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New Zealand Herald, Volume XXX, Issue 9111, 31 January 1893, Page 4

We are sorry to not. tnat to the long list of failures in 'Melbourne has to be added that of the Federal Bank of Australia (Limited). The event was not altogether unexpected in well informed commercial circles. Rumour

asserted, some months ago, that the Bank was slowly bleeding to death through a loss of public confidence, and a steady depletion of its deposits. Although the Bank was not one of the large institutions of Victoria, it was bound up with a good many interests and enterprises, and its suspension will tend to intensify and spread the feeling of doubt and consternation which is so prevalent in Melbourne just now, comiug as it . does upon the top of so much financial trouble caused by

the bursting of the great Jland boom bubble. The Federal Bank had its head office in Collins-street,' Melbourne, with branch offices at Sydney, Adelaide, and London. It had also branches at Albert Park, Melbourne, Armadale, North Melbourne, Prahran, and South Yarra. The directors in Melbourne were: Mr. John Whittinejham, J.P. ; Mr. John Robb, J.P.; Mr. T. S. Hale, J.P. The general manager was Mr. A. Priestley. The directors in London were: Mr. W. Longbottom, J.P • Mr. W. Bickford, J.P.; Mr. Theodor Scherk, M.P., and the manager, Mr. W. Neill. There were six deposit agencies in Scotland and three in Ireland. In April last the.twentieth half-year's report was issued, in which the directors stated that the amount at credit of profit and loss account, after making due allowance for bad and doubtful debts, interest accrued on deposits, and rebate on discount of bills still current, was £24,426 18s lOd. With the balance from the previous half-year, the sum at disposal was ■ £29,829 12s 9d. A dividend was declared at the rate of 8 per cent., £16,000 ; transfer to reserve fund, £10,000. The directors recommended that, to cover shrinkages in the market values of the securities held by the Bank, the sum of £35,000 should be j transferred from the reserve fund to a ;

contingency account, to provide for any eventual loss on realisation. The directors, however, did not then anticipate that the amount would be required. After carrying out this arrangement the reserve fund still stood at £100,000. At that time,, it was announced that the Hon. James Munro had resigned his seat in consequence of being appointed General. This report seemed frank and straightforward, and as the worst period of depression and panic had passed, it was generally believed that the Bank would survive. But in October last the twenty-first halt-yearly report had a doleful tale to tell. In consequence of the continued depression in the market value of all securities the directors were

compelled to take the whole reserve of £100,000 and make it a contingency account, in addition to the £35,000 set apart in the previous half-year, as cover for any ultimate shrinkage., The amount at the credit of profit and loss was £8278 5s sd, which, with the balance from the previous half-year, making a total of £11,188 18s sd, was recommended to be carried forward, "so as to conserve the best interests of the Bank." At the meeting of shareholders the president of the directors, Mr. J. Whittingham, explained the balancesheet, and said : ''Still, with excellent harvest prospects there was every reason to believe that the colony would shortly emerge from its difficulties, and the directors sincerely trusted that the bank would enter upon a new era of prosperity." All would not do. The depression was too profound, and no recovery has yet come. In the last balance-sheet it was stated that the paid-up capital was £400,000 ; the Crown deposits were £410,735 ; and the general deposits, £2,079,514. It is stated now that owing to the non-payment of dividend last half-year there had been persistent withdrawal of deposits in England and the colonies, compelling suspension. The distrust in all things Victorian excited in England by failures of monetary institutions, by prominent politicians occupying doubtful positions, and by the hopeless extravagance of the Government, has been the means of bringing down the Federal Bank. If, when the storm was brewing, the Ministers in Victoria had had honesty enough and foresight enough to take precautions instead of carrying on all sail, many institutions which have failed might have got through the crisis. But instead the Government attempted to carry out a game of bluff, with disastrous results all round.