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PUBLIC RECORD OFFICE

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PUBLIC RECORD OFFICE, LONDON

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the heart of the Colony ceases to beat then everything is lost, in my very humble opinion, and, I am sure, in the opinion of everybody.

Rumours were spread about, rumours that the Commercial Bank would fail, would shut its doors very soon, and, of course, there are many people who have small sums of money there who thought that perhaps they would do better to remove that money than leave it there. They did not reflect, but still that gave an impetus to the movement of withdrawal of money from the Commercial Bank. There was no reason for that. The Commercial Bank was carrying on its business in a most proper manner; I shall say in a most liberal manner. The whole time that money was being withdrawn from the Bank, the Bank kept on discounting; had it not done so the Colony would now be a heap of ruins. The position of the Commercial Bank is such a safe position that it can bear large losses and such is not the case on the am certain that the losses which may be made through the present occasion. failure or through the suspension of payment of those two brokers that I have men- What is that in comparison with tioned, will not amount, after all, to Rs. 250,000. the resources of the Bank, in comparison with its capital, with its reserve fund, in fact, in comparison with the position of the Bank? Nothing. The Bank for a number of years, has been prosperous, and, in my opinion, is still very prosperous. The Bank has been discounting for immense sums of money every year, millions and The Bank had to millions of money. The Bank has made now and then losses. meet those losses, and it did meet them very easily. What is a loss of Rs. 200,000 or Rs. 250,000 as compared with, let us say, the reserve fund itself alone? The reserve fund is now Rs. 1,240,000. When the Bank had a reserve fund of Rs. 600,000 or Rs. 800,000, the Bank gave dividends, the Bank continued its operations, the Bank was in full prosperity; and now that the reserve fund has reached Rs. 1,240,000 will it be said that because it has to meet a loss, let us say of Rs. 250,000, the Bank is no longer worthy of the confidence of the public? No. There has been a panic; very fortunately that panic has ceased now.

I must put the position of the Bank before you and the public; there is no secret about the position of the Bank, The position of the Bank is this, in a few words. The Bank holds about Rs. 3,000,000 of dock warrants, dock warrants on sugars which the Bank has taken with a difference, a margin, of from 22 per cent. to 25 per cent. So that every Rs. 100,000 which figures in the dock warrants must be increased by 22 per cent. or 25 per cent. of its value. If you increase only by 20 per cent. you will find that the dock warrants held by the Bank amount really to Rs. 3,500,000 or Rs. 3,600,000. Against the dock warrants there are the deposits of customers, which amount to about a total sum of Rs. 3,000,000. So that with the amount of the dock warrants, which certainly is the best security that can be had- it is a security that reposes on sugar now actually sold for the greater portion, which is to be shipped very soon-the Bank has sufficient to pay every rupee of the deposits. Then there is the capital and the reserve fund of the Bank, Rs. 3,200,000, which are represented by cash and by the portefeuille of the Bank, by bills and accepted accounts discounted. Further, there are investments which have been made in obligations of the Board of Curepipe and in obligations of the Albion Dock. So that you see that the position of the Bank is one of the most sound positions that When a man says: Oh, the Bank will can be imagined. You know how things go. lose much money with the first broker, Rs. 700,000 or Rs. 800,000, after that there is a lull; then the Bank will lose Rs. 300,000 or Rs. 400,000 with the Chinese, and it begins again; it ceases; after that the other broker suspends: there is a loss of Rs. 900,000. Of course there are people who believe in those rumours, those rumours go about from mouth to mouth, and thus the reputation of the Bank is jeopardised. People who hear that, for instance a man who has got Rs. 1,000 in the Bank, says: I would like to have that in my chest rather than in the Bank. Then he gives the nows to his neighbour, to his friend, and within a few days you see that hundreds of That is the reason why the thousands of rupees have gone out of the Bank. Directors of the Bank felt it their duty to approach Your Excellency and to beg your assistance to meet the difficulties which were thus put in their way. No; the Com- mercial Bank cannot fail. That is a thing which must be known by everybody, because if the Commercial Bank fails, the Colony fails with it, and you know what that means that means ruin to everybody. I will not minimise the importance of the other bank, but we know that the other bank does not bear the burden of the affairs of the Colony to such extent as the Commercial Bank. Everybody knows that the Commercial Bank has to provide, I shall say, for nearly all the wants of the Colony. If it were to stop, the next day there would be a collapse of all business.

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How could the Government even receive what is due to them if the Commercial Bank were not in full swing? How could the accounts of the railway be paid to the Government? How could taxes be paid to the Government? How could customs dues and so forth be paid to the Government? I do not see really. How could all the men on the sugar estates, how could all the population in fact be fed? With what money? Government would have to come in. But Government is not placed so as to manage the affairs of the whole Colony. There would be robberies, there would be more than that, and I am afraid that, in the long run, it would be impossible to go about without a pistol in one's pocket, and that there would be bloodshed in the Colony. Well, all that has been averted by the kind, intelligent interference of Your Excellency, and the Colony cannot be too thankful for what you have done for it.

10181

(Secret.)

MY LORD,

No. 40.

THE GOVERNOR to THE SECRETARY OF STATE. (Received 23 March, 1908.) [Answered by No. 59.]

Government House, Le Reduit, 15 February, 1908. In continuation of my secret despatch of the 5th current, I have the honour to state that in a separate numbered despatcht I have reported on the action taken in the matter of the loan to the Commercial Bank, and that copies of the Agreement made between the Government and the bank on the 4th, of the Ordinance passed on the 7th current, and of other connected papers will be found therein enclosed.

2. It would seem necessary, however, that I should submit some further remarks on the causes which have led to the previous correspondence, commencing with my cypher telegram of the 20th of January,‡ and to the action taken on and since the 4th current.

3. On the 6th of January Mr. H. Leclézio sought an interview with me, and, as a Director of the bank and as a member of the Executive Council, stated that he conceived it to be his duty to "warn" me that it might become necessary for the bank to apply for assistance from the Government as in 1898. He gavé, as the causes for this possibility, the short sugar crop of the past year, the high rate of exchange against the Colony, the constant drain of silver to meet the ever increasing cost of rice and grain imported, the serious decrease in the number of Bills offering for exchange on Bombay and London, and the, withdrawals of deposits from the bank, which had commenced with the failure of Messrs. Antelme, and which had further increased on the rumours, in most cases unfounded, of the heavy losses incurred by the bank. I replied that any representation so made to me would, of course, receive full consideration; but that I was strongly opposed to any suspension of the currency law (to which he had referred as being necessary); and I added that what was done in 1898 should not be taken as forming a precedent for present action; that a second application for assistance on the part of the bank would assuredly be questioned; and that, whilst I was desirous of preventing, if possible, a general crisis in the Colony, and of staying the financial depression and lack of confidence which had been created, I could give him no assurance that the assistance would be forthcoming as a matter of course. I questioned him as to the position of the bank, and as to the transaction of the Board with their correspondents in Bombay and in London, and I asked whether silver had been imported against accommodation drafts. This he denied, but he admitted that a credit of Rs. 500,000 on the National Bank of India had been exhausted; adding, however, that this would be speedily restored by Bills which would be drawn on the shipment of sugar now * dook-warranted" to the bank. I asked him whether he wished me to put the matter before you at once, and he begged that I would wait, as the Directors would not apply for assistance unless it was absolutely necessary.

4. I made enquiries as to the financial position of the Bank of Mauritius, with a result that this appeared to be quite sound, and I examined the monthly state- ments rendered by the Commercial Bank under Article 32 of the Deed of Partner-

t No. 31.

• No. 32.

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