The Establishment and the first years
The Bank of Greece was established in accordance with the Geneva Protocol of 15 September 1927 and began operations on 15 May 1928.
The proposal to establish a central bank was put forward by the League of Nations in order to support the Greek government' s efforts at overcoming serious economic and budgetary problems.
Until the establishment of the Bank of Greece, central banking functions had been exercised by the major commercial bank, the National Bank of Greece, which had been founded in 1841 and had gradually acquired a monopoly over note issue. In the view of the League of Nations, the National Bank of Greece was involved in conflicts of interest and other incompatibilities in conducting a public policy function like the note issue alongside its commercial banking business.
Assets (mainly gold and government debt) and liabilities (the note issue and mainly government deposits) were transferred from the National Bank to the new central bank. The Bank of Greece began operations in May 1928 with a staff of 500 persons. Subsequently the Bank opened a number of branches and agencies serving mainly to supply currency locally as well as to disburse and / or to collect funds for the government accounts. On 4 April 1938 the headquarters of the Bank was moved to its present location.
The Geneva Protocol also determined the gold content of the drachma and specified that the drachma should join the Gold Standard. Indeed according to Article 4 of the original Statute of the Bank of Greece the first duty of the Bank shall be to ensure that the gold value of its notes remains stable. Although the gold standard had to be abandoned (September 1931), safeguarding gold and foreign exchange reserves remained a central concern of the Bank until the outbreak of World War II.