The Credit-Anstalt Crisis of 1931

Aurel Schubert examines the failure of Austria's largest bank in May 1931, which is conventionally described as the event that spread the Depression from the United States to Europe and triggered the collapse of the international financial system.

Schubert's research, using Austrian bank and central bank archives, complicates that account. He shows that Credit-Anstalt's problems were long-standing and domestic: the bank had been weakened by the collapse of the Habsburg empire, which left it with claims across successor states and with industrial holdings whose markets had been fragmented by new borders; it had been forced by the government to absorb other failing banks, including Bodencreditanstalt in 1929, which transferred their losses onto its own balance sheet; and its industrial participations had been unprofitable for years. The 1931 announcement of a loss was the disclosure of a condition that had existed for a decade.

He also examines the international transmission and argues that the causal chain from Vienna to the German banking crisis and then to sterling's departure from gold is weaker than the standard account holds. Austria was small and its banking system was not deeply connected to Germany's, and the German crisis had its own domestic causes. Schubert's account is quantitative and archival and is the standard reference on the episode. It is a specialist work and assumes familiarity with interwar financial history.