The Newfoundland Bank Crash of 1894, known as Black Monday, was one of the turning points in Newfoundland's pre-Confederation history. The financial woes of the former British colony were worsened when two of the colony's commercial banks, the Union Bank of Newfoundland (established in 1854) and the Commercial Bank of Newfoundland (established in 1858), both located in St. John's, Newfoundland,

Canada Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by tot ...

, closed their doors to the public on December 10, 1894. Fish merchants sat on the boards of directors of both banks and had approved large and risky loans to themselves, which left the banks with dangerously-low cash reserves leading into the crash. London banks suspended credit to the Commercial Bank of Newfoundland and requested payment on some of its loans. It was unable to meet these demands and was forced to close two days later. A bank run ensued on both the Union and the Savings Banks. The government-run Savings bank was able to weather the storm, but the Union was forced to close that day, never to reopen.

Aftermath

The crash had a disastrous effect on

commerce Commerce is the large-scale organized system of activities, functions, procedures and institutions directly and indirectly related to the exchange (buying and selling) of goods and services among two or more parties within local, regional, nation ...

and employment in the colony. Many families were left destitute. The crash brought Newfoundland to the brink of bankruptcy and resulted in the Canada Newfoundland

Confederation A confederation (also known as a confederacy or league) is a union of sovereign groups or states united for purposes of common action. Usually created by a treaty, confederations of states tend to be established for dealing with critical issu ...

talks. It also highlighted the weakness of its economy and the truck credit system on which it depended. Over a million dollars in bank notes from both the Commercial and Union banks were rendered worthless, at least temporarily. Savings accounts suddenly decreased in value and the country was in danger of defaulting in its public debt. The banks' directors were arrested and charged with larceny and conspiracy (they were all acquitted in 1897). Unemployed workers held street demonstrations demanding food and jobs. The government faced growing instability and went through three prime ministers in two months. Canadian banks began arriving within two weeks of the crash: the

Bank of Nova Scotia The Bank of Nova Scotia (french: link=no, Banque de Nouvelle-Écosse), operating as Scotiabank (french: link=no, Banque Scotia), is a Canadian multinational banking and financial services company headquartered in Toronto, Ontario. One of Canada ...

, the Bank of Montreal, the

Canadian Bank of Commerce The Canadian Bank of Commerce was a Canadian bank which was founded in 1867, and had hundreds of branches throughout Canada. It merged in 1961 with the Imperial Bank of Canada to form the Canadian Imperial Bank of Commerce. History In 1866 a ...

, and the Merchant's Bank of Halifax (now the Royal Bank of Canada). The Bank of Montreal accepted the government's account in early 1895, and the country adopted Canadian currency in January of that year. It was the beginning of heavy involvement by Canadian banks in the Newfoundland economy, which was an important factor in Newfoundland eventually joining Confederation in 1949.

External links

Newfoundland and Labrador HeritageNewfoundland Museum Notes - Newfoundland Banking Institutions and Currency
{{Financial crises 1894 in North America Bank failures History of St. John's, Newfoundland and Labrador Pre-Confederation Newfoundland 1894 in economics Financial history of Canada Financial crises 1894 in Newfoundland