A BRIEF HISTORY OF BANKS IN THE STRAITS SETTLEMENTS AND MALAYSIA 1840 – 1986 ( PART I )



Saran Singh AMN, AMP, PNM



A BRIEF HISTORY OF BANKS IN THE STRAITS SETTLEMENTS AND MALAYSIA 1840 – 1986by Saran Singh AMN, AMP, PNM
 
INTRODUCTION
After the signing of the Anglo-Dutch Treaty of 1824, Singapore became an important trading settlement. It was found necessary to have an efficient banking system to serve the needs of the rapidly expanding commercial centre of Singapore which was made the capital of the Straits Settlements.

Attempts had been made to set up a bank in 1833 and 1835 but there were insufficient investors willing to put up the necessary capital. Finally, a breakthrough was achieved when the Union Bank of Calcutta opened a branch in Singapore in 1840. By 1877, there were seven banks having their offices in Singapore. These early banks were known as “exchange banks” since they dealt mainly in foreign exchange to finance external trade and short term financing. However, some of the early banks also had bank note issuing powers.

Some of the main functions of banks today are - receiving money for savings, current and fixed deposit accounts, discounting bills, lending money on short-term, providing overdrafts, foreign exchange operations, floating and servicing various loan issues, providing electronic banking services, providing automated teller services, providing auto-pay services for salary payments and auto-pay in services for payment of various bills. Banks also provide personal services to customers and some even act in an advisory capacity for private businesses and investors.

BANK NEGARA MALAYSIA

Bank Negara Tanah Melayu was set up in January 1959. One of its main responsibilities is to supervise all activities of commercial banks in Malaysia through the Banking Ordinance 1958 which was super-ceded by the Banking Act 1973. With the formation of Malaysia on 16th September 1963, Bank Negara Tanah Melayu came to be known as Bank Negara Malaysia (Central Bank of Malaysia). With effect from June 1967, Bank Negara Malaysia has been issuing Malaysia’s currency notes and coins.


THE ASSOCIATION OF BANKS IN MALAYSIA

The Association of Banks in Malaysia was established in November 1973 following the termination of the Interchangeability Agreement with Singapore on 8th May 1973. Its primary role is to represent all the commercial banks in all matters pertaining to the banking industry in Malaysia as well as abroad. As a matter of interest, there were 38 commercial banks in Malaysia in 1973.

Given below are brief historical details on the various banks, past and present, which operated or are still in operation in the former Straits Settlements and Malaysia up to 1986.


1. UNION BANK OF CALCUTTA, Singapore Branch

This was the first bank to open a branch in Singapore in December 1840. Very soon after, this bank issued its first issue of bank notes which are believed to have been in the denomination of 5, 10, 25, 50, 100 and 500 Spanish Dollars. Only the 100 Spanish Dollars denominations issued by this bank has been traced. It’s date of issue is 184~ (unknown), size 16.8 mm x 13 mm and was printed by Smith, Elder & Co., Cornhill, London, England. This bank is believed to have closed a few years later.


2. THE ORIENTAL BANK, Singapore Branch
(renamed THE ORIENTAL BANK CORPORATION in August 1851)

This bank commenced business on 1st May 1846. On 31st May 1849, this bank issued bank notes for circulation in Singapore. Only two denominations were issued i.e. $5 and $100 bank notes. Unfortunately none of these early notes have come to light. The only reference to these notes is an article in The Overland Singapore Free Press of Friday 1st June 1849. This article states that these bank notes were printed by the use of elaborately engraved plates on paper with a peculiar watermark. The obverse of the bank notes had the inscription “Oriental Bank” and the denomination ($5 and $100) written in

English, Chinese, Malay, Bengali and Tamil. This bank was granted a Royal Charter on 30th August 1851 and its name was changed to The Oriental Bank Corporation.

The Oriental Bank Corporation, Singapore Branch issued bank notes between 1860 – 1875. A cut Proof $100 bank note exists. This note was printed by Perkins, Bacon and Company, England and is undated (Circa 1865). Other denominations must have been issued but have not surfaced. This bank closed on 18th July 1884.


3. THE NEW ORIENTAL BANK CORPORATION LIMITED, Singapore Branch

This bank was formed in 1884 after the collapse of The Oriental Bank Corporation, Singapore. It evidently did prepare at least one bank note denomination, if not more, for circulation. A $1 Specimen bank note 18--(undated) exists. The size of this note is 127 mm x 79 mm and it was printed by Bradbury Wilkinson & Co. Engravers, London. This bank failed in 1892.


4. NORTH WESTERN BANK OF INDIA, Singapore Branch

This bank was established in Singapore in late 1855. An unissued $100 bank note of this branch exists, size 205 mm x 130 mm. Other denominations most probably exist but have not been traced. This bank closed in 1859.

5. THE CHARTERED MERCANTILE BANK OF INDIA, LONDON AND CHINA, Singapore Branch

Mercantile Bank of India, London and China, Singapore Branch was opened on 12th September 1855. It was granted a Royal Charter in 1858 after which its name was changed to The Chartered Mercantile Bank of India, London and China. Two transitional denominations in Proof on card of the $50 dated 18--(dated April 10th 1861) and the $100 dated 18--(dated April 13th 1861) have been traced. The plates for these notes were evidently prepared before the bank received its Charter. As such, the words “The Chartered” were added above the old name of the bank.

The regular series of bank notes bearing the denomination $5, $10, $50 and $100 were first issued in August 1861. This was followed by the $25 bank note in January 1862 and the $500 bank note in December 1864. Bank notes bearing various dates and signatures were issued by the Singapore Branch up to July 1892.

The Chartered Mercantile Bank of India, London and China, Malacca Branch was authorized to issue bank notes on unstamped paper under the provisions of the Stamp Ordinance No. II of 1881 vide Government Notification No. 150 dated 5th April 1882 published in the Straits Settlements Gazette. The Malacca Branch issued its first bank notes from 1881 onwards. The $5, $10, $25, $50 and $100 on the Malacca Branch of this bank exist. Bank notes bearing various dates and signatures were issued by the Malacca Branch up to January 1889.

The Chartered Mercantile Bank of India, London and China, Penang Branch was opened in 1860. The Penang Branch issued the $5, $10, $50 and $100 bank notes on 31st December 1861. The $25 note was issued on 10th March 1862. The Penang Branch issued bank notes bearing various dates and signatures up to February 1889.

The Chartered Mercantile Bank of India, London and China lost its Charter in 1892 and ceased to issue bank notes by February 1893. The name of this bank was later changed to The Mercantile Bank Limited. In 1959, The Mercantile Bank Limited became a wholly owned subsidiary of The Hongkong and Shanghai Banking Corporation. In January 1974, The Mercantile Bank Limited was integrated under the banner of The Hongkong and Shanghai Banking Corporation.


6. THE CHARTERED BANK OF INDIA, AUSTRALIA AND CHINA,
Singapore Branch (now known as THE STANDARD CHARTERED BANK)

The Chartered Bank of India, Australia and China opened its first Agency Office in Singapore on 19th February 1859 with David Duff as its first Agent. The Agency Office in Singapore was not authorised to issue bank notes until 20th July 1861 when a Supplementary Charter raised the status of the Agency Office to that of a Branch with bank note issuing powers.

To overcome the acute shortage of paper money in Singapore between 1859 – 1860, the Agent used his stock of Post Bills as a form of transitional “Bank Notes”. The Post Bills were payable three days after sight and were signed by the Agent and the Accountant and later accepted by them as Agents of the bank. These Post Bills circulated in Singapore and performed the functions of a bank note. The first issue of Post Bills was mad on 1st March 1859. These were signed by David Duff as Agent and C.S. Sherwood the Accountant. Very soon after, David Duff was dismissed for exceeding his authority on loans to his friends. C.S. Sherwood was promoted to Agent and G. Anderson was appointed as Accountant. Post Bills were hereafter issued on 1st August 1859, 1st December 1859, 2nd April 1860, 1st July 1860 and 27th August 1860. About $ 93,500 worth of Post Bills are believed to have been issued in the following denominations: $5 (300 pieces), $10 (200 pieces), $50 (500 pieces), $100 (500 pieces) and $500 (75 pieces).

Post Bills were also issued for Kwala Lumpur and Thaiping (Perak) in denominations of $5 and $10.

In 1861, the first official bank notes were issued by the Singapore Branch. They were in denominations of $5 (6,000 pieces), $10 (2,500 pieces), $50 (300 pieces), $100 (100 pieces) and $500 bank notes were prepared but it is not certain if they were issued. The $20 and $25 denominations were issued later. Bank notes bearing various dates and signatures were issued by the Singapore Branch up to 1903.

The Chartered Bank of India, Australia and China, Penang Branch started as an Agency Office run by Fraser & Company, Penang in the early 1860s. The bank opened its own branch in Penang in 1875. The Penang Branch issued bank notes in denominations of $5, $10, $20, $25, $50, $100 and $500. So far, only $5 and $10 denominations have been traced. The Penang Branch issued bank notes bearing various dates and signatures up to 1907.

The Chartered Bank of India, Australia and China relinquished its note issuing rights in 1921 at the request of the Straits Settlements Government which had been issuing legal tender bank notes since May 1899.

In 1956, the name of this bank was changed to The Chartered Bank.

In 1971, The Chartered Bank acquired The Eastern Bank which used to be located at the Benteng (Embarkment) in Kuala Lumpur.

In 1984, The Chartered Bank amalgamated with The Standard Bank of Africa and its name was changed to The Standard Chartered Bank. In 1986, this bank had 35 branches throughout Malaysia.


7. ASIATIC BANKING CORPORATION, Singapore Branch

This bank opened a branch in Singapore in 1862 and issued its first bank notes in 1864. Specimen bank notes bearing the denominations of $10, $25, $50, $100 and $500 dated 18-- (undated) exist. All these denominations are 210 mm x 132 mm and were printed by Smith Elder & Company Engravers, London. This bank closed during the crash of 1866.


8. THE HONGKONG AND SHANGHAI BANKING CORPORATION, Singapore Branch

The Singapore Branch of this bank was opened in 1877 and issued its first bank notes on 1st December 1881 vide Ordinance No. X of 1881. This Ordinance was confirmed by Despatch No. 9 dated 11th January 1882 and published under Proclamation dated 14th February 1882 in The Straits Settlements Government Gazette. Bank notes bearing the denominations of $5, $10, $25, $50, $100 and $500 were issued bearing various dates and signatures until 28th September 1909.

The Hongkong and Shanghai Banking Corporation, Penang Branch was opened in 1884 at the request of Major MacNair, officer administrating the Penang Government. W.A. Gard’ner was assigned to set up the Penang Branch which was then located in Beach Street. In 1892, the Penang Branch was given permission to issue bank notes in denominations of $5, $10, $25, $50, $100 and $500. So far only the $5 and the $25 denominations have been traced. Bank notes were issued by the Penang Branch bearing various dates and signatures between 1st January 1893 to 28th September 1909.

The Hongkong and Shanghai Banking Corporation opened a branch in Ipoh in 1909. Branches of this bank were also opened in Malacca, Johore Bahru and Kuala Lumpur in 1910.

In 1921, The Hongkong and Shanghai Banking Corporation relinquished its bank note issuing rights at the request of the Straits Settlements Government which had been issuing legal tender bank notes since May 1899.

During the Japanese occupation of Malaya (1941 - 1945), the Penang Branch of The Hongkong and Shanghai Banking Corporation was occupied by a Japanese Bank i.e. The Nampo Karhatsu Kinko or Southern Bank. The banks branches in Ipoh, Malacca and Johore Bahru were occupied by the Yokohoma Specie Bank.

In 1959, The Mercantile Bank Limited (formerly The Chartered Mercantile Bank of India, London and China) became a wholly-owned subsidiary of The Hongkong and Shanghai Banking Corporation.

In January 1974 all branches were integrated under the banner of The Hongkong and Shanghai Banking Corporation. In 1986, this bank had 36 branches throughout Malaysia.


9. ALGEMENE BANK NEDERLAND N.V., Penang
(formerly NEDERLANDSCHE-HANDEL – MAATSCHAPPIJ, N.V.)

The Nederlandsche Handel – Maatschappij, N.V. Bank of Holland opened its first branch in Penang in 1888. Its main objective was the financing of international trade. In 1964, the name of this bank was changed to Algemene Bank Nederland N.V. This bank also had a branch office in Kuala Lumpur.


10. KWONG YIK BANKING COMPANY LIMITED, Singapore

This bank, which commenced business in 1903, was the first Chinese bank in Singapore. The shareholders of this bank were predominantly Cantonese. The managing director was Wong Ah Fook who was a leading contractor and gambier planter in Singapore and Johore. From the late 1880s onwards, Wong Ah Fook had been issuing his own private bank notes which circulated within his numerous estates. This experience led him to set up The Kwong Yik Banking Company Limited in Singapore. This bank got into financial difficulties in early 1913 and was closed soon after.


11. MALAYAN UNITED BANK BERHAD, Kuala Lumpur
(formerly KWONG LEE BANK, Sarawak)

Kwong Lee Bank, Sarawak, which was incorporated in 1905, is the oldest local bank in Malaysia. This bank was acquired by the Malayan United Industries Group in October 1982 and its name was changed to Malayan United Bank Berhad with its head office in Kuala Lumpur. In 1986 this bank had 23 branches throughout Malaysia and 1 branch overseas.


12. SZE HAI TONG BANK LIMITED, Singapore

The Sze Hai Tong Bank was founded by members of the Teochew community in 1907. This bank has been very solid, sound but over-cautious. The summary of accounts of this bank for 1952 shows the total assets as $ 26,335,803 with a declared dividend of 20%.


13. CHINESE COMMERCIAL BANK LIMITED, Singapore

This bank was incorporated on 1st September 1912. On 31st December 1932 it amalgamated with Ho Hong Bank and the Oversea-Chinese Bank to form the Overseas-Chinese Banking Corporation Limited.


14. KWONG YIK BANK BERHAD, Kuala Lumpur
(formerly known as The Kwong Yik (Selangor) Banking Corporation Ltd)

The Kwong Yik (Selangor) Banking Corporation Limited was the first local bank to be incorporated in the Malay Peninsula on the 15th July 1913. The first office of this bank was located in the Paterson & Simons building at Old Market Square near the embarkment in Kuala Lumpur. The initial authorized capital of this bank was $ 1,000,000 with a paid up capital of $ 300,000. The bank underwent rapid progress especially after the post war period. On 29th November 1965, the authorized capital of this bank was raised to $ 50 million. On 31st March 1970 the name of this bank was changed to Kwong Yik Bank Berhad. This bank had 35 branches throughout Malaysia in 1986.

To Be Continued...