Decentralizing central banks: The branch offices of the Austrian and Prussian banks of issue 1815-80

Project leader: Clemens Jobst
Project team members: Marius Hafke
Project duration: 01/10/2024 - 30/09/2027
Funded by: Oesterreichische Nationalbank (OeNB), Jubiläumsfonds

Abstract:

Since the nineteenth century, many central banks maintained large branch networks, often with hundreds of locations nationwide. Although this presence extended well into the twentieth century, it has received little attention in the history of central banking. This project addresses that gap by retelling the emergence of modern central banks through the lens of their branch networks. Its central premise is that branch services, their impact on local economies, the organizational demands of managing them, and the political and economic conflicts in which they were embedded are essential to explaining why central banks are structured as they are today and what roles they perform—in monetary policy, payment services, banking supervision, and their function as lender of last resort. The core aim is to understand the timing, geographic spread, and organizational choices in building these networks through comparative case studies of Austria-Hungary and Prussia/Germany. The project examines branch structure and autonomy, business activities, counterparties, the central bank’s position vis-à-vis local financial intermediaries—which could be complementary or competitive depending on location—and the profitability of branching. It shows that governments strongly influenced branching decisions, which must therefore be interpreted as eminently political. Based on new, little-used archival sources and quantitative evidence, it finally assesses the contribution of branches to local development. Overall, the project seeks to demonstrate why the local embeddedness of central institutions is crucial for understanding the long-term relationship between the economy and politics.