The Italian Banking Scandal of 1893 That Toppled a Prime Minister and Revealed That the National Bank Had Been Printing Duplicate Banknotes for Six Years

The Banca Romana had been one of six Italian banks of issue since national unification in 1870. Each of the six was permitted to print Italian lira notes against its reserves; the total volume of issued currency was regulated by the Ministry of Finance. The arrangement was structurally fragile and depended on each bank maintaining honest reserve accounting.

By 1889 the Banca Romana was not maintaining honest reserve accounting.

The Roman real-estate boom

The capital had been moved from Florence to Rome in 1871 after the Italian Army’s capture of the city from the Papal States. The transfer of national administration drove a Roman real-estate boom from approximately 1880 onwards — speculation in development land, office construction, and apartment building. The Banca Romana under its director Bernardo Tanlongo had financed much of the speculation through unsecured construction loans.

When the boom collapsed in 1887–1888 the bank was left holding approximately 40 million lire (about $200 million in 2025 dollars) of bad construction loans. The legal route would have been a public recapitalisation or insolvency. Tanlongo chose instead to cover the losses by simply printing more banknotes.

He did not, however, print notes with new serial numbers — which would have been visible in the Treasury’s monthly reconciliation against the authorised issue ceiling. He printed duplicate notes with serial numbers identical to notes already in circulation. The Banca Romana issued approximately 60 million lire of duplicate-serial notes between 1887 and 1892 without the Treasury noticing.

The 1889 audit

A Ministry of Agriculture, Industry and Commerce audit of the six banks of issue in 1889 detected the discrepancy at the Banca Romana. The audit report was submitted to the responsible minister Giovanni Giolitti. Giolitti, who would become Prime Minister three years later in May 1892, did not act on the report. Instead the report was filed and the Banca Romana was permitted to continue operations.

The reasons for the suppression are documented in the subsequent 1893 Senate inquiry. They were political. The Banca Romana had been making personal loans to senior politicians — including, by 1893 contemporary report, at least a hundred members of the Italian Parliament — at interest rates below market and with extended or open-ended repayment schedules. Calling the bank to account would have exposed the personal-loan network and, very probably, brought down the entire liberal political establishment of post-unification Italy.

December 1892

The exposure came from a Republican parliamentary deputy from Sicily named Napoleone Colajanni, who had obtained a copy of the suppressed 1889 audit report from a former Ministry of Agriculture official. Colajanni delivered a four-hour speech in the Italian Chamber of Deputies on 20 December 1892, naming Tanlongo, naming the duplicate-banknote scheme, and naming Giolitti as the official who had suppressed the audit.

A Senate inquiry was opened the same week. Its report on 17 January 1893 confirmed Colajanni’s account in every particular.

What followed

Tanlongo was arrested on 18 January 1893. He was tried for fraud in Rome from June 1894 to July 1895 and acquitted on technical grounds — the court found that the duplicate-banknote scheme had not legally been forgery because the notes were physically genuine Banca Romana products. He died in 1896 awaiting a separate civil suit.

Giolitti’s government fell in November 1893 — eleven months after Colajanni’s speech, his survival having been prolonged by the slow pace of the Senate inquiry and his own administrative skill. He returned to power three more times in 1903–1905, 1906–1909, and 1911–1914, the longest cumulative tenure of any Italian prime minister before Mussolini. The Banca Romana scandal did not end his career.

The institutional response was the consolidation of five of the six banks of issue into the new Banca d’Italia, founded on 10 August 1893. The Bank of Italy retains its central-banking function today. The Banca Romana itself was wound down into the new institution. The duplicate notes were gradually retired from circulation through 1893–1895 by being substituted with new authorised issues.

The duplicate-banknote scheme had run for six years undetected. The political concealment of the audit had run for four years. The exposure had taken one parliamentary speech.