How Albania bought and sold shares in the most important bank in the world in 1977

In 1930, a special financial organization, the International Bank for Settlement IBS, was created in Basel, Switzerland.

The creation of this bank came as a necessity of building a monitoring body for the repayment of reparations of the First World War by Germany.

Founding members of the Bank for International Settlements were a group of central banks such as that of Belgium, Switzerland, France, Japan, Great Britain, Italy and Germany itself. A group of banks from the United States of America were part of it.

In this way, what is known today as the "Central Bank" of Central Banks was born.

The Bank for International Settlements is one of the oldest international financial institutions and remains the main center for international cooperation in the banking sector.

This bank operated according to the status guaranteed by the Constitutional Charter according to which it was exempted from paying taxes and taxes on its income and capital.

However, the assets of the bank, such as deposits or funds entrusted to it, could not be subject, even in wartime, to any decision for expropriation, sequestration, confiscation or restriction of export and import of gold, currencies, etc.

The bank started its activity in May 1930 with a capital of 500 million gold francs distributed in 200 thousand shares.

Over the years, the bank expanded its activity, as well as the number of participating banks.

And Albania, although it had only been a few years since it had created its own bank, in the 1930s it became part of this bank by first buying 500 of its shares.

The inclusion of Albania as a shareholder in this international organization seems to have stemmed more from the fact that most of the National Bank of Albania was owned by Italian capital.

In this way, not only the Bank of Italy but also the Bank of Albania, in the 1930s, were shareholders in the Bank of International Settlements.

At the end of the Second World War, Albania undertook a strong economic but also political movement...

How it was transferred from the National Bank to the State Bank

The change of the political system in Albania after the Second World War would also bring about the change of the economic system; a process that would also be reflected in the country's banking system and monetary policy.

On January 13, 1945, two special laws were issued, one for the nationalization of the National Bank of Albania and the organic law on which the Albanian State Bank would operate.

A few days later, on January 22, 1945, the Albanian State Bank opened the Tirana branch and in the following months also opened other branches in the centers that had generally been the branches of the National Bank before.

Nationalizing the bank and changing the way it operates would bring a new Administrative Council, which would face a great challenge; not only to establish the functioning of a post-war bank, but also to redirect its purpose to a centralized economy.

The Council decided that the Bank of the Albanian State should be a State Institute, the operation of which would comply with the political principle of being a strong tool in the hands of the government for strengthening the state economic sector.

The decision on the new role that the bank would play would not pass without debate and there were no shortage of proposals that the bank should serve the development of the private sector and not only the state sector.

At the end of these debates, the Bank would stop granting loans to the private sector, sanctioning financial support only to the state sector that had started to become the main priority of the country's new governing policy.

Therefore, one of the first steps that was taken was the re-appointment of the personnel, the evidence of the state of the treasury and the setting of the exchange rates for the purchase of gold and foreign currencies.

The large shortfalls in the bank's cash reserves would be resolved through some radical steps for the time being.

The first step was to take austerity measures for creditors who were forced to pay loan installments.

On the other hand, some quick measures were taken that put order in the circulation of money.

Restructuring of the Bank and restoration of relations with international banks

In parallel with the stabilization of monetary circulation, the bank itself went through an internal transformation process.

In 1946, the Administrative Council decided to organize the bank with 4 important Directors; Accounting Directorate, Credit Directorate, Foreign Exchange Directorate and Agrarian Credit Directorate.

With the creation of the State Treasury service and the beginning of the operation of the agrarian credit, the Administrative Council decided to open 12 new branches in the main centers of prefectures and sub-prefectures where they did not exist, as well as three service boxes, respectively in Burrel, Kruje and Tropoja.

Also, the Accounting Department worked intensively to close the old accounts of the former National Bank, the Bank of Naples and the National Labor Bank that had previously exercised their activity in Albania.

Likewise, the Albanian bank's relations with foreign banks that were established in 1945 and at the beginning of 1946 took a wider development.

The first banks with which relations were established in 1945 were the National Bank of the People's Republic of Yugoslavia and the State Bank of the Soviet Union.

At the beginning of 1946, relations were established with several American banks, and in April the first actions began.

In 1946, the Albanian State Bank established relations with the following banks:

Credit Suisse in Zurich

Union de Banques Suisses Zurich

First National Bank of Chicago

First National Bank of Philadelphia

Irving Trust Company, New York

Public National Bank in New York

Banque Commerciale Française du Commerce Exterieur Paris

Zivnostenska Banka Prague

Handelsnbankan Stockholm

Banque Nationale de Bulgaria Sofia

Credit Suisse in Zurich

Union de Banques Suisses Zurich

First National Bank of Chicago

First National Bank of Philadelphia

Irving Trust Company, New York

Public National Bank in New York

Banque Commerciale Francaise du Commerce Exterieur Paris

Zivnostenska Banka Prague

Handelsnbankan Stockholm

Banque Nationale de Bulgaria Sofia

But..in this recognition process, difficulties were encountered in recognition by the Bank of International Settlements, or as it was otherwise known by the "Central Bank of Central Banks", where the 500 shares purchased in the 30s by the National Bank of Albania remained.

Recognition of Albania's shares in the Bank for International Settlements

After the Second World War, the Bank for International Settlements had taken on a new, important role as an institution for international payments between states.

In this period, it was suggested that this bank should be dissolved after it had closed its mission and in the meantime the International Monetary Fund and the World Bank were created but the resizing of its role would make this bank reach the point where it had tripled its initial capital and the number of shares.

And in this context, Albania, which had just nationalized the National Bank by transforming it into the Bank of the Albanian State, undertakes the formal request that the former 500 shares be recognized as ownership of the newly created but still officially unknown bank by its counterparts its in many countries.

The request was made in 1947, but recognition of the shares would only take place in 1960. All this delay was due to the very fact that Italy had claims for its properties in Albania, and therefore also for the ownership of the National Bank.

Therefore, the Bank of International Settlements would recognize the Albanian ownership of 500 shares of the National Bank only after the issue of mutual war obligations between Albania and Italy had been resolved.

After the recognition of the shares, Albanian delegations of the State Bank would participate in the annual meetings held at the Bank of International Settlements, and the Albanian side would even increase the number of its shares over the years.

On average, Albania in the 1960s collected about 20,000 dollars annually as a dividend from its participation in the Bank for International Settlements, which enjoyed undisputed authority in the financial world.

At its extraordinary meeting in June 1969, the Bank of International Settlements approved a capital increase from 500 million gold francs to 1.5 billion gold francs, increasing the number of issued shares from 200,000 to 400,000, thus doubling the pre-paid, number of shares per any joint stock bank.

In this way, also on behalf of the Albanian State Bank, the payment was doubled and the number of shares increased from 500 to 1000.

Albania's participation in the 38th Assembly of the Bank for International Settlements in Switzerland

On June 10, 1968, the proceedings of the General Assembly of the Bank for International Settlements took place at its headquarters in Basel, Switzerland.

In this meeting, Albania was represented in the capacity of a joint-stock bank, by the Director of the Albanian State Bank and another representative of the Albanian state.

In this period, Albania owned 500 shares, the value of which at that time was estimated at around 400 thousand dollars, while the annual benefit received by the Albanian state was estimated at 15-20 thousand dollars per year.

But how does the director of the Bank* show in his report, the way Albania was received at the meeting of the Bank's Assembly?

"They arrived in Basel on the 8th. On the 8th, we participated in a reception given by the General Director, and effectively the beginning of the work opens in this reception.

At this reception, the General Director welcomed us and expressed his satisfaction for our participation after we had not participated in several years.

We note that in general our reception was correct, it developed in a normal way and we had the opportunity to meet with many representatives of central banks and exchange opinions on a series of problems that interested us.

On the 10th, the meeting of the Assembly took place.

After the meeting in we met with the General Secretary of the Bank, Antonio D'Aroma, Italian, to express his thoughts on some problems that interested us, mainly about the situation and perspective in the field of currencies and based on his request also with the Director of General Gabriele Ferras, French.

The reception was warm. The General Director immediately told us: We are used to seeing Albania's chair empty and it does not please us, while now we were glad to see you and we hope to see you always in the future...".

In general, they expressed their satisfaction for our participation while simultaneously expressing their opinion that we should participate regularly and every year as long-standing members of this Bank or as many representatives who come many times during the year do.

From our side, he gave you the answer that "our relations with this bank are limited, so there is no need for us".

*Report on participation in the 38th General Assembly of the Bank for International Settlements in Switzerland

Albanian State Bank, Tirana 27.VI.1968

Beyond the technical details that are given about the progress of the meetings and discussions at the Basel meeting, at the end of the report some conclusions and proposals are given which shed light on a project of the Albanian state to sell the shares of the bank.

The fact that the Soviet Union and the communist countries were not part of the Bank of International Settlements should be highlighted, which would make Albania's presence 'stutter' in this international financial organization from an ideological point of view.

**"Conclusions-Proposals. In general, we consider that the participation in the meeting of the Assembly of the Bank for International Settlements was fair and useful.

We think that it is good that the Albanian State Bank, while keeping its shares in this bank, makes better use of its membership; in terms of the extensive information that they have on the issues that interest us, in terms of mediating commercial problems with Switzerland and the Netherlands, etc. and also in terms of profitably securing our deposits there".

**Report on participation in the 38th General Assembly of the Bank for International Settlements in Switzerland

Albanian State Bank, Tirana 27.VI.1968

Likewise, the officials of the Albanian State Bank recommended opening bank accounts in Switzerland and securing there some bank deposits that were previously secured in France.

In 1974, Albania started the process of negotiations for the sale of its shares in the Bank for International Settlements.

In this period, the number of Albanian shares had reached 1 thousand with a nominal value of about 985 thousand dollars.

In this period, Albania benefited on average 20-22 thousand dollars per year and in the meantime also provided benefits from the deposits it had opened there in US dollars. For these deposits, Albania received interest of 5-6% per year.

In this period, it was expected that there would be an increase in shares for all participating countries, including Albania, as a result of the reinvestment of the accumulated funds.

Therefore, the officials of the Albanian State Bank proposed that Albania continue with the increase of its shares in the Bank of International Settlements since the income that benefited from their dividends was many times higher than the income provided by term deposits.

***"According to the statute of the Bank for International Settlements (BIS), a shareholder bank may authorize the transfer of its shares to another bank, but not subject to the acceptance of the Bank for International Settlements, which has the right to refuse approving this transfer, without stating the reason. However, we think that there is no need for our Bank's departure from the BRI, and therefore neither for the sale of the shares we have"

Tirana, 26.6.1974

***General Directorate of the State Bank        

But despite this suggestion of the Albanian State Bank, the Albanian authorities decided to finally leave the status of shareholder in the Bank of International Settlements by giving up the shares in 1977.

Despite this departure, Albania used, during the period of dictatorship and isolation, a series of bank accounts in Western banks, which it used mainly in the function of commercial exchanges.

Meanwhile, during the period of the communist regime, Albania publicly anathematized the role of international financial institutions such as the International Monetary Fund or the World Bank.

The return of Albania to the international financial institutions would only take place after the fall of the communist regime...

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