Bank von Danzig

The Bank of Danzig, known in German as Bank von Danzig, was the central bank of the Free City of Danzig, the League of Nations–administered city-state established after the First World War. It was created during an international stabilization effort intended to address the territory's monetary disorder and to provide it with an institution capable of issuing and managing a local currency. The bank emerged after an earlier plan for a currency arrangement between Danzig and the newly established Polish state failed. In the years immediately after the war, Danzig's monetary system was affected by the severe inflation that also afflicted Germany and Poland. A branch of Poland's provisional central bank, the Polish National Loan Bank, had been opened in the city in anticipation of a currency union associated with a customs union. That proposal was abandoned in September 1923 as hyperinflation made a stable joint monetary framework impractical. Until the end of 1923, Danzig's monetary affairs were also served by the local branch of the German Reichsbank. The Bank of Danzig was established on 5 February 1924 under arrangements associated with the stabilization loan organized through the League of Nations' Economic and Financial Organization. Its formation followed the model of the Austrian stabilization program of the preceding year. The bank began with capital of 7.5 million Danzig guldens. Its investors included private commercial interests and a consortium of Polish banks, reflecting the territory's mixed economic and political connections. The Reichsbank ceased operations in the Free City on 31 December 1923, and the new institution began its own operations on 17 March 1924. The bank's principal monetary responsibility was the issuance and management of the Danzig gulden. The gulden replaced the Reichsmark, whose value had been destroyed by postwar German hyperinflation. As a central bank, the Bank of Danzig provided the institutional framework for the currency, held reserve assets, and supported the monetary administration of the Free City. Its reserves included gold used as currency backing; a substantial portion of this gold was held in London at the Bank of England. The institution's existence ended after Germany annexed Danzig in September 1939 during the Danzig crisis and the opening phase of the Second World War. The Reichsmark was introduced in the territory, and the Bank of Danzig was liquidated in a process comparable to the dissolution of the Austrian National Bank after the Anschluss of 1938. The bank's gold reserves held in Britain were immobilized by the British government during the conflict and its aftermath. The former bank building subsequently served as a Reichsbank branch between 1939 and 1945. It was heavily damaged by wartime bombing and, after the war, was used by the National Bank of Poland. In 1976, the United Kingdom transferred the immobilized Bank of Danzig gold to Poland, which had incorporated Danzig into its postwar territory in 1945. The bank therefore survives primarily as a historical institution associated with interwar monetary stabilization, the contested constitutional status of Danzig, and the transition from the Reichsmark to the Danzig gulden.

The Bank of Danzig was created in response to the unstable monetary conditions that followed the First World War. Danzig had become a separate Free City under League of Nations supervision, while maintaining close economic ties with Poland. A proposed currency union was intended to complement a customs relationship between Danzig and Poland. Poland's provisional central bank, the Polish National Loan Bank, established a branch in Danzig for that purpose, but the plan collapsed as inflation in both Germany and Poland intensified. In September 1923, the currency-union project was abandoned. Danzig's financial system had also been connected to Germany. The local Reichsbank branch continued to serve the city until 31 December 1923, when the Reichsbank ended its operations there. The need for a separate monetary institution became more urgent because the Reichsmark had been severely devalued by German hyperinflation. The solution was incorporated into a stabilization loan organized in 1923 and 1924 through the League of Nations' Economic and Financial Organization. The arrangement drew on the earlier Austrian stabilization model, in which international financial support was paired with institutional monetary reform. The Bank of Danzig was legally established on 5 February 1924 with capital of 7.5 million guldens and opened for business on 17 March. Its shareholders were private people and companies, including a group of Polish banks. Although privately invested, it performed the public functions of a central bank for the Free City. Its most visible responsibility was the issue of the Danzig gulden, which replaced the discredited Reichsmark. The bank also managed monetary reserves and held gold intended to support the currency. Much of that gold was stored with the Bank of England in London. The institution operated during a period in which Danzig's political status and economic orientation were contested. Its monetary role reflected the city's intermediate position: it was not part of Germany, yet its population, commercial institutions, and historical ties were heavily German; at the same time, Poland exercised important economic rights and maintained banking connections with the territory. The bank provided a distinct currency and a formal monetary authority without resolving those wider political tensions. The bank's independent existence ended in September 1939, when Germany annexed Danzig during the crisis over the city's status. The German Reichsmark was introduced, and the Bank of Danzig was liquidated. Its fate resembled that of the Austrian National Bank after Germany's annexation of Austria in 1938. The bank's gold held in Britain was immobilized by the British government, separating the reserve assets from the institution that had issued the currency. After liquidation, the bank's premises were used as a Reichsbank branch until 1945. The building was badly damaged by bombing during the war. After 1945, when Danzig became part of Poland, the site was used by the National Bank of Poland. The disposition of the bank's reserve gold remained unresolved for decades; in 1976, the United Kingdom handed the immobilized gold to Poland. The Bank of Danzig is consequently remembered as a short-lived central bank created by an international stabilization scheme and extinguished by territorial annexation and wartime monetary integration.

1. 1976Reserve gold transferred to Poland

   The United Kingdom transferred the bank's immobilized gold holdings to Poland.

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2. 1939Liquidation after annexation

   After Germany annexed Danzig, the Reichsmark was introduced and the Bank of Danzig was liquidated.

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3. 1924Bank established

   The Bank of Danzig was established on 5 February with capital of 7.5 million guldens.

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4. 1924Operations begin

   The institution began operating on 17 March and assumed central-banking responsibilities for the Free City.

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5. 1924Danzig gulden introduced

   The bank issued the Danzig gulden to replace the devalued Reichsmark.

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6. 1923Currency-union plan abandoned

   A proposed monetary union between Danzig and Poland was dropped in September after hyperinflation undermined the planned arrangement.

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7. 1923Reichsbank service ends in Danzig

   The local Reichsbank branch ceased operations in the Free City on 31 December.

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A League of Nations–supported central bank designed to stabilize the currency and monetary system of the interwar Free City of Danzig.

• Danzig guldenCurrency1924

  The Danzig gulden was the currency issued by the Bank of Danzig for the Free City. It replaced the Reichsmark after German hyperinflation had severely damaged the value and usefulness of the existing monetary system. The gulden represented the bank's central public function and was supported by reserve assets that included gold held in London.

• 1939Liquidate the bank after annexationOther

  Germany incorporated Danzig into the Reich during the Danzig crisis and replaced the territory's monetary system with the Reichsmark.

  What changed. The Bank of Danzig was liquidated and its central-banking role ended.

  Aftermath. The premises became a Reichsbank branch, while the bank's gold reserves held in Britain were immobilized and were not transferred to Poland until 1976.

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• 1924Introduce the Danzig guldenProduct launch

  The Reichsmark had been undermined by hyperinflation, while a proposed currency union with Poland had failed. A separate currency was therefore required for the Free City.

  What changed. The bank issued the Danzig gulden and made it the monetary standard of the Free City.

  Aftermath. The gulden became the central bank's defining monetary instrument until German annexation brought back the Reichsmark in 1939.

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• 1976United Kingdom transfers immobilized Bank of Danzig gold to Poland

  Gold associated with the bank's reserves and held in London was transferred by the United Kingdom to Poland, which had annexed Danzig after the Second World War.

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• 1939Bank of Danzig liquidated after German annexation

  Following the incorporation of Danzig into the German Reich, the Reichsmark returned as legal currency and the Bank of Danzig was dissolved.

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• 1924Bank of Danzig established during League of Nations stabilization program

  The Bank of Danzig was founded with capital of 7.5 million guldens and began operations in March as the central bank of the Free City.

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• 1924Danzig gulden replaces the hyperinflated Reichsmark

  The newly established bank issued and administered the Danzig gulden, replacing the Reichsmark as the territory's currency.

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1. Bank of Danzig