AUSTRALASIA. 



ing facilities, and the profits of the business had 

 been in the highest degree satisfactory. To meet 

 the large and constantly increasing demands for 

 loans the colonial banks readily secured, by the 

 offer of 4^ to 5 per cent, interest, vast amounts 

 of English and Scottish capital in the form of 

 fixed deposits, which were really loans that at 

 the option of the depositor might be withdrawn 

 after a certain date. The aggregate of British 

 capital which thus found its way to the Austra- 

 lian banks reached nearly $200,000,000. These 

 funds the banks lent at handsome rates of in- 

 terest upon lands, mines, and fixed properties 

 all over the colonies, and most of them did not 

 hesitate to loan up to, or even above, the full 

 amount of their deposits from all sources. In 

 some of the cities, notably in Melbourne, Victoria, 

 a great boom in real estate took place, and houses 

 were built far in excess of the needs of the pop- 

 ulation, with money which the banks were at all 

 times ready to lend. Meantime the colonial 

 governments had been indulging in very heavy 

 borrowing; extensive public works were being 

 made at high rates of wages ; imports, especially 

 of luxuries, greatly increased, yielding liberal 

 revenues through the customhouses ; and the 

 country was enjoying an era of prosperity that 

 was largely fictitious. While this state of things 

 continued values were constantly appreciating, 

 leaving an apparently ample margin in the se- 

 curities upon which the banks made their most 

 liberal loans. But they were not quick enough 

 in noting the turning of the tide. The Baring 

 crisis in the autumn of 1890, and the distrust 

 which followed it, served to check to some extent 

 the depositing of English money in Australian 

 banks, but those banks took no heed of this note 

 of warning. They continued to loan their bor- 

 rowed capital, which they were liable to repay at 

 a certain time, against securities upon which 

 they could not possibly realize quickly in a de- 

 clining market. It had been so easy to get money 

 from England, and the profits of the business 

 were so inviting, that curtailment or retrench- 

 ment was in the majority of cases unthought 

 of. These conditions continued until late in 

 1891, when the failure of the Standard Bank and 

 the Metropolitan Bank in Melbourne, and several 

 other institutions, awoke a feeling of insecurity 

 and distrust which could not be quieted, and 

 failure followed quickly upon failure. These 

 early failures were confined for the most part to 

 those institutions which had fostered the land 

 and house-building speculations, at this time in 

 a state of collapse : but a far more widespread 

 disaster was only averted by a combination of 

 the more solid banks for mutual aid. This ac- 

 tion of the banks in March, 1892, marked the 

 end of the first phase of the banking crisis. Dur- 

 ing the remainder of the year there were but few 

 suspensions, and many of "the banks did a profit- 

 able business, though it was becoming evident 

 from the sharp competition for business that 

 there were more banks in the colonies than the, 

 business of the people required, and this com- 

 petition led to the running of risks that judicious 

 and conservative bank management would have 

 avoided. In the beginning of 1892 there were 

 28 banks, with upward of 1,700 branches, doing 

 business in the Australasian colonies. The fol- 

 lowing table shows the banks doing business at 



the end of the year, and, so far as the figures are 

 obtainable, their paid-in capital, and the volume 

 of business of each during the quarter ending 

 Dec. 31, 1892 : 



The volume of banking business in each of the 

 colonies, the figures representing the aggregate 

 of advances, deposits, and bills and notes in cir- 

 culation, was as follows: Victoria, 94,002,196; 

 New South Wales, 81,244,015; Queensland, 

 28.539,193; New Zealand, 29.861,047; South 

 Australia, $15,405,257; Tasmania, 6,965.818; 

 Western Australia, 3,638,336. This was a large 

 volume of business in proportion to the population 

 of the colonies, and was a considerable increase 

 over the business done during the quarter end- 

 ing June 30 of the same year. There was also 

 an increase in the total deposits received by the 

 banks during 1892 of about 5,000,000 over the 

 previous year ; but the increase was confined al- 

 most entirely to banks regarded as strictly first- 

 class, the Bank of New South Wales leading with 

 an increase of 1.760,000. But the deterioration 

 in the quality of the business transacted is shown 

 by the decrease in the total profits. For six 

 months in 1892 these amounted to 880,082, as 

 against 1,049,627 for the same period in 1891. 

 This decrease affords striking evidence of the 

 fierce competition for business, and also indi- 

 cates a lack of careful discrimination as to the 

 character of the business taken. 



The second phase of the crisis began early in 

 1893 with the failure on Jan. 28 of the Federal 

 Bank of Australia, Limited, at Melbourne. This 

 bank was established in 1881, opened an office 

 in London in 1887. and obtained there a large 

 sum of money on deposit. It had never been 

 rated as first-class and had not been able to 

 secure the best class of business, and when at 

 its half-yearly meeting in October, 1892, no divi- 

 dend was declared, a withdrawal of confidence 

 was shown by the immediate falling off in de- 



