The 1917 Bolshevik Seizure of Petrograd’s Banks, War Communism, and the Rise of Gosbank

On the morning of December 14 (December 27, New Style), 1917, detachments of armed Bolshevik Red Guards, sailors, and Latvian riflemen fanned out along Nevsky Prospekt and the central financial district of Petrograd to occupy every private joint-stock commercial bank in the Russian capital. That evening, at the urging of Vladimir Lenin, the All-Russian Central Executive Committee promulgated the Decree on the Nationalization of Banks alongside the Decree on Safe Deposit Boxes, declaring banking a state monopoly, merging all private credit institutions into the State Bank, and ordering the confiscation of private gold coin and bullion stored in bank vaults. Over the next fifteen years, Russia became the laboratory for the most radical banking experiment of the twentieth century: first the January 1920 liquidation of the People’s Bank of the RSFSR during War Communism’s attempt to construct a moneyless economy, then the October 1921 restoration of central banking under the State Bank of the RSFSR (Gosbank) led by Aron Scheinman and Finance Commissar Grigory Sokolnikov with the gold-backed chervonets, and finally the 1930–1932 Soviet Credit Reform that abolished inter-enterprise commercial credit to forge the Stalinist monobank. ^[1]

The Paris Commune Lesson and the Siege of the State Bank (November 1917)#

In the months preceding the October Revolution of October 25 (November 7), 1917, Vladimir Lenin repeatedly argued in his economic pamphlets that Karl Marx’s critique of the 1871 Paris Commune held a vital operational lesson for revolutionary socialists: the Communards had fatally hesitated to expropriate the Banque de France, allowing their enemies to finance counterrevolution. Furthermore, Lenin viewed Russia’s highly concentrated commercial banking network—which was closely intertwined with Petrograd’s metallurgical, coal, oil, and railway syndicates as well as French, British, and German capital—as the ready-made bookkeeping apparatus through which a revolutionary state could monitor and direct industrial production. ^[2]

When the Bolsheviks seized power in Petrograd on October 25 (November 7), 1917, they immediately dispatched a detachment to occupy the headquarters of the State Bank of the Russian Empire on Ekaterininsky Canal. However, the senior officials and civil servants of the State Bank and the Ministry of Finance launched a coordinated strike, refusing to honor unbudgeted payment orders signed by the Council of People’s Commissars (Sovnarkom) and secretly channeling cash to anti-Bolshevik strike committees. Only after Valerian Obolensky (Osinsky) and Vyacheslav Menzhinsky threatened dismissal and brought armed guards to force open the vaults in mid-November 1917 did the Bolsheviks secure physical command over the central bank’s note-printing plates and cash reserves. ^[3]

Even then, Petrograd’s twenty-eight powerful private joint-stock commercial banks—led by the Russo-Asiatic Bank (the largest private bank in the Empire and holder of the strategic shares of the Chinese Eastern Railway), the Petrograd International Commercial Bank, the Azov-Don Commercial Bank, the Russian Bank for Foreign Trade, and the Siberian Commercial Bank—remained open. Initially attempting a compromise agreement to supervise private bank disbursements, Bolshevik commissars discovered that wealthy depositors, industrialists, and bank directors were discounting bills to fund anti-Bolshevik resistance, transferring securities abroad, and withdrawing millions of rubles in cash.

December 14 (27), 1917: Red Guards Occupy the Commercial Banks and Vaults#

Prepared in strict secrecy by Lenin, Sokolnikov, and Menzhinsky, the military seizure of the private banking system began at dawn on Thursday, December 14 (27), 1917. By late morning, armed Red Guard squads had occupied the head offices and branches of the Russo-Asiatic Bank, the Azov-Don Bank, the Petrograd International Commercial Bank, and every other private bank and mutual credit society in Petrograd, arresting several prominent bank directors and sealing the strongrooms and telegraph lines. ^[4]

That evening, Lenin addressed the All-Russian Central Executive Committee (VTsIK) to demand immediate passage of two linked decrees. The first, the Decree on the Nationalization of Banks, declared that “in the interests of a proper organization of the national economy, a thorough eradication of bank speculation, and a complete emancipation of the toiling masses from exploitation by the banking capitalists,” banking was henceforth a state monopoly. All existing private joint-stock banks and banking houses were merged into the State Bank, which assumed their assets and liabilities under temporary management by the State Bank board. A subsequent Sovnarkom decree of January 26 (February 8), 1918, went further, confiscating all joint-stock share capital of the former private banks in favor of the State Bank and annulling all bank share certificates without compensation. ^[5]

The second measure enacted on December 14 (27), 1917—the Decree on Safe Deposit Boxes—targeted the private wealth of the Russian nobility and bourgeoisie stored inside bank steel compartments. All cash found inside safe deposit boxes had to be deposited into a traceable current account at the State Bank (where withdrawals were strictly rationed to small living allowances), while all gold in coin or bullion was ordered confiscated outright and handed over to the State Gold Reserve. Boxholders were given three days upon public notice to appear in person with their keys before investigative commissions; the boxes of anyone who failed to appear were broken open by locksmiths and their entire contents—including jewelry, foreign currency, bearer bonds, and family heirlooms—seized as state property. ^[6]

War Communism and the 1920 Abolition of the People’s Bank#

Over 1918 and 1919, the Bolshevik government consolidated the nationalized commercial bank branches and the former State Bank into a single institution renamed the People’s Bank of the Russian Socialist Federative Soviet Republic (Narodny Bank RSFSR), subordinated to the People’s Commissariat of Finance (Narkomfin). At the same time, specialized mortgage banks—beginning with the Nobles’ Land Bank and the Peasants’ Land Bank—were liquidated by decree. ^[7]

As the Russian Civil War escalated into the regime of War Communism (1918–1921), private trade was outlawed, industrial enterprises were nationalized and supplied through centralized physical rationing, and grain was requisitioned from the peasantry by force. With Narkomfin printing unbacked paper currency notes (sovznaki) around the clock to cover state expenditures, hyperinflation reduced the ruble to a tiny fraction of its prewar purchasing power. Many Bolshevik theorists—such as Yevgeni Preobrazhensky and Nikolai Bukharin—celebrated this monetary collapse as the imminent transition to a communist society free of money and banks. ^[8]

Accepting the premise that state enterprises now settled accounts through direct budgetary book entries rather than banking credit, the Council of People’s Commissars issued a decree on January 19, 1920, formally abolishing the People’s Bank of the RSFSR altogether. Its remaining bookkeeping offices were folded into the Central Budget and Accounts Administration of Narkomfin. For nearly twenty-one months in 1920 and 1921, Soviet Russia functioned as a major modern state without a single operating bank. ^[9]

The 1921 Creation of Gosbank, the Chervonets, and the 1930–1932 Monobank Reform#

By spring 1921, catastrophic agricultural collapse, urban famine, and the Kronstadt rebellion forced Lenin to abandon War Communism and proclaim the New Economic Policy (NEP). Legalizing private retail trade, replacing grain requisitioning with a tax in kind, and requiring state industrial trusts to operate on commercial cost-accounting principles (khozraschet) immediately demanded the restoration of a functioning credit system and a stable currency.

On October 4–12, 1921, the All-Russian Central Executive Committee decreed the establishment of the State Bank of the RSFSR—renamed the State Bank of the USSR (Gosbank) in 1923—which opened for business on November 16, 1921, under Chairman Aron Scheinman and People’s Commissar of Finance Grigory Sokolnikov. To halt hyperinflation without starving industry of working capital, Sokolnikov and Scheinman executed the 1922–1924 Soviet monetary reform. Under a decree of October 11, 1922, Gosbank was granted the right to issue a new, parallel bank note: the chervonets, set equal to ten prewar gold rubles (containing 7.74234 grams of fine gold) and backed by at least 25 percent in gold, precious metals, and stable foreign currencies, with the remaining 75 percent covered by short-term commercial bills of exchange and easily marketable goods. In spring 1924, once the hard chervonets had stabilized prices and driven out the depreciating sovznaki, the state redeemed the old paper tokens at a rate of 50 billion 1918 rubles (50,000 1923 rubles) to one new gold treasury ruble.

Throughout the mid-1920s, Gosbank operated alongside a pluralistic tier of specialized and cooperative credit institutions—including the Industrial Bank (Prombank), the Bank for Foreign Trade (Vneshtorgbank), the Agricultural Bank (Selkhozbank), and municipal banks—discounting commercial bills of exchange traded directly between state trusts. Yet when Joseph Stalin launched the First Five-Year Plan and forced collectivization in 1928–1929, decentralized commercial credit allowed enterprises to evade central planning priorities.

Through the landmark Soviet Credit Reform enacted on January 30, 1930, and refined by supplementary decrees in 1931 and 1932, the Soviet government permanently outlawed direct inter-enterprise commercial credit and bills of exchange. State enterprises were prohibited from extending trade credit to one another; instead, all short-term working-capital loans and clearing payments across the entire economy had to pass directly through accounts at Gosbank, while long-term capital investment grants were segregated into four specialized investment banks (led by Prombank, later Stroibank). By subordinating every enterprise bank account to physical plan fulfillment—a mechanism known as “control by the ruble” (kontrol’ rublem)—the 1930–1932 reform completed the institutional journey begun by the Red Guards in December 1917, establishing the classic Soviet monobank system that endured until the late 1980s.

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