Annual Report of the German Reichsbank

September 1940

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-flnnuai /2ejaott ofi the Qatman The annual report of the German Reichsbank for organization accomplished in the preceding the year ending December 31, 1939, was submitted on April 19,1940, to the general meeting of the share- years, was rapidly and smoothly completed, holders by the President of the Bank, Dr. Walther enabling the economy to achieve the neces- Funk. The greater part of the text of the report is sary expansion of its productive capacity given in translation below:* to meet the war-time needs. Nonetheless, the hastily adopted measures of economic The influence of political events in the policy represent political and administrative German economy in 1939 has more than achievements of the greatest significance. ever determined the course of trade and The solid structure of the German money commerce. During the first eight months and credit system was not endangered at any of the past year, economic activity was char- time during the year under review, so rich in acterized by the practically unchanged con- unforeseen events. Thanks to the discipline tinuation of the constructive achievement of the German people and thanks to their con- carried out in the preceding years. The fidence in the National Socialist Government, increase in area and population, moreover, withdrawals at the banks even at the out- had disclosed new production and market- break of war, in spite of the exceptional cir- ing possibilities. Planned economic coor- cumstances, showed relatively small increase dination and sensible rationalization were and were soon succeeded by a considerable directed toward the goal of further increas- expansion of savings and other deposits. ing the productive capacity of the old Reich There was no need to consider emergency area and of bringing the newly acquired re- measures, such as raising the Reichsbank dis- gions up to the same high level of industrial count rate, closing the stock exchanges, proc- and technical efficiency. Production of goods lamation of a moratorium, or other stringent and new investments, sales, and consumption regulations. Certain legal relief measures all reached a new peak. The predominance of were provided, however, for the sections of the public authorities as the source of orders, our economy which were especially hard hit and the supremacy of capital goods produc- by the war. tion over the output of consumption goods, Currency and credit policy.—It proved even though the latter was also expanded, possible in the past year to pursue the same remained the outstanding features of the currency policy as in recent years, and even German economy. National income, savings to retain its principal outlines after the out- and capital formation, and tax receipts also break of the war. Various measures of eco- increased, thus contributing to the Reich's nomic policy, which had become effective over ability to push forward its great undertaking. a widening area since 1933, such as the super- At the outbreak of the war, all economic vision over wages and prices, control of activities were pursued even more inten- security issues and investment, regulation of sively than before, serving especially, of raw materials, foreign trade, and foreign ex- course, the defense requirements and the change, contributed to the strength of the aims of the Four Year Plan. The transition German currency at home and abroad. The to war-time activity, thanks to the work of regulation of consumption in the most im- 1 The report, available in German, contains in addition an portant departments of supply, which became introductory paragraph, a section on the Bank's activities in the issue and exchange of securities on behalf of the Government, necessary in connection with the war, took and a section relating to personnel matters. There are also tables its place as a further link in the chain of these and charts showing the operations of the Bank in detail. For earlier reports, see BULLETIN for September 1939, and for May, measures. The limitation of the general 1938, 1937, etc. For the German Reichsbank Law of 1939 and standard of living and the systematic restric- the German Credit Act of 1934, see BULLETIN for September 1939, pp. 737-742, and January 1935, pp. 30-38, respectively. tion of output of consumption goods have

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Foreign Banking Laws and Reports directed increasing attention to the impor- to the banks patronized by the grantees, prin- tance, from the standpoint of currency policy, cipally the German Company for Public of skimming off and capturing the surplus Works, the German Industrial Bank, the purchasing power of the German economy. Luftfahrtkontor G.m.b.H. and the Reichs- The Reichsbank has been and remains active, Kredit-Gesellschaft. Further support to in- in closest cooperation with the other inter- dustry was provided by the Decree of Septem- ested departments of the Reich, in making ber 19,1939 (Reichsgesetzblatt I, page 1851), available for the Reich's financial needs the by which it was made possible to give priority funds set free in the economic process, and to defense orders and thus to prevent liquidity in pioneering ways to protect the stability of difficulties in defense enterprises. It is a the currency while on the other hand ensur- testimonial to the efficiency of the German ing the unobstructed activity of the economic banks as a whole that the additional credit machine geared to maximum speed. needs of the economy called forth by the war Special currency measures of a technical could, in general, be covered within the frame- nature were required at the beginning of the work of the normal credit system, and that war only to the extent of a temporary sus- where, on the basis of the guarantees men- pension of the legal provisions regarding the tioned above, exceptional measures at first Rentenbank note circulation and of the cor- appeared necessary, much smaller amounts responding Section 32 of the German Reichs- than originally estimated were actually re- bank Law (Decree of September 4, 1939, quired. Reichsgesetzblatt I, page 1694), and the in- The financing methods chosen to meet the clusion of a provision in Section 1 of the Reich's requirements had to be altered in Decree regarding War Economy, which pro- the course of the past year in view of the vides penalties for unwarranted hoarding of situation created by the outbreak of war. currency. The first-named decree created the The issue of tax certificates which began in legal basis for a more extensive employment May 1939 in connection with the new finance of Rentenbank notes; this was necessary to plan and formed a temporary means of financ- supply the need for currency of smaller ing the greater part of the Reich's expendi- denominations, especially of small coin, which tures in excess of tax receipts, was brought is always intensified in war time and in this to an end by the Third Administrative case was multiplied by the recent extensions Decree of October 22, 1939 (Reichsgesetz- of territory. blatt I, p. 2067). The right originally granted All measures of credit policy had to serve to business men of making mutual payments the same purpose as the currency policy. The for goods and services in tax certificates, credit policy had to be adjusted with the up to 40 per cent of the total account, was greatest care to the Reich's financing re- abolished by the Fourth Executive Decree of quirements, which were naturally greatly March 20, 1940 (Reichsgesetzblatt I, p. 518) increased by the war. The German credit for payments due from April 1,1940. There- system was thus subjected to an extraordi- upon the tax certificates finally disappeared nary test of its efficiency. The result demon- as payment media. In accordance with the strated that the Reich could place short and expanded financing requirements, the war medium term securities on the money market finance program was further extended in the in sufficient volume to cover its requirements, field of taxation by the War Economy Decree in so far as the war finance needs could not of September 4, 1939 (Reichsgesetzblatt I, be covered by tax receipts, without resort to page 1609), which created a systematic basis excessive borrowing from the central bank. for the most important questions of financial When, as a consequence of the war, credit policy. Through the introduction of the requirements of a special nature arose in war surtax on the income tax, through in- private business, measures of credit assist- creases in various consumption taxes, and by ance were provided under guarantee in part the establishment of a war contribution from by the entire industrial community and in the provinces, communities, and other public part by the Reich, so that military supply and bodies, considerable new funds were fur- armament industries as well as enterprises nished to the Reich budget. in foreign trade and other business could ob- The Reichsbank recognized the manifest tain necessary and justifiable financial sup- duty at the outbreak of the war of placing port. The chief administrative agencies for itself at the disposal of the Reich for the these interim measures were, in addition financing of the Reich's projects, not only in-

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Foreign Banking Laws and Reports directly through utilizing the latent possi- the output of consumption goods, reduction bilities of the German money market, but of inventories, and postponement of new in- also directly through contributing its own stallations not essential for war purposes, as credit resources. At the same time, because well as of many replacements and renewals. of the satisfactory development of the money The sale of non-interest bearing Treasury and credit situation described above, the notes of the Reich was increased throughout Reichsbank retained throughout sufficient the entire year under review—in part with liquidity to furnish credit support to private lengthened maturities. Especially active business, whether in the normal course of turnover prevailed in Treasury bills while credit operations, or through granting re- by contrast the circulation of Solawechsel discount facilities in connection with special (promissory notes) of the German Gold measures of assistance, or on other occasions Discount Bank, which had reached its peak outside the usual scope of the Bank's busi- on January 24, 1939, with a figure of RM ness. The volume of credit demand which the 1,893,000,000, declined from month to month Reichsbank satisfied is reflected in its bal- with narrow fluctuations. At the end of the ance sheet. The Bank's total investment in report year, the amount of Solawechsel in cir- bills, lombards, and securities increased by culation was RM 637,000,000. Active demand RM 3,476,000,000 in 1939 to RM 12,- for private discounts ruled, with a continuous 619,000,000; note circulation increased cor- scarcity of bills offered. respondingly by RM 3,575,000,000 to RM 11,- The favorable money market situation was 798,000,000. The total volume of payment clearly reflected in the interest rate struc- media rose by RM 4,114,000,000 to RM 14,- ture. The private discount rate, which since 502,000,000; at the year end RM 957,000,000 the middle of April 1937 had remained at the of the circulation consisted of Rentenbank level of 2% per cent, halfway between the notes. Although the situation indicated by money rate and the bill rate, was lowered Vs these figures calls for continuous and careful of 1 per cent in May and again in November attention, the causes of the expansion are of the report year, thus reaching 2% per cent. clearly apparent. The greater part of the At the beginning of 1940 and on April 1 of growth in cash circulation is to be ascribed this year, further reductions of % of 1 per to the fact that, for the Army authorities, a cent were made, establishing the present rate large reserve of cash and large cash payments of 2% per cent. In connection with the last are always necessary, and that the area of the two steps, a reduction of the discount rate German economy has considerably expanded for short—and medium-term non-interest- as a result of accessions of territory. In the bearing Treasury certificates was also ef- recently added areas, because of their pre- fected, similarly by Vs of 1 per cent each time. dominantly agricultural character and due to The monthly average rate for day-to-day the war situation, the rate of turnover of money, which temporarily fell to 2 per cent money is especially low. Moreover, experi- and lower, was without exception below— ence has shown the persistence in war time of sometimes considerably below—that of the a general inclination toward larger cash hold- corresponding month of the preceding year, ings, based on the most diverse grounds. and it never rose higher than 2.70 per cent. Money and capital market.—The money Expressed as an annual average, the rate at market during the first five months of the 2.48 per cent remained appreciably below year under review was predominantly liquid. the preceding year's average of 2.79 per cent. At the middle of the year certain indications In view of the market situation and the of credit strain appeared as a result of the progressively favorable development of in- expanding issue of tax certificates, of which terest rates, the Reichsbank has recently only the second category was eligible as col- lowered the discount rate and the lombard lateral for advances at the Reichsbank, and rate by !/2 of 1 per cent each to 3^ per cent of the intensified demand for bank credit on and 4*/2 per cent respectively, with effect from the part of business arising from expanding April 9 of the current year. This action, activity. In August, however, there occurred significant for the entire German economy, a noticeable easing, and soon after the out- which introduced the first change in the break of the war, at first as a consequence Reichsbank rates since September 22, 1932, of the necessary credit expansion, the market also facilitates the financial accomplishment again reached a high level of liquidity. This of the war objectives. development was supported by limitation of After the extensive demands on the capital

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Foreign Banking Laws and Reports market by the Reich in the preceding years, of the trade and credit agreement, and of the the market had mainly to satisfy the capital economic agreement, with the Soviet Union requirements of the elements of industry has opened a wide breach in the blockade at- operating within the framework of the Four tempted by our enemies. By this means and Year Plan. During the report period, the by utilization of other possibilities, the Ger- market also easily absorbed Treasury bonds man export trade has been kept at a level of the German State Railways, issues of the which assures the supply of important raw German Postal System as well as of various materials and food products. Where, as a communal groups, and considerable amounts result of changes in the German foreign trade of mortgage bonds: and industrial bonds and territory and of the abnormal conditions pre- stocks. At the same time the disposal of vailing, German foreign trade firms have en- the 4^ per cent long-term Reich loan direct countered difficulties in the maintenance or to the great reservoirs of capital made good adjustment of their businesses, assistance has progress. No new series of 4*/2 per cent been provided in the form of credit relief, redeemable Reich Treasury bonds was floated either by the Reichsbank alone or by this Bank in 1939, but on the other hand, the Reichs- jointly with the German Gold Discount Bank. bank disposed of a considerable volume of its In order to make possible the future liquida- own holdings in the market, as shown by the tion of obligations and claims in currencies of movement in the course of the year of the bal- enemy countries on a stable basis, domestic ance sheet item: "Securities eligible as note clearing rates were adopted after the official cover." In further satisfaction of the press- quotations for the currencies concerned had ing need for investment securities, the Reich had to be discontinued. A further problem made available to the market beginning was created by the foreign claims of German March 12, 1940, 4 per cent Treasury bonds exporters the collection of which was ren- with maturity of about 5 years. The offer- dered impossible by war conditions, as well ing of these securities through the Reichs- as by the obligations of German importers bank met with a good reception. who could not discharge their indebtedness in Gold and exchange transactions.—The ex- foreign exchange to creditors in enemy coun- change position is determined fundamentally tries. The Reichsbank undertook, by arrang- by the status of German foreign trade. After ing hedging transactions between exporters the appearance of a temporary trade deficit and importers, to bring about an adjustment in the year 1938, it was possible to achieve a of the risks on both sides. surplus of exports in the year under review. The measures in the sphere of exchange The efforts of foreign trade circles and the control were directed chiefly toward improve- public authorities concerned were effectively ments in the organization of the control. supported by the Reichsbank through a series Here the Reichsbank has always been de- of measures such as lowering the interest rate, sirous of reducing to a minimum the ad- far-reaching remission of fees and insurance ministrative burden weighing on business, charges, and other modifications in exchange and of effecting any possible relaxation. procedure and in the purchase of exchange Here and there some desirable improvements insurance drafts. in foreign trade policy occurred as, for ex- After the outbreak of war, the field of ample, when the requirements were eased operation of German foreign trade naturally regarding the sending abroad of called securi- underwent a change by reason of the suspen- ties, and when the use of foreign claims as sion of trade relations with enemy countries collateral for loans from foreign banks was and the restriction of trade with countries made possible. In the department of precious overseas. If our foreign trade nonetheless metal control, regulations of the Reich De- showed satisfactory results in the last four partment of Precious Metals were issued months of 1939, this was largely due to the (Reichsanzeiger No. 214) requiring reports soundly based German foreign trade policy on holdings of silver and platinum and pro- of building up the exchange of goods with hibiting the disposal of such holdings, and countries which by reason of their geographic also regulating the requisition of gold. Other position and economic structure are the nat- necessary regulations were issued, including ural markets and sources of supply for Ger- measures for the resettlement of populations, many. The success of these efforts is ex- and for the treatment of enemy property in pressed chiefly in the trade with South- this country and financial relations with eastern Europe. Furthermore, the adoption enemy countries. (See Regulations regarding

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Foreign Banking Laws and Reports declaration of enemy property of November of amounts to the Conversion Office in favor 3, 1939, Reichsgesetzblatt I, p. 2141, and of of creditors who are regarded as enemies, March 5, 1940, Reichsgesetzblatt I, p. 483; special safeguarding orders were issued. and Regulations for the treatment of enemy The special credit granted to the Reich in property of January 15, 1940, Reichsgesetz- 1930 by international consortiums was out- blatt I, p. 191). The fourth administrative standing in the amount of some $52,700,000 decree under the Exchange Control Law of at the beginning of the report year. In April November 6, 1939 (Reichsgesetzblatt I, p. 1939, the unamortized portion of the credit 2170) extended to the territory of the Reich was extended for another year until May 10, the prohibition on importation of zlotys, al- 1940. Transfer in foreign exchange of the ready effective in the occupied territories of Reichsmark sinking fund payments on the Poland. credit was not possible in the report year. Since the outbreak of war, payments with Under the terms of special agreements with neutral countries have been carried out in the foreign consortiums, however, it was pos- general on the basis of existing agreements. sible to reduce the outstanding amount of the The far-reaching activities of the Reichs- credit by the end of the report year to about bank, pursued in collaboration with other $37,000,000 through disbursements of regis- interested departments, naturally extended tered marks. to the solution of the difficulties in this field The 9th German Credit Agreement (Stand- arising out of the war, whether of a funda- still) adopted in May 1939 was formally de- mental or of a technical nature. New clear- nounced at the beginning of September by the ing agreements were entered into with American Standstill Committee—also in the Afghanistan, the Protectorate of Bohemia name of the English Standstill Committee— and Moravia, and Slovakia. Payments be- and thereby also brought to an end so far as tween this country and the Soviet Union are the other foreign parties to the agreement made as provided in the original arrangement were concerned. However, on September 18, through the special accounts in German banks 1939, arrangements were concluded with the maintained by the Soviet Russian trade repre- Swiss banking creditors, and on October 3, sentative. With Yugoslavia an agreement 1939, with the Dutch and Belgian banking was reached respecting the former Serbian creditors, providing for the continuation of or other loans chargeable against Yugoslavia. the Agreement of 1939. In addition, on De- Payments to enemy countries are pro- cember 9, 1939, a new Agreement with the hibited on the basis of the above-mentioned United States of America, now the largest Decree of January 15, 1940. Furthermore, Standstill creditor, was successfully nego- official approval is necessary for domestic tiated on the basis of the old Agreement. Reichsmark payments in favor of enemy citi- The adjustments in the Agreements with zens, whether made to special foreign ac- Switzerland and Holland thereby necessitated counts for domestic payments, to free ac- were effected by corresponding supplemen- counts or blocked accounts, or for the liquida- tary agreements dated December 11, 1939, tion of approved private clearings. and February 8,1940, respectively. The final Existing restrictions on the transfer of result is that the Standstill is now restored foreign debt service had to be maintained in with all neutral countries under terms dif- full effect. The announcements by the Man- fering only immaterially from those of the aging Board of the Reichsbank of September earlier Standstill Agreements. It was also 26, 1939 (Reichsanzeiger No. 225) and of possible to secure the release of attachments March 28,1940 (Reichsanzeiger No. 73), duly on German property which had been obtained observing the restrictions dictated by war- by foreign creditors, and at the same time to time conditions, govern the treatment of the secure a reduction of interest which reduced interest and dividends paid into the Conver- the burden on the German exchange reserves. sion Office for Foreign Debts in the second Through the framework of agreements thus half of 1939 and the first half of 1940, so erected with the participation of the Reichs- far as this is not already covered by special bank, short-term credits amounting to about agreements. Under this regime, obligations RM 240,000,000 were maintained for German of the Conversion Office are not issued to business, especially the merchandise trade. creditors who are of enemy nationality or Incorporation of territories into the Reich who have acquired their claims from enemies currency area—control in the occupied since September 1, 1939. For the payment areas.—The incorporation of new areas into

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Foreign Banking Laws and Reports the Reich and the assumption of the adminis- payment (Gazette for the occupied territories tration in the parts of the former Republic of in Poland No. 3). The Reichsmark and Poland occupied by German troops, required the zloty were thereby made legal tender at prompt measures to reorganize the currency the ratio 1 zloty = 50 Reichspfennigs. In and credit system. The Reichsbank cooper- accordance with the Decree! for Reich Credit ated effectively in the accomplishment of Agencies (Reichskreditkassen) of September this task, and in particular made available 23, 1939 (Gazette for the occupied territories numerous members of its staff to administer in Poland No. 5) Reich Credit Agencies were it. In so far as districts reincorporated in set up in the occupied area, except in Upper the Reich and areas newly annexed to the Silesia, with the function of regulating pay- Reich were concerned, the introduction of ments and credit in place of a central bank. Reichsmark currently and of German ex- These Reich Credit Agencies were adminis- change control was mandatory. tratively in close connection with the ex- For the currency reorganization in the perienced organization of the Reichsbank territory of the former Free City of Danzig, which indeed supplied the greater part of the the Reichsmark was made legal tender along necessary personnel of these institutions with the Danzig gulden by the Decree of from the ranks of its own staff. The central September 1, 1939 (Reichsgesetzblatt I, p. administration of the Reich Credit Agencies 1567), and the conversion rate of 1 gulden — was authorized to place at the Reich's dis- 70 Reichspfennigs was established. In ac- posal in the occupied area a loan of up to cordance with the Decree for the taking over RMl,000,000,000. It was empowered to of the Bank of Danzig by the Reichsbank issue Reich Credit Agency notes (Reichs- dated September 5, 1939 (Reichsgesetzblatt kreditkassenscheine) for 20, 5, 2, and 1 I, p. 1621), the management was transferred Reichsmarks, and 50 Reichspfennigs, which to the Reichsbapk on that date; the latter were the exclusive legal tender in the occu- carried out the liquidation of the Danzig cen- pied area except Upper Silesia. Only very tral bank for account of the Reich. By limited use was made of this authorization, authority of the First Administrative Decree however, since the political realignment of for the introduction of Reichsmark currency the occupied districts in pursuance of the into the territory of the former Free City Fiihrer's Proclamation of October 8, 1939, of Danzig, dated September 7, 1939 (Reichs- soon altered the area of circulation of these gesetzblatt I, p. 1691), the gulden lost the notes. A temporary regime of exchange con- character of legal tender on September 30, trol was set up by the Exchange Order for 1939; all payment media denominated in the occupied area of the former Polish Gov- Danzig currency, with the exception of sub- ernment (exclusive of Upper Silesia) dated sidiary currency of 1 pfennig up to 1 gulden October 7, 1939 (Gazette for the occupied inclusive, were to be exchanged for Reichs- territories in Poland No. 9). mark issues by October 15, 1939. The exchange control law in effect in the Reich After the political reorganization of the together with other laws and decrees con- occupied Eastern territories effective October nected therewith was introduced by a Decree 26, 1939, the assimilation of the currency dated September 22 (Reichsgesetzblatt I, system of the section allotted to the Reich, p. 1865). Up to this time the Danzig ex- excepting the areas already subject to special change law had remained in effect, after some regulation, was accomplished by the Decree of tightening up in certain particulars at the November 22, 1939 (Reichsgesetzblatt I, p. beginning of September. Under the terms of 2291). The zloty thereby ceased to be legal the law of September 1, 1939 (Reichsgesetz- tender as of November 27, 1939, and the blatt I, p. 1547), the German Reichsbank Reichsmark became the sole legal means of Law became effective in the area of the payment. The exchange into Reichsmarks of former Free City of Danzig on January 1, the zloty currency in circulation, except the 1940, together with the body of Reich law. small subsidiary currency, was made up to December 9, 1939, at the rate of 2 zlotys = 1 For the regulation of payments in the Reichsmark. In connection with these cur- portion of the former Republic of Poland rency changes, the Reich Credit Agencies occupied by German troops, the Army Com- situated in these districts were converted into mander issued a decree under date of Sep- Reichsbank branches at the beginning of No- tember 11, 1939, concerning legal means of vember 1939. The Decree of November 17,

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Foreign Banking Laws and Reports 1939 (Reichsgesetzblatt I, p. 2255), made and Preussischer Staatsanzeiger (No. 246) the German exchange legislation applicable, on September 30, 1939, the President issued thus completing the currency assimilation of the Bank Statutes drawn up in accordance the Eastern territory acquired by the Reich. with Section 27 of the German Reichsbank For the occupied area of Upper Silesia, a Law. They contain provisions for the organi- system of currency had been set up in ad- zation of branches, the Advisory Council and vance by special decrees with a view to the the regional advisory councils, Reichsbank prompt restoration of the unity of the local shares, annual meeting, fiscal year, annual industrial district. This was put into effect balance sheet and report, and the audit of by the Reichsbank branches opened on Sep- accounts and distribution of profits. The tember 12, 1939, in Kattowitz and Konigs- organization of an auditing division of the hutte. Reichsbank as required under Section 21 of Since January 3, 1940, under the terms of the Statutes and the issue of an auditor's the Decree of December 21, 1939 (Reichs- report took place in the middle of November gesetzblatt I, p. 2), the German Reichsbank 1939. Law has been effective in the annexed East- The German Reichsbank Law of June 15, ern territories. 1939 has already been adequately discussed In the area under the General Government in its more important features in the preced- (of Poland), the Reich Credit Agencies con- ing year's annual report. tinued temporarily to act as banks of issue. Advisory Council of the Reichsbank—Re- A new Exchange Order for the occupied terri- gional Advisory Councils.—At the beginning tories which remained Polish (Gazette of of July 1939 the President appointed the the Governor General No. 7), issued by the members of the Advisory Council to the Governor General with effect from November Reichsbank Managing Board, in accordance 20,1939, abolished all exchange control measures previously issued for this area. Under with Section 6 of the German Reichsbank this Order, zloty currency continues in circu- Law, at the same time naming his permanent lation in the General Government; all means representative to preside over the Council of payment denominated in other currencies and setting up an inner advisory committee. are considered foreign. Only the notes of the Regional councils were also appointed for the Reich Credit Agencies which were already more important independent branches of the issued retained until further notice the char- Reichsbank. acter of legal tender along with the zloty Under the Bank's Statutes the Advisory currency. The Reich Credit Agencies ceased Council and its committees are charged with the issue of their own notes and converted the duty of assisting the Managing Board their banking business to a zloty basis. To with advice on special matters if needed. provide for the clearing of obligations be- The members of the regional advisory coun- tween the Reich and the General Govern- cils shall be available in an advisory capacity ment, the Clearing Institute of Krakau was at the request of the management of the established by Decree of November 20, 1939 branches. (Gazette No. 7). At a session of the Advisory Council at the The Decree for the Central Bank of Poland end of October 1939, six committees were ap- of December 15, 1939 (Gazette No. 14), pointed, viz., the General Committee, and the established the principle that in the General Credit, Capital Market, Stock Exchange, Cur- Government, the makeshift Reich Credit rency, and Foreign Trade committees. These Agencies should be replaced by a local bank committees have met several times for the of issue, which would issue new zloty notes in discussion of timely subjects, with profitable exchange for the notes of the former Bank results. Polski circulating in the General Govern- Commissioner for Note Issue.—The Office ment. The new institution began operations of the Commissioner for Note Issue, estab- on April 8, 1940. Its sphere of activity, lished by the Bank Law of August 30, 1924, especially as regards the granting of credit, was abolished on June 16, 1939, the effective is adapted to the local conditions, and to the date of the German Reichsbank Law. character of the country with its predomi- Credit Supervisory Board.—The Credit nantly agricultural economy. Supervisory Board set up at the Reichsbank Statutes of the German Reichsbank.—By under Section 30 of the German Credit Act proclamation in the Deutscher Reichsanzeiger of December 5, 1934, was abolished by the

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Foreign Banking Laws and Reports Decree for the amendment of that law dated Simplification of procedure.—In view of September 15, 1939 (Reichsgesetzblatt I, p. the necessity of bringing the Central Bank to 1953), with the stipulation that its functions the high standard of efficiency demanded by be transferred to the Reich Minister of Eco- modern management concepts, attention was nomics. The Reichsbank continues as before directed during the report year to the sim- to cooperate in the supervision of credit. plification of Reichsbank procedure.

BALANCE SHEET OF THE GERMAN REICHSBANK AS OF DECEMBER 30, 1939r AND DECEMBER 31, 1938 [ID thousands of Reichsmarks]

Assets 1939 1938 Liabilities 1939 1938

Gold, not under lien (gold bars, domestic and Total bank note issue 23,868,820 18, 716, 777 foreign coins) : Credit balances of giro accounts 2,018,189 1,527,469 In the vaults of the bank (0 60,201 Non-interest-bearing deposits 27 27 With foreign banks of issue (0 10,572 Original capital 150,000 150,000 Legal reserve fund (including transfers from 70,773 70,773 net profits of the year).- 99,054 87,353 Reserve for pension and unemployment fund.. 100,000 100,000 Cash: Reserve for contingent liabilities 320,000 274,962 Reichsbank notes 12,069, 527 10,492,892 Subsidiary coin 349, 652 116,453 Reserves for: Rentenbank notes 115,401 16, 778 Printing of new notes 31,000 21,250 New buildings 55,000 58,260 12, 534, 580 10, 626,123 86,000 79, 510 Credit balances in foreign currencies 35, 211 i 29, 544 Foreign notes 2,728 2,336 Reserve for future payments of dividends 40,307 40,307 Foreign bills and checks 186, 610 165, 544 Silver... 13 31 Miscellaneous: Interest on bills due in 1940 and ,1939 re- Domestic bills and checks: spectively. _ 61,883 36, 620 Treasury bills of the Reich (0 120,690 Dividends due but not yet paid 387 322 Other domestic bills and checks ... 7,959,062 Dollar Treasury notes of the Reich due in CO 1926 but not yet presented 4_. __ 141 11,200,866 8,079, 752 Liabilities in foreign currencies. __ Unpaid claim of the German Govern- Loans against collateral (lombards), viz.: ment—contra account __ 70,082 70,082 Loans against gold and silver (Sec. 13, 5a Other liabilities. 227,147 102,336 of the Reichsbank Law) Loans against bills and Treasury bills 359,499 209,511 (Sec. 13, 5b) 873 5,884 Loans against securities (Sec. 13, 5d) 20,397 19, 731 Net profits for the year less 10 per cent assigned Loans against goods (Sec. 13, 5e) 8,729 19, 246 to the legal reserve 105,311 36,607 30,000 44,861 Securities eligible for note cover 803, 721 565, 052 Other securities _ 418,209 298,820 Overdue and doubtful claims (3) (3) Land and buildings 30,000 30,000 Claims due on balance from the Reich. 91,410 92, 601 Miscellaneous: Bank notes no longer fit for circulation 1,358 1,238 Postponed claim on the German Govern- ment in virtue of Sec. 11,4, of the law of Aug. 30, 1924, for the liquidation of Rentenbank notes in circulation __. 70,082 70,082 Credit balances with post office accounts.. 39,072 48,168 Investments for pension and unemployment fund -. 99,995 100,000 Reichsmark claims on foreign corre- spondents 13,193 10,005 Revolving credit to the Reich. _ 985,400 208, 600 Claims against the Reich for sinking-fund purchases 11, 069 22,460 Foreign exchange authorized but not yet delivered 183,455 Government debt C taken over from the former Austrian National Bank 101,379 104,615 Claim arising from the liquidation of the Bank of Danzig 31,376 Claim arising from exchange of Czecho- slovak currency „ 306,746 Claim against the Reich Credit Agencies for their notes cashed 10,302 Items in transit 179, 784 Other claims _ 200,076 161, 717

1,743,086 1,217,086

Total assets.. 27,147, 208 21,222, 524 Total liabilities.. 27,147,208 21, 222,524

i Not shown separately. • Of which the equivalent of 3,179,000 Reichsmarks was assigned as cover for the notes in circulation. 3 Entered at the nominal amount of 1 Reichsmark. 4 See Reichsbank report for 1926.

SEPTEMBER 1940 949

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis