RDP 9303: The 1893 Bank Crashes and Monetary Aggregates 3. Estimate of Deposit Liabilities Converted to Long-Dated Maturities 1893–1914

The purpose of this section of the paper is to provide an estimate of the liabilities incurred under the reconstruction schemes which should be netted out of measures of the money stock within Australia. It should be noted that contemporary estimates of the amounts of liabilities ‘locked up’ under the reconstruction schemes and the timetable of their repayment were published in the Australian Trading World and reprinted in the Banker's Magazine (1894, p. 869 and p. 890). These data are deficient in two respects. First, they are based on balance sheet figures which do not show the distribution of those liabilities between Australia and the United Kingdom. Second, the schedule of repayment was based on the schemes of arrangement agreed to in the middle of 1893. The schedule of release of funds did not always follow that laid down in the original schemes. Several banks meet their obligations in a shorter time frame than had been agreed upon. Others extended their timetable of repayments when five of the twelve banks were forced to seek revised schemes of arrangements with their creditors ^[6].

The estimates presented below follow the contemporary analysts by using the balance sheet data of individual banks rather than those based on colony and state data. Reconstructed banks usually showed their terminable and interminable deposit stock and deferred deposit receipts as a separate item in their accounts, while nearly all of these liabilities were included as ‘deposit liabilities’ in the quarterly data published in the various Government Gazettes. In those cases where reconstructed banks did not identify these types of exceptionally long dated liabilities in their accounts it has proved possible to estimate the amounts. The aggregate results for year ended December 1893 to 1914 are shown in Table 2. The data for each bank and the method of estimation are presented in Appendix B.

However, the use of balance sheet data in Table 2 presents a problem insofar as nearly all the banks in question had assets and liabilities beyond Australia. Indeed, Australian banks had aggressively raised deposits in the United Kingdom during the 1880s so that in 1893 they comprised around £37m^[7] or more than a third of all deposits held. However, there were marked differences between banks in their reliance on this market^[8]. An Australian series of deferred liabilities has been constructed by subtracting an estimate of each of the reconstructed banks' United Kingdom liabilities incurred under its reconstruction scheme from its aggregate figure. An all reconstructed bank series has been generated by summing the individual data sets.

The method of estimation was to establish a benchmark figure of British deposits for each of the reconstructed banks. A statement of deposit liabilities in the United Kingdom at the time of suspension was often reported to the shareholders and creditors during the reconstruction process^[9]. These data of United Kingdom deposits have been converted to a percentage of the deposits of the unsecured creditors of each bank falling under the reconstruction arrangement.

It has been assumed that all deposits held in the United Kingdom would have been fixed term and so subject to the scheme of arrangement. This assumption inflates the weight of Australian banks' United Kingdom deposits as they did accept current account^[10] and government deposits in London which generally fell outside the reconstruction schemes. It is also assumed that depositors in the United Kingdom would have chosen to take up preference shares in similar proportions to Australian deposit holders, and that the repayment schedules would have been the same for both classes of depositor.

‘Other liabilities’ held in Australia are calculated by using a weighted average of the Australian and United Kingdom liabilities of the Colonial Bank of Australasia, English, Scottish and Australian Bank and Queensland National Bank.

The figures of United Kingdom deposits given for the City Bank of Melbourne, the Commercial Bank of Australia and the London Bank of Australia are implausibly high. City Bank of Melbourne, the Commercial Bank of Australia and the London Bank of Australia are implausibly high. In all cases they exceed the total of deposits brought under those banks' schemes of arrangement. Estimates of United Kingdom deposits of these banks have been calculated as a proportion of their total deposit liabilities at time of suspension. The 1893 ratios of the Australian-United Kingdom split of deferred deposits and inscribed stock have been applied to each of the annual figures. The aggregated results are shown in Table 3 and the detailed estimates for each bank are included in Appendix C.

Footnotes

Those five banks were the Colonial Bank of Australasia, for details see AIBR (1895), pp. 364, pp. 431–432 and p. 594; English, Scottish and Australian Bank, for details see AIBR (1895), p. 796; (1896), pp. 113–114, p. 179 and p. 333 and (1896), pp. 417–418; Commercial Bank of Australia, for details see AIBR (1896), pp. 587 and pp. 671–672 and (1897), p. 84; Australian Joint Stock Bank, for details see AIBR (1897), pp. 228, pp. 318–321 and pp. 393–395; Queensland National bank, for details see AIBR (1896), pp. 783–785 and pp. 820–822 and (1897), pp. 6–7, pp. 68–69 and pp. 96–97 and (1897), pp. 167, pp. 214–216, pp. 231–242 and pp. 322–323. [6]

Estimate from AIBR (1893), p. 586. See also Boehm (1971), Table 47, p. 199. [7]

Boehm (1971), Table 65, pp. 272–273. Estimates of the deposits held in the United Kingdom by the banks which reconstructed are given by Cork (1894), p. 216. [8]

Australian Joint Stock Bank, AIBR (1893), pp. 331–332; Bank of North Queensland, AIBR (1893), p. 335; Bank of Victoria, AIBR (1893), p. 335; City of Melbourne Bank, AIBR (1893), p. 336; Colonial Bank of Australasia, AIBR (1893), p. 581; Commercial Bank of Australia, AIBR (1893), p. 241; Commercial Banking Company of Sydney, AIBR (1893), p. 335; English, Scottish and Australian Bank, AIBR (1893), p. 243; London Bank of Australia, AIBR (1893), p. 332; National Bank of Australasia, AIBR (1893), p. 695; Queensland National Bank, AIBR (1893), p. 335 and p. 775; Royal Bank of Queensland, AIBR (1893), p. 618. [9]

The National Bank of Australasia had small current account deposits in London when it suspended. See AIBR (1893), p. 695. [10]