By Ben Quinn
31 July 2013
@ The Guardian
Official account of what many believe was British central bank’s most shameful episode revealed more than 70 years after event
Bank of England records detailing its involvement in the transfer and sale of gold stolen by Nazis after the invasion of Czechoslovakia were revealed online on Tuesday.
The gold had been deposited during the 1930s with the Bank of International Settlements (BIS), the so-called Central Banker’s bank, as the Czechoslovak government faced a growing threat from Germany.
The document goes on to detail how a request was made in March 1939 to transfer gold, then worth £5.6m, from a Czech National Bank account at the BIS to an account operated by Germany’s Reichsbank. Some £4m of the gold went to banks in the Netherlands and Belgium, while the rest was sold in London.
The document tells how the chancellor, Sir John Simon, had asked the governor of the bank, Montagu Norman, if it was holding any of the Czech gold in May 1939, two months after the Nazi invasion of Czechoslovakia.
It says: “The Governor in his reply (30th May) did not answer the question, but pointed out that the Bank held gold from time to time for the BIS and had no knowledge whether it was their own property or that of their customers. Hence, they could not say whether the gold was held for the National Bank of Czechoslovakia.” A further transaction was made that June – despite concerns from Simon being raised. On that occasion, there were sales of gold to the value of £440,000 and a £420,000 shipment to New York.
According to the documents: “This represented gold which had been shipped to London by the Reichsbank. This time, before acting, the Bank of England referred the matter to the Chancellor, who said that he would like the opinion of the Law Officers of the Crown.”
The BoE’s account, of what some regard as one of the Threadneedle Street’s darkest episodes, was written in 1950 and published online on Tuesday following the first stage of the digitalisation of the bank’s archive. It admits that the incident involving the Czech gold “still rankled” at the outbreak of the second world war “and for some time afterwards”.
“Outside the Bank and the government the Bank’s position has probably never been thoroughly appreciated and their action at the time was widely misunderstood,” it adds.
“On the BIS enquiring, however, what was causing delay and saying that inconvenience would be caused because of payments the next day, the Bank of England acted on the instructions without referring to the Law Officers, who, however subsequently upheld their action.”
Professor Neville Wylie, a historian at the University of Nottingham who has examined the period as part of research into Nazi Germany’s looted gold and the role of Britain and Switzerland, said on Tuesday that the Bank of England’s official history of the period was news to him and shed new light on a number of issues.
Wylie said that the attitude shown by the BoE in the history was consistent with what emerged from his own research into the British position towards Germany’s wartime financial activities, which he described as “wanting”.
He added: “The bank was wedded to a view of international finance and central bank co-operation. It was too concerned about maintaining London’s status as an international financial centre – and clung to the need to maintain sterling’s convertibility long after it was wise to continue with this policy.”
Sources at the Bank of England on Tuesday drew attention to a section in the official history, containing comments by the chancellor to the House of Commons in June 1939, when he stated that Law Officers had advised him that the British government was precluded by protocols from preventing the BoE from obeying instructions given to it by the BIS to transfer the gold.