Russian Empire
In 1809, the Russian Empire annexed Finland and made it a Grand Duchy with its own administrative structure. One aim of the new authorities was to sever Finland's previous economic integration with Sweden, including the use of the Swedish riksdaler as currency. To that effect, the Office of Exchange, Lending, and Deposits was chartered on 1811/12/12 and established on 1812/03/01 in Turku by Alexander I of Russia, partly modeled on the Bank of Sweden.[5][6] It started operations in August 1812. It was owned and controlled by the Grand Duchy's government, but from the start had its own capital and balance sheet. The Grand Duchy government was usually in surplus and did not use the Office to finance itself, allowing it to extend credit to the Finnish economy instead. It issued banknotes denominated in rubles and kopecks and provided credit to local landowners and merchants.[7] Its design was inspired by Russian Secretary of State Mikhail Speransky, whose plans to create a similar institution for Russia itself were thwarted by the French invasion of Russia in mid-1812.[8]
In 1819 the institution relocated to Helsinki. Its efforts to displace the Swedish currency were only partly successful, however, until both Sweden (in 1834) and Russia (in 1839) returned to the silver standard. In 1840, the remaining riksdaler banknotes in Finland were withdrawn from circulation and substituted by rubles, and the withdrawn riksdaler notes were exchanged for silver at the Riksbank in Stockholm. This allowed the Bank of Finland (which took that name in 1840[7]) to accumulate a significant metallic reserve, start discounting bills of exchange, and generally become much larger and more liquid in the 1840s, in contrast to the Russian State Commercial Bank and other Russian public banks of the time. The Bank soon opened its first branches in Turku and Vaasa.[7] From then on, Russian currency-denominated notes became the dominant means of payment in the Grand Duchy, and the Bank of Finland's banknotes represented less than one percent of all banknotes circulating in the Russian Empire, thus Finland had effectively no monetary autonomy. Consequently, Finland suffered from the Russian monetary disorder associated with the Crimean War and its financially disastrous aftermath. The convertibility of its banknotes to silver was again restricted from April 1854.
Requests for greater protection from Russian monetary vagaries developed in parallel with the Russian efforts at monetary stabilization, including the establishment of the State Bank of the Russian Empire in 1860 and subsequent reforms initiated by finance minister Michael von Reutern. On 1860/04/04, Alexander II authorized the Bank of Finland to issue its own denomination, the Finnish markka, defined as a quarter of the Russian paper ruble (and thus nearly equal in value with the French franc at the time). In 1865, the Bank of Finland finally secured monetary policy autonomy when Finnish Senator Johan Vilhelm Snellman obtained from Alexander the right to keep the markka linked to the silver standard irrespective of the ruble's situation, which was implemented in March 1866. From then on, the Bank of Finland effectively set its own monetary policy, making the Grand Duchy a separate currency zone from the rest of the Russian Empire, with the markka fluctuating in the range of 2.79 to 3.60 to the ruble between 1866 and 1875.
In 1868, the ownership and oversight of the Bank was transferred from Finland's executive Senate to its recently revived legislative Diet (from 1906, the Parliament of Finland), thus strengthening its independence and accountability along the lines adopted by Sweden. To reflect the Bank's new institutional position, plans were made to move it away from its location in the southern wing of the Senate Building in central Helsinki. The bank purchased a nearby plot of land in 1875 and held a design competition in 1876, which was won by Balto-German architect Ludwig Bohnstedt. The new building's construction started in 1878 and was completed in 1883.[9]
In 1876, Alexander II assented to Finland's shift from silver to the gold standard. This was implemented in July 1878, when the Bank of Finland unilaterally joined the Latin Monetary Union, a stance it kept until the outbreak of World War I.[7] Meanwhile, the Russo-Turkish War had again plunged Russia into monetary turmoil, and the ruble remained only partly convertible into markka (coins in small quantities). Even after Russia joined the gold standard in 1897, an imperial decree issued in 1904 restored the legal tender status of Russian ruble gold coins in Finland, but was never implemented because of the Russo-Japanese War.
Independent Finland
Shortly after the independence of Finland in late 1917, the civil war erupted. The Red Guards occupied the Bank of Finland's head office together with other strategic points of Helsinki in late January 1918 and secured control of the printing presses. The bank's professional staff refused to obey them, however, and the gold reserves had been precautionarily removed to the branch in Kuopio in Northern Finland;[10] The Reds tried to seize the reserves in Kuopio by force in early February, but withdrew after a weeklong battle.[11]
Red leader Anton Huotari became the chair of the Executive Board in Helsinki,[12] in competition to governor Clas von Collan, who remained in Stockholm during the civil war, and the other Executive Board members who stayed with the White government in Vaasa. The White side remained in control of the gold reserves, half of the branch network in Finland, and foreign assets, but suffered from a cash shortage as it had no capacity to print banknotes.[13]
