The Creditanstalt

The Creditanstalt (also referred to as The Credit Anstalt or Credit-anstalt) based in Vienna, was one of Austria's most important banks.

Origins of The Creditanstalt

In 1820, Salomon Mayer von Rothschild (1774-1855) established his business, S M von Rothschild, Vienna, then the capital of the Austrian Empire. The Creditanstalt was founded in 1855 by Salomon Mayer's son Anselm von Rothschild (1803-1874) as K. k. priv. Österreichische Credit-Anstalt für Handel und Gewerbe. The Viennese Rothschilds owned approximately a third of the bank's shares. The Rothschilds' rivals in France, the Pereire brothers, had set up their own credit bank in Paris, the Crédit Mobilier, and were looking to gain a foothold in the Austro-Hungarian Empire.  The Credit-Anstalt was established to pre-empt this, and the bank provided investment for industry, initially focussing on the state's rapidly developing railway network. Anselm's son Salomon Albert Anselm von Rothschild (1844-1911) assumed the direction of the Creditanstalt in 1872, succeeded by Louis Nathaniel von Rothschild (1882-1955) in 1911. In 1912, the firm's new headquarters in Vienna's Innere Stadt opened in an impressive Neoclassical-style building, which still stands today. The Creditanstalt quickly became the largest industrial investment bank in Austria and by 1913 had grown to be the largest bank in the whole of the Austro-Hungarian Empire with a balance practically the same as that of the Austrian state budget. 

Collapse of the Creditanstalt, 1931

Business dramatically changed with Austria's defeat in the First World War and the dissolution of the Austro-Hungarian monarchy and empire. In the late 1920s, a principal debtor, the Steyr-Werke AG faced financial difficulties, with bad loans leading to a drain on finances. In October 1929, the Austrian Schober government compelled the allegedly well-financed Creditanstalt to assume liabilities, which together with the simultaneous Wall Street Crash led to the financial imbalance of the then-largest Austrian credit provider. In 1929 the Creditanstalt merged with the second largest Viennese bank, the Allgemeine Öesterreichische Boden Credit-Anstalt. The Boden Credit-Anstalt had extensive industrial holdings and a considerable part of Austrian industry depended on this bank for day-to-day financing.  However, the Boden Credit-Anstalt was suffering badly due to a range of business errors and a large number of withdrawals. In order to save it, the Austrian Chancellor decided that a strong partner had to be found. The Creditanstalt was the only bank considered strong enough for this and Baron Louis eventually, albeit very reluctantly, bowed to political pressure. 

On the eve of the bank's collapse in 1930, about 69% of all Austrian limited companies did their business through the Creditanstalt, its stocks were quoted on twelve foreign stock exchanges, and more than 50% of its stocks were in foreign hands. A number of prominent foreign bankers and businessmen sat on its board of directors and it had an excellent international reputation. Its business interests extended into eleven banks and forty industrial enterprises and among its creditors were 130 of the most important foreign banks, "From the moment of its birth the Credit-Anstalt of Vienna stood in the forefront of international finance" (The Economist, 27 June 1931). The taking over of the Boden Credit-Anstalt to create this so-called 'superbank' proved to be a grave mistake and one which undoubtedly was a major contributing factor to the collapse of the Creditanstalt which itself had been experiencing problems due to the effects of the Great Depression that was squeezing Austrian industry.  The absorption of the ailing Boden Credit-Anstalt was just too heavy a burden for the bank to contend with.

The Creditanstalt had to declare bankruptcy on 11 May 1931, one of the first major bank failures that initiated the Great Depression, and an event that sent shockwaves throughout Europe. Chancellor Otto Ender rescued the Creditanstalt by distributing the enormous share of costs between the Republic, Austria's central bank Oesterreichische Nationalbank and the Rothschild family.

Nationalization plans advanced by the Social Democrats were rejected. The failure of the Creditanstalt and its impact in producing a major global banking crisis provided a major propaganda opportunity for Adolf Hitler and the Nazi Party: it allowed them to further blame Jews for German and international economic and social troubles. In 1934, Chancellor Engelbert Dollfuß ordered the merger of the institute with the Wiener Bankverein, and it changed its name to Creditanstalt-Bankverein. 

Anschluss into Nazi Germany

Following the Austrian Anschluss to Nazi Germany in 1938, Creditanstalt-Bankverein was targeted for both financial and racial reasons. Baron Louis de Rothschild was immediately arrested and imprisoned for the losses suffered by the Austrian state when the bank collapsed. Deprived of his position and property, he was released upon payment of $21,000,000, believed to have been the largest bail bond in history for any individual, and migrated to the United States in 1939 after more than one year in custody. Creditanstalt-Bankverein was later taken over by Deutsche Bank, under the direction of Hermann Josef Abs and was responsible for settling the financial issues of Nazi war operations as well as the 'Aryanization' of Jewish-owned businesses.

Post-war

After the second World War, the bank was nationalised by Allied-occupied Austria in 1946. It became mainly a commercial bank and was highly involved in Austria's economy, holding stakes in important Austrian companies such as Wienerberger, Steyr-Daimler-Puch, Lenzing AG and Semperit. From 1956 onwards, Creditanstalt was again partly privatized by issuing 40% in shares, though only 10% in common stock.

In 1981, the former Social Democratic Minister of Finance Hannes Androsch assumed the office of a general manager. Industrial interests were reduced, while the government ownership share fell to 51%. In the 1980s, Creditanstalt opened branches in London, New York and Hong Kong, while the international orientation towards East-Central Europe was boosted by the fall of the Iron Curtain upon the Revolutions of 1989. Nevertheless, after several difficult lending operations, Creditanstalt became an acquisition candidate.

In 1997, Geoffrey Hoguet, a direct descendant of Salomon von Rothschild, ceased to work for the investment bank, becoming the last Rothschild to be employed in the financial sector in Austria. In the same year, the state-owned shares of Creditanstalt were sold to Bank Austria (BA), resulting in a crisis in the ruling coalition between the Social Democratic Party and the conservative Austrian People's Party, since Creditanstalt was considered to be part of the conservative sphere of influence, whereas BA with its roots as Red Vienna's Central Savings Bank (Zentralsparkasse) was considered to be on the political left. The merger was not completed until 2002, with the creation of Bank Austria Creditanstalt (BA-CA), which became part of the German HypoVereinsbank (HVB) group. In 2005, HVB was taken over by the Italian holding company UniCredit.