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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.

PERIOD FROM 1814.

MODERN DUTCH BANKING.

THE BANK NOTE SYSTEM.

OUR inquiry into the development of Dutch Banking before 1814 has shown that the principles upon which are founded the operation of the banks of to-day as establishments for giving credit were in those days unknown. The character of banks of deposit and circulation (giro) had not been officially given up by the already mentioned city banks. Only in the loans on specie and bullion in Rotterdam and Amsterdam, and still more in the loans on stocks in Middelburg, do we find a glimmering of the idea that a bank serves the public interest if it uses part of the means intrusted to its keeping in giving credit to the productive classes. The private cashiers had* even in the eighteenth century not only done a loaning business, but also discounted bills of exchange and given credit in blank. The city banks, however, had not made so much progress.

It may be presumed that the Netherlands would have adopted earlier the modern principles of banking if Great Britain, at that time growing very rapidly in power, had not repressed Dutch trade more and more, and if the effects of war, after 1780, had not seriously injured the country. The East India Company had been ruined at this time, the Dutch colonies were devastated, and for the greater part lost.

The Bavarian Republic (constituted in 1795) was not able to protect their small country from the results of the disturbed times. The kingdom of Holland (constituted in 1806) was drawn into the wars of Napoleon, the country was severely shaken and its trade was ruined by the “continental system.”

It was first by the treaties of 1814 and 1815 that the basis was furnished for a term of more favorable development. King William I. of Orange anxiously sought to promote the national welfare, but a long time was required to restore the commerce, so important for the Netherlands, because of the adverse conditions of the times.

Since the middle of the nineteenth century, the country has made considerable progress. From 1847 till 1871 the yearly average commerce showed an increase (for every quinquennial period), as follows:

From 1872 till 1891, the yearly average for each quinquennial period was increased:

EARLY SUBSTITUTES FOR BANK NOTES.

Trade and banking being always closely connected, it was natural that Dutch banking should become of great importance in the nineteenth century, and should be adapted to the modern system of credit. The first and most important step in this direction was made in 1814 by King William, who introduced the bank note system. We have seen that before this time this very important instrument of modern credit was not desired.

If the Dutch merchants wished to have paper credits, they could get them in other ways. It was therefore unnecessary to copy the bank note system adopted a long time before in England. Thus the men of those times reasoned.

The private cashiers supplied, in the eighteenth century, the wants of the merchants. It is supposed that the number of cashiers in Amsterdam alone was more than fifty in the seventh decade of the eighteenth century. The cashiers promoted a considerable intercourse between the merchants, and issued paper which circulated in the commercial towns. Of this paper, the kassiers promessin and the kassiers quitantien were the most important elements.

The kassiers promesse was a promise of payment, given by the cashier, answering to our promissory note. The kassiers quitantie was an assignation drawn on the cashier. It is true that these papers were only an imperfect substitute for bank notes. Besides these, the bank money of the Wisselbanken and the book credit by the private cashiers served as currency. The book credits were very serviceable on account of the cashiers clearing system.

In 1795 the attempt was made for the first time to introduce bank bills, but in a very imperfect form. The province of Holland resolved on May 12, 1795, to establish a general provincial lombard house (Bank van Beleening), in order to obviate the difficulty of negotiating the provincial loan of March 4, 1794, a difficulty arising from the scarcity of money at that time. The Bank van Beleening was to do business from July 1, 1795, to July 1, 1798. It made advances at a rate of interest of four per cent. on certain stocks, movables, and realty up to eighty per cent. of their value.

The advances were not paid in hard cash, but in beleen bank geld (i. e., loan bank money), and were entered in the account of the Exchequer as the contribution of the debtor to the provincial loan. A receipt was given to the debtor for the amount, and the receipt was transferable to a very limited extent. The beleen bank geld bore interest at three per cent. and could not be reclaimed in specie. These receipts cannot be considered bank notes in the modern sense of the word, but they offered a safe investment to capitalists.

FOUNDING OF THE BANK OF THE NETHERLANDS.

To facilitate a new loan, the Government proposed to Parliament on December 28, 1798, to establish a nationale beleen, discompto, en deposito bank (a national loan, discount, and deposit bank); the proposal, however, was not discussed. But the beleen bank of 1795 did not suspend operations in 1798. Vissering* says that in 1802 the liquidation of the bank established in 1795 was resolved upon, and that in 1807 King Lewis put an end to it.

More important than the scheme of this bank, which never was of much consequence, was the bill of May 21, 1802, by which the Government, having in view the example of the Bank of England, proposed to establish on July 1, 1802, for the following twenty-five years, a similar bank, under the name of “Algemeene Bataafsche Beleen, Discompto, en Deposito Bank (General Batavian Loan, Discount, and Deposit Bank). The parliamentary committee in its report of July 29, 1803, objected to this proposal, especially to the bank notes, which the committee regarded as dangerous, and the bank was not established.

King William reverted, however, to this plan, and issued, by decree of March 25, 1814, precise regulations for the Nederlandsche Bank (i. e., Netherlands Bank), which was chartered for the following twenty-five years as a joint-stock bank, with the privilege of issuing notes.

In the introduction to the decree, attention is particularly drawn to the necessity of raising commerce from the state of depression caused by the unfavorable circumstances of the times, and of increasing the circulation. Experience has conclusively shown the importance of these measures. At that time, however, the Government was more far-sighted than the merchants, who did not avail themselves of the services of the Bank, and considered their use as indicating a dubious condition of solvency. The subscription of the capital, fixed at 5,000,000 guilders, met with much passive opposition from suspicious capitalists. At the end of the first year, only 2,400,000 guilders had been subscribed, of which 1,000,000 was the gift of the Government. In the second working year, the whole capital was subscribed. But it was not till many years afterward that the Bank was fully appreciated by the Dutch merchants.

THE JAVA BANK.

In the kingdom of the Netherlands the Netherlands Bank remained the sole bank of issue, while in the Dutch colonies two note banks existed. The more important of them is the Java Bank at Batavia, exclusively privileged to issue bank notes in the Dutch East Indies.

The early history of this bank begins in 1746. On August 26th of that year, the establishment of a joint-stock company at Batavia, named “Bank van Leening” (i. e., loan office), had been decided upon. It had to make advances on gold, silver, jewels, merchandise, linen, furniture, etc. The capital of the Bank was divided into 300 shares of 1000 rycksdaelders each; the Government had subscribed for 200, and the public for 100 shares. The Bank was opened on December 1, 1746, but had so little business that it lent its capital at interest to the Government, in order to employ it profitably. Very early in its history the transformation of this bank into an exchange bank had been sanctioned. In 1752, in fact an exchange bank was established, and in the same year amalgamated with the Bank van Leening, under the style of “Bank en Bank van Leening” (i. e., bank and loan office). This institution took up the operations of the Dutch deposit banks, combined with the granting of loans on merchandise. Besides this, the Bank issued a sort of paper currency.

For his money the depositor received a certificate, called a bank bill. These bank bills, issued to the depositor’s order and indorsable, could at any time be exchanged for hard cash. In consequence of the great variety in the circulating coins, the bank bills were often and readily used as substitutes for money. The general state of affairs in the Dutch East Indies, however, was unfavorable to such a great establishment, and the Bank could not get into full working order. At the same time that the Amsterdam Bank went through its fatal crisis, the bank at Batavia also was ruined. In 1790, a deficiency, reaching the amount of 63,000 rycksdaelders, had been discovered, of which the directors could not give a satisfactory explanation. The Bank was dissolved on April 5, 1794.

The loan office (Bank van Leening) was continued, first as a dependent, but after 1809 as an independent institution. The English Government, which, from 1811, was in possession of Java, empowered the Bank van Leening to issue bank bills; but this measure met with no success. The payment of the bank bills was made impossible in consequence of the scarcity of ready money, and the plan of redemption by colonial goods, offered instead, proved entirely unacceptable. In 1817, this establishment passed into the hands of the Dutch Government and then ceased to exist. The bank bills still in circulation had to be presented for payment before June 18, 1818.*

Five years later, the merchants petitioned for the establishment of a private bank on the island of Java, and on July 16, 1823, the draft of a decree concerning the establishment of a Nederlandsche-Oostindische Bank† was submitted to the committee of the Batavian Exchange. Nevertheless, four years more passed before the plan was carried into execution. By a decree of December 11, 1827, the new note bank was opened under the style of “Javasche Bank” (Java Bank), and organized according to the model of the Netherlands Bank. The Java Bank did not at first find much support from the public. Its capital was fixed at 4,000,000 guilders (8000 shares of 500 guilders), and the Bank was to begin business as soon as 2000 shares had been subscribed. On January 24, 1828, this condition was fulfilled.‡ The placing of the remaining shares met with many difficulties, although the Government tried to induce the officers to subscribe. It was not before the year 1831-32 that 2,000,000 guilders had been subscribed, and for a long time no increase took place.

THE SURINAM BANK.

The third bank of issue, the Surinam Bank, had been established at Surinam, in 1829, as a note bank. It was described as a private bank, but in reality was a Government undertaking. The Bank gave credit too freely to planters and very soon was ruined.

By royal decree of May 19, 1864, the now existing Surinam Bank was established as a joint-stock company, and was empowered for the following twenty-five years to issue bank notes in Dutch Guiana (Surinam). The capital of this bank was at first 1,000,000 guilders. The head board of directors is at Amsterdam, while there is a local board at Paramaribo, the capital of the colony. The Surinam Bank is not of the same importance as the other two note banks, and may therefore be more briefly dealt with.

[* ] Mees, page 254.

[* ] “De Nederlandsche Bank gedurende haar vijftig jaarig bestaan,” in “de Gids” annual, 1863, pp. 5 and 6; Mees, pp. 268 and 269; Koenen, page 56 et seq.; and Citters, page 10, differ from Vissering on this point.

[* ] With regard to the Bank van Leening in Batavia, see N. P. van den Berg, “De Bataviasche bank courant en bank van leening” (Amsterdam, 1870), and the paper, “Bank courant en bank van leening (Bataviasche),” by the same author, published in the “Encyclopædie van Nederlandsche-Indie,” edited by P. A. van der Lith and A. T. Spaan.

[† ] Dutch East Indies Bank.

[‡ ] The Government had subscribed 1000 shares.