FURTHER BANK FAILURES

West Coast Times, Issue 319, 1 October 1866, Page 2 (Supplement)

FURTHER BANK FAILURES

(FROM THE ARGtJS LONDON CORRES

JPONDENT.)

No fewer than four banking establishments have suspended since the despatch of my last letter. The most calamitous of" these failures is that of the Birmingham Banking Company, which closed its doors on Saturday, the 14th insfant. The consternation and agitation in that town and throughout the iron district were excessive, and many of the manufacturers are. put to dreadful inconvenience. The amount of liabilities, is variously estimated at* from a million and a half to two millions. The company, which Avas the first joint-stock bank started at Bir- 1 mingham, in 1829, having been based on the principle of • unlimited, liability, the losses to the town do not merely include the usual items of a bank catastrophe, but the majority of the shareholders are local people. The explanation of the cause of failure is, to say the least, a remarkable one. The manager in his circular intimates that, owing to gross past mismanagement, recently discovered, they have sustained heavy losses, of which the directors were ignorant until recently. In addition to these -past losses, there have been recent blunders. A large amount of capital has been locked up in securities which are not immediately available — the secret cancer gnawing at the vitals of half the financial associations and agencies of the age.- The evil dates back for many, years. Some fifteen or twenty years ago the executive fell into the dangerous -system of making large advances to persons of small means and speculative turn, in the iron trade. Once in the meshes of these persons; the bank could do no other than suffer severely. Advances to an enormous amount were from time to time made ; every attempt to assist these persons ' only resulted iv the loss to the. bank of so much more treasure ; as one failure after another occurred, the position, character, and credit of the bank became in some measure compromised ; so that whatever misdeeds there may have been of more recent date, it is to the false steps of former times that we may look for the origin of this disaster.

On the day previous to the suspension, a deputation of directors from this' and other joint-stock banks had an interview with the governors of the Bank of England, to solicit aid in the emergency, but it was refused. A few weeks since the directors themselves advanced nearly L 70,000 to meet the pressure. The bank had branches at Walsall, Wednesbury, Dudley, and Coventry. The number of shareholders exceeds 700. The paid-up capital is L 275,590, being at the rate of LlO per share. The reserved fund was said not long sinee"*to have been L 200,000. Throughout South Staffordshire and East Worcestershire the suspension has occasioned a shock to credit in all commercial circles, and \t is feared that several iron firms will be compelled to discontinue operations. To mitigate the inconvenience as much as possible, all the other local banks have rendered assistance to depositors, and those whose needs are most urgent. Meanwhile, a petition under the Winding-up , Act has been filed ; and some active measures are being taken for reorgannising the business of the collapsed establishment. It is probable that a new institution will be formed, on the limited liability principle, v At a 1 meeting of shareholders on the 19th, the liabilities were stated/ to be about L 1,800,000, and the assets L 2,000,000. It is to be presumed that a large proportion of the latter are unrealisable at present.

The stoppage is announced of Messrs Charles Harvey and Son, private bankers, of Longton, North Staffordshire,. The liabilities are believed\ to be under L 40,000. The business is understood to have been diminishing for some time past, and the stoppage .appears to have been expected. The failure of Overend, Gurney and Co., and the inability of the firm to obtain assistance in other quarters, combined with the difficulties of a nephew of Mr Harvey, are stated to be the proximate causes The bank was established in 1821, and had a fixed note issue of L 5624.

On the 19th, Preston was convulsed with the tidings that the " Banking Company " of that town and neighborh6od had closed their doors. Enormous advances to cotton speculators appear to have led to the .catastrophe.

At the Blackburn branch alone two firms, it is reported, have obtained accommodation amounting in round figures to L 400,000. Latterly, it appears, the directors of the bank had become uneasy about their outstanding accounts with some of the manufacturers and other debtors, and pressing demands were made on them for a settlement. This naturally got wind, induced suspicion that matters were not quite right, and led to a "run " on the i part of those who were in the secreC On the two days previous to the'failure L 40,000 had in this way been paid away. The liabilities, are roughly esti1 mated ai'Ll,soo,ooo, and the assets are not yet made public. The company' was formed in 1844, and tke liability of its 130 shareholders is unlimited. The -paid-up capital is LIOO,OOO, the amount paid on each LI OO share being LSO. The suspension has seriously depressed the Liverpool cotton market. The fourth suspended establishment is the General Exchange Bank, a somewhat trumpery" affair, which was an amalgam of two other concerns — the ' London, Hamburg, and Continental Exchange Bank, and -*he Estates Bank. The nominal capital Vas one million, but only L 93,101 was ever paid up, and the assets on its stoppage did not exceed L 40,000. An abortive attempt has been made to erect 4 a hew bank on the ruins of the old one, but it is to be wound up and disappear.

The Consolidated Bank was re-opened for business on the 2nd instant ; its shares are at a premium, and its prospects are highly auspicious. The closing to the trade of the country of the great discount house of Overend, Gurney, and Coy has led some of their 'principal employes to commence business as bill brokers. Among these are Messrs C. Spencer and S. B. Hobbs, The suspension was announced on the 28th ult. of Messrs Dadabhai. Nayroji, and Co., of Great St. Helen's, East India merchants, owing to the non-re-ceipt of expected remittances from Bombay. The firm was 1 established in 1859, and has enjoyed good credit and an extensive business. Its liabilities arc' stated to be L 305,000,' and anticipations seem to be entertained of a favorable liquidation. i ' ! 1 It transpired on the 19th iust. that the acceptances of Messrs Carleton v Brothers, wholesale warehousemen, of Gutter lane and Goldsmith street, had been returned. The amount of liabilities has not transpired,- but* it seems to be thought the 'assets will be considerable. ' v