enactment of the Foreign Notes (Prohibition of Circulation) Ordinance 1913, on 1st August 1913, banknotes of these three banks became the only paper money allowed for local circulation. They were declared legal tender for the first time under the Currency Ordinance 1935 which provided for the surrender to the Government by the banks of all silver coins and bullion held against the existing note issue in return for certificates of indebtedness with additional issues to be made against the purchase of further certificates.
The Chartered Bank of India, Australia & China, which is The Chartered Bank of the presentday, was incorporated in London by a Royal Charter granted on 29th December 1853. Its Hong Kong Branch was established in 1859 and issued its own notes in 1862. The note- issuing rights have been defined in the bank's original charter of 1853 as amended by supplemental charters of 1897, 1922 and 1939. Its presentday note issues are therefore subject to the following terms: for the first $8 million, one-third backing in securities and/or certificate of indebtedness; from $8 to $30 millions, backing in either securities or certificates or a combination of the two; and over $30 million, a 100% backing in certificate of indebtedness, provided that one-third of all funds deposited shall be certificate of indebtedness. There is also a banknote duty of 1% per annum on every note up to a maximum of $42 million.
The Bank's merger in 1970 with the Standard Bank Ltd., a British bank with its Head Office in London, has created Britain's largest overseas banking organisation, the Standard & Chartered Banking Group Ltd, now called Standard Chartered Bank PLC.
The Mercantile Bank of India Ltd., was originally formed as the Chartered Mercantile Bank of India, London & China by a group of British and Indian merchants in Bombay in October 1853 and was granted a Royal Charter by Queen Victoria on 15th September 1857. Having surrendered its Royal Charter in 1892, the bank was reorganised and registered in 1893 as a limited company with its name subsequently abbreviated to its present title of Mercantile Bank Limited in 1958. In 1959, it was bought over to become a wholly owned subsidiary bank of the Hong Kong & Shanghai Banking Corporation which has gradually taken over its right to issue banknotes of legal tender in Hong Kong. The last note issue of the Mercantile Bank Limited is the one hundred dollar note of 1974 which is still in current circulation locally.
The Hong Kong & Shanghai Banking Corporation has evolved from a small limited company first founded in 1865 to become one of the largest local banks in Hong Kong and may be regarded as performing the functions similar to that of a central bank of Hong Kong in matters related to the economic and monetary affairs. All the government issues of local coinage and subsidiary currency notes are being physically issued by the bank with which a current account of
the Note Security Fund is opened by the Government for accounting purposes. The note issue of the bank is divided into two categories, the authorized and the excess. The former is limited to $20 million, for which a backing of two-thirds in certificate and/or approved securities is required, and the latter which consists of all issues above the limit of $20 million, requires a 100% backing in the form of certificate of indebtedness.
During the Japanese Occupation of Hong Kong (1941-1945), a total of $119,800,000 worth of the bank's stock of unissued banknotes in denominations of ten, fifty, one hundred and five hundred dollars were issued by the Japanese for the purpose of acquiring material supplies from China and Macao. These notes, being in a strict sense illegal issues without appropriate financial backings, were not recognised by the bank nor the Hong Kong Government, and are generally known as "Duress Notes". Warnings to this effect had been broadcasted by the Free China Radio in Chung King during the period and resulted the notes to be passed for a time at as much as a two- thirds discount. These "Duress Notes" were, however, finally declared valid for acceptance as legal tender under the Bank Notes and Certificate of Indebtedness Ordinance 1946, after an agreement had been reached between the bank and the Government on the surety of the note issues. In 1977, the bank issued its first $1,000 banknote which is the highest denominated banknote of legal tender ever issued in Hong Kong.
To-day, banknotes of legal tender in general circulation locally consist of five denominations, ranging from ten, fifty, one and five hundred to one thousand dollars; the five dollar note being discontinued after 1975 when Government announced its issue of the five dollars regal coins.
DESIGN AND PRINTING
The designs of nearly all the 19th century local banknotes were relatively simple and monotonous, following more or less the pattern of a promissory note, but usually printed with the symbol or coat of arms of the issuing bank. Though printed by professional note printers on specially manufactured paper capable of withstanding constant wear and tear through circulation, no precaution against forgery seemed to have been taken in the production of these notes. However, notes produced in the first decade of the 20th century became much more alive and complicated with intricate details in their design and printing as a measure to discourage the would-be counterfeiters. They usually incorporated pictures showing the scenery and life of the region where they were to circulate as well as classical figures which bear relevancy to the services and prosperity of the issuing banks such as the portraits of Mercury and Britannia, representing communication, power and wealth.
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