THE PANIC IN AUSTRALIA.

Press, Volume L, Issue 8478, 9 May 1893, Page 5

THE PANIC IN AUSTRALIA.

SUSPENSION OF BANKS

THE VICTORIAN GOVERNMENT PROCLAMATION.

MELBOURNE, May 2.

The financial crisis reached an acute stage yesterday, when the suspension of the National Bank of Australasia was announced, and when also there was issued a Government Gazette extraordinary proclaiming every day of the present week except Saturday a Bank holiday. The Argus evidently considered the occasion a serious and momentous one, for it published in the centre page of its issue a fac simile of the Gazette extraordinary, which occupied three columns of its space in width. On the same page was announced the temporary suspension of the National Bank of Australasia, so that the issue of the Argus of Monday, May Ist, wil , . be regarded as a historical publication. The Cabinet had met on Sunday afternoon, and the Gazette did not leave the Government printer's hands until one o'clock on Monday morning. The reasons which actuated the Government in this grave act of State, as it is termed by the Argus, are given in the following statement made to the Argus by Mr J. B. Patterson, tlie Premier, after midnight on Sunday:—" Yesterday afternoon I was informed that the Directors of the National Bank of Australasia had decided to suspend payment. The information gave mc great surprise, and I , realised at once that the position had become extremely critical. Without delay I had a consultation with some of my colleagues, and we gave consideration to a proposal that bad previously been before us for the proclamation of a Bank holiday for a week. It had been represented to us.that if we could by any means suspend banking operations an opportunity would be given for calmer consideration of the position of affairs than if withdrawals on the tremendous scale which has been the rule for the last two or three weeks were permitted to continue. It had been represented to us that possibly if time were permitted some of the Banks which had not up to the present suspended might amalgamate, This consideration weighed with us a good deal; besides we had been having communications almost daily from the Premiers of other colonies urging us to do something with a view to restoring public confidence. Although it would not be correct to say that we acted on the initiation of the Banks, still we were informed that unless some such step as the proclamation of a holiday were taken it was probable that others would close during a few days. The very successful reconstruction of the Commercial Bank has had a good deal to do with this. Depositors easily take alarm, and look only to their own safety. They would see on the one hend that the National Bank of Australasia, one of the greatest of our institutions, had closed its doors, and on the other the resuscitated Commercial Bank beginning its new career. They would say to themselves, " The Commercial, at any rate, is safe ; we will put our money into it." By this means the deposits of undoubtedly sound Banks would quickly be transferred to the Commercial, which would help to moke things worse than they are. Having, as I have said, given full consideration to the matter, my colleagues determined to suspend banking business by proclamation for five days, up to, and inclusive of Friday next. We did not include Saturday because we wanted to give facilities for the closing up of the week's business. In order that the matter might - be , put into due form it wis necessary that a meeting of the Executive Council should be held, and for this purpose a sufficient number to constitute a quorum went down to Frankston by train, where his Excellency the Acting-Governor was staying. The form of proclamation was thereupon agreed to, and when we returned late at night intimation of it was given to the managers of the various Banks, who, hearing of our intention, were wait ing for the result. It must be remembered that this proclamation does not apply to the Commissioners , Savings Banks or the Post Office Savings Banks. At midnight I notified the decision of the Government to the Premiere of the other colonies in the following terms:— * In consequence of another Bank having decided to close its doors to-morrow, we have proclaimed to-morrow and the four following days Bank holidays in order to allay public excitement and give time for calm consideration. . As a epecimen of the telegrame I have received from the other colonies I will give you the following from the Premier of Western Australia ;—' Do you propose to do anything in regard to the Bank failures? The situation is becoming very perplexing. Disposed to join in any measure for restoring public confidence. Please let mc have your views to-day if possible. , " The suspension of the National Bank of Australasia ranks as a calamity almost if not quite on a level with that of the Commercial in 'this city and of the Australian Joint-Stock Bank in Sydney. It has been caused solely and entirely by the steady drain of deposits from the institution, which set in almost immediately following the downfall of the Commercial on April sth. For the space of one week the drain was not serious enough to excite alarm, but the suspension of the EDglisli, Scottish and Australian Chartered Bank as from April 13th accentuated the distrust existing in the public mind. A draining process com* menced, and by April 14th the Bank had lost £300,000 since tho date of its balancesheet, viz., March. 31st. The successive suspensions of the London Chartered Bank of Australia and the Australian Joint Stock Bank added to public distrust and slowly bleeding at all branches the Bank lost £350,000 between April 24th and April 29th. making a total of £650,000 in about four weeks. Thus while on March 31st the amount of specie at all points in Australia amounted to £1,450,000 it had been reduced at the hour of closing business on Saturday to £800,000. During the same period the notes' in circulation increased, it is estimated, from'£32s,ooo to £450,000, principally' in Victoria, the increase thas being £125,000. The distribution of the loss of specie has been as follows:—In Victoria, £425,000, In South Australia J8175,,000, and in WeStelrn Australia £50,000. The deposits declining to this extent, there remained therefore no other course but to close the doors, and the Directors .came to this determination after closing hours on Saturday. The total amount of deposits held by the Bank is £819,000, of which only £140,000 is English money. The ordinary half-yearly meeting of the proprietors of the Bank is to be held to-day, but the dividend of 10 per cent per annum recommended by the Directors in their report will not, of course, be paid. The shareholders will thus bo deprived by certainly no fault of their own of a distribution amounting to £50,600. ' The Argus declares that there is one point which should be mentioned id praise of the Directors and chief manager of the Bank. It is that they resolutely set their, faces against the follies of. the boom period, and during that time they increased their advances to but a small extent. The Chairman of the Bank, Mr Jno. Grice, thus " emninarises the Bank's positi6n :— "Notwithstanding the heavy drain which has been siade on toe Bank we stilt hold in coin in Australia a stun of £800,000, having £450,000 in Victoria. In addition we had oa the 31st March in thtt vhape of consols, Government debentures; and Treasury bonds and money at short, call, in London, about £730,000, and £260,000 in cash. I have no hesitation in saying that the balance-sheet of that date showed the Bank to be in. one of the strongest positions it hats yeb .occupied. Our cash on that, day amounted with the above bonds to £2,266,000 against notes and deposits, with accrued interest of £934,700, being 4s 10d in the £1, of what might be regarded equivalent to cash of our liabilities. Of our a earn of £1,400,000 i* in

London, the rest is in the colonies as security for our creditors. The capital paid up with the reserves and undivided profits amount to £1.720,000, ami the uncalled capital to £1,500,000, making a total of £2,120,000, bo that, including " inner" reserves, wo havo a martjin of about 40 per cent, between depositors and any risk of loss. [A- X r ** The manager of the Commercial Bank, in the course of an interview with an Argus reporter, stated that the most serioua blow by the stoppage will be inilioted on the South Australian people, for the Bank did by far the largest business in South Australia. It had all the best accounts, and about half the shareholders are also in thac colony. He added in regard to the panic:—"So far as the present scare is concerned, I can only characterise it as mad and senseless. People rush from one Bank to another with their money, aud are so influenced by the varying advices they get from theic friends that they are at their wits' end to know what to do. I heard of a case yesterday of a man taking hi a money out of one Bank to put it into another. On the doorstep of the second Bank he met a friend, on whose judgment he placed the utmost reliance, aud who was employed taking his money from that Bank to the hrst Bank which the other man had just left. The people do not know what they are doing. They aye just running to aud fro as if demented. Hundreds of thousands of pounds have been planted and hidden in all sorts of places, and when the scare is over no doubt a lot of money will be lost. Cases will occur in which people will foiget where they put it; they will hide it so carefully."

EXCITEMENT IN MELBOURNE.

The Argus of to-day, in its report of yesterday's proceedings, says: — " The let of May, 1893, will long be remembered as the most eventful day in the commercial history of Victoria. The publication of the news of a compulsory Bank holiday, suspending financial operations for the current week in Victoria, excited lively feelings of alarm and anxiety throughout the city. Business was practically disregarded, and the whole trading population of the metropolis was to be seen in the streets. Collins street was a sea of heads. The excitement was great, and the discussions were earnest wherever two or three citLsens met, nor did the agitation abate until after commercial hours." The paper goes on to describe the situation in detail. It was complicated by the action of the two Anglo-Australian Banks, the Union and the Bank of Australasia, which both elected to carry on busiuess as usual, or as nearly as possible. The Banking Chambers of the Institutions displayed an unwonted animation. As soon as the doors opened a crowd of email depositors anxious to withdraw their accounts jostled fiercely in the doorways with a large number of customers deairous of paying-in money to their credit, while the excitement of the scene was increased by some hundreds of curious onlookers who lined both footpaths, and made constant and very often successful attempts to force their way into the banking chamber. At first there wan a good deal of crushing and crowding, but it soon became apparent that a good many of those present were there simply as onlookers, and the ready promptitude of the imperturbable tellers epeedily checked any symptoms of a panic among those who wished to withdraw their funds. At the Union Bank the three receiving tellers were almost as busy as the four paying tellers, and a large number of customers who were evidently seized of the strong position of the Bank increased their existing credit balances by fresh additions, instead of giving way to the- prevailing -tendency" of making withdrawals. The Union Bank limited its transactions almost entirely to making payments to persona who held current accounts, and no Government cheques or cheques payable to third parties were negotiated, A very considerable proportion of those who presented cheques for payment were ladies, and it was almost ludicrous to see the anxiety which some of them displayed to receive cash for cheques representing Bums which went as low aa £1 and £1* 10a. After a while the people began to get tired of carrying away heavy burdens of sovereigns, and began to ask for notes, but it was not convenient for the Bank to pay every applicant in the paper currency, and those who -were moat eager to withdraw began to waver when they found-that they would be paid only in gold. "Most extraordinary Bank this," observed one perspiring customer to another, as he mopped his brow with a large silk handkerchief,,, , ' they ; ,will, only pay in gold.";J ; 4JSo.yhaa. presented'a; cheque for £1400, and was offered somei thing like a quarter of a hundredweight- of gold coin by the obliging teller in return for hie piece of paper. " No, you can have it back," he said after a moment's reflection, " on second thoughts I think I will leave it here after all," aud he elbowed his way out of the crowd again with hie black bag *mpty. A BANK SUPERINTENDENT INTERVIEWED. Mr John Sawera, the superintendent of the Bank of Australasia, on being interviewed yesterday regarding the action of that Bank in opening notwithstanding the proclamation issued by the Government, said —" We were not consulted in any way by the Government as to its intention to issue the proclamation published in the Government Gazette of yesterday proclaiming five days' holidays in connection with the Banks in Victoria. Wβ only heard of it late on Sunday night, and, late as it was, we gave the matter very grave and careful consideration before deciding on our course, of action. We felt strongly that if it could be possibly avoided without doing injury to our Bank we ehould not take any course that would accentuate the position of the other Banks by having comparisons drawn by the public between their action and ours. We nad a very sincere desire not to embarrass them by any action of ours, and at the same time not to take any course that would bo in opposition to the wishes of the Government if it could be avoided. After most carefully considering the matter from every point of view, we had to look what the effect would be upon our position in the other colonies, in England, and in all parts of the world, such as the East, where we have connections, if we allowed it to go forth next day that we had stopped business for five days and practically suspended payment. People would not stop to inquire into details or into the cause, that it had been at the mitigation of our Government that we had closed our doors for that period, they would merely look to the fact which appeared on the surface, that the Bank had practically suspended payment jL or -five days. Seeing that we had not been consulted in the least as to the advisability of issuing the proclamation, and that if we closed our doors as directed by it it would have a detrimental effect on the Bank which could not easily or readily be removed, we decided that our first duty was to do what was best in the interests of our Bank and its constituents. We believe that the action of the Union Bank aud ourselves will have the very best effect in stopping the panic and in restoring confidence both at Home and abroad."

THE ACIION OF THE GOVERNMENT.

The action of the Government in ordering the dosing the Banks is seriously regarded, but the. opinion in commercial circles in the main seems to be that it was unwise. V£The President of the Chamber of Commerce, Mr Robi. Dickens, tot instance, inclines to the belief that the general view ia •* that unless the Government had good reasons for believing that the whole or the Banks would co-operate in the observance of the holidays, the step was a false one." The Argus, commenting upon the matter to-day, writes:—"A circumstance that has created unfeigned astonishment is that irioat of, the Banks'managers do not appear to have consisted t in: a matter which so closely ,-|tJiom. One or two may have been in'tW confidence of the .Ministry, bat to others the intimation was as -great a surprise ac ifc was to any outside member r of the community, lor ' our; part, we must confers to an opinion that before the now historic proclamation waa issued a persistent effort should have been, made, to bring the Bank managers to the one frame of mind, and thus to have prevented an invidious and possibly a mischief-making distinction ; and, also,,wo muet express the belief that communications should hsve been entered into with the Governments of the other colonies so that the Victorian actiou might have been deprived oi its isolated and

hysteric character. Reviewing the situation as a whole, and making every possible allowance, we uro constrained to say that it is unfortunate for tho Ministry and for the colony that at this writioal juncture the Government should have ft Treasurer who, apparently, is not in touch with thu business community, and is not capable of giving his colleagues level-headed advice."