BDAR

The Land Bank

95 years ago, on 15 April 1924, Seimas passed the Law on the Land Bank. It was one of the most important banks of the interwar period. It was established the latest of all but largely contributed to the strengthening of the country’s agriculture.

The Land Bank’s history

Even before reinstating the independence of Lithuania, it was realised that statehood and economic progress is impossible without national banks, therefore, in 1916, an initiative to establish a Land Bank that would credit Lithuanian agriculture and newcomers had started. A group of Lithuanian intelligentsia left for the US to collect donations for a Land Bank. A significant amount of $100,000 was collected until 1919. In 1920, it was decided to transfer this sum to Lithuania and exchange it to the local currency, auksinas. Unfortunately, the money depreciated due to inflation and it was no longer sufficient. The bank’s establishment had to be delayed.

In 1922, a law on land reform was passed which provided for giving lands to those who had little or no land. The question of establishing a Land Bank arose once again. However, the lack of money and constantly growing inflation rates intercepted the idea once again. The opportunity provided itself only at the end of 1923 and it took long discussions to decide between two types of banks: a mortgage bank and a short-term credit bank. The latter was finally chosen.

On 15 April 1924, the Law on the Land Bank was passed in a hurry. According to the law, it was a joint-stock bank with a set share capital of 5 million litas (later increased to 50 million) and the shares were distributed. More than 5,000 shares were distributed at first and the absolute majority (almost 99%) of them were purchased by the Ministry of Agriculture. Therefore, it was a joint-stock bank but with a predominant governmental capital. The most important decisions of the Land Bank were also made by the President of the Republic or the Government. However, the shares were also available for purchase to municipalities, companies, credit institutions and individuals. Throughout its existence, its core capital (50 million litas) was composed of 50,000 unregistered shares worth 1,000 litas each. The constituent assembly meeting of the bank’s shareholders took place on 23 June 1924 and the bank started operations on 21 July.

In 1930, an improved law on the Land Bank was passed. The bank was converted to a long-term credit, or mortgage, bank. The general objective of the bank was to provide loans to farmers, newcomers, agricultural cooperatives and similar. After 1930, it was allowed to credit residential construction in cities, agricultural-based industry and trade as well as municipalities. Loan conditions that were quite lenient before became much stricter after 1930. This amendment was in force until 1940.

The Land Bank, ever since its establishment, was very popular and dynamic (and upheld a rapid pace of crediting expansion). Until 1937, the priority and benefits were given to farmers, especially newcomers, and after that, residential construction was actively credited. However, agricultural loans still amounted to 2/3 of all loans provided. During the Land Bank’s time in existence, almost 30,000 farmers and newcomers benefited from loans. When providing loans, requests were being processed in succession, but there were exceptions for newcomers, farmers, victims of fire or fallen stock. Victims of natural disasters were exempted from paying late interest. The lending rate decreased during the Great Depression but improved once again in 1938. During the crisis, the credit policy was made stricter to ward off insolvent clients.

The most important state, social and economic task was to credit newcomers. They were given benefits and the Land Bank credited them with priority and preferential conditions. However, newcomers weren’t avid borrowers (only around 10% of all the bank’s clients were newcomers).

The Land Bank also provided loans to agricultural processing industry and trade companies as well as rural credit cooperatives. Crediting of these companies also helped to solve strategic issues of state economy policy.

There was no city mortgage bank as such in interwar period Lithuania. Some loans to build houses were provided by the State Savings Bank, the Ministry of Finance, commercial banks and others. Until 1930, the Land Bank also provided small short-term loans. The bank provided loans for up to 15 years, for a total amount of 40–50% value of the mortgaged plot. During the 1930s, the bank was expanding the net of construction lending. Until the end of 1939, the bank had given out mortgage loans to 1,221 city residents, mostly from Kaunas. In Klaipėda region, the bank had started to employ a progressive way of lending, cottage complex crediting. The bank bought a 40 ha plot in Smeltė and built cottages fit for workers. Such a cottage was worth 22–28 thousand litas. A worker would have to pay 1 to 3 thousand litas and the rest of the money would be lent by the bank for 10 years. The bank had also started crediting the construction of Šventoji fishermen and farmers’ cottages.

The Land Bank’s Chairs

The bank’s Board, probably to save costs, was tiny, composed of the Chair and two directors. From 1930, an additional member was added, a Deputy Chair. The President of the Republic appointed both the Chair and the Deputy Chair. The Council consisted of at least five members and they, same as the Board members, were appointed for a three-year term. The Board members were liable with their entire assets for any losses caused to the bank. They could not hold any positions in other banks or joint-stock companies. The 1930 law changed this prohibition so that the members of the Board were not allowed to work only in those companies and organisations that had loans taken out in the Land Bank.

The first Chair of the Land Bank was an economist, Petras Karvelis (1897–1976). From 1923, he worked as an adviser to the Minister of Finance and significantly contributed to the creation and improvement of the tax system, as well as organised the mintage of the first Lithuanian coins. He also devoted time to community work and published articles in newspapers. In 1924 he was elected to the 2nd Seimas and soon became the Land Bank’s Chair. He didn’t stay in this post for long because in 1925 he was appointed the Minister of Finance.

On 25 September 1925, a new Chair was appointed, Kazys Radušis (1891–1966). This financier had previously worked at a number of banks, both in Lithuania and abroad. In 1924, he became a member of the Economy Bank’s Board and in 1925, when he was just 34 years old, he became the Land Bank’s Chair. In 1926, the left-wing government made him resign, so he went to work at the Bank of Lithuania but returned to his post in 1927 and remained there until 1940. Radušis wasn’t only the Chair of the bank, he also helped to establish important agricultural organisations (e.g. Maistas, Lietuvos Cukrus and others), was a member of various fellowships, one of the founders of Lithuania’s Aeroclub and published many articles on the economy. His contemporaries claimed that the Lithuanian financial policy of 1930s was created by the Prime Minister Juozas Tūbelis, the Chair of the Bank of Lithuania Juozas Paknys and Kazys Radušis.

From 1926 to 1927, Vytautas Račkauskas (1881–1956) was the Land Bank’s Chair.By education, he was a geodesist. After 1918, he worked at the Ministry of Agriculture, was a lecturer and in 1924 he was elected to Seimas with the Peasants’ Union. This Union was the one that appointed him the Land Bank’s Chair. He didn’t hold his post for long but managed to improve the governance of the Land Bank, its credit resource management and made other important changes.

 

 

The Land Bank’s building

 

According to the law, the bank had a right to establish branches and agencies, but it barely exercised this right. In 1927, it established an agency in Klaipėda and in 1930 it was converted to a branch. This was the only branch of the Land Bank that was credited by the main bank. Eventually, applications for loans were allowed to be submitted by post and there was no need to come to Kaunas in person anymore. Loans were given out at post offices and at the branches of the Bank of Lithuania.

For a while, the Land Bank was renting premises on Laisvės alėja and from 1929 until its own building was finished in 1935, it rented premises in the Bank of Lithuania’s new building on the intersection of K. Donelaičio and Maironio streets. The Kaunas City Construction Commission’s decision of 25 September 1933 gave way to the construction of the Land Bank’s building on the intersection of K. Donelaičio g. and Unity Square, the building was designed by the architect and engineer Kārlis Reisons (1894–1981).

A three-part, four-story building was designed in a corner plot of Unity Square, next to K. Donelaičio g. The building’s central part was for guests. The Banking Operations Hall took up two stories starting from the second one and was connected to the lobby that was parted by a row of columns. The side parts of the building housed the employees’ offices. On the second floor of the east wing was a depository, the fourth floor’s East side housed the Ministry of Foreign Affairs and apartments were located on the building’s sides. The building’s facades facing Unity Square and K. Donelaičio g. are decorated with slightly higher protrusions and narrow, vertical windows. The very tops of the protrusions boast bas-reliefs created by a sculptor Bernardas Bučas (1903–1979).

The building’s ground floor is covered in granite plates. The facade’s top is engirdled by tall, level parapets with stylised rosettes. The main focal point of the building is its corner entrance.

The Land Bank’s building cost 1.6 million litas.

Nowadays, the building is home to Kaunas University of Technology.
 

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Last updated: 2021-07-08