THE BANK FAILURE IN MELBOURNE.

New Zealand Herald, Volume XVI, Issue 5493, 25 June 1879, Page 5

THE BANK FAILURE IN MELBOURNE.

The Melbourne Argus of the 6th instant gives a long aceonnt of the excitement caused by the failure of the Australian and European Bank, and the run made upoD the City of Melbourne Bank. It says :— The greatest excitement ■was caused in Melbourne and the suburbs yesterday morning by the suspension of the Australian and European Bank. The doors arere closed about 11 o'clock, and the following announcement was placed outaide them:—"The directors find it necessary to close the doors of the bank for the present, but expect to re-open shortly, and liquidate their liabilities under the auspices of the associated banks, at whose offices all notes now in circulation will in the meantime be paid. ,, A little crowd collected outside the bank instantly the doors were shut, and the news of the stoppage of payment spread through the city "with the utmoet rapidity, and brought the greater portion of the business people whose time was at their own disposal to the neighbourhood of the bank, with the view of learning the actual iitate of affaire. Little, however, of an authentic nature could be gathered at that time, but rumours of all kinds, not only aa to the state of the bank, but of another—the City of Melbourne— were freely circulated, and culminated a little later on in the day in a run on the latter institution. The announcement which appeared on the doors of the Australian and European Bank that the notes of the bank would be cashed by the other banks, had a very goed influence in quitting the fears not only of noteholders but also of depositors. The directors and manager of the Australian and European Bank were closeted together ioaide their institution from the time the door a were closed, and as no information could be obtained from them with respect to the immediate cause of stoppage, or the reason why they opened at all that morning when they had to close so quickly afterwards, various explanations became current, one of which was that the Union Bank had promised to assist the Australian and European to the extent of £50,000, and the manager had opened on the faith of that assurance, only to tind th&t it was not fulfilled. Information obtained later in the day, however, shewed that there was only a small substratum of trutli in the statements made with regard to the Uuion The Australian and European Bauk had its account with the Union Bank, and the latter cleared the notes of the former, but they did not allow advances to it, and the real fact was, that the Union Bank had nothing to do with the stoppage. A few days ago, it is stated by an authority, the manager of the Australian and European Bank applied to the Union Bank for an advance of £30,000, sayiug that this sum was only wanted to increase the reserves ia case of a run. The Union Bank, however, did not believe that £30,000 would be of any use for the purpose mentioned, and the manager of the Australian and European Bank th--n asked for £50,000. The Uuion Bauk said that if they thought £50,000 would be sufficient for the purpose, they would yive it, but they did not think it would be, a-id they were therefore unwilling to do anything unless the other banks acted in concert with them. A consultation of the assosiated banks was then called, and they appointed a committee af four persons to investigate, and see if anything could bo done to enable the bank to tide over the run which had already partially commenced. The result of the investigation was that the committee did not feel jnjtificd in giving the assistance the Australian and European Bank desired, but they agreed that the associated banks should cash its notes, the amount of which, according to ths last balance sheet of the bank, which is dated 31st March, was £29,201. They also agreed to entertain afterwards any proposition which the bauk might make to them for assistance to enable them to meet their liabilities, to which end they suggested that the bauk should call up more of its capital. The committee have not let it be known precisely what was the reason that they declined to assist the bank, but a glance at the sworn returns at the qnarter ending 31st March last will show that the bank had no less than £169,600 7s 2d in deposits not bearing interest, and therefore liable to be withdrawn at any moment a run might commence, as well as £'25,327 out in note circulation, or, togoiher, nearly £200,000. The committee, however, were not prepared to back up the bank, when, as was tolerali'y well known, the run on it was commencing They concluded, as well as they were able to do from their lusty examination, which lasted for some hours yesterday afternoon and evening, that all the creditors of the bank—that is, depositors and note holders —could be paid in full from the present resources of the bauk, without calling up more of the shareholders' capital. That opinion became partially known to the public during the course of the day, and had some effect in calming the excitement, which kept on increasing for several hours after the banks doors closed, and caused, as has been already said, a rush on the City of Melbourne Bank. The City of Melbourne Bank being, like the Australian and European, a small institution as compared with our other old and well - established associated banks, was freely named by many excited individuals, who had gathered near the Australian and European Bauk, as likely to be subject to a run, and a panic immediately occurred amongst some of the depositors and noteholders, which ended in their rushing to the City of Melbourne Bank a fey minutes after twelve o'clock, and withdrawing their deposits or changing notes for gold. The first run of customers inside the bark kept up until about half-pas:; 1 o'clock, but it appeared much larger than it really was, as all sorts of persons were allowed in the bank, whether they had business there or not, and the consequence was, that at one time there were no less than 40 people standing at the counter. It was early circulated abroad that this institution wai in a different position from the Australian and European B.ink, and that it would be backed up to the utmost limit by other banks or wealthy persons, and for t,n hn«r after half-past 1 the run on it slackened very much. About 2 o'clock the manager caused notices to be posted in tho window that tho bank would be kept open until 8 o'clock that evening, and tho posting of the notices was greeted with cheers from the crowd outside. An incident occurred duriug the day which called forth cheers from the crowd in tho street, but they were not aware that they were cheering for a bag of coppers and not one of gold. One of the omnibuses belonging to the Melbourne Omnibus Company called with a heary bag or sack of coppers, and left it at the bank, and the crowd thinking it was a heavy sack of gold from some of other banks, cheered heartily at what they believed to bo proof of the intention of other institutions to assist the bank to the utmost. There was no necessity, however, for the bank at any time during the day to obtain any assistance in the shape of ready cash, its own resources being quite sufficient for all demands.