As Franco’s government endeavored to rebuild the economy of country in shambles, companies started focusing on their own efforts to lay the foundations of their businesses in a new market, marked by much tighter government control and the impossibility of engaging in any sort of foreign commercial activity. As for banks, they faced the daunting task of putting back together the two realities into which the sector had been split during the war.
The return to unity
For Spanish banks, restoring unity became the most pressing issue. Most banking institutions had been forced to become bicephalous entities to pursue their activities in the ever changing National and Republican territories as the conflict wore on. But, despite their efforts to remain true to banking and economic principles, both the circumstances of war and the meddling of the Republican, National and Autonomic governments complicated even more the normal development of their activity. However, once the war was over, banks were able to recover in a record time.
Banking institutions soon started working on reconnecting their central headquarters with the branches that, for months, had been operating independently on the other side of the conflict. Damaged branches were also taken care of immediately. Based on the level of damages they sustained, some were rebuilt, while others required looking for alternatives. The precarious accounting records of the 1936 – 1939 period were recovered, and, working with incomplete accounting documents, institutions managed to put together books that reflected more accurately the post-war situation. Also, banks were able to retrieve the assets and documents that had been shipped abroad to prevent them from falling in the hands of the enemy.
On June 23, 1939, the Managing Committees and Commissions that had been created months earlier to replace the managing bodies of both banks and savings bank were dismantled, and from that moment on, the new Boards of Directors were established.
Banco de Vizcaya check of the 1940s.
The banking status quo
The new organization of the State turned out to be much more interventionist than the one that existed during the Second Republic, and banks did not escape the interference of the administration in private businesses. On October 19, 1939, the government passed laws to regulate aspects such as the way in which banks had to run their businesses, the configuration of their operating networks, and the branches they could have. The new regulations, enacted by the Ministry of Finance, established that “any change in the structure of banking enterprises that entails a change in their legal nature, will require, to become effective, this Ministry’s previous approval.”
What was known as the statu quo of the banking system was nothing but the embodiment of two priorities of the State: Expediting the country’s economic recovery and a strong intervention in the running of businesses.
The aforementioned order of October 1939 did not come into force until May 17, 1940, when a prohibition was issued, banning banks from opening new institutions, branches and agencies, and from physically relocating any of them. However, a new law was passed on December 30 of that same year that eased off these constraints a bit. According to the new provision, and subject to the Council of Minister’s prior approval, banks would be allowed to open new branches “for reasons of national or State interest or convenience”, or relocate branches within the same locality “provided that they do not result in an increase in the number of Branches or Agencies of an Institution and are promoted for reasons of insalubrity, ruin, demolition or any other cause.”
These were times when decisions were being made on an on-going basis, in an attempt to readjust the course of the economy every so often. Thus, in April 1941, a new law loosened some of the requirements that the banking industry had to observe, as a result to the improvement that was being perceived. The Boards of Directors and managing bodies were granted permission to manage “capital increases, passive dividends and stock issues”. However, and this would remain in force for many years, the distribution of dividends among shareholders was forbidden.
Already in 1940, banks not subject to interference from Republican authorities during the war were allowed to file their balance sheets. Banks that during the war had their headquarters or part of their subsidiaries in Madrid, Catalonia, the Basque Country or the Valencian community, were not allowed until the Ley de Desbloqueo (Unblocking Act) was repealed in 1942.
The law passed on March 13, 1942 allowed, among other things, to regulate the closing of Bank of Spain’s Financial Statements for the 1936-1941 period. State control over the Bank of Spain became much stricter. The Government Delegation was granted full-managing powers. Its most visible heads would be the commissioner of the official bank and two technicians appointed by the bodies reporting directly to the State. Thus, the State itself increased its representation in the governing board of the Bank of Spain from three to five directors.
Excerpt of the final part of the publication in the Official State Gazette of the Law of March 13, 1942.
As regards the presence of Spanish banks abroad, Banco Bilbao recovered its Paris branch, which went out of business during the civil war. The only private banking branch in the French capital came out of bankruptcy in November 1941, and was put at the disposal of Banco de Bilbao’s managers in January 1942. However, the branch struggled throughout most of the 1940s, as a result of the loss of customers caused by the Spanish civil war and the outbreak of the Second World war. Regarding the London branch, all it could do was hope to survive. As for the expansion of Banco Exterior’s network, devised during the Second Republic, all plans were stricken out. The self-sufficiency imposed from the beginning by Franco’s government did not allow any international growth and the commercial relationships that already existed abroad were severely hindered by the strict regulations imposed by the State.
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