Gerle János: Palaces of Money - Our Budapest (Budapest, 1994)

Hungarian Compromise of 1867 was organised by the Municipality of Pest. The ceremony took place in the square which was to bear the name of Francis Joseph. The square (called Roosevelt tér today) happened to be where the office, later the headquarters, of the Commercial Bank, creditor of the expenses incurred by the event’s organiser, stood. A system of banks suddenly began to develop, and by 1869 there were thirteen regular banks, six savings and two land banks operating in the country. The same year saw the appearance of crisis symptoms, which always tend to accompany political independence. In 1872 the country was obliged, for the first time, to raise a loan to pay off previously incurred debts. In another two years’ time there was a threat of the state going bankrupt, which could only be avoided with the help of a treasury bond issue guaranteed by the Rothschild consortium. That was how the General Credit Bank of Hungary, a Rothschild subsidiary, acquired the position of being the government’s financier as its number one creditor.

The improving economy, the levying of new taxes, thrifty budgeting, and the financial politics of Sándor Wekerle, who played a major role in the stabilising programmes of Kálmán Széli and, later, Kálmán Tisza, resulted in a gradual recovery. In 1878 the Austro- Hungarian Bank, a financial institution reorganised along the lines of dualistic politics, was formed as a central bank attending to the finances of the Austro- Hungarian Monarchy. In the eighties a series of large scale investments commenced mainly with the support of the Commercial and Credit Bank. The Commercial Bank was the first to introduce the predecessor of today’s savings book. In 1882 control over the bank was taken over by Leó Lánczy, whose figure inspired more legends than that of any other Hungarian banker, and who envisaged the construction of a national infrastructure (a telephone network in Budapest, local train lines, a sailing company on the Adriatic, tram routs in Budapest, etc.) as the bank’s major business.

The 1880 edition of the official directory already lists 36 financial institutions, but some of the entries contain the remark “under liquidation”. The number of solid, large banks operating over an extended period of time was around ten. The number of smaller ones rapidly grew to reach, according to the directory, 136 by 1911, the year preceding the period of great international financial tensions. The figure for 1914 was 175, and it was 157 in the year following the Great Crash.

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