The Credit Bank’s history


8 April marks 100 years since the Lithuanian Credit Bank’s (lt. Lietuvos Kredito Bankas) articles of association came into effect. Who were the bank’s founders and managers? What made it stand out from other private banks that operated in Lithuania at that time? This article provides answers to all of these questions and many more.

There is not a lot of information available on how the Credit Bank began its operation. Only the date when its statutes came into effect is actually known. Even the date of the start of its activities differs in various sources. Some of them state that the bank started its work on 15 April, while others claim that it was on 20 April. 

The bank was established by Lithuanians residing in the US and local businessmen. US Lithuanians were represented by Lithuania’s restoration company which was supposed to aid in the country’s economic recovery. Amongst the bank’s founders were the Lithuanian businessman Andrius Vosylius and the representative of US Lithuanians Romanas Karuža. However, probably the most well-known founder was Jonas Smilgevičius, signatory to the Act of Independence of 16 February. Let us provide a short introduction to his biography. 

Who was Jonas Smilgevičius? 

 Jonas Smilgevičius, one of the 20 signatories to the Act of Independence of Lithuania, was born in 1870 at Šoniai Manor (near Alsėdžiai, Telšiai district). He was a descendant of the noble Smilgevičiai family. He was one of the eight children. His family was very patriotic and Jonas also picked up this trait. Ever since his young days, he started collecting information about the country’s history and wrote articles on it. Up until 1893, Smilgevičius attended Jonava and Mintauja gymnasiums. After graduating, he went on to study Economics at the University of Königsberg and later – Agronomy at the Humboldt University of Berlin. He wrote a couple of books for agronomists. Since he was young, he was also prone to business ventures. He would constantly say that reviving Lithuania will only be successful with business-minded people. 

Having finished his studies, Smilgevičius lived in Saint Petersburg and Warsaw, while later he moved to Vilnius. This is where he purchased a metal works factory Vilija that had gone bankrupt. It renewed its operation in 1912 and became the first Lithuanian joint stock company. That same year, Smilgevičius purchased Užventis Manor. At the end of the 19th century, it belonged to the family of the writer Šatrijos Ragana. This was the manor that was described in the writer’s most critically acclaimed novel “Sename Dvare” (In the Old Manor). When Smilgevičius purchased it, the manor was already abandoned. The future signatory restored it and established an exemplary property there. 

Although on 16 February 1918 Smilgevičius, as a member of the Council of Lithuania, signed one of the most important documents in Lithuania’s history, he was not prone to politics. He dedicated the remainder of his life to business. Smilgevičius established a number of companies. Some of them were Neris, Dubysa, Nemunas, Miškas and Sidabrinė Lapė. He also purchased various firms (e.g. Stiklas). The companies specialised in various areas. Quite a significant amount of profit also came from Užventis Manor. 

Smilgevičius held important positions in economic organisations. He was one of the Lithuanian Millers Association’s founders and the Chairman of its Board as well as the Chairman of the Lithuanian Distillery Industrialists Association. As an economist, Smilgevičius was also no stranger to banking activities. In addition to that, he was a member of the Board of the Bank of Lithuania and one of the Credit Bank’s founders. 
In 1940, Smilgevičius fell gravely ill, was treated in Germany and passed away in 1942 after having returned to Lithuania. 

The Credit Bank’s activities

 The Credit Bank’s articles of association set objectives to establish and finance various industry and trade institutions. In addition to that, it was also meant to provide credit and carry out all banking operations. 

When establishing the bank, a 3 million litas share capital was envisaged. The bank’s shares were registered. What made it different from every other bank was its management structure. Its articles of association did not provide for any council. Its functions were supposed to be partly covered by the Revision Commission. This Commission’s tasks included not only reviewing accounting but also supervising the Board’s activities, the bank’s settlements and cash operations. Therefore, the Revision Commission had to hold monthly meetings. It had three to five members. In 1927, the articles of association were specified. A minimum of three board members was set. Shareholders who had at least 25 shares could be elected members of the Board.

The temporary Lithuanian currency auksinas kept depreciating in value, thus the share capital had to be constantly increased. When the litas was adopted, the share capital amounted to 10 million auksinas, which was equated to 0.5 million litas, which depreciated the bank’s capital more than that of other banks. When shares were issued in 1925, the bank’s share capital increased to 2 million litas. 

The Credit Bank did not have a lot of shareholders. Interestingly, their number even continued to decrease. In 1926, there were 155 of them, while before Lithuania’s occupation in 1940 – only 26. This was due to the fact that most of the shares were owned by only three people. The first of them was one of the bank’s founders Andrius Vosylius, whereas the other two were politicians Juozas Tūbelis and Antanas Merkys. They made the majority of the decisions and, most likely, had a hand in deciding who can become a shareholder. This is probably the reason why Vosylius was constantly elected the Chairman of the Board, while Smilgevičius – Deputy Chair. Only Jonas Lukauskas was for many years the irreplaceable third member of the Board, holding the position of Director-Manager due to his professional skills. By the way, he left the bank in 1936 because he did not agree with the bank’s credit policy.
 Until 1927, the bank had the only branch in Panevėžys, which was liquidated that year due to a low turnover. From then on, it was the only bank not to have any branches. It also had a small number of employees. 

The Credit Bank’s operation was never stable. It constantly went through ups and downs. The situation was especially difficult after the Great Depression in 1931–1935. However, the bank was always appreciated because it supported Lithuania’s agriculture and industry. The Credit Bank invested quite heavily in the country’s largest agriculture and industry companies. The major part of investments was made to such companies as Nemunas, Miškas, Ringuva and Lietuvos Loidas. Yet it should be noted that most of the firms belonged to the bank’s founders and shareholders, therefore they also benefited from it. 

The number of issued loans kept growing. However, amongst other joint stock banks, the Credit Bank held one of the last positions in terms of the size of loans.

In 1923–1928, the bank used loans from other banks, especially their money that was held in correspondent accounts. This source of credit exceeded the bank’s capital and, during some years, the deposits (with current accounts).

However, the Credit Bank was always viewed in a positive light and it continued its activities up until Lithuania’s occupation and the nationalisation of banks. Although it was not big, it still left a mark in Lithuania’s banking history. And we still remember it to this day. 

Last updated: 2021-06-25