
1,115..4
L-cp~3-3
-65-
The Banue Beige d'Afriue was an affiliate of the Banque de
Bruxelles. Its activities were centered in the Belgian Congo and in French
Equatorial Africa. The head office wras at 3russels there were 10 branches
in Congo and 4 in Frenh Africa. , The president of the bank was M. Duquesne
de la Vinelle, general managing director of' the Banque de Bruxelles.
Banqule Beige d'Afriq ue
Abridged Balance Sheet for Septenber 30, 1939
(Million francs)
Assets Liabilities
Cash, at issue banks, and 36.3 Deposits 97.8
with Office des Cheques Miscellaneous 6.3
Pos taux Capital and surplus 37.6
Due from banks 30:7 Profits 1933-39 2.6
Other. receivables at short 25.6
tern
Bills 10.9
Debtdrs
7.4
Securities 22.4
Premises 10:0
i s cellaneous 1.0
Tbtal 244.3 Tbtal 1/4. 3
Belgian Banks Operating Abroad.
Belgian banking representation; abroad, wvhich w ras almost non-
existent in 1914, grew considerably, during the inter-wa7r period, Jargly
by virtue of the activi ties of the Socie to Gene rale group. . The first
foreign banking corporation was the Banque JBlge pour It Etra nger, affili-
ated with the Societe Generale and esta blsshed in 1913 -'by the transfoxma-
tion of a formor ejn.all organizations Banqu Sino-Belge. After a period of
great. expansion in the -ttvrenties, the whole organization of the B.B. pour
1' Etranger under ent a reo rga;niz it ion, h os tly be cause of political and
econonic difficulties encountered in countriesc whe.re nationalistic sentiment
was strong. Branches in foreigi couri~.tes e rrc incorporated there and the
B.B. pour l
1
'Etra.ger itself becm a holding company which in 1935 -was
absorbed by the So ciete Generale. The foll-owing corporations which took
over the business of the ITnquo. Beige pour l' Etranger were thereafter
owamed by the Societe Generale, the Banque do la Societe General,, 4and other
affiliated corporations.
The Banque Beige pour 11Etrangor (Overseas) was established' in
London as a private company wi th a, branch in Now York City. No balance
sheets were published, this bank had a subscribed capital of p2;000000
and paid-up capital of 630,00. The Bancoue Belg e pour 1/ Etranger (Paris)
was a French corporation established at Paris with a .board . com,,iposed of
representatives. of the Societe Generale. On Juno 30, 1939, the subscribed
capital was 33 nillion Fren.ch ,francs, the paid-up capital 13 million, and
the deposits 191.4 million: The Ba .que Belge pour 1' Etran er (Extreme
Orient) was a Belgian corporat;ion wi-th head office at o2rassels, and 4
branches in China (Ha.nkow, Hong Kong, Shang i, .Tentsin) . Its board was
composed of representatives of the So ciete ,Gen ralo group.. The main items
of the balance shoot for Juno 30, 1939, follow.
Assets'
Cash, at National Bank, and
at Office des Cheques
Pos taux
Due from banks
Bills
Collateral loans
Various debtors
Securities
Mis cellaneous
Debtors per acceptances
lb taL
19.9
96.6
33.8
20.3
9.2
5.8
5.Q
19.1
209.9
Liabilities
Due to banks
Deposi ts
Note issue in China
1\i s cellaneous
Capital and surplus
Profit 1938-39
Acceptances
Tb tal
The Banque Belge et Internationale en Eg-mt ivas established with
its head. office at Cairo and a branch in Alexandria. The majority of the
board consisted of Belgians, mostly connected with the Societe Generale;
the others were Egyptians. Th.e chaiman w as ?M. A. Callens, director of the
Banque de la Societe Generale, and the deputy chaiman, H. E. -assan
Maxioulm Pacha. The main items of the balance sheet for June 30, 1940, were
as follows:
Banque Beige et. Internationalo en Egypte
Abridged Balance Sheet, for June 30, 194.0
(Million Egyptian pounds)
Assets
Cash and banks
Due from banks
Bills
Debtors
1 Mis cellancous
Liabilties
1.6 Capital paid--up (subscribed
0.4 1.0)
'0.1 Creitors
1.1 iiscelaneous
,a .
~Ttal 3.3 Tbtal
The Roui'anian bran ches of the B.B. -pour 11 Etranger were trans-
ferred to the Banca Comorciala RomI ana, in which the Societe Generale
group still had, in 1939, a minority interest ith representation on the
board. The Bulgarian branches were transferred to the Banque Franco-Belge
et nq- which was merged in 1933 into the' Banque Franco-Bulgare It
seams, however, that the Banque de Paris et des Pays-Bas. purchased most if
not all of the' Societe Generale interests in the Banque F ran c6-Bulgare, on
the board of which the Societe Generalo ceased to be represented.
Another large foreign banking corporation, also connected with
the Societe. Generale, was thn Banque I-alo-Bcle which represented Belgian
banking interests in South, a erica. It wias: the only Belgian bank, outside
of the three leading banks,' which had assets exceeding a billion frmcs.
It iivas established in 1911 as Banque Brosi]liene Italo-Belge, and took its
later name ii 1913. ' The principal fotuneirs were the Societe Generale and
the Credito Italiano, which oere joined by sevcefl other Belgian banks.
9.3
137; 5
0.2
8.9
33.0
'1.9
19.1
209.9
0.5
26
0.2
-66-
Banque Beige pour 1' Etranger (Extreme Orient)
Abridged Balance Sheet for June 3Q, 1939
(M11ilio fran cs)
6-
Whiler at the. 'beginining the Credi to talino had. a 40 per cernt interest,
this share ,was, reduced,, by successive .caoital increases to around 212.5 ser
cent in. 1939. Although, the Credibo Its liano. continued to be represented
on the board, the bank. was definitely. under the control of the So ciete
Generale; the President was. Baron E. Carton do Wiart, director of the 'Basqu~e
do la Socicte Gencraic . The head office wJas at A ntwerp; brarnchos were
established in London, Paris,; ,c. Evrc, D3u-nos niros, Rio do Jeanciro,. Saor
Paulo, Santos, Canpinas,. and " Montt viuco The balance shoet of the balk for
mid-1939 is showa on the fallovding page.
In the Grand Duchy of Luxembourg, the So cie to Genev .1e controlled
the Banqiue Gene rale dlu Lu emboug wi th 16 branches .. The =Principal i tems.
of the balance sheet for June.30, 1939, follow..
Banqu~e Generale. du -Luxembourg
* 'Abridged BaJrance .Sheet for June 30, 1939
(Million francs'}
Assets . Liailiti.es
Cash lead Paid-up capital and asurp1us % .9
At banks and short-ateim 133.6 'Ihe 'from banxksr ti.5
loans ~emand; depos is 136.3
Bills ,40,0 Thne dopo sits ll7 2
Investnen~ts .67 Profit 1 7
Debtors 105,5 Mis cell aneot s 3
M scella neous 42.-:
Tb tal 30- hta. .30.8
The foreign representation of banks other then the Societe
Generale may be briefly listed. The Crod~it Anvor sois had established a
French cor1poration,9 Ciredit Anversois ( Paris) The' banking house of Glorieux
et Cic had a branch .in ?asel 7vd7tzorland). The Solvay group ha~d a French
affiliate, La ?Mutuellce Industi'ie ll.p,
t
whicha hardy did any commner cial bank--
ing business, being primraarily devoted to the maageme nt of the financial:
interests-of, the group in France. The cLondon1 bra~nches of Bel ia~i colonial
banks have been : Brti.oned in the pre cedi.ng . section.
Belgian Participationsi n. Foreign Banks
Belgian groups also had interests in foreign banks which did not
result in control over these institutions bu~t often 2ed to collabor tion
with them. Exact .infomation is available only in, the case of ;some of these
participations. The Societe 'Gene rale held a ,small pa rti cipation in thne
Banque do l'Union Pa risienne, (4, 500 shares out of 400, 000), in the Banque
Fran cniJso d' A ccep tation (3, 725 shares out o f 50,000) , in the Banque Hypo the-
caire Franca-Argentine, (8, 300 shares out,.of 100, 000) , in the Banque d! Etat
du Maroc (6, 450 shares out of 92,400), and in the Banque Nationale; do
l
t
Albanie,, (25 ,000 shores out of 500, 000) ~It also participated vith other
foreign 'banks (especially~ French) in the B anca Commerciala Romani. ( uchares),
the General Jugoslav Banking Corporation (Belgrade)., .and the Countr -Bnk of
Posnia-Hcerzegoi .; it was represented by fMr. Paul Hamlot (and by ot1 crs. in
sane cases) on the boards 'of these 'three institutions. The Societe Generasle
had also held interests in the Bohemi Union Bank (Prague) and the Creditan--
stilt-Bankveroin; (Vienna) but by the end of 1939 these banks had been taken
over entirely bar Gaxman interests.
- 63 -
Banque Italo-Belge
Balance Sheet 'for Jun-ie 30,: 1939
(Million fran cs)
Assets
Cash, at. National Bank, and
at Office, des Cheques
Postamx
Clearing banks, call money
Due from banks
Other receiva.bles at
short term
Bills
Various debtors
Debtors per acceptances
Investment of the, legal
surlus
Belgian govermnent bonds
Banking shares
Premises (Paris, Buenos
Aires; Mron evideo Rao
de Janeiro', Sao Paulo,
Santos, Cmpins) )
Total
Liabilities
68.1 Reposits
Cal money
Du6 to banks
12".4 Acceptnces
163.9 Due on short notice
476.3 Bills held as guaranty and
for ' collection
123:6 Callable on securities
291.5 Rediscounts
114.1 Capital
10.0 Legal : surplus
Free surplus
2.3' Undivided profit
15.4 Profit 1938-39
21.9
404.3
Tbotal
IOf Central Bank of Argentina.
Profit and. Loss Account
Debit
Interest a sn'd commissions
General expenses
Taxe s
Advertising expenses
Dividends
Directors' share
Carried forward
Total
13 3
15 7
3.1
0.1
S.0
0.7
23
43.2
Credi t
Interest and commissions
Income from securities
Profits brought forward
Total
395.4
34.4
153.6
114.1
91.4
392.3
9. 7
1.7
100.0,
10.0
90.0.
1~7.
10.*6
.42.5
1.0
1.7
4.2
-69- ~~ ~
The TBrufi'na (controlling the Banque de Bruxelles) had a large
minority inaterest in the Baia nische Escori pte-Bank at Prague until. 19'39;.
followLng the Gern~an occupation of e ze cho slov'akia, this bank was re capital--
ized anid the B esdiie' ank, Berlin, ac aired control by taking over the
new lyrisscued shar es. At one time th .angs~ de Brux.elie s had had a large
.into e: s t in the Banque In tenza-tiorale 'a Luxembourg'; however, the ma jo r
part of it. seems to have been -sold, although the two o rganizatiQns continued
to' colla~borate,
The C re dit Gene ml Ind s try e, (connected with the K reie tbank)
had. an interest in the Union, Ben4aire du. Nord, an organization .for indus-
trial loans con trolled. by the largest French regional bank:, the Credit du
Nord at Lille:
The S o1yt -r.up' had. an ;interest in the Union Bank of 'yugo slav ia
and. was represented 'on its board by IKobert H<:,rka r-Solvay.. The L~ouis.
EfDain rro ij~ , hich ovn ed thy: Bany uou ; ge pour 1' Thdustriea, ha d a, rior~iLty
in tore st in- the,. Bannque Paris cnie ,ouir .1? Indus trie, a' Fren ch finan ci al
comnoany (capitsal' 25 million) whos ae : a-ace. sheets were. not published.
Other banks and' banking firms appear to ha ve had some minor .interests' in
-Easter . European banks but no su ffiqientb information is available.
'Foreign BPxnks in Bui
Foreign barks wore repr ce sod in Biolgium thr.ough branches or
through subsi diary corporations established un der BelgtLah law~t. Nine' foreign
banks had established? branches in Belgium.. The largest repro sentations by
numb?r of branches and' probably by the: s -ount of f unds, belonged to French
banks: the Credi L ~on a ..s at 'Srussels (three ;of:fi.ceb ), at Antwex, and
at. Glent; the Societe. Fran tai se de IBncIre ot doPcotis (an affiliate of the
'Socicte Genrle de. France) a 2t JErxellcs (two offices); Antwerp, Charleroi,
and O s tend ;tlo' Co ptoeir National dt Escome uog at Brussels; and. the B3andue
de Paris o-c de s_~ a-E ot Bruoso's. Thr e m~eri can banks had branches
in. Belgiurn: the Nto onl Cij~ank, theo Garnty Trusb Co., and the Am~can
Bxpress Co. Each of, them had one branch. in Brussels and one Tn A n yerp..
Finally, tro i n lishz banks--the Limods rwnd N ational Provi 'cia Forein t Bhnk
an d the We s i mns e r Fo ,ej " ia ch had a branich in both :of the s e ci ti es.
An oc~r bk.sbihdi
o lmhdt
sint prtions
in the country at least 10 million francs, of its; funds. No -individual
staten~ts were published for the branches of foreign iyanks, but the 'tcble
on~ the folio giing pagfe shows the combined position at the. end of 1939,. of
the, Belgia. i .branches of the nine foreign banks:a
- 70 -
Belgian Bran ches of Nine Foreign Banks
Combined Balance Sheet for December 31, 1939
(Miillion francs)
Assets
'Cash, at National Bank, and 185.8
at .Off- ice des Cheques
Po s t uxy
At bakers, call money, and 62 .Q
with parent institutions
Other receivables at. short 110.1
term
Bills
109.7
Carry-over and collateral 44.6
loans
.. Debtors for, acceptances
59.7
Various debtors
12.5
Belgian goverxme nt bonds 88.8.
Other securities
39.0
Miscellaneous
15.3
Fixed assets
Ttal
52,.9
1, 5222.4
Liabilities
Privileged creditors
Ban ers, cali money, etc.
Acceptances
Other short-term ,liabilities
Creditors for bills in
course of collection
Deposits not exceeding .one
month
Tine depos its
Mis cellaneous
Capi.tal accounts
Dtta
Belgian bainking. corporations controlled by foreign banks included
the following organizations (the figures are for the end of 1939, in mil-
lions of francs):
So ciete Be de Credit Industriel e t Commercial et de Depots.,
established at B3russes with a branch in London and affiliated- with the
Credit Industriel. (of France)--capital and surplus 15.5, deposits 56.5,
total assets 88.6.
Credit du Nord Bel e, aff ilia'ced with the Credit du Nor& (the
largest French regional bak) and established at Bruzssels with 7 branches
in the southern, section of the country, along the' French border--capi tal
and surplus 19.0, deposits 51,7, total assets 93.6.
Amstedmscthe Bank voo r Belge affiliated with the Bank of ins ter-
dam, and established at Antverp, mail for relations, with the diamond
trade-capital 25.4, deposits 24.5, total assets, .62.8.
Comptoir Belgo-Hollndais at ? rssls, affiliated with the
Potterdns che Ban}kvereoniging--capital 10.0, dcposits 4.9, total assets
15.5.
Societe Hollandaise de Banc.uce at Pru.ssels,. controlled by Bancu.e
Jordaan S.A. (Paris), a French corooration under Dutch control--capital and
surplus 11.9, deposits 34.3, total assets 81.2.
Thc~re were only a few '-foreign minority interests in Belgian beaks.
Mention has already been made of British and French interests in the Banque
Diamantaire Anversoise and of British interest in the Banque de Commerce,
also at Antwerp.. Small interests cre held by the Banque de Paris et- des
Pays-Bas and the Credit du Nord in the Banclue Sud Belge, at Charleroi.
196.7
65.8
10.85
955.1
16,.2
191.9
115.8
1, 522.4
ID. Sa in s and Co prative Cr edit Thnstitutions
Al thoug;h ,the c re ercial b nks, throegh th eir large branch. net-
.works, provided. deposit and credit f'a61J:..es throughout the court, a
niunber of' other org,)xizations had deve:loped with the objective of. collect-.
ing small savi'ngs or' of providing loans---usually on a cooperative basis--
to ?a'1al traders, artisarns, and the agricultural con mmiity By, far the
most imporKt ant of these organizations -w:as a governmnent institutizon operat-
ing on anation-wide scale,, the Caise Gene rale c'
t
ipargno. Te primary
purpose of this institution was to .receive the ;wvings of people with small
.mo ans and to place them in secure inves tnen ts, often made through coope ra-
t ! ve ins titvutions. There . ere: also various types of private " Icaisses.
d' epar gnelt, which emphasized the Collection and safe investbmernt of small
savmngs, and a number of cooperative credi.t organizations, especially in
urban centers, which emphasized the provision of credit to their members.
CaiseGeneraled_'a
ne
In the colic etiLon of small. savings, a function wit in I elium
was always considered to: be vested with a public interest, a predominant
roll; ws played 'c tho official Cai.: ss e nera e d!, Epa rgne (Postaml Savings
B~ank~), fourded. in 1,065.1;/ Itvwas an au.tonomous institution under the
supervision of the I11-inistor of cinanc , its liabilities being guaranteed
by the goveimment. Th' Caisse Generale was directed and. managed, by a
General Council, a LBard: of Directors, an.d a General Manager,. all appointed
byW the Kinig. The General Council was composed of a prsiden t .and from 15
to 25. aem J - b.s'",5,?r, .in cluding :high offi ciaL7 , busi_:;nemss m en, so cia l wiorkters,
local adm inistrators, etc. in making the appointments due consideration
was given to political raff ili at ons , in or der to obtain a. fair represon-a-
tion of the difforent
political
parties.
The Board of Directors
was' an
executive committee of the General Council composdd of the president and
sevon Courici ors. The General Manager, working_ under the immedia te super-
vision of the Board of' Directors, headed. the .oporating staff' of'. the
institution,
A decree of' October 1937 ruled that .no more than two seats 'in the
General. Council, might be held, by bankers or by directors and manag ers. of a
corporation. .of ning,, directly or indirectly,5 per cent of the capital of a
bank. Persons in tahese categories, as well s members of Parliament,, were
not peamitted to belong. to th~e Board of Directors.
From the, start, ,the institution was entrustedi not only with the
collection and management of small sav~ ng but also' Zw1 th the: organ ization
of an i office for retirement pen 5iQns~ J &ter -with the development of social
insurance -of all kinds, the Caisse: wa-s entrus ted with the management of
various other insuranc& fund: forc old ageo pensions., emolo ycrs
T
liabi ly,
annual leaves, et c.
1This 1in-stitutDion wa ntirely dietne fro .:"OfiedoCeqe
Postau. I although both operate' thprough thy: pest of Jce"
~/The officia l name of the .ins tit ution issit Cis se Gembrale d' pargne o t dc:
RPotraite"U (General Office for Sa:vings and Pei-sions ).
-72-
The operations of tie Caisse Generale were perfoxmed at the head
office (Brussals)) at the branches of the National Bank, and at all post
offices. Practically all deposits were received at post offices. At the
etd of 1933, there were 5,97/9,990 passbooks in use, of which 5,973,360
belonged to individuals and 6,630 to public institutions, mutual aid socie-
ties, etc.; no deposit accounts were opened for .business corporations.. k
large mwber of depositors were school children,. As shown by its rate
policy, the Cai sse di.d not seek large deposits: In 1939 .the rate of inter-
est was 3 per cent for deposits not exceeding 20,000 francs, .1.5 per dent
for deposits between 20,000 francs an.d 100,000 francs, and 0.5 per cent for
the rare :inounts exceeding 100,000 fraincs. At the end of 193, only 112,430
accounts contained deposits of more than 20, 000 francs. Deposi ts were
repaid on demand up to 3,000 francs per month. For 1argc r with drdraals,
from to to six months notice might be required but in practice payments
were made, on much shorter notice.
in no mal times, the raount of ehnds managed by the Caisse showed
regular increases partly from new. deposits and partly from the accrmilation
of interest. Large withdrawals occurred in times of political or monetary
instabi ity, but they never permanently; checked the upward trend. At the
end of 1933 the total amount of deposit on passbooks -was 13.2 billion
francs, of which 12.7 billion belonged to individuals. Moreover, there
were som.e depb sits on current account held on behalf of various public'
institutions, amounting to 275 million francs. With some other small
creditor accounts and the' substantial reserres accimulated, by the Caisse
out of its earnings, 't1 'net amount of funds belonging to the Ca'isse
SGene rale proper (exclusive of insurance funds which it administered) was
somewhat more than 14 'billion francs. The folloe ng table reproduces the
balance sheet of the Ca isse Generale 'proper, sommen-hat abridged, for Dcecm-
ber 31, 1933:
Caisse Generale d't pargne
Balance Sheet on December 31, 1933
(Milion francs)
Assets Liilities
Investments (fixed) 11,,342 'Deposits on passbooks' 13,9158
Temporary investndnts 1,796 Current accounts 275
iscellaneous assets 26 Miscellaneous accounts 52
Interest due 283 Rediscount of temporary 35
Cash and at National Bank 324 inves tents
Rosorvre .accounts 70
To tal 14,261 Total 14,26 1
The monies administered for the 'acciunt of insurance and related
funds amounted to 5.6. billion frcancs at the end of 93, the bulk of which
was in'vested in 'pr ductivo assets. The istribution of the investments of
the Caisse Generale, amounting to 19.5 billion francs at the end of 1933,
is shoipi in the. follo wing table.
1 In. may communities, upon the 'bi rthj of a child, the a rets Ve pre-
sented by the; loca governoent with a passbook in the name of the child
and bearing a deposi t of one fran c.
Tnvesttments of the Oaisse Generale
on December 31, 1938
(Million fracs)
d' Bpargn~e
Ttl Sayig Other
__________funds _funds
iixedinvestments
1. Public onds 8,052 5,3540 2, 512
2 "Bonds of the Colony 2, 3021 1,360 942
3. Muini cipal' and Credit Commuvnal bonds 2, 288 1, 583 700
4. Corporate bonds 1,366o 999 867
5. M e otgae loan s V635 438 197
6. Agricul tur2. crerHit 436 436 -
7 Loans to building end loan soci eties 1,335 1,243 5E 7
a.Loans to the oSociete Tea t: .onale des 216 216 -
Hai tations et Logenen-ts a Br. Marche~
9.Locm. s to the 'V., ter. s Admlinis tration 17 17
10, Loans to mi'uaicipal pawvnbrokinlg -institutions 35. --- 35
Total 17 ,6832 11,3842 53,340
Short-teim investmients
i il cGBld.1
5 5
2
Collateral
loan~s
115
115
113. Nrtie 'and. rivrer loans 34 34 ~ -
14. Loans to art~ .sans
33 33,
15. Loans for' sm all business (t"profies sional 60 .60
credit's)
Grand -tofal 19,473 13,9633 5,840
/See footnote, p.76
By far the largest investment was in. government. and other public
bonds, included in the first three items of the table; over taro-fifths was
in government bonds alone. Howerver, since the foundation of the institution
it had been stressed that the Caisse should not be' considorodo xclusively as
an ouitlet for govornment bonds. It was supposed to undertake other. invest-
ments, part icutsarty. of a 81o0rt which would' bonfit small i people; such. invest--
monts carne to be known ,as "social infesfMints" (ulacemonts sociaux). The
management. of the Caisso Gencrale classed in this category the assets
included in, items 6, '7, 8, 9, 10, 13, 14, ran d 15 of the -table,. to which it
added 46 million francs granted to v eterans on favorable toins (inclued in
item 5) and 2751 million francs invested .in bonds issued by the Societe
Nationalo dos Hb-itations, etc. (inc luded in item 1),. The aggregate amount
of "s0c-ial1" assets amounted to 3 billion francs, or 1:5 per cent of the
total investments at -the en d of 1933, o~f which over throc-ouarters was
represented by loans for housing, devolopmen-ts. The fifth item of the tabple,
ropro~sent ingr individual mortbgage lcians, was not considered as a "social
t
investment (e-xcept for loans to veteranis), 'although lot s not exceeding
100.,000 francs (around 30 per cent of tc total amoun-t) wiers granted, at a
r'educed rate of intorocst. W~hile ci-porate bonds were not, of co-urse,
eligib:leo for this category, the policy -of the Caiss6 in a.cquii ing such
assets was governed not 'only byr pr-ofit anticipations but also by considera--
tion of the public interest.
-73 --
~_74 --
The financial ope rations of the Caisse Generale were performed.
through the National ak.. 'This was particularly important for the short-
term Investments, since tie Caisse had neither the staff nor the e oerience
for discounating b.lls or granting collateral loans. It was noneth less
importint to :hold a substantial amount of its assets in this form in order
to be able to meet any sudden withdrawals of cash.
Agricultural loans were usually granted through the institution' s
"comp toirs a ri coles", analogous to the 1 conrimo oirsU of the NationJI Pank
described previously; in some cases, -howilever, the comptoirs of the National
Bnk also performed this .function. At. the end of 1933, there were outstand-
ing 29,160 loans (mostly short- or mediuzm-term) to 23,7083 /farmers. No loan
might exceed 100,000 francs, a rather moderate figure.. Loans not exceeding
20,000 francs were granted at a reduced rate--in 1938, at 4 per cent against
'4..25 per ' cent for the other agricultural loans: IThe Caisse was authorized
to lend to agricultural credit coop erativyes, but no such loans were out-
standing in 1938. Maritime a nd river loans (item 13) were granted through
special mortgage compaies to small shipowaers and fishermen. Loans to
artisans and small business were extended through special cooperative
organizations (see below).
Private Cais ses d' Ep? rune
The pr ivate caisses d'epaigne, as noted in Part I, suffered a
serious setback in the crisis of 1934-35 andwre thereaftr subjected' to
c2.ose government regulation. -through the. Office Central do la Petite Bpargne.
In particular, this -institution maintained surveillance over their invest-
ments; by de.cree'Nro. 42 of 1934 these had to be placed up to 40 'per cent
in approved short-term assets (discounts,. secured advances, etc.) and at
least 60 per cent in suitable long-terr invesetnents (government bonds,
mortgge loans, or other long-terrn assets approved: by the Minister of
Finance). Organizations subject to this control included any which use&
the 'word '{epargnoU" in. their title or which issued pass-books similar -to
those used by the Caisse Generale d'Epargne.. In practice, by 1939, this
covered only a few mortgage banks (see next section); a few savings coopera-
tives organized by urban consumer groups, and by industrial corporations
(e.g. the Ford Co'mpany) for their employees; and the "caisses 'agricoles"
(rural credit coopertives) most of which wouere affiliated with the, Caisse
Centrale ; di Bee renbond and held, their surplus funds wth that insiitution.
The total amoun t of savings managed by the private caisses d' epargne at the
end of 1933 was soma 1.3 billion francs, of which about half represented
savings deposits with mortgage banks * This figure had declined by more
than half since the early thirties due to various institutional changes and.
the withdrawal of deposits or their conversion into bond.s of the savings
institutions.
The caisses a gricoles, wile primarily only collectors of s eall
savings, also met some of the farmers
t
credit neeCds. However, agricultural
credit wa s not much of a pro be e nin Belgiumi. Most farms were ver small,
all available land tiaras under intensive cultivation, and production was.
heavily concentrated on roducts rh icch were marketed continuously (dairy
products, fresh vegetables,: etc.). Hence. there was not, a large demand for
fa rm mortgage credit or even for wrking capital ,for agricultural purposes.
-75- -
Some large fanmers borrowedfromii ,corercial banks, but the need of 'most
.Snall faiemrs were met by the Caisse General; d' Epargne or- by the caisses
agricoles. The. latter received many .ore deosts than they could use,
however, and pl,aced their surplus finrds vith central institutions v'ith vhich
.they were affiliated. Befo re the 1934-35 crisis, there had been several
such central bod.ios, but by 19D3 only one, the Caisse Cenltrals du 8erenbond,
was of any imnpor tance, having about 750 affiliated caisses agricoles.
An, official institution,, the Institut National de Credit Ag-ri cole
(see p. 35) was founded in 1937 to fo ster the d.evelornent of agr;i.cultural
credit, but its operations remained on a very Thnlited scale.
Other Coopora tive ranization
Urban credi t cooeratives lwere less successful than the. aisses
agricoles in attracting deosts, but they did find a keen demand for loans
- from their membership, consisting of small tradsers and artisans wrhose
credit -was not well established with conmiercial banks. By 1939, most of
these institutions, the successors of the fora er "banques populairos"
(see p. 9 ), had become affiliated writh one or other of the three official
insatitutions providing loans to small business. A discussion :f the latter
appears in a later sect' ion (see ._p. 90), together with brief details concern-
ing the cooperatives affiliated with each of thm. Mention may also be
made of building sand loan societies, coopo: ra i ve organizations of home
o vners which were the "charnel through which various official agencies
i (nvested in residential deve lopmen t.
. Mortgage Banking
Mortgage banking institutions in Belgium were generally formed to
extend credit for residential building, although loans were sometimes made
on agricultural property or (exceptionaly) on industrial plants. In
eligium itsel.f there was an increasing demand for residential building
loans after, the turn of the 'century because of the ri sing standard of li ving
of a growing population.. 'oreover, many institution s were formed for nort-
gage bankig operations -broad.
side from the specialized institutions to.be described in this
section., various other sources supplied mortale loans. Insurance companios
were big investors in residential mortgages (generally combingd with a life
insurance policy), while realty companies, private investors, etc.,, supplied
substantial funds for this puurpose. The biggest single institution in the
field, however, ww as the Caisse Gonoralo d'tEpar gne, which at the end of 136
had outstanding mortgage loans to individuals of 635 million francs, credits
to building and loan societies of 1835 million, and loans to (or bonds of)
=the Societe Nationale des Habitations et Lofigments a Ben Narchel of 1. 9l
million. These various housing credits--though not all strictly mortgage
loans--totalled nearly 4 billion francs, or easily double the amount of loans
'extended in Belgium by mortgage bank.ing in1stitutions pro per.
There was also an official mortgage institution, the Office Central
du Cr edit Hypotheeire (see p. 91) founded in 1936 in order to assist insti-
tutions financing middle-class housing. o-:weaver, it was still operating on
only a small scale when the German invasion occurred.
Societes Hypothecaires. Specia'l institutions devoted to mortgage
banking, formerly known as 'anq es hyothec wires", were generally called
a fter 1935 "societes de credit 'hpohe a .re t'2/ They generally had a small
capital and obtained funds by issuing bonds or accepting time deposits. Their
* funds were used,) exclusivel.y or mainly, for long-term loans repayable in
annual instalments. Some of them issued uassbooks resembling those of the
Cais se Generale d'Epargne and some even used the word ";par gncU in their
name. Under the decree of l9 L these organizations fell under the slcr-
vi.sion of the Office Centrale de la Fetite Epargne (see p.34) , and wore re-
qulied to segregate certain assets as specific security for their savings
Sdoos its. 3 By virtue of a decree of 1935 all mortgage institutions, whether
supervised or not by the Office Centrale de la petite l pargne, had to be
licensed by the Mnister of Social Security, acting upon the advice of a
special tConilttee for Private Insurance and Mortgage Loans". ortgage credit
act .v7ities were subject to detai.led regulation, especially those in which the
in iitution acted mainly as an intermediary between "mort' ago lenders" and
"moitigage borrowers" (see description of Credit Mutuel Hypothecaire below).,
his 'institution, founded in I9l91 promoted cotstruzction of middle-class
residential ^roperties by raising funds through bond issues and lending,
them at low rates to cooperative building and loan societies.
2/ The law of July 9, 1935, restricting the use of the word "baque" caused
several of these organizations to change their names--e.g. the "Banque
: Bulge do Frets Fonciors" became the "Societe Belgo do Frets Fonciers".
Mortgage institutions not supervised by the Office Centrals could not
accept deposits with less than tro years maturity.
While some of these organizations devoted themselves exclusively
to mortgage loans, others combined 'them with realty operations or with
mana gement of security' portf olios. Some performed their operations ex-
clusively in Belgium, some in one foreign country, and some in several
countries.
The oldest organization for mortgage loans was' the Credit Foncier
de Belgique, established in 1855. 'The following table shows itts situation
on December 31, 1938.
Credit Foncier do Belgique
December 31, 1958
(billion francs)
Assets. Liabilities
Cash and banks 154 Bon issued 391.5
Mortgage loans 405.3 Crodl t rs 7.5
Other debtors 2.2 Capital 25.0-
Securities 12,0 Surplus 5.1'
Shareholders' liability .16.5 Contingency fund 19.9
Other assets 3.2 Fension fund for the staff 1.4-
Profits 4.3
Total
Total 454-7
As the figures indicate, the Credit Foncier d.e BBelgique was a
mortgage bank on classical lines: its funds were derived primarily from
the issuance of bonds which, found their 'counterpart entirely* in mortgage
loans. The paid-in capital was very small and no substantial amounts were
received on deposit, The interest rate paid on bonds- declined during the
'thirties and settled at 3-1/4 per cent in 1937; this, interest eras paid tax-
free,. As far as can be ascertained, the companyr lent exclusively, or at
least primarily, on properties located in Be.gium. It was controlled by
the Societe Generalo, which hel.d 11,000 out of the 25,000 shares outstanding.
The Caisse Hypothecaire A ersoise was also a relatively old
organization (established in l887l17f even. larger size than the Credit
Foncier, but it had a much more''nixed business. The following table reor'o-
duces the main items of the balance sheet for December '31, 1938.
"'
.s ets
ash and wvith bankers
Earmarked as security for
savin s deposits:
Securities
iortgage loans
Other mortgages
Other sedurities
i scelaneous
Prem;.ises
Sh'ireholders? liability
Total
Liabilities
15.7 Bonds issued .91.4.
Savings deposits:
Less than 2 yr s. mat. 275..5
205.5 More n 1 3.1
1448.9 Fixed mat. 5 and 10 yrs.
1
49.
6
95.1 Creditors 21..5
55.3 Us ace laneous 7.2
b.9 Capital 40.0
20.0 Surplus and reserves 71.1
21.2 Profit 9.4
86J.9 Total
The head office of the Caisse was at Antwerp, with a branch in
Brussels andl another in Liege. .The. balance;. sheets shows that savings de-
posits rather than bonds wer'e the source of' mostb of its funds. The Caisse
was consequently subject to the-decree of December 15, 1934, and was super-
vised by the Office Centrale de la Petite Bpargne. MWihile. the largest part
of, its funds was used for mortgage loans (on residential buildings only),
nearly 30 per cent was, invested in securities, almost, exclusively govern-
ment bonds. ' This institution there fore combined the functions of a classical
mortgage bank- and of a savings bank.
The Societe HRyothece.ire Jelge et Caisse d' pargne, also in Antwerp
with a. branch in n ssei, al so cobined mortgage lending with: savings
banking. On December 51, 1938, it had no bonds outstanding,. its funds
being derived exclusively from., savin -s deposits.. The ;secu rity portfolio,
mainly goverunent bonds, was as Largze as the mortgage loans. The company
had participations in some other mortgage companies. Its, balance sheet for
December 31, 1938, follows:
Societe Hypothecaire Belge ot Caisse dY.Eprgne -
Dec ember 31, 1958
(Million francs)
Assets
Cash reserves
Assets earmarked as security
for savings deposits:
Mortgage loans
Realty (defaulted
debtors s)
Government bonds
Shares of mortgage
c mnp a rii e s
Shareholders liability
Various shares
Prm.i s e s
Total
Liabi litie 'a
6,2 Srvingsoposits:
Less than:2 yrs. maturity 151.5
More " " " t 92.2
159.
Creditors 1.3
3.2
100.8 Capital'
7.2
7.5
10.6
2.0
Surplus and reserves
Profit
12.5
16. 8
2.6
Total 27.7
78
-
Caisse Hypothecaire Anversoise
December, 31, 1938
(1 illion francs)
-79.
The Credit Mutuel Hypothecaire was, an organization of quite dif-
ferent type. Zstablie in 1910 at Brussels, its activities grew. in the
'ttw-enties, 11 branches being established in the leading cities of all Belgian
provinces. The main characteristic of this company _Vwas that it acted pri-
marily as an intermediary between lenders and borrowaers in the mortgage
field. l / o st of its funds were derived neither from the i ssuance of bonds
nor. from ordinary depositors, but rather from "mortgage lenders" who placed
funds with the institution to cover specific mortgage loans. Such arrange-
ments were usually motivated by the fact that whereas the mortgage loan was
amortized in annual instalments, the "mortgage lender" wanted to keep all
of his capital employed. Thus the Credit Mutuel would collect and reinvest
amortization payments on the original loans, and pay off the "mortgage lenders"
only when the original loans finally matured. Ais a result of abuses which
had developed in this and related types of transactions, a decree of 1936
had subjected such operations to stringent regulation.
Some of the Credit Mutuel's operations had been unsuccessful, and
in the years before the war most of its current profits had to be allocated
to -reserves against losses. . Dividends, which had once been very generous,
were passed entirely in 1937-38. T e balance sheet of the institution at
th:eend of 1938 was as follows
Credit iMutuel 11ypothocaire
December
31, 1938
(Million francs)
Assets Liabilities
Cash reserves 7.0 Passbooks and bonds 35.6
Premnises and material 12.3 Creditors 2.5
Securities &.l Mortgage lenders 111.7
Mortgage loans 190.8 Miscellaneous 04
Miscellaneous 7.14 Capital 25.0
Various reserves 49.8
Profit 0.6
Total 225.6 Total. 225.6
The preceding- discussion covers all large mortgage comanies
operating in Belgium before the war. Two or three other relatively large
corporations, all receiving saving deposits, had got into difficulties in
the first half of the 'thirties and were being liquidated. Their small
deposi.ts were transferred to new organizations, with- the help of the Office
Centrale do la Petite Bpargne. Moreover, there were about a dozen more
small mor tgage corporations.
M"ortgage Companies for Shipping. A grotup of special companies ex-
tended mortgage loans secured by ships, mostly vessels used on inland water-
ways or for. fishing. The governrment avid other public, bodies considered the
1/ The company also had an insurance business, which however, was being
liquidated.
- 80 -
maintenance of the shippi ngT and fishing industries as in the national
interest, and the Caisse Generale d'Epargne was urged to. rediscount loans
made by mortgage shiping con nanies. The maximum of such rediscounts
amounted to 80 million in 1932, but they had declined to 314.2 million at
the end of 19)38. A law of February 1, 1939, empowered the government to
grant its guarantee up to an mnount of 375 million francs to official credit
institutions making loans for the expansion of the mercantile marine, of the
fishing fleet, and of ship building.
The CreditMaritime et Fluvial de Belgiquel"/ was established at
Ghent in 1908. The main items of the balanco sheet for the end of 1938 are
shown in the following table:
Credit M3aritime et Fluvial de Belgique
December 31, 1938
(Million fran..cs)
Assets Liabilities
-or fgage loans 63.3 Bonds outstanding 42.3
Shareholders liability 10.4 Creditors (mainly Caisse
Generale d'Epargno) 22.2
Miscellaneous 5.6 Capital 12.8
Contingency fund 2.0
Total 79.3 Total 79.3
The Societe Belge de Credit Maritimel/ was established at Antwerp
in 1908 and had many of the same directors as the preceding company. At
the end of 1938 it had outstanding mortgage loans of 42.8 million francs,
financed mainly by bonds and notes of 25.3 million and rediscounts with
the Caisse Generale d'Epargne of 12.1 million. The ComptoirAnversois drHypo-
thexqe e Fluviales was a relatively small comrpany established at Antwerp in
1922. No bonds were issued; its mortgage ldans of 8.7 million francs on
June .30, 1938, were financed mainly by rediscounts with other oganizations,
presumably with the Caisse Generale d'Epargne.
Mortgage Companies for Foreign Operations. In the last decade of
the past century groups of Antwerp business men who had long had financial
and trade relations with over-seas countries, particularly South America,
began to set up mortgage inktitutions for operations abroad, hoping thereby
to find more secure foreign investments than loans-to foreign governments,
many of which had already been. defaulted. These companie's often combined
mortgage lending with realty operations, land improvement schemes, etc.
The largest was the Credit Foncier et Immobilier Sud-Americain
(Credito Territorial e Inmobiliar Sud-Americano), established at Antwerp in
1929 by the merger of the Credit Fonc er Sud- mericain (founded in 1903) and
the Credit Iimmobilier Amoricain (1911). The company was controlled by some
of the largest trading and financial firms of Antwerp: Kreglinger, Qsterrieth.,
iracht, etc. The main field of operations was Argentina, although some loans
1/ Minority interest held in this company by -the Societe Generale.
- 81 -
seem to have been made in Belgium. Wiile assets formerly consisted almost
exclusively of mortgage loans, the reduction of rates of interest in the
second half of the
t
thirties induced the company to engage; extensively in
realty : operati'ons--mainly land improvement--either directly. or through the
Argentine affiliate (Cresud, Socied. Anonima Imniobiliara, Agricola, y,
Ganadexra). The following table reproduces the main items of its balance
sheet for June 30, 1938.
Credit Fonder et Immobilier
December 31, 1938
(Million francs)
Assets
Mortgage loans
Other long-term loans
Realty
Affi 1. ated company
Securities
Debtors
Cash and at banks
Miscellaneous
Total
Liabilities
174.2 Capital
22.1 Surplus
46.8 Contingency reserve
20.7 Long-term loans
18.3 Miscellaneous
L.2 Profits
10.3.
5.0
Total
The oldest organization of this kind was the Societe Anversoise
Industriielle et Pastorale Beige Sud Americaine, established at Antwerp in
lB9Jj. The company was controll-ed by a group of Antwerp firms acting through
certa:i.n financial corporations, particularly the Companie Comerciale Belge.
Although the Societe Anversoise was authorized to engage in a very large
field of activities, in fact it limited itself to mortgage loans and realty
operations. Originally formed for business in Argentina, it later extended
is.activi ties to Tunisia and Belgium. The following items of the balance
sheet for June 30, 1938, show the nature and location of its activities:
Societe Anversoise Industrielle et Pastorale Belge Sud Americaine
Decrrfbor _31, 1938
(Million francs)
Assets
Realty in Argentina 4.0
r1 s Tuni sia 4.8
Loans in Belgium 3.8
it 11 Argentina
2.3
1 i Tunisia 32
Securities in Belgium 5.0
Vi Vt Argentina 23.L4
Debtors iah Argentina 396
"Belgium 5.6
Cash and banks 9-4
Total x5
Liabili-ities
Bonds issued
Creditors
Capital
Surplus and reserves
Profit
Total
19.4
7.8
15.0
21.5
1.4
65.1
In the years before the war, operations in Argentina were conducted
mainly through the firm Ernesto Tornquist Co.
150 .
30.2
50.0
52.0
6.7
12.7
I-::
::I
- 82 -
The Societe Belge de Frets Fanciers, established at Antwerp in
1899, under the .name of banque B3 eige de -ats Fonciers, was largely con-
trolled by tile same group anld underwent a similar development. Its field
of activities, was also partly shifted from Airg;entina to nisia. The
following tale contains the.. main items of the balance sheet for January
30, 1938:
Societe Beige de Frets Fonciers
Decounber 31, 1938
(Miillion francs)
Assets
Realty in Argontina
it " Tuinisia
tY tt o~ix U tBelgium
Mortgage loans in Argentina
STunisia
tt t f, Belgium
Securitioe in Argentina
If If Belgium
Debtors and miscellaneous
Shareholders' liability
Balances with banks
Total
1.7
14.5
3.0
2.1
11,2
14.0
12.3
304
16.0
6.8
1.l7
Liabilities
Capital
Surplus and reserves
Bonds outstanding
Creditors
rofi,t
Total
The Societe Generale Beige Argentine and the Societe Fonciere
Beige Argentina were smaller corporations, also in Antwerp, mainly con-
trolled by tho same group. Their total assets, also partly held in Tunisia,
amounted to 25...E and 10.4 million francs, respectively, at the end of 1938.
The Societe Hypothecaire Belge;_Amuricaine was established at
Brussels. in 18)8, alth ouh some Ant-terp inte rests wore also involved. This
comp.any, which was very prosperous, was controlled mainly by the Societe
Generale (which holds 3,964 shares out of 18,000) and the group Bunge; a
small interest also seems to have beenhkld by the Bank of London and South
America. In turn this company held' an interest in the French Banque
Hypothecaire France Argentine (group Banque de l'Urnion Farisienne-Societe
Generale de Belgi ue). Its operations were performed exclusively, or at
least mainly, in Argentina. The main, items of the balance sheet for the end
of 1938 are as follows:
Societe Hypothecaire Belge Americaine
December 31, 1938
(illion francs)
Assets
Mortgage loans
Realty
Securities
Baker s
Assets of the Argentine
branch.
Mi s cel laneou s
Total
Liabilities
7.6 .aia
7.0 Surplus and reserves
2.2 Liabilities of the
9.5 Argentine branch
M i scellaneous
20.8 Erofit
1.0
Total
39.0
16.2
23.2
1.7
1.2
813
9.0
6.8
20.8
7.0
4.5
- 83 -
Several Belgian corporations, also operated in Canada. The
Societe Hypothecaire dui Canada vas established; at Antwerp in 1907 and
ra"idly ex tended its mortgagw loans and realty holdings in the Dominion,
(valued at 29,0 million francs at the end of 1938) . It later undertook
some smiiall operations in Egypt. The Socie ue Fcnie re Beige Canadienne,
established in Antwerp in 1911, has writ en of'f' its properties in Canada
(mainly apartment buildings) at least for balance sheet purposes. Its
balance sheet for June 30, 1938, shows total assets of 20.9 :Zilion francs,
of which 8.6 million was mortgage loans in, Belgium and 2.7 million mortgage
loans and realty in Tunisia. The Credit Gneral Ponder et obilir as
established at Antwerp in 1930 by the merger of two carlier cormpa t.nies
operating in Canada and Egypt. Py the end of l%9,, rmost of its assets
(20 million francs) were in rarticipations in 'other companties, notably the
Cie Irnmobiliere et Agricla du Canada., a realty company.
The Caisse Hyrpethecaire dEgypte was .established at Antwerp' i.n
1903 and formerly operated exusively in Egypt." Later it expanded its
operations and even took over, in reimburseent of previous leans, the pre-
ferred share's of a Belgian corporation operating copper mines in Portugal.
The main items' of the balance sheet for the. end of 1938 foll1ow:
Caisse Iby othac'air
e d' Egypt
Dec emmber 31, 1932
(T.i:illion
francs)
Assets Liabilities
T. ortgage lo ns 302 Capital 10.0
Securities 37.3 Rserves 36.5
Annuities dueL Bonds -i7 6
Debtors 5.0 M'iscellaneous 5.7
Cash and at banks 3.2.0 profit 0.8
di -sc el laneous 2.7
Total oTotal 9
The Cie Fonciero et Imnmobiliere_ BeigeT1-unisienne was established
at Antverp' in 192 by a group ol firms already interested in other mortgage
companies operating overseas. The depression and later the fall of the
French franc inflicted heavy losses on the company. By June 30, 1938, its
total assets had been reduced to 22 million francs, including realty in
Tunisia (11.8 million), mortgage loans in Tunisia (3.!i million) and debtors
in Bielgium (5.0 million).
.The Credit Foncier d'Extreme Orient held a strong position in the
Far East before the war, ' It was established at Brussels i n 1907 and was
mainly under the control of the Societe Generale de Belgi que and the' Banque
de Pri s- et des F'ays-Bas. Branches were established in Shanghhai, Tiontsin,
Hankow, Hongkong, Tsinau, Peiping, and Singapore. The company engaged in
mortgage loans and realty operations, mainly in the, foreign concessions in
China. The main items of the balance. sheet for the end of 1938 follow:
- u4 -
Credit Fon. er d? Extreaeme ()rient
December 31, 1.937
(Million f'rancs),
hssets
Cash and. at banks i5.'
Realty inChina. 1.7.1
f naSinpore
1. 7
Mortgage ;loans in" China 5.7
rr
r f Singapore
25,0
sr
unspecified
3015
Miscellaneous 2.4
Total
5 1
Li.ab il iti-es
Car it ';a.l1
Suri plus and contingency
funds
Creditors
is ccl larleous
Profit
Total
A group of snall. companies connected with the Banque de Bruxelles
provided. mortgage credit in the Belgian Congo. In 1921 the Credit Foncier
Africain was established to engage in real.ty operations and morztgage loans.
Its mortgage loan business 'was taken over a few ears later by another
corporation, the Credit Hypothecaire df'A.fricue; the outstanding ba.ne of
this company in the y'-ears before' the war' did not (exceed 20 million franos.
The Credit A gricole d'Afrique- also did some morrtgage .lending.
70.0
12.2
8.7
.117
4
o.1
-85- -
F. Official Credit Institutions
The general category "official credit institutions" (generally
called in Belgium "credit institutions established by spec.ial law" or
"ublic and semi-public credit insitu ions"
t
) comprises a wide variety of
oorgaizations. Some were .government institutions; others were corporations'
with shares held by the public but strongly under the. influence of the
government, which guaranteed their liab ilijties The organizations. coming
under this headi ng are:
1. Banque Nationale (p40)
2. Caisse Gererale d'Epargne (p.71)
3. 'Institut do Reescompte et de Garanie
L. Societe Nationale do Credit a 'l!Industrie'
5. Office National du Ducroir e.
6. Office Central do Ia Petits Epargne
7. Credit a l'Outillag6 .Artisanal. .
8. Caisse Centrals du etit Credit Pr ofes'sionel
9. Capisse Nationale do Cr :edit pour les Classes. Moyennes
10, Office Central; 'du Credit, Hypothece.iro
11. Institut NatiQnal. du Credit .grico]e
12. Credit Communal
The first two of these. insti.tutions have been diseusse'd 'in preced-
ing sections leaving ten for. review here. 'Altogether they providtd a
central financial institution for a?. Bost every important branch of ;economic
activity, although the activities of some of them was still very li ited.
Most of them had been organized or had expanded their activities during and
after the banking crisis of 1934--35 and in 1937 two official committees were
set up to coordinate their diverse activities. The first, established to
develop a cormon policy for institutions serving the "small business" field.,
was entitled the "Conseil do. Coordination des Institutions de Credit pour
los Classes M oyennes"', It included two representatives from 9ach of the. .
small business institutions, proper (Nos. 7-9), one appointed by 'the govern-
mint in each case and one named by the institution concerned; and one repro- i
sentati e each from the National Bank, the Caisse General: d'Bpargne, and
the Office Central du Credit Hypothecaire. The' second committee, covering
all official credit institutions, was the "Conseil des Institutions do
Credit." It consisted of representatives chosen by the government from the
management of all the institutions named above except the Credit Communal;
the "three small business institutions were represented by a single member
chosen from the Conseil do Coordination'des Institutions deo Credit pour los
Classes MIoyennes.
Institut de Ree scompte et do Garantie
This organization (I.R.G.) is discussed first because of its
general significance for the' whole banking organizatioi. It was established
by a decree of June 13, 1935,, being a product -of the 1931-35 crisis. It took
the form .of an ordinary corporation with a capital of 200 million francs'
(20 per cent paid-in) subscribed by the banks.. Its liabilities,, which could
not exceed 2. billion, were guaranteed by the Stacte, and bills vhich it en-
dorsed were made eligible for rediscount 'tat the Nationa. 13 rJr
- 86 -
It was c irected by a board of six meiabers appointed by the King,
three of whor ~d to be 'chose rfrom a pane. of. nine candidates nominated by
the share11oI e s;
The, aim Qf the I.RS :., as stated by the decree in very broad terms,
was to "give its aid. 4 bank. and to industrial, couimercial, and agricultural
enterprises for thr p'upose of mobilizing their assets, if required by the
general interest, a to s. tisfy t;heir special needs for credit". Another
article alLowred. it; tp enga e in almost any kind of banking operation in
medium- or short-.-r;t cre. it. In practice it pursued activities of two kinds.
Firstly, the I. stooc. ready to intervene in emergency when a bask had
to mobilize large gm ont's of assets which, although "sound', were not eligible
for rediscount t the c antral bane:. By accepting a draft drawn by the bank
and secured by s .@h as sets, the I.R.G. dould' enable the bank to ob tain the
needed funds f ' , the ;Nationa al Bank. In pr"actice, however, it usually
handled the Ga~ t Btse lf, extending loans with funds raised by the issuance
of short-term. gt-es (from 6o to 90 days maturity) which becare a preferred'
asset for coa~r c; a banks. It also borrowed 'considerable call money -from
the banks. , l .r :,G. intervened to alleviate 'the difficulties of several
banks, notel the , Cisse do ?Reports, whose collapse it prevented, and the
Credit Anve -K: v ', whiiliose small dep'ositors it helped. (see p. 31). It also
helped soveT Smll banks to liquidato by reimbursing their depositors.
The 'second activity of the I..R.G. was to help banks in granting
loans 9Th mte rmedi ate term It :did this through "ouvortures de credit",
which xr*y be translated as "promnises of redi scount" . For example, an in-
dustr?1 f r m might request from its bank a, two or three year loan for 'the
execution if an order on which payment would be forthcoming only after that
period (o "ders for, machinery, construction works, etc.). In such case, the
I.G, :ght induce the bank to grant the loan. by premising to rediscount it
iad Shen necessary.
The main ite of the balance she~t of the I.R.G. on Dedeirer 31,
are. shown in the following tablae:
Institut de Reescomipte et' de Garantie
December 31, 1939
(Million franc s)
Assets Liabilities
Bills 412,7 Capital 200.0
Credits opened 3,1Al Notes 1.5
Debtors 2.8 Creditors on short term 134.5
Miscellaneous 5.6 Credits opened 3> "1'
Shareholder s'f liability 160.0 Miscellaneous 5.1
Total 925.2 Total
Societe Nationale die-.Credit a l'Industrie
This organization (the S.NC..) as established by a law of March
19, 1919, on the basis, of plans prepared by a corlmiittee orgaized by the
Nat'ional Bank during, the Fir-st f orld.;rfar. It took the form of a corporation
87 -
whose capital of 25 million francs was contributed by the National. Bank in
the f9rm of sound but, frozen assets resulting .from .. thle Bank' s pre-war loans.
The shares of the S N.C. . were di'st ributed as a bonus to the shareholders
of the National Bank. The object of the new institution w as to grant inter-
mediate and long-term industrial loans, throwu1h and with the guarantee of an
ordinary bank. The S.N.C.T.. was authorized4 to issue bonds and notes guaranteed
byr the government up to ten times the amount of its capital. During its first
years, its activities consisted mainly in .granting loans to- industrial enter-
prises whose plants had been .da.aged during 4hie war, the management being
largely in the hands of representatives of the National Bank, Tn 1926, it
was ,reorganized, its capital was raised, to 180 million francs, ail! the large
commercial, banks' boughj.t part of the new share issues and began to dominate
th.e ,board. At the same time the improved budgetary situation'of the State
permitted increased payme-nts to war .d.airge claimants by the government and
most of the S.N. C.T. advances for postwar ,reconstr uctio were repaid. Thence-
forth, the S.N.C.I. was able to devote itself to industrial credit proper,
stress being put upon: long-term credits- for exports. By the end of 1931 its
loans amounted to 1,37 milion francs, although/they gradually declined there-
after and in 1937 amounated only to 780 mslillion..
1
,
In that year the S.N.C.I. was thoroughly reorganized. again in
accordance, with the general pro gram f or of icial credit institutions, the
aim being to expand its activities and .to bring it more cl.osely under the
control' of the government. The object of, the. institutLon, as redefined,
was "to promote, through operations in intrrmediate and long-term credit--
or in art in short-term credit--the activity , 'improvement-, trans formation,
and expansion of Belgian industrial and comercial. ontorprisos, especially
bjr furthering the transformation and moderization of plant's, development of
new products, and reorganization of national industries". The S. N, C.I . was
now allowed to grant loans directly, writhout the guarantee of a bank, and the
amount of its outstanding liabilities might reach fifteen times its capital
and surplus. Loans might be granted for ten, or in exceptional cases, for
twenty years. The governor was to be appointed by the King and the nine
directors were to be designated by the shareholders, four of them chosen
among candidates nominated by other official institutions, No more than two
directors might held off ice in a commercial bank or a corporation owning 25
per cent of the stock of a commercial bank.
The main items of the balance sheet on December 51, 1938, (full
details not available for the end of 1939) are shown in. the following table:
i/ ThiS figurd relates to normal loans; for the special emergency loans granted.
.n l93L -35 and taken over by the OSL. TL, C. in 1936, see above p. 23.
Societe Nationale de Credit a l' ndusti e
)eclerh 3l 1938.
(Jiff2~ofl francs)
As sets
Cash reserves
Call 'money
Due from banks
Sundry debtor accounts
Governmient securities
Sh.ar eholders liability
Premises, etc.
Total..
11.8
7"o0
874.5
124.6
0.5 1202.2
Liabilities
Capial.,
Surplus
Amortization of
government be nds
Bonds issued
Notes and . time. decosits
Mlliscellaneous
Profit
Loans, includod in the item "bills"'. increased by 1914 million
francs during 1938 and by a further 60 nillion francs during 1939. The
item "Sundry' debtor accounts?? includes. interest due from debtors, and some
contra items. The large easount of government securities held at the end of
1938 represented the tE iporary ivestm ent of sums repaid to the, institation
by its debtors during 1936-37.
The purposes for vrhigh loans outstandiing at-the
are shown in the following table.
Sunding . of shor t-term debts in: intermediate and
long-term debts
New construction
Increase of working capital
Financing of exports
Transformation or taking over of plants
Repayment of bonds and notes
end of 1938. had
Per cent
25.9
13.2
10.
4.
0 C.1
100.0
The following table shows the distribution of these loans among
various branches of indu stry; it will be noted that the "heavy"
t
industries
represented in the, first three items were the mnein beneficiaries.
Coal mining and connected industries
Metallurgy and machinery
Railways,; public works, and building
Textiles
Agricultural and food industries
Chemical, pharmaceutic, and photographic industries
All others
Per- cent
32.9
16.4
i4t
6.1
19.5
205.0
24.6
11.5
?746.5
1)44.2,
16.3.
1202.2
been made
8L: 1
- 89 -
Office National du Ducroire
Thro fice which on behalf of the government, guaranteed risks
arising from export credits, was not a credit institution proper, bit is
mentioned because it faoilitated the granting of loans by banks to industrial
and trading qoncerns. 'The system under which it operated was introduced by
a. law of August 7, 1921, but was modified several times, the last change
being effected by a decree of August 31, 1939. This decree greatly broadened
the scope of the Office and established it as an autonomous body directed.by
a ,board of eight members appointed by the. King, thr'ee. on nominations by the
competent Ministers. ' The -Board was given great latitude in the admission of
risks to be covered, which in principlq wer e not liited to those arising
from insolvency but might include, for instance, risks resulting from foreign
exchange control or the blocking of foreign balances., The Office might grant
'its guarariteo directly or by reinsuring, partly or e'ntirely, risks garanteed
by credit insurance comparios.-J By the decree of August 1939, the Office--
which had previously had no indopendnt''funds--rceived an endowment of 25.0
million francs in government b'onds, aid it wad authorized to incur liabilities
under government guarantee up to seven, times its endowmnt and reserve funds.
'The' latter wore accumulated from premiums paid by beneficiaries of the
'guarantees.
Up to December 31; 19 39, '\guearantes alovontinJ to 975 million francs
had been granted by the Offi ce' (on ex ports alued at 1717 million francs) and
risks amounting .to 261 million francs were'outstan
1
.ding on that date. As in
the. case of S.N.C.I. loans, the heavy industries were the 'principal bene-
ficiaries. More 'tan 60 per cent of th e exports- involved had consisted of
deliveries fbr railways, mostly to public bodies; more than 20 per cent of
materials for const uction, and only about 15 per cent of tekties. The
Office had not yet actually paid any compensation on guaranteed risks,
although somree foreign debts will probably be settled finally with a loss.,
Office Central do la Petite Epar gne
This Office'was established by the law of December 7, 193
1
4, to
assist the private caisses d'epargne in mobilizing their assets during the
banking crisis. It originally received an endowvment of, one bill1 ion francs
(;later reduced to 500 million); up to' Decemfber 31, 1939, it had lent 359
million francs to various private caisses, of which 3L million had been re-
paid. Its assistance was instrumental in preserving the liquidity of the
caisses duri ng the crisis, but in order to avoid a repetition of this
si-tuation, the 193 l iposed strict regulation upon private savings insti-
'tutions, which were thereafter supervised by this Office. It was .managed
by a board of' seven r mbrs_, foiur beping members ox officio: .the Governor
of the Na tional Bank (who presided over the Board ,-+the Pre si dent of the Cour
des Comptes (an institution corresponding to the Office of the Comptroller
General in the inited States), the General Mvlanago of the Caisse ' onerale
dEpargne, and one of the high officials of the Treasury. Three other mem-
bers were appointed by the King.
1/ A private corporation for credit insurance (Cie Belge lAssur ance Credit)
was established in 1929 by the large financial and insuirance companies.
Its subscribed capital was 17.O'millioni francs, its paid-in capital 3.b.
million; its activities developed very slowly.
90
Loans for small business.
Official organizati.ons for f ostering loans to small business
began to appear in the 'twenties, and durig th e thirties they expanded
and took more definite shape, tartly a.s a result of the depression ana
partly for political reasons. the moveme.nt resultecd finally in three
organizations especially devoted to loans for smiall business.
Tho srnallest of these, buit probably the most charactori sties, was
the Credit a J. 'O utillage A.rti.sanail established in 1920 to grant loans to
"artisans and sm,-all industrial41ists" for the modernirzation of their eeuipment.
This organization was simply a section of the Ca-.isee Genrale d 'arvno,
wvhich was e inpowor ed to grarit such loans, undrr the gu~arantee of tho1E -tate,
up to an aggregat e amount of 50 million francs. Loans could be made only
through local credit cooperativcs affilia ted with apnroved national
federations, and the project had to be approved by the technical serfice
of the "A m, istration des Classes 1.1o =nanes" (a section of a goverlnment
departm ent). A fbill signed by the b rrowrer would be rediscounted by the
local cooperative with its national federation, wbhih in turn would redis-
count it w"ith the C(i;sse Gener .le d'Zpsrgne. The duration of the loans, to
be repaid in annual instalments, migh t not exceed five yeroars; thoe rate of
interest was 5 per cent. The security' g:iven by the borrowr consisted
generally of addi tional signatuzres by r lti.ves or fri e, s, one su ch
signature usually bing required for ee~ch 10,000 francs of the loans. Before
the war there were five fedorations 7irth 66 ,e.ffiliatotd local cooperatives
operating under this systcem.. From 129 throgh 1937, 124 loans were granted
amounting to L9.7 million francs; the avra;ge w~as consequently only 16,000
francs. As shown in the statemtent of the Caisse Generale .d'Fpe.rgne (see
p. 73) 33 million francs of leans were outstandi ng at the end of 1938.
The Caisse Centrale du Fetit Credit Professionel had a larger scope
of activities than the -'eceding organi-zation. It wtas established in 1929
to grant intermediate and short--term loans to craftsmen and tradors through
credit cooperatives undaer its supervision. Short-term loans were granted by
discounting bills up to 120 dayrs? duratilor, sonletime s renewable. Loa.n.s for
l onger term ight reach 10 years but could not eseod 3 years unless sp cial
security was offered. The rate of interest for' dscon.ts was from 1.5 to
2.5 per cent above the rate of the TT tio al Bank; for longer-term loans, the
rate was generlly 5 to 6 per cent.
The Caisse was m1?anage by a beard of 3 mfembers appointiet dby the
King. The government granted the Caisse an encldo, mmnt of 50 million fryncs,
and it was furthor authorized to rediscount its pa:per with the Caisso (}oueralo
dt Fpar gnc, under the guarLmantee of the State, up to an a.m.ount of 150 mi.llion
fran.cs. Before the xar it had L48 affiliated credit cooprativnres, somie of
which had local branches. At the end of 1938 the outstarding lons of the
Caisso Cntrale amo'nted to 102.6 mil lion francs, the average loans being
for around 26,3000 francs.
The Cisso Ihtionale o do Cr;d:it -our los Classes liyo nhe3 s was the
most recently established among the al busi ness"t institutions. It was
established in 1937 in order to continlue and expand the operations of a
-91 -
teirrporary fund operating since 193)4. Unlike the Caisse Centrale, this
organization could grant loans to individuals', it gave. short-=term loans
by discounting bills or giving current account advances, and medium-term
loans up to 15 years
t
maturity. The; interest' rate for such loans was
generally around 5 per c ent.
This institution was directed by, a board of 7 members appointed by
the King. Members of parliament, bankers, and. directors or officers of
corporations holding 25 per cent of the capital of, a hank might not be
,members of the board. The capital of the Caiss o was provsided by the State
(55 million francs) and the Caisse Generale d.'Pargne (15 illion). More-
over, the Caisse might issue bonds or notes, its liabilities 'being guaranteed
by the goverieent up to 350 million franc s. A-b the end of 1938, there were
1086 lines of credit aggregating 219 million francs, the average beoing about
200,000 francs. The actual amount of loans outstan.ding was 143.3 million.
As shown by the average anount of credits,. the loans of the CaissC i,atinale
went to somewlhat more important entorprises than those of the Caisse Centrale.
However, they remainod in the sphere of ptsmall business", as no loan to any
individual or firm might exceed 500,000 francs. The debtors had to submit
their accountancy and. mlanagement to the supervision of the representatives
of the Caisse Natio hale.
Office Central du Credit Hypothecaire
This institution, established by a decree of January 7, 1936,
amended by a decree of October 14, 1937, aired rrimarily to turther the
development of residential building for the middle classes../ It sought
this objective. not so much by direct lending as by providing cheap credit
assistae to existing organizations. Direct loans were made only by a
special decision of the board, a majority of two-thirds being required.
The Treasury put 50 million .francs at the disposal of the Office to be used
as a -working fund and it was authorized to issue bonds or notes unddr the
,guarantee of the State. The Office was directed by a 'board of seven members
appointed by the King. It had barely started to operate when the war broke
out, however; and at the end of 1939 the amount of loans outstanding was only
46 million francs.
Institut National do Credit Agricole
This institution was established by a decree of September 30, 1957,
under the direction of a board of seven members and a general manager, all
appointed by the.King.. Its aim was to foster the expansion. of agricultural
loans, either by direct loans or by helping existing credit institutions
(especialW the .caisses agricoles). It was planned to develop loans at very
reduced rates for small farmers.2/ The Institut was granted 30 million francs
T Societe Nationale des ilabitatious et Loge ents a Ben Marche and the
building and loan societies were interested primarily in low-cost housing.
2/. The authors of the decree considered a farm small when the work was done
only by the farmer ark. his family without hired help.
- 92 -
provided half by the Treasury and half by thie Caisse Generale d' pargne,
and was authorized to borrow a further 100 mill.ion. francs (by salie of bonds
or otherwise) under the guarantee of the State. However, as the Institut
started in a per iod of great economic and political instability, its
operations remained on a very limited scale; at the end of 1938 its loans
slightly exceeded 5 million francs.
The Credit Communal
Tis organization, established in cor orate for, constituted a
cooperative credit association of provinces and municipalities (
t t
conmunes
t t
).
It raised funds by the issuance of bonds serviced from the proceeds of
certai.n taxes collected by the State for the provinces and communes, and
used tho proceeds to make long-term loans to meriers of the associazu-ion..
Small comunities which could not sell ther own bonds in the market at a
reasonable rate of interest were the principal benficiaries of the operations
of this institution. Although its activities were vested with a public
interest, the Cre;dit Communal was not alays classified as an official
credit institution since it was completely independent of the governme nt,
which did not ordin'arily guzarantee its liabilities. In Octo er 1973, for
the first time, the State did garantee a loail is sued by the Credit Commnuanal
for the purpose of making advances to corwnunes r"having financial difficculties
because of the international evYents". No statistical. information is available
concerning the operations -of this institution in recent years.
- 93-
G. Financial. .Companies
Aifter the banking reform of 1935, investment banking, although
not completely abandoned by comitercial banks, wams intended to be left to
so-called "financial comaani es" or "hol.ding com panies", these vague terms
being applied to all kinds of organi zation s erforx~iling various finraicial
activities. It is impossible to indicate the scope of these comanies
with any precision, and frequently the exact character, of thee business in
i ndividual cases was known only. to "siders" . Hiowrevver, informati.on is
available with respect to the larger cmpa.nie .
In general, two categories of those comn.nics. may be distin-
guished: "general"" financial c ompanio s, which included in their sphere of
interest entorpriss, in many different .industries; and "special" financial
companies, which concentrated their attention upon a ai icular industrial
line.
Most of the ."ge'neral" Comp nei es wore of receant origin, having been
formed to take over the security portfolios and investment .businiess of the
mixed banks after the 1935 reform. Although, as previously noted, such
comaniec frequeztly retained control ovr te subsidiaries set up to handle
* the commercial banking operltions of . the fbrm r mixed banks; they themselves
could no t ,accept dodo si ts maturin in less than two years except from their
own affiliates. Their sphero was inv estnmle~nt, b/arn ng, the promotion of new
enterprise, and industrial management; in sonr~ was the' bore a resemblance
to some large American i nvestment trusts. There x ere only two companies
with really broad scope in different industries, the Societe Genorale do
Belgique and'trufina" (inheritor of the Banque de Bruxelles) ; however, a few
others existed with only a limited degree of specialization in a particular
industry.
The "special" financial companies were a much older type of insti-
tution in Belgi.u, constituting holding companies for enterprises in
particular indius.trial .lines. Much the most prominent wrere those in the
public utility field (electricity and "street railways), while others existed
for colonial enterprises, the oil industry, and various other lines. i.any
of i em were controlled in, turn by- "general" fi:,nancia l companies. They not
"only financ d operating companies but also: provided them with various
managerial and technical services. Aside from the leading companies of this
character described in the fol.owi rng; pages,. there was a multitude .of smallecr
organizations active in Belgium or abroad. Mloreover, some of the larg& in-
dustrial corporations proper often had domestic" and foreign affiliates pro-
viding raw materials, performinig commercial or financial operatio n.s, etc..
Thus there was not always a clear-cut distinction betwe en. operatlng companxies
and financia1l or, holding corporations.
Loading "General'" Financial Comar. as
Societe' Goerale 'doBelgique. This organization was the largest
aggregation o privto JIOth in Bel um an. d one of the most important pri-
vato corporations on thu European Continent. ,
1
ho origr n and: growth of this
institution as a mixed bank, and the allocation of its commercial banking
business after the 1935 reform to the Banque do la Societe Generale, have
been described in Part I. The followjilig is the last pro-invasion balance
sheet:
Societe Generale de B3olgique
Balance Sheet for Decetmber 31, 1939
(F:ri .1 ion fr anc's)
Assets
Balances with the banli/
Portfol o of bo.ds
Portfolio of shares
Syndicates,
participations,
securities
Premises and fixtures
Current accounts and
misce laneous
Contra items
Total
Li ab i litie
s
.1 Reserves
2,592.9 contingency fund
Ponids
136..1 Time deposits of affiliates
15.0 Creditors and miscellaneous
Contra items
122.6 Profits
712.1
77gi_.
Total
i e/ .. with the i
3
anque de la oci.ete ueneralc.
S636,00 shares of 1,250 francs each.
Profit and Loss Account for 19i39
Expenses
General~ expenses and taxes
Interest on bonds
Anorti zations
Contingency fund
Profit
Total
inc ome
8.3 Irg'tbrest, dividnds,
13.0
cormioissionls,
23.0 Profits brought forward
C)
, / o
12%9.o Totdl ' 12 9
i/ Of which 39.8 distributed as dividend.
As a result of the segregation of the banking business proper, the
Societe Genurale operated in 1939 primarily with its ownn funds, which were
more than double the amount provided by the deposits of affiliates and by
the issuance of bonds. .The hugo surplus had been accumulated partly from
profits but' largely from premiums on shape issues during the prosperous
periods of the company's history.
The small cash holdings of the Societe
0
enrale were held on
current account with the Banquc do la Socicte Generale; the holding company
owed no debt to its banking affiliate. The great bulk of its resources wore
invested in securities, listed under three headings. The first two (bond
and share portfolios) include the perm.anent holdings of the company, while
7)6.0
1. , 6L.. 2
512. 3
51.9
714.2.l
4.L 3.-
117.8-
11.8
95 -
th e .third item (synd cates, participations) .,normally include securities
acquired through underwriting agreements, etc., and intended to be sold in
th; ;course qf business. Together these items represented an investment
of mere tan 2.7 billion francs.
The custom of.. the Societ Generale was " to value securities either
at cost, 'particularly 'when the cost was. below the stock exchange quotations,
or at a capitalized value based on their yield. Generally, 'the book value-
wa:L"> rmucch lower- than the. sto'ck exchange quotations, giving the company strong
"i nternal reserves,", but the serious slump in ;stock exchange quotations" at
the outbrak of war had reversed the usual positio'n at the. end of 1939. A.
;footnote to the balnc. sheet for that date acknowledged that. the current
value of the bond and share'portfoli o was 665.5 million francs less than the
book value.. However, sin.ce thore were no legal rulings conceriing. the valu-
ation of as Sts for balance. shee-t purposes,,: the' directors of the Societe
Genorale ignored the stock exchange quotations, which they did not regard as
an accurate reflection of the true value of the portfolio.
The Societe Genrale and several other Belgian corporations were
noing the few financial corporations on the Continent which published a com-
plote -list of their. perrianont investments. The portfolio 'contained, shares
of about eighty corporations, some of themt: holding corporations, whid"ch in
turn controlled numerous industrijs; . corpora tions. ' In most cases, those
corporations were controlled by the Societe eneralq , although no definite
conclusion as to control inan individual case can be based upon the pro-
portiorate interest held by the, Societe' Gonera'le. Ownrship of 5 "per cent
of shares might _give control of a corroration if the othe'r shares wore split,
among the general p;blice while in other cases owsrnership of 30 to 40 per cent
might not give contro
The participations of the Societe.Genorale included share holdings
in the following banking corporations, plmost al1 of which have been mentioned
in other sections:
Banque de la Societe Generale
Banque -d' Avers
Banque Beige ,pour l'Btranger (Extreme Oiient)
Banque, Bel ge pour 1'Etranger (overseas)
Banque BeJ e pourl'Etraner (Paris)
IBanque de lUnion1 Parisienne
Banque Generale do Luxembourg
Banque d., Etat du laroc
Banque Francaise d' cceptation
Banque Nationale dT Albanie
Credit Foncier do Belgique
;Credit, Fonci or d' ,tr.ome. Orient
Cre.dit aritime :et Fluviale de Belgia que
Society Beioge de :Credit i aritime.
Societe .,hypo thocaire Belgo-Americaine
Banque Hypothecaire Franco-urgcnti no
i/ It should b noted that in the balance shoot terminology "participations
t
'
means temporary holdings wheroas in common usage the word is used to end
cato permanent interosts (e.g. the "participations?? of the Societe Generu
in the coal industry. )
-96 --
Moreover, reports of the Societe Generale listed interests in
'several imnortant industries. Participations were reported in five railway
companies, the largest: of which was a 25 per cent interest in the Cie
de Ceins de fer et d'En'treprises . This was less an operating company than
a holding corporaton in. wa~hich other banking groups, principlly the aning
house of Philippson and Cie, also held important interests. The Cie Beilge,
established in 180, had participated in the establishment of many railnays,
mainly outside of Belgium. In the years before the war its interests in
operating companies had been reduced, partly because some of them had bon
nationalized in their' respective countries. The corporation then became
interested inainly in construction of railways and other public works; before
the outbreak of the war, it was building railways' in Iran. The other rail-
way comparnes in which the Societe Gnerale had a relatively large interest
wore the Cie. Auxiliaire Internationale do Chnemins do for (a company leasing
cars), 'ociete 'el~ge de" C ?emis de for en xrne 'so ll compa for pro-
moting railway construction in. China)'Ci. Genrale de Chemins de for
dans la Province do Buenos-Aires (a smf talli. interestn the le. Luxem
bourgeoise des Chemins do for et ilinieres Prince Henri (one-f6Turth interest).
The Societe General; e net r(.ported partici pati ons in about 15 Jcoal
mining compaipnis; some entirely and others partly controlled, representing
around 30 per cent of total Belgiani coal production. Some 8 metallurgical
corporations (steel arid machinery) wr' reported, amon g whic hI-tworo somC1B oT
the oldevst araillargest 'corporations in Belgium a ;ndl Lu 2rebour (Cockerili,
Providence, Anrbed, etc.). The participcat ions in the field of non-ferrous
metals included an interest in the Vicille-onone of the large' pro-
du'cers of zinc (control bein. shared fitha=, the Hottini. grr baliking firm of
Paris, the . Sagelmakers of Liege, etc.), in the Socite rC; en ralo cdes Miiinerais
(strong position in the non-ferrous metals trade in thne Cie. Meta.lurgique
de Hoboken (s...elting and refining Congo ores, producing cobalt, radium, etc.),
and in some lesser corporations.
The only interest reported in ithe electrical industry was in. the
Societe de Traction et d'Electricite, wholly owed by the; Societe Generale.
Thi was naii a holding com:panry, i.e. a ".peciai" financial corporation,
'which aside from purely fin'ncial functions also provided managerial ser-
vices for affiliated compa ries arnd sometimes even engaged in construction
,work. It had large interests in several Belgian electrical companie:s, in
some Polish enterprises (particular-ly Exploitations Electrioues do Lodz et
Extensions), in the Electricito et Tranwrays en Orient el ectricity au.id
street car companies in Damascus, Snm:yrnc, etcT), and in some French on-
pani es
The Societe Genrale was a dominant factor in the "-'crigo economy,
and held controlling interests in most of the large Congo corporations.
First was the Cio. du Congo pour Ic Commerce at l'Indu strie, the eldest
and largest colonial holding company, with large interests i n a variety of
colonial corporations (mi iing, plantations, transportation, etc.). Another
was, the powerful Union Aliniere du HautKat nga, an important producer of
radium, copper, end other minerals. The company was -mainly under the con-
trol of the Societe Generale although an important interest was also held
-97,
bry. the Brtish corporation, Tanganyika .Concessions,. Ltd. Other.. participations
reported wer, the Cie. Internationale Forestiere et. 1iniere du Congo
(rmnere, alarge pi'oducer of d~ndF everal affiliates or.
planntations, agricultural -development, etc., the Chex~m. do. for du ,3as-Congo
auT atanga, and an interest (about 10 per cent) in the Portuguese Agola
Dl f. rond. Co.
wroeng the other interests of the Societe Generale were its. control
over. the Codes Verrrios do Mzariera ont (a holding company controlling a
largo, n'm or of { iass wJ~orks) and the Cristnllieries du V~al-Saint-Lamnbert
(one of the oldest produceris of crystT7 and p oicptions. in vari8liT
textile .com~panies, in the Cie'. Carbochzimio (almost the only chemical
inter est. of the Societe Ge neaal 7fn the Union Financisere oftMari time (a
hol ding corporation controlling most of the Mall Delgian slipn dsr)
in the Chinese Engineering anid MIining Co. (aipin),and in sev eral other,
srnalleOr corporations.
The net profit of th~e 'Societe Ge'nor l~i in 1939 was 43.3 million
francs, a figure much l'ower than in earlier &ears. The fall was due not
only to the.:reduction in gross profits, but. also to th e allocation of 42
milo frns n139 to asp cial ,c ontin~gendyc fiund. A divi denid of 5 per
cent was declared for 1939 as compared with 10 per cent in 1937 and 1938.
Societe de, Brttcell es pouar la F'inanice et 1" rndus brie'Ciruf ' i a.
This cman ri .x to ti3T S-~3~ cze~n.rl -- isor. 1 . 1 0
but it was a much less p. owe rful. organi zation. It w4as formed. vide the f:."-I rmer
Banique. de Bruxelles divided its business in. 1935, in comx pia n4e w ith the
banking reform. The Banque de Bruxelles', c.lthough a r elatively old organi-
zation, b~g n to e.xpand its industrial interests only 'early in 'the' present
century, when it took. over some interests in Belg. ian coal mines.. T['he great.
growth in its sp)here of operations took place during the interwwar period.
Thie ,following table condensos the .last available balance sheet, of
Brufi na, th at for June ;30, 1938:
Societe do 3ruxelles pour la Finiance 6t 1l9Indus tri-e
Balance Sheet for Juno 30, 1.938
(l illion. francs)
Assects
Liabilities:
Cas r eserve s 824.2 Capibat
375.0
Debtors ' 4i.
6
'Surplus
'87.5
Securities
795.0 Conti'rrencyr fund . 150.0
karticiTnat.ons
32.6 Notes '' 11)4-4
Miscellaneous
0.1 Deposits. of &ffiliates '98...
Creditors
40.24
i scallaneous
.19.53
profit'4.
Total J'5Total 926.5
9 8
Pro fit and Loss Accou nt for 1,933-39
Lx~ne
Income
Interest on notes 5.i0 Di vidlends cmson, etc. 49:3
General e; .enes 5.8 Profits carried forward 4 9
IMiscellaneous
16
Profit iJ 43
'ib tal ' 54.2 Th tal' _54.2
lT 1 7 whih 15.0.) allocated to c ontingen cy fund w ad 21.0 distribu~ted as
dividend.;:
Ain ong ,' mfinal, s participations were the6 Banque do. Bruxelles and.
a, :rath.;r rdinor, credit institution for the Congo: (see p. 65). Almost all
its other interests in the Congo were centered in the Credit General du,
Co~(Cre o co- ,, a hal dinrsg compnyv ith: pcacipations in various colonial
*co rporations . Vhil e almost all i ndus trie cb1 ra bhe s in the Congo were largely
contro lledl by. the Societe Generalo arnd its a:V~iliatos', the production of tin
and zinc xrss handled, by ;corporations conected: with the group. Brufi na and
v i th the; banking houses of. N1a gem1a,-kers and of Allard.
Th.larges;t =;r fine interests were in coal mining companion,
mne taluhrgical works, and- ale ctri.cal eniterpris s- (including Blectrobol
(see p. 101). There we*re also inte rests i n chcmicaa1,9 textile, and glass
works. Most of the important participations of Brufin were in domestic
enterprises.
Cia. Fiantci cr: (at Indu~cs try -. 6 tii dt). Thi s company w as
close 'relatedr toruia, beth' bein Lr7presi dd o rer by Baron do La'Unoit,
the. head of the Cia . nonyir di 111 ree.iariha yo, one of tae: srongesat
metallurgical c ompanios in L elgium,. Cofiniachiw wans es tablishe in 19 35,
Nmainly te take over the: control of 0u roe--iiarihaye a~nd affiliated mining
aid metallurgical works. lIt also holcd inter'c:,s s-in ufinar, i soe
electrical onto prisacs, end in other companies. At the end of. 1 93, -it had
total assets of 788 million francs, its resources boin ; de rived as follows,
in millions of frncs: capital, 125; surplw's andc rese rves, 157; bonds out-
standing, 156; dry _osits of affil iates, 2 64; enrd other; 86.,
Federation d' IEntr rises In~rdu trices. This organization. was con--
trolled by Ba ron Joan Dmnpain, one of the sons of Baron E. Thtpain, head -of
a. famous pr:ivato barking hourec which, bceforb the First World War, ha d pro--
mo-ted a large, number of industrial enterprises in elgium and abroad. .This
comeany, the shares of which ere .:hold exclusively by members' o f the family
Fnipain and~ connected grou7ps, had or iinateda in 195, when the commercial loan
ing business of this brancoh of 'the family had been. transferread to the T^nqcue
I. dustrielle Belge (see p..60), Th main items of its balance shoot: for the
end of. 19 38 were as follows:
- 99-
Federation. d:'Entreprises Industrielles
Balance Sheet for ihecenber 31, 1938
(Trillion francs)
Assets Liabi 1 i ties"
SzeTfrom banks 3 --. v50.0
Securities 132,.2 surplus and reserves 32.5
Debtors
10.8 Creditors 57.9
Profits.
59
Total T.Total
146-3
Te re iss no official information about the securities hold by
the company, but it can be taken for, granted that they include primarily
shares of the Barque Industrielle Beilge and of the .pain "special" financial
corpor ation Eloctrorail (se p. 102).
CorpagnicBeige. rbis comp.an was controll ed by Baron Louis
Emp.i n, another son" of t7xe forme r -head of the house . In 1935, the cor-
mnercial banking business, of this branch of th'e f.fm ly had been transferred
to a. now corporation,, the B.nque. Belge pour l'Industri e (see p.
6
0). The
main items of the balance sheet for October 31, 1938, were as follows:
Comagne' Beige
Balance Sh e e t for October 31, 19.38
(illion francs)
As sots ibiP tics
Securi ties 136.0 Capital:1 180.0
artitipt ons 20.9 C reditor
11.3
Shreholds't liability 4.7 scelaneous 11.2
:Miscella neous 2.0 Profit
6.
Total 205.6 Total .
The security portfolio included, in "addition to sharon of the
Banquo BeIgoe pour l',Industrie;, a 1a, go interest in Eloctrorail, in :the
Atliors do Constructions de Char leroi, in the-Cie. Beige pour .Industries
Chlimiq1es, and in some lesser corporations. The shares of the Compane
B eige -were also closely held by the Empain family grouap, although, as wvill
be noted below, a Iarge ' part of the shares of Electrorail ar. of some other
co nected holding companies had been sold to.the 'general public and were
listed on the Stock Lxchange
The Credit Genoral Industril was organized in 1935. to take over'
the participations of the K'rG c etbar (se p. 55) . It had a large partici-
pation in a. Hungarian coal mininig corporation, which was :a frozen asset.
Other participations were mainly in medium-sized: enterprises in the Flernsh
section of the country. The main items of thee balance sheet for September
30, ,1938, follow;
- 100 -
Credit General Industrial
Balance Sheet for September 30, 1933
(Million francs)
As-sets
' Securities
Far tici pat ions
'1*scellaneous
Total
297.9
6.0
7.8
7l
Liabilities
Capital
Creditors on demand
(secured)
Other creditors (secured
and unsecured).
Miscellaneous
Total
A. large part of thy; debt was presumably due to the Kredietbank.
"IlSpecial" Financial Companies
Ci. Financiere de T'rarsnorts et ntre prises Industrielles (Sofina).
This corporation , the !.rgest of the special ffinancial coypanes, was one
of the s tronges t enterprises in the electrical industry. It had participated
in the establishment of e lectric-ity and street railway enterprises in many
foreign countries, although its dynamic expansion had boon checked before
the war by increasing' political and economic barriers to foreign ivest-
ment. It, had boon established in 1.098 by an international group including
the banking houses assel and Allard, which still have an interest in the
compar. However, among all th3 large financil compaies, Sofin was the
most frce from 'control by bankinc or financial groups, the bulk of its shares
being widely held by, individual investors in Belgium and abroad. Moreover,
some' affiliates of Sofi.na wiere among its largest stockholders (particularly
Chaoe--see belowr). To an. unusual oxtent, threfor, Sofina was controlfled
by tho manoageont. Sofina's board of diructors wcmas cos-mopolito, including
Belgians,, French, English, Americans, etc. Th,., actual power was concentrated
in the Standing Comrnitto (all Belgians), presided over. by Marr. D. eineman,
who was born in the United States but had lived in Belgium for about 1.4.0 years
before the war. He was the main artisan of Sofina's expansion. The balance
shOt of Sofir for the end of 1939 is as follows:
Cie. Financiere de Transports et Entrepri-ses. Industrielles
Balance Shet for December 31, 1939
(Million francs)
Assets
Securities.
Cash and at bankers
Affiliates and other
debtors
I, 330. 0
692.2
10L..7
Total
Li ab 1 i ti e s
Leg l surplus
Unavailable su rplus
Contingency fund
Creditors and provisions
for contingencies
Profit
Total
140.0
136.0
131.1
4.6
311_7
120.0
20.0
1,508.0
171.0
214.3.3
624.6
2,126.9
1/ 200,000 ordinary shares and 140,000 preferred shares, all of 00' francs each.
/ Paid-in surplus resulting from large premium on new shares sold in 1929.
In.Njm
- lol-
profit and Loss Aceount
Expenses Income
Tereral expenses 26.5 - i*dends, commissions, etc. 154.7
Staff 3.0 Profits brought forward 11.3
Amortizations 71,9
Profit 61..6 ____
Total, b . Total 16.0
At the' end of 1939, nearly one-third of total assets was held
in cash; this was due largely to the disturbed political situation in
that year, but also to the established policy of Sofina to keep large
liquid reserves, The remaining assets consisted of the security portfolio,
loans to affiliates, etc.
Sofina's largest interest was in ComparAa Iispano-Americana do
Electricidad_(Chade), a large holding company incorporated in Spain and
controlling electrical corporations in Argentina, pr:incipally in Buenos
Aires and vicinity. Although Sofina. had, only a minority interest in Chade,
it seems to have had a major iifluence. and it furnished managerial., financial,
and technical services to Chade and its affiliates,. Another large interest
was in the Ste in~ternati:oxir4.e dt Energie_ hydro-Electri que Sidro), a Belgian
holding comany Wkiich cothe Barclona Traction iight and Power Co.
and also the Mexican Light, and Power Co. The Sidro wa.s controlled and
largely managed by Sofina.
among qther large corporations Ih which 'Sofina had an interest -
aometime s amounting to control--wre the Cie. Generale dg Tramways, de
upnos Aires, (which controlled the Anl-entiea )iete
df1ectrcite de RQS rijo (Argentina), Com Tpagnies Reunies .Gas et Electricit e
(Lisbon), a d erEl TFFench and elgian hoding and operating companies.
$ofi. held a large n unber of mall participations in other corporations.
Sofina formerly had .a large interest in Transports, Electrici to et Gaz, which
controlled electrical and tranportatio4 comb anie,:s ,a t Istanbul, but in 1938,
bqthis affiliate, was forcod to sell: its asets to the Turkish government, and
it went into li.idation.
0
ofina was a very prof table Bnterprise, deriving about one-quarter
of its income. from managerial and technical services to affiliated companies.
The exceptionally large item of " m'tizain' in 1939 re'lected the writing-
orf of a claim on the defaulted Bank M endels:sohn (of .iusterdam). However,
the dividend for 1939 was naintcainea at the sine level as inr the preceding,
years: 425 francs .(85 per, cent), net-of tax, on the ordinary shares :and 25
francs '(5 per cent) on the preferred shares. .It is recalled that most of
the ordinary shares had been issue4d at many, times their face value.
Cie. Generale d'Entreprises electriquos et industrielles (Floc-
trohel).. Next to So fi ra, this companriy was the largest holding corporation
in the electrical industry. It was established in 1929 by the merger of
three older corporationrs which had large- interests in electrical plants, in,
city transportationn systems, and also in the gas' indiustry Its ,shares Were
- 102 -
largely held by the general, public, but there were also sizable blocks in
the hands of various financial groups: Societe Generale, Brufina, Sofina,.
.E pain, BEa i e de Paris et des Pays-Bas, etc. The balance sheet for the
end of 1938 is reproduced in the follovuing table:
Cie. Generale d'Entreprises electriqiies et industriellos (Electrobel)
Balance Sheet for December 31, 1938
(illion francs)
As sets
Sec uri ties
Cash and at banks
Debts of affiliates
Other debtors
Miscellaneous and contra
items
Pr em s e s
Total
Lia bi i tie s
9314.6 Caital
181.9 Surplus
120.6. Unavailable surplus
13.6 Bonds outstanding
Duhe to affiliates
9.6 Miscellaneous and contra
S0 . 0 items
Profit
Total
1
Profit and Loss Account
Expenses
Interest on bonds, and
taxes 6.o
General expenses 6.
Pension fund of the staff 1.0
Amortization on securities 22.0
Peorti zation on. affili ates?
debts 5.6
Amortization on other items 1.1
Profit 41.2
Total U37
Income
Dividends, service fees, etc. 83.0
Profits brought forward 0.3.
Total
83 .3
The participations of Electrobel were held in. various countries,
although probel ' the interests in Belgium were proportionally higher than
those of Sofiria. Among the largest participations were somue holding com-
panics entirely or largely controlled by Electrobel: Electrafina (con-
trolling uatilities at An-tvrp); El ctro-Trust C large holding co mpany, con-
trolling primarily utilities in thep Nethrlands East Indies, with some
interests also in Czechosl ovakia, Poland, etc.); Les Exploitations
elcetriques (a Franch hlolding comparrj controlling electrical and trans-
portation utilities in France) ; and, Ci. Geieralc du Gaz pour l~a France eti
l'Etrager. Mv'oreover,' Electrobel held large interests in a number of
operating co 'uxanie in Belgium--epg L F ncr cent interest in the Inter-
cornmunale B alge d'i1ectricite. Te interests in foreign operating companies
included participations rn electrical and transportation systems in France,
Italy, Spain, . luma .ni., Egpt, thes Near Eas t, etc.
Coipagnit c Reunies d'Electricitc ot do Transports (Eectrrail).
This was the larest holding comnpany, controlled by the group Empain., It
was established in 1930 by the merger of three older companies controlled
210.0
1.58.6
,59.8
125.0
171 .0
2)4.7
1.2
.1,290.3
03
-
by the same group. The main items of the balance sheet for the' end of
1.938 follow
Comragnies Reunies d'Electrircite: at de Transports (Electrorail)
Balance Sheet for December 31, 1938,
(.illion francs)
Assets Liabilities
Securities 503.8 Capital 372.6
Cash and at banks 34.7 Surplus 50.0
Miscellaneous and. contra Bonds outstanding 42.2
items 18.7 Miscelianeous and contra
i tems
33.6
Profit 58..8
Total 572 Total 557:2
The nvyin participations of Eleotrorail were those promoted by the
late Baron B. Empain in d-ifferent holding and operating corporations in the
field of electricity and transportation. One was the Cie. Auxiliare Indus-
triello et Financiere des Grands Laos Africains (Auxilcacs)7ontrolling one
of the T~ilwa yyT the ongo vnd holding i ntcrosts in some other colonial
companies. Others were several European holding compan._ies in the field of
electricity: Cie. Parisienne pour l'industrie des chemins dc fer ot des
Tramways Electniques, -:lectrobel (see above), etc. Among the operating com-
panies in which Elctror*il Tmeld large interests were the Metropolitain of
Paris (subways), Chemins dc fer de Basse Egypte, iTramways d Caire, Cairo
Electric Railways and Hel: opo li Co., At iers de Constructions
Electriqes de arleroi, and vairious electrical plants or city trans-
portation sy stems in Belgium.
Cie. Financiero dExploitatins Hydro-Electriques (Hydrofina).
This organization, with total assets 'of 316 -million francs, was a smaller
company operating in Rumania partly as a holding company and partly as a
constructor of hydro-electrical works. Another was the Cie. Centrale
d
t
lndustrie Electrique with total assets of 97 million francs, holding
interests in various operating comrpanies in Bul;aria, Rumania, and. Lithuania.
Among; thy; financial companies active in other fields besides
electricity and city transportation, the following may be mention:d:
Societe Financiere des Caoutchoue s. This company, established in
1909, was miiainly controlled by two bank-ing houses, Mallet et Cie., in
Brussels, and Rivaud Freres, in Paris. It had total assets of 55 million
francs in 1939. It held large irierests in rubber plantations in Malaysia,
Sumatra, and Indo-China. Connected wi th it was the Financiere des Colonies:
(total assets: 220 miillion francs), also holding lare interests in rubber
plantations in the Netherlands East Indies and some smalle+ participations
in other cou'ntries,
Cie. Financiere Belg -des Petroles. (Petrofina). This organization,
established in 1920, was controlled by the groups of the Societe Generale de
- -lol.
Belpique .and o f the Banque del.'Union Par iL sionene. It had total assets of
566 million francs. The company controlled several. affiliates in Rumania,
representing a large portion of the oil industry of that country, and held
a large interest in, Furfina (oil r'efining plants ,and distribution
gasoline). Several other affil- iates ha n.dled. distribution of oi]. andf
gasoline in difforent countries.
Societe Financiere des Cinents_(Cimfina).. This was a hold.._ 'g corn-
panry with interests in cement and concrete 'lants .. n Blgium, Rnania, and
Turkey. Tn 1939, it also acquired an interest in a compan.,y established. in
Santiago (Chile). It .iad total assets of 63 million francs.
-105-
H. Stock Exchanges
There were four stock exchanges in.Belgium--Brussels, Antwerp,
Liege, and Ghent--but the Brussels Stock Exchange dominated security
dealingP, almost all transactions being concentrated thre. The Antwerp
Exchana had only minor dealings in securities controlled by local. groups,
and these in Liege and Ghent were of even lesser importance. The role of
the stock exchanges expanded with the corporate movement, in industry a d.
the expansion of foreign interests. In 1913, there were some 22,200
securities listed on the Brussels Stock Exchange, and their number in-
creased to 3,000 in 1930. The .figure was somewhat lower in 1939. In 19:13:,
alxrost half of the' listed securities were issued either by'foreign corporation.
or by Belgian corporations whose main field of activities was abroad. In the
inter-war period, 'the role of foreign securities was some that reduced,
relatively speaking,' while that of Congo securities greatly expanded. The
quotation of somany foreign and coJonial .issues (almostb- ntirely shares)
gave the Exchange a distinctly international character.:.
The following table shows the face value and market value at
current) quotations: of securities listed on the Brussels TExohangelon January
1, 1939.
Face value Market vsuo
7iTl ion franc77
Public bonds 146 635 140,227
Corporate bonds 2,27 2,151
Total bonds 9:12 31
Shares
27,8 L147,359
Grand total. 0? 07
Trading on the Exchange was very active during the.
t
twenties,
encouraged by the expansion of industry, and widespread speculative feve
induced by the instability of the currency. As may be seen by the table
below, there was a sharp. slupp in activity, duin the depression with only
a short-lived recovery in 1935-37. Indeed 'aftor 1929, the "term market",
in which speculative' transactions for; future scttlc'nont were negotiated,
never regained anything like its former importance.
Turnover on Brussels Stock Exchange
(Amounts settled through the Exchange Clearing Office)
Year Cash market Term 'market
(onthly average in million francs )
1928 675 378
1929 1,26 305
'1930 6314 157
1931 L449 '99
1932 3140 73
1933 3146 62
193 14 3. 28 146
1935 785
73
1936 9143
103
1937 1,15? '174
1938 .513 82,
1939 337 142
- 106 -
Th e severe slump in share prices 'hich also occurred during the.
!thirti ss is -shown in the following table. It will be seen that the fear
and uncertainty, which attedeed the outbreak of war in Europe not orn]
brought the share index to a new low point by gardh 191;:0, but also produced
a sharp reaction in bond prices which during the depre s si on years had shown
considerable strngth;
Index of btock Exchange Quotations
(January 1, 1928 = 100)
Shares of finan-.
cial corporations
Shares (banks, holding
Year Bonds (general index) cos., insurance)
Moth y a verages)
1928 10 112 109
1929 111 101 100
1930 116 67 65
191 19 50 46
192: 110 35 31
1955 112 35 70
1934 117 30 25
1935 1:21 33 31
1956 125 39, 32
1937 129 47
's3
1938 122 58 25
1939 114 5 20
Mar. 1, 1940 108. 28 17
Organization
The organization of the' stock exchanges was r gu1ated by a .'.ecree
of Jauary m30 195, modified on some minor points by u3,ubsequent decrecs.1/
The fundamental principle laid down wa's that no' person might engage in any,.
brokerage busine-ss, or even call himself a broker, without being registered
with a .recognized stock exchange. In order' to be registered a candidate
had to be a Belgian citizen, at least 25 years'of age, must have had a period
of. probation of .at least 6 years in brokerage houses, and must have received
an academic diploma. or have passed a scierrtific and professional exm tina.ti_ on..
He then had to 'be presented by two sponsors who had been members of the -Ex-
change for. at least' five years, and to deposit security in cash or in govern=
ment bond.s amounting to ;'150,000 francs if at Brussels, 100,000, francs if at
Antwerp, and 50,000 francs if at Liege or Ghzent. Even if all conditions
were 'fulfilled, however, the candidate had no "ri ght" to become a member of
the Exchange but had to be accepted by the xchange. Coxfittee (see below),
presuumably after an inquiry into- the moral' and busine'ss' standi ng of the
candidate.2/ Once accepted, a member of the Exchanmge' might not engage in
1 Prior to 1955,' the only regulations governing stock exchange activi ties
were those passed by the lodal municipalities which were of small effect.
2/ The decree contained somewaat less stringent requirements for . special
category of "correspondent brokers"--brokers' livirng miore than 25
kilometers from a wtvn where a stock exchange .was .located, Howrever, these
brokers were, not allowed, themselves to execute, orders on the stock ex-
change but had Co transmit them to regular brokers.
- 107.
any other occupation without special authorization of the Committee. He
was specifically forbiddeh to e nga2gre in financial or banking operations,
such as the flotation of securities,, discounting bills, acting as financial
agent for corportt ons,I etc. He might accept deposits .of Poney/ffrom
custome7. rs when necessary for stock exchange operations,but he was not
allowed to pay "ib erest.
The decree provided that orders for buying or selling securities
listed on a stock exchange might be accepted only by brokers or by bankers
for transmittal to brokers j Thus banks were no longer able to pursue the
profitable" course of matching the buying orders of some customers against
the selling orders of others,. and coll ecting double commissions on the
transaction. Neither a broker nor a banker mi ght act as principal in buying
or selling securities, Thus brokers were limited strictly to the function
of intermediary, but, as eoznensation, they received a monopoly for trans-
actions in listed securities. For transactions i~n unlisted.securi-ties, only
a brkor or a' banker could act as intermediary.
Each stock ex change was managed by a Co.Littee comrisng from 6
to 15 members elected by all hrokers registqred for at least 6 years. ' The
by-laws of the 'Exchar e had to be submitted to the aapproval of the govern-
ment, and to each :exchange was a tachec3. a goverznmtent com issioner Who might
attend the mrieetings of the Conmittee and appBal any of its decisions to the
iun ster of Finance or to the Apellate ' o mis~sion. The lat ter body was a
central committee at Brussels , consisting of a president and six mmbers
appointed by the iis te rf Finance, four from a list of .candi date sub-
mittd by the exch'angos Thi prihipal ro:lE of the Comission was to review
appeals from decist'ons of tock Exchange Committees (such as a refusal 'to
accept a new member, or disciplinary meiasre s against mmbeors), as well as
appeals by a govtrnrent commissioner.
Be s ides theo gener al committe each stock xchang:O had a Listing
Comittoe whiqoh scrutinized all securities for which listing on th Exchange
wras requested. phis Corummttee' _ comprised from 6 to 12 members appointed by
the Minis'ter o f Finance, half to be chosen from. a list of candidate s nominated
by the Co:n Ittoe of the :Exchange ad consisting of brokerza re i stered-with
the Exchange for at, least ten years.. No security might be listed unless the
capital-f: the issuing corporation was at least 10 million francs and tnless
the corporat on ad published balance sheets covering at least twvo complete
business ye rs. This l
t
st provision was a, serious handicap to the pro-
motion of new 'enterprises, since unless a securityT could be listed on an
nxchange, it could hardly. receive geniral :public distribution. The decisions
of the Listing Committee miiight be apealod to the Appellate Commission.
Before any security couldbe listed, a prospectus for the issue had'to be
approved by the Bankiinp C o mAm ssi:on (see' p. 26) . M.111 ore :over, since 191 9, ,the
granting of listing faci'lrti s to any foreign securityroquiredtho 'authori za
tion of theJi nister o Finance
Operations
"ost people, particularly sm ll investors, would give their
brokerage orders to a 'banker; the banker had 'o transmit them to a broker,
1 Bankers had to deposit specia security with ho National Bank, the amount
of which Wers fired by the Mi .aster of Fi.nno.
- 108 -
and the two would share the commissi on. Before strict rules on the
sharing of commissions' were established, brokers had competed for orders
from bankers; some had-been practically bank employees, getting a more or
less fixed salary and leaving their commissions to, the banker. Such.
practices became prohibited after 1935.' The share of the banker (remise)
was fixed by the by- law s of the various exchanges, normally at ha].f of the
commission. The rates. of commissiors themselves were also established by
the by--laws on a mandatory basis. In 1939 tea- rates in the cash mar keit were
2 franc's per thousand on government bonds and 5 per thousand on most other
bonds andl shars, with certain minima according to categories of securities.
The rate for transactions in shares mi' the term market was 1. per thousand.
The c.ash market. Ahis may be seen from the table on p.l05, most of
the transations the xchange were negotiated in the cash market, i..
in principle for immediate settlement. 'Brokers operating on the exchange
floor matched buyingS and selling orders at prices which produced the maxi-
mum turnover; in other words quotations were continuous and fluctuated
accordin g to supply and demand forces. Prior to 1935, qu..uotation s on' most
issues had been "4managed" by particular brokers identifi ed with and assisted
by the issuing corporation or the financial institution handling its intecrests.
Under this system, all. dealings in a given share on a particular d.L;.: {srre
usually concluded at a so-called "average'? price, the broker 'absorb4i< any
excess of offers or filling any excess demand.. This practice was barred by
the decree of 1935. Thereafter quotations were established at the opening
of trading each day on the bs-i:s of buying and selling orders placed 'tau
nremier cours" (at the opening 'qubtation) , but from then on they were free
to fluctuate according 'to market forces.
Orders might be placed in the cash market for any number of
securities--i.e. there was no minimum "unit" for quotations. Prices were
quoted ex accrued interest on government bbnds, but for all other bonds
(anid shres) the quoted pricse in~cluded accrued interest (or dividends) .
bi'hLle banks could not, participate as principals in security trading,
they did reoeive orders for -transmittal through brokers ancid did make loans
to brokers to carry customers. trading em margin.
The term market. 'Transactions in the term market were negotiated
f'or fu.ture settlcfment ospeciif-ied "-ttlemont days", falling on the 15th
and last days of. each month. Such transactions were essentially speculative,
and wore actively practiced in only some Lp-50 shares, mostly foreignfnd
colonial issues (dealt in in 25 share units). They ere frequently, settled
without any actual delivery of. shares. The buyer of shares in this market--
if his hopes of a rise in price materialized--would ' simply receive payment
from, his. broker of the difference between the pribe ate wwhich the order was,
placed and the price quoted on the settlen nt day; conversely, sellers would
be called upon to make up the difference. On the other hand, a speculator
who was 'a buyer could carry an open position over from one settlerient day to
uamo the by borrowing funds to make payment.
l 0,
'These and other speculative techniques wo re severe v r( strroted
by decrees issued in 1932-35. In particular a decree of October. 15, 19.34s'
required speculators operating in the term mnako t to deposit collateral writh
the brokler, in cash or listed securities, up to at least 25, par cent of
their commitment or 2,000 francs, whichevor was greator. The consequent
skrinkago of term market transactions gave raise to greatly increased specu-
lative dealings in cmmodities, which wrrco in turn severely rogul1atod by a
decree of November. 30, 1939"
- 110
-
I. nsu 'ance CdmpaniesJ
Inrsui m Law
Tfhe Belgia. law of insurance coCtract is is govrneed by Book I of
the Code of. Come rce of June 1874, which contains six chapters dealin d with
the insurers andthe insue. Isurnce law devoloped
only slowrly therdafter. A major stop was taken with the law of June 25,
19 D, which established government supervision over' life insurance companies.2i
However, companies dealing with -the major property insurance bran ches
remained free of such supervision.
The supervisory functions established by7 the Act of June 25,
1930, were entrusted to. the "Direction Generale de l'Assurance Ot de la
P.revoyance Sociale" at the Ministry bf Industry and Labor. The Act ipro-
vided that life insurance companies had to apl y for authoriz ation at the
Ministry and had to submit to the Ministry their statutes, gencral policy
conditions, and a description of the methods used for the calculation of
net premiums and premium reserves. The Act u.rther required life insurance.
companies to make a uarantee deposit, the size of which was to. be de-tmined.
by an executive decree to be. issued by the inistry. Another article of the
Act authorized the establishment of an advisory. crmmittee at the Ministry
of Industry and Labor, to be composed of nine mcmbrs selected from among
persons closely familiar with insurance operations. and insurance law. The
Act forced insurance companies to draw a distinct line beteon life and
property insurance operations by providing that life insurance cornipaties
which also transacted business in other insurance f.ieltds should es-t .:abl ish
a separate 'department. and separate administrative and accounting services
for their non-life operations.
Detiled rules on the rights of the supervisoxy authority and the
obligations of life insurance companies Tis--av is the supervisory office
were issued by Royal Decree of June 17, 1931, amended. by the oyal Doecrees
of August 8, 1935, October 22, 1936, and. June 1, 1937. Pursuant to those
decrees, life nsurance companies had to submit to the Minister balance
sheets, profit' and loss account statements, as well Es all resolutions5,
prior to, presentation to their general meetings of shareholders. They
also had to submit upon recut st. detailed anmual statements on ,their life
insurance operations, ,as well as books, records, copies of policy contracts,
and any other documents which might be useful to the supervisory azultho i t y,
'The decree prohibited reductions' of premium tariffs viithout the consent of
the Minister.
The decree contains detailed provisions on the size of the guarantee
deposits of insurance' companies and on the accumulattion. of mathematical
reserves.. The initial amount of the deposit ims 100,900 francs to which
had to be added 3 per cent of the premiums collected during each fiscal
~/_Section prepared by Foreign Research Division in Federal Reserve Bank of.
New York.
/ Also over compnies engaging in worlimen' s compensation insurance d in
compulsory liability insurarce of bus operators.
~~:: : -111. - -
year until the total, deposit reached .3 per cen t of the mathematical reserves,
at -which level it had to be maintained.' The provisions of, the Act on
mnathemati cal reserves gave insuran ce companies considerable scope in the
selection, of their investments ,and authorized the acquisition of assets
which the insurance laws of most other countries do not a& it as coved for
premium reserves. At least 15 per cent of te premiumn reserves had to be
invested in securities issued .or guaranteed byt te Belgian Government, 'in
bonds of. the Credit Communal, the Sociote Nationale des Chemins do 'eer
'elg s, and the Societe National de Credit; a lIndustri e, ' or in borid.s of
Bclgian provinces ,and municipalities. As much~as 50 per cent of the. premium
reserves could be inves-ed in bonds of Blg'ian corporations which had a
five-ygear record of meeting thecir liailtes out of ordialr in.OOLe, and
up to 15 per cent in shares of such corporations; on the other, hand., up to
10 per cent could be put into bonds of Belgian corporations which failed
lthis test. Again, up to 50 per. cent of 'the reserves could bb' put into
oans on collateral of bonds authorized as. cover for premium reserves. No
limit tivat established for the investment of premium reserves in policy.
loans, whi chi, however, mi ht not emceed the .surrnder value of te policy
forming the loan collateral. Lp to 65 per cent of mathemtical rdseres
could be invested in real estate 0ocated in elgium or in mortgages on su .ch
property. Up to 20 per cent .of the premiumi reserves could be ' invested.' in
foreign securities if I-their acquisitibh was .a'provod 'by a special decision
of the inister of Labor and Industry. The law further provided that
reserves covering policies underv^ i tten in foreign' currencies should be
invested in se cu ri ties denominated in -the d non currencies and aproved byl
the Minister.
A ll assets representing premium reserves were to be kept in
Belgium and were . to, be placed .in a custody account with the ' National Bank
or, if the Minis ter did not object, with ether institutions. Insurance
companies were to keep an 4p'-to-date list of all assets placed in these
custody accounts and were also, -to maintain detailed list s of real estate
and mortgages allocated to their premium reserves.
During the thirties the :Belgian insurance industry was exposec.
to 'considerable criticism, which cujinated in 1935 in the presentation to
Parliament of an insurdnce bill: prdviding for the ostablishment of four
separate State insurance funds which were to monopolize the life, fire,
accident, and gnera business. These plans were successfully re'sisted
by the industry and in particular. by the le dig' association of insurance
companies, the Federation des Societe; d'Assurance Operant en Belgiou:e of
Brussels; it. was pointed out that pem fits= distributed to stockholders
amounted only to between- 2' and.4 per cent of premium receipts.
The preminent place occup ied by foreign insurance companies
created no little oposition in Belgian insurance circles. A. report by
an investigating cmmisin released it ;1X3 su sted legislative action
to the effect that no foreign company should be. authorized to ope rate in
Belgium unless its home country was aditting Belgian companies on equal
tems with domestic companies. It also recommended that foreign property
insurers operating in Belgium should . be compelled' to keep their reseres
in Belgium, a provision w hich. had been in force for life insurers since the
law dealing with-the supervision of life insurers had been enacted in: 1930.
- 112
-
Measures were also proposed with the viewv to preventing the foreign head
offices of companies operating in Belgium. fromm carr7.ng part of the maage-
ment expenses, thereby peiritting their agencies to operate, at a loss while
getting established in the country. None of These neasurres was aodop ted:,
however. /
A Royal Decree of August 7, 1939 provided for the establishment
of a hVutual Mdarine War Risk Insu ara nce lnti ute, ith vhich all shi's and
larger fishing vesse1N were to be insured.. Thie statutes of the new insti-
tution, -which was domiciled in Antwerp, . were contained in a decree dated
August 3, 1939.
Life' Insurance 0aerations
At the end of 1933, the last year for. which complete tstatistics
for the Belgian life insurance indu .txr are,.' available , eighty companies,
including thirty--five foreign corporat oninw ere authorized by. the "Di.rec-
tion General" to engage in life insu.ranco operations. All but seven--tw o
cooperatives and .five mutuals--.were organized in ordinary' corporate form.
The following table gives a sumary picture of the status of the' life
insurance industry in 1933, and. reveals the proportionate share in direct
lbusiness of domestic and. foreign -copanies and of companies organized in
corporate ,and non-corporate form.
Direct 0perations in 1933
(Million francs)
Net addition Insurance in force
in 1938 December 31, 1935
Domestic companies'
Corporations 414 2 69 6.3
Cooneratives 970 1,117.1
utuals 11.5 69.0
Total 5227, 7,42.9
Forei n. compaies
Corporations 33 .: ! , 264 5
Mutuals 19.') 263.6
Total. 35f 4 5 231
Grand total 879.0 11,2 0
Gross sale of policies. in the drect business totaled 2.2
billion francs in 1938, o f :,which: alostl 1billion francs was placed by
the agencies of foreign insurers. roreign ;comnanies had increased their
share of the- ,irnsuranco in force in the celgiaun market from 28.8 per cent
in 132 to 37.7 per cent in 1933. Contract tcrminatons during the year
1938 were-& pproxittely 1..3 billion francs, reducing the net addition to
insurance iff- force to 879 million.
Belgian life insurance statistics distingui-sh between ordinary,
industrial, group, and roinsurance. 0rdinary insurance of the whole lifieJ
lJ Vhohe life insurance policies provide for premium payments throughout.
the life of the 'policyholder (the policy automatically becoming an endow-
ment at the, age ,of 85 or more).,
i :-: -;ndu, - 113:; -11~
and term. .type in.force at the end of 1938 ~no rated to 7.8 billion francs;
enD mment insurance in force at the end. of 138 mounted to only 169
million francs, while polios denomirinat d in foreign currencies wore
worth. 'only 204 million, francs and num 'bered: 2,.104 almost all sold by foreign
agencies. Gross sales of wole li fe sa-d ten polices dur'ing t ieJyear
1938 amnouted to 36C() contracts worth aJmost 1,2 billion francs. rina-
tions of such policies amounted to 534 million francs, the, reported reasons
for which nay 'be tabulated as follows:
Mil lion f ran1 cs
Lapse l90e8
Surrender 1635
Change of policy l06:2
Death 425
Maturity 32.4
Other reasons 4____
534r.1
These da ta show that only a strkinly small percertage of poli-
cies--scarcely one-eigh th---rem ai.ned in force until death or maturity. Over
throe-fifths of torrninations resulted from lapse or surrender, both eseen-
tial ly wasteful modes of policyr tern:nation, h hich--in the case of most. of
the policyholders invol_ ;e d---r preserat la east some loss.
Tndustrial insurance policies, which w ere sold primarily to
persons in the. lower income brackets, were for ' lativoly small amnounts,
were paid for in -eekly or monthly preriums, and '-ere issucd without medical
examination.. Each year i ithin the 1934 to'l2* 3 . period, betreen 270,000 and
330,000 industrial policies (a.most all of the whole life and enudowelent
type) were sold in Belgu, mostly .bar domestic co imprnie.s The value of all
industrial insurance policies in force amounted to some 2.7 blllion francs
at the end of 1933, but the avera .ge value vra s only about 1, 500 francs as
compared with 30,00 francs in the ordinary -- insurance field. Ttal sales
were about 605 million. francs in 193, but policy tor.iacations were as high
as .465 million, leaving a n et increase of only 140 million. his .very high
termination ratio - s duo to the hugce mumbo r ,of policies which. were allored
to- lapse; policies worth only 13 million were terminated by the death of
the policyholder. Policies which lapsed 'during 1933 'wre wsorth 338 million
francs, eqsual to 59.7' per cent of the 19383, sales; over half of then were
le.ss than three ytears old, the corresponding proportion in the field of
ordinary insurance 'being only about one-eighth. Clearly industrial insur-
an ce suff e red f rom .serious maldis trbution and Overloading, of 'the market.
Group: insurance--i. e., that form of life insurance which is irritten
under-a policy issued to an employer for .a large number of employees--played
. relativly prominen t part in Bolgium. At the end of 19.33' to-,tal group
insurance n force aggreg ated 1, 2 billion fran cs, a bout 100 million more
than: at the end of 1937. Ann uity insuracc was of little importance; the
total amount in force . s only 54.7 million francs at the end of 19383 927
annuity policies worth 4.7 millibn francs having been issued during the
year.
l I4 r L
In 93, total investments of Belgian life insurance coimpanies--
excluvding securities and other assets representing guartanee dcosits-=vwere
3,055 million francs, distributed as follows:
Million francs
Cas/h and in banks 54.4
Securities 2, 0o7:7
Mortgages
%5l.9
Real estate 256.0
Policy loans 153.1
Other investments 2:O
Total 3,05 5.0
This tabulation shows clearly the predominant role of securities
among the investment assets of the life insurance, industry. It is note-
worthy that foreign companies invested in bonds and shares almost three-
quarters of their ' funds representing premritum reserves. The following table,
showing the distribution of securities in the investment portfolio of the
:life insurance industry in, 1933, reveals that most of them were government
,bonds and bonds of public corporations and public credit institutions.
Security Portfolio ,'of Lire Insurance Companies
(Million francs)
Types of securiAt os o Per cent
Obligations issued or guarauteed by tho govnhmet 112$.$ 55:3
Obligations of the -Cr6dit Cornmudnal and other 44.4 21.9
public c rpo rations
Bonds quoted on stock .. xchange -801 )3
Shares quoted .on exchange 153.3 7.6
Securities
1
not quoted 199,9 9.9
l2024;5 100.0
l1/This figure is slightly larger than that in the preceding table, since it
includes securities representing guarantee deposits.
One of the: principal channels of investment which life insurance
companies in Belgium' ha% eutilized for many years has been first. mortgages
on urban. real estate. Such' loans accounted for a proximately 20 per cent
of the invesmaents of the .industry in l938.. .. Policy loans, though in many
countries occupying a prominent place in the investment portfolio of insur-
ance companies,, played only a relatively minor role in Belgium.
In view of the relatively wide scope 2eft to. life insurance,,. com-
panies. in the investment of thdir reseve funds, , it- is interesting to note
that on the whole they pursued a fairly conservative, investment policy.
The .insurance law required only 15 per cent of premium reserves to be
invested in obligations issued or guaranteed by the governmcent, or issued
by public corporations, but companies preferred to' put as much as 47 per
cent of their reserves into, this investment type. hough as much as 65 per
cent of premium reserves could be invested in real estate and mortgage's,
-
.
..115--
only ~ ~ ~ ~ ~ ~~.: 27'per cen wer ada1' ietdinhafsio. ALs mTh a 50 per
cent of the reserve investien ts ould be put into obligations of "soun~d"
Belgian corporations, but in .practice only 8.4 per, cent of the reserves
were thus invosted
Belgian life insutrers obtainedv~, apreemium incone in 1933 of 54.2
millionl francs and / en inves r eat yield of 140.9 'million, corresponding to
an interest .rate, on capital assets of 4.7 pare cent, which compared with 5.5'
per cent obtained in 1934. Tis .rather shar decline in the invest .ent
yiel. was chiefly due to the'. red.uction of in te re st paid on governmLent bonds
and on obligations of public corporations from an average 6.3 per cent in
1934 to only 4,,6 per con c in 193.' iMortgages ari.d'policy loans yielded 5.4
per cent in 133, only slightly less than in 1934. Disbursements o~f life
insurance companies to poli cyh olders w ere '230 million fr ancs, of .hich 172.4
million. were 'paid upon miz turty of policy contra cts or in the form of
annuities and 58 million on account of policy surrenders. Acquisition
costs rer 79 million francs, administrative costs 40 million, and preenumn
collection costs almost 19, million.
By far the largest Belgian life insurer was' the Cie. Be1e
d' Assurances Generales S'ur la Vie, of Brussels, 'which was established in
1324 and was unddr the management of Mr. Pierre Pleeck. Mr. Leon El:iat
was chairman of the, board. 'The paid-up capital of the company was 5.6
million 'francs, 'and its total life insurance assets at t he ed f 1933
amounted to 764.2 million (including 460 million inves ted: in securitios and
260 million in mortgags). Together with assets representing acciden t
business, the compnany's 'oalanc& sheet total ' at. thc end of 193 aOnounfted to
more than 1,3 billioi francs. 'The 'premium income of the Assuan ec's
Qenertales' in its life sector was 97.1 million francs in 193E, qal to
almost 13 per cent of the total. premium receipts of the Belgian' life
insura:nce industry. At the end of 19353 , the company had more than -33,8300
policies outs-tanding, wtith a face amouint of approximate1ly 1,550 million
francs; against which t had accuumuated reserves aggrgating 752 million
f rancs.
Second in rank among' Beg ivn life insurers was the' Roy lgc
Soc. Ar. dAssurance 'Sur la Vie et Centre les Accidents. Te manager .of
the Royal Belge 'was Mr. Verrmeulen and' the chaiman bf its 'board Baron
Carton do W'irart, director of the ' Bancjue d.o 1_ 'So ciete Generale.. The
premium income'of' :th' company on life policies wai s 67 million francs in
1933, while at the' end df that gyear the face ; amount of its outstanding
policies as 1,147 million framcs, its premium reserves were 423 millien,
and bhe total assets of the 'life inin;rance sector of fthe company were 433.4
million'( 308 million invested in'securities).
M aesudied by p romium income, the third largest life insurance
carrier , in Belium was the Prev oya nce S'oci.lo, a cooperative enterprise
with 73,311 policies outstandi.ng--the' 'larget number sold by any company
in Belgium. The specialty of 'this insti t on~ was industrisal life 'insur-
ance , in 'whih it had 560,-000:policibs outstanding--about one-third of all
industrial policies in force. The' total insurance in force of this company
. - 116-
was in excess of 1.1. billion -fran::cs at th- ,end of: 1933; premiiaum reserves
were 133.3 rillion - nd tot.,al assets 146.3. million. Its prernium incm eye
during 1933 was 33.2 million francs. These figures do not include the
operations o.f the company in the, fire and accident field, in which it
handled a :considerable amount of business.
A Dutch' company, the "trecht" o f Utrec .t and- a Fren chcompny,
the ssurances Generales Sur a -Vie o f Pa ris , were two, o the r companies
operating in iBelgiiza' which owed their prominence to their success in selling
policies in iiall face amounts. Their life i..nsuirance premium income was
31.1 and 23,4 million fran cs; rese inT, 33, Th Assurances
Generales Sur la Vie attracted some business by sel ing policies- TD th profit
participation, a prziv=iLege never sttachd t) poolicies sold. y Belgi an
companies. At the ,end of 13,M the company had outs t ding 0,103 off such
policies, ioarth 363.3 million francs, in the industrial f iJld alone .
Other Insurance Branches
The non-life insurance sector of t11e Belgian insurance industr
wvas' characte:rized by sharp compe'titioh, the number of companies being -*
excessively lDarg, consider ing the narrow market. In the fM re hinsurance
business, there were,201 comnpanie, in the accident sector 137, and in the
liability branch 105. Te reinsurance markt consisted of- sofie 70 comeenies
and agencies, including some of the biggest Belg aan insurers, suchz as the
Cie. des Propriotifes Reuniis, iCh o tnod Wo re insurance operators. 'There
were only two other specialized reinsurers, L Th. 1oyoyancb Sociale. Reassur-
ances and. the Antwerpia Reassirances, in this ratLhor narrow professional
marke t. Most cessions weore placed with the we1 -knovn int-eLz'ational re-
insurance companies in Britain, Switzerland, and Germny. Credit insurance
was transacted by only one cormpar y,.. the Comb agie Bolge d' Asi rance Credit,
working in. close contact with British credit insurers and reinsu.rers..
Marine insurance was a, very minor un-dervri nin terest, as the, business
was chiefly in the hands of foreign companies due to the proximity of the
Londoi marke t, where all placements could be absorbed under more attractive
conditions and at lower preiLUn rates than in Belgium. Worinent s cemnnsa-
tion and motor branches wore important insurace interests, but owing to
unfavorable claim ratios were a source ofV anxiety for some jears prior to
the outbreak of the war. The situation in the -wrt nenT s compensation branch
became so difficult in the course of l938 that it. attracted the attention
of the supervsory authorities, wihich urged insurance companies to rev se
their rastes in order to .meet the actual claims ogqeriencc Conpctipion in
-the motor branch was particularly intcnse, with numerous small companies
writing risks at rates well, below the standaid tariffs.
The Belgian statistical offices do not publish any d.; at . concern-
ing the non-life insurance transactions., of insurance companies, so that it
is unfortunately impossible to give any global' figures on the assets,
liabilities, a.d -operations of the industry. In tho piballshed. accounts of
individual ;companies a lack; of clarity is no ticea ble, speciallr Gas to the
separation of life from. other business The lea ding property insurer was
the Compagnie des ro retare s Luris, of Bpis es, -estakslished in l32l:
The chainnan cff the board of .-this company was Count A. Du Chastel, and. its
- 117- : i.
president = s Yves Hamoir. Gross pre.itm in .193 increased ightlvr to
87 million francs, while net premimns were 62.7 million. btai. assets at
the end of 1933 ;were almost 100. million francs.
T h e second largest company was the R o y , al ejJ_ e which,3 in ait.:.ion
to its considerable life insrsance operations, w as also the largest, operator
in the acci dent insurance field. - Tn, 1933, the. company earned in its acci-
dent branch gl-oss premiwas of 53.3 million francs and obtained a net premimi.
income of 36.6 million.
Th e third largest compar ei ras, the Cie. Be d ssurances Generales
oan of rsewhc obtainedl in 193 a gross
rd~e les I~zsues dp 'ncqc nuze, o L Brussels , which c r : n.J-j~ :: ~s
premiwn income of 51 million francs and net premims of 33 mllion, This
company is closely associated with :-the, Compagnie 3elge d Assurances Gener-
ales Sur la Vie. The latter company also wrote a considerable accident
business, in addition to its vrery substantial activities in the 1 hu:e sector:
Other important ,property insurers were the Societe d' Asurance cu
Bocrenbond Bege, of Louvain, operating in the accident, fire, and life
business with total assets of appro dc1a.tely 150 million francs at the end
of 19383; lAssurance Liegeoise, of Iliege, vhich offered a large varicty of
accident lcies, and bhe Compare d! As uranco do I? Escaut, 'of Antw er,
which wrote accident, fire, marine, ard worioen' s compensation insuran,,
and had total assets of 32 million francs.,
WNW,
PART III. !i.'EVBLo P iJNS SINCE I E IN"'ASIOON
The Invasion Crisis and the Exile of the National Bank
Thei n.vasion of Bei-iumy :=ccurring on Ma 10, 1940, brought the
immediate -enactsler t of .several war measures .' A decr ee of May 10,' 1940, sus-
pended the gold standard by releasing the National Bank from its obligation
to ,scll. gold or forei 91 exchange at the legal price. The notes of the
National Bank, thereupon be came an irredeemable currency. Anothor decree
allowed the National Bank to gran t loans to the Treasury without limitation,
thus repealing Article 13 of the decree of August 25, 1939 (see p. 17).
The stock exchanges were closed on the' day oi the invasion and a decrcee of
Mary 13, 19/1, - imited vithdrawa.ls of dposits from all banking institutions
( as vel3 as fr om the Office des Cheques o's tau) to 5,000 francs per fort-
night. b / mA. oratorium, effective for the duration of the v~ar, on payment of
hegotiable" paper issued before May '10 was proclaimed by a decree 'of May 15.
Dealings in foreign exchange wejare suspend.ed. and on May 14, a decree ordered
the registration ,of all holings of gold and of foreign currencis, a
measure which in :practice was impossible tp carry out, owing to military
developments. In. fact Belgium vras overxgheL x ed so rapidy by the enemy
forces that the eme rgen cy wnar. measu.rcos 'of the? Belgi;an Go ve rment had only
a brief period of operation.
As the German forces advanced in the country the Belgian cabinet
left for France, and de spite the surrender of the Blgian arry .on May 2E8,
the cabinet decided to continue resistance. On hay 30 it aeproved. a decre ..
stating that the. powers normally vested in. the Ming, ho had fallen in the
heds of the enemy forcos,\ aould be exercised br the Government in pursu-
ance of article 32 of the Constitution. This action was siprported on the'
following day by the Belgian Pariament, meeting at Limoges, and recogni-
tion of the cabinet as the only legal government of Belgium was accorded
by the British Government in.. a declaration of June 6.
The Belgian goernment ri a -ned in France after the French
surrender but on October 22, 1940, was reconstituted in London a day or
'so after the arrival there of the PrLme a M inister, 1r. Pierlot, and the
Minister of Foreign Affairs, Mr. Spank. They had been preceded by' Mr. do
Veleschauwer, Minis ter of Colonies, w.ho since July had acdinistered the
affairs of . the Belgian Congo from London, and Mr. Gutt, 'Minister of Fineh cc,
who. reached London in August. A reotgani tion of the cabinet to assign
additional ministerial functions to each of the four members was announced
in a decree of October 31, 1940, which became effective upon its publication'
in the Mbniteur Belge, London, November 2 . Again in October 1942 the
cabinet was reconstruicted with a membership of seven ministers, r. Gutt
continuing as Minister of Finance.
At the same time as the Belgian cabinet left the country, the
National Beaik transferred its head office abroad, acting under emergency
powers granted to all Belgian corporations by a decree of February 2, 1940.
The decision of the, officers of the Lank, dated May 15, stated that the
Bank could establish its headquarters at the place where the & at of
lJ Exceptions were made for rithdra als of funds for te pac::ynent of vtinges
and salaries or for any purposes connected with national defense or,'w th
maintenance of the economic life o f the coun try,
CIVIL AFFAI~R iI..NDi3OK
on
13 E L G ' UL13
Section FiLve
on
S0 N BY A ND BANK I NG
PA R T III
Finwn cial developmonts under the Go(rman a ccupation .have been domnated by
the, Germarn ocxloitation of -the count4-ry. ohe banking sy stem--especially the
central bank--~-has boon mobilized .to provide credit for the payment of
o ccupation costs a~t-c{ :for fine ncing. the huge exort suzrlus to Germany.
The newr money puimpod :into circulation to sa tisythose needs bins created
e o s sive l.iqc idiqty throughout the economy,9 has,, carivon :intorost ratos
dovrn, and a s relie:ved thbi bdarks of :any pressulre on their re~servves. At
the s ane time., how'egver, it has generated great inflatonary pressure wihich
has boon comnbattod viHth only partial success by price control, ra tioning,
and other ferns, of totalitarian control. T~ie ernount of currency and dewad
depo sits aporoxdmatoly tripled from, the end of 1.93') te the end of 1943,
Mhile theC1 banking sytcm~ haes built 'up an asset Structure consisting largely
of' clai s. on the govermlon t (including the rei' claim.s on Gexmanyv which in
effect are guaranteed by t.he goverment).
-119-
government -as located and that the powers of control over the Bank aid its
assets, formerly exercised by persons olr boies in occupied territory were
suspended. . For ,two months close contact was maintained between the Bankcl
and the governnent in France. In the middle of July, most of the Bank'
1
administration, headed by Governor Janssen, returned to Brussel s. The
foral no tice of this action canceled the decision of May 15, including the
linta.ifion on the powers of persons in BelZgiun to dispose of its propert~
outside the eountnrv. However, to protect the ;foreign assets of Belgian
companies, including those of the 1ank, twir inistears who succeeded in
getting to London issued a decree-Law on.. Sepntember 2, 1940, supplementing
that of Foruar. e now mneasure authorized a d2i nistrators of. comnanibs
residing in free territory to deal with assets abroad and rolieved" thon. of,
any control by officers in occupied..torr torv. Fuirther amendaent of the
Feruary decree mws made on ctobe r 31 by. thrie newly-constituted government
in London. Meanwhile, one of the managers of the National Bak, Tv r. Adolphe
Baudewyas, had arrived in London :v ith; a pow'rer of attorney from Go vernor
Janssen to administer the Bak s forei gn asests, and the, government g'ranted
him sole authority to act for the B a k abroad.
Up to this time, the Bel lan cauthorities in London had acted. only
as administrators of, the National Ban:' s foreign a ssets. A new situation
v s, created in Juno .1941, however, when .Governoir Jansn died and Mr.. A.
Goffin, a manager of, the Ban'k. who had. T'(.nained in Be
1
9 gum,; was nm ied as his
successor, there. The London 0ovo rn ent repuoiated this appointment, and by
a series of decroes on November 27n d 2, : 1941,, set upa full a ninistra-
tion-n-exile for the National Bsnk. . 'r. Gorges Th n-is, fourer Pr ime
Minister of Belgium and, a regent of the Bank cefore the invasion, was named
Goverxnor, and T r. iubert Ansiaux (ao l er official of the Bank) was
appointed to act a
5
the second manager Vvl fh TI r. Baudo" . The inistr of
Finnc was 'mt nnd Theov the~te of
F~inancew~as authorized to appoint s ranagors for the
duration of the war, and the Governor and managers in London were grantod
full authorityr over all the .Bank? s a ffairs,. . Mr. BaudeiUyJn s, who sle to Xtas
manager began in 193'7, wnas. reappointee. by the Minister at the' end of 1942.
to s r-e until after the first general meeting following the liberation of.
the country.
Before. 'the invasion, the buflk of the Bank' s god reserves was
already under earmark with.' central- banks overseas, and the remaining amount
(except for a trivial su) together with the gold held for-.the. Office des
Cheqes Postux was evacua ted. to France durn g the frs't :-;s of the in .-
sion. Part of this gold had to c be used for emergency purposes, however,,
and the, .total gold and foreign exchange reserve of the National Bank 'd clined
from 23, 243 ,mi'lion francs on May 1, 1940 (the lst pro-in-vsion statement)
to 21,90 million francs on June 25, 1940 (the first post-invasion 'statement).
Some light on the nature of this loss i s shed by the balance. sheet for Juno
25,. 1940, and the remarks of the Governor at the semi-annuarl eeting- of
shareholders held, on August 27 to uhich this balance; sheet was presented.
Fistly, gold to -the amount of 1,437 million francs c?as earmarked t the,
Bank of ~' ance to cosripenpsato that Bnk for 'exchanging Belgian, currency
carried into France by Blgian refugees. It appears that by June 25, 1940,
929 million francs had been utilied for this, purpose,, and 477 mglion
francs of t' Belgian currency redeemed had beens delivered by the Bankof
Frances to the National Bank. The National Bank' s balance sheet on that date
-120-
showed special "clais on the Bank of France for 55 million francs in gold..
(1,437 minus 929 and 452 million francs in Belgian currency (9 ininu
477). These claims have been maintained . a t that lrvel ever since. The
rest of the decline in the gold andd foregn exchange holdings of the
National sank up to June 25 (some 340 million francs) presumab i ly refe cts
other contributioi s to the neergency neods of the govemnment-in-exi
The gold reserves of the Nat zonal Banak on June 25, 1940, wero
reported at 21964+r7 million f rancs, l eav.ng '333 million francs fo r foreign
.exchange. The figure for gold resex es has- remained virtually unchanged
since that time in thpe statements issued oby the Nationa L Bank from Brussels.
36ow=evrer, the gold entrusted to tho Bank of F'rane, after being evacuated
to IDakar by the French autho ri tieas b Cfro e the collap 'eb o f ' France, was
brought back to Marseille early in 1941 and w a eportedly delivered to
'the' Rich~snk. Legl :pro cedngs w;ere t 1( reupn isituted in the New:
York courts in the nsamre of thd National 'Lak to recover an equvalent
amoun.t of gold from stocks. of the metl held under earnark for the Bank of
France by the Federal Roso rye Bank of New ork. A first sui t, begun in
Fobr nary 1941, named the amount sought as 260 million dollars. A second,
entered: in April,' apparr.tly superseded the first and so oght to 6btea in
judgment for 223 million dollars. Both suits are still Pening as the
action brought has not' pregres>sed b eyo. d: prel iminany stages. On the basis
of the smaller claim, 'Tllich is for gold vhucd at about 6,726 million
francs (at 3.39 cents per frnc), it iwou ld ap r that the amIount of gold
entrusted to the Bark of France in addition to the
T
e ecil deposit"i was
at least 6,163 million francs. Prob l b y this figure include s the 506
million fr n.cs' of gold hold, ab road by the Nat;ionnal Bank for_ account of the
Office des 'Checues Fostaux.
One of the most important financial measures undertaken by theios
Belgian~ godvernenin; exile wajrs- .the conclsin Oi" agreem: nts v 'ith th ritsh
and French govermcints cn'Junc 7, 903 , wiZch in effect signified the
adherence of Belgium to the A glo-French monetary agreement of D ceomber
* 1939' for th.l period of the war 2nd six months thereaofter. By these agree-
ments. the exchange rtt o f the ' lgian franc--and the lBelgi3an Congo franc--
was reduced to parit uw ith the French franc (176-5/8 to the' pound sterling);
the value of these cr rrcncies in terms of US.S dollars thus became' 2.23
cents as coreared with .3 9 cents p1ior to the invasion. The rate on, the
Belgin franc proucv ha d little s'ianifiance except for .the exchange of
Belgian currency re~ ugoes,: but that for the Cdngo fran@c has continued
to g overn, the impo r Lenu internatiol tr~c and finncal reltion ofe
the Colony. The A nglo-B3elic, i agrecen t conti. 'd fur;her broad prov siors
for reciprocal credit facilities, for an "ecuitab o l distribution of oar
exanditut res inc u'red %- the parties in told and dollars, and. for facili-
tating trade beten the te countrieres, includi the colonial enpires
however, littoe info rmation is avaiia oe conce rning the iplcmettation of
these 'terms o'f the agreeme nt. By a fen ~a. financial rgrecmone t between the,
United 'Kingdom and the elgian Congo dated Ja ,nuaxyr 21, 1941, the 'latter was
broight into the "steriig.areaUf . This meant that the Congo was bound to
main tain exchange restrictions on the British pa ttern, to' cense oe its gold
and foreiig exchange resources, and to transfer to the Bank of England.
'(acting'for the 'British Treasury) against pacment in pounds sterling any
sirpus gold 'a nd e xchange which it, acc1~au .ate d.beyond the needs of the
Colony cdthe BJ1 .gian govenent--in-e ile.
*T he agency rin the Belgian. Cogo ,through, which these; financial
agrecmie' ts are adm1iistered. is the Ban.que du Congo Beige ( see p. 63)5
winr Ch t' err fo: e hags bean an important &inancisl agency of the' e ,dled Belgrian.
reg'ine10..: Jefore thue gar the head office., o:U this instiution was in Brussels,
.but af ter: the Frehch amr istLice in. June 1940 control '. as shif ted 'to Leopold-
X1i0~. The geaneral manaiger of the bank , M.r. R. Baseloer, rorained the
acti'e head, admirynistering the bank' s affairs uer a power of attoicy.
F nmalv action was taken in London, on January 14, 19 43 , to esto ligh the
legal tianmfer of .the head office of the ba to. Leopoldvillo;.. Authoiit
orthtrn
rwspvi'ebyaccr
ao Fbar19
92cerning
the administration
of comm ercial compaies
in tinie of war.
Exchangec contro? lk, wa ntrodcedc l In the, Congo in May 19/0 (extendedl
by su bsequent mpeasur:es) and. the red emaablityr of, t~he bank' s notes and coins
'wi thin the Colony -ras suspendecd. 2rbhexr aoj~, on F'ebruary 1x9, J.941,; all
restrictions wore removed on the; Baks powers to oextend credit to tho
Congo Govornuelnt. Nvo roceont c l c sheets of the- Ba-'ao Congo Bilge;
are available but thec circla titon ofk its not .s an d oins is reportied to
have -increased. f rom 410. million- francs at 'teend_ of Arpril 1940 to 96'7
million francs on. June 30, 194.3. Bp~t oei h an eidfon
63'7 million .to more than 5,'000 r i llion. The ge rl mrone tary' expanision
in .the Coniga is attributabl;. to the' high, rate of'.oconorniic activity in the.
Colony d uring the wi-ar., anzd. to the inzrabiJlit v of i ndividu.,als an d corporationis
in the territory' to. spend their money or. ' mit it to IBlgiuna as in normal.
times, There has been a large exotsurplus, , ainly in war ,supplies
(copper etc..), ,oend. the produ cers h.Tve had to soil te foreign, 'exchange
proceeds against depo sits with the central bank of the Colony. 'As proviously
noted, mos t of thewe fo reign balance~s are held. in poundrs sterling; it may
be pre sumeda thatb pa rt of. these s terli n g Th ends have been l.en t to the Belgian~
go vom'rent-ineie
GermanFinancial E, ploit.tIon
-The 4rva? teribute ec]ted by, the German authorities has been at tho
root of all e conomlica and fin n cial devel open ts in Belgium .under the occupa-
tion. At first colic cted simply by the, is aan cO of occupation currency,
this tribute was soon. put on a .perma nen t basi.s in the fort of (a) charges
for "toccupatiodn co st"s" l.evied uaen the B36l1gicn adi cnistrat on remaining in
the country- and (b) enfryced acc. ulation of Boi'chomnark "1clearing .blnc '
in payieent fo r goods shipped from B6lgi0111 to the Reich.
The qu ckest method (,short- of. outright confis cation) -'for thie
invading a iry to obtain supe.Cioe; and faciities in the invaded counitry- was
to use its one currency. _Accordingl-y, on .the first dca of the invasion.,
;an order .of the German military con :ziander gave- legal tender status to, a
1/_It' ray ,be rotodl that the Belgian Congo 'is, a; geld producer, yielding some,
8 -9 million doll a 's o,t the, me tal annua lly.
1l22 ___
special Reich' ark c rrency (Iteichskreditkassenscheine) issued to the Any
through emergency btnking offices (:Reichskreditkassen) opened i n the occupied:
territory ay n official Gernnan institution affiliated Pith the Reichsbank,
the Hauptver 'raltung der Reaic:hskreitkassen. By contrast with the practice
during the First World War, this currency was quite distinct from the circu-
latinEg ; ediun in Geimany 'and was vali o nly in the o ccupied region. It was
iniialy .iLntroduced a t te roun d figugre of 1i if 10 francs , but on July 22
the xa t 7a s changed to I Ti=: 12.5 francs o'r 8 francS I HLE, the nearest
con eniLen t rate to the pr-w ar th eoretical gold pai.ty of _ I. 1 = .9 francs.
Although on the face of it, this rate therefre had seone pretense to equit r,
in .eet ict grossly ove rvaue1 .the reichsmark. 5he latter currency had long
been maintained at an entirey artificial gold value, .enid its actual pur-
chasing power in 1940 probably d .id not exceed, to-thirds of its theoretical
gold pariir.
This occupation currency -a.s only a trmpooary . doi c, howvvcr,
and was superseded as soon as ac thdo for colecting " occupation costs," in
l cal currency could be desi~gned. Under the circuristanices, credits for
this purpose in adequa c voluin a0. could only be supplied byi an institution
with the power of note issue, and the a dministration of the National Bank
had left the country taking witrh it all,. unissued stnocs o currncy and
even the printing, plates. A-ccord nV, it was decided to set'( up 'a new
central bank of issue, .the B3 ;n , =e ls d ssioi 9 8 r cZ'l s to supply the
currency needs of the country andc to finace cc the paynen t of occupation
costs by the Belgian ad iii st rataion. ,This Bank was authorized by a de~cree
of June 27, 1940, and 'actually established. on July 13, 1940, with a capital
f' 150 million francs (20 per ceat paid tn), suibscribed by a symdicate of
lead- ng Belgian' banks an d financial come~pan.ies. It vas authorized to issue'
legal tender currency and w -as given bread. operating powers. Its officers,
to be elected by the shareholdcts T--th te aproval1 of the Geirnan military
cord &ndler, were to consist of a 'resident, ieo "deputies" or Vice-Presidents,
an IAinist'rativi Counil of 20 members ( enced to "not exceeding 30" by a
decree of A"ugust 19 140, ridtw - uditors. A speil arti0cle of the
eriginel decree impo sad on all officers the duty to maintain complete
secrecy concerning the Sank' s operations.
On or about the date on xhyich the Is ue Bank commenced operations,
however, Governor Janissen of the National Bank returned to iThissels, anid
that Bnk re nied. acti vities in te o cupied territory. As a result, the
Issue Bnk never undertook the issuance of currency , ut, using, funds
supplied mainly by the National Bank., has acted as ' an adjsnclt of the latter
in hanlig syeci l business, particularly financing the clearing claims on
Geena'n. Actually, on; of its first functions arose as the German occupa-
tion cuxron cy was retired through the National Bank against payment in
franucs. The National. D3ank passed its holdings of this currency over to
the Issue Bank, whicoh del:i.vered it to the issuing agency,9 the Reichskredit-
kasse, against a book clan on that , ins t itution denominated in Belgian
francs. The amount of this claim zceached 3,3567 million francs' in enPtcmbr
1941-9 at which figure ,it has re ained ever since. Hoiweover, during 1942 the
Issue Bank acculated further ,eichskreditkassoensc;he i ne:, especiall y up to
August of that year, when the o ccupoing autheri tie issued an order that
Belgian banks should no longer make or accenpt :na ents in these notesa,
-- 123-
Vtmhough under certain restrictions, exchange of such notes for Belgian
currency might still be made' at. the ;National Bank and Issue Bank. On
Decemer: 25,1942, the Issue Bank helm this currency to an. amount equiva-
lent to 1, 634. million francs; however by the sanme date in 1943 its holdings
were rpdiiced to 1.,090 million f. irancs.l
Th re - initi al paymrent of "a ccupation ;costs" in localcurrency is
believ~dl to have been made on August 20, 1940, in the forn of a deposit of
3 billion francs opened at the Issue Banf in fa Tor of the Reichskredikasse
in Brussels The funds were supplied by the National Bank against the
receipat of securities issued by the Belgian froasury.: Information on
subsequent payernts drawn. from Belgian budget figures ini 'cates that
approxni a tly 4.5 billion francs ;ats exacted during 1940, 16.3 billion in
1941, 1.5 b illion in 1942, and, an estimatedd 22.0 billion in 1943. ven
allouving for the c 'hanged value of the currency, the se sums vastly surpass
the nvnximirn of 720 mil:ion francs per. annum levied. as "iar tributel! from
Belgium during the Iirst World -ar. Although in international law a
belligerent power has the right to ley con riutions in an occupied tern.-
toy for , the mintenance of a gar;nson there, it is cl.ear that '"occupation
costs'! have been demanded fom Begium -to several' times the legitimate
amount. The excess .proceeds have been used to : fina~nce the construction of
,fortifictions, to purchase supplies for th, A.rmy eyrond. the needs of any
ordinary garrison, to acquire : lgian px-penrty. including 'interests in -
Belgian. corp: orations, c-tc. F 'or purposes of comparison 'ith the figures
cited. above, it may be no tLed that in 1937, the last " no:tmalt" year, total
budgetary expenditures of the B elgian govrernmenr:t (including debts amortiza-
Lion Ard capita expenditures on public works, etc.) *.aounted. to only. 13
billion francs.
T boulk_ of the paymnts h .ae actually been specnt, as showvn by
the fact thiat the deposit accotint. of ,the Richskrcditkasse at. the Issue
Bank has remained moderate in siazo3i1indoed -the Issue Bnk itself has
extended a line of credit to the PReichpskrreditk as se to', supplement occu, pation
costs, or rath r to rvide the Germai. authorities with ready Fnds in the
intervals betc~een l-sum 1! rcpaion cost" payijints. -Sus drav~n under:
this credit, hovever, have been very lirited. These relations botvreen-the
Issue Bank ann d the Reichskreditkasse ayre reflected in the balance sheets of
the foimer. whih axre shown on p. 127.
1The sigificance of this reduction is not knovwn. It may be doubted
whthe r it reflects a restoration of sone of the cucrency to circulation,
or ts re d'rnrtion by the Michskreditksse.c In the balance sheet of the'
Issue Beni: ( see p.127) the reduction in holdings of occupation currency
during. 1943 wcs closely zrached by an increase in holdings of "Other"
foreign no tes and coins, sugesting th-e possibility that the Issue Bak
simply exchanged part of its a cuptien crrre cy for other currency,
per' ,a*ps ordinary Germ- notes and coins.
The legal 'govcrmment of Belium, of course, eras estalished in london;
the authority remaining in Belgium is termed' herein .the U"Belgian ad inis-
treatio'l and_.r reerence is hre made 'to" its Treasury.
3J Most paynents have been m ae to this account, although a few (e.g.
billeting costs) ha:ve 'eeen made direct to Blgia sn claimants.
-124-
Hiweve r ltociup tion costs,; and occupation currency have formed .
on1ly a part of th e tribulte levied upon Bel gium by the occupying power.
Farther sum s, a~mou n;L.ng in 1943 to more than the "occupation costs II, have
been extracted by the G_'er Iln authoritios in) the ferin of forced credits td
GeraH-ary represented by the accumulation- of Beichlsmark clearing balances.
Thne "c learinzgi
1
between Genoa y and. Belgium was established byr a decree, of
-t, e Go:La m iitary coimmader in Belg ium, dated 'July 10, 1940, an d supple-
ment td by other decreea. All. pavm ents betweenL the two countries must be
executedr_ through the. clearing offices, represented in Bae] .ium by the Is sue
Bane of Brussels and in Ger-man~y by the Peuts -he Verre chnungka se Paymeont
for' goods delivered- to Germany is mace in Belgian ... unde r g'overnment
{pa rs.ntee by the, Is sue t..ak, n 'hie h recei .vesr a co rre sponcling R :i hsark
credit on the books of ,tho Ve rrec~h.i n sk .se; on the other ha:nd, Bclgian
importers from .Gemany pay in Bel]..gi .fr o s to the Issue Bad.k tho: Richs-
mark account' of which is debited in favor of the German e porters . The
"baLance of trad()1 -- if this to rnp nay b,: u ed? i n thyt conne cti.on--has ;pro=-
duced a huge, surplus in ?lfavoa t of iBelgii.h, ca.u'ing large Rcichsr' .7"rk suns
to accumuloate a t the Vecrr chr_ n mskass for ac c unt of the Issue Ban k .
Othe.r credits to' this accounti ha ve arisen, for 'exemiple, from remittances
home by Belgia workers employred in Ge many; ti a Issue;. Brnk pays out. franics
in Belgium against iieich smark deposited in Germany byr the workers . It is
oven 1 lk ely that Germ abanks an d indm sftial corpora.tions -have acquired
Belgi~an funds -t bough the clearing to fin '.ce their acquisition of interests
in Belgian corpora ions and in ntorprises in ; stern Europe ownied by
B elgi an capital. Farth' ermore, Belgum' s JInited. transactions since the
occupation with almost alll o t .e r European countGri.e s. ji eiluding .even Belgium' s
neighbors,, France, and the Netherlanids) have, :ben cleared through Reichsmark
transfers on, the books of -hie' Deutsche Verrechnungskasse so that any sur-
plus which' Belgil n ay h1ave gand from . sch transacti1ons wo~ld 'have a dded
to the Roichsma ilr balan coo o f the; Issu . ' nk. Th total amou~nt of these
balances; have been reported in th.e bo:aance shoeets of th._e Is sue Bank a t the.
end of each year as Ifoil ows, in mil'.ion s of francs~ 1940, 1.03 1941, '7.9;
1942~ 24.'7, .191-3, 8
In the followffn.g table, .the .available data on the German financial
exploita~tion of Belgiumi arLe broug-,ht together, showi-ang, that thiough the end
of .1943 nearly. 114 billion francs had been exacted in various 'o rms. The
growing s cale of t'he levies fromz year. to year is evident. In. part this
reflects tUhe rise in prices, in Belg;ium, la rgoly inducbd by tlle inflt:Vnal7r
Eidnnci ng o f the war tribute, buat :,uch of the increa-,se in, clearing cl ais
reprosents the moun ting; tom~oe of Gorna an looting of the country Of coure
the I'igures cited do not cover any outrightu p1]P age of cernioitiev, inidus -
tri al e u ipme nt, or othe r property which maj ha re take n :plate In. par.ti.cu-
lar 'they do not in c lude the 6. 7 billion francs cif 'gold bel1omg ig to the
Na tional "11. Bankt, which a s .noted in the px1:e-. xou s s ctiLon, is repor~ted., 'to have
been delivered into Geiman han ?ds; oe any aoTri. 1 or ene~my property-in.
Belgium~ wihich, may have, boon confisca.ted hw the Germran aalThoit Los.
- 125 1- r
stimated German Levies UJpon Belgi
(Billion francs)
1940 1941942
'19x ttal
Occupation costs (a1 ounts 1e-leJrd on .4.5 16.2 183.6 20.E 60.1
Bud:.; an administration plus advances
(est.),
fro . Is sue Bank to R.K .K less unused
baances held at Issue Bank by R..K.)
Occupation. curren- (amounts ac. ired by 1.7 1.9 1.5 -O.5 4.7.
National
Bank and Issue Bank)I1
Incrase in clearin~g claims. 1 .0 6.9 2,3:24,1 43.38
Totl 7.2 25.0 37.0 44.4 113.6
1 Th .e benefit fronm ex en di tar e of t his currency accrued to the GeflmSn
authorities as s lon- as it vwas put in circulation but no periodic figures
on the circulating amlourt a e avilbe. The figures as showin indicate
the amount whirr ch had to be financed each Gear by the Belgian authorities.
2/ A small fraction of these claims may represent net exports not to Germany
but to ,oter coutries Frith which Belgium clears through' Berlin (espe.
cially France--since January 1941). However, to this extent Germanyt s
clearing debts to these other countries are riuced, so that the benefit
to Germany is truly measured by the increase in totl clearing claims.
Among the Ce man measures of exploitation in Belgium, mention
shoud also be made of the requiisitioning of foreign pr~itely-held gold,
currencies, and securities, although prcsinably any amounts actually ,taken
over by the Gcrm -1's were paid for -,.V ..th 'B lgian fun-ds derived from the,
"occupation cost" payments or through the clearing mechanism. The exporta-
tio.n of such valuables from the co.try -wcs prohibited by a provisional
-decree issued "on the cirt day' of the invasion. Subsequently comprehensive
exchange control regulations :we re promulgated, subjecting to stringent
control all dealings in - foreign property by residents of Belgium. and all
deligs in Belgian property ownedr y .foreiEnrs. Thceforth all foreigh
exchangQ transactions required a license and could be effected only through
certain authorized 'banks. 'An order: of August 27, 19.4, requi red all persons
to register and offer for sale to the Isa' o Bank their holdings of gold,
foreign currency, *fo reign securities or other claims on foreigners (who tor
donomrin-ated in ' domestic o- foreign 'curency'), and, oven Belgian securities
denominated in' foreign curre+icios .~ German hopes of using such valuables
to fince their expenditures overseas wvere largely frustrated, however, by
prompt British and rreric n counter-action in "tfreezing"t Belgian assets- and
controlling transactions in securities and other property which3 might
represent German loot' in Belgium. It is not knom.gin, therefore, how far the
German au thoritios ,rent in acqui4ring---or having the Issue Bank acquire-
the property which had to be offered: for sale. The balance *sheet of. the
Issue Bank for the emd of 1940 showed hold'ings of gold (1 million. 'francs)
and of -foreign nots and coins other. than occupation currency (650 million
1/_For these purposos, the Belgian Congo was regarded as foreign territory.
- 126 - _ _ _ _ _
francs) w' hi ch were presumably derived in whole or in "part_frm this forced
sale1 ji/ Of the assets actually acquired by. German interests through this
pro cedure,. howrever, perhapss the most important were Belgian .holdings in
banking and indstrial corporations in other European areas under German
domination (for information on transfers of banking interests, see. p139 )
Centbral Bunking and the Finan. cin8gfjthe hfi bu te
a. description has l ready been given of the departure :o f the
National Bank' s administration from the country and its lreturn in the, person
of Governor Janrsn in July 1940. When the National Bank r esumed ope rations
in occupied territory, the Issue, Bank becamne srr rIply: an adjunct to the cen-
tral institu iinn, MrA. Goffin, wrho became Goveror of the Ndator!al Bank
upon tihe death of Governor Janscen in 1941, is also president of the Issue
Bank while two managers of the 1 ational Bank (Messrs. Cracco and Vandepu tte)
serve in the same capacity with the affiliated institution. T;e remaining
members of the board of directors . of the Issue rank are largely rec:riti ted
from directors 'of large banking and other cororations and from public
officials; there are also representatives of agricultural interests.
0 June, 26, 1940, an order of the German miita ry comm ander nmied.
Dr. Hans von Becker, head of the banking house Cones and Co., /Berlin, as
the=: German Comm issione r at the Nationafl B a .k, and Dr. von Becker alsobecamne
Conriissioner at the Issue Bank ,when the latter -iias fbunded.. He was g'iv'en
sweeping powers of supervision and direction over thse institutions, includ-
.ihg the right to discharcg e and replace any officers~ an order dated December
16, 1940,9 gave himi full power to mak any disposi=.tion of the Na tional Bank's.
assets, subject only to, approval by the military commandor,
The: Issue Bank Is been vrery largely financed s .ply by advances.
from. the National Bank, and the two institutions are in fact so, closely
allied that it is customary to present consolidated statements for the two
in addition to individual s tmuents for each of tie , se a ate .y. Te
resources at the, d isnosal of the Issue Bnk also include--in addition to.
its -.small capi ta;.l--curren-t, deposits, held. -in_ 1h it mainly by German agencies
in Belgium, and special deposits from the Office des Cheques Postaux. The
latter a eny had formerly deposited all of its funds directly with the
Tresury, but pursra'.ncUL-t to an order of the Secretary of they Treasury issued
on July 30, 1940, the Issue Bank took over the role bf the Treasury as
depositary;; for funds representing .privte deposits -with the Office,l amount-
ing at that time to 3,059 million francs. These deposits have since 11 howv n
a stemady g rowth, rising to -omOre than 7 O billion. at the end of 1943.;-. on: the
latter date the uformed over one-tenth of the Issue Bank' s resources,
1In subsoquehnt. years the Issue Ba1n1.1-' s gold holdings ha.ve remaineod neg -;
gible but its assets in the form of foreign notes and coins other thann
occupation currency have continued to. grow, reachinig 1, 55a mi lion francs
at.the end of 1943. As noted previously, however, :there is some reason
to believe that by that time' the item in clu tod a. *substantial volume of
German currency " ( see footnote p. 1123).
The assets of -tie Issue Bak consist mainly of Reichsmxark clear-
ing =a l antes u',ith the Deutsche Verrechnung ;kasse and claim s .'on he eics-
kreditkasse i v the foim of a~ book claim lin -Belgian francs and holdings of
th . 1ichsmiar1~ cuarrency issuedrb tI'nat institution. The: origin and) dever~op-
ment' of' thoses assets has 'been described in the preceding. section;. in adci -
tion," th ssuec nk holds larg e rounts df other foreig notes and coins
off r whci par may be, Gqxman (see discussion .on p. 122) . Wzhen the Issue Bank
took:. ovenc~ the :Treasury' s liability to the Office des 'Cheques Postaux\'9rre-
epondi ng to. the latter
1
s private deposi-ts, it re ceived. a spe cial ,non- Interes t -
b ea ring "sighit oboliga:tion"l of the 'I easur y for n equal 'amount 0(, 059
'million francs). The s ubsequent increase in -the e deposits has been placed
by the Offiice at the di sposal of the, Is sue Bank, 'which -.has invested about
t :o-thirds ofthe accruing ai. unts in loas to the Belgian a inistrat .orb
(viery possibly in non-intorest-boaring Treasury certificates similar .to
these taken by the National - rk--see 'p. 132) .. The 'following table sh pws
the devrelopircnt of the ?ank' s* balance s heets at the end of each year since
1-940 a1d , or.. February 24, .1944:
I ssue Bank, B3rtssels
(B illion francs)
End. o f.'yar
1940 19114 1943
Assets 4
Fori exchange
Claim n .on Reich.skredi tkas so:
From redemption of currency
*Advances to RhK.K.
Foreim notes and coins:
T?eichskreditkas ens cheinoe
Other
Special. 'YigLht oblig ationY of
Oth.er creits 'to the StateI~
Unpaid dapital.
Other assets
Treasury
'1b tal
1.0 7.9 24.
0:5 3.6 . 3:6
0, 6 0.2 0.2'.
l J 16
0.7 0.7 "l: 0
3.1 3d1 3..
0. 5 1.3 1.8
0.1 .0.1 0l
6..4 16.7 36.1
4,8.8g
3.6
0.1
1.1
1.6
3.1
2:5
0.5
0.1
61.4
Feb.
51.5.
0.2
(26
3"1
2 7
0.7
64.5
Liabilities
DUCE to National Bank
Diac: to O0ffice des Cheques
Current done is
Rieichskreditkasse
Other
Special certificates
Paid-in. capita.l
Other liabilities
1.5-
3.8
Po0s taux/
Ttat.
10.7
5".
.
0.2
0.2
6. 16.7
273. 49,.4
.. 7 ,7.0
0.2 , 1.2
2.7 ,. 3 0
0.;5
0.2: 0.62
36.1 '61.4
1 -Less than .50 million francs--at end of 1943 r3 =Oher assets" included
notes o f the National Bantk (15 million 'francs) gold, (1 milion) , and a
miscellaneous item (117 million) wh:le' "Other liabilitie&' included
re seive3 () million) and a inis cellar eous itl (34 illio,).
2/ In the actu:al statements as issued by th-e 3ank through July 1943, -thc
investments wore shodvn as a
7
doduction from the liability to the Office'
des Cheques Postaux, thus reducing both assets and" 1iabilitics by this
amount.
529
.7.3
(3.5
0,2
64..5
-128
One see chi feature of the Issue Bank' s operations remains to be
mentioned. In a b elated attempt to combat the inflationary pressure gener-
ated by the financing ofd clearing claims through the central bapkihg.
machiLnery, a decree was issued on -F bruai- 24, 1943,, authorizing the I ssue:
Bank to pay onl y 70 per 'cent in cash any cl:aims arising out of Belgian
d.eli ries to Gemti any w vhich exceeded 10, 000 ,francs. The reraining 30 per
* cent wa+ -), paid in specia non-negotiable one-year certificates con-
stitutiig an obligation of the :Issuo Bank and bearing interest at 1.5 per
cent. On. June 1, however, the proportion to be paidin .certificates was
reduced to 20 per cent, and the certificates were made negotiable and eli-
gible for the paymrent of: certain taxes. Only 2l - million f cs of this
paper was outstanding on June 2, 1943, ,and 547 rillion francs a-t the end
of the year. The amut which the Issuie Bank, saved in pay-ments for deli\ er-
ies to Gernany had to be put at the disposal of the. Treasury through -the
purchase of 'a equivalent aount of Treasu.ry bil ls (see balance sheet).
The Bank received gross revenues from its operations in 1943 of
32.7 million francs. Operating costs amounted to.:32.3 million, and the
small remaining balance was allocated to reserves.
So far as the National Bank is concerned, under the German occupa-
tion it has become simply a "rprLnti ng press" for financing the various
operations of the Issue sank and for covering part of the occupation costs
paid by the Belgpan. ad inistration. The volume of its .deposits has remained
fairly s.tab, and almost the entire ambu t of the net ne credi twhich it
has created has taken the fern of ' an in crease in note circuilation. On
June 25,. 1940', the first report date alter the invasion, the note ci rcula-
tion stoed at 33.5 'billion francs 'as com oartd with 29 .5 billion on May. 1,
1940. The increase to the end of 1940 was very moderate,' partly 'because
the - Beichskreditkassenischeine wecre bei ng issued as a circulating .medi
dtiring that perioc., but the rc:Eafter a tremendous oxoanion occurred, aing-
ing the figure at the end of 1942 to double _ that for June 25, -1940. =
furter marked grwth took place duri.n 19/3, although the pace aa c1kened
somewhat as a re s-l of a temporary interruption of t he uward trend in
March axad April of tha t year. This intcerription was apparently' due to a
reflux, of notes from, hoards following the action of the Netherlands-' in
calling in all hi rh denomination notes (Fl. 500 and 1,000) and; blo eking the
proceeds unless holders coud deonstrate that they were "legitimate"
holders and that they had paid up, al]. their taxes. No such measure ha s
been initiated. in Blgium, however.I
1 It should. be noted that Eupen-Ma1ne dy arnd Lu co wore incorp )orated in
t-e Psichsmark currency area in July 1940 and February 1941, respectively.
Belgian currency circulating in these areas was exchanged for Reichsmark
and presumably spent by the Gersns in Belgium propei.
/ No data arc, available for the circulation of subsidiary notes and coin
unde-r the occupation. however, the a thorized limit for the issuance of
Treasury notes anid coins in denominations of 50, 20 and 5 francs, fixed
at 1,750 million francs at the tine of the invasion, was raised by stages
to 3,000 million frzancs in April 191a and finally abolished in June:of
that :year by order of the Secretarry General. of the Treasury. In Fcbx-a ry
1941, the Secretary. General authorized the minting of 5 franc pieces in
zinc rather th-an, nickel, and in June all nickel coins were, recalled from
circulation, by order of,the Gennan military commander. According to some
reports, the response to the latter order was very disappointing, only.
some 30 million francs in nickel coins being delivered.
- 129,-
Already in 1942, the legal_ gold= reserve ratio was infringed and
on March 6 in that year, it was suspended by order of the German military
commander. By the end. of 1943, the -reported gold. reserve was equivalent
to' only 26 per cent of the Natinal Bank's sight liabilities.
The development of the National Bank during the occupation period
is shon in the following, condensed balance sheets; while the full balance
sheet for December 25,!_ 1943, is given on the following page.
National Bank of Belgium
(Billion francs)
June 25
_1940,
Assets
Gold
Foreign. currencies and
balanCCs
Loans to 'Issue Ba nk
L'oens to- private .economy
Loans to the State
Govomment bonds
%Mis ceaneousj
Total
21.7
0..3'
4.7
6.7
07
35.6b
Liabilities
Notes issuod 33.5
Deposits . 1.4
Capital ' and reserves 0.6
iscellaneous 0.1
To tal 35.6'.
Dec .25
7.940
21.7.
1.2
L19
l22
11
36.6
34.5
1.4
0.6
0.L
3606
Dec. 25 Dec. 25
1941 19
21 7
0.2
10.7
0.8
13:*9
24
50.4
0.6
0.3
50.4
21.7
0.1
26.5
0.7
i1802
1.9
0.7
69.8
6-7-8
1.1
0.6
0.3
69.5
De.25 ar.30..
1943 l
21.7 21.7
49.3.- 54.2.
0,9 0.5
11.1 12.:..7
1.9' 1.,7
076 91.5
83.1
1.5
0.4
85 .:6
1.9
006
91.5.
For discussion of gold reserves; seep . 119.
/ From the end of 1940 on, almost entirely Roichskrcditkasscnschine
jMainly Belgian notes and . coins due from Ban.rk of France ( see p. 119).
It will be. observed. that aside from the gold reserve and advances
to the Issue Bank, the assets of the National Bank have come to consist
almost Ontirely of claims on the State. "Leans to, the private economy"!,
which had risen from 2.5 billion francs at tt-he 'edc of 1939 to 4.7 billion
on June 25, 1940, reflecting recourse to the central bank br the commercial
banks, have since dwindled to loss than 1 billion francs, or scgrcely 1 per
cent of the bal an ce sheet total. Comn orcia-baniks, glutted ith cash punt
into circulation by the National nk and Issue_ :Bank, have stood in little
need of credit. The National Bank s rates' for laans and discounts have
therefore been of little significance; it may be 'noted, hcmvor, that they
have remained unchanged ekccpt ,for an incroase .fromi 3 to .3 per cent on
loans collateraled by govrnmment securities maturing in more than 120 dayrs,
and, the abandoment; of the preferential rate on export bills.
-----
UTPW"MArl iEI3
Banque Nationalo ade Belgique
Balance Sheet for Decernber 25, l9Lv3
(?!Million francs)
Assets
Gold':;
Held abroad
Reserve , at the Bank
of Francel/
In Belgium
Total
Notes and coins. at
Bank of Francel/
For eign exchange
Advances' to Issue Bank
Credits to private economy:
Domestic bills
For ei gn bills
Loans and advances
Total
Credits to State and.
public bodies:
Subsidiary'.currency
'and,
postal checks
Treasury bills
Government -debt:
Treasry note (Law of Dec.
27 , 1930) ' 500
Special note (Law' of July..
19, 1932)
'62
Treasury, certificates 10,330
Total
Government bonds:
Acquired under agreement
of July 2'7, 1932 550
Bought 'pursuant to the
statutes 1,386,
Total
Promises and f ixtur es
Transitory 'accounts
Total assets'
21,089
558
8
21,655
L.52
146
x-9,288
716
6
Li abi li ties
Notes, is sued
Current accounts':
Treasury
Other
28
1,t496
10
LAztI
Capital
-St rtutory reserve
Co~ t ig en icy and amorti-
zati'on funds
Special provision for ro-
valuation of assets2/
Traisitory accounts
Total liabilities
8.64
Contra
Itoios/
Deferred liabilities (forward
exchange comitmcns) '
Bills in course of collection
Office do Compensation'
Securities on deposit .(inol'.
10,892 o qlatoral for advances)
Assets deposited on bond
Securities held for .acc'ouat of
Treasury
Fon .s ivonetaire
Gold reserve for Office des
1,936 Cheques Fostaux (held abroad)
153 Assets of. Caisse Ge. r lo
71 dt pargner/
85,56 Ponsion fund 'of the staff
See, discussion. of these items on p. 119.
See 'discussion of' this item on'p. 3.
This' sectioni. somew t'abridged.
Short-term'-assets only - long-term assets held by Caisse itsolf-.
-30
i'
i
:).048
1, 521!
200
122
311
3~0
85,5<5O
36
97
6)4
.4
6
,
6
75
56
1,268
221.
'
In cons*.dering the credits made avilable by the National Bank to
the State, it is only reali sti c' to include in this ,'.category loans to the
Issue Bank used to _f ha ice tie accurulation of' claims on Germany: The
Issue Bank is kino-n tob have a guarantee of' the T'easuiy on its clearing
claims on the Deutsche Zerrechniin~ gskasse, and in any eventual liquidation
of the claims' on the Reichskreditkasse, itmlay be presumed that the govern-
ment would underwrite any losses incurred, ! n the following discussion,
therefore, it i s assumed that claims on Germany by the Issue Bank (and by
the National Blank in 1940-42 when it .too was holding Peichskreditkassonscheim
represent a contingont liability of the State,
Detailed information is not available concerning budgetary and
extra-budgetary revenues and expjenditures of' the Belgian administration
during the period of German occupation. However, it is knon. that 'despito
an increase in tax revenues from 8.2 billion francs in 1940 'to '15.2 billion
in 1943, the entire smount of occupation costs had to be met- by borrwing.
The .devlopnnt- of 'the Belgian public debt (reported and contingent) from
mid-1940 to the ~end of 1943 is .hoin in the following tabi and compared
with the burden of' occupation costs.
Increase in Belgian Public Debt
(Billion francs)
1940 1941 1942. 1943 To tal
Increase in: (six mos.)
Reported dobt /
Long-termj 1.2 2.1 -0
6
2 .7 5.4
Medium-term -- bil_6.1 10:0 10,.6 26-7
Short-term. 6.3 97 11.0 10. 37.3
Total 7 4 17.9 205 023 69.4
(Occupation costs)(4.5) (16.3)(4:5)(22:0Y(61.3)
Contingent debt3J 3,2 $4.; l36 23:3. 53
Total 10.7 .26.3 39.0 46.9 122.9,.
"/ "Sight debt"" arising from private postal chocking dcposits - unchanged
throughout periods
Includes foreign debt wirhi ch w'Tas reduced by 1.2 billion francs from: mid-
1940 to the end of' 1943. t
1 Claims on. Gerany by Issue Bank (and National Bari in 1940-41) -- see text.
It is evident that the bulk of' the reported public borrowing dttr-
ing the occupation period has been at medium or' short ter . Thzelong--term
f'unded debt rose fron 53.1 billion francs in mid-1940 to 53.5 billion... at
the end of',1943,t Itho medium-term debt from 0.7 to 27.4 billion,J and the,
1 It may be of interest to note that hile Belgium has f^': anced clearing
claims primarily through the central bank and o ceupatic : costs only
partially so, in France clearing claims have bcen handled by an agency
of the Treasury with only limited assistance from the central bank while
occupation costs have been. final cod la rg y by the Bank 'f of' France.
g Including 12.8 billion 'francs of World War debts.
3J Mainly by irtue of two 10. billion f'ran c is secs,, one pla ced in 1942 with
a life of' 15 years and one placed in 1943 -mratring in 20 years.
short-te. debt fra.ii 10,1 to 47.4 billion francs.s The 'total reported debt
,t. the erdof 19.43 (inclhding the unchanged emount of 3.1 billion francs of
"'sight" debt) came to t.6.4 billion francs W i the addition of the accumu--
lated contingenlt ijability of 53.5 bilionri,9he totl indebtedness would be
l9.
9
billion francs.
The table on thef:fol7_lo'ng page simIrs thatt almo st' all of the
:contxgent debt (claims on GeinaryVT and a portion of the increase in reported
debti has: been financed, by. 'the National Bank. 'I-tUs contributiont to the financ
ing of the contingent debt is represented by its advances to the Issue Bank
and--in 1940-41--by its holdings of occupation currency. The Issue Bank has,
covered tie balance of..the- contingent debt with 'its capital and with funds
put at its disposal by depositors (i~ncluding funds from private doposits
with the Office des Cheqes Postaux to the 'exteint that thse s wore ,not
invested in loans to the *Bdlg:i-a T:casury) At the end of 1943, the. :.Na c .on l
Bank was financing .9 2 pe r'cen t of the claims on G rm.any. It hs also con-
tribu'ted a signific nt 'in '.to the direct borro-wvving program 'of the Belgian
administrat oo1. :jthou.h the -effo ts of that adinistration to covor' its
requirmehnts by borroving in the market rather. than from the central bank
were so successful in 1943 that some, 60 per cent of the: direct debts incurred
to 'the central bank duing thed occupation period wore paid off during that
year. hereas through the end of 1942 over half of the net increase in
government debt (reported and contingent) was financod by the central bank,
in 1943, 'tor' alloy; ing for' the actual reduction in. the Bank' s financing of
the direct public debt, ti- . propor'x on w s loss than one--> 'rd.
T_!_he National Bank' direct credits to the Belgian Treasury have
been extended mainly against spa cial non- Lntrest1-beai.ng Treasury certifi-
cates isuod pursuant to the dccree of fay 10, 1940, abolishing 'all rostric--:
tions on central ' bank .oars to the Tho asury. The ?anikt s holdings of such
c6ertific ts -- mounted. to 12.6 billion fr cns at the end of 1941 (part of
these "'haying bee;i issuo-d to:redoom ethear 'jhort-terum. Tcasury paper held by
the;- Bank) end about 16 billion francs at the end of L42, by the end .. of
1943,, hwever, they had been reduced to 10.3 billion francs. Its holdings'
of other short-tom Teasury paper on those dates was rolatively small an d
its 'investment in long-tean government bonds, after rising moderately dur-
ing 1940-41, was again reduced and stood at only 1.9 billion francs a t the
"end of,1943, 0.4 billion higher than in mid-1940.
The. total amount of -credit created by the National Bank for or on
behalf of the State from id-1940 to the end of 1943 (54e2 billion francs)
was closely matched by the increase in currency issue (49.6 billion francs-)
Very little of the new credit was reflected in a rise of deposits at the
National Bank, most of the gap between the figures cited above was. due. to
the contraction of they Bank' s. credits to the "private ecoibmyt, which
declined by 3. ,billion francs during this period.
the tawblb on- the preceding' page lso; shows the 'iZ la y
contr ibultion-.;made -to .-the financing of the- increase in, public , debt by the
independent resources of the Issue Bank', and the, important part played by
conmcrial banks in financing .the reported debt.. The ele ::of the :commcr-
cial banks is discussed, in mor ' detail in a later section; here: it .is suf-
ficient to note that while those banks supplied less than onie-third of the"'
Ii CLASSiI[U
X 133 -
Financing of Increase in Public Debt
T id-1940 through End of -1943
Total IReported Oojrtin ent
Total 19410-41 1942 1943 Total 1940-41 99~ ~43 To tal 19.40 -41 11y942 1943
140-43
ms }
1 1
0/04
3""1j
. o f rar7
National Bank 54~2 1l3.O 20~2 15;.l 4.8 8;1 3.8. 7::l 49.4 .10.9 16.4 22:2
Issue Bank 6.6 2.0 *.2.3 1.8 2.5 1.3 0.5. .0.7 4.1 0.7 2.2 1.1
(with independent
resources}?/
Commercial banks 26-*6 8;0 .6;2 l2-11 26;6 8.0 6.2 12.4 -
Other . 35.~5 ___8:0 10.3 17.6 35..5 7:9 10.0 17;5 ----- -
Total 1 2.9 371 0 39.0 46.9 69.4 25.3 20.5 23.5 53..5 11. 18.6 2.3.3
(Per cent)}
N\ational Bank - 44 51 52 32 7 32 19 -30 92 94 88 -95
Issue ank 5 5 6 4 45 2 38 6 12 5
(with independ ant
resources) /.
Commercial banks 22 22 16 26 38 32 30 53 .-- --
Other -29 22 26 38 51 31 49 74- - - -
Total 100 100 100 1 00 100 100 100 100 100 100 100 100
1/I.e with resources
- cpitldeposits, etc. -other than advances from NationalBak Bank.
ca at i ta1,
-134-
Treasury' s new borrowing in 1940-41 and in 1942,: in 1943 they covered.. well
over half. ,In absolute ter:s, their acquisitions of Treasury paper in 1943
were double* those in 1942; it was tii s marked change whic,.-; -together with
increased puchases byy other investors--made it possible for the central
bank to divest itself of part of its portfolio during that year. In/ the
period from mid-1940 through the end of 1.;43, the co mercial banks added
26.6. billion francs to thei~r holdings of Treasury 'paper (an increase of
27.2 billion in Treasury bills partly, compensated by a reduiction. of 0.5
billion 'in long-teenn governrxent bonds). This movement was closely matched
by an increase of 27.3 billion in their de osits, of which 21.4 billion
occurred in demand and short-term deposits and 5.9 billion in tunen deposits
(maturing in more, than ono month).
Before leaving the National Bank, it should be noted that bogin-
ning with the profit and loss account for the first half of 1940, there, has
been no net profit available for d. stribution and hence no dividends or
payments to the State of a share in the ?ank' s profits. The entire excess
of receipts over expenditures, allocations to tho usual reserve: funds, etc.--
amounts which othervwise would have boon profits available fors distributior--
has been assignccl to -a spe cial account iakin.g provision for a revaluation
of assets. In view of tho uncertain status of a large part of the Bank' s
assets, this conservative policy is 'quite understandable. The amount
accumulated in this special account had risen' to. 350 million francs by tho
end of 1943.
The idiinistrative Council of the National Bank at the end of
1943 as composed a s Lollow's:
Governor: Llbrt Go ffin
Vi ce-Governor: Jules 'Ingonblcok
Managers: 'Francois Cracco
Robert Vand'eplutto
Regents: Clement Swrolf s
J. Leopold Frateur
Leon Tbkaert
Gust-cave Laro che
Andre Poltzer
The changes in the Bank' s lcading offico'rs under the occupation;
may be briefly sumarizod (see list for i ay 1940 on p. 42.). Mr. Goffin
foimerly manager, as elevteto Goernor by the administration in occu-
'pied Belgium folloing nthe death of Governor Janssen in June. 1941; 'The-
other pro-war manager, Mr, Baudevwyns, having remained abroad with the
govenm nt-in-exilo, it was neces sary to appoint two new managers; those
were -wo former obfficials of the E:' ', ;Messrs. Pierre Berger and Jean Van:
Nicuwcnhuysen. These Individuals resigned their posts in November 1942,
over, in protest aginst the developmaent of negotiations writh Germany
corming the clearing dgroeircnt. They were replaced by Mr. Cracco, then
ef. of the Bank' s Foreign Department, and M1r.. Van- deputto, fonner secro-
of the Belgian ianliking As sociation. The only changes aixong the regents
c the disappoarance of M r. Thunis' (who was nlamed Governor of the Bank' s
inistration-in-=exil6 in N-ovember 1941) and of essrs. Laloux, Kroglingr,
an Canon-Lqgrand. The terms of the first three ojpired at the end of 1942
and no successors: were flamed, while lair. Canon Legr nd is reported to have
died.
.I;l 50. -
Inflation. and Prices L
The great exp ansion of monoy in the hands of the public in the
form of. currency and demand dposits 'with the National Bank, commercial
banks, and Office des Cheques Pos taux "Mould have exercised great pressure
on the price level even if circizistan_.ces. hzad otherx' se been normal. But
with productive activity at first dirupted? and. then channeled increasingly
to .serving the. Goren an war machine rather than the needs of the civilian
population in Belgi , the groat' disparity between the supply of, money and
the supply of goods .has generated immensely strong inflationary tendencies.
These tendencies, have been combatted with sone measur'e of success by s trin-
gent rationing and price controlnicasuros; official prices for rationed
goods in the: middle of 1943 averaged ony about double the pro-war level.
But just because some goods had too' be sold through, official channels at
rdlgulated prices, leaving a mass of purchasing power' still outstandi ng,
black mar at prices for goods dealt in*llci l have seared to fantastic
heights. /
Currency and. Dposits hold by the PubJ.ic, 1939-43
Factor of
End of 1939 End of 1943 increacs
(pillion francs) (times):
Note issue of the Ntional BanksJ 27:9 83.1 3.0
Issues of subsidiary currency 1.5 4.5 3.0
(less holdings by National Bankf)
Deposits with the Office des Cheques 2.9 7.0 2,4
Postatx (less government deposits)
Deposits with the National' Bank 0.6, 1.5 2.5
(less government doposits)
Demand deposits with comnmercial banks 11.9 32;6 2.7
Total sL48 L28:7 2;9
Deduct: Cash reserves of 1' l.6 2.3 1.4
commno rcial 1nk s2
Net total hCld by the ;public 43.2 4J26.4 2.9
1/ Ignoring the fact that in 19/39 some 's' [l portion of the note issue was
held in territory since ircororated, in the Rcichsraar area--i.e. Luxm.-
Bourg. and Eucn -Nanedy.y,
/ Estimate based on increase in note circulation and other supporting data,
3] ose reserves ar& node up principally o: shares in the first four itqms
in the ta bi e, but no dotailed breakdown is available.
4j In -addition thcee wore deposits ith *the Issuc ank of 4.2 billion francs
but these were mostly held by German agencies nd e hnce were not part of
the money -supply of the Begian public.
The evidence concerning price: dov e opmcnts in Belgitm under the
occupati6n is very ragmiontary. In mid-1943 the officia: pr1cos of.-most
staplo ' foods produced in the country h/,d beon held do-an to 1-l/ t, t 2.times
lJ Of course transactions *wrhich art Iillic 4t?tfrom the point .of, view of the
occupation authoitics are not necessarily sti atized as such. by the
Belgian public.
-36 -
the p re-ins asion level. Many other essential 'a rticl.es had advanced more
rapi dy in price, althougha stab iizationi oi rents was easonab. ly effective.
An indx f the: gneralr ' cost :of .ivng, calculated, from official prices on
a 19,36-3- 1Se, is reported to hve risen from 119 in Aprnil 19/40 to 236 \in
~i~~il 19439 Mveanrhile wages '.:a. b'en igrously controlled wth the dua
purpsse of combatting inflatioaryu presure aind of ind dc ing elgian woerkers
to migrate to Germany. Byr nid-'l 943, hourly wages are believed to hate
dvanced some 30-'-LO per cent above the pro- inv:asion level, w hile wi th other
allo ancos--granted in some industries., at Io ast--the increase viould be
somewhat higher. It is clac, hore ver, that the income of the wsorking
classes. has not kpt pace oven with the rise in the "officia& _13 cost. of
living, h~ile the amount of rationocl goods available at official prices is.
so Scanty that. all persons have to resort to black mare ts and pay uncon-
cion boo3 ricos to cover come part of their needs. On the other hcind, most
reports agree that dospite strict control, over the m arketLng of frm pro-
duce,, imers in general have been able to maintain their money inccmes at
a high level.
The gradual deterioration in the, value, of the currny.--moderato
enough if official prices are taken as a criterion but drastic i ndeed if
black market pri ccs for luxuries are the measure--together with fearss for
its. future decline, have long since engendered acute fears in the minds of
the 'inflation-cons cioust". Belgian pulic . Warned 'by the- exper ienrce in
Belgium during and after, t e, last wrar, not to mention more extreme currency
inflations in ether. cou.tries many :persons have lost faith in the future 'of
the cirrcncy and' have sought to convert their cash 'ran.d money claims into
"1real values", i.e. physical propcrty of any description or equity .interests
in property, such as. coporate sTares. Fars, jewercls, silverrviare,,. -.objdts
d' art,' and even postage stomps with any' potssible philatolic value' have
bomne -hig ly prized. and are traded i.n at greatly inflated values:.. There
has been a boom in rcal estate, although this avenue of escape . requires
large amounts of noneoyt, is burdened wiath hea vy taxes and.' 'rent control, and
may too freely be. investir:ate by the fiscal authorities. Nowr construction,
whe ther for resitden. tial, comercial, or inc'ustrial purosos, would be'
attractive but cannot be under taken on any scale for llack of materials. In
any case., a license is required from the Gorman authorities an-d is only.
forthcoming for favored persons who e projects wrill serve Germnan needs.
One ve ry sinull end vi e -7 popular form o specu ating aga inst
inflation rem ins to be mentioned, ie. steo excRange purchases of cquity
securities. WvThen the, stock exchage' reopQend in August 1940., a boom Ln
corporate sh arces comsi cnced which soon bocame tr nsparantly a flight from
the currency rather .than ; manifestation of ,hopefulness for hi gh' corporate
earnings. Dividend yields on the shares -of companies with large industriasl
plants--or even .better, inth onteorisos. overscwas--sopn fell well beloT.,w the
interest rate available on governm..envt bonds: . Tm the section below on the
stock exchm-nges (see p. 146) details are given concerning the increasingly
harsh' restri ctive' measures wh i ch wrere :taken gainst. stock exchaige specula-
tiom, wnhich was, justly. regarded :sa bad influonce on publi.c_ psycholor .
These measures, -Pius the:. d istressin;..business.. experience of. any Bei an
onterprisos, did indeed check the boom and even caused a sharp setback
early' in 1943. However,: a re co-very"doo folo c.. ani d zt the. end of l?3.
general ind'x -of share prices stood afit .three c-id :one-half times -the pro-
invasion level.
i137-
Grea t ingenuity and even greater resolutioi would have been
necessary to pre V~eflt the vast outpouring-of hewly -created money from having
Seo i nflatioary erfect on prices. As noted previously, one line of
defense by the Bel.gian authorities has been. -to attempt to freeze prices by
deCree, and to settle through ratioiling procedures the prob em of distribbut-
i1 go eds in short supjly, ovrever, in order to mop up part of tho unspnt
i ce nhieh ould. otfherwise have accumlated and prossed against the 'price
cetrtl harrir, fiscal iasuires have ooen a dopted in the. fo r, of increases
in. taxation 3n!d attmp ts to sell government ;bonds to the public. These have
not been conspicuously successful, and as may be seen from thc data in the
preceding soction, the central bank and the conic rcial banks: have continued
to finance the bulk of the governnctt' s expendi-tlures, including the a ccuniu-
latieon of clearing claims, One re cie 1 'fi cal device w-ith a certain logic
was intro d ucod in October 1941_ in connoction w ith paymants b y the Treasury
for goods end sor vics.J A decree of the Socretar General of the Treasury
ordered that such payments be m :ade partly in Treasury notes---25 per Cent on
claims from 50,000 to 100,000 francs, 30 per cent on claims from 100,000 to
200, 000 francs, and 35 per cent for any excess over 20, 00 francs. These
notes, maturing in five years a-id bearing. interest at 3-1/2 per cent, were
non-negotiable s-id thus constituted a forced loan; howevicr,. they were to
be accepted at face va-Lue in payrment of taxes after they had ben outstad-
ing for a year. By decree of the Goennen military commander in early 194/2,
the same tems were introduced .for pajymients to 'suppliers by the occupation
authorities. No 'inlfor ation is available, however, as to the' amount of
forced loans acts ally raised in this m anner. A similar scheme introduced
by the Issue Bank. in Fnbruary 1943 for- paymn ents to clecaring claimants
succeeded in immobilizing .only insig~nificant su~cs se p. "128 8
It should be noted that the. Gemians had a spo cific interest in
stemming price infla tioni in Belgium to the extent th.at this ha0"s reflec'ted
in e-port prices. rven if prices on. goods ii2por ted from G re n~ny were riised
correspondingl y, the fact that there iv s a large Cxport surplus to Germny
meant that any increase in export prices rci uired larger amounts of Reirhs-
marks to be -creditd to Belgium on -the clcrng account. Of course, the
Gernhans might ha ve dealt with this situation by alt' ring the 'echage rte
in favor of the ReicheaarA , but. such action would h ave fenned the inflation-
ary senti nnt in Poicum end oul d have oxhosed a weakness in the vaunted
tNow.r Order in Europe. In fact, the excha nge rate of the Reichsmark aguainst
the Belgian franc--'and against almost all other currencies of occupied
counitrias--has been maintined ithout cha. nge after the initial adjustaont.
Whereas the Reichsmark yas undoubtedly over-valued vis-a--vis the Belgian
.franc when the present rate of 1: 12.5 was .introduced,. it 'is likely -that
the disparity in price oemrcmennts within the tw o countries has since caused
it to' become undoei-valucd. So far as the effect of this phenomenonl on
Belgian. clearing clais is concerned, recent official statements issued in
Gennony have 'Momnisod that '
t
fter the hrm4n1 victor" these clin s would
be ' repaid by Goraan exports, but have hinted tha t the prices to 'be put on
such exports -woulad be ajus ted. to the priccs w,.rhich Germany in.d had to pay
for the war-time '. citmports.V Manw-hilo, i n Belgium the undervaluation of the
Reichhsnaark meoant that, to the extent, that trade' was . condulcted on a noneval
1/ Including pa ymnts for 'the billeting of GrnM troops e.nd payments in
drrears for goods, 'etc., req'isi~tioned by thy Belgian A rmy prior to
Mayr 29,9 1940.
1
138-
commercial basis, the prices of German imports were abnormally low while
prices en shipments to Germany were unrenunerative. This was contrary, of
course, to German desires and it has recently been reported that an official
office had been set up (the Office de Perequation des Prix entre Exporta-
tions et Importations) to subsidize exports to Germany with the proceeds
of levies on German imports. Equalizing operations in the opposite direc-
tion may also have been undertaken with respect to trade with countries
whose currencies are over-valued vis-a-vis the Belgian franc under the
present fixed pattern of European exchange rates.
Commercial Banking
The whole field of banking and finance was placed under strict
'German control soon after the invasion. An initial decree of June 114 ,.19)40,
ordered the establishment of a German Office for Banking Control. All
enterprises performing banking operations (including savings banks) were
ordered to register with the Office and. to submit to all its orders. The
Office was empowered: (a.) to examine the banks' books, correspondence, and.
assets and to require any kind of information; (b) to order that no "import-
ant business" should. be concluded without its approval, and to prohibit any
operation, especially the disposal of asets or the execution of conmitments,
(c) to order the deposit or the transfer of assets, and (d) to dismiss any
bank's officers and to appoint their successors. The expenses of the Office.
were to be borne by the controlled institutions. Violations were to be
punished by fine or imprisonment, and. even by hard labor, the amount or
length of which are not specified in the decree. -The order of June 26, 1940,
naming Dr. Hans von Becker the German Commissioner at the NTational Bank also
appointed him head of the Office of Banking Control.
A decree of the Military Comander dated. June 20, 19)41, placed
all mortgage credit organizations under the control of the Office. It also
ruled that holding companies night be subjected to the same control by
orders ,of the Military Commander. A decree of September 2, 1941, further
empowered the Office to issue orders regulating "cashless" payments (by
check or banking transfers) and "to extend.modify; or suppress -the e et
ing- organizations through which such payments are made". The same decree
ruled that no issua::re of bonds and shares might take place thereafter
without the authorization of the German Military Commander.
Alongside the German Office, the Belgian Banking Commission is
still functioning. The decree of June 20, 19)41, emipowered the German Office
to exempt any bank from the control of its Belgian "reviseurs", but no such
exemption has been granted to any Belgian bank. The result is that Belgian
banks are subject to the dual control of the Belgian Banking Commission and
of the German Office, bietween which no connection seems to-exiet. It should
be noted., however, that the German banks established in Belgicm since the
invasion have been exempted by the German Office from any Belgian supervi-
sion.
The main structural changes in the commercial banking system
under the occupation seems to have been the penetration of German banks
into Belgium afd their acquisition of Belgian banking interests in other
parts of Europe. Soon after the invasion, several of the big Berlin banks
established "representations" in Bruesels, and. during 19)41' some of these
offices were incorporated. The following new banks then eme e:
1
39
U CL A SS I FD
The Banlqac :Con tine tale (a Sibsi:diary of the Dresdner Ban k),the
Banquie de 1 Onge st (a suibsidiary- of the Bank der Dent-s ch n1 Ar beit), and. the
Banq e Hanseatiqrie (a s :bsi-dia ryr of the Con'.ei :'z Bnk). Ihe Deutsche Wank
continues to maaintain a"represoetation"., The G e n.n banks do not per
to compete with Bcelgiare banks for d nresti c businress p;er, but I-, ncentrate
upow. developing Ge racan--Belgin econiomic reltions and up0on ne o tiertions for
the acquisition of Belgian i1nt urest In r.Foreign underta l~. i'nr o. Their
deposits said other resour-ces Pave re maine d small,- as shnop n uy the following
data fo r the end of 1943:
To te]1. as ts Cani to].
Banque Conti nen.tale 634 25
Bancque
Hian s,ati
none
262
1m 10do10
Baaad ' n 1 25
1 An increase to 25 mill.ion francs was eorgi cm platied
As a resi it of the o ccu atnon, Belgian banks and holding comupanies
lost to .German interests miost of theiLr rcmraning hanuking participations in
ne u ope (the loss of Autinan zc itrst 9n PC-39 wsntdi
Part ?II). In their annual re eort for 194.0, the dire cters of the Societe
Generale expressly stated that " owing to the rece~nt orientation". of somte
banking -organizations in Cgntr'J Europe andrl in the. Balk ans, they had decided
"1to- reduce their cor nlmnints it thes coup tr:Laec" . In 1940 the Societe
Geor-rale., whiichi was the rira4 ority ish,arc holder of the Daneqre Qe(:norale dn,
Luxenibourg, sold a 30 per cent inturust in that bank to the Deatsche Bank,
which was :also. given an option on anoter 30 ?for cent. It also sold the
DotcloBn snc3 per cent o f t he s ^ te ^r .re s of t'he impora-nt; Bnica Corn-
nierciala in Bucharest; subsequently the Denuts che l ~ak aou red a fathor
55 pcr cent interest. in. thatd institution ,from the. Banque- do 14 Union Pa risienne.
Also in 1940 the Socie~te Gene rale s old to the Deut.sche,, tr-c' oll ed
Crodita nstal t irankvneroin, innis interest in the Ge;rnor f.1 Yuros.lav
Banking Coiporation; enounting to a little mnore then. one-thnara o the capita l
of this institution. The, transaction gave the Crdians 1t w4v ,rOe n
interest of 80 per cent in. this; irriportent institution ,wich--after the die-
menbeirnen t of Ya slavic in 1941--be ca o~ the nucleus of be)oth the Banking
Corporation for. Croatia, Zagrob, and the Bnking Corporation, Belg 'edec.
The Banquo do Pruxolles and the Un:ion iParisienne, vhich togcrthor
controlled the -Banque Intornation.ale a 1uximbonrg,. sold a subs tantic:i part
of , their participation. to the Dresdner Bakin 1940; the. Belgian and the
French banks each rotaned only a5 per cent interest. Finall:J1,y in 1942,
the Croditans talt-Bankvere in c cq ired froma 3e l in ro otr ln
interest .in the snall Countryv Bank of B osnia raid Hrcegov~ia , S , .raj e ve,
althoufgh Paul Hi o t anpoars to co.ntinue.q as . dire ctor of that b~ar ' ,
On the other hand, the Belgian banks abroad (tice nrn of the
So ciete G enerale and the Banque htalo-Belgo) continue to opeirate "in cllied
or neutraj. countries, but no 'recent balance sheets are a vil able. Infenrr .oe1. -
tion concerniing. the war- taa ope ration s of the Banque du C ono Ilelge is.
,give on p.: 121.
- ,'14,0 -f -aL ^
It may- elso be rioted th~at the Belgian Asraich ft he
American and two Fr iish eeziks operating n that country h~ ve either been
closed dovea or are operating on a re stricted basis under Gerani adrministra-
tion. Thee branches of the National .Ci:ty. Baa k arc, definitely l norm to have
been closed., the business of the B aisses branch having beon sold to the
K redie tban k TEa Guarant<r Tr'ust C. :branch in A.ntver~ ha-,s been close d, but
the one in Prassels continuj;es in1 opeera..tioni:. along ith those of the tab.
British banks, In the official list of .3anks published by the Banking
Commission for the end of 19 .3, the x erican E~xross Co. is i.nclhdod with
the notation "activities in Belgiumr temporarily susp :end"d.
Commorcial1 banking ope~rat ?oe. the .:tuindaee:"ntfal trends inc,!p r
cial banking operations since the invasion have been rauch th e sarno aw those
characterizing the devclopment of the central. bank, i.e~ a r' at . x Ysioan
of liabilities and of loans to publ ic agon cies (mainly the : heac rry), 5n
a marked. falling off o f come c ial loans. The table on. the fell owi n. pace;r
shows .the doevclopment of the combined baan ce sheets of comgimerci P1 barks
frmteedof 1939 to the end of 194 3. A str.iking view - ofl U-he cha X g -
which have occurred is provided in ti'n. following condensed table. O-Ysonn
tially, the commercial banking process urcc er te German o ceupato hao s been
simply to re cive on douo s itu part of t he u ds pumped ito ci rcui twt~ onb
the central ban k, and to roland those funds to the rfcreajrm to cover, part
of the heavy fiscal burden, es eecie tlly that createdbociatc ct5
In otho r words, commercial ba.nks, liethe cent;ralbn, ha veo bee lC h2s od
to ser've GeC Cani financial explo ite,.tion ofL theS country.
Principal Commerc a'l .La'nk AU s ' ta 1and Le Taiiis
(Mlill -ion francs)-'
eeeorr- "3==9 1939 Do cember 31;. 1943
Assets
Loans to the State 3,345 31,921
Loans to thsn private economy 8,733 6,155
Cash, invos~tehts, etc. 83459 0
Ibtac l 21, -r 46,i0
Liabiliti Os
Depo sits - 13,154 39,45.1
Capital accounts 3, 329 ?'
Miscellaneous , 5 4 3,7.153
Total 21,03 7 46, 108
Deposits -with commercial banks amounted to 13.2 billion a.t the
end of 1939 and. to 39.5 billion in December 1943, an increase of aroufid " 00
per cent corresponding approxim;ately to the rate of e x pmnson of the no te
circulation. the amount. of d eposits 'a s artim.1 Ca rly lo -thoen on~
1939, due to the- .widespread hoarding of 3P rrency.. .ur -,r , h thdraw ls
occurred in. the first half of 1940, although th y cwere narrowrly restricedo
following the imposition of a merateorium on. May 135, 19/' Th1 n, in the
second half of 1940, an expansion beganz, dma to the po .ring of the occupy.-
tion "notes into circulation and., presum~nably, to some dishoarding. Already
-'<<1
Coribi ned, Eal ance She ets of Coaminercial. Banksi (1i11
Dec. 31
1Q 9
rASS.ETS,
Cash, and at National Bank and
Office des Cheques Postaux .1,6 14.
Balances with banks ..6
Receivables at short-notice 1,3
Collatferal loans (00
Debtors (current accounts) 3, 1L7
Ac c.ptatnc s (cu stome rs a'i ability) 767
Coimmercial hills 2, 219
'Treaisury bills 4
Govormient bonds 3,161
Foreign bonds21.
Banking shares 3.
Other securities 7,
Mi sco~lieneous
Premises, fixtures, etc.
LIABILI TIES
Deposits (demand and
short- torn)
Depo sits (exceeding one month)
Bankors' balances
:Due on short notice
8S L
61.1
2I,777
11,
53)W
1L .
Acceptances 77
Creditors for bills in collection 712
Miscellaneous 1, 317
Capital 2 '
Surplus. and reserves 9
2.,0)t
Dec * 3
2,20
)
?. ) '3
1,80
)4., c_42
1. 265
t oe;
1 )C
629
2'
,
T 1
/I 7
2 lv
Daec.31
1 74
2, 20)1
5 33
508
:4, 87
3-'I3
67 0
..7.
11)4
rQ .
2., 10 J1
Dec 1
A; , 210
1408
5C
3726
21)
167
22,J_)4
1., 6U ..
31)
8G 0
, . .;
on francs)
June Dec .31
11L3 1j3
& 00
23
'
X09,_1
2j7 7'
1 8 3l0
200
2,1'0
712.
7' 3
14; 1
1
7
21 5
4-
i (
T"-
T6-7r
1 81.7)
)492
Fe
276
980
711:
4r -;o
1/ Since the -1 nvasion, the statIsti cs do not include t-/e assets nd- liabiili ties
ri~ .... .. 44 . 12- , t 44.- d . ,c4
o_-4 U4U1U-4: in)Ues lnca t4.U~t.U 4-44 La or - 14-4 C01,4)JU I L IU Vz(LU1 lea - .1L.. UJ. 12-4- ; navy;
lost contact.
IF11:i s t n August
17 1j93940, te mrora torim.
was abrdg tesd. Th e net, inraseii
deposits m iunted~ to 2.9 blli1on francs in 1940, 4,.7 x.illion1 in 19 I, anc
6.7 bilo n14. ICti the i.s t qurirter. o)f 194.3 alone, th~ere wa ar sudden
expansion by l.,9 billion, re.:lectin the pan ic dishearding ofcurry ncy
followving the dra sti c Tutch -.t Lon or hi h doee 1 ir t see . 2)
In the second ouart r, ho;reve r, .the panic subvld ed ' 'io t _e e r Lrse i
.deposits w(s.rlativ3y modre b ( , bj 1 ion f"m0 Th' 1o o ed
to the bns again ,gained strngth i r the la] '1 - s t 1 o: tie 0 .aC9n the net:\c:
increase in deo sits during 19/ .merounted to 12a l~ lio O" "hes, or m'ore
than for. 194-4 corr.in edt It J_ be n.o tedc tha-c.c .pit. for ;_eriods exeeo~:,A.-
ing one month havc increased even fas< or tVar o ther: d( O is E E . the
end of 1939 they wore only one-ten " h as t area.' . as"). ^" otieci' i -eJ t L, ib the en
of 1943 tills proporio asorthn one; -f bh Tie 1' a ;i-~ r
ofcommercial banks ha:ve not k entf YcC wi Lii sh rie in. Ld iupos s' in act.,
there was a mlarked re du'ctionI in such r.eseou r c s ciuriry 1940 O.r _d Llt21 c can.ge
thereafter. As a result the preportion. of ~itzl and r. m- rooS2 s to cc:o sits
has declined from 1 5.6 at the- end of 193 3 to 1 17' end of1543.
Meanw-vIhile, the commrcial busz ines. of the boarks ('"lcans -to the
psriva 1te c eo.on ey11) has dwi nded , not only_ because , of tie eeure cc.p ien
of economic actii "T but ls bcais fth, rc tll iA (' L} 4 usint5
onterurxiss in gone.al 1it.h. th c,e earthl of raw: mate: uc o t cso
finished goods in -industrial as well as in. commeircil establiSnmrnts, -the
need .for banok credit irhs been mnuchi dimirn ,-hed]. Dospite the deori-7on in
the currency, loan on curren~t a ccoun t (de ca;rs) hL7ve :r en ain c r: _tr r sta ble,,
a f l in 1920-41, beinl cAl 1. oatedI~i Me., l_1. VV~ we6. .rrser _.i. 1942" Bill, -. ..7.
counrting and a~cceptanco 1 usiness have ; rtuir Ly disappeared. T oas nto the
private economy constitutud onl1y 13 pn r cc e co commercial bankc assets a t
the end of 1943 as compared: wnith 43 ner cent at the lend of 193x.
The role of the, comfieerciel banks in fiacn the Be-ga Bhuryr
has boo de scri ;ed -in the pro ceding section. In (_ff.,ct, they have had to)
put at the disposal of the State -bhe entire amount of the in7crease,_, in thei r
deposits under the German occupation. Treasury bills havo been the main
i~strument through which the so credits have bean g rarnted. Th-e ba 4 1s
holdings of such bills, <_ moun1tinr, "g to les, s thano~r 0.,1 bi_,"Lli_ ]_o n fre x " ' the' ,0 i
end of 1939. and evon in, id-1940, have sinc risen l in steep nrergre ssio
reaching at "the end of 1943 no less .than 27,S b_-illion facor mare, thanM
60 per 'cent of th.r, totalO assets. .Changes, in their ho.ldings of.+r mirmic-iit
bonds have been much loss sgnif icant;, c tre 1a a ^ sh arp rise i. the firs t
, ss_"
> , s : Lrhalf
of
1940 which was reversed in Vey soecond halif of the-: year, and agradual
r ise in subsequent years . At the e_ d of 1x4 3, goveiD .rsr t 'bonds, 4:.t a bou t
4..billion f~r4ancs, formed less tha n 9per cent of commceial b ark Lasts,.
On:Ly a limited cinount of> info rrn.atien is available con cc rning the
development of individual bank s * There ap cars to h1iave bee n acertain
amutof ba. nking concen traon, only~ 92 institutions boing officially
listed at the end of l.943,~ : C~ con ~ r.ed with ?1'? at the z"!.d of 1939.
Most of the banks wh ich pav diveoa.a re wee.a n irtoscoe
doin, in 1940. The mnarke d decline inq thez cap ital of commercial banks in
that year ( see .tab.lec on p, 141" reflects these closings, as we'i as the
1 Bzxcluding the three German banl s.
reorganization 'and re capi talij-at' on o-f the old Caiss e Gene ra:le de's Trorts
( see p. 61 ) . The nmber of hank brancohes 4as reduced from .933 at the end
of -1939 to $77 at the end of J9A.
As may be seen fromn thle f1 1.1 e,- in the follovi lg table , the
Banque do la Societe Gener1ale has maintained. its corlrmandinlg lad onong
Belgian banks, holding about 40, per cent of all den'osi.ts with comercial
banks in March 1943. This bm.k
1
s dle o s:it 10St the end ,of 1943 amounted to
14,929 million francs, somewhat lcess a.han 40 per cent of the total. Its
affiliate, the Banqi e d1 Anvers, had also shared in the gene rol co _m i's~jon,
its deposits amountjncr to 1,164 il0lion. frahe.ns ac.t the cnd x.:' 1943 as coi-
pared with 396 million at th0 endo of 1939. H over, tih-e~ oer two 1 .rgest
banks, the Ec ncuc Cde rll les and the Kredi thank', have grebtly nee
their relative positlion at the expense of, the smaller ba0l s. The Wr.nque
do Iru xce s is re:oruod to have expe~rienced,6 a particularly \T I r.- inevso
of deno sis in the y-ea r 194,.,2; in Mv : a .rch, 194.3, it held 2 3 ocetfal
cormmrcial bank denosits as compJared. wth 17 oc r cent in 1939,n thus:i gaining
considerable ground on the leader, the B3ancue' do la Societe Generale
Doosits wvi th the K ra dio tbank showerd a -such more remarkablo development,
t:this bankt s share in to toJ l bpoe .ts hav:ig' risen from lo se tha n 5 per cen t
'V"rh1 21iin 1939 to arly 11 per cent in Mrh143 Thi sne etaculr {;rewth,
involving nearly a six-f'old expansion of deposits~ dur ing this period, is
attributable mainlyr to the fact that this bank onu rn uCs 1.a3 0 mmr in thne
agricultural sections of the country. As durirr the 1ir'st 'orld iTar,
these sections have been res ponsible: for a rela to ilv 1larg-o propor tin of
the money- savings of the tou=tmr. 'h e KrecLotoank probably c:i so added to
its deposits when it took over thne Na tional Ci y Banik .iios
Distr'ibution of Comecil .B&~ .n?. Decosits
(illi_ 'on. fran cs)
Do ce-j per 31 1 39 R rch 31,=: 1943
Banquc do. lo. Societe Gene: role 5 20c 1J1
3
O
0
00
Pancu e do Br-Li ellos 2,220 r732)7
K rodietbank
622 ___ 5!
Total 3,2t1. 2A7
All' o the r beak s 3,9017 0 51-?
Grand. to tal 13,13 5 32,352
IEstimaote on basis of end of 1942 fEigure and increase for all1 banks in
first quarter of 1943.
Official Credit Institutions
Voab little a;n omuati.oh is availabl ,concornirr te development .of
most o f these organizations during the occupation period, but on the whole
thoiz' activities appear to have been reducedT. Like the o.'. 0Lo -- i-al banks,
they have found littlo demand for normal business leans, although sanre of
them (notably the S. 1. C.I ., tho Office Central du Credit Li Ho the cai re, and
the Institut do Credit Agricolo) have. participa~ted in proje cts for the
~UsAissSIF I II
reconstruction of war damage. A General Reconstruction Commission was set
up in August 1940 to administer govo ment guaranties g ien to official
credit institutions on r constimiction :Lo s ,and to indemnify such institu-
tions for the losses they incurred in miraking 'such loans at the low rate of
2 per cent.
Cai ,sse Gei'i.e rale, d' Eparc.n. Info iat ion concerning toe, movement of
deposits on passbooks of: the Caisse Generale held, by individals is showtun in
the following table:
]Deno sits wiith tlhe Caisse Gene rale dT }. Yrac "n.
(Billion fran cs)
Slranco at the
P~osts Vfyhd ihdi L s Net i ovement e.ir
193 3 305 -0.2 12.7
1939 2.1 3- -1. L. r0
1940 l 0 1.7 Do 1 15
1941 104 .13 -0G2 :1.6
1942 ?2l4 1.
193 .3 13 +2.9 iKo
The difLrference between the apparent itrn rease or dec-_,rease. as shown
in the third column and the actual movement a s !s3oen by the last column is
due to' the accumulation of interest on. ais flagodeposits. The large net
withdrawals in 19 -40 were. duo pr- ari-a1 to li:.e oardig of currency; this
movement probably continued into the fist mont h of 1941. Deposi t then
became sabilized and in 1942 the.r e was again a 1 increase. In 1943
there were vcir subs tant .al net deposits, rflec bing the gencral mon tai-
expansion and--ini the first half of the y er- the se, ei dishoarding of
bank notes to wh i ch reference has previously been made. No info iat 1111is
available concerning the devclopment o f the assets of the institution, hut
it may be presumed that funds arising from the increae of deposits have
been invested in gove ru:mcnt pa pe r.
Offic ds Chlesaostaux. The trcnrsfr of the manageme nt of
this insti cution to the rya sseiLs Issue Lank and. the subsecquen ct deve lopment
of. its affairs has been described in the section on the Issue Bank (seeo p.
12 ). Privato deposits with the Office have steadily expanded, reaching
7.0 billion francs in March 194 as comparCC ith 3.1biion in mi-1940.
Turntover in postal checking accounts in. 1943 is reported as 613 billion
francs .against 533 billion in 1942 and. 282' billion in 1940.
Institut de oescompte et do GThr~n~. 1Te I. R.G, after uadar-
taking commitments on behalf of the Cre(Th t Amcrsoiis toward the end of.
.1939, extended some additional assistane to dis-trssed banks in 194.0.
In the following years, as shown in the tai:. J bclow, the gnera]. abunan.ice:
of money, enabled the embarrassed basl to renay their debts to the I.R.G.,
which had al-most liquidated its cornitnients by the end of 1942.
Claims of Irstitut' de R escempte et d Ca rantie
(Illion f remnc.)
193 140 194.1 1942
Dpbtors 2417.2 0, l .5
Bills 412 7 'h 0 121 1 86
Ibtal 4l3t,5 556.2 2;3.0 9.
Societe N-ti onale de Credit a 1' Indstrio. As a result of the
general economic conditions, the "nonrialu
T
loans of the S.N.CJ:.[. hie
decdined as some were reijaid while 'few' new loans were requested. A- the
end of 194,,2, the amnount z- of !?norm.alt loans outstan ding warr s 71) mil.li oni
francs against 935 million at the end of 1939. However, in 1940 the S.N.C.I.
was authorized to mnrake loans for the restoration or recons tru ction o: war
damage to industrial and commercial enterporises whose assessed ;.:and income
(revenue cadastral) exceeded 10, 000 francs, *t s may ho soon from.. the followr-
ing tatle of S.N.CI. loans at the end of 1942, 203 million. fran.ao of recon--
stni tion loans were then outs tanding, moe thn offsetting the decline in
"nonual"
loans since 1939.
Loans (ordinry)
7539.9
1Discounts 1.5
Leans for shinbuildin; rp
Loan for reconstruc t-ion of bui.'?. $ slds 1713,3
Loans for reconstruction of movable property 30,1
ib tal 9713.6
Officc Ce ntral du Crc c.it Hs~Tpo', 1r.cairo. TOis Offce had hardly
commenced oooerrations before the wuar, and its inormal" loans, amounting to
46 million. francs at the end of 1939, have remained at a im ost the same
figure. It wvas also authorized, however, to' gr at Sttegua rrtoed loans
for the restoration and reconstruction. of wao~r damage to residential property
and small industrial establishments not seroved by the 3N.C.I, Such loans
amounted to 2 48 million francs at the en d. of 1941 and 375 mil lion at the
end of .1942.1/. Thy are granted. at the su ci al interest rate; of 2 per cent,
Office National du 3DUcroir. The scope of this institution was
enlarged by a d cree of Janvuary 9, 1 941, empowering the Office to cover
risks arising .from internal traOde. It i s not -knoun, howvr, whthr such
operations actually; attained any con.sideablo voluime. In 1940, th e Offi ce.
granted guarantees ,for 46 million francs on transactions aieounting to 63
million, and, in 1941, for 161 million on transactions amounting to 206
million. At the cnd of 1942, the outstnding coiranithiernnts am ounrted to 165
million francs against 261 million at the end of .1935.
1 Granter d to 13,9 703 indivi duals,
Smnllbu'~tsin.es s Tns tai tu tions. The organiza t:Lons for i' th 'riddle.
classes
1
have participa ted only slightly in the re cons tructi.on prog grau
and their activities have gra 'ciu.:r y hiindJked as their old loans ha e been
repaid. The followving tab.le showes The co a mitaents of tho-,se institutions
at the close of the respective -years
fn.rancs)
1 940 :1)1_, 1Q,,2
Credit Arti sarial
34 24" 14
Cai see Centrals du Petit Credit P rofessiornnel, l'74 160 141
Caisse va tionele do Credit' pour las Chee.cseCs Mroyanno's 225 !95 160
T.he Cai1s se Centrale du etit Credit Pr'ofession:nel was cinpowrea
-to grant loans for wrar dauzage to moe;able p rpe: t y, At the end of 1942
17,3 rnllion fre .cs of ch loans wore outstandia~ng.
Insti tut de Credit ,Ari ola. This organization was e?: i1nowqedC to
grant re construction loens to E.arners who had suffered f_:rom war dweago,. It
was also authorized to lend up to 900 million free ::cc to the Contralos
Alinmentaires (Food Offices) nti oh haned t d istribution of rationed
foods, No further statistics arc availab^le for this instituio dur-ing
"the occupation~ period.
Credit Ces"inunal. rre a ctiviti es of ths i siin appear, to
havo expanded consicber ablcy __n ie ecting the needs o.f local goy exrinentl 'aut1hori-
tics,*I financbed it oerain
lhog
1941. anybyteisuneo
one year notes. the interest rate on which was rdQu ced. :1romi 3.6 -be 3,0 per
cent in August of that year. Early in 1,942 , however, i-b was authorized to
issue a 4 per cent 30 youar loan of 1 billion francs for the convers ion. of
short-toin provincial and ce:ar unal' debts into lonp:-temi oblig jtions. F''r
non-consolida ted debts~ of borrowrers,, the i ns titut bion lowered its rabe f roml
4-1/2 to 4-1/4 per cent- in mid-1941,
S-bock Exchanges
On the day of the invasion (Mlay 10, 19 40) the stock enchar-sc~
wore closed. By two decrees da-bed Auguast 20, 14,modifications "wore
intro duced in the regulation goveng th'e exchangs it wa- ue ht
when decided by the So crc taxry General of IT. Lnan cc, -bhe exchanges could.
reopen for cash transacbions in securitibs designated.. by the Comnmit-bee of
each exchange. No security could be offered unless the seller proved that
he ow,, e d the se curity before PTay- 10, 194!0,. or that hohdbuh - us-
quon-bly f rom a l g it l c tow err All -rarsactions had to be settled in
full wvithin /C hours- conseouen tly,9 -be: brading was ne longer- fl1owed
The, Exchange Corit toes 1were also oinpoaetred. to preinu ,lga to re gul a Lionis
concerning the methods of quotation and the Committee of then ;r'.ssels
Exchange was empowered to e stablish lari-b -be que tations, -ie m(:ax imum
prices.
Tecash m a ret of the c Br ssels Stock Exhnge was reopcrme on
August 21, 1940, and a hea~vy dcmand for men y shares manifested. itself
immediately. As noted previously., distrus t of the future value of the
47A (LA0,AIFID
currenc and an: unusally large voln,:e o:U floatings; : funds caused. shamri
competition for the available supply of cor16orwate shares. The issues of
colonial comnpariles--parti cularLyr those ape rating mi-:es in the Congo--and
of holding companies vieth i.,portarit foreign -inte rests, wore, especially
sought after as a refuge for liquid ca.-pit al. A st;ee p rise' in share njrice
therefore threatened, and in view of the unset ltlng effect wrhich such' a
develonment was bound. to have on public confidence in the currency, it was
combatted by a series of restrictive rea suros inspired byff,' the overning
autlo ri -ties,
At frrst the ComnmiLttee of . the .3r-sYui.,se
1
ccsr,. nge sought to- tro ttle
speculativc trading in securities by fabi dd~ing thc' euoation of any share
at more than 15 per cent above its pre--invasorn pric. Buiness on the
Exchange soon began to dir. up, and this rigi .d rule nhd 10 be r-laaxod in
favor of a grad.u l rise in prices, dalylr increa.ses e in ; fixa ted to a small
per cent.. The continued rise of share p~ 2 cus causcd i ncre~ ing conc'rn,.
howe. ver, and in April 1942 trans actions in all l adJng s taro.s were ou,.t
under the dire ct control of the Exchange Comittee. The Coirnt to;c was to
designate certain brokers who eachiday would. determine for specified
securities 'K1unifie"t prices which would govern ther market for th t day.
Finally in June 1942 i t w$a s announced that fixed maxi mum f rices w e r'e again
to be intro duced, i1 though a continued r-i se in te go. nral index of share
quotations indicated that this rule was not st-:1.I etly enforced.
Various other measures -ore adon ted niis. the purpose o f damping
do n specula 'ive act1ii t tom;' on the c'ICan 1 cs or >eventina evasion of scchange
regulations through outside marke ts. Already in October 1940, a docree
forbade collateral loans made to finance the purchase of corgiorate shares
making ?1p argin" i.tr'ansactionsr impossibin, ahd. the. turnover tax on exchange
transactions was raised in hay 1941 to 2.5 per centt on co rpore te shares
(0.5 per cent on govmmcnt bonds and 1,0 pecr cent on other b ond s). In
October 1941, rccstrictions on dividend distributions m;re introduced-on '
the Gera an modl; in general corporate dividends wn-ere :!iiw-Lod to 6 per
cent of the invested capital and undi stributedl profits h1lad. to be invested
in govorrnncnt secuari t 1 s.
Since restr'i.ctions on trading on the cha gns nt lly ca:sea
a large. outside market: to deve lop, a dcrde of - the Secretary General) of the
Trdasury, dated Januaiy 20, 1942,' declared, that anry, kio of outside transac-
tion in listed securities 'was prohibited. Exctos could maew
the; special authorization of' the Teasux if the proposed, tr m1 .s a ctior
involved at L]east 10 per cent of. the shares of a corporation (e.g. in case
of a now public offering) .or if the seoller or buyer could dermJnstr to soie
specia. need. to negotiate the transaction' outside the exchanges. How re-ver,
oven in such exceptional cases the tra n-saction had to be settled through a
broker and. was subject. to the turnover ta'x.
Tho rri1se in share Cuo ta etnions cwaslmost uninterrupted du1rin 4: .194.,.0
and 1941, the general index of share prices based .on Mey'9, 1940 = 100
reaching 323 by the end of 141.. A spcilI in.dexL--callculs ted. on the sone
base--for the. hhares of colonial mining corporatLions h.d by that ti-me reached
575. In 1942, quotations became more :irreg'ular and even suffered several
setbacks -at,. times *when.:the poor earnings s .tatermnento of industral enterprises
(affected. by. risimi waiges . and. taxes, by. r'a:w mater'ial shortages, etc
9
') over-
shadowed the generJ. desire of the investing publ:Lc to hedge against= infla-
tion. The general index reached the highest point in Januai 1943 at 377.3;
n August te lovcj for h:a yar, 2.8 chds ttch fl. dbara:a
recovery to 342.5 at, thle. end of? D'eceer. These arg fluctuations repre-
sent to a considerable t; xs-ent hopes an,].d fears concerning the progress of
the ' wr; on several occasions Allied victories hlav"tre caused breaks in ,tho
market rehle ing hopes that -the end of' ernn o ceuaio ad ran inced
inflation was near,
The total turnovcer on the Bm.Lss el- 'Stock Exchange, wh~iich. had
amounted to 6.2 billion ffrancs in 1938 annd. x..0 billion in 1939, reached
14.6 billion in 1941, although i.t recedded': again to around 12 0 billion in
1942 and in 1943 . The great bul..( of the turiove"r was iin shares (d6. per
cent in 1942). l hen adjussted for the increase in prices, thc'voln me of
transactions in 1943 was probably not much: more than in the comparative ly
poor year 1939.
The abundance of lijuid funds seekho, I:vinstae nt caused Oven
fixed-interest so curities to enjoy a regular demand and rising c ue t ton
despite the fact that they offered no p tection against depreciation of
the currency
9
During the inf la tion .of the ',twenties, te prices of ondS'
fell considerably, since there was. the nossibiity of investing: money either
in now domestic industrial developments or :Ln foreign 'securities. Such
outlets have bcna closed cu :'fn the occunation period Moreover, 'a large
fraction of the money saving has been made by a ricu
1
turad- classes mere
accustomed to govo rnment bond's than to imdustri.r] _ shares. As a result of
those factors, the yield on long--terr govomnrent bonds, which rose frfom
3.33 per cent in 1937 to an average of narly 4.4 ' O?'Dor' cent in the crisis
years 1939 and 1940, fell again to. an. averaVie' of :373 per cent in 1941,
3.49 per cent in l/+42,. aind 3.27 per ccn .a c August 1943.0
The establ hnor~t unde' official supervision of. clearing offices
for cash trdnsatctions on the Brussels and AntoiTr?. stock exchanges wyras
announced by decree of the Secretary General of Pina ne in Ie ceaber 1941.
The offices are roporfed to have commenced operationems on Ap 1..ril '1, 1 42,
All brokers on each excharie ad to becom n :bcr.eb of the respective offi ces,
anid each b-raker had to subsdri be to.-one 10,,000--fra no sarc of hiS ,office,.
on-fifth -aid u-p. The 'aeministrationi of each of'fice was entristd. to a
board of five momb s appointed by' the, respe tivo StLack Exdhan.g Co CoiitteC.
n' January.19, 'as part of the 'gcneral rciremr for Cj Scouragin.g s''to'd.
exchange : transactions, the number of broke rs on the Bruissol's Exchange w a-s'
limited to 750 as compared ith about 1,300 proviiuslyV, hi lt the numz ber
at Antwerp was reduced' from xl. to 20.50
The f ollowrin g tab> shows the fluctuations in act rivt in the
capital 'mna rket for coiporate securitcs during the yea's L938-43.. TIhe net
now issues. in 1943 (especially of bonds) wore markeadly htig ;her than lo
several 'years, although the'. doprrcia ti on in the value of 'the :fianc shold
be -borne itiz mind. 'The big 'increase in 1941 of ; the issuance of. 'hew- shares
against reseres wa s .innced' y the l.:imitaion of corp 1:rato di~vidaeinds in
October of that year to a fixed-noreen tae- of the corporationt s capital
(see above).
- 149
Isbue s of Corporati on Secl.ri ties
(Million frar cc)
Shares of new companies
Shar'es of existing companiies
Less: Aounts issued to capitalize
reserves
Net new issues
Corporate bonds
Less: Aounts issued for refunding
purposes
Net new issues
Total net new issues
Incl udi n :
Subs cribed in cashi
Subscribed in ether assets)
19a ; }39 1940 1941 / 194 2 1943
535 457 394 550 28,30 381
1,2'76
519 915 2, 619
300 259 733 2,11.8
46 260 7..7 50 1\
392
153
41
239
41
651
356
152
152
295 303
209 fJ 924
-. - 22"
1 209 64 6i6
1,242 758 572 1,260
'7 237
573. 4. 71
284 763
236 499
316 1,1.72
352 360
.Tta.l of these two i tems .s]igthly exceod;s '.mount of nme b now issues in
some years because som e issues were,, sold at a primiiv ovr tir par
value,.
Insurance Cenpani s:ll
The impact of wr and invasion caused severe difficulties for
insurance ope rations. A considerable propertion. of te population was
mobilized, fami ly life was disrupted, anTi d th-,, income of ti middle class
was substantially reduced. Th ie life insurance sector' of the industry was
particularly affected, and premium income in 19,40 fell to 496 million
francs from approx.mate y oO nillion in 1939. Lit in 1941, under tbhe
stimrhulus of monetary inflation, life insurance sales cquickly recovered.
lji 1941, new business eras reported to have aggroga ted 2,'047 millich francs,
an increase of 135 per cent over 1940 and of 35 per cent- over 1939. he
heaviest 'increase o ceurred in the group insurance soetor. 'Stimultan1 oosly,
contract teaminations were considerably reduced, amounting to only ,1,.145
million f ran cs, against 1,407 mizlion in 1940.
The foioring table indicates the main trends in the life insur-
ance industry during the period 1939-1941:
I Section prepared. by Forcign Rsear ch Division in FOderi Resrver 3 .ank of
New York.
OMHE"
jI n La r.n ce in fo rc02J frmu
Belgian
Pror.11n'
Total. conpanies companies
(
M
i
l
io
n
f
ra
n
c
s)19
93
,5
13 1354 9,0a8:2 4, 502 599
194.0 1 9.5 s0 8 , 771 4, 209
1941 14, 051 '97511 4,294 653
IN ig
n nuiisures are 'available
as toinsurance
in force
in 1942
a .i
1943, but it is resorted that orea Tim receints of the insuranco indust tr
in 1'942 anioumted to 1,-143 million. fran cs, alanost double those of 194.10
The purchase of life insurance Las anparestE..y become ons of. the major,
outlet for the idIle money of thC e Iegin p7?opulation, despite the fears
entertained fo r the future of the franc.
Non-life insuran ce uiys:-rc d i n ot, o~f cource, assumeo
responsibaili'tyT for wurar ri ,-sksha ccaner . cc e ec:Lal as . result , the:i c
appreciation in nroporty v Iue s. y~oIATCVO .', ic ha ranch. as a whrole cext'.rinced
a severe blow as a result1 of a aevastafl ox .aosieni at the blgiLan tow of
Tesscnderloo in April 1942. The 3elgiatsa rnsu'red isti. i s reported to
have resi.stedc pa.yme .nt of thelaisrin fo is rldn nitn
that it was caused by sab otage i n a c r~ ..- odssc-in. ' ,io 1 pl s, and
therefore ought to bo e fegcc.'.1:d as aw risk. 1-oncv r, the comkpanies
finally had. to accede to G0emia. pressure an to o i s ft: ee cmands of
policyholders. Sniass reinsurers werre a, so 'e'aw vi v ' l~ ed
A heavy influx of Germa.n agen cn ' il II cued Jomnedi ately upon the
invasion of ] elgium. In. 1942, as many as 40 acgencicces of German companies
operated in Belg iuma, compared witha only 16 earlyy i n I r( Brtis
reinsurance market, ,to which 'most Belgian \compm nies had. rocour so pr-J.or to
the invasionr, was repl aced by German reinsurers. According to German
source, Belgian. policyholders who had insurcd thei r .risk -J1I Bi hTitl sh
pmdenriiters sustained severe losses through the fact that the rmac e
against, their policies were kept in Englsnd Al lwance should be miade,
however, for the fac t that Bri ti sh comipan ieos k, ot substantial dash ba.:rlances
in Belgium end hbold considerable investuocnts in local insurance comp .nies.
Corpora tive organizations on the Gos. r model have been established
for the Bel gian ,insurance business~, largely -in order to provid.e a channel
for officiai control of activities in thatnied
A deree of June 19, 1942, established a i
1
Groupenseonta des
A ssurances
1
to wJhich all individ-ual .s and cemoerations wAhi-ch on: rato an.
insurance or roi.nsurance business have to belong. The Are ident of the,
org anizatio wa's autor, e to issueJ1 its stattes AC" >Ji do l. cr.ee\, o Jf Augus ..IJt 30,
1942, created four professional grou4ps i thin the in g~. rour, one fer fr
and burglar-y insurance; one for a ecident andC l iabili1ty insuron ccq one for
life insuirant-ce; and. one for transuort, r einsuran ce, and11 other insurance
branches. The president of each group 'ens to iss:ue statutes which weeto
be approved by the he~ad o f the central organizatiion. The president of the
mai n group was also to doterminso to which professional g roup insurance
companies were to belong.
-151
NCLASSI
SFE!
Already on Novrember 29, 1 '412, a decree had provided for t e
creation of a corporative crga.niiration of. insurance b rokers anid agents; it
was actually established by a decree of April 20, 1942, a further decree of
Novemiber 25 in that year miA ing memibership compulsory for all. brokers,,
agents, or intLeraeciaries. Any person lc gaily. , ei npoered. te close insurance
contracts in. his o-vvn n<3ue on behalf of snc isurance conepany became a raember
of the Groupenmen t des Assurance e'.Sr ch perso ns .fight at. the same tim'e, how-
eve r,r be mere brokers or agents for oter corapan:.e s .
Certain other decrees issued under the eccupation may be brief-ly
mentioned. One dated August 22, 1940, authorizo. the0 General Secretary of
the Labor Ministry co sot up a pr"oi7-si anal. ro n s hra' 'ion for crtai
insurance companies (especially thoss 1unde r B~r-* Us! con ,rol) A dccree a:o
April 30, 1941, issued by the M iristr^r of Late,-,r, 'pvov cig new tchnical
principles to be .follovred by inur nce comanis in the v/aluat on of their
securities, bu:t did not affect invstieont ooli~ c si rmificnt:ly. A decree
issued inthe fall of 9/3 inspired by the hear losses of son"i c compnanies
in the ie sscnderloo ex~plo sion, Jrovidod for conir1 tsory' reinsurance iln the
field of -rork uen' s compensatiLon insurance. In addi tion various era
insurance funds have been set up under official au pies to in asure cor twin
vrar risks, such as those involvd in s ccmi neation. and in poperty
d'am_:age to ve.ssels 'oneratinmg on. inlan.1d vrato raays.