Photo:
A bill of exchange, a sort of promissory note for making payment, dating from
1859. This is one of the earliest surviving documents from the Chartered
Mercantile Bank of India, London and China, which was known as the Mercantile
Bank of Bombay between 1853 and 1857; the Chartered Mercantile Bank of India,
London and China between 1857 and 1892; the Mercantile Bank of India between
1893 and 1957, and the Mercantile Bank Ltd. between 1958 and 1984.
Mercantile
Bank Ltd.
The
Mercantile Bank Ltd. had a very storied past full of ups and downs. It was once
upon a time a local Indian bank, then it became a British bank, and eventually
a Hong Kong bank in its final decades. The bank was founded in 1853 as the
Mercantile Bank of Bombay as a trade finance bank. By 1857,
the bank had opened offices in London, Madras (now Chennai), Colombo, Kandy,
Calcutta (now Kolkata), Singapore, Hong Kong, Canton (now Guangzhou), and
Shanghai.
In that same
year of Mercantile Bank of Bombay’s founding, however, the establishment of a
rival British overseas bank also with a focus on British India, China and the
colonies in the Orient applied for and obtained a Royal Charter from Queen
Victoria, and called itself the Chartered Bank of India, Australia and China
(today’s Standard Chartered plc).
A Royal
Charter used to be the only means to establish a public or
private corporation, but by the mid-19th century it certainly was
not the sole process to do so. While a Royal Charter defines a corporation’s
privileges and purposes such as those of a town or a city, the granting of such
by the Victorian era no longer indicated, for example, Royal patronage, nor implied
or express state guarantee in times of troubles. Even
though a Royal Charter is technically granted only to a body or business which
can demonstrate pre-eminence and stability, constitutionally or legally, there is
no reason to believe that a “chartered” business is any more or less likely to
be successful than those without a charter.
Nevertheless,
the Mercantile Bank of Bombay felt that it was at a competitive disadvantage
and did not want to be outdone by the regal sounding Chartered Bank of India,
Australia and China, which had a habit of promoting itself as being “Incorporated
in England by Royal Charter 1853.” Therefore,
in 1857, the Mercantile Bank of Bombay also obtained a Royal Charter and
renamed itself the Chartered Mercantile Bank of India, London and China, and
moved its head office from Bombay to London. In doing so, the Chartered
Mercantile Bank of India, London and China was often mixed up with the Chartered
Bank of India, Australia and China – the fact that both banks were founded in 1853
doubtlessly added to the confusion.
Following
the tradition in Great Britain at the time, banknotes in the British colonies
were often issued by certain authorised commercial banks. After receiving the
Royal Charter, the Chartered Mercantile Bank of India, London and China gained
the privilege to issue banknotes in Hong Kong (starting in 1859), in Penang
(starting in the 1860s) and later also in Malacca and Singapore. As a matter of fact, the bank played a prominent role in the early banking development in the
Straits Settlements and the Federated Malay States, which became today’s
Malaysia and Singapore.
In 1892,
however, the Chartered Mercantile Bank suffered a liquidity crisis and had its
Royal Charter revoked. It was re-capitalised as the Mercantile Bank of India in
1893, but it ceased to issue all banknotes.
In the early
20th century, growth returned to the Mercantile Bank of India and it,
for example, acquired the locally-incorporated Bank of Calcutta (founded 1895).
In 1912, the
Mercantile Bank regained the privilege to issue banknotes in Hong Kong. It also issued banknotes in the Chinese port city of Shanghai for years during the early 20th century. (Between 1846 and 1945, Great Britain controlled “concessions” -- extraterritorial jurisdictions -- in
China, and the Shanghai International Settlement was probably the most
well-known one of all.) Surviving 19th
century banknotes issued by the Chartered Mercantile Bank of India, London and
China from Hong Kong, Singapore, Malacca, and Penang; and even mid-20th
century examples by the Mercantile Bank of India from Hong Kong and Shanghai are very rare, and can command very significant valuations at auctions.
In 1916, the
Mercantile Bank of India took over the Bank of Mauritius. This was the third
bank of the same name – none of them were related to one another -- to have existed
in Mauritius. This particular Bank of Mauritius was established in 1894 to take over the
local operations of the Oriental Bank Corporation that had gone bankrupt. The Oriental
Bank Corporation was another prominent Anglo-Indian bank that was active in
British India, Ceylon, Singapore, Hong Kong and China in the mid-19th
century before its demise.
While rival
British overseas banks like the Chartered Bank of India, Australia and China
and The Hongkong and Shanghai Banking Corporation (HSBC) have had a strong focus
in Hong Kong, China and the rest of the Far East, the Mercantile Bank’s main
focus was in British India, where the bank had half of its branches.
In 1947,
British India gained independence and became India and Pakistan. The newly
formed nation-states wanted to nurture their own domestic industries and became
increasingly restrictive to the British businesses including the Mercantile
Bank of India. New regulations in place banned foreign banks from opening new
branches, and growth in the 1950s for the Mercantile Bank in India was much
hampered.
Towards the late
1950s, it was believed that the Mercantile Bank of India would be vulnerable to
a takeover by an American bank eager to have a presence (however restrictive) in
the Indian market. Ironically, right around the same time, the decision was
made to drop the reference of India from the name and the bank became the
Mercantile Bank Ltd.
In 1957, The
Hongkong and Shanghai Banking Corporation pre-empted the rumoured American
interest by first acquiring a 20% stake in Mercantile Bank Ltd., before fully acquiring
the remaining shares in 1959.
HSBC kept
the Mercantile Bank operations separate and independent for many years. In
1966, Mercantile Bank relocated its head office from London to Hong Kong. Interestingly,
Mercantile Bank continued to be a banknote issuer in Hong Kong until 1974 (along
with HSBC and the Standard Chartered Bank). In 1984, finally Mercantile Bank’s
operations were integrated into HSBC, except for the small Thai operations,
which were sold to Citibank. The sale of this small unit of the Mercantile Bank
appeared to have caused much confusion about the final years of the bank, as
many sources, including Wikipedia, often suggest mistakenly that HSBC sold the entire
Mercantile Bank to Citibank in 1984.
Click here to return to the Index page.
