The 1893 banking crisis in the Australian colonies involved the collapse of a considerable number of commercial banks and

building societies A building society is a financial institution owned by its members as a mutual organization. Building societies offer banking and related financial services, especially savings and mortgage lending. Building societies exist in the United Kingdo ...

, and a general

economic depression An economic depression is a period of carried long-term economical downturn that is result of lowered economic activity in one major or more national economies. Economic depression maybe related to one specific country were there is some economic ...

. It occurred at the same time as the US

Panic of 1893 The Panic of 1893 was an economic depression in the United States that began in 1893 and ended in 1897. It deeply affected every sector of the economy, and produced political upheaval that led to the political realignment of 1896 and the pres ...

(1893–1897).

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; as they were 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. Consequently, these 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 found themselves unable to repay these debts, and many began to declare

bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debto ...

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 The Federal Bank of Australia was established in Melbourne in 1881, and opened for business in April, 1882. Initially successful, the company expanded to New South Wales by absorbing the Sydney and Country Bank Limited in 1882. Banknotes were is ...

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 A bank holiday is a national public holiday in the United Kingdom, Republic of Ireland and the Crown Dependencies. The term refers to all public holidays in the United Kingdom, be they set out in statute, declared by royal proclamation or h ...

to ameliorate the financial panic and prevent any further run on the banks. By 17 May, 11 commercial banks in

Sydney Sydney ( ) is the capital city of the state of New South Wales, and the most populous city in both Australia and Oceania. Located on Australia's east coast, the metropolis surrounds Sydney Harbour and extends about towards the Blue Mounta ...

Melbourne Melbourne ( ; Boonwurrung/ Woiwurrung: ''Narrm'' or ''Naarm'') is the capital and most populous city of the Australian state of Victoria, and the second-most populous city in both Australia and Oceania. Its name generally refers to a metro ...

, as well as other locations in Australia, had temporarily or permanently closed their doors. The banks and other financial institutions affected included: * August 1891 – Van Diemen's Land Bank * September 1891 – Mutual Provident, Land, Investing, and Building Society * February 1892 – Toowoomba Deposit Bank * July 1892 – Victoria Mutual Building and Investment Society * February 1893 – Federal Bank, and the Queensland Deposit Bank. * April/May 1893 – Within seventeen days, three banks collapsed: the

Australian Joint Stock Bank The Australian Joint Stock Bank was a bank in Australia. It operated from 1852 to 1910, after which it became the Australian Bank of Commerce and then was taken over by the Bank of New South Wales in 1931. History The Australian Joint Stock Ban ...

, the Commercial Bank of Australia, and the English, Scottish and Australian Chartered Bank * May 1893 – the

Bank of North Queensland The Bank of North Queensland was formed in 1887 in Townsville with branches in Sydney and London. In 1893 there were branches in: Ayr, Cairns, Charters Towers, Cooktown, Herberton, Normanton, Rockhampton and Thursday Island and agencies at M ...

, the Brisbane Permanent Building and Banking Company, the City of Melbourne Bank, the

Commercial Banking Company of Sydney The Commercial Banking Company of Sydney Limited, also known as the CBC, or CBC Bank, was a bank based in Sydney, Australia. It was established in 1834, and in 1982 merged with the National Bank of Australasia to form National Australia Bank. Hi ...

, Federal Building, Land, and Investment Society, Limited, and Deposit Bank, the National Bank, the

Queensland National Bank The Queensland National Bank is a former bank in Queensland, Australia. History In 1872, the bank was established in Brisbane. In December 1914, the bank had its head office in Brisbane with branches throughout Queensland at Allora, Aramac, ...

, and the Royal Bank of Queensland. The

City Bank of Sydney A city is a human settlement of notable size.Goodall, B. (1987) ''The Penguin Dictionary of Human Geography''. London: Penguin.Kuper, A. and Kuper, J., eds (1996) ''The Social Science Encyclopedia''. 2nd edition. London: Routledge. It can be de ...

(absorbed by the

Australian Bank of Commerce Australian(s) may refer to: Australia * Australia, a country * Australians, citizens of the Commonwealth of Australia ** European Australians ** Anglo-Celtic Australians, Australians descended principally from British colonists ** Aboriginal A ...

in 1917) is noted as one that did not close its doors.

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. 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 mass. 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. These comments of 1897 were made as the

Federation Drought In Australia, the Federation Drought is the name given to a prolonged period of drought that occurred around the time of Federation in 1901. Though often thought of as a long drought, until the record dry year of 1902 the period was actually one ...

(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.

Social commentary

Poets of the time were critical of financial institutions, their profligate lending practices, and the misery resulting from their actions. In 1947, an author wrote, "Bankers' ruthlessness... were so much a feature of the 'Australian way of life' fifty years ago, that they brought words of burning protest from the pens of some of Australia's leading poets." * E. J. Rupert Atkinson's ''In the bank'' ::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. * Bernard O'Dowd's ''The mortgagee'' ::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. * Will H. Ogilvie's ''Taken over'' (1895) ::The banks are taking charge, old man ... I knew how it would be: ::The Flags are flying halfmast high for death of Tringadee... *

Banjo Paterson Andrew Barton "Banjo" Paterson, (17 February 18645 February 1941) was an Australian bush poet, journalist and author. He wrote many ballads and poems about Australian life, focusing particularly on the rural and outback areas, including the ...

's ''Kiley run'' ::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. * Steele Rudd's ''When the bailiff brings a warrant'' ::...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.

People affected by the crisis

Austrian-born but Australian-based landscape artist Eugene von Guerard (1811–1901) had invested his finances in Australia. After moving to Europe in 1882, his wife died in 1891, and then he lost his investments in the 1893 crisis. This resulted in van Guerard living in poverty in Chelsea, London, England, until he died in 1901 aged 89.

References