Preussische Bank

The Bank of Prussia, known in German as Preußische Bank, was the principal state-linked banking institution and note-issuing bank of the Kingdom of Prussia. Its institutional origins lay in the Prussian Royal Bank, founded by Frederick II on 17 June 1765. Because the original institution soon encountered financial difficulties, it received a revised charter permitting the issue of banknotes on 29 October 1766 and began operating under that revised framework in 1767. Consequently, both 1765 and 1766 appear in accounts of its foundation. The original Royal Bank was created to support public credit, payments, lending, and savings activity. It was located in Berlin at Jägerstrasse 34–35 in Friedrichswerder, in a building originally erected in 1690 for the chief huntmaster of Brandenburg. The bank later expanded throughout the building. Although it held an important public position, its functions were closer in many respects to those of a savings and lending institution than to those of a fully developed modern central bank. Its note circulation remained limited, and its financial condition deteriorated severely after Prussia's defeat by Napoleon at Jena and Auerstedt in 1806. Its equity became negative and remained under pressure for years. Convertibility was gradually restored during the 1820s and was fully re-established only in the 1830s. A major institutional transformation took effect on 1 January 1847. The Royal Bank's business was reorganized as the Bank of Prussia, a formally private-sector entity with new equity supplied by individual shareholders. The Prussian state contributed the former Royal Bank's business and approximately 1.2 million Reichstaler, while private investors contributed approximately 10 million Reichstaler. Despite this nominally private structure, government control remained decisive. Shareholders had representation through an advisory body, but management continued to operate under strong state direction. Christian Rother, the Prussian Minister of State who had previously led the Royal Bank, became the new institution's first president. The bank's development was closely tied to debates over monetary organization and banking reform. David Hansemann headed the institution from 1848, but his reform-oriented views were incompatible with the conservative Prussian government's preferred approach, and he resigned in April 1851. The bank subsequently concentrated on strengthening its position in the fragmented market for banknote issuance. In 1856 it obtained an unrestricted but non-exclusive privilege to issue notes. That arrangement gave it greater capacity while leaving competing note-issuing banks in operation. In the same year, working with conservative Interior Minister Ferdinand von Westphalen, it opposed the creation of additional joint-stock banks in Prussia. The aftermath of the financial panic of 1857 reinforced the Bank of Prussia's standing as the leading note-issuing bank in the German territories. Its branch network expanded substantially during the final decades of its existence, from 143 branches in 1867 to 167 in 1875. Between 1869 and 1876, its Berlin head office was rebuilt according to designs by Friedrich Hitzig. The completed building was taken over by the Reichsbank after the Bank of Prussia ceased operations. The institution ended on 1 January 1876, when the newly established Reichsbank succeeded it as part of the monetary and institutional consolidation of the German Empire. The Bank of Prussia therefore represents a transitional stage between eighteenth-century state banking, nineteenth-century note-issuing institutions, and the centralized imperial central-bank system that followed.

The Bank of Prussia developed from the Prussian Royal Bank, an institution established by Frederick II on 17 June 1765. The Royal Bank was intended to support public finance, lending, payments, and savings in the Prussian state. Its early operations were troubled, leading to a revised charter on 29 October 1766 that authorized banknote issuance. It began operating under that revised arrangement in 1767, which explains why some historical accounts identify 1766 rather than 1765 as its effective founding date. The institution operated from Jägerstrasse 34–35 in Berlin's Friedrichswerder district. The premises occupied a building constructed in 1690 by Johann Arnold Nering for the chief huntmaster of Brandenburg. The bank initially used only the ground floor but had expanded into the entire building by approximately 1786. In institutional terms, the Royal Bank was not a modern central bank in the later sense. It performed state-banking and lending functions and operated a savings-oriented business, while its banknote circulation remained relatively modest. Prussia's military and financial crisis during the Napoleonic period placed the institution under severe pressure. Following the Prussian defeat at Jena and Auerstedt in 1806, the Royal Bank's equity became negative. Its financial difficulties persisted for an extended period. Convertibility was restored gradually in the 1820s and was not fully achieved until the 1830s, reflecting the broader challenges of rebuilding Prussian public credit and monetary stability. On 1 January 1847, the institution was reorganized as the Bank of Prussia. The new structure introduced individual private shareholders and additional equity while preserving strong government influence. The Prussian state contributed the old Royal Bank's business and approximately 1.2 million Reichstaler. Private investors, including some who were not Prussian, supplied approximately 10 million Reichstaler. Shareholders received a measure of representation through an advisory board, but the bank's management remained firmly under government control. Christian Rother, a Prussian Minister of State and the former head of the Royal Bank, became its first president. The reorganization placed the bank at the center of nineteenth-century disputes about monetary authority and banking competition. David Hansemann became its head in 1848 and advocated banking reforms, but the conservative Prussian government did not accept his approach. He resigned in April 1851. The bank then sought to consolidate its influence over the fragmented market for note issuance. In 1856 it secured an unrestricted but non-exclusive privilege to issue notes. This gave it greater operating freedom without creating a complete legal monopoly. Also in 1856, the bank worked with conservative Interior Minister Ferdinand von Westphalen to oppose the establishment of further joint-stock banks in Prussia. The policy helped preserve the bank's privileged position, although it did not eliminate all competition. The financial panic of 1857 subsequently enhanced its reputation and standing as the premier note-issuing bank in the German territories. The Bank of Prussia expanded its physical network during its final years. It had 143 branches in 1867 and 167 by 1875. Its Berlin headquarters was rebuilt between 1869 and 1876 to designs by Friedrich Hitzig. The building was completed around the time of the institution's replacement and was taken over directly by the Reichsbank. The bank ceased operations on 1 January 1876. Its successor, the Reichsbank, formed part of the more centralized monetary order of the German Empire. The Bank of Prussia's historical importance lies in its role as a bridge between absolutist state banking, nineteenth-century private-capital banking under government supervision, and the centralized imperial central-bank system that followed.

• 1876

  Replaced by the Reichsbank

  [1]Bank of Prussiaen.wikipedia.org

  The Bank of Prussia ceased operations on 1 January 1876 and was succeeded by the Reichsbank.

• 1875

  Branch network reaches 167 locations

  [1]Bank of Prussiaen.wikipedia.org

  The number of branches increased to 167 in the final full year before replacement by the Reichsbank.

• 1867

  Branch network reaches 143 locations

  [1]Bank of Prussiaen.wikipedia.org

  The bank operated 143 branches, demonstrating the scale of its regional network.

• 1856

  Expanded note-issuing privilege

  [1]Bank of Prussiaen.wikipedia.org

  The bank received an unrestricted but non-exclusive privilege to issue notes.

• 1848

  David Hansemann becomes head

  [1]Bank of Prussiaen.wikipedia.org

  David Hansemann assumed leadership and attempted to advance banking reform.

• 1847

  Bank of Prussia begins operations

  [1]Bank of Prussiaen.wikipedia.org

  The Royal Bank was reorganized as the formally private-sector Bank of Prussia, with both state and private capital.

• 1830

  Convertibility fully restored

  [1]Bank of Prussiaen.wikipedia.org

  The bank's convertibility, restored progressively during the 1820s, was fully re-established during the 1830s.

• 1806

  Financial crisis after the Napoleonic defeat

  [1]Bank of Prussiaen.wikipedia.org

  The Royal Bank's equity became negative after Prussia's defeat at Jena and Auerstedt.

• 1766

  Revised charter authorizes banknote issuance

  [1]Bank of Prussiaen.wikipedia.org

  A revised charter dated 29 October 1766 permitted the Royal Bank to issue banknotes; operations under the new framework began in 1767.

• 1765

  Prussian Royal Bank founded

  [1]Bank of Prussiaen.wikipedia.org

  Frederick II established the Royal Bank on 17 June 1765 as a state-linked institution for banking, lending, payments, and public credit.

A government-controlled, state-linked note-issuing bank serving as Prussia's leading banking institution before the creation of the Reichsbank.

• Currency issuance · 1766

  Banknotes

  The bank issued notes under the Royal Bank's revised 1766 charter and later under the Bank of Prussia's broader 1856 privilege. Its authority was important but not fully exclusive, since other note-issuing institutions continued to operate.

• Banking and credit · 1765

  State and commercial lending

  Lending was a core part of the institution's original purpose and remained central after the 1847 reorganization. The bank combined public-sector responsibilities with credit and banking services for the wider Prussian economy.

• Deposits · 1765

  Savings and deposit services

  The Royal Bank developed substantially as a savings-oriented institution. Its deposit and savings functions distinguished it from a purely monetary authority and formed part of the historical foundation inherited by the Bank of Prussia.

• Payments · 1765

  Giro and payment services

  The institution's original German designation included Girobank terminology, reflecting its role in account-based transfers, payments, and related banking operations within the Prussian state.

• 1876

  Replacement by the ReichsbankM&A

  Background

  The German Empire established a new centralized monetary institution.

  Action taken

  The Bank of Prussia ceased operations on 1 January 1876, and the Reichsbank took over its role and completed Berlin headquarters.

  Aftermath

  The institution disappeared as an independent bank within the consolidated imperial central-banking system.

  Source

• 1856

  Expansion of note-issuing authorityOther

  Background

  The bank sought a stronger position against competing note-issuing institutions.

  Action taken

  It obtained an unrestricted but non-exclusive privilege to issue notes and opposed the creation of additional Prussian joint-stock banks.

  Aftermath

  The bank strengthened its competitive position, and the financial panic of 1857 further enhanced its standing.

  Source

• 1847

  Reorganization as the Bank of PrussiaStrategy

  Background

  The Royal Bank's structure and capital base required institutional reform.

  Action taken

  The business was reorganized with private shareholders supplying new equity while the Prussian state retained a minority ownership position and effective management influence.

  Aftermath

  The new institution became Prussia's principal state-linked note-issuing bank while retaining a formally private-sector structure.

  Source

• 1766

  Adoption of a revised founding charterOther

  Background

  The newly established Royal Bank encountered financial difficulties soon after its creation.

  Action taken

  Prussia issued a revised charter on 29 October 1766 that authorized banknote issuance and provided the basis for operations beginning in 1767.

  Aftermath

  The revised framework became the practical starting point for the bank's early operating history.

  Source

1. 1Bank of Prussiaen.wikipedia.org