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 discredited both ministers and parliamentarians, in particular those of the Historical Left and was comparable to the Panama Canal Scandal that was shaking France at the time, threatening the constitutional order. 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.
Background
The Banca Romana was founded by French and Belgian investors in 1833 under the jurisdiction of Pope Gregory XVI. (Other sources mention 1835) After the fall of the short-lived Roman Republic in 1849, the bank was renamed Banca dello Stato Pontificio in 1850, and became the official bank of the Papal States, acquiring a monopoly of currency issue, deposit collection, and credit in the Papal States. Following the annexation of the Papal States to Italy in 1870, the bank retook its former name of Banca Romana. At the time, Italy had no central bank and in 1874 the Banca Romana was made one of the six banks authorised by the Italian government 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 during a 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 and a trade war with France followed, 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.
Under the direction of Ludovico Guerrini (1870–81) the bank had been managed prudently and its banknote circulation had remained within the legal limits. However, his successor as governor of the Banca Romana, Bernardo Tanlongo, was a peculiar man, semi-literate but 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 Roman Republic in 1849, he made his career in the bank in the Papal State, providing illicit entertainment to Vatican officials. Tanlongo remained at his post in the Banca Romana after the Italian unification and was promoted governor in 1881. Over the years, Tanlongo had built an influential network through strong personal connections with Roman aristocrats and businessmen, freemasons and Jesuit clerics, top government officials and industrialists, including the Royal Family. He was their agent in real estate speculations, and subsequently started to speculate on his own account. He had a remarkable ability to secure friendships and protection by providing loans to cover up secrets.
Government inspection
In 1889, three Turin banks heavily involved in financing speculative building in Rome suspended payments. The note-issuing banks were persuaded by the government to bail out other banks in order to avoid a major disaster.Clark, Modern Italy, pp. 119–22 They were allowed to issue bank notes in excess of their reserves and legal limits in an attempt to steer clear of economic recession. However, this caused them to become entangled in the crisis.
In June 1889 inspections of the Banca Romana by a government commission revealed serious irregularities in its administration and accounts and that 91 percent of the assets of the bank were illiquid. Moreover, the bank's directors had committed a criminal offence by permitting an additional number of banknotes with duplicate numbering to be printed. The Banca Romana had loaned large sums to property developers but was left with huge liabilities when the real estate bubble collapsed in 1887. One of the government reports concluded: