Establishment of the central bank

The new Czechoslovak currency needed to be managed reliably, and for this purpose the classic central issuing bank was to be ignited. On April 14, 1920, the Act on the Stock Issuing Bank (the so-called Banking Act) was adopted. It determined in great detail the legal status of the bank, its management, the principles for issuing banknotes and the rules for their coverage. The basic task of the bank was to administer the Czechoslovak currency and, in connection with this, to operate certain credit and foreign exchange transactions precisely defined by law. Although the law also contained the bank's articles of association, the bank's administration, the Rules of Procedure of the Bank Board, state supervision, and the bank's accounting principles, it did not yet establish an issuing bank. The reason was the so far unstable economic, financial and monetary situation. The government was empowered to "set up a joint stock issue bank" at a time when economic preconditions would be given. This did not happen until March 1926 after abandoning deflationary policy and moving to a concept of monetary stabilization.