Greece 2021

The establishment of the first Bank of the Greek State

The creation of the National Bank is the first significant milestone in the country's history of banking. The foundation of the longest-lived financial institution of the Greek State required tireless efforts, laborious processes, and, inevitably, several failures.
It took 20 years since the beginning of the Greek Revolution for the persistent effort of certain brilliant minds to thrive and lead to the creation of the first fully functional Bank of the Greek State. "It is established, in the capital of our Kingdom, a National Bank, in the manner of a publicly shared company, which may have branches in other parts of the State." The publication of these few but so crucial words for the economic history of the country in the Official Government Gazette was not an easy task at all. The adoption of the famous law "On the establishment of a National Bank" on 30 March 1841, was preceded by a long and strenuous behind-the-scene effort. Endless discussions, unpredictable meetings, constant negotiations and briefings, diplomatic maneuvers, brutal cancellations, multifaceted and concurrent procedures were taking place. The key players in them were the first governor of Greece Ioannis Kapodistrias, the Swiss philhellene knight Jean-Gabriel Eynard and the merchant from Epirus and member of the Friendly Society Georgios Stavros.

A primitive credit system

In 1827 the Great Powers (England, Russia, France) signed the Treaty of London, in which they committed to peace and resolving of the Greek issue, essentially taking the first major step towards the recognition of Greek independence. After a lengthy revolution, however, the country faced a series of severe and pressing problems. The productivity was feeble; the external loans for the Revolution were a "mine" in the foundations of the Greek State's development while lacking underlying mechanisms and fundamental infrastructure. Under the circumstances, the State could not operate according to Western standards. This inability hovered over any discussion on the course of action needed to be followed in the immediate future.

Under these circumstances, any effort towards the Greek economy's development necessarily needed to strengthen its financial liquidity. But there was a difficult problem. In the Greek State, there were no banks. And, consequently, there was no organized and established probability for private lending. This absence brought forward ambitious business people who acquired the role of the lender to the rural population by procuring the forthcoming yearly harvests. The borrowing terms were very unfavorable for the farmers and very profitable for the lenders themselves. This practice resulted in a series of commercially exploitative networks. The country's credit system was in a primitive state.

"Form a sustainable establishment"

A Swiss philhellene, internationally known for his successful economic endeavors and connections, was the first to realize and outline the critical situation to the Greek governor. "Mon idée mère est de former un établissement durable et de commencer à le doter avec les fonds qui nous resteront et de l'augmenter par les nouvelles souscriptions..." ["The fundamental idea is to establish a lasting organization and start to endow it with the savings capitals, increasing them with every new registration..."], wrote Jean-Gabriel Eynard in a letter to Kapodistrias, as early as November of 1827. What Eynard had realized was that an organization needed to provide not only targeted support but loans, thus creating the conditions for an organized banking system, a vital pillar in the development of the Greek State.

Eynard was certainly not a random individual but a privileged interlocutor of many prominent personalities of his time, a successful trader, a connoisseur of economic issues, a man with an acute perception not only of the challenges but also of the enormous opportunities that the world offered during his time. Born in Lyon and having survived a bloody conflict between Jacobins and Girondins in his hometown, after the French Revolution, Eynard met with Kapodistrias at the famous Vienna Congress in 1814, a convention that marked the 19th century. He immediately became close friends with him, and soon after, he became a fiery enthusiast of Greek interests. During the Revolution, he did not hesitate to distribute large sums of money in support of the Greek cause but also to intervene on a diplomatic level, through his acquaintances and influence, defending the Greek side.

The National Financial Bank

The proposal of Eynard convinced Kapodistrias, and in 1828, the National Financial Bank was founded, towards the capital of which, the Swiss philhellene contributed 100,000 francs of his own money.

Six years after its creation, the National Financial Bank was already a thing of the past. The limited response to the project by the Greek capitalists and the use of its entire capital for purposes related to the pressing obligations of the State were some of the reasons that contributed to its rapid decline. In its six-year course, the National Financial Bank could not proceed with the banking transaction implemented in its statute. But it was made evident to those who were clear-headed and able to understand that no branch of the Bank would prosper without sufficient fund liquidity.

Consequently, the first Greek Bank was not meant to endure. However, the role of its first director would be decisive for the future of Greek economic and banking history. Georgios Stavros was one of the four children of the Giannena-born merchant and elder Ioannis Stavrou. Stavros' father made sure that his son received an excellent education from an early age. From the school of Kosmas Balanos and the Kaplanio School where the great philosopher, Athanasios Psalidas taught him, Stavrou moved to Vienna to study at the Commercial School, where he learned to speak and write German and French. He would then add to his "arsenal" of foreign languages two more: Italian and English. His return to Greece in 1824 was an adventurous one. He quickly joined the national cause and soon rose and distinguished himself for his honesty and fairness.

The insightful move and the establishment of the National Bank

Kapodistrias' murder seemed to have had a significant impact on Eynard. "He who murdered Kapodistrias, murdered his country. His death is a disaster for Greece and a European misfortune," he was quoted saying when he was informed of the tragic event. The Swiss philhellene continued using his contacts during the period of King Otto's reign. He also continued to formulate and submit plans for the creation of a bank, as well as to negotiate their implementation, even when the political equilibrium did not favor it. However, Otto did not seem to be convinced of the necessity of the project.

At an undisclosed time, another meeting would act as the catalyst that connected all the remaining people and the scattered pieces of the story. At the beginning of the Regency period, as a member of the Court of Auditors, the former director of the National Financial Bank, Georgios Stavros, met with the French businessman and economist Arthémond de Regny, a close friend of Eynard. The mutual respect and regard that developed quickly led to de Regny's mediation in introducing Stavros to Eynard.

Shortly afterwards, Eynard decided to proceed with an insightful move. He hurried to allocate money, about 300,000 francs, to Regny and Stavros with the intention for them to set up a down-payment office in Athens. The idea behind it was relatively simple. If this small credit "experiment" was successful, then perhaps Otto could be more easily persuaded to implement and develop it on a larger scale. Indeed, the results of the endeavor were very positive and contributed significantly to bend Otto's reservations. The establishing decree of the National Bank went into effect on 30 March 1841.

According to the decree, the National Bank was a public limited company with a capital of five million drachmas, divided into 5 thousand shares of a thousand drachmas each. The Bank had the right to issue banknotes as its exclusive privilege for the entirety of the country for 25 years. The National Bank eventually retained this privilege for 87 years. Its first director was George Stavros, who remained in charge for 28 years, permanently linking his name with the Bank.

The first privately owned building

Four years later, the National Bank acquired its first privately owned building on Aeolou Street. The Bank bought it for 47,000 drachmas from the University of Athens professor of natural history, Kyriakos Domnados. The building was located next to one of the two luxury hotels in the area, the "Hotel of England." At the same time, in front of the building, there was a ravine that was often used for military exercises.
The two buildings were joined at the end of the 19th century, and they formed the famous neoclassical building that features on the present-day logo of the National Bank of Greece. Since then, the course of the Bank became attached to the course of the country, while its administration has occasionally been handled by prominent personalities, including Alexandros Zaimis, Dimitrios Maximos, Alexandros Diomedes, Emanuel Tsouderos, etc.

Sources - Bibliography

The information used in this text was drawn from the following publications:

National Bank. A course from 1841 and into the future, Editor: Gerasimos Notaras, National Bank Historical Archives, Athens 2014.

National Bank of Greece. Historical Timeline, Editor: Gerasimos Notaras, National Bank Historical Archives, Athens 2008.

Jean-Gabriel Eynard. Visionary and primary contributor to the Establishment of the National Bank of Greece, Editor: Gerasimos Notaras, National Bank Historical Archives, Athens 1999

Georgios Stavros from Epirus 1788-1869. Founder of the economic establishment of the modern Greek State, Editor: Gerasimos Notaras, National Bank Historical Archives, Athens 2010.

Alekos Lidorikis, "Historical Buildings of Banks in the center of the city of Athens," Bulletin of the Greek Union of Banks, Athens 2007.