CO882-(8-9) — Page 265

PUBLIC RECORD OFFICE

Reference :-

ICO. 882

9ALLY WITHOUT PERMISSION OF THE

PUBLIC RECORD OFFICE, LONDON

BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH—NOT TO

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ship, August, 1950, and the papers in connection with the assistance rendered in 189".

5 On the 10th of January Mr. Leclézio informed me that the position had considerably improved; that the bank had been able to purchase drafts which would not only restore the exhausted credit of Rs. 500,000, but would lead to a considerable balance in favour of the Commercial Bank in the books of the National Bank in Bombay; and he asked me to take no further action. On the 18th of January, however, he came with a different story, and stated that whilst drafts were on their way to Bombay restoring the credit of Rs. 500,000 as above, and leaving a sum of some Rs. 240,000 on which the Commercial Bank could draw, the local position had again become very anxious, that withdrawals had recommenced, and that the Directors might, and probably would, be compelled very shortly to apply for assistance. The interview was a long one, and during our conversation I warned him that it might become necessary for me to have an independent examina- tion of the bank's affairs. He strongly deprecated such action at the present moment, saying that it must inevitably add to the panic, and lead to a further and disastrous run on the bank, and he said that the security to be offered would be in the dock warrants which were fully liquid, and which bore a face value of 20 per cent. to 22 per cent. less than the selling price of the sugar therein "warranted." He again urged that it might be necessary to suspend the Currency Law, and I again stated my determination not to recommend or adopt such a course. result of this interview I addressed your Lordship by telegraph on the 20th of January reporting the condition of affairs, and giving the financial position of the bank, as gathered from statements left with me by Mr. Leclézio and from the monthly returns furnished by the Directors.

As a

6. I would add, here, that before despatching my message above quoted I again questioned Mr. Leclézio as to the position of the bank's accounts with its foreign correspondents, and that he assured me that the drafts to restore the credit with the National Bank, and to leave Rs. 240,000 there, were on their way to Bombay; that the bank had a drawing credit with Lloyds Bank in London, and also on a bank in Paris; that all their foreign accounts were in credit, and that the whole of the dock warrants (Rs. 2,998,381) were free. These latter statements, as to the credit with correspondents, were modified later on.

7. During the week commencing the 19th of January the position generally appeared to improve; considerable sales of sugar at advanced prices were effected; and, although there had been rumours as to the stability of the firm of Regnard, it was thought that these sales had placed them in funds. On the 26th of January I received your Lordship's telegramt of the previous day; I noted that you had obtained confidential information as to the above-mentioned sales, and I believed that, with them, and with the assistance of a telegraphic transfer of £15,000 made on the Crown Agents' draft by my Government to the bank, the situation had again become less anxious.

8. In the ensuing week, however, Messrs. Regnard, finding themselves unable to obtain funds for operating the important group of estates for which they were responsible as either owners or as agents and Bailleurs de Fonds," declared them- selves insolvent and suspended payment. I have been unable, so far, to obtain a reliable statement of their liabilities and assets, but the amounts involved are large, and whilst eventually the liquidation may produce a fair dividend, the failure has added largely to the existing difficulties in financing the estates, of which several have been put under sequestration.

9. On the 1st current I received confidential information that on many of the properties, especially in the District of Flacq, no provision had been made for the issue of the legal rations of rice to the people engaged thereon, and that a body of indentured labourers would march into Port Louis and demand, from the Protector of Immigrants, and from the Government, the food which was their due. I immediately sent for Mr. Trotter and the Colonial Secretary, and instructed them to prepare for this event, and I told Mr. Trotter that he should take all possible steps to ensure the proper supplies being issued by those responsible for. or who had undertaken, the working of the estates.

10. On the following morning, Sunday, the 2nd, Mr. Leclézio came to see me, and stated that a further run had been made on the bank, and that a crisis could

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only be averted by Government assistance. He added that Lloyds Bank had asked for security, and that the National Bank had instructed the Commercial Bank not to draw without cover. I gathered that there was a drawing credit in London up to £25,000, of which use had been made, and that drafts were on their way to reduce the balance to some £8,000, which latter sum would also be repaid in a short time. With regard to the National Bank of India he again stated that the credit of Rs. 500,000 had been restored, and drafts to the extent of Rs. 400,000 were being remitted against which his bank would be able to draw. The local cash balance had dwindled to less than Rs. 400,000, and there were notifications of further withdrawals by depositors for remittance to India, in addition to the withdrawals which might be anticipated on Monday morning in consequence of the panic. Mr. Leclézio also stated that the Directors would meet on that day, and would, thereafter, come to me with a formal application for assistance. During this interview, which was of considerable duration, I mentioned the information which had reached me as to the shortage of rations, and I told him that whatever happened provision must be made for feeding all the people on the estates.

11. I further drew his attention to Article 33 of the Deed of Partnership of the Bank. 6th April-26th August, 1880, and I said that on a proper occasion it would be necessary to act thereunder, and to make a full investigation of the affairs of the bank; which, I added, would probably have to be carried out by an independent examiner. He at once admitted the right of the Government to take such steps. and he added his assurance that the Directors could, and would, raise no objection to the course. I may here also state that I followed the same procedure when the delegation of Directors waited on me on the following day; and that I obtained from them the same admission and assurance.

12. After the interview I addressed your Lordship by telegram,* in the after- noon of the 2nd current, giving shortly the information which had reached me, and again advocating an advance to the bank in order to prevent a general catastrophe. 13. On Monday, the 3rd, uefore seeing the Directors, I ascertained that no demonstration had been made by the labourers on account of shortage in their rations; but I was again assured that the greatest difficulty was experienced in obtaining the necessary food supplies, and that, if the bank suspended payment, no means would be available for continuing them. Messrs. Ducray, President, and Leclézio and Ritter, Directors, then saw me, as delegates from the full Board, making the statements and application which led to the action taken as already reported in my secret despatch under reference.

14. In the same communication I have mentioned the occurrences on the 4th, after the receipt of your telegram of the previous day, and I may here add that whilst the President accepted, for the Board of Directors and for the Corporation of the Bank, the terms under which the advance was made, both he and Mr. Leclézio I told them, strongly urged that the rate of interest would prove most onerous. however, that I must insist on that point, and on all the others which were embodied in the letter of that date, and in the agreement subsequently made and signed.

15. On the afternoon of the same day I informed the Executive Council of the steps which had been taken, and received their unanimous endorsement of what had been done. It was also advised that the Council of Government should be summoned to meet on the 7th current, for the purpose of considering and passing a Bill which I had caused to be drafted on the lines already indicated to your Lordship.

16. This course was followed, the measure was submitted by the Procureur- General, and, on being seconded by Mr. Leclézio, was passed through all its stages without dissent; and, as I have stated elsewhere, I assented to it on the same day.

17. As I have already informed your Lordship the Directors have assured me of their desire to avoid any application for further assistance, and I earnestly trust that this may be unnecessary. It is desirable, however, to be prepared for such a contingency, and should it occur, or should there be any request for delay on the part of the bank in carrying out the terms and obligations of their agreement already made, I am of opinion that not only a full examination of the affairs of the bank should take place, but that Government control of its operations should be made a condition precedent to any extension of the assistance afforded.

18. In connection with the examination, and also with the contingency above indicated, I would ask for consideration of the following points:-The Auditor-

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