A Chapter on Banking: financial crises and an old magazine...

Submitted by Andrew Craig-Bennett on Sat, 05/01/2010 - 21:17
Dent and Co came to a Bad End soon afterwards.

On the 10th of May 1866 the London banking house of Overend Gurney refused payment. In other words, it collapsed, owing around eleven million pounds, or say a billion or two in current money. Overend Gurney had been the biggest discount house in London, known as "the banker's bankers" and it had been doing frightfully well until its directors made the classic banker's mistake of borrowing short and investing in illiquid assets, in their case not mortgages but mainly railway shares. The Directors of Overend Gurney appealed for help to the Bank of England, but since Gordon Brown was not Prime Minister in those days, and also perhaps because Overend Gurney had been behaving rather like competitors to the Bank of England, they were not bailed out, but allowed to sink.

The "run" on Overend Gurney was the last run on a British bank until just the other day, when we had the run on Northern Rock, which is something to reflect on, perhaps.

Anyway, the collapse of Overend Gurney had about the same impact on the financial markets of 1866 as the collapse of Lehman Brothers had on the financial markets of 2008.

News spread fast, and where there was a telegraph cable, it spread along the cable.

The telegraph cable to Hong Kong, however, stopped at Calcutta.

The Directors of the Princely Hong owned a paddle steamer named the "Glengyle".

She was a rather unusual ship; in the days of low pressure Scotch boilers and single expansion she consisted almost entirely of engine, boilers and coal bunkers - as a cargo carrier she was useless, and not much better for passengers.

This did not matter; her job in life was to sail from Calcutta one day after the mail steamer for Hong Kong, overtake it, arrive one day ahead of the mail steamer and sneak into Junk Bay, without clearing Customs. As she did so her Mate changed into his go ashores, jumped into a sampan and headed for the offices of the Princely Hong in Central, or Victoria as it then was, with the very latest news in his pocket. Once this was done, but not before, she would up anchor, potter into harbour and clear Customs properly, soon after the mail steamer.

The Princely Hong learned of the collapse of Overend Gurney and withdrew their deposits, in gold, from the banks likely to be affected, one day before the news arrived.

Dents knew nothing of this, did not cash their deposits, and went bust when the banks collapsed.

The Princely Hong bought their offices and Hong Kong Land owns The Landmark to this day....

The "Glengyle" came to the end of her usefulness once the telegraph cable reached Hong Kong; for some reason that I have never been able to fathom, the Great and Ancient Hong, which in those days was a Small and New Hong, bought her as the first ship in their line of steamers, but they did not keep her long, as she ran on a rock and sank...

Which, of course, leads me nicely to another event of the 1860's - on July 22nd 1864, the Hong Kong Superintendent of the P&O Steam Navigation Company, the thirty year old Mr Thomas Sutherland, goes aboard one of his company' mail steamers, the SS "Singapore", on her arrival in Hong Kong and has the usual chat with the Captain. The Captain mentions, by way of a favour, that a new Bank, the Bank of China, was going to be set up in Bombay to finance China trade. If Mr Sutherland fancied subscribing for some shares in it...a chance to stag these shares would be good for a seventy per cent profit.

Earlier that year Tom Sutherland had been travelling from Hong Kong to Swatow aboard the SS "Manila" when having nothing better to do, he started reading a twenty year old copy of Blackwood's Magazine (coastal steamers, in the words of the official historian of the bank I am about to mention, "apparently carried, besides cargo, a stock of out of date magazines")

This copy of Blackwoods had an article on Scottish banking...

Tom Sutherland has a different idea.

He puts two and two together, reckons that the really smart move is to go one better and get the merchants of Hong Kong to subscribe to their own Bank, and, before the next mail steamer arrives, on the 28th, with the news of the formation of the "Bank of China" in Bombay, he has, in five days flat, besides doing the day job, issued the Prospectus for the Hong Kong and Shanghai Banking Corporation, now called HSBC except in Chinese, where it sticks to its old name,香港上海滙豐銀行 Wayfoong Inhang, the Money Coming In Bank...

HSBC is the biggest bank in the world today... their original choice of HQ was based on it having the best feng shui in Hong Kong, as indeed it still does.

Talking of which, outside the Hong Kong HQ of HSBC are a pair of bronze lions. Their names are Stephen (left hand lion) and Stitt (right hand lion). There are another pair outside the London HQ, but I don't know their names.
These lions enjoy exceptionally good joss, and it is wise to rub a paw or a nose as you go by.

The lions also appear on HSBC bank notes, and there are some people, such as me, who are superstitious enough to carry a red note (HK$100, particularly lucky) in their wallet all the time (very unlucky to have an empty wallet; credit cards don't count.)

They are, of course, a variation on the customary Chinese door guardian lions, or Fu lions, but the traditional Chinese lions are male (to the right, with a ball) and female (to the left, with a cub) whereas the HSBC lions are both male, and are clearly Western lions derived from Landseer's lions in Trafalgar Square.

Anyone who thinks that Hong Kong's fascination with feng shui is confined to the Chinese is mistaken... 

Tom Sutherland became Chairman of the P&O before he was fifty. Not really surprising...