Hungarian Commercial Bank of Pest
The first commercial bank in Pest
Móric Ullmann, together with several merchants from Pest, submitted his proposal for the establishment of the first modern Hungarian commercial bank in the form of a joint-stock company to the Governor's Council in May 1830. However, approval was delayed for more than a decade, and the founding letter of the Hungarian Commercial Bank of Pest (PMKB) was finally signed by King Ferdinand V on 14 October 1841. The bank began operations in August 1842. In the early years, its main activities were bill discounting and the provision of advances (in today's terms loans) for various transactions, such as railway construction, as well as securities-backed lending and, to a lesser extent, mortgage lending. In addition to a series of capital injections, the sale of interest-bearing banknotes provided a means of raising funds. The bank's foundation licence also contained a number of restrictions, which were much stricter than the rules applicable to Austrian banks. For example, it could only discount bills of exchange payable in Budapest, signed within 3 months by 3 registered trading companies. Despite repeated promises, the bank's management was unable to get the rules of the Austrian National Bank amended to allow it to grant credit to PMKB. Despite all these restrictions, the bank developed dynamically in the first phase of its operation, up to the Revolution of 1848.
From the 1848 Revolution to the Compromise
On 17 June 1848, on behalf of the Batthyány government, Finance Minister Lajos Kossuth signed a contract with PMKB, Hungary's only commercial bank, to issue one and two forint banknotes backed by gold and silver deposited by the state. The bank could only use the precious metals to redeem the banknotes. It was planned that the bank could issue 12,5 million banknotes, known as Kossuth banknotes, backed by 5 million forints of precious metals. However, the amount of gold and silver backing made available to the bank and, accordingly, the volume of banknotes issued, fell considerably short of this. At the beginning of 1849, during the Austrian occupation of Pest and Buda, an Imperial Commissioner was appointed to the Bank, who ordered the conversion of Hungarian banknotes into Austrian banknotes within 8 days, and the collected banknotes were publicly burnt. The Bank's stock of precious metals had to be handed over to the Austrian command and was taken out of the country. After the recapture of Pest at the end of April 1849, the bank temporarily resumed its role in financing the state. Following the fall of the War of Independence, the Austrian government demanded that the bank should issue banknotes in an amount equal to twice its paid-up capital, which would have led to its bankruptcy.
Meanwhile, in 1850, due to the severity of the Austrian claims, and also because the Austrian National Bank wanted to open a branch in Pest to take over the business stock and the entire infrastructure of the PMKB, the bank's president, József Havas, proposed the liquidation of the bank. This proposal was rejected by both the bank's board of directors and its general assembly.
After numerous petitions and a long legal procedure, the bank was released from the Austrian claims on the banknote issue by a royal pardon on 29 August 1854. From then on, it was able to resume its development, which coincided with the economic development that had begun before the Compromise.
From the Compromise to the outbreak of the First World War
During the period of economic recovery that followed the Reconciliation Treaty, the Bank also increased its activities dynamically. The burgeoning construction boom increased the demand for bank financing. In 1867, the Bank therefore resumed mortgage lending, which had been discontinued in 1848, and issued long-term mortgage bonds to meet the increased demand for financing. It had applied for permission from the Austrian Minister of Finance as early as 1864, but received it only in 1867, just before the Hungarian government took office. In response to the stock market speculation that followed the Reunification, the bank adopted a conservative business policy, making no advances for the purchase of stock market securities and taking no part in financing the burgeoning corporate rescue fever. Thus, the Bank weathered the stock market crisis of 1873 relatively well, which had a lasting effect for several years.
With the revival of the economy from 1879 onwards, the bank extended its activities from 1881 onwards to include activities not previously favoured, becoming active in practically all the banking business then in existence, including participation in corporate rescue. In addition, the bank sold a large block of shares to Österreichische Lӓnderbank, a member of the internationally important Bontoux Group, and concluded agreements with it covering a wide range of areas, in order to strengthen its foreign links. However, the Bontoux banking house failed in 1882, mainly due to its speculative dealings in France, which had a prolonged negative impact on Hungary and on the business of PMKB. Nevertheless, it was at this time that PMKB's organisation and business were renewed and, under the leadership of Leó Lánczy, it was transformed into a modern commercial bank with a wide range of activities and international connections. The bank's development was virtually uninterrupted until the outbreak of the First World War. Its activities shifted significantly towards long-term lending, including the financing of railway construction and industrial investment. It was also during this period that the bank built up its branch network, opening 19 branches in Budapest between 1886 and 1914, and in the countryside, in addition to opening new branches, it increased its presence by acquiring a majority stake in a number of existing banks. To strengthen its international presence, it built up a substantial banking network in the Balkans.
From the First World War to the demise of the bank
In July 1914, on the outbreak of war, there was a major withdrawal of deposits, amounting to 25 million kronor in one week for PMKB. In response, the government imposed a moratorium on deposit withdrawals of over SEK 200 on 1 August. PMKB did not take advantage of the moratorium, which restored depositors' confidence. The bank's business structure was significantly restructured, with a radical decline in traditional business lines (mortgage transactions, bills of exchange, foreign exchange, securities). A new business area was the financing of the State. In the field of corporate finance, the Bank's activities focused on meeting the needs of the war utilities and the military industry, partly by setting up, acquiring and recapitalising companies and partly by granting loans. It was also active in underwriting war loans.
During the war, the disintegration of the Monarchy, the revolutions, the shrinking of the country's territory and the post-war inflation, by 1925 the PMKB had lost nearly three quarters of its pre-war assets. The bank then began to stabilise and its traditional business began to grow rapidly. This process was interrupted by the financial crisis in the spring of 1931, which, however, affected PMKB, which had pursued a conservative and constructive business policy in the preceding years, less severely than other banks. There followed a succession of better and worse years, and from the end of the decade the preparations for war and the war economy in the first years of the Second World War led to a strengthening of the bank's position. In 1944, following the German invasion of Hungary, the Weiss family handed over their assets to the SS in exchange for their freedom, which included a minority stake in PMKB. The bank continued to operate until the siege of Budapest.
After the war, the PMKB resumed operations, but due to hyperinflation, this could only be resumed in earnest for a short period after the stabilisation of August 1946. In 1947 the domestic ownership of PMKB was nationalised and in 1948 the Hungarian Foreign Trade Bank was established on the basis of PMKB.
Sources:
János Botos (1991) History of the Hungarian Commercial Bank of Pest, Láng Kiadó
Lóránt Hegedűs (1917) History of the Hungarian Commercial Bank of Pest 1841-1917, published by the Bank
György Kövér (2012) From bank organisation to bankruptcy, The Pesti Hungarian Commercial Bank as a specbank (1948-1950), In: The Legacy of the City of Pest, 367-377.
Károly Lamotte (1941):The Hungarian Commercial Bank of Pest 1841-1941, Budapest
Pesti Hungarian Commercial Bank (1941) The centennial history of the Hungarian Commercial Bank of Pest, 1841-1941, Posner Graphic Institute, Budapest
Jakab Pólya (1892) History of the Hungarian Commercial Bank of Pest, 1841-1892, published by the Bank
Tibor Szádeczky-Kardos Szádeczky (1928) The Development of Financial Institutions in Hungary, Hungarian Economic Society, Economic Library, Volume IV
Founded on 14 October 1841.
Date of cessation: 1947
Founders: Móric Ullmann and several merchants from Pest
Decisive leaders:
1842-1843 | Móric Ullmann |
1843-1848 | Ferenc Ürményi |
1848-1849 | Valero J. Antal |
1849-1855 | József Havas |
1855-1857 | József Appiano |
1857-1861 | László Podmaniczky |
1861-1872 | Ferenc A. Jálics |
1873-1881 | Jenő Ágost Tömöry |
1882-1891 | Lajos Rósa |
1896-1921 | Leó Lánczy |
1921-1938 | Fülöp Weiss |
1938-1939 | Dr. János Teleszky |
1939-1948 | Dr. Lajos Walkó |
Main activity not set
Main products are not set
Seats:
1841-1861 | Pest, Ferenc József tér offices for rent in the Hall of Traders |
1861-1909 | Pest, Theatre Square (today: Vörösmarty Square) |
1909-1948 | Budapest, Ferenc József tér 3-4 (today Széchenyi István tér József Attila street corner, today Ministry of Interior) |
Locations are not set
Main milestones are not set
Author: by Dr. Mérő Katalin
Founded on 14 October 1841.
Founders: Móric Ullmann and several merchants from Pest
Decisive leaders:
1842-1843 | Móric Ullmann |
1843-1848 | Ferenc Ürményi |
1848-1849 | Valero J. Antal |
1849-1855 | József Havas |
1855-1857 | József Appiano |
1857-1861 | László Podmaniczky |
1861-1872 | Ferenc A. Jálics |
1873-1881 | Jenő Ágost Tömöry |
1882-1891 | Lajos Rósa |
1896-1921 | Leó Lánczy |
1921-1938 | Fülöp Weiss |
1938-1939 | Dr. János Teleszky |
1939-1948 | Dr. Lajos Walkó |
Main activity not set
Main products are not set
Seats:
1841-1861 | Pest, Ferenc József tér offices for rent in the Hall of Traders |
1861-1909 | Pest, Theatre Square (today: Vörösmarty Square) |
1909-1948 | Budapest, Ferenc József tér 3-4 (today Széchenyi István tér József Attila street corner, today Ministry of Interior) |
Locations are not set
Main milestones are not set
Author: by Dr. Mérő Katalin
Hungarian Commercial Bank of Pest
The first commercial bank in Pest
Móric Ullmann, together with several merchants from Pest, submitted his proposal for the establishment of the first modern Hungarian commercial bank in the form of a joint-stock company to the Governor's Council in May 1830. However, approval was delayed for more than a decade, and the founding letter of the Hungarian Commercial Bank of Pest (PMKB) was finally signed by King Ferdinand V on 14 October 1841. The bank began operations in August 1842. In the early years, its main activities were bill discounting and the provision of advances (in today's terms loans) for various transactions, such as railway construction, as well as securities-backed lending and, to a lesser extent, mortgage lending. In addition to a series of capital injections, the sale of interest-bearing banknotes provided a means of raising funds. The bank's foundation licence also contained a number of restrictions, which were much stricter than the rules applicable to Austrian banks. For example, it could only discount bills of exchange payable in Budapest, signed within 3 months by 3 registered trading companies. Despite repeated promises, the bank's management was unable to get the rules of the Austrian National Bank amended to allow it to grant credit to PMKB. Despite all these restrictions, the bank developed dynamically in the first phase of its operation, up to the Revolution of 1848.
From the 1848 Revolution to the Compromise
On 17 June 1848, on behalf of the Batthyány government, Finance Minister Lajos Kossuth signed a contract with PMKB, Hungary's only commercial bank, to issue one and two forint banknotes backed by gold and silver deposited by the state. The bank could only use the precious metals to redeem the banknotes. It was planned that the bank could issue 12,5 million banknotes, known as Kossuth banknotes, backed by 5 million forints of precious metals. However, the amount of gold and silver backing made available to the bank and, accordingly, the volume of banknotes issued, fell considerably short of this. At the beginning of 1849, during the Austrian occupation of Pest and Buda, an Imperial Commissioner was appointed to the Bank, who ordered the conversion of Hungarian banknotes into Austrian banknotes within 8 days, and the collected banknotes were publicly burnt. The Bank's stock of precious metals had to be handed over to the Austrian command and was taken out of the country. After the recapture of Pest at the end of April 1849, the bank temporarily resumed its role in financing the state. Following the fall of the War of Independence, the Austrian government demanded that the bank should issue banknotes in an amount equal to twice its paid-up capital, which would have led to its bankruptcy.
Meanwhile, in 1850, due to the severity of the Austrian claims, and also because the Austrian National Bank wanted to open a branch in Pest to take over the business stock and the entire infrastructure of the PMKB, the bank's president, József Havas, proposed the liquidation of the bank. This proposal was rejected by both the bank's board of directors and its general assembly.
After numerous petitions and a long legal procedure, the bank was released from the Austrian claims on the banknote issue by a royal pardon on 29 August 1854. From then on, it was able to resume its development, which coincided with the economic development that had begun before the Compromise.
From the Compromise to the outbreak of the First World War
During the period of economic recovery that followed the Reconciliation Treaty, the Bank also increased its activities dynamically. The burgeoning construction boom increased the demand for bank financing. In 1867, the Bank therefore resumed mortgage lending, which had been discontinued in 1848, and issued long-term mortgage bonds to meet the increased demand for financing. It had applied for permission from the Austrian Minister of Finance as early as 1864, but received it only in 1867, just before the Hungarian government took office. In response to the stock market speculation that followed the Reunification, the bank adopted a conservative business policy, making no advances for the purchase of stock market securities and taking no part in financing the burgeoning corporate rescue fever. Thus, the Bank weathered the stock market crisis of 1873 relatively well, which had a lasting effect for several years.
With the revival of the economy from 1879 onwards, the bank extended its activities from 1881 onwards to include activities not previously favoured, becoming active in practically all the banking business then in existence, including participation in corporate rescue. In addition, the bank sold a large block of shares to Österreichische Lӓnderbank, a member of the internationally important Bontoux Group, and concluded agreements with it covering a wide range of areas, in order to strengthen its foreign links. However, the Bontoux banking house failed in 1882, mainly due to its speculative dealings in France, which had a prolonged negative impact on Hungary and on the business of PMKB. Nevertheless, it was at this time that PMKB's organisation and business were renewed and, under the leadership of Leó Lánczy, it was transformed into a modern commercial bank with a wide range of activities and international connections. The bank's development was virtually uninterrupted until the outbreak of the First World War. Its activities shifted significantly towards long-term lending, including the financing of railway construction and industrial investment. It was also during this period that the bank built up its branch network, opening 19 branches in Budapest between 1886 and 1914, and in the countryside, in addition to opening new branches, it increased its presence by acquiring a majority stake in a number of existing banks. To strengthen its international presence, it built up a substantial banking network in the Balkans.
From the First World War to the demise of the bank
In July 1914, on the outbreak of war, there was a major withdrawal of deposits, amounting to 25 million kronor in one week for PMKB. In response, the government imposed a moratorium on deposit withdrawals of over SEK 200 on 1 August. PMKB did not take advantage of the moratorium, which restored depositors' confidence. The bank's business structure was significantly restructured, with a radical decline in traditional business lines (mortgage transactions, bills of exchange, foreign exchange, securities). A new business area was the financing of the State. In the field of corporate finance, the Bank's activities focused on meeting the needs of the war utilities and the military industry, partly by setting up, acquiring and recapitalising companies and partly by granting loans. It was also active in underwriting war loans.
During the war, the disintegration of the Monarchy, the revolutions, the shrinking of the country's territory and the post-war inflation, by 1925 the PMKB had lost nearly three quarters of its pre-war assets. The bank then began to stabilise and its traditional business began to grow rapidly. This process was interrupted by the financial crisis in the spring of 1931, which, however, affected PMKB, which had pursued a conservative and constructive business policy in the preceding years, less severely than other banks. There followed a succession of better and worse years, and from the end of the decade the preparations for war and the war economy in the first years of the Second World War led to a strengthening of the bank's position. In 1944, following the German invasion of Hungary, the Weiss family handed over their assets to the SS in exchange for their freedom, which included a minority stake in PMKB. The bank continued to operate until the siege of Budapest.
After the war, the PMKB resumed operations, but due to hyperinflation, this could only be resumed in earnest for a short period after the stabilisation of August 1946. In 1947 the domestic ownership of PMKB was nationalised and in 1948 the Hungarian Foreign Trade Bank was established on the basis of PMKB.
Sources:
János Botos (1991) History of the Hungarian Commercial Bank of Pest, Láng Kiadó
Lóránt Hegedűs (1917) History of the Hungarian Commercial Bank of Pest 1841-1917, published by the Bank
György Kövér (2012) From bank organisation to bankruptcy, The Pesti Hungarian Commercial Bank as a specbank (1948-1950), In: The Legacy of the City of Pest, 367-377.
Károly Lamotte (1941):The Hungarian Commercial Bank of Pest 1841-1941, Budapest
Pesti Hungarian Commercial Bank (1941) The centennial history of the Hungarian Commercial Bank of Pest, 1841-1941, Posner Graphic Institute, Budapest
Jakab Pólya (1892) History of the Hungarian Commercial Bank of Pest, 1841-1892, published by the Bank
Tibor Szádeczky-Kardos Szádeczky (1928) The Development of Financial Institutions in Hungary, Hungarian Economic Society, Economic Library, Volume IV