Banca Romana scandal

Banca Romana scandal

Banca Romana scandal trial
Date	1893–1894
Location	Italy
Participants	The Banca Romana had loaned large sums to property developers but was left with huge liabilities when the real estate bubble collapsed in 1887.
Outcome	The scandal prompted a new banking law, tarnished the prestige of the Prime Ministers Francesco Crispi and Giovanni Giolitti and prompted the collapse of the latter's government in November 1893.

The Banca Romana scandal surfaced in January 1893 in Italy over the bankruptcy of the Banca Romana, one of the six national banks authorised at the time to issue currency. The scandal was the first of many Italian corruption scandals, and, like the others, it discredited the whole political system. The crisis prompted a new banking law, tarnished the prestige of the Prime Ministers Francesco Crispi and Giovanni Giolitti and prompted the collapse of the latter's government in November 1893.

The Banca Romana was founded by French and Belgian investors in 1835. In 1851 the bank became the official bank of the Papal State and in 1874 it was made one of the six national banks authorised to issue currency.

Due to rising inflation and easy credit, the Banca Romana and the five other issue banks (banks that were allowed to issue banknotes), had steadily increased their note circulation. In 1887 five of the issue banks had exceeded their legal limit, a fact well known to the government and banking and financial circles. However, restricting credit in a period of speculative construction boom was considered politically impossible.

Since the late 1880s, the Italian economy had been sliding into a deep recession. New tariffs had been introduced in 1887 on agricultural and industrial goods, followed by a trade war with France, which badly damaged Italian commerce. Many farmers, especially in southern Italy suffered severely, which eventually led to the uprising of the Fasci Siciliani. Additionally the collapse of a speculative boom based on a substantial urban rebuilding programme gravely damaged Italian banks.

The governor of the Banca Romana at the time of the scandal, Bernardo Tanlongo, was peculiar man; a semi-literate with a genius for accounts and finance. "He was not a womanizer, he never played, he is the antithesis of all elegance, his frugality resembles avarice," was how the Corriere della Sera once described him. A former farm hand and former spy during the short-lived Roman Republic in 1849, he made his career in the bank in the Papal State, providing illicit entertainment to Vatican officials. He remained at his post in the Banca Romana after the unification of Italy and was promoted governor in 1881. He had a ramarkable ability to secure friendships and protections through corruption and loans to cover up secrets.