On 28 November, exactly a hundred years ago, Lithuania’s Cabinet of Ministers approved the statutes of the Lithuanian Bank of Commerce (also known as Lithuania’s Commercial Bank from 1927). During the approval, the word “Baltic” was removed from the name. The Bank was officially established on 3 August 1920, thanks to the efforts put in by Lithuania’s business leaders.
Lithuanian Bank of Commerce founders
Probably the most notable businessmen that contributed to the establishment of the Lithuanian Bank of Commerce, as well as its largest shareholders, were Richard Tillmanns and Nikolai Soloveichik.
Tillmanns was a businessman of German descent. He came to Lithuania at the end of the 19th century. Alongside his family, he established and managed quite a few factories, mostly specialising in metalworking and production. Probably the most famous company that he owned with his brothers was Brothers Tillmanns and Co. Amongst other companies, he was also in possession of one of the largest candy factories in interwar Lithuania, called Tilka. The Tillmanns were considered Lithuanian industry developers. They were also the largest shareholders of the Lithuanian Bank of Commerce.
One of the wealthiest families in interwar Lithuania was Soloveichiks. They were an old family of Kaunas Jews, who made quite a lot of investments in private business. Nikolai Soloveichik was an especially large businessman who owned a couple of companies. Together with Richard Tillmanns, he established one of largest insurance companies called Lithuanian Lloyds; he also owned a quite successful company called Soloveichik and sons. Leontij and Nikolai Soloveichik were amongst the Lithuanian Bank of Commerce founders and for a number of years, until 1939, Leontij was the Chairman of the bank’s Board. Soloveichiks were in second place by the amount of the Bank’s shares that they owned. In 1939, they sold their shares to Tillmannses.
The establishment of the Lithuanian Bank of Commerce
The bank’s statutes stated that its purpose was to finance industry and trade, whereas its share capital amount was 1 million auksinas. It was raised by issuing 4,000 shares with a nominal value of 250 auksinas each. The shares were unregistered. Lithuanian Bank of Commerce had its board (consisting of shareholders that had no less than 50 shares), a council (shareholders with no less than 20 shares) and a general meeting of shareholders. Foreigners could also be a part of the board and council (no more than a third of all the board and council members according to law).
A quickly rising inflation of auksinas caused the bank’s share capital to shrink; therefore, it had to be raised constantly. Until 1925, the bank’s share capital was raised yearly and, right before the adoption of litas, it had increased to 8 million auksinas. This is what helped the bank to catch up to other banks because, upon its establishment, it had the smallest capital of all.
On 2 October 1922, when litas was adopted, the bank’s share capital was converted to litas at the rate of 16 to 1 (which was not very favourable to the shareholders) and equated to 0.5 million litas. However, in a few years, the share capital was managed to be more than tripled.
Until 1926, the largest shareholders were the Tillmanns family (they held shares worth around 300,000 litas), the Soloveichik family (with shares worth around 250,000 litas) and foreign banks. Those were three large German banks: the Darmstädter und Nationalbank, Königsberg Eastern Trade Bank and Danzig Bank. These banks held around one third of all the bank’s shares. Therefore, for a long time, there were some German citizens amongst the bank’s board members and a lot of Germans worked at the bank itself. Collectors and valuables were also insured in Germany.
The Lithuanian Bank of Commerce after 1927
In 1927, the bank started to work under new statutes that were written in accordance with the Law on Joint-Stock Banks passed in 1925. In 1927, an obligatory share capital minimum was set (2 million litas), which was accumulated only in 1929 and hadn’t changed since. By this indicator, the Lithuanian Bank of Commerce was one of the three smallest banks, yet it was a leader in the increase of reserve capital, because it accumulated almost a million litas.
However, its strength did not lie only in the size of its share capital. Due to its connections to Germany, this bank had wide access to foreign loans. It was borrowing from Germany and England, had close ties to banks in Europe, the US and Africa, even the most famous ones. Its clients kept large sums of money in their accounts, and the bank, based on the banking operations, held a second place amongst all the Lithuania’s joint-stock banks. This was probably due to its cooperation with foreign countries and it being less dependent on the local deposit market. Some sources state that as much as 75% of all Lithuania’s currency transactions with abroad were made through this bank. Many foreign establishments and citizens had current accounts at this bank. However, when the Great Depression of 1929 reached Lithuania in 1931, bank depositors started panicking. The Lithuanian Bank of Commerce suffered the most – it lost more than a half of its deposits in a year and was only saved from total failure by the help received from the Bank of Lithuania and numerous credit injections. It earned its trust back only in 1936.
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However, the bank remained more or less stable. It avoided using its equity for assets and had the lowest investment rate amongst all the banks, which increased its liquidity. The bank didn’t provide large loans (only up to 100,000 litas). Larger loans were only provided to the companies of the bank’s owners. The bank purchased quite a lot of shares of other various banks (Klaipėda Trade and Industry Bank, the Central Jewish Bank, the Bank of Lithuania, etc.), it also later purchased shares of Lithuanian enterprises.
It had only three branches – in Kybartai, Šiauliai and Panevėžys. When Vilnius was regained in 1940, the bank had its branch opened there for a while. Everywhere else, private bank collectors performed some of the branch functions.
Based on the data of 1926, the average monthly salary was 450 litas. There was also a support system created. To do this, two support accounts were opened. One of those accounts was used to collect compensations from health insurance funds for sick employees, so the bank paid its sick employees full salaries and used the money accumulated in extraordinary circumstances (when employees found themselves in difficult situations, when they needed special treatment, etc.), whereas the second support account was being filled up by transferring a part of banks profits every year.
The Lithuanian Bank of Commerce was also generously donating to charity. Its donations, based on 1936–1937 data, amounted to one third of all bank aid (Ūkio bankas excluded).
From 1922 to 1939, the bank’s profits reached 2.5 million litas.
