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Sonja Jerković, PhD
National Bank of Serbia
Belgrade, Republic of Serbia

 

Saša Ilić, PhD
National Bank of Serbia
Belgrade, Republic of Serbia

 

ESTABLISHMENT OF THE FINANCIAL SYSTEM IN THE KINGDOM OF SERBS, CROATS, AND SLOVENES AFTER THE FIRST WORLD WAR

Vol. XLII, 1/2024, pp. 65-86
https://doi.org/10.29362/ist20veka.2024.1.jer.65-86

 

ABSTRACT/RESUME:

Among the new states on the map of Europe in 1918, the Kingdom of SHS was the most complex. It was composed of previously different state-legal entities (independent Serbia and Montenegro and several areas of Austria-Hungary) with uneven levels of economic development and diverse national, religious and linguistic communities. Part of the territory of the new state (Serbia) suffered war destruction, gross economic exploitation and many human casualties, and the entire country was gripped by inflation accompanied by the black market and other speculations. In order to unify the currency, ensure state payments, revive trade and credit and other activities to establish a unified financial system, the government undertook several interrelated and chronologically intertwined steps. There was a redefinition of the function of the National Bank of the Kingdom of Serbia, whose activity was expanded territorially, the capital was increased and a new management staff was introduced in accordance with the national and new shareholder comp. For the sake of the functioning of regular payment transactions, which was important not only for the state, but also for all citizens, activities were carried out to take over branches of the Austro-Hungarian Bank. The original sequestration was replaced by a temporary regulation of work and finally by agreements and contracts by which the National Bank bought the property and took over the personnel of the branches. The specificity of KSHS was the multitude of currencies in circulation. Considering the quantity, the Austro-Hungarian kronen was a particular problem, so several steps were taken to control and stabilize it, from stamping, through marking with a deduction of 20 percent of the value, to issuing money simultaneously denominated in SHS dinars and in kronen and replacing the kronen with those denominations. Due to the complex economic and financial circumstances and non-economic measures of the government, the national currency was continuously losing its value. In order to ensure its stability and strengthening, and indirectly to ensure sufficient amounts of gold and foreign currency for foreign payments, the state authorities undertook a series of measures of an administrative nature, which had a limited effect. It was only with the measures of foreign exchange liberalization and the listing of the dinar on the stock exchanges, initiated by the Minister of Finance Stojadinović, that the dinar began to appreciate and its de facto stabilization was achieved.

 

KEYWORDS: Kingdom of Serbs, Croats, and Slovenes, financial system, financial reconstruction, national bank, inflation, exchange of currency, krone, dinar, currency stabilization

 

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