In mid-1931, eighteen months after the Wall Street crash of 1929, Germany experienced a severe banking crisis that saw the collapse of the Danat-Bank, the country's second largest, and the suspension of gold convertibility.
The conclusion was confirmed in the December 1931 final report of the Special Advisory Committee of the Bank for International Settlements, which had met at Germany's request and recommended that a new reparations conference be convened.
Warmbold and Krosigk argued that the reparations paid up to that point, together with the payments of inter-allied war debts and related loans, were the cause of the worldwide financial and economic crisis.
German proposals to make the complete termination of reparations acceptable through closer political ties with France were rejected and then countered with an offer of economic and financial participation in a European reconstruction programme.
When the conference threatened to fail after two weeks, its president, British Prime Minister Ramsay MacDonald, asked under what political conditions Germany would agree to a final reparations payment.
On 5 July, after difficult negotiations among the Western powers, a solution was reached which, for a final payment of four billion Reichsmarks, offered not only the termination of all reparations but also an advisory pact between France, Great Britain, Italy and Germany; a common, Europe-wide monetary policy; the striking of the "war guilt" article and a declaration of Germany's "moral equality" at the ongoing Geneva Disarmament Conference.
The Treaty of Lausanne obliged the Weimar Republic to make a final payment of three billion gold marks, payable in five-percent bonds to the Bank for International Settlements in Basel, Switzerland.