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• Banking In Germany.
• Chapter I.: Non-issuing Credit Institutions.
• Chapter II.: German Banks of Issue.
• History of Banking In Austria-hungary.
• Chapter I.: The Austrian National Bank.
• Chapter II.: Austrian Joint-stock Banks and Banking Associations.
• Chapter III.: Hungarian Joint-stock Banks and Private Credit Institutions.
• Appendix to Banking In Germany and Austria-hungary.
• II.: Statistics of Banking In Austria-hungary.
• Banking In the Netherlands.
• Introduction.
• Chapter I.: Era of Exchange Banks.
• Chapter II.: Period From 1814. Modern Dutch Banking.
• Chapter III.: Period 1814-1863. the Netherlands Bank.
• Chapter IV.: The Netherlands Bank, 1864 to 1895.
• Chapter V.: Banks of Issue In the Dutch Colonies.
• Chapter VI.: “cashiers,” Joint-stock Banks, and Private Bankers.
• Banking In the Scandinavian Nations.
• Part I.: Banking In Denmark.
• Chapter I.: History Previous to the National Bank.
• Chapter II.: The National Bank During the First Half of the Nineteenth Century.
• Chapter III.: Private Banks.
• Part II.: Banking In Sweden.
• Part III.: Banking In Norway.
• Banking and Money In Japan.
• Part I.: The Banking System.
• Chapter I.: Common Banks.
• Chapter II.: The National Banks.
• Chapter III.: The Yokohama Specie Bank. ( Shiokinginko. )
• Chapter IV.: The Bank of Japan. ( Nippon Ginko )
• Chapter V.: Land Mortgage Banks.
• Part II.: The Currency of Japan.
• Chapter I.: The Old Coinage System.
• Chapter II.: The New Coinage Period.
• Chapter III.: The Paper Currency.
• Chapter IV.: Readjustment of the Public Debt.
• Chapter V.: The Future Money Standard.
• Appendices.
• Appendix D.: National Debt In Japan. (from the “british Economic Association Journal” of June, 1895.)
• Banking, Currency and Land Tenure In the Chinese Empire.
• I.: China’s Currencies.
• II.: Chinese Banking: Ancient and Modern.
• III.: Land Tenure and Taxation In China.

CHAPTER II.

AUSTRIAN JOINT-STOCK BANKS AND BANKING ASSOCIATIONS.

THE VIENNA CLEARING-HOUSE.

IT was first attempted to handle the clearing-house business at Vienna on the plan of the like English and American institutions; but the attempt proved so slow and feeble in the way of results that a new organization was introduced, which deserves to be generally known. We refer to the Vienna Giro und Cassen-Verein.

Frequent complaints were formerly heard that the Vienna mercantile community made too little of the “bank account” department of the old Austrian National Bank. As late as 1873, only 1474 of the registered Vienna firms, out of a total number of 6100, had their folios in the various local banks. In 1864, when the Bank of England joined the London Clearing-House, a similar institution was founded in Vienna, at the instigation of the Austrian Credit Bank, and under the name Vienna Saldirungsverein (Balancing Association). This began business on December 1, 1864, in the so-called Saldosaale (Balance Hall, or Clearing-House). Four of the principal banks had announced to the mercantile community that they would daily adjust their claims at the new institution by the exchange of bills, cheques, money orders, etc.; and they invited the community to patronize the new enterprise by opening bank accounts with the banks of Vienna. The four leading banks were the Austrian National, the Austrian Credit Bank, the Lower Austrian Discount Company, and the Anglo Bank. At this stage, the proportion of settlements made in cash was as high as forty and a half per cent. At present, ten banks are associated with the Vienna Saldirungsverein, namely, the following six in addition to the four previously mentioned—the Union Bank, General Commercial Bank, Vienna Giro und Cassen-Verein, General Deposit Bank, Territorial Bank, and the Vienna Banking Association. All except the General Commercial Bank had “bank account” departments in 1887. The clearances from 1865 to 1873 were from 300 to 700 million florins per annum—two-thirds being made in paper and one-third in cash. The paper facilities are by no means utilized to the same degree as in London and New York, where cash clearances average only from four to five per cent. The transactions for 1887 were 551,472,661 florins; the total item for the Austro-Hungarian Bank being 135,000,000 florins. But the clearing-house business in Vienna received a new impulse by the founding of the Giro und Cassen-Verein, which (as appeared above) was also associated with the Saldirungsverein, and in 1887 turned over 143,324,082 florins. It is true that London was a century before us in this branch of business, and both elsewhere in Great Britain and in the United States there were clearing-houses many years before we thought of starting one in Austria; nor may it be expected that Vienna will ever reach the colossal results of London and New York. Nevertheless, the Vienna Giro und Cassen-Verein is just as intense in its activity and as perfectly equipped as the model clearing-houses of the United States and England. in the latter centres, the clerks of associated banks or firms meet at stated times and in specially appointed halls, to exchange cheques, bills, etc., and settle various claims; but all such business, and more besides, is managed by the Giro und Cassen-Verein alone. Its maximum annual transactions were 7,668,904,167 florins in 1881, 5,571,638,178 florins in 1882, and 8,112,396,442 florins in 1894. This is a moderate showing, even for the relative size of Vienna, when we consider London clearances, amounting to 6,000,000,000 pounds sterling; yet it is large in view of the circumstance that cheques are but imperfectly naturalized with us, whereas in London all payments of the middle and upper classes are made by cheques. Such differences of habit are explained by the difference of circulating mediums and of popular traditions. Notwithstanding occasionally depreciated currency, the Austrian circulating mediums are more convenient, especially for dealings between Vienna and the provinces, than those of England. The lowest denomination of English bank notes is five pounds, or ten times our lowest in Austria. Moreover, the Bank of England employs no further protection against counterfeits than to manufacture its own notes from its own water-marked paper; so that, there, both the Bank managers and the public are more distrustful of counterfeits than in Austria. The Bank of England holds all notes once returned from circulation—perforates and eventually destroys them. This affords an exact history of the duration of circulated notes. Indeed, the London banks, hotels, and public are so suspicious of counterfeits that one may hardly get a ten-pound note changed without introduction by somebody of known credit. We were ourselves obliged to call on the clerk of one of our merchant friends in the City in order to get change for a ten-pound note; and a five-pound note led us the long two hours’ chase from the Grosvenor Hotel, by Victoria Station, to the Bank of England, because the note had been issued by the branch bank at Southampton, and so excited the hotel cashier’s suspicion. No wonder that every well-to-do citizen of London keeps a bank account, and always carries his cheque-book with him, and but little extra cash. The formality of cheques, however, is decidedly more troublesome than the Austrian general use of bank notes; and the small five and ten florin notes also save the inconvenience of carrying considerable sums of silver. This practical usefulness of our currency, and the comparative helplessness of the English note circulation, explain our limited and backward adoption of cheques and the enormous multiplication of cheques in London. Lately, however, postoffice orders have become a quite popular form of currency, and they are generally accepted. The business facilities enjoyed by patrons of the Giro und Cassen-Verein are much wider than those offered by the English and American clearing-houses.

THE GIRO UND CASSEN-VEREIN.

The Vienna house not only receives deposits of money in accounts current, but also securities for deposit and bills of exchange for collection. The firms which deal with the Giro und Cassen-Verein are not obliged to handle the securities which they wish to buy or sell, but only to have the bargains transferred from one folio to the other. Besides buying and selling deposited securities, the Cassen-Verein also draws in coupons when due, and attends to time contracts. The Austrian Credit Bank and the Lower Austrian Discount Company pay two per cent. interest on deposits; but the Cassen-Verein, instead of paying interest, allows its patrons a percentage of the net profits in excess of six per cent., apportioned according to the size of their accounts. Even when the net profits come short of six per cent., and there is no surplus to be meted out, the Cassen-Verein’s patrons have this advantage, that all their business transfers are effected gratuitously. As a rule, the chief clearance business of nearly all the banks and banking houses is committed to the Cassen-Verein; they deal with it in accounts current, effect their mutual conveyances through its agency, and deposit with it their principal securities, inasmuch as the Cassen-Verein has extraordinary accommodations of security for this purpose. The transfer of securities, like that of money, being mostly effected by clearing-house paper, the banking houses need hardly half the clerical personnel required before the Giro und Cassen-Verein was founded. Many banking houses also keep reserve deposits at the Austro-Hungarian Bank. A great time-saving device has been adopted in the department of coupons, in the guise of an ingeniously constructed machine. This is fed with coupons in batches, and the slips are turned out perforated and automatically numbered. The trouble of stamping and numbering coupons by hand is thus avoided. They are delivered in bound parcels—100 parcels to a package—and the bearers receive accompanying cards, which give the numerical order and total amount of the coupons.

The structural arrangements of the palatial edifice which serves as the local habitation of the Giro und Cassen-Verein are admirable, and ensure perfect security to the deposits. Valuable papers are kept in two deep subterranean vaults, absolutely fire-proof, and lighted day and night by glass-insulated gas burners, high above reach, near the lofty ceiling. The light may be magnified or softened by turning the stop in a remote corner. Adjoining the vaults is a manipulating room, lighted from a deeply depressed courtyard. The windows are guarded by strong iron bars, and the whole basement can also be flooded with water in a very few minutes. The vaults are lined with great fire-proof safes, immured in the walls. An iron railway encircles the vaulted compartments. The surrounding corridor is nightly patrolled by two watchmen, who, through staunchly barred loop-holes, must look into the vaults every half-hour, to ascertain that nothing suspicious is brewing within, and they are obliged to attest their vigilant presence by touching an electric button. The instantaneous message is then communicated by a conducting-wire to a clock in the uppermost story, and this clock records the intelligence by dropping points on a great arch or conceptive dial, whose registrations are inspected every morning by the officer in charge. The telegraphic apparatus is further utilized. Fine wires are drawn across the space behind the iron bars, and any attempt to break through a door or window would be instantly signaled by the rupture of a wire. The electric bells in the rooms occupied by resident officials would loudly ring, and by pressing a button the basement could be straightway flooded. In view of the useful activity of the Cassen-Verein, which, as previously mentioned, undertakes more diversified operations than the English and American clearing-houses, it is not surprising that its transactions from the very start attained large proportions. It began business on July 1, 1872, and even in that first half-year the bank accounts amounted to 4,022,198 florins; cash accounts, to 2,681,520 florins, and the total sums turned over in the first half-year, to 2,296,598,351 florins.

By courtesy of Mr. Isidor Kanitz, director of the institution, we are enabled to give data for that and the succeeding years, as follows:

AUSTRIAN CREDIT BANK FOR TRADE AND INDUSTRY.

(Oesterreichische Credit-Anstalt für Handel und Gewerbe.)

The Austrian Credit Bank, founded in 1855, is nearly as old as the French crédit mobilier. The company is located in Vienna, with privileges of organizing branches and agencies at home and abroad. Within terms defined by the laws of trade, it may also interest itself as a limited partner in other firms. Branches may be erected for all or for only some of the operations designated in the statutes, and whatever be their functions, they have the same rights and obligations as the main organization. The charter was granted for ninety years, dating from 1855. In a few years after the original company was chartered, branches were created at Prague, Brunn, Lemberg, Buda-Pesth, Trieste, and Alexandria, though the latter was subsequently discontinued.

The company’s business departments may be classified as follows:

In addition to these comprehensive rights, the Credit Bank is also authorized to issue interest-bearing bonds of its own, whose total amount must always be secured by its proper resources, marketable effects, covered capital claims, and real estate. These bonds must not mature within less than one year, nor be issued in lower denominations than 100 florins. Their form must be submitted to the State for approval. The Credit Bank is authorized to issue certificates or warrants for the merchandise or raw materials on which it advances loans. The original capital stock was fixed at 100,000,000 florins, of which 60,000,000 florins were paid in. The result of twelve years’ operations showed that such a large capital was unnecessary, if the old experience held good, that a bank is a public receptacle for surplus capital, which it proceeds to distribute according to local needs. The Austrian Credit Bank soon became such a receiving and distributing centre, for its management was excellent. In 1868, it resolved to reduce its capital stock to 40,000,000 florins, in 250,000 shares at 160 florins each; and the step was defended as follows, in the business report for 1868.

“The Imperial edict dated May 20, 1868, sanctioned the resolution which was adopted at our general session of March 31, 1867, with reference to reducing our capital stock from 60,000,000 to 40,000,000 florins. To this end, we are authorized to buy in 50,000 joint-stock shares at their nominal value at the public Bourse; and then cancel the same, together with the 50,000 shares already bought in and held by the Bank. It was further ordained that these operations should be conducted in strict conformity to the regulations of the Commercial Code.”

The right of issuing new shares was reserved to the General Assembly of shareholders. Wide concessions were made to the founders of the institution, as in the event of an increase of capital stock above 60,000,000 florins they had the privilege of acquiring one-third of the added shares, while the other two-thirds should be held by the former shareholders. Despite these sweeping rights, or perhaps because of them, the institution rapidly gained vast influence, and suffered no loss of credit, even on occasion of several serious injuries by bad officials. Rather, the public confidence grew so great that the shares of the Credit Bank became the standard paper at the Bourses of Vienna and Buda-Pesth; and quite often even Berlin speculators based their operations on the status of Austrian Credit shares. The institution’s high status is also proved by the favor it receives when associated in raising State loans or effecting State conversions.

Data from the reports for 1894 will appear in the Appendix to this treatise.

The business development of the Austrian Credit Bank is especially important in the two features of State loans and discounts. As a syndicate firm for the floating of State loans, the institution has won an influential position, in line with the Rothschilds and the Berlin Discount Company, not to speak of other great banks in both Berlin and Vienna. By its judicious management, the great Hungarian loan of 400,000,000 florins was converted into four per cent. rentes, though only twenty years ago Hungary had to pay interest on the same at nine per cent.

The following table shows the dividends declared from 1856, the year after the institution was founded, to 1890, together with the price of shares:

LOWER AUSTRIAN DISCOUNT COMPANY.

This institution was founded in 1853, and next to the Austro-Hungarian Bank, it is the oldest discounting house in Austria. Its capital stock for the first few years consisted of 4,981,500 florins in 9963 shares of 500 florins each. The stock was increased to 5,000,000 florins in 1856, making 10,000 shares; and by another million florins in 1859, through the issue of 2000 new shares. It now consists of 9,800,000 florins, in 19,600 untransferable shares. The Discount Company supplied an urgent public want; and so sound has been its business régime that not even the embezzlement of 2,000,000 florins by one of its higher officials, about a decade ago, had power to undermine its credit. Business data will appear in the Appendix.

ANGLO-AUSTRIAN BANK.

This bank was organized in 1864, with a capital stock of 20,000,000 florins, of which only thirty per cent. was originally paid in. By the end of 1870, the paid-in stock was increased to 14,000,000 florins, and it now amounts to 18,000,000 florins in 150,000,000 shares of nominally 200 florins each, but effectually only 120 florins each. The Anglo Bank also issues mortgage bonds at four and a half per cent., which may be legally offered by way of security and invested in the way of private foundations, minors’ and other trusts, and as ordinary deposits. Statistical data of this bank may be found in the Appendix.

AUSTRIAN TERRITORIAL BANK.

This institution was founded mainly by French capital. It rendered special service by drawing French investors to take part in the fusion of the extensive Styrian mining companies. Those capitalists, however, were obliged to divert a large portion of their funds to Servia, in order to reap speedier profits. The Territorial Bank was established in 1880, at first with a capital of 80,000,000 florins; but as it soon appeared that so great a sum could not immediately find profitable occupation, the stock was reduced to 40,000,000 florins in gold, Austrian standard, fully subscribed and paid in. The Bank has very diversified interests in foreign railways, mines, and State loans. Its privileges and limitations are similar to those of the Austrian Credit Bank. See Appendix for data.

GENERAL AUSTRIAN MORTGAGE BANK.

This highly prosperous organization was started in 1864. At the first general meeting of shareholders, on April 24th, it was ascertained that 30,400 shares at 200 florins each had been paid in to the extent of forty per cent., and that there was no lack of customers. Indeed, the want of credit was so pressing that by the end of 1875, 11,189 applications for loans had come in, amounting to 54,532,700 florins; of which applications, 9277, amounting to 35,626,700 florins, had been rejected on statutory grounds; 1912 loans granted, amounting to 18,906,000 florins; but only 1648 of them realized, at an amount of 16,388,600 florins. The Bank’s charter was revised in 1881, with a term of ninety years. The business headquarters are in Vienna; and though the charter is limited to Austria, the actual operations also embrace Hungary.

The following rights and restrictions are provided:

The extraordinary activity which these liberal privileges encourage has not only never endangered the Bank’s stability, but has wholly contributed to its success. The net profits have averaged fourteen per cent. a year, save in the five years following the disasters of 1873. Before that time there had been dividends as high as 17, 20, 21, and 26 per cent. These remarkable profits are partly explained by the difference between the mortgage bonds and the mortgage loans, and partly by the directors’ management of bills of exchange at short sight. Much of the capital stock was subscribed in Paris, and this brought in a welcome supply of foreign funds, which were employed in agricultural improvements. The Bank requires mortgaged security three times the nominal value of its loans; and on this basis it had issued bonds to the amount of 15,600,000 florins, even by the close of 1865, in the first period of its operations. Outside its mortgage business it profitably devoted its working funds to the usual departments of banking; and the discount traffic reached a round sum of 54,000,000 florins; contango transactions, 30,000,000 florins, and the total cash transactions over 120,000,000 florins. Finally, the Bank might largely associate itself with great financial syndicates, and co-operate in the issue of State loans. At the beginning of 1887 the total item of loans was 143,000,000 florins, and the issue of mortgage bonds had risen to 138,000,000 florins.

For further facts, see Appendix; also, for the business report of 1894.

THE UNION BANK.

This bank was founded in 1870, with a capital stock of 12,000,000 florins. It was properly the amalgamation of four older banks. It has notably satisfied public wants in the way of opening a warehouse department, with capacious docks. In this connection it give an impetus to the legal issue of warrants. By 1887 more than 12,000,000 florins had been advanced on merchandise and warrants. The Bank has its own warehouse in Vienna; and, by the close of 1887, about 350,000 cwt. of goods lay stored therein, with an insurance value of over 3,000,000 florins. There are branches in Trieste and at Sarajevo, in Bosnia. It is widely concerned in syndicates and industrial enterprises.

For data, see Appendix.

VIENNA BANKING ASSOCIATION.

This was founded in 1869, with a nominal stock of 8,000,000 florins in 40,000 shares at 200 florins each, of which 40 per cent. was paid in; so that the effectual capital was 3,200,000 florins. In 1875, however, the effectual capital was increased to 12,000,000 florins. The Bank was thus put in a position to join a number of profitable syndicates.

For data, see Appendix.

GENERAL SURVEY OF OTHER AUSTRIAN BANKS.

The number of other discount, credit, and mortgage banks in Austria-Hungary is too great for us to attempt a complete review of their statutes and business operations; it must therefore suffice to give a sketch of them according to materials derived from sundry financial journals, and such statistical authorities as Mr. Ehrenberger and Dr. Rauchberg.

The years of over-speculation which led to the crisis of 1873 were serious times for banking in Austria-Hungary. Never had so many banks been founded in so short a time as were established at Vienna and Buda-Pesth in 1872 and 1873; nor did ever so many banks collapse shortly after their organization. Business which ought properly to have been managed by private persons was metamorphosed into the semblance of a bank; for instance, that of the stock-brokers, who were among the first to “break.” From data compiled by Mr. Ehrenberger, it appears that most of the banks founded prior to 1868, of which the principal ones had been started in the fifties, withstood the storm of 1873; whereas of the seventy banks founded at Vienna from 1868 to 1873, only eighteen were still operative in 1883, and of sixty-five provincial banks founded in the same year, only twenty-one were alive in 1883. We append an illustrative table showing the status of these institutions (expressed in millions and thousands):

With the exception of the Austrian Bank, only forty-seven banks may be regarded as still substantially solvent after 1883, geographically distributed as follows: Lower Austria, 15 (of which 14 belong to Vienna); Upper Austria, 2; Carniola, 1; Styria, 2; Coast Province, 2; Tyrol and Vorarlberg, 1; Bohemia, 12; Moravia, 2; Silesia, 1; Galicia, 4; Bukowina, 1; Dalmatia, 4. Twenty-nine of these banks engage in mercantile and industrial applications of credit, as well as in agricultural operations of the crédit mobilier; sixteen confine themselves to ordinary banking business; and others, including some of both the preceding classes, make most of their profits through large foundations, funding of loans, etc. In the period from 1869 to 1883, the movements in the capital stock, including that of the Austro-Hungarian Bank, were as follows:

Including the Austro-Hungarian Bank, we may classify the banks as follows, the amounts being represented in Austrian florins:

The balances for the separate years from 1870 to 1883 reveal unexampled fluctuations. Except in the case of the Austro-Hungarian Bank, the maximum total of liabilities occurred in 1872, at 1,466,000,000 florins, and the minimum, 784,000,000 florins, in 1877. The liabilities of Vienna banks decreased by fifty-four per cent.; those of the provincial banks by only twenty per cent. As business revived, liabilities rose again from 1878 forward; not appreciably, however, in the case of the Austro-Hungarian Bank. The following table shows the distribution of liabilities in percentages, exclusive of the Austro-Hungarian Bank:

The item of exchequer bills calls for special remark, as they require longer terms of notice than other interest-bearing deposits. On the side of assets, the least fluctuation appeared in the items of bills of exchange and mortgage loans. The latter departments represent the ordinary course of business, and are least influenced by speculations at the Bourse. Still, the bills portfolio could not altogether escape the effects of critical years; and from its maximum status of 337,000,000 florins in 1872, it declined to 259,000,000 florins in the six years following. A constant improvement set in at the close of 1878, and by 1883 the bills had again reached a maximum of 338,000,000 florins. Their subsequent movement varied somewhat according to turns of the market, but on the whole it was steadily and solidly upward. Loans show less uniformity, because they are also connected with contango operations, and these are more or less subject to chance. Loans dropped by a round fifty per cent. from their high status just before the critical period, in the course of the next nine years. We subjoin a classified table of assets in percentages, exclusive of the Austro-Hungarian Bank:

Next, we may distribute the assets among the respective banks as follows, including the Austro-Hungarian, stated in millions of florins and percentages:

The several headings of the assets columns below express the sundry departments of business; nearly all of which require special technical direction. That direction implies an adaptation to banks of the general economic principle known as division of labor. (We are at present quoting from Dr. Heinrich Rauchberg.)

The following statement gives the same items in percentages:

AUSTRIAN ASSOCIATIONS, OR CO-OPERATIVE SOCIETIES.

These institutions were legally organized toward the close of 1860. The Imperial Diet, in considering measures to be adopted, very carefully avoided the mistake of the German Empire, and gave no advantage to the rich over the poor. The matter of limited or unlimited liability was left optional with the organizing members. In practice, the societies are about equally divided. However, this remarkable fact was observed in the stormy years following the crisis of 1873, that the number of unlimited societies which fell into bankruptcy was much greater than that of bankrupt limited societies. There was the same reason for this as in England; namely, that in case of unlimited liability, the partners feel too much confidence in the directors and attach too little importance to cautious management. In Austria, co-operative societies have not attained wide development; there were too many older, powerful savings institutions, not to mention the new and admirable postal savings-banks, with their highly successful system of cheques. Lastly, there is the effectual competition of many local and provincial banks. The transactions of these societies are therefore very modest; their savings deposits are usually in sums less than 100 florins, and only in exceptional instances do the separate sums amount to 3000, 4000, or 7000 florins. Data furnished by the Austro-Hungarian financial year-book, “Compass,” are so meagre that we shall not attempt any tabulated statements.

SAVINGS-BANKS.

In the front rank of savings-banks appears the Postal Savings-Bank, which has by far the most perfect organization. Founded as recently as 1883, this institution soon spread into fourteen of the Crown lands; and when the department of cheques, or money orders, was added to its business, all classes of society patronized its bureaus. The number of its customers in 1894 was about 2,000,000, and their deposits amounted to more than 124,000,000 florins. There were over 1,000,000 depositors under twenty years of age, one-third of whom were children under ten years. Transactions in cheques and clearances amounted to 46,000,000 florins in 1884, 265,000,000 florins in 1885, and above 1,367,000,000 in 1894. The secret of this prodigious activity is quite simple, in that the whole transfer of payments is gratuitous. Every postal savings-bank money order, drawn by any depositor, is at once made payable in cash and receipted at any post-office in any part of the Empire, without cost of postage or other charges whatsoever.

For further data, see Appendix.