Activities and monetary tensions in the period of two World Wars (1914-1945)
During and after the First World War the Netherlands played an important role in financing world trade. The need to maintain imports resulted in the arrangement of a number of large loans to foreign companies. The position of the Amsterdam branch during the First World War is summed up succinctly by Eric Bussière67: Due to the neutral status of Switzerland and the Netherlands, Geneva and Amsterdam were able to render extremely valuable services. As a security measure, the headquarters securities portfolio was sent to Switzerland at the start of the hostilities, while Amsterdam ensured that contacts with occupied Brussels were maintained.
The post-war era ushered in a period of bank concentration and financial expansion, which led to the banking crisis of the late 1920s. The economic depression of the following decade and the monetary turmoil it generated for example Britain came off the gold standard68 in 1931 provoked a financial collapse in Germany and Austria, which also impacted the Netherlands, Germany being not only one of its major economic partners, but also a major player in the Dutch financial market after the British market closed its doors. The plummeting value of sterling resulted in an astronomical loss of 30 million guilders for the Nederlandsche Bank, which was holding quantities of sterling-denominated securities in its portfolio.
The Amsterdam branch of the Banque de Paris et des Pays-Bas was still highly active in the securities markets, taking part in a number of deals initiated by French and Belgian issuers who came to Amsterdam in search of finance. During this period, the branch succeeded in growing its business with Dutch companies and subsidiaries of foreign, especially French, companies. It also expanded its network of correspondent banks. A large number of banks that had relationships with the Banque de Paris et des Pays-Bas opened an account at the Amsterdam branch for their documentary credit business.
This period ended with the Second World War, a disastrous period in the history of the Netherlands which badly affected the Amsterdam capital markets, especially as so many financial professionals were from the Jewish community.
67. In Bussière, Eric: Paribas, Europe and the World 1872-1992, Fonds Mercator, Anvers, 1992, p. 91.
68. On 21 September 1931, the British government announced that it was suspending the convertibility of the pound sterling for six months and would block the foreign exchange market. Sterling duly lost 30% of its former value. This abrupt devaluation threatened international economic equilibrium and Europe become divided into three blocks: Britain, Scandinavia, Portugal and Greece which devalued; the central European countries, which suspended the convertibility of their currencies and restricted transfers of currency to financing of imports of basic necessities; and France, Belgium, the Netherlands, Poland, Italy and Switzerland (the gold bloc ), which strove to preserve the gold standard and defend the parities between their currencies.
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