Palais Ephrussi, family of Austrian bankers (Vienna – the bank opposite the Palais was destroyed in the 2nd World war), architect Theophil Hansen

The Austro-Hungarian Monarchy generally had an export surplus of securities, which means it was a net importer of long-term capital, except during the period 1903-1908. While in 1868 the majority of loans was taken by Amsterdam, Brussels, Frankfurt and Paris, in 1914 Berlin was the most important foreign creditor. Government securities and railway priority bonds constituted the largest categories. In terms of state debts, the Austro-Hungarian Empire was a debtor towards Western and Central Europe and a creditor towards the Balkans together with Germany. Yet compared to Germany and France, the Austrian banks in Serbia and Romania were insignificant, only in Bulgaria were they of importance. After 1878, most of the debts of the Balkan states financed railway construction. While lending for the infrastructural development of backward countries, the empire constructed its own railway network with the help of foreign capital. After 1855, when the railways were sold to private enterprise and the system of guaranteed interest was introduced, foreign capital penetrated the empire’s economy. The mobilier banks provided the needed capital for the railway construction. In Hungary 85 per cent of the railway system was owned and run by the state by 1891, while in the Austrian half of the empire only 55 per cent was run by the state and it owned only 43 per cent in 1897. More than 70 per cent of the railway priority bonds were still in the possession of foreign investors at the beginning of the 20th century.


Direct foreign investment in the industry of the Austro-Hungarian Empire was small; only 12 per cent of industrial shares and only 0.5 per cent of all Austrian securities at the beginning of the 20th century. In the Austro-Bohemian industry family businesses were still prominent. Austrian capital investments in industrial branches in Hungary were gradually withdrawn from the beginning of the 20th century on. They played a decisive role only in industries such as machinery and chemicals with a high demand for capital. The empire’s capital exports to the Balkans were not really significant either.


The cooperation of the banks promoting the international movement of capital brought about the establishment of international banking groups. Legally these groups were consortia of independent banks and the holding of one bank in the stock of the others was of minor importance. Banking coalitions showed a surprising stability in the Austro-Hungarian Empire. Here the battle in the field of government debt was to break the monopoly of the Rothschild- Credit-Anstalt consortium. Yet the monopolistic position of the Rothschild-Credit-Anstalt consortium could not be broken by just depriving them of privileges. In 1903 five Viennese banks under the leadership of the Wiener Bankverein and its French and German partners joined the consortium. These steps can be considered as the outer signs of a rearrangement of banking groups in the empire. This was due to the fact that the banks of Prague, Budapest and Vienna established independent “national” banking groups by establishing branches and contractual relationships and it was further due to the increase of capital. The increased capital and possession of securities of domestic banking institutions made it possible to place the majority of state loans within the empire. The Rothschild-Credit-Anstalt group, though flexible when cosmopolitan dynasties of bankers were transformed into international banking groups earlier in the 19th century, could not react effectively to the new challenge. But not only the role of the Rothschild-Credit-Anstalt consortium had changed in the state loan transactions of the empire, also the importance of state loans shifted in the areas of business in the Austro-Hungarian banks. The banks left out of the loans of the dual governments of Vienna and Budapest after 1873, when the trends of the market were favourable, turned towards the Balkans. For instance the Länderbank cooperated in the issue of the Serbian and the Bulgarian state loan in 1884 and 1889. After the turn of the century the Balkans became a battlefield for the foreign policies of the big powers and the international banking groups were drawn into this conflict. In the German-French rivalry the Austrian banks could seldom intervene or only with English assistance, as with the Bulgarian state loan. Mostly, they had to be satisfied as subcontractors of smaller shares. Yet the Austrian banks were somewhat compensated with the incomes from their industrial investments, which increased from 1900 on. The banking groups of the Austro-Hungarian Empire not only founded industrial companies of their own, they also established the Österreichische Kontrollbank für Industrie und Handel as a joint undertaking of ten Cisleithanian banks in 1914. This was the beginning of a new era, as the objectives of this bank were the management of syndicates and the control of cartels and trusts.

Literature: Köver, Gyöegy, The Austro-Hungarian Banking System, in: Cameron, Rondo / Bovykin, V.I. (eds.), International Banking 1870-1914, OUP 1991

Teichova, Alice, Banking and Industry in Central-East Europe, in: Rathkolb, Oliver / Venus, Theodor / Zimmerl, Ulrike (eds.), Bank Austria Creditanstalt. 150 Jahre österreichische Bankengeschichte im Zentrum Europas, Zsolnay 2005