Varioki, a well-respected banker in Bachava, deeply values his reputation. After all, a good reputation is essential for attracting customers to deposit their money and conduct transactions at his bank. Varioki's primary goal is the development and growth of the small bank that his father entrusted to him. Recently, however, his bank, known as the Romanian Development Bank, has encountered some trouble.
The source of the problem is the State Bank of Russia. Varioki's bank had been profiting by taking low-interest loans from the Russian bank and then lending this money to local residents in need at higher interest rates. This arrangement accounted for 60% of the Romanian Development Bank's profits. The State Bank of Russia wasn't acting out of charity; rather, foreign banks like it needed local cooperation to expand their business effectively. This model of operation was common among small banks in Romania, which relied on local markets for growth due to their limited capital.
However, the recent introduction of the Finance Act has heightened tensions between foreign banks and the government, making it risky for small banks like Varioki's to take sides. On one hand, there were the foreign banks that provided essential funding, and on the other, the state agencies that regulated their operations. Choosing the wrong side could spell disaster for these small banks.
Now, Varioki felt powerless, his bank's capital too weak to offer any resistance. He anticipated further pressures to conform but was determined not to yield until absolutely necessary. His stance was not born out of national pride but from a sheer inability to afford failure.
Across the country, other small banks were also feeling the squeeze. Most were either capitulating immediately or resisting as long as possible, much like Varioki, driven by similar concerns.
In the royal palace, King Carol and his son, the Crown Prince Edel, were briefed by their secret informant, Milok. "The four major foreign banks are pressuring the local banks to align with them. Jiurjiu City Bank and Iasi Farmers Bank have already succumbed, but many small banks are still undecided. They may not hold out much longer," Milok reported. He also mentioned that many were closely monitoring both the palace and the prime minister's residence, indicating the gravity of the situation. After delivering his report, Milok discreetly exited.
King Carol, visibly upset by the news, was reassured by Edel. "Father, don't let these vampires disturb you. They will soon witness the strength of Romania," Edel promised confidently.
King Carol appreciated his son's capabilities and foresight, though he sometimes found him a bit too lenient. He believed, however, that with a few more years of experience, Edel would be ready to assume the mantle of kingship.
"The American loan will soon arrive, and that will catch them off guard," Edel continued, unaware of the rapid calculations his father was making about their next moves.
"Edel, my child, I trust you with this matter. Make sure we come out of this victoriously," the king stated, placing his faith in the crown prince.
"Yes, father. I will not let them succeed. You will have your satisfactory result," Edel assured him.
King Carol then summoned the Prime Minister to further discuss their strategy. The importance of the situation meant that no detail could be overlooked.
On the third night following this discussion, a heavily guarded train arrived at Bucharest Railway Station. Chief Adrian and the Crown Prince's Guard, Carust, were there to meet it. Brockley, a senior manager from Morgan Bank in Europe, was the first to disembark. "Greetings, gentlemen. I'm Brockley. I look forward to making your acquaintance memorable," he said upon meeting them.
"Let's proceed," Carust suggested, signaling the guards to inspect the cargo. Brockley confirmed, "It's all in pounds, as requested."
The counting took all night, but by dawn, it was confirmed that the amount was correct. Carust then directed the transportation of the funds to the vault.
After ensuring Brockley was accommodated for rest, Adrian returned to the palace to inform the king and Edel that the transaction had proceeded without issue. The king, in turn, instructed him to summon Prime Minister Sturley.
Following a comprehensive discussion, the government decided to enforce the financial bill strictly. All banks were required to deposit their reserves with the Romanian Reserve Bank within a month, or face suspension of their operations until compliance.
The Romanian Reserve Bank, a joint venture between the royal family and the government, was now central to the nation's financial strategy. The royal family had invested significantly, holding a majority stake, and the government had contributed as well, ensuring that the bank could fulfill its roles in policy formulation, banking supervision, financial stability, and service provision, including issuing the national currency, the leu.
"Now the Romanian government seems to have to implement the bill, and we are not afraid of them. It is time to show them a little bit more," declared Tiromotov, the first to speak in the dimly lit room. The issue at hand had the greatest impact on him, primarily because the Russian economy was in dire straits. A substantial amount of money had already been withdrawn from the National Bank of Russia to salvage the domestic economy. If the new financial bill were implemented, it would necessitate mobilizing additional funds from the headquarters to maintain normal financial operations. This left Tiromotov with no choice but to act.
"How much money do we all have to operate with now?" inquired Ellison, the head of the Bank of England in Romania, addressing the critical issue at hand.
"Paris National Bank has 2 million pounds in Romania," one banker chimed in.
"The German Reichs Bank has 3.1 million pounds," another added.
Finally, Tirotov, with a sense of urgency, reported, "Russian National Bank has 1.7 million pounds."
Upon hearing that the State Bank of Russia was operating with such limited funds, all eyes turned to Tirotov. Unfazed by the scrutiny, he bluntly added, "If necessary, we can mobilize an additional 200 pounds from the country." His comment, however, was met with silence, as it sounded almost childishly insufficient.
Ellison quickly did the math in his head. Adding 2.6 million pounds from the Bank of England, the total came to 9.4 million pounds. It should be sufficient to launch a financial turmoil against Romania. With this in mind, he turned to reassure Tiromotov, "We believe in you, Tiromotov." After comforting the Russian, he continued, "Now, we need all our banks to take action. First, we stop lending to the smaller banks that don't obey us. Except for the exceptional assets, we can sell everything else to suppress the Romanian national debt and loans to Romanian companies. In short, to suppress the Romanian economy, we must make them succumb; otherwise, I believe that soon, the head office will send someone to replace both you and me."
The men present were no novices in the world of finance. They understood the gravity of the situation without needing further detailed explanations. After the meeting, as they returned to their respective banks, the impact of their decisions began to ripple through the Romanian economy.
Warioch, a local banker, was already grappling with severe headaches due to the financial strain, and the latest moves by the foreign banks exacerbated his woes. That morning, he learned that foreign banks had announced a reduction in their external loans due to the Financial Act, a decision that threatened to break his capital chain. Feeling utterly drained, he contemplated selling his bank.
"Father, I visited Uncle Matos's house. Their factory can't secure a loan now, and they can't help us," his son brought home more bad news, further crushing any hope Warioch had harbored.
The following day, Warioch visited the branch of the State Bank of Russia in Bachava. Upon arrival, he noticed Udel, another local banker, had just left the bank. Feeling a surge of anxiety, Warioch composed himself and approached the front desk.
"Hello, I'm looking for President Millesiva. Is he available?" Warioch inquired politely.
"The president is currently busy. You'll need to wait," the receptionist informed him.
"Okay, I'll wait over here, thank you," Warioch replied, taking a seat nearby.
After some time, Warioch noticed an opportunity to eavesdrop on a conversation coming from the president's office. He cautiously approached and listened in.
"Mr. Udel, I've told you, the bank can't assist you right now," President Millesiva's voice was firm.
"I understand, but perhaps, for the sake of our long-standing friendship, you could offer some advice?" Udel pleaded.
After a brief pause, Millesiva responded, "Honestly, Udel, don't even think about borrowing from foreign banks at this point. Your only option is to try domestic banks and the nobility."
"Is there truly no other way? I am willing to remain a loyal friend to the State Bank of Russia," Udel persisted, his voice tinged with desperation.
"Udel, haven't you realized? The bank doesn't need friends right now. Until this financial war is over, you won't get the funds, so it's pointless to come to me," Millesiva replied coldly.
Hearing this, Warioch felt his last sliver of hope vanish. He didn't bother listening any further. Heartbroken and lost in thought, he left the bank and instructed his coachman in a hoarse voice, "Send me home."
As the carriage slowly made its way back, Warioch was overwhelmed with despair. He envisioned the day the public would learn of his bankruptcy and feared they would storm his house to claim whatever they could to recoup their losses. The thought of his family's reputation being tarnished was unbearable, and he considered ending his life as a means of escape.
Meanwhile, Edel was discussing the dire situation with the Prime Minister. "Foreign banks are pushing our local small banks towards bankruptcy, which could decimate many of them. Most of these banks hold the savings of ordinary people, and this could lead to political instability. It's unacceptable. These foreign banks know exactly where to strike us," Edel explained.
"But, Your Highness, the reserve funds are all tied up in combating them in the national debt and currency markets. There's nothing left," the Prime Minister replied, highlighting the financial constraints.
Edel, realizing the gravity of the situation and the opportunity it presented, responded, "Very well, Prime Minister, I will mobilize funds to support the struggling banks."
The next day, all Romanian newspapers heralded the news that the royal family would use 4 million pounds to aid the domestic banks. This initiative was met with widespread admiration within the banking community, though the banks that accepted the royal family's help would have to agree to a merger and be integrated into the newly formed Industrial and Commercial Bank of Romania.
For Warioch, who was on the brink of bankruptcy, this news was a lifeline. It meant that his family could still maintain a semblance of dignity and a decent life. This was now the only viable option for small banks facing insolvency.
The four major foreign banks were evidently pleased with the recent maneuvers by the royal family. These strategies had effectively depleted Romania's capital reserves, exerting even more pressure on the country's national debt and currency. The foreign exchange and national debt markets were in turmoil.
Edel, reclining in his chair with his head propped up by his left hand, listened with a lackadaisical air to Carust's report. "We have now injected 6 million pounds into the market. I believe the investment from the four foreign banks will not be less than ours. This financial war is nearing its conclusion. Prime Minister Sturley is inquiring about our next move."
Thinking of the stubborn old man who hadn't rested properly for three days due to this financial conflict, Edel straightened up, his expression turning serious. "Deploy all our remaining funds into the market and crush them in one fell swoop. For the foreign banks that have caused this chaos, the outcome..." Edel paused, weighing his words, then continued with a sigh, "As long as they agree to comply with the bill, we will end this."
Carust observed the transformation in Edel from a position of complete control to one of helplessness. His body trembled involuntarily as he responded, "I will relay this to the Prime Minister immediately." The chief guard exited the room, closing the door softly behind him. Just before the door shut, a muffled curse escaped from the room, "These damn powers."
At that moment, the four major foreign investors also sensed that something was amiss. Romania's funds seemed excessively abundant, prompting the four executives to reconvene to brainstorm a solution.
"Where did these Romanians get the money?" Tiromotov entered the room in disarray, his voice preceding him. Upon entering, he noticed that his three colleagues looked no better off. Mondric's eyes were bloodshot, his hair unkempt for days. Ellison, typically the epitome of an English gentleman, was clad in soiled attire. Cromander appeared relatively normal, though his shoes were mismatched.
"I asked friends and colleagues yesterday to investigate the three major financial markets in Europe," Mondric said, his eyes red from fatigue.
Tiromotov frowned, clearly dissatisfied with the response. "We need funds now. Without sufficient funds, we've already lost half the battle," Ellison stated hoarsely.
"The only option left is to request additional support from our headquarters. If we can secure even half of the current funds, we might stand a chance," Tiromotov added, his tone desperate.
A heavy silence fell over the room. They all knew that if reaching out to the headquarters for help was a viable option, it would have been exercised much earlier. Given the current financial crisis, it was unlikely that the headquarters could muster the resources to bail them out in time.
"Let's be transparent about how much money we can actually procure from the headquarters; there's no point in hiding it now. If we lose, we might as well go home. I'll start with my figure: 850,000 pounds," Ellison declared resolutely.
"850,000 pounds," echoed one.
"900,000 pounds," added another.
"800,000 pounds," came the last reply.
Bolstered by the pledged support from their respective headquarters, Ellison laid out the plan. "Request the funds once you return. They should arrive in two to three days. For now, let's stabilize our position in the market, and when the funds arrive, we'll continue our suppression."
As they were about to leave, the door burst open. Ellison's secretary entered, breathless and sweating. "The Romanian government is aggressively intervening in the market, and we're on the verge of collapse."
Upon hearing this alarming news, they hurried to the Bucharest Stock Exchange. Arriving there, they found the atmosphere tense; traders and investors were visibly anxious. Ellison and his team encountered his deputy in the trading room, who was frantically directing traders to counter the Romanian government's moves.
"At around 1 PM today, the Romanian government flooded the market with a substantial amount of money, bolstering the foreign exchange and national debt markets we've been suppressing. We estimate their injection to be around 6 million pounds, while we have less than 4 million at our disposal. The market is on edge; what should we do?" the deputy explained rapidly.
Ellison, his brow furrowed deeply, listened and then turned to his colleagues. "We have no choice but to go all in; we can't just sit back and wait for retirement."
"Yes," agreed Tiromotov and Mondric. Only Cromander seemed conflicted, burdened by the responsibility from his headquarters and feeling the despair akin to that of future stockholders watching their stocks lock up, unable to articulate his distress.
Noticing Cromander's hesitation, Ellison approached him, his voice gentle yet persuasive. "Cromander, it doesn't matter who we are or who caused the losses. If we don't fight back now, none of us will have a future."
Bolstered by Ellison's words, he turned to the traders. "Give me all the bills. Let's suppress them now." With that, a fierce battle ensued on the exchange floor. Everyone was fixated on the fluctuations in the national debt and exchange rates, each trying to anticipate the market's next move.
As the trading time dwindled, with just 30 minutes left, the Romanian government threw an additional 3 million pounds into the fray. This sudden influx overwhelmed the foreign banks, which struggled to mount any effective resistance. Ellison and his colleagues were left reeling. Small investors, who had been closely monitoring the market, seized the opportunity to follow suit. Fortunately, the session ended with a modest rise, sparing the foreign banks from a complete rout.
Reflecting on the day's events, Ellison and his team realized that the Romanian government had intentionally avoided a total annihilation; otherwise, they would have been forced to capitulate much earlier. The next day, the four major foreign banks publicly declared their compliance with the Romanian Finance Act, agreeing to transfer the required deposits to the Reserve Bank within three days.
As the market reopened, transactions proceeded smoothly, culminating in a slight uptick. Over the following days, Romania capitalized on this stability. The Reserve Bank spearheaded the consolidation of smaller domestic banks into two major entities: the Romanian Construction Bank and the Romanian Agricultural Bank. Along with the already integrated Industrial and Commercial Bank, these institutions, now under the control of the government and the royal family, began to dominate the financial sector. Smaller banks that resisted the merger gradually faded from the scene, leaving a transformed financial landscape in their wake.