From world player to unremarkable member of Euronext : the evolution of the "Brussels Stock Exchange " during the 20th century1

Hans Willems

University of Antwerp 0. Introduction On the first of July 2006, the Euronext 100, the index based on the 100 most liquid stocks listed on Euronext (the Pan-European stock exchange created by the merger of the Stock Exchanges of Amsterdam, Paris, Brussels, and Lisbon), consisted of only 10 stocks, originally introduced at Euronext Brussels2. These stocks represent only 6.47% of the Euronext 100. Euronext Number of stocks Weight Paris 63 67.31 % Amsterdam 21 23.93 % Brussels 10 6.47 % Lisbon 6 2.32% Table 1: Situation on 03/07/2006 (source : Euronext)

In the year 2000, the total market cap of the Brussels Stock Exchange represented only 0.7% of the world’s market cap. None of these numbers are very impressive and one may well ask if it is really worth the effort to devote any attention to the Brussels Stock Exchange at all. As is often the case, however, the importance of the Brussels Stock Exchange is not to be found in the present, but rather happens to be situated in its glorious past as one of Europe’s leading stock exchanges. It was the French statistician Alfred Neymarck who stated that the Brussels Stock Exchange was amongst the key-players in the matter of the number of stocks listed and their significance in relation with the GDP3. Country (and Number Value of corporate equities Average Stock Exchange) of listed at market prices listed companies Total Per capita Ratio to company GDP size ($M) ($) ($M) Belgium (Brussels) 163 723 108 65 1.2

1 Unless otherwise indicated, all the data provided in this paper are expressed in BEF (Belgian Franks), for a reconversion table to USD (US Dollar), see annex 3. 2 The base value of the Euronext 100 Index is 1000 as per December 31, 1999. The Euronext 100 Index ground rules ensure that the constituents of the index may be seen as the largest and most liquid stocks traded on Euronext. Each stock undergoes a screening process whereby only liquid stocks are included in the selection of the investment world. Each stock must reach a trade velocity ratio of 20% per annum. This means that each stock must show turnover in more than 20% of its issued shares over the course of the current one-year analysis period. The stocks in the Euronext 100 Index represent 80% (Euro 1.177 bln) of the total market capitalisation of the investment world (Euro 1.477 bln) as per 31 December 2002. (EURONEXT 100, Product information, Euronext, Amsterdam, 2006, www.euronext.com/trader/index) 3 NEYMARK A., Statistique internationale des valeurs mobilières, in: Congrès international des valeurs mobilières, documents, mémoires et notes monographies (International statistics effects, documents, memorandums and monographs), Paris, 1900, pp.1-19.

UK (London) 744 4,300 104 49 5.8 France (Paris) 430 2,540 65 40 4.2 Victoria (Melbourne) 130 231 62** 25** 1.8 Russia (all exchanges) 1,557 Austria-Hungary (Vienna) after 925 20 21 4.6 USA (New York) 123 2,860 37 15 14.9 Germany (Berlin) 719 1,110 20 14 2.2 Italy (all exchanges) 119 360 11 14 3.0 Japan (all exchanges) after 162 4 13 ca.0.44 Total 2,428 14,551 * * 5.0 *weighted average Not only Neymarck, but also Bairoch listed Belgium in 1860 just after the UK when he rated the most industrialised countries as based on the industrial output per capita4. 1860 1913 1953 1980 1. UK 64 1. USA 126 1. USA 354 1. USA 629 2. Belgium 28 2. UK 115 2. UK 210 2. Sweden 409 3. Switzerland 26 3. Belgium 88 3. Canada 185 3. West-Germany 395 4. USA 21 4. Switzerland 87 4. Switzerland 167 ….. 5. France 20 5. Germany 85 5. Sweden 163 12. UK 325 6. Germany 15 6. Sweden 67 … …. 7. Sweden 15 7. France 59 10. Belgium 117 14. Belgium 316 … … … 15. France 277 11. Netherlands 11 12. Netherlands 28 14. Netherlands 96 … 15. France 95 20. Netherlands 245 Table 2 : List of the most important industrialised countries (industrial output per capita) (UK, 1900=100)5

This paper will go back to the glory days of the Brussels Stock Exchange and will focus on the functioning and the importance of the Brussels Stock Exchange.

4 BAIROCH P., International industrialisation levels from 1750 to 1980, in : The Journal of European Economic History, 1982, 11, pp.269-312. 5 Ibidem, p.286.

In a short introduction we describe the historical development of the stock exchanges in Belgium and the constitution of the Brussels Stock Exchange. The next chapter will explain the institutional changes the Belgian stock exchanges went through during the 19th century and the implications of these changes on the position of the Brussels exchange. We continue with the evolution during the 20th century and will conclude with a short chapter in which we provide some numbers to give an idea of the importance and performance of the Brussels Stock Exchange.

1. The Stock Exchange has “Belgian” roots In medieval times, the Italian merchants played a prominent role in international commercial

transactions. Because of their geographic position, they acted as the middlemen between the East and the West. The distribution of the goods in the west took place over land and in the “foires du Champagne”, the ((annual) fairs of Troyes, Provins, Bar-sur-Aube and Lagny, amongst others ) in the north of France. During the 12th century, these fairs outgrew their regional character and assumed more and more of an international status6. Flemish tradesmen in cloth and fabrics visited those fairs to establish contacts with their Italian counterparts who brought with them oriental spices. The count of Champagne introduced several measures to ensure the smooth workings of the fairs7. These measures ensured that a special legal status was accorded to the markets, whereby the

safety and security of the traders was assured and even guaranteed. Furthermore, two ‘fair custodians” were appointed that were charged with supervising correct proceedings during market activities and with checking the effective payments of the transactions that had been concluded between the merchants. This system established the basis of the subsequent market supervision and control8.

During the same period, a parallel network of annual fairs had been developed in the

Flanders, the most important of these being Rijsel, Ypres, and Bruges. As of 1200, Bruges held an annual market, which, nonetheless, would quickly be relegated to a subordinate role as soon as the city began its development and evolution towards a status of being one of the major international trading centres, and after a permanent market came to establish itself in Bruges9. Bruges lay at the crossroads of the German trading routes from the north and the Italian routes from the south. The Bruges people did not act so much as traders per se as they functioned as intermediaries on behalf of the many international merchants that came to the city. In this aspect, the tavern and inn keepers played a central role. One of the parties that operated such a tavern was the family “Van der Buerse” (literally, the family “of the stock exchange” (the bourse). They operated the inn “Ter Buerse” (At the Bourse), and in the course of the 14th century , the

6 VAN DER WEE H., Het Europese bankwezen tijdens de middeleeuwen en nieuwe tijd (476-1789) (The European banking system during the Middle Ages and modern times) , Italië’s financiële hegemonie tijdens de late middeleeuwen (Italy’s financial hegemony during the late Middle Ages), in : VAN DER WEE H.(ed.), De Bank in Europa : 25 eeuwen bankgeschiedenis (The Bank in Europe: twenty-five centuries of banking history)), Antwerpen, 1991, pp.71-73. 7 VAN HOUTTE J.A., Van ruilverkeer tot wereldhandel (From bartering to world trade), Antwerpen, 1944, p. 70. 8 VAN DE WIELE J., Jaarmarkten : handelscentra van de agrarische maatschappij (Annual Fairs: trading centres of the agrarian society) , in : VAN DE WIELE J. & DE HERDT R., De markt : economisch forum en kloppend hart van agrarische, stedelijke en industriële maatschappijen (The market: economic forum and the heartbeat of agrarian, urban, and industrial communities) , Gent, 1988, pp.9-11. 9 SPUFFORD P., From Antwerp to London. The decline of financial centres in Europe, Wassenaar, 2005, p.11.

square situated in front of the inn would increasingly come to function as the Bruges commercial and financial centre par excellence.10. “THERE EXISTS A SQUARE IN BRUGES WHERE MERCHANTS GATHER; THIS IS CALLED THE BOURSE. IN THAT LOCATION, SPANIARDS, ITALIANS, ENGLISH, GERMANS, EASTERN TRADERS, IN SHORT, ALL NATIONS, ARE GATHERING THERE TOGETHER”11

Already as early as 1370, quotations for exchange rates were established in Bruges and, around 1400, there existed an organised and permanent money market featuring such price quotations12. The square in front of the inn where the (international) merchants gathered to make their deals was widely known as the “Bourse”, a term that henceforth would become the general name for such transactions. The first regulations that served to structure the occupation of broker also stem from the same period. The certificate that Mary of Burgundy issues on 21 April 1477 will remain for more than 3 centuries the standard that defined the occupation of broker13. In this way, not only did medieval Bruges signify the place of origin for the word “bourse”, but also the first regulations of the “Belgian” exchange business date back to that period14. After Bruges had been forced to cede its role in the international trade to the city of Antwerp, this likewise signalled the end of the Bruges exchange. Antwerp came forward as the great proponent and supporter of free trade and wanted nothing to do with the many rules and regulations that dominated the Bruges trade. The flowering in the volume of commercial and financial transactions that accompanied this development made Antwerp by the end of the 15th century and during the 16th century the new centre for international trade in the West15. In this new financial centre, Antwerp, the stock exchange trade would bloom and it was to be 10 DE CLERCQ G., Brugge als financiële markt in de 14de-15de eeuw (Bruges as a financial market during the 14 th and 15th centuries): DE CLERCQ G., A la bourse (At the exchange), Brugge, 1992, p.17. 11 Quotation from the travel diary of Hieronymus Muenzer, a German physician from Neurenberg, March 1495. 12 VANDEWALLE A., Een Europees handelscentrum 1100-1480 (A European trading centre 1100 – 1480), in : RYCKAERT M., VANDEWALLE A., Brugge : de geschiedenis van een Europese stad (Bruges, the history of a European city), Tielt, 1999, pp.64-65. 13 LIMAUGE E., La bourse et les agents de change. Etudes suivies d’un aperçu sur la lettre de change et d’une notice sur toutes les valeurs cotées à la bourse de Bruxelles (The bourse and the stock brokers. Studies with an overview on the letter of exchange and a record of all of the prices quoted on the Brussels exchange) , Bruxelles, 1864, p.X. 14 While it is indeed generally accepted that the term “bourse” hearkens back to the occasion of these gatherings, researchers are nonetheless of a divided opinion whether one may justifiably label these meetings as true exchange gatherings. In the eyes of Van Werveke, an historian specialising in the history of Bruges and Ghent, this is not at all a correct interpretation. Resorting to the studies done by the German Ehrenberg, he argued that the “exchange” meetings in Bruges were almost exclusively frequented by Italian merchants and that merchants of other nationalities gathered somewhere else in Bruges. According to Van Werveke, one is only justified in talking about a true exchange when all nationalities select the same location for transacting their business, a condition that would wholly be fulfilled in Antwerp only around 1530. Nevertheless, the study of Maréchal shows that around 1434 also Castilians arrived in Bruges to establish themselves in the vicinity of the inn and the square and were joined in 1495 by German traders (Neurenberg, Frankfurt, Augsburg) (VAN WERVEKE H., Les origines des bourses commerciales Faut-il abandonner la thèse Guichardin-Ehrenberg( The origins of the commercial exchanges. Is it necessary to abandon the thesis of Guichardin-Ehrenberg) , in : Belgisch Tijdschrift voor Filologie en Geschiedenis, 15, 1936, pp.133-141 and MARECHAL J., Bijdrage tot de geschiedenis van het bankwezen te Brugge (Contribution to the history of banking in Bruges)., Brugge, s.d., p.65). 15 VAN UYTVEN R., De triomf van Antwerpen en de grote steden (The triumph of Antwerp and the major cities ), in : VAN UYTVEN R., BRUNEEL C. (ed.), Geschiedenis van Brabant van Hertogdom tot heden (History of Brabant from Duchy to the present time), Leuven, 2004, pp.243-244.

there that the first building specifically designed for conducting exchange transactions would be constructed16. As of 1487, the merchants were assigned their permanent meeting place for conducting their business right in the centre of the city. This location became known as the “Borsse”, or the “Bourse = the Exchange”. Since a large number of international trading houses would establish offices in Antwerp, this location soon became much too small and, in 1531, the timber construction was replaced by a masonry building17. The new exchange soon became a popular meeting place amongst traders and bankers. It was, in the first place, the location where, through the intermediation of the brokers, the financial aspects of trading were completed and where the actual Antwerp money market was held18. A guaranteed liquidity supporting the bonds and drafts and the commercial securities to bearer was an absolute necessity in order to promote smooth and safe commerce. It was furthermore at the Antwerp exchange that the joint stock company came into being. A number of small traders wanted to spread the risk in a given project through their joint investment. This paved the way for the later major corporations limited by shares. At the time of the formation of the VOC (Dutch ‘Verenigde Oost-Indische Compagnie’) in 1602, 300 of the 1143 shareholders were of Antwerp origin19. The political tensions that at the end of the 16th century held the Netherlands in their grip eventually had adverse consequences for Antwerp’s international position as a commercial centre. The closure of the river Scheldt (1584) tolled the death knell for the city, as many of the traders subsequently departed to the north, to Amsterdam. The Treaty of Munster (1648) definitively defined the parameters of the new situation and during the next 150 years, the Scheldt remained closed to all shipping traffic. The Antwerp exchange lost its international attraction and for the next decades only performed a restricted national function. The gravitational centre of trade and exchange transactions had swung towards London and Amsterdam20. Under the Austrian regime, a number of diverse attempts were made to breathe (new) life into the exchanges, for instance, in Ghent and Antwerp, and also in Brussels. The various decrees, however, were only moderately successful but would nonetheless lay the foundations for the development of the legislative regulations governing the workings of the stock exchange after the French Revolution had made tabula rasa of the legislation and provisions existing under the old regime21. 2. The constitution of the “Bourse de Bruxelles” (Brussels Stock Exchange) The French occupation and the annexation of the Belgian regions to the French empire (1795-1815), provided the “Belgian” economy and the related exchange business with additional impetus. It was Napoleon who, via a number of laws and decrees on the workings of the 16 The Antwerp exchange building would be a model for, amongst others, the London and Amsterdam exchanges. In fact, the London exchange was built by the same architect (see its model in the Museum of London). 17 DIELTJENS F., Historique de la bourse de fonds publics et de change d’Anvers (History of the Antwerp public sector securities exchange) , Anvers, 1955, p.15. 18 THYS A., Een ongeziene commerciële bloei (An unnoticed commercial boom), in : VAN ISACKER K., VAN UYTVEN R., Antwerpen : twaalf eeuwen geschiedenis en cultuur (Antwerp: twelve centuries of history and culture), Antwerpen, 1986, p.93-95. 19 WAGENAAR L.J., Onder actionisten, ontstaan van de aandelenhandel in Amsterdam in de zeventiende eeuw, ( Amongst shareholders, the emergence of the trading in shares in Amsterdam during the seventeenth century,) in : DE CLERCQ G., O.c., Brugge, 1992, pp.89-90. 20 JONKERS J., Merchants, Bankers, Middlemen : the Amsterdam money market during the first half of the 19th century, Amsterdam, 1996, p.32 (doctoral thesis University of Utrecht). 21 MERTENS L., Les changes et les fonds publics à Anvers depuis le XVIe siècle jusqu’à 1792 (The exchanges and public sector securities in Antwerp from the XVIth century until 1792) , Anvers, 1894, p.12.

exchanges, created some uniformity and laid the foundation for the modern exchanges in the Belgian regions22. Napoleon decided to create exchanges in various major commercial centres. With respect to the Belgian regions, this thus meant that Ostend, Bruges, Ghent, Antwerp, Liege, and, of course, also Brussels, were in line to establish such an institution. But it became clear very quickly that most of these selected cities were unable to generate sufficient commercial activity to furnish the type of fertile ground in which a stable exchange business could thrive. For instance, in Brussels, several attempts were made to create such a stable business, but without much of a success to show for23. Just as had been the case during the 16th century, it was Antwerp that, thanks to the re-opening of the Scheldt, had started a rapid come-back and was thereby able to recover her place as the most important exchange institution in the Belgian regions. The importance of the Antwerp exchange at the start of the 19th century was found not so much in the conducting of transactions in securities and shares, but rather in the business of the numerous commodities (grain, coffee, textile, amongst many others) as a result of the growing port activities24. Cities such as Brussels, which could not rely on the presence of a port to boost their trade, consequently experienced difficulties in trying to develop exchange activities in this period when there still existed enormous distrust in securities (brought about also by the sharp depreciation of the paper money). At the start of the 19th century, there was nothing to anticipate that, one hundred years later, the Brussels exchange would come to play an important role in the (inter)national exchange and financial world. The Brussels exchange had to operate completely in the shadow of her Antwerp and even Ghent counterparts. Significant for this period, however, was the fact that the legal framework was created destined to administer the Belgian exchange activities for more than 60 years. The French Commercial Code instituted by Napoleon in 180725 and which encompassed all effective legal provisions regarding exchange business, would remain in force vis-à-vis the Belgian exchanges practically unaltered until 1867. In concrete terms, this meant that a bourse was seen as an assembly place for traders, brokers and exchange agents to gather, with this assembly being conducted under the supervision of the authorities. For what concerned the transactions carried out during these assemblies, there existed a strict monopoly for commodity brokers and exchange agents, meaning that only they were authorised to engage in transactions at the bourses 26 . The stock brokers were, in fact, appointed to their positions by the central authorities. These official brokers not only held the monopoly on what concerned the conducting of exchange transactions, they were also the only ones to be entrusted with the task of drawing up of the official market price quotations27. The very stringent provision entered into this code remained in force unchanged, even after Belgium’s independence in 1830. The separation between commodities and foreign exchange 22 GONTARD M., La bourse de Paris (1800-1830) (The Paris Stock Exchange (1800 – 1830), Paris, 2000, p.11. 23 WILLEMS H., De vergeten beurzen van België : Een institutionele blik op de liberalisering van het beurswezen in 1867 over de grenzen van Antwerpen en Brussel heen (The forgotten bourses of Belgium ; an institutional glance on the liberalisation of the exchange business in 1867 across the boundaries of Antwerp and Brussels), Antwerpen, 2006, pp.109-111. (unpublished doctoral dissertation) 24 FINDLAY R., O’ROURKE K., Commodity market integration 1500-2000, London, 2001, pp.25-26. 25 Code de Commerce, Paris, 1807, 205p. 26 Arrêté du Directoire exécutif, portant règlement concernant la bourse, 2 ventôse an IV (21/2/1796), Pasinomie, Bruxelles, 1835, 1er série, vol.7, p.271. 27 The brokers were forced, aside from taking an oath of dedication and loyalty to their profession, to also post a considerable surety bond. This sum could, in the event of disputes, be used to compensate the clients. Moreover, the brokers had to assume a totally independent position within the exchange world, which, in practical terms, meant that they could not engage in commitments within enterprises and that they were prohibited from forming associations amongst themselves.

transactions, plus the totally independent status imposed upon the stock brokers, made it very difficult for smaller brokerage institutions working at the exchange to develop a solid business there 28. The Belgian economy had meanwhile embarked on a strong growth period and the newly created Belgian state quickly assumed a leading position in industrial mechanisation. Already in the very early stages, Belgium had set off on the development of a dense railroad network and, together with the UK, the country had gained a top ranking within industrialised nations(see table p.2) 29 . The availability of raw materials (coal, ores, water) played a significant role in the development of the country’s industrial capacity. Especially the southern regions could boast of rich coal deposits and also iron ore was present in adequate volume. Around the discovery points of these raw materials, and side by side with the mining industry, also heavy basic industry sprung up (iron and, later on, steel), together with the necessary infrastructures for their exploration30. From the very outset, Belgium formed a favourite investment field for French and British capital (the British and French houses of Rothschild, railroad, and others)31. In 1852, 22 of the 40 Belgian coalmines operating as limited companies were held in French hands. Consequently, the shares in these enterprises were traded on the Paris exchange32. In addition, almost all of the mines that were controlled by the two major mixed banks, Société Générale and Banque de Belgique, counted widespread French participation. The same kind of phenomenon reiterated itself in the case of the first railroad enterprises, which attracted primarily British capital and consequently became listed on the London exchange33. Country 1855 1861 1869 1881 France 40 39 47 57,5 Belgium 58 60 53 42 Table 3 : Share of the Belgian and French mines in the total of the coal transports for the Northern-France network of the Comagnie du Nord (in %)34

In order to provide these new companies with the necessary capital, new financing resources were required. The formation of limited companies where a number of different shareholders 28 WILLEMS H., O.c., Antwerpen, 2006, pp. 116-120. 29 LEBRUN P., BRUWIER M., DHONT J., HANSOTTE G., Essai sur la révolution industrielle en Belgique, 1770-1847 (Essay on the industrial revolution in Belgium, 1770-1847) in series: Histoire quantitative et développement de la Belgique et de ses régions aux XIXième et XXième siècles (Quantitative history and evolution of Belgium and her regions during the XIXth and XXth centuries) , 1st series, Tome II, Bruxelles, 1981, p. 68. 30 SCHÖLLER P., La transformation économique de la Belgique de 1832 à 1844 (Economic transformation of Belgium from 1832 to 1844), in: Bulletin international de recherches économique et sociale, 1948, XIV, 3-5, p. 527. 31 KURGAN-VAN HENTENRIJK G., Industriële ontwikkeling (Industrial Development), in : BLOK D.P., (ed.), Algemene geschiedenis der Nederlanden (General history of the Netherlands), Bussum, 1982, vol.12, p.34. 32 VAN DER WEE H., GOOSSENS M., Belgium, in: CAMERON R., International Banking 1870-1914, New-York, 1991, p.118. 33 CAIRNCROSS A.K., Home and foreign investment 1870-1913, 1975, p.3. and WILLEMS H., BUELENS F., CLAASSEN A., Het beursavontuur van de Belgische spoorwegondernemingen (The adventure at the bourse of the Belgian railroad enterprises), in: VAN DER HERTEN B., VAN MEERTEN M., VERBEURGT G. (ed.), O.c., Leuven, 2001, pp.120-122. 34 CARON F., Histoire de l’exploitation d’un grand réseau, la Compagnie du Chemin de Fer du Nord 1846-1937( History of the operation of a large railroad network, the Northern Railroad Company 1846 – 1937), Paris, 1973, p.159.

could apportion the risk amongst themselves and muster large capital funds seemed the right type of solution. Just like in the UK, Belgium in turn saw a considerable rise in the number of limited companies during the second half of the 19th century35.

Belgian limited companies (NVs) in Belgium

Belgian limited companies (NVs) abroad

Belgian contribution

Foreign contributions Belgian contribution Foreign contributions

BEF % BEF % BEF % BEF % 1890 55,4 88,07 75 11,93 42,1 74,25 14,6 25,75 1900 125,5 83,88 24,3 16,12 120,8 40,94 174,3 59,06 1910 157 89,35 18,7 10,65 89,1 53,67 76,9 46,33 1913 118,6 77,77 33,9 22,23 49,5 35,51 89,9 64,49 Table 4 : Contributions of foreign capital in the formation of new limited companies (NVs) (in million BEF)36

The increase in the number of limited companies resulted during the first half of the 19th century only partially in an increase of the number of exchange listings. On the one hand, this had to do with the specific situation of the Belgian economy, where the mixed banks played a major role in the financing of the economy and via direct participations in the industrial activities made exchange listings superfluous37. On the other hand, the strict legal framework ensured that it was very difficult for enterprises to get listed on the Belgian bourses. In fact, following Belgium’s independence, not only the provisions in the Commercial Code had been adopted, the competent minister had decided to put the exchange business under even stricter state control and to allow the listing of new shares only with approval from the authorities38. These measures were introduced in the aftermath of the economic crisis that had hit Belgium in 1838 and had brought to light a number of deficiencies in the limited companies39. The RD of 19 November 1840 decreed that, henceforth, all shares with the exception of Belgian government bonds, needed to undergo a thorough screening process before their introduction onto the exchanges. During the period 1840 to 1845, only three new shares were allowed a listing on the exchange. Clearly, the Belgian governments wanted to take an 35 In the period 1834-1838, 125 limited companies were incorporated in Belgium with a total capital of 543 million BEF. Subsequently, strict legislation on the formation of limited companies would put the brakes to such incorporations. In the period 1838-1873 (date of the liberalisation of the companies legislation), only 350 new limited companies were incorporated (STEVENS F., Vie et mort des sociétés commerciales en Belgique: évolution du cadre légal XIXe-XXe siècles (Life and death of commercial enterprises in Belgium : evolution of the legal framework in the XIXth - XXth centuries), in : MOSS M. and JOBERT P., Naissance et mort des entreprises en Europe XIXe-XXe siècles (Birth and demise of the European enterprises during the XIXth - XXth centuries), Université de Bourgogne, 1995, pp.3-16). 36 VAN DE VELDE G., Le rendement des placements (1865-1939) (The return on investments (1865-1939)), Société d’Etudes Morales, Sociales et Juridiques, Gent, 1943, p.167. 37 DURVIAUX R., La banque mixte origine et soutien de l’expansion économique de la Belgique (The mixed bank: source and mainstay of the economic expansion in Belgium), 1947, p.30. 38 WILLEMS H., De cote en de Beursnotering in het 19de eeuwse België (The stock exchange official listing in 19th-century Belgium), in : Economisch en Sociaal Tijdschrift, 56jrg., 3, 2002, p. 363-402. 39 LAUREYSSENS J., Industriële naamloze vennootschappen in België 1819-1857(Industrial limited companies in Belgium 1819 – 1857), Leuven, 1975, p.25-35.

unequivocal stance vis-à-vis speculation and stock-jobbing and looked upon shares of limited companies and foreign loans as a significant source of evil. As of 1846, a new wind blew partially through the competent ministry and the procedures for admission to the exchange were standardised. Henceforth, Belgian businesses could via a fixed procedure gain admission to the exchange within a two to three-month period. However, for foreign companies, things were not that easy. To protect the Belgian economy, foreign shares remained subject to strict criteria and the listing of such shares was discouraged and delayed as much as possible, this to a lot of grumbling from the stock brokers who saw large portions of their turnover disappear. Foreign government bonds could only be introduced on the exchange if there was question of some reciprocity, meaning in cases where the Belgian shares would get their own listing on the foreign bourses. In practice, this caused a lot of problems, seeing that various countries, amongst which Denmark, Sardinia, and many others, did not during this particular period operate a structured exchange business, but nonetheless issued shares that seemed to find great favour with the Belgian investor. For what concerned foreign companies, their shares were only allowed if they could demonstrate that they maintained links with the Belgian economy. The placement of substantial orders played an important role in this (at least 1/10 of the capital to be introduced) as well as the backing of major financial institutions40. This strict position vis-à-vis the listing of, primarily, foreign shares resulted in the fact that especially the Antwerp exchange, which had a long tradition of specialising in foreign government bonds, had a rough time of it and ran into serious competition from a parallel exchange circuit where these kinds of shares were being officially traded. To compensate for this, Antwerp concentrated even more on the trading of commodities, as a result of which the number of commodity traders at the Antwerp exchange registered a spectacular rise. In the absence of this sort of transaction, Brussels became more and more involved in the trading and listing of shares of companies. In time, this appeared to be a very wise choice with an eye on the evolution of the Brussels exchange41.

Summary of the number of exchange listings on the Antwerp and Brussels exchanges42

Antwerp Brussels Date Shares/bonds Public sector

securities Shares/bonds Public sector

securities 31/12/1830 31/12/1831 31/12/1832 2 45 31/12/1833 2 44 31/12/1834 1 48 31/12/1835 15 11 31/12/1836 29 12 31/12/1837 38 13 31/12/1838 46 13

40 WILLEMS H., O.c. in : O.c., 56, 3, 2002, pp.363-402. 41 A.o. Algemeen Rijksarchief Brussel, Fonds : Brussels Chamber of Commerce, Dossier no 263 : Letter from Dansaert (chairman Trade Union Chamber of Stock Brokers) to the Brussels Chamber of Commerce (7/4/1832). 42 Drawn up on the basis of the Official Share Listings on the Antwerp and Brussels exchanges, archived at the ‘Studiecentrum voor Onderneming en Beurs’ (UA).

31/12/1839 43 13 31/12/1840 41 19 31/12/1841 46 15 31/12/1842 45 16 31/12/1843 7 35 44 17 31/12/1844 5 34 44 18 31/12/1845 45 18 31/12/1846 7 35 40 15 31/12/1847 9 35 43 15 31/12/1848 8 35 44 16 31/12/1849 7 37 44 16 31/12/1850 7 37 42 15 31/12/1851 7 37 43 15 31/12/1852 7 38 45 15 31/12/1853 7 37 48 14 31/12/1854 7 36 50 16 31/12/1855 17 39 50 17 31/12/1856 23 39 67 17 31/12/1857 24 38 77 20 31/12/1858 26 38 85 20 31/12/1859 27 39 90 22 31/12/1860 56 43 93 24 31/12/1861 56 47 93 24 31/12/1862 60 50 96 24 31/12/1863 65 47 99 22 31/12/1864 62 47 107 24 31/12/1865 62 45 111 28 31/12/1866 64 46 115 28 31/12/1867 67 49 114 28 31/12/1868 39 81 131 36 31/12/1869 38 81 132 8 31/12/1870 38 84 134 7 The significance of the limited companies and the listing of their shares would only increase during the following years. The Brussels exchange was quick to use this opportunity to reinforce her position on the Belgian bourse landscape. The number of listings on the Brussels exchange rose from a mere 2 in 1830 to 134 in 187043. In addition, in the Belgian context, Brussels had also grown into the nation’s administrative and political centre of gravity. The head offices of the major banks (Société Générale, Banque de Belgique, Nationale Bank), were all located there. The fast--

43 Cours Authentiques de la Bourse de Bruxelles 1830-2000 (Authentic share listings of the Brussels exchange, 1830-2000), (archived at the University of Antwerp (SCOB)).

growing industrialisation, especially in the Francophone part of the country, also placed Brussels into a more central position and thus a more likely one to attract listings44. 2. The growth of the Brussels Stock Exchange The steady advance that Brussels had cautiously embarked upon during the first half of the 19th century reached as of 1867 racing speed. Under pressure from the various Chambers of Commerce, the exchange agents and brokers, the large mixed banks, and pretty well everybody that had some sort of connection with the exchange business, the liberal government under Frère-Orban and Rogier decided to subject the Belgian exchanges to a thorough restructuring. The rigid laws on exchange business that for nearly 70 years had well-nigh forced the bourses into a straightjacket were all eliminated in one fell swoop and the law of 30 December 1867 pushed through a far-reaching liberalisation of the Belgian exchanges. Henceforth, the right of decision to allow listings of new titles would be exercised by the Exchange Commission45. The Exchange Commission, a body now established at every Belgian bourse, was composed of and by stock brokers. In practical terms, this signified that, henceforth, all shares that investors or speculators wished to trade could, in fact, be traded accordingly. Especially for the foreign enterprises and government loans, this meant a drastic turn-around and, subsequently, their numbers rose dramatically on the share listings. Moreover, the profession of broker was now able to shed its shackles. From that moment on, anybody who so wished could act as broker and even the opening of a bourse or stock exchange was no longer subjected to the approval of the central authorities but left to private initiative. The number of brokers at the Brussels exchange rose from 160 in 1872 to 350 in 1890 and in 1901 exceeded 900. On the eve of the crisis of the thirties, their numbers had risen to more than 130046. The monitoring of the proceedings at trading sessions was assigned to the municipal authority. For the Brussels exchange, being freed of government restrictions rang in the most prosperous period in her history. The industrial revolution expanded during the second half of the 19th century and, particularly as of 1870, moved into other sectors. The chemical, electricity, and tram sectors all assumed greater and greater importance and it would be especially in these sectors that Belgian industries could start playing a role on a world scale. This then caused the transition in the Belgian economy and, in contrast to the previous period where Belgium attracted foreign capital as an “emerging market”, this time around it was

44 DE SCHAEPDRIJVER S., Elites for the capital? Foreign migration to mid-nineteenth-century Brussels, Brussels, 1990, p.13. 45 VANTHEMSCHE G., Van keurslijf naar losbandigheid : de evolutie van de beursreglementering in België in de 19de eeuw (Shedding the straitjacket for profligacy: the evolution of stock exchange regulations in Belgium during the 19th century) , in : DE CLERCQ G. (ed.), Ter beurze. Geschiedenis van de aandelenhandel in België, 1300-1990 (At the exchange. The history of the trading in shares in Belgium, 1300-1990) , Brugge, 1992, pp.216-235. 46 VILLE DE BRUXELLES, Bulletin communal de la ville de Bruxelles (Municipal notice of the City of Brussels), sessions 17/2/1890 and 18/11/1901.

Belgian industries and financiers that were exporting Belgian capital. It was during this period that Belgium secured a leading position within industrial nations47. Great Britain 19.350 France 9.280 Germany 5.650 The Netherlands 4.100 The United States 3.510 Belgium 900 Table 5 : Capital export expressed in million USD (1914)48

The above table clearly demonstrates that Belgium, account taken of her small surface area and population numbers (approximately 7 million in 1900) quite belonged on a par with leading nations. For what concerned the exchange business, Brussels ‘ share kept growing, yet she still had to be considered a secondary market, still in the shadow of, for instance, London or Paris. This is also obvious from the exchange rate figures. Brussels investors closely monitored the French and British financial (press)releases and in this way steered the Belgian prices in the same direction49. Belgium’s liberal policy towards other nations in terms of its commercial relations with them simplified the export of the country’s industrial products. For reason of its limited domestic market, the Belgian economy became ever more dependent on export. The fact that there was hardly any inflation and, on the international plane, there existed a relatively stable monetary climate based on the gold standard, made international commercial relations and investments possible 50 . The legislation on companies having been freed from its restrictions, the incorporation of limited companies witnessed an enormous expansion. In 1890, no fewer than 1330 Belgian limited companies (NVs) are reported to be active. Different Belgian companies, amongst which Cockerill (iron/steel), Asturienne des Mines (mining, copper) or Vieille Montagne (non-ferrous products), opened various foreign affiliate companies and already before World War I could be considered to be multinationals. The relative inexpensive importation of raw materials from the Belgian colony (Congo) made it possible for such Belgian companies to gain a competitive advantage. Belgian industries such as Empain (tramways) and Solvay (chemicals) brazenly became engaged in Egypt, China, or South America to develop in those nations train and tram transportation networks, amongst other operations. In 1900, Belgium was the largest investor in the Russian economy, larger even than countries such as France, Great Britain, and Germany51.

47 CHLEPNER B.S., Le marché financier belge depuis cent ans (Belgian financial markets during the past one hundred years), Bruxelles, 1930, pp.110-115. 48 PARKER G., Times atlas of World History¸ London, 1993, p.253. 49 WILLEMS H., The London House of Rothschild and its Belgian contacts (1815-1860), in: The Rothschild Archives, Review of the year April 2004 – March 2005, London, 2005, pp.14-20. 50 CHLEPNER B.S., O.c., Bruxelles, 1930, p.51. 51 PEETERS W., Usines dans la steppe. Economische en bedrijfskundige aspecten van de Belgische industriële expansie in Rusland (1880-1914), (Factories on the steppes. Economic and business aspects of the Belgian industrial expansion in Russia), Leuven, 1992, p.20.

Year Stock market cap.

as % of GDP 1880 50,53 1890 46,44 1900 63,32 1910 92,44 1913 93,86 1920 30,25 1930 64,12 1940 63,15 1950 18,29 1960 26,47 1970 18,47 1980 9,07 1990 22,37 2000 30,40

Tabel 6: Source : Belgian Annual Statistics (National Bank)

The First World War, coupled to the loss of Russia as a ground for investments, hit Belgium hard economically. Measures undertaken by the Belgian government that, amongst others, led to a devaluation of the Belgian franc, this in combination with the economic optimism during the nineteen-twenties, ensured, however, that the consequences upon the Brussels exchange remained rather limited. A wave of new share issues and capital increases took place. Many family businesses that during the war years had suffered from a lack of sufficient capital now approached the exchange in order to get the needed financing in place. Shares of many colonial companies were readily snapped up by willing Belgian investors. The number of listings kept on rising and, in 1930, on the eve of the great crisis, the Brussels exchange had still a registered number of 1027 companies on its books for a total of 1575 listings52. Shares Bonds 1900 840 582 1910 1038 799 1920 1238 923 1930 1533 838 1940 693 215 1950 811 317 1960 714 267 1970 584 224 1980 463 196 1990 534 177 2000 250 189 52 See also annex 2.

Table 7 : Shares and Bonds listed at the Brussels Stock Exchange (Source : Scob database)

The method of listing shares on the Brussels exchange rested on a very ingenious system, where by means of the open outcry quotations the prices of the various shares were defined as precisely as possible. The Brussels share listings used not only the opening and closing quotations but also dividends (as of 1873), and also the number of shares admitted to the exchange (as of 1878)53. The liberalisation of the economy coupled to a strong growth in the numbers of limited companies, as well as the number of exchange listings and the sharp rise in the number of exchange transactions that accompanied this, meant, however, that the number of abuses on the exchange was significantly on the rise as well. Shares of companies that had not yet even commenced operations were traded for three times their issue price. Companies that were nothing but castles in the air readily profited from the stock market boom but, in 1930, when things started to go wrong, would drag down the exchange in their collapse.54. The call for reform had already been raised at the close of the 19th century, but except for some minor actions following World War I, it would take until the crisis of the nineteen-thirties before the Belgian government finally decided to effectively intervene.55.

3. The decline of the Brussels Stock Exchange The Belgian industry, in 1919 down to 41% of its pre-war production capacity, had from January 1920 onwards managed a steady rise56 and in 1923 once more reached its pre-World War I levels. The new coal beds that in Limburg had gone into production, together with the rich natural resources to be had from the Belgian Congo (e.g., diamonds, gold, radium, etc.), provided the Belgian economy with extra impetus. However, the German war reparations that failed to materialise, plus the large government deficits that resulted from their default57, in combination with the negative trade balance58 posed a threat to the recuperation process of the Belgian economy. In order to put a stop to high inflation and counter the uncertainties regarding the stability of the Belgian franc, as well as the country’s international competitive position, the government decided to embark on

53 WILLEMS H., O.c., in : O.c., 56, 3, 2002, p.390-393. 54 TIENRIEN, Les cours de bourse à Bruxelles et les abus (Share listings on the Brussels exchange and the abuses), Bruxelles, 1933, pp.5-10. 55 Fearing an occurrence of the so-called “Kapitalüberfremdung” (foreign capital infiltration), the Belgian government decided to put a stop to capital export abroad. Only trade in foreign shares already present on the Belgian markets was still allowed. In order to more tightly screen the bourses, the different Belgian exchanges (Antwerp, Brussels, Ghent and Liege) had to resort to the appointment of a government auditor whose task it was to monitor the exchange market transactions (LAMAL E., Les bourses des valeurs mobilières en Belgique (The exchanges for effects in Belgium), Brussel, 1934, p.17). 56 1 January 1920 : coal 108%, textile : 90%, steel : 60% (VERAGHTERT K., Het economische leven 1918-1940, in : BLOK D.P., Algemene Geschiedenis der Nederlanden, Bussem, 1979, p.55) 57 Following the signing of the armistice, the Belgian government had committed itself to exchanging the German marks present in Belgium at their pre-war value. As it was, at that time the German mark retained only half of its original value, which resulted in large quantities of the German currency being imported into Belgium from abroad, something that placed the Belgian Treasury into a rather precarious position (WITTE E., Politieke geschiedenis van België (Political history of Belgium), Brussel, 2005, pp.161-165). 58 As a result of the heavy rate of destruction that Belgium (Flanders Fields) had suffered during World War I, there existed a great need for products that had to be imported from abroad. The need for foreign currency to pay for these imports put the Belgian franc under severe pressure (JANSSENS V., De Belgische frank (The Belgian franc), Antwerpen, 1976, p.25-45).

drastic measures. On 25 October 1926, the Belgian currency was devalued to 1/7th of its pre-war value. This created not only for industry but also for investors a breathing space that provided a stimulus for the economy and for the stock exchange. As a result, the share index recuperated quickly59. In the electricity sector, share prices in the course of the nineteen-twenties saw a fivefold rise over their value in 1920. Likewise, the glass sector and the sector of coke ovens registered similar increases. The latter sector even managed a ninefold rise. The Belgian economy nonetheless remained specifically focused on semi-finished products, a fact which, seen within the international context, made the Belgian industry dependent on the evolutions of foreign economies. In the euphoric atmosphere that pervaded the nineteen-twenties, one had managed to close an eye to the dangers of this structural pitfall, but the crash of 1929 and the subsequent crisis during the nineteen-thirties forced the Belgian industry to confront the harsh reality head on. The crisis also hit Belgium hard and signified not only a decline in Belgian industrial production, but the new situation moreover exposed in the process a few serious corruption scandals involving major industrial figures (e.g., Albert Loewenstein, corkwood magnate Perena, and others) who had taken advantage of the “wild” years of the twenties to convince investors to buy into a fraudulent business empire based on hot air and have such businesses listed at the Brussels exchange at high prices 60 . All sorts of dubious and questionable constructions such as, for instance, shares with multiple voting rights that ensured that the power of the common shareholders would be curtailed, undermined public confidence in the workings of the exchange61. Not only were share prices adversely affected by these goings-on, but likewise the volume of transactions declined substantially. The serious consequences of the crisis that as of 1930 gripped the Belgian economy turned this distrust of the stock exchange into outright distaste and caused share prices to go into free fall. During the period 1929-1935, stock prices lost no less than 70% of their value62 . Following a brief resurgence in 1935, as a consequence of the devaluation of the Belgian franc, there was a further 52% drop in value63. Begin December 1929, it appeared nonetheless that the Brussels exchange would be able to maintain its position vis-à-vis the other European bourses. The crash of Wall Street even caused Belgian capital to retreat from abroad in a renewed search of Belgian capital. The Belgian economic press talked of a natural market correction whereby overvalued stocks, the result of investor speculation and an excessive number of new listings, were falling in line with the reality64. Initially, things seemed to work out quite well and only a small number of stock broker companies were during that phase filing for bankruptcy. However, as of January

59 See Annex 1 for the graphs of the price-index of the Brussels Stock Exchange (1900-2000). 60 VAN MEERTEN M., Faktor zeven op de beurs : de wilde jaren twintig en de crash van 1929 (Factor seven on the exchange: the wild twenties and the crash of 1929), in DECLERCQ G., O.c., Brugge, 1992, pp.235-253. 61 WILLEMS H., Multiple Voting Rights in the shareholders’ general meeting in Belgium during the interwar period, in : BRAUTASET C. (ed.), Essays in European business Performance in the 20th century, London, 2005, pp.69-90. 62 The share index on Wall Street had dropped from 216 points in September 1929 to barely 34 points in June 1932, a decline of 85% (1926=100) (KINDLEBERGER C.P., The world in depression 1929-1939, Harmondsworth, 1987, pp.110-111). 63 Moniteur des Intérêts Matériels, 1930-1935. 64 Moniteur des Intérêts Matériels, 20/12/1929.

1930, it became evident that the crisis would not be a passing phenomenon and that the possibility of a recovery in the short term was not a realistic expectation65. Year Share price decline in % Duration of the crisis 1873 46 6 years 1880 43 7 years 1890 15 2 years 1893 5 10 months 1895 17 10 months 1900 31 2 years 1903 8 8 months 1907 16 1 year 1911 7 8 months 1920 24 1 year 1924 34 21 months 1929 70 6 years 1937 52 21 months Table 8 : source : Monimat, 28/10/1937, p.2966 (as quoted in Van Meerten M., Het moeras van de Krisis (The Crisis Quagmire), in Declercq G., Ter Beurze, Brugge, 1992, p. 257)

This trend was even further aggravated by the difficulties that descended upon the Belgian banks during the same period. The panicked run on deposits forced a number of large banks to stop payments at the cash counters, while other important financial institutions such as the “Banque Chaudoir” (with far-reaching engagements in the British Hatry Group), the “Bank van de Arbeid”, and the “Crédit Anversois” had to resort to the desperate step of filing for bankruptcy66. In their collapse, these institutions dragged down a variety of enterprises that were dependent on them for their financing. In addition, the defaulting of a number of questionable enterprises, such as, for instance the Compagnie Industrielle de Liège (the CIL), meant that banks which had stood guarantors, e.g., Banque de Bruxelles, found themselves mired in increasing precarious situations67. No surprise then that drastic measures were called for in order to restore confidence in and by the Belgian financial world. The Van Zeeland government consequently took urgent steps to introduce via a number of emergency Royal Decrees various measures meant to re-establish that much-needed confidence68. For what concerned the banking sector, this meant dropping the system of mixed banking. The Royal Decree no 185 (9/7/1935) forced the Belgian banks involved in mixed business to split their industrial activities from their purely banking business69. Thus came about the

65 CHLEPNER B.S., Réflexions sur la crise boursière internationale, Comptes Rendus des Travaux de la Société d’Economie Politique de Belgique (Reflections on the international stock exchange crisis, Reports on the activities of the Society of Political Economy of Belgium), 60, Bruxelles, 1930, pp.13-22. 66 VAN DER WEE H., Mensen maken geschiedeni s (People make history), Brussel, 1985, pp.54-113. 67 KURGAN-VAN HENTENRYK G., De Société Générale van 1850 tot 1934 (The Société Générale from 1850 to 1934), in : VAN DER WEE H., (ed.), De Generale Bank 1822-1997, Tielt, 1997, pp. 223-290. 68 VANTHEMSCHE G., L’ élaboration de l’arrêté royal sur le contrôle bancaire (1935) (Elucidation of the royal decree on bank controls), in : Revue belge d’histoire Contemporaine, 1980, 3, pp.389-439. 69 This led to the establishment of the Generale Bank, the Bank Brussel-Lambert, the Kredietbank, and others.

creation of the important holding firms that would continue to dominate the Belgian economy during all of the 20th century. The most important one of these was undoubtedly the Société Générale, which managed to build up a far-reaching industrial network ranging from energy (gas, electricity), to steel, to consumer products. Other important holding companies that sprung from the former mixed banks included, amongst others, the Group Lambert (Banque de Bruxelles) and Almanij (Kredietbank)70. Such reforms were not, however, confined solely to the banking sector; also the workings of the stock exchanges and the structures of the Belgian bourses were heavily scrutinised, and these would in the course of the unsettled and volatile nineteen-thirties become substantially revamped71. The election victories by the extreme right in Germany and Italy created nervousness on the European exchanges. The Brussels exchange, which following the crash of Wall Street had become more and more oriented towards Paris, suffered a great setback as a result of the Banque Oustric scandal, which in its demise dragged down with it a number of other French banks and the Paris exchange as well. Moreover, to add insult to injury, various members of the Brussels Exchange Commission became discredited, which, if such were possible, even more undermined people’s confidence in the Brussels stock exchange72. In order to restore confidence in the exchange markets, all parties involved called ever more urgently for a prompt and thorough review and revision of legislation controlling the workings of the stock exchanges. The liberal legislation on the stock exchanges of 1867, which almost immediately had elicited reactions, had, except for a number of minor adaptations following World War 1, remained well-nigh unchanged. Already during the bull market of the twenties, a certain economic newspaper (e.g., Moniteur des Intérêts Matériels) had cautioned against an overheating of the exchanges and the deplored the fact that there was existed no currently adapted statutory mechanism for successfully reining in such excessive bubbles73. In the aftermath of the crisis, coupled to the loss of confidence in the workings of the exchange and the multiple scandals and abuses that had become exposed within the various facets of stock exchange business, the process of reviewing and revising legislation for control on the stock exchanges became a foremost and pressing priority. The law of 30 January 1935 would drastically reform the Belgian stock exchange landscape and, in practical terms, signified in various aspects a return to the situation prior to 1867. The Exchange Commission was retained but, in order to limit its powers (that had been all- 70 VANTHEMSCHE G., De Bank van 1934 tot vandaag (The Bank from 1934 until the present), in VAN DER WEE H., (ed.), De Generale Bank 1822-1997, Tielt, 1997, pp.303-315. 71 VAN MEERTEN M., Het moeras van de krisis : de jaren dertig op de beurs (The crisis quagmire: the exchange during the 1930 years ), in : DE CLERCQ G., Ter Beurze, Brugge, 1992, p.261. 72 Members of the Brussels Exchange Commission had, during the bull market of the years 1927-1928, been led to a very broad interpretation of the rules regarding the listing of new shares and had allowed shares to be listed without actually exercising the required control on them. In this manner, a procedure normally taking two months was reduced to two weeks instead. The commission members had fast-tracked this procedure in exchange for stock options, at a not-negligible gain to themselves. (BOURSE DE BRUXELLES, Procès-verbaux de la commission de la Bourse (Reports of the Exchange Commission), 11/1930. (kept on file in the SCOB databank)) 73 WILLEMS H., BUELENS F., De tweede wereldoorlog en de Belgische beurzen (The second world war and the Belgian stock exchanges), in : DE KEIZER M., HEIJMANS-VAN BRUGGEN M., SOMERS E., VAN SON A. (eds.), Thuisfront : oorlog en economie in de twintigste eeuw (The Homefront: war and the economy in the twentieth century) , Zutphen, 2003, pp.149-150.

dominant), a commission was formed for every exchange to maintain control over exchange listings. This committee had full empowerment to decide with complete autonomy what shares to list on or to reject from the exchange. Furthermore, the exchanges were no longer kept under supervision of municipal authorities but were placed under the immediate custody of the Minister of Finance. In addition, the minister had henceforth to give his approval to the listing of foreign shares on Belgian bourses74. And, moreover, more stringent demands were once more imposed on the stock brokers. For example, they were now again required to pass an examination, and the deposit of a surety bond on their part was reinstated75. None of these measures, however, did have any retroactive force, which, concretely, meant that the more than 1300 stock brokers that in 1935 were connected to the business of the Brussels exchange, could proceed with their ongoing affairs quite undisturbed and unaffected by these reforms. Not surprising then that the immediate consequences of this statutory reform were rather negligible, and it would indeed take until the outbreak of the Second World War before some real movement happened in the stock exchange dossier. Following the invasion of Belgium by German forces, the Belgian bourses closed their doors on 10 May 1940. Nevertheless, the Antwerp and Brussels exchange commissions would subsequently exert themselves to the utmost in order to effect the reopening of their institutions at the earliest feasible moment76. After intensive negotiations with the German occupation administration, the Brussels and Antwerp exchanges received, respectively on 6 and 16 September 1940, permission to resume trading77. The bourses would during the war years be forced ever more to pay a higher price to avoid their closure. The German invader not only demanded that the Nazi vision be actively introduced into exchange markets in the occupied regions, but, at the same time, the bourses were also seen as an important element in the financing of their war operations 78 . The occupation administration succeeded, notwithstanding all adverse and nefarious conditions adduced as a result of the persecution of Jews and of forced labour inside Germany, in turning into practice the more stringent provisions relating to the workings of the exchange that already since 1935 had been imposed by the Belgian legislator but in practical terms had had little concrete effect because of their vagueness of character. The number of stock brokers was reduced by half and, for the remainder, their tasks were now strictly delineated. The streamlining and updating of the exchange workings was enforced with a heavy military hand79. After the war, many of the dismissed stock brokers had their rights restored, yet the more stringent provisions, as they had been formulated in 1935 and implemented in their extreme form by the German occupier, were to remain in force until the reforming of the Belgian stock exchange in 1980.

74 THIEBAULD E., MESUREUR J., La profession d’agent de change en Belgique (The profession of stock exchange broker in Belgium), Bruxelles, 1940, pp.27-28. 75 DIELTJENS F., Code pratique des agents de change (Code of conduct of stock brokers), Anvers, 1939, pp.5-20. 76 Minutes of the Brussels Exchange Commission, 1938-1945, 10/5/1940 (General National Archives, Archives of the Brussels Exchange). 77 Reopening of the funds and stock exchanges in August 1940 (General National Archives, Ministry of Finance, General Secretariat, dossier no 755). 78 BETTELHEIM C., L’ économie allemande sous le nazisme (The German economy under the Nazis), Paris, 1946, pp.10-25. 79 Minutes of the Brussels Exchange Commission, 12/5/1943 (General National Archives, Archive of the Brussels Stock Exchange).

As a result of the war, the geo-political scenery had undergone drastic and lasting changes. The centre of gravity had definitely shifted from Europe to the United States of America, and also to the Soviet Union. Belgian business had no choice but to adapt itself to a fit in the post-war economic map in order to be able to compete internationally with the growing competition from abroad. Upsizing played herein a significant role, this to be able to face up to the (American) multinationals. Like many other European economies, the Belgian economy needed in its turn to make the transition from a traditional industrial economy to the post-industrial era based on mass consumption 80 . The GNP per person rose from 30.122 BEF/person (1948) to 87.551 BEF/person (1978) (inflation adjusted). The number of workers in the industry in 1947 was still 50% of the active population, a percentage that since that time has only kept on declining. Ever more increasingly, the Belgian economy became dependent on foreign countries, on the one hand, as sales territories for products that were being produced in Belgium, and, on the other, as being the registered location for foreign multinationals (Ford, Volvo, Siemens, Procter and Gamble, and others). The traditional industry, established in Wallonia (southern Belgium), steadily lost its importance as trade and unimpeded, fast connections with the sea became ever more dominant factors. Hence, there resulted in the economy a clear shifting of interests towards the north, that is to say, towards the regions of Flanders. Also industries that were making use of the new technology (for instance, Barco, Bekaert, Gevaert, Janssens Pharmaceutica), as well as only recent, newly established enterprises, decided to establish themselves within Flanders81. During the war years, the Brussels stock exchange, just like the bourses in Paris and in Amsterdam, had passed through a boom period82. In order to avoid the kind of monetary chaotic conditions such as Belgium had suffered following World War One, the Belgian Minister of Finance, Camille Gutt, at the time in exile in London, UK, decided already during the war years to prepare for a post-war currency re-alignment. The so-called Gutt-operation arranged for the monetary supply in Belgium to be reduced, as of October 1944, from 140 billion francs to 25 billion francs83. The re-opening of the Brussels exchange84 in July 1945 brought about an immediate rise in the share prices85. Monetary uncertainty indeed led to a flight out of capital funds into market shares. This brief flowering could nonetheless no longer conceal the structural problems that brought their weight to bear upon the Brussels exchange. For example, the Brussels exchange saw a whole series of listings vanish in thin air. The shares of the Belgian coal mines, which in 1913 with 125 listings had represented 16.1% of 80 HENAU B., Paul van Zeeland en het monetaire, sociaal-economische en Europese beleid van België 1920-1960 (Paul van Zeeland and the Belgian monetary, socio-economic, and European policy), Brussel, 1995, pp.199-216. 81 VAN ROMPUY V., De economie van eind 1944 tot heden (The economy from the end of 1944 until the present time), in: LAMBERTY M., VAN ROOSBROECK R., VANDEKERCKHOVE M., VAN ISACKER K., ROPPE L., WILLEMSEN W., Twintig eeuwen Vlaanderen (Twenty centuries of Flanders), Hasselt, 1978, pp.214-231. 82 OOSTERLINCK K., The bond market and the legitimacy of Vichy France, in: Explorations in Economic History, vol.40, 3, 2003, pp.326-344. 83 GUTT C., La Belgique au carrefour 1940-1944 (Belgium at the cross-roads), Paris, 1971, pp.169-181. 84 The exchange remained closed from September 1944 until July 1945. 85 SERCU P., De oorlog en de wederopbouw. Een sterke beurs in moeilijke tijden : 1940-1959 (The war and the rehabilitation effort. A strong exchange market during difficult times: 1940-1959), in : DE CLERCQ G., Ter beurze, Brugge, 1992, p.310.

the total Brussels market capitalisation, disappeared almost entirely from circulation86. Many mines had been depleted and had to shut down; others no longer found it profitable to keep on mining coal resources. They were squeezed out of the market by the more recent energy sources (e.g., petroleum, nuclear energy).

Share of GNP

1948 1978

Mining 5.6% 0.9% Iron/steel 2.9% 1.9% Building sector, glass 2.1% 1.3%

Chemical industry 1.5% 3.1% Nonferrous metal 9.3% 10.5%

Table 9 : figures provided by the Belgian National Bank

Not only did the disappearance of the coal mines mean a serious set-back for the Brussels exchange, also the declaration of independence of the Belgian Congo on 30 June 1960, plus the hostility vis-à-vis the continuing presence of the Belgian enterprises in the former colony resulted in heavy losses for the Congolese shares that always had claimed a major portion on the Brussels exchange87. Many colonial enterprises simply disappeared from the exchange. Others became transformed into holding companies. The loss of the Congo as a colony dealt a heavy blow to the Belgian economy and to the Brussels exchange market. CONGO BELGIUM 1890 25.440.000 1.667.123.125 1900 264.073.250 3.203.872.643 1913 543.826.048 6.355.074.242 1920 791.351.100 8.641.910.521 1928 24.450.629.075 69.170.314.911 1939 8.596.678.136 23.910.055.892 1955 98.457.421.424 125.936.000.000 1959 39.491.579.286 159.482.000.000 Tabel 9 : Marketcap. 1890-1959 Brussels Stock Exchange

The sixties and the seventies thus introduced for Belgian enterprises a period of adaptation. Major companies such as Union Minière or the Société Générale were forced to reorganise their entire business culture, which in the past had been partially coordinated with their colonial participations in mind. The rigid attitude assumed by various Belgian holding companies opened the way for, primarily, American multinationals. The Belgian government

86 In 1972, the mining sector accounted for barely 1.8 % of the Brussels market capitalisation, and by the end of the nineteen-nineties, all listings for coal mines had disappeared (source: Scob Databank based on the Authentic Lists of Shares on the Brussels Exchange Market). 87 LUYCKX T., Politieke geschiedenis van België (The political history of Belgium), Brussel, 1973, pp.400-450.

tried to attract foreign companies to Belgium by offering generous investment perks. The central position of Belgium and its central role in the development of the European Economic Union, introducing the elimination of various custom barriers, considerably lowered the threshold for investors wanting to invest in the country. The result of all of this was that many Belgian enterprises found themselves unable to compete with foreign competition and were forced to close down their businesses or have them absorbed by the large international groups88. In time, even large holdings such as the Société Générale appeared not exactly secure against the threat of foreign take-overs (cf. Suez). The result was that various blue-chip listings disappeared from the Brussels exchange. The Brussels stock exchange became lethargic and conducted business as if in a daze. Various presidents of the Brussels exchange commission attributed the absence of competitive Belgian enterprises during the seventies and the eighties as the most important factor in the decline of the Brussels stock exchange. The conservative attitude assumed by the holding companies that were often more concerned with their position of reference shareholders than with the attainment of corporate governance created a difficult position for the Belgian industry. But at the closing of the eighties, a new wind seemed to blow through the Brussels stock exchange. This informational wave that swept across the stock exchange scenery reached, under the impulse of former Minister of Finance Maystadt, all the way up to Brussels. Until that particular moment, the Brussels exchange had kept functioning under the provisions within laws and decrees that had been issued during the nineteen-thirty years. The exchange thus operated on the basis of procedures that were judged archaic and bureaucratic. Attempts to reform this existing system initially met with quite a bit of resistance from stock brokers, yet, the drive towards reformation and renewal was not be denied89. For , indeed, the Minister of Finance not only advocated the implementation of a computerised system, but also wished to do away with the provincial character that typified the Brussels exchange in favour of creating an exchange system that would (once more) be in a position to play a significant role on the world’s stage. For it was a fact that the stock brokers had been only moderately enthusiastic in their reactions to the new investment mechanisms and instruments such as, for instance, the options that had proved themselves so successful on other European exchanges. It goes without saying that the computerisation of the exchange alone was not sufficient to bring about a successful resurgence. Since March 1982, the so-called “law on shares”, that is the Cooreman-De Clercq Law, had come into force. This law was inspired by the measures taken by the French Minister of Finance René Monory, and was aimed at promoting the sale and purchase of shares. Via all sorts of fiscal measures, both investors and businesses could

88 In the course of the twentieth century, there are numerous examples of this, such as the steel works of Cockerill and Sidmar that were acquired by Arcelor ; Electrabel and Distrigaz that together with the Société Générale wound up in the hands of Suez ; Agfa-Gevaert became a 100% subsidiary of the German chemical giant Bayer, Petrofina was absorbed totally by Total ; Cote d’Or became part of Philippe Morris, the GIB Group was split and sold to German and French interests… the list goes on. Nor did the banking sector remain inviolate; the Banque Bruxelles Lambert (BBL) became incorporated into the ING Group, the Gemeentekrediet wound up partially into French hands (Dexia), and also ASLK and the Generale Bank came, via Fortis, partially under Dutch control. Other Belgian enterprises simply disappeared from the business scene: for instance, Acec (specialised in electronic applications), Forges de Clabecq (Steel), Sabena (aviation). 89 On 24 January 1989, the first computerised system at the Brussels exchange, named CATS, was taken into service. This immediately led conservative stock brokers to initiate the campaign known for the slogan “I hate Cats” (DECLERCQ G., VANDERLINDEN M., Dow Jones 3000 : de hausse van de jaren tachtig 1982-1990 (Dow Jones 3000: the bull market during the eighties), in : DECLERCQ G., Ter Beurze, Brugge, 1992, p.413.

benefit from considerable tax advantages if they invested in shares – or in the case of businesses - if they introduced new shares into the market 90 . In combination with the reduction in interest already fixed and the new political climate that was prevalent around Belgium, this meant a considerable resurgence of stock exchange transactions. At the end of the eighties, minister Maystadt wanted nonetheless to go one step farther and subject the legislation dealing with exchange business to a complete overhaul. The so-called “GIGA law” that on 4 December 1990 was adopted by Parliament, was meant to lead the Belgian exchanges into the 21st century. The smaller exchanges of Ghent and Liege were definitively closed down. The Antwerp and Brussels exchanges had to follow the international trends and renounced the rigid, conservative statutory system that was still dictating the working of the exchange. Where the New York exchange had already in 1975 freed up the commission fees and allowed an association of different stock brokerage houses91, London followed this example only in 198692. The Giga law and the amendments to the law that were implemented during the following years in an accelerated tempo were meant to adapt the Belgian exchanges to the European norms (ISD-directive, CAD-directive)93. The Belgian exchanges that until now had formed a virtual company of stock broker agents, and had thus been operating under a rather loose legal form, were refashioned into full-fledged limited companies with an independent board of directors. Older structures such as the exchange commission or the commission controlling exchange listings disappeared from the scene and, after the American example, were replaced by, amongst others, the Listings department and a board of directors94. Market supervision and overseeing was taken away from the exchanges themselves and assigned to the competence of the Banking and Finance Commission (BFC). The minor stock brokers, whose business had often passed from father to son, disappeared from the scene and were replaced by professional stock brokerage firms. From that time onwards, the banks were in a position to directly process stock orders at the exchange, doing this without the intermediation of stock brokers. Where rigid laws and regulations had failed to lead to a drastic reduction in the number of stock brokers, this new movement gained tremendous impetus by giving free rein to the free market mechanisms. The European upsizing, whereby the small Belgian broker faced direct competition from mighty European and even world players, tolled the death knell for most of the Belgian stock brokers. The hold by banking institutions and investment funds was also considerably tightened on the Brussels exchange. The Belgian banks, which were much more in tune with the latest developments in the financial world than the conventional stock brokers, actually were instrumental in wafting a fresh breeze throughout the Brussels exchange.

90 VAN DE VOORDE A., De penningmeesters van de Wetstraat : De ministers van Financiën sinds 1831 (The treasurers of the Wetstraat : The Finance Ministers since 1831) , Tielt, 1993, pp.45-48. 91 GEISST C.R., Wall Street: a history, New-York, 1997. 92 Free price fixing, opening capital of the British exchange market companies for British and foreign banks, starting up an automatic transaction system, the organisation of a futures market Liffe, etcetera. (MICHIE R., The London stock exchange : a history, Oxford, 2001, pp.584-586). 93 These regulations determined, amongst others, that all European accredited financial brokers and bankers could be active on all European bourses. De COUSY H., VAN GERVEN W., De nieuwe beurswetgeving: commentaar bij de Wet van 4 december 1990 betreffende de financiële markten en de financiële verrichtingen (The new exchange market legislation : comments with the Law of 4 December 1990 regarding the financial markets and financial transactions) , Kalmthout, 1991, pp.91-95. 94 Reports of the Board of Directors of the Brussels Stock Exchange (1995-1998) (archives kept in the SCOB data bank).

Nevertheless, all of these steps forward such as computerisation and modernisation of the system could not prevent that, as a result of the increased communication facilities and possibilities, a trend towards globalisation became ever more present and relevant. More and more frequently, investors started to look beyond country borders and had no qualms about placing their orders with whatever exchange seemed more advantageous to them. The Belgian exchanges seemed very badly positioned to capture a permanent position within this global network. The Antwerp exchange had already during the first half of the nineties been forced to halt its activities, but also the Brussels exchange was experiencing ever greater problems. The only solution thus appeared to conclude a foreign partnership, this to ensure the continuation and continuity of business. Such a partnership was concluded on 17 September 2000, heralding the fusion of the Brussels, Amsterdam, and Paris exchanges into one body called Euronext. Euronext is itself an organisation under Dutch law, with its head office in Paris. In the meantime, the Lisbon Exchange and the futures market of Liffe have been accepted into Euronext. Euronext offers to her members one single commercial regulation, one stock exchange official list, one central order book, one clearing system, one settlement and delivery system and one trading platform. Euronext has become an important player in the stock market world. The recent acquisition/merger rumours between Euronext and the New York Stock Exchange or the Deutsche Börse are only confirmation of this importance. Via its ultramodern trading system, Euronext is present in every corner of the world through computer links. The role of the minor partners within Euronext, amongst whom, beside Lisbon, Brussels certainly figures as well, has become very obvious on the basis of the figures entered in the preface of this paper95. In the Next150 index96, the dominance of Paris and Amsterdam has slightly diminished, but it remains more than evident that Brussels still lags far behind these two major heavyweight players. Euronext Number of stocks Weight Paris 74 48.15% Amsterdam 44 30.96% Brussels 22 12.82% Lisbon 10 8.04% Table 10 : Composition Next 150 : Situation on 03/07/2006 (source : Euronext)

An eventual take-over of Euronext by the Deutsche Börse or by the New York Stock Exchange can only result in a further weakening of the position of the Brussels Exchange. 4. CONCLUSION : The Brussels Stock Exchange had at the end of the 19th century and at the start of the 20th century successfully managed to turn itself into one of the most important European bourses. This success was made possible also because Belgium had decided at the time to play a pioneering role in the industrial revolution of the 19th century and, from a historical point of 95 See table 1. 96 The Next 150 Index is a market capitalisation weighted index of the 150 next largest stocks following the selection of the Euronext 100 Index. The Next 150 Index represents the large to mid-capitalisation segment of listed stocks at Euronext. (www.euronext.com)

view, possessed considerable expertise in the stock market business and in (international) financing. The crisis during the thirties did, however, uncover the structural problems that confronted the Belgian economy and, hence, also the Belgian stock exchanges. An all too one-sided focus on heavy industry (e.g., steel, coal, glass, et cetera) placed the Belgian economy in a weakened position and made her very dependent on international (economic) vagaries. The depletion of the Belgian coal mine deposits, followed by the independence of the Belgian Congo, caused many listings to simply disappear from the Brussels exchange. Following World War II, the Brussels exchange entered into a period of years of somnolent existence. Nothing remained of the early heady days of the twentieth century when things were blooming and booming. At the end of the eighties, Brussels jumped on the bandwagon of technological renovations and upsizing. Alas, the effort came too late and, by September 2000, Brussels had definitively lost her autonomy as a major player and was relegated to the role of one of the minor characters on the stage of the Euronext constellation.

Annex 1 : Price-index of the Belgian shares listed at the Brussels Stock Exchange (1899=100)

300

400

500

600

700

800

900

1000

1100

1200

1945 1950 1955 1960 1965 1970 1975

PRICEINDEX

0

1000

2000

3000

4000

5000

6000

7000

76 78 80 82 84 86 88 90 92 94 96 98 00

PRICEINDEX

70

80

90

100

110

120

130

1900 1902 1904 1906 1908 1910 1912 1914

PRICEINDEX

100

200

300

400

500

600

700

800

20 22 24 26 28 30 32 34 36 38 40

PRICEINDEX

Annex 2 :

Overview on the Emission of New Shares (1919-2000) and Trading Volume at the Brussels Stock Exchange (1940-2000)97 (in BEF)98

Emissions of new

shares Trading Volume Brussels Stock

Exchange

Emissions of new shares

Trading Volume Brussels Stock

Exchange 1919 977.139.000 Not Available 1961 19.200.000.000 25.200.000.000 1920 829.000.000 Not Available 1962 19.600.000.000 20.400.000.000 1921 436.766.000 Not Available 1963 15.200.000.000 21.600.000.000 1922 654.953.000 Not Available 1964 23.200.000.000 22.800.000.000 1923 576.719.000 Not Available 1965 23.300.000.000 20.400.000.000 1924 918.895.000 Not Available 1966 30.600.000.000 16.800.000.000 1925 1.124.842.000 Not Available 1967 33.600.000.000 19.200.000.000 1926 Not Available Not Available 1968 53.000.000.000 32.400.000.000 1927 Not Available Not Available 1969 47.400.000.000 36.000.000.000 1928 Not Available Not Available 1970 45.700.000.000 27.600.000.000 1929 14.729.383.000 Not Available 1971 31.200.000.000 41.500.000.000 1930 4.479.363.000 Not Available 1972 41.300.000.000 48.800.000.000 1931 3.589.894.000 Not Available 1973 48.500.000.000 67.500.000.000 1932 1.910.806.000 Not Available 1974 50.100.000.000 45.900.000.000 1933 1.580.087.000 Not Available 1975 39.600.000.000 50.000.000.000 1934 2.067.427.000 Not Available 1976 51.300.000.000 56.900.000.000 1935 2.828.158.000 Not Available 1977 92.300.000.000 40.800.000.000 1936 3.131.603.000 Not Available 1978 64.400.000.000 40.800.000.000 1937 4.148.804.000 Not Available 1979 67.900.000.000 54.500.000.000 1938 1.564.515.000 Not Available 1980 39.700.000.000 64.800.000.000 1939 866.022.000 Not Available 1981 48.300.000.000 60.245.874.791 1940 1.366.492.000 8.928.000.000 1982 104.200.000.000 89.234.072.888 1941 3.179.093.000 14.568.000.000 1983 246.600.000.000 137.625.301.745 1942 761.844.000 11.892.000.000 1984 87.700.000.000 159.142.465.000 1943 726.732.000 11.508.000.000 1985 103.500.000.000 186.116.410.323 1944 663.771.000 10.848.000.000 1986 141.700.000.000 295.900.944.110 1945 1.352.261.000 11.688.000.000 1987 212.400.000.000 394.747.924.408 1946 4.487.738.000 11.376.000.000 1988 208.000.000.000 395.612.757.415 1947 7.976.730.000 5.160.000.000 1989 368.600.000.000 418.015.466.216 1948 28.270.409.000 6.180.000.000 1990 440.794.087.300 319.062.000.000 1949 11.230.205.000 8.292.000.000 1991 408.683.526.900 289.998.477.963 1950 11.494.172.000 11.880.000.000 1992 490.412.164.300 315.560.947.661 1951 12.130.000.000 20.844.000.000 1993 339.500.598.400 494.438.422.223 1952 25.416.000.000 19.800.000.000 1994 321.186.283.800 553.758.817.366 1953 7.872.000.000 16.572.000.000 1995 292.504.614.900 546.704.053.796 1954 10.118.000.000 27.324.000.000 1996 382.906.330.800 808.752.718.240 1955 18.903.000.000 37.320.000.000 1997 462.617.973.200 1.229.209.220.6571956 25.187.000.000 27.768.000.000 1998 527.403.852.600 2.251.711.630.3081957 34.676.000.000 26.124.000.000 1999 787.031.449.000 2.241.180.610.9831958 11.083.000.000 17.304.000.000 2000 1.257.556.042.600 1.915.962.081.4001959 12.669.000.000 25.932.000.000 1960 22.508.000.000 23.112.000.000

97 Source : BANQUE NATIONALE DE BELGIQUE, Belgian Economic Statistics, 1919-2000 ; BOURSE DE BRUXELLES, Monthly Statistics, 1960-2000. 98 For reconversion to Dollar : see Annex 3.

Annexe 3 : Exchange rate US Dollar – BEF (Belgian Franks)

Date Dollar BEF 31/12/1900 1 5,14 31/12/1920 1 16,42 31/12/1925 1 22,04 29/12/1926 1 35,91375 31/05/1933 1 29,94375 27/03/1935 1 21,4 30/04/1935 1 29,35 30/04/1940 1 29,69375 31/01/1946 1 43,83 22/09/1949 1 50 29/10/1971 1 46,62 31/01/1980 1 28,255 31/07/1981 1 40,3725 31/05/1983 1 50,325 28/09/1984 1 61,37 30/09/1986 1 41,94 29/04/1988 1 34,92 27/10/1995 1 28,6075 29/09/1997 1 36,3625

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