This page uses content from Wikipedia and is licensed under CC BY-SA.

Australian banking crisis of 1893

The 1893 banking crisis in the Australian colonies involved the collapse of a considerable number of commercial banks and building societies, and a general economic depression.

Foundations

During the 1880s, there had been a speculative boom in the Australian property market. The optimistic climate was fostered by the commercial banks, and also led to the proliferation of non-bank institutions such as building societies. Operating in a free banking system, there were few legal restrictions on their operations, and there was no central bank or government-provided deposit guarantees. The banks and related bodies lent extravagantly, for property development in particular, but following the collapse of the land boom after 1888, a large number of enterprises that had borrowed money began to declare bankruptcy.

Crisis

Banks and non-bank institutions came under increasing financial pressure, and the full extent of the crisis became apparent when the Federal Bank of Australia failed on 30 January 1893. The situation was particularity acute in Victoria, and on 1 May 1893, the Victorian government implemented a five-day bank holiday to ameliorate the financial panic and prevent any further run on the banks.[1] By 17 May, 11 commercial banks in Sydney, Melbourne, as well as other locations in Australia, had temporarily or permanently closed their doors.

The banks and other financial institutions affected included:

Critique

Whilst gold and securities were held by certain banks, many Australian institutions did not make representations to their London branches which held those deposits.[13][18]

Criticisms were levelled at the directors:

The first result is that colonial banks have frequently opportunities for making larger profits in comparison with the volume of business than is possible with home banks. The second result arising from this possibility of larger profits is that there is a greater element of risk attaching to the business than attaches to the ordinary business of a British bank, and consequently need for greater caution in investments. It needs but a moment's consideration to reveal the fact that money advanced for the carrying on of our staple industry — the pastoral industry — is exposed to greater risk than money advanced on the comparatively steady staple businesses in Britain. Our staple industry is exposed to the caprices of climate and the invasion of insects, insignificant when considered singly but terribly significant when considered in the muss. Droughts, frequently recurring, blast the hopes of the pastoralist by robbing him of all prospect of return for his labour and anxieties, and that blasting of the squatter's hopes means loss to the institution which has advanced him money.[18][19][20]

These comments of 1897 were made as the Federation Drought (1896 to 1902) commenced, which resulted in the widespread death of livestock and strains of livelihoods. There were some reforms to regulation and law with a view to preventing future abuse.[21]

Social commentary

Poets of the time were critical of financial institutions, their profligate lending practices, and the misery resulting from their actions. 'Bankers' ruthlessness... were so much a feature of the 'Australian way of life' fifty years ago [1947], that they brought words of burning protest from the pens of some of Australia's leading poets.' [22]

Here in this sacred place God is secure!
His golden blood, hence, here and hither drugs
Life. Ships, lands, cables, railways, roads, entice
Spoil to this great hushed temple; men immure
Their sons, all future hope here; here Death hugs,
Slimes and devours their gluttony and vice.
We bring the wilderness to bounds;
We grub the land to roads.
In sour or sullen savage grounds
We sow Advance's seeds;
We grade the mountains, paint the hills
With patterned greenery,
And through Saharas lead the rills—
To feed the mortgagee.
The banks are taking charge, old man ... I knew how it would be:
The Flags are flying halfmast high for death of Tringadee...
But droughts and losses came apace
To Kiley's run,
Till ruin stared him in the face;
He toiled and toiled while lived the light,
He dreamed of overdrafts at night;
At length, because he could not pay.
His bankers took his stock away
From Kiley's run.
... The owner lives in England now
Of Kiley's run.
He knows a racehorse from a cow;
But that is all he knows of stock;
His chiefest care is how to dock
Expenses, and he sends from town
To cut the shearers' wages down
On Kiley's run.
...Then you'll see a glorious future and you'll dream by night and day
Of corn and wheat and "taters" and such things that never pay;
And you wonder why they hang around the blessed town below
Till the bailiff brings a warrant and your cows have got to go—
Till your cows have got to go.

See also

References

  1. ^ "Timeline: Depression". The Age. 2003. Archived from the original on 31 August 2007. Retrieved 29 November 2007.
  2. ^ "V.D.L. Bank". The Coastal News and North Western Advertiser. I (51). Tasmania. 22 August 1891. p. 2. Retrieved 28 October 2017 – via National Library of Australia.
  3. ^ "The Sydney financial scare: Yet another building society failure." South Australian Register. LVI (14, 002). 29 September 1891. p. 5. Retrieved 28 October 2017 – via National Library of Australia.
  4. ^ "Toowoomba Deposit Bank failure". The Brisbane Courier. XLVIII (10, 638). 18 February 1892. p. 7. Retrieved 28 October 2017 – via National Library of Australia.
  5. ^ "Victorian News". Australian Town and Country Journal. XLIV (1174). New South Wales, Australia. 16 July 1892. p. 14. Retrieved 28 October 2017 – via National Library of Australia.
  6. ^ "Federal Bank". Launceston Examiner. LIII (36). Tasmania. 11 February 1893. p. 5. Retrieved 28 October 2017 – via National Library of Australia.
  7. ^ "Financial failure". The Australian Star (1308). New South Wales. 9 February 1892. p. 6. Retrieved 28 October 2017 – via National Library of Australia.
  8. ^ "Another bank gone". Newcastle Morning Herald and Miners' Advocate (12, 289). New South Wales, Australia. 6 April 1893. p. 4. Retrieved 28 October 2017 – via National Library of Australia.
  9. ^ "The Banks". Katoomba Times. IV (209). New South Wales. 5 May 1893. p. 4. Retrieved 28 October 2017 – via National Library of Australia.
  10. ^ "The Bank of North Queensland". The Queenslander. 20 May 1893. p. 946. Retrieved 28 October 2017 – via National Library of Australia.
  11. ^ "The Brisbane Permanent Building Company". The Queenslander. 20 May 1893. p. 947. Retrieved 28 October 2017 – via National Library of Australia.
  12. ^ "City of Melbourne Bank". Warwick Argus. XXVII (2207). Queensland. 20 May 1893. p. 2. Retrieved 28 October 2017 – via National Library of Australia.
  13. ^ a b c "Federal Building Society". The Queenslander. 20 May 1893. p. 947. Retrieved 28 October 2017 – via National Library of Australia.
  14. ^ a b c "Country Telegrams". The Queenslander. 20 May 1893. p. 947. Retrieved 28 October 2017 – via National Library of Australia.
  15. ^ "The Inquirer. FRIDAY, MAY 5, 1893". The Inquirer and Commercial News. LIII (2, 923). Western Australia. 5 May 1893. p. 18. Retrieved 28 October 2017 – via National Library of Australia.
  16. ^ "Suspension of the Royal Bank". The Queenslander. 20 May 1893. p. 946. Retrieved 28 October 2017 – via National Library of Australia.
  17. ^ "Financial Crisis". Queensland Times, Ipswich Herald and General Advertiser. XXXIV (4973). 18 May 1893. p. 3. Retrieved 28 October 2017 – via National Library of Australia.
  18. ^ a b "Banks' Prospects". The Telegraph (7806). Brisbane. 2 November 1897. p. 4. Retrieved 28 October 2017 – via National Library of Australia.
  19. ^ "Australian Banking Collapse". The Telegraph (6, 591). Brisbane. 30 November 1893. p. 4. Retrieved 28 October 2017 – via National Library of Australia.
  20. ^ "Land-Mortgage Banks". Windsor and Richmond Gazette. 5 (248). New South Wales. 15 April 1893. p. 11. Retrieved 28 October 2017 – via National Library of Australia.
  21. ^ Cannon, Michael (1966). The Land Boomers. Melbourne University Press. p. 197.
  22. ^ "Australian Poets' Hate For Private Bankers". Tribune (347). New South Wales. 3 September 1947. p. 4. Retrieved 22 February 2018 – via National Library of Australia.
  23. ^ "The mortgagee". The Herald. X (444). South Australia. 11 April 1903. p. 8. Retrieved 22 February 2018 – via National Library of Australia.
  24. ^ "Selected poetry". Toowoomba Chronicle and Darling Downs General Advertiser (5265). Queensland. 7 September 1895. p. 6. Retrieved 22 February 2018 – via National Library of Australia.
  25. ^ "Interesting Lecture". The W.A. Record. XXX (1284). Western Australia. 6 May 1905. p. 25. Retrieved 22 February 2018 – via National Library of Australia.
  • Hickson, C. R. and Turner, J. D. 2002. "Free banking gone awry: the Australian banking crisis of 1893." Financial History Review 9:147–167