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Between private responsibility and public duty. The origins of bank monitoring in the Netherlands, 1860–19301

Published online by Cambridge University Press:  12 September 2008

Joost Jonker
Joost Jonker
Affiliation:
Amsterdam
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Financial History Review , Volume 3 , Issue 2 , October 1996 , pp. 139 - 152
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Copyright © European Association for Banking and Financial History 1996

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References

2 The best historical perspective is given by Bosman, H. W. J., De wet toezicht kredietwezen (Leiden, 1958).Google Scholar See also Coljé, H., Het toezicht op de banken in Nederland (Amsterdam, 1988)Google Scholar; van Wijk, H. H., De Nederlandsche Bank, functie en werkterrein (Amsterdam, 1988), pp. 67–8.Google Scholar For an exhaustive treatment of developments towards formal monitoring during the 1930s, see de Vries, J., Geschiedenis van de Nederlandsche bank, 5.2, Trips tijdvak 1931–1948 onderbroken door de Tweede Wereldoorlog (Amsterdam, 1994), pp. 166–90.Google Scholar

3 For the Nederlandsche Bank, see the invaluable company history by de Jong, A. M., Geschiedenis van de Nederlandsche Bank, 4 vols (Haarlem, 1967).Google Scholar More recent, but drawing heavily on De Jong, is Jonge, J. A. de, ‘Het economische leven in Nederland 1844–1873’, ‘Het economische leven in Nederland 1873–1895’, and ‘Het economische leven in Nederland 1895–1914’, all in Blok, D. P. et al. (eds), Algemene geschiedenis der Nederlanden, 12, Nieuwste ti jd (Bussum, 1977/1978), pp. 35–6, 53–76, 249–84.Google Scholar For an overview of nineteenth-century developments, see Jonker, J. P. B., ‘The alternative road to modernity, banking and currency 1814–1914’, in Hart, M. 't, Jonker, J. P. B. and Zanden, J. L. van (eds), A Financial History of the Netherlands (forthcoming).Google Scholar

4 Eisfeld, C., Das niederländische Bankwesen (The Hague, 1916), pp. 140–50CrossRefGoogle Scholar; Jongman, C. D., De Nederlandse geldmarkt (Leiden, 1960), pp. 125–35, 183–4Google Scholar; and De Jong, , Nederlandsche Bank, 2, pp. 560–3.Google Scholar

5 Boissevain, G. M., ‘Bankwezen I: de Nederlandsche Bank en de Amsterdamsche bankinstellingen’, in Smissaert, H. (ed.), Nederland in de aanvang der twintigste eeuw (Leiden, 1910), p. 812Google Scholar; and for lender of last resort operations from 1857, see De Jong, , Nederlandsche Bank, 1, pp. 412–13; 2, pp. 167, 172.Google Scholar When the Rotterdamsche Bank's position was threatened in 1868, it asked the Nederlandsche Bank for an assessment of its postion (ibid., pp. 200–1). For the important role of the Nederlandsche Bank in clearing the Pincoffs crisis in Rotterdam in 1879, see ibid., 2, pp. 406–17.

6 See ibid., 3, pp. 270–1, with Eisfeld, , Niederländische Bankwesen, 2, pp. 16, 18–19Google Scholar, for data on the ratio of bills discounted by the major commercial banks to the total amount of their bill holdings. Between 1890 and 1914 the Amsterdamsche Bank discounted on average 5.5m. guilders annually, against an amount of bills ranging between 6m. and 15.7m. guilders shown on the balance sheet at each year end; the Twentsche Bank: 13m. guilders on 9.9–41.5m. guilders; and the Rotterdamsche Bank: 10.6m. guilders on 7.6–18.im. guilders. For the latter bank, Eisfeld gives a total of between 101.3m. and 258.3m. guilders for annual turnover on discount.

7 For details see Jonker, J. P. B., ‘Spoilt for choice? Statistical speculations on banking concentration and the structure of the Dutch money market, 1900–1940’, in Cassis, Y., Feldman, G. D. and Olsson, U. (eds), The Evolution of Financial Institutions and Markets in Twentieth-Century Europe (Aldershot, 1995), pp. 190–1.Google Scholar

8 De Jong, , Nederlandsche Bank, 2, pp. 183–7.Google Scholar

9 ibid., pp. 457–8. Data in ibid., 3, pp. 574–5. Since the figure for Amsterdam also includes discounted treasury bills, the proportion of true bills was even lower than 40%; see Eisfeld, , Niederländische Bankwesen, pp. 122, 142–3.Google Scholar The dilemma between unwanted practices and a fragile credit system reflected by policy towards notaries discounting their acceptances finally ended after the bankruptcy of two notaries in 1885 and 1890; see de Vries, J., ‘Het notarispapier en de Nederlandsche Bank’, in Bosmans, H. W. J. and Brezet, J. C. (eds), Sparen en investeren, geld en banken, opstellen aangeboden aan prof. dr. W. Eizenga ter gelegenheid van zijn afscheid op 13 november 1987 als gewoon hoogleraar in de staathuishoudkunde en de statistiek aan de rijksuniversiteit te Leiden (Leiden, 1987), pp. 398–411.Google Scholar

10 De Jong, , Nederlandsche Bank, 2, pp. 186–7, 459.Google Scholar For a good impression of the Nederlandsche Bank's narrow attitude towards the kredietverenigingen from the receiving end, see Louwerens, M. M., Honderdvijfentwintig jaar NV Crediet-en Depositokas, van kredietvereniging naar algemene bank (Amsterdam, 1993), pp. 23–9, 113–20.Google Scholar Other banks were sometimes also subjected to strict conditions for discount, as for instance the Banque de Paris et des Pays Bas in 1874–75: see ibid., pp. 194–5. Data in De Jong, , Nederlandsche Bank, 2, pp. 193, 465; 3, p. 265;Google Scholar and Eisfeld, , Niederländische Bankwesen, 2, p. 40.Google Scholar

11 De Jong, , Nederlandsche Bank, 2, pp. 351–2, 635.Google Scholar For data, see ibid., 3, pp. 560–3, 610–13. Between 1864 and 1875 the bank lost on average 0.07% of turnover on discounts and, between 1875 and 1889, 0.6%.

12 The classical, but somewhat biased, description is from Westerman, W. M., De concentratie in het bankwezen, een bijdrage tot de kennis der economische ontwikkeling van onze tijd (The Hague, 2nd edn, 1920).Google Scholar See also De Jong, , Nederlandsche Bank, 3, pp. 140–58.Google Scholar Data given in Financiële instellingen in Nederland 1900–1985, balansreeksen en naamlijst van handelsbanken (Amsterdam, 1987), pp. 40–1.Google Scholar

13 Eisfeld, , Niederländische Bankwesen, 1, pp. 178–9; 2, pp. 68–9Google Scholar; and De Jong, , Nederlandsche Bank, 3, 555–64Google Scholar

14 The cited phrase was used in the parliamentary debate of the Bank Act, 1903 and quoted by de Jong, A. M., De wetgeving nopens de Nederlandsche Bank 1814–1958, een historische stadie (The Hague, 1960), pp. 114–15.Google Scholar The homilies were sometimes put into practice, however, as for instance in letters to clients asking them not to present kredietpapier again. It is, however, impossible to tell on what scale, and how regularly, this happened. The losses on discounts are in De Jong, , Nederlandsche Bank, 3, pp. 560–3, 610–13.Google Scholar

15 On becoming its president in 1912, G. Vissering described the bank as ‘rather an old timers' bank’; quoted by de Vries, J., Geschiedenis van de Nederlandsche Bank, 5.1, Visserings tijdvak 1914–1931 (Amsterdam, 1989), p. 31.Google Scholar

16 The bank's indolence regarding the problem of organising an effective inter-bank payments system is a telling example of this attitude; see De Vries, , Nederlandsche Bank, 5.1, pp. 44–6, 51–2; and see also pp. 392–6Google Scholar for the bank's vacillations between private and public responsibilities. Eisfeld, , Niederländische Bankwesen, 1, p. 150.Google Scholar

17 De Vries, , Nederlandsche Bank, 5.1, p. 141.Google Scholar

18 Jongman, , Geldmarkt, pp. 148–57, 183Google Scholar; and Sayers, R. S., The Bank of England 1891–1944 (Cambridge, 1986), 1, pp. 38–9.Google Scholar

19 De Vries, , Nederlandsche Bank, 5.1, p. 62.Google Scholar

20 Jonker, , ‘Spoilt for choice?’, pp. 190–1Google Scholar; Jongman, , Geldmarkt, pp. 157–62Google Scholar; and De Vries, , Nederlandsche Bank, 5.1, pp. 61–3.Google Scholar De Vries compares this with an average of discounts, lombards and loans at the Nederlandsche Bank of 298m. guilders, and of four large commercial banks of 283m. guilders. However, De Jong, , Nederlandsche Bank, 3, p. 548Google Scholar, gives a total for the credit operations of the Nederlandsche in the financial year 1913–14 (April to March) of 159.4m. guilders. The combined balance sheets of the five major banks in 1913 show a total of bills, lombards and loans of 355.2m. guilders, according to the Financieële instellingen, pp. 42–3.Google Scholar

21 The bank had initially objected to the closure of the stock exchange on the grounds of being unable to meet the expected demand for credit. De Vries, , Nederlandsche Bank, 5.1, p. 61.Google Scholar

22 ibid., pp. 120–1; and Financiële instellingen, pp. 24–5.Google Scholar

23 De Vries, , Nederlandsche Bank, 5.1, pp. 80–1, 97Google Scholar; Houwink, A., Acceptcrediet, economische en bankpolitieke beschouwingen over den in het bankaccept belichaamden credietvorm (Amsterdam, 1929), pp. 36–7Google Scholar; Jongman, , Geldmarkt, pp. 187–8.Google Scholar

24 Capital and reserves of the Nederlandsche Bank remained the same, while lending fell from 226m. guilders in 1914 to 118m. in 1916, before recovering to 226.6m. in 1918. Data in Financiële instellingen, pp. 24–5, 42–3.Google ScholarDe Vries, , Nederlandsche Bank, 5.1, p. 85Google Scholar, prefers to give data for the five major banks from statistics prepared in the 1920s – capital from 113m. in 1913 to 190m. guilders in 1918; deposits from 288m. to 1,007m. guilders; and credits from 368m. to 1,085m. guilders.

25 De Vries, , Nederlandsche Bank, 5.1, pp. 87–8, 123–4, 383.Google Scholar Vociferous complaints were aired by Lamsvelt, H., Het provinciaal bankbedrijf en de concentrate (Arnhem, 1917).Google Scholar

26 De Vries, , Nederlandsche Bank, 5.1, p. 238Google Scholar, gives a list of cases stating the bank's commitment without, unfortunately, detailing the nature and extent of its involvement. During the interwar period the Rotterdamsche Bank was called the Rotterdamsche Bankvereeniging, or Robaver, but, for reasons of convenience, it will be referred to by its most commonly used tide.

27 ibid., p. 243; and Finanetëie instellingen, pp. 24–5.Google Scholar The bank's capital and reserves stood at 27.7m. guilders.

28 When supporting the Algemeene Nederlandsche Centrale Middenstands-Credietbank and in the collapse of Erdmann & Hethey, which occurred in 1918, the bank shared the risk with others and demanded proper collateral. See De Vries, , Nederlandsche Bank, 5.1, pp. 125–7.Google Scholar

29 Nieuwe Rotterdamsche Courant, 14 Apr. 1922; de Vries, J. (ed.), Herinneringen en dagboek van Ernst Heldring, 1870–1954 (Groningen, 1970), p. 485.Google Scholar Heldring was non-executive director of the Nederlandsche Bank.

30 Sternheim, A., in De Telegraaf, 4 04 1922Google Scholar; and De Vries, , Heldring, Dagboek, pp. 460–1.Google Scholar The director, J. van Vollenhoven, had close connections in Rotterdam with, amongst others, the Rotterdamsche Bank, one of Marx & Co.'s two main creditors guaranteed by the Nederlandsche Bank. In the case of the Rotterdamsche Bank and the Algemeene Centrale Bankvereeniging voor den Middenstand, the Nederlandsche Bank seems also to have been unaware of the true position. See De Vries, , Heldring, Dagboek, p. 571Google Scholar; and Beyen, J. W., Het spel en de knikkers, een kroniek van vijfiig jaar (Rotterdam, 1968), p. 47.Google Scholar

31 De Vries, , Nederlandsche Bank, 5.1, pp. 239–40.Google Scholar

32 De Vries, , Heldring, Dagboek, pp. 435, 460–1, 471.Google Scholar

33 De Vries, , Nederlandsche Bank, 5.1, pp. 240–2.Google Scholar The Nederlandsche Bank again stated its opposition to guardianship in a memorandum prepared for the Minister of Finance as a brief for the parliamentary debate on the government's backing of the Rotterdamsche Bank rescue operation: ibid., pp. 257–9.

34 Data in ibid., pp. 244, 248–9.

35 Stuart, G. M. Verrijn, Bankpolitiek (The Hague, 3rd edn, 1935), p. 140Google Scholar, puts the figure at 42m. guilders.

36 De Vries, , Nederlandsche Bank, 5.1, pp. 243–7;Google Scholar see also idem, Heldring, Dagboek, pp. 558–60, 562–7, 569–71, 573–5, 578, 580, 584–8, 591–602.Google Scholar

37 De Jong, , Nederlandsche Bank, 3, pp. 256, 258.Google Scholar

38 De Vries, , Nederlandsche Bank, 5.1, pp. 125–6.Google Scholar

39 ibid., pp. 259–62. When a shadow of doubt seemed to threaten the guarantee, the bank was quick to withdraw its credit. See Beyen, , Spel en knikkers, p. 49.Google Scholar

40 De Vries, , Nederlandsche Bank, 5.1, pp. 376, 392Google Scholar; and De Jong, , Nederlandsche Bank, 3, pp. 562–3.Google Scholar

41 The Nederlandsche Bank, Annual Report 1925–1926, pp. 23–6Google Scholar; and de Vries, J., De Cooperative Raijfeisen en Boerenleenbanken in Nederland 1948–1973, van exponent tot component (1973), 1, pp. 15–16, 21–3.Google Scholar

42 De Vries, , Nederlandsche Bank, 5.1, p. 266.Google Scholar

43 ibid., pp. 213, puts it to standing, perhaps following Sayers, R. S., Modem Banking (Oxford, 4th edn, 1958), p. 107.Google Scholar

44 Goodhart, C. A. E., The Evolution of Central Banks (London, 2nd edn, 1989), p. 104.Google Scholar

45 The non-executive director, Heldring, was quite clear in his criticism of the board in this respect. De Vries, , Heldring, Dagboek, p. 161Google Scholar; and see idem, Nederlandsche Bank, 5.1, pp. 178–202, 355–61, 390–6Google Scholar for other examples of the bank's sometimes doubtful efforts to earn money. The foreign exchange operations earned the bank criticism from other central bankers, notably Montagu Norman and, moreover, caused a huge loss when sterling was devalued in 1931: ibid., pp. 393, 429–67.

46 ibid., 5.1, pp. 257–9.

47 Even then, it was not staffed by trained accountants; see De Jong, , Wetgeving nopens, p. 248Google Scholar; Jaarboekje van het verzekeringsfonds van beambten van de Nederlandsche Bank (1952–1953), p. 90Google Scholar; and Jonker, J. P. B., ‘Sinecures or sinews of power? Interlocking directorships and bank-industry relations in the Netherlands, 1910–1940’, Economic and Social History in the Netherlands, 3 (1991), pp. 125–6.Google Scholar According to De Vries, , Nederlandsche Bank, 5.1, p. 259Google Scholar, the bank's accountants checked only rarely.

48 Bosman, , Toezicht, pp. 17–18, 47–8Google Scholar; and Stuart, Verrijn, Bankpolitiek, pp. 251–2.Google Scholar

49 Bosman, , Toezicht, pp. 18–23.Google Scholar

50 See De Vries, , Nederlandsche Bank, 5.2, pp. 166–90Google Scholar; Scholte, A. H., ‘Bankiers en belangenbehartiging: de Amsterdamsche Bankiersvereeniging 1914–1940’, Jaarboek voor de geschiedenis van bedrijfen techniek, 7 (1990), pp. 183–9Google Scholar; and Bosman, , Toezicht, pp. 18–23, 27–48.Google Scholar