Banking collapses in the 19th century
Today Jersey’s internationally renowned finance industry is highly regulated and involves some of the biggest names in world banking. This situation is in stark contrast to the early days of island banking in the 19th century.
Then anyone with capital and business acumen could launch his own bank, and several individuals did just that. Unfortunately they most did not have sufficient capital behind them to support their operations in difficult trading times and business acumen often proved to be sadly lacking. One by one the island’s main banks would collapse, taking some of their important customers into bankruptcy with them and causing many an ordinary Jerseyman to lose his life savings.
In 1797 Hugh Godfray, a wine merchant, founded what came to be known as the Old Bank. Then came the Commercial Bank of Janvrin, Durell, de Veulle and Company. In 1843 both these banks were drawing on de Lisle and Company of London, the de Lisles having a family connection with the Janvrins.
Jersey Banking Company
The Jersey Banking Company also drew on London and was known locally as the States Bank, because although it was privately owned, its manager, Philip Gosset, was also Treasurer of the States and banked with his own firm.
The bank was strongly linked to the business of Abraham de Gruchy. The founder had been a paying agent for the bank of Jean Lemprière of Mont au Pretre, in 1825, and in 1838-1841 he was agent for that of de Carteret.
In April 1863, Abraham de Gruchy`s son, William Philippe, entered into a partnership with Philip Gosset as “Gosset, de Gruchy and Co” and took over the Jersey Banking Company, which had been established in 1828. The bank was located at 17 Broad Street, St Helier. A new bank building was completed by 1875, in Library Place, to the design of architects, Hayward and Sons, of Exeter, who also drew up the plans for Victoria College and, in 1883, for de Gruchy`s Arcade.
Joint stock banks
The Jersey Joint Stock Bank was a Methodist concern in which the chapels and most of their members kept their money. There were two other joint stock banks, the Mercantile Union and the Channel Islands Bank.
English and Jersey Union Bank
Around 1860, Jean Le Neveu became the principal director in a new banking venture trading in St Helier as Le Neveu, Sorel et Cie. On 10 December 1863 a deed was passed in which the company acquired the premises of the English Union Bank, and it may have been as a result of that acquisition that the name English and Jersey Union Bank was coined, although Le Neveu, Sorel et Cie continued as the firm's 'social signature' on their banknotes.
Business boom ...
Business was booming in Jersey in the middle of the 19th century and the small local banks prospered on the back of the upsurge in all sectors of the island economy. There had never been a time in the history of the island when the island community was simultaneously involved in such a variety of successful enterprises, nor has there been since.
Agriculture was thriving and diversifying. Cider exports were predominant in the first half of the century, although they began to tail off after 1855 as farmers found potatoes to be a more profitable crop. Cattle exports grew steadily as the reputation of the Jersey cow spread throughout the world.
On the east and north coasts of the island the oyster fishing fleets were kept constantly busy as the seafood harvest grew exponentially, to reach its peak around 1856. Although this industry had died out in another 15 years, the skills learned by local boatyards in building oyster boats were harnessed to the production of much larger vessels to support the growing international trade of Jersey merchants and also for sale elsewhere.
And the growth in the population in the first half of the century brought about by an enormous influx of English families, and the trades people needed to support them, meant that the island’s internal economy was also buoyant, the man in the street or on the farm was beginning to earn good money and some were beginning to have need of banks themselves.
... and bust
The banking businesses were inextricably linked to the success of the merchants, farmers and other businessmen, but the foundation on which they were built proved inadequate to cope with the downturn in some areas in the 1870s, with disastrous results both for the individual operations and the island’s overall economy. It all started on 1 February 1873 with the closing of the doors of the Jersey Mercantile Bank, an event which, as the Rev Alban Ragg wrote in his ‘’Popular history of Jersey’’ later in the century, ‘threw over the island an untold gloom’.
- ”To add to this, and to the excitement caused by it, the startling news followed that one of the Judges of the Royal Court, Jurat Josue Le Bailly, had been charged with embezzlement in connection with the bank’s failure, a crime for which he was, on 13 May, sentenced to five years penal servitude.” [Justice was dispensed quickly in those days – Ed]
He served his sentence, with hard labour, at Pentonville Prison, London, and after his release he went to live in Oxford Road in Reading where he died, in disgrace and virtually broke, on 19 March 1881. In his will, he left just £42 - a stark contrast to the comfortable life he had led on Jersey, before his downfall.
Joshua Le Bailly’s great grandson was Vice-Admiral Sir Louis Le Bailly, Director General of Intelligence at the Ministry of Defence between 1972 and 1975, responsible at the height of the Cold War for the collection of information on the enemy, principally the Soviet Union and its allies.
Scale of losses
When elected, Jurat Le Bailly’s majority broke all records, as did the losses incurred by the community following the failure of his bank. It closed its doors with liabilities of £300,000 and assets a mere tenth of that. Not only the depositors were affected, because £55,000 worth of the bank’s banknotes were in circulation. They were instantly reduced to waste paper.
It was not long before the malaise spread and on 3 July the Jersey Joint Stock Bank failed ‘to add to the depression and ruin of all concerned’. Its managers were also arrested but were acquitted of any criminal activity. The auditors appointed to examine the reasons for the bank’s collapse reported:
“The directors may be good farmers, but they were not good bankers. Those who conducted the affairs of this bank were not fitted for their office”.
The English and Jersey Union Bank suffered from these two failures and decided to sell its business to the island's first English bank, the Hampshire Banking Company, in September 1873.
It had been put under enormous pressure by its depositors, as the British Press and Jersey Times reported:
- ”The approaches to the bank were crowded. Persons with bundles of notes of all sizes clamoured for immediate change. People were standing on the window sills, and one man jumped on the counter in his eagerness to possess hard cash.”
Even more unruly crowds besieged the Savings Bank, which had been founded in 1834, specifically for the benefit of the ordinary working man. For the time being it, and other local banks, managed to weather the storm, but more, and greater problems were not far off.
Jersey Banking Company
The remaining banks were clearly not in a healthy state and there has been rumours of forthcoming disaster for some time before, on 11 January 1886, a notice appeared above the door of the Jersey Banking Company:
- ”Unforeseen circumstances have compelled the bank to suspend payment”.
It transpired that the circumstances leading to the closure were far from unforeseen, because investigations showed that the bank had been insolvent for years and Philip Gosset, the States Treasurer and bank manager had been gambling wildly with its funds. He was arrested on 14 January and eventually tried and sentenced to five years penal servitude. Charges brought against the sub-manager and three of the bank’s managing directors were dismissed by the Criminal Assizes. George Balleine wrote in his History of Jersey:
- ”It was sufficient shock to the island to learn that Gosset could no longer honour the States coupons, but worse was to come. On 12 January the firm of Charles Robin and Company had closed its doors and applied to the Royal Court for permission to meet its creditors for the purpose of making an arrangement to safeguard their interests, as well as those of the Jersey Banking Company, as the interests of the two institutions were closely connected.”
This was something of an understatement, because for some time Philip Gosset had been using the bank’s credit to buy into the Robin business, to the chagrin of his de Gruchy partners, whose Newfoundland firm, De Gruchy, Renouf, Clement and Co, was Robin’s chief rival.
La Nouvelle Chronique, in the second of two dramatic articles on la catastrophe financiere, described Robin and Company as the largest, most important and oldest of the Jersey companies:
- ”For more than a century the house of Robin and Company had advanced from success to success. If Providence had favoured them for many a long year with great prosperity, hundreds of ship’s captains, thousands of sailors and fishermen, numerous clerks, indeed the better part of three generations of Jerseymen had borne witness, not only to the excellent care exercised by the administration of this great commercial house, but also to the numberless small amenities which employees had enjoyed as the fruits of their industry”.
But that was all over. Robin and Company had borrowed extensively from the Jersey Banking Company to help tide them over a bad season. Although the business owned extensive properties in Canada, beyond the jurisdiction of the Jersey Court, it could only avoid disaster by reaching an agreement with the bank.
The surviving banks came to the assistance of the States, but gradually they were taken over by English banks and by 1918 none of them survived in local ownership, although they continued to operate from the same premises as before.
In Canada a number of mergers severed commercial links with Jersey but Jerseymen continued to travel to Gaspé and Newfoundland to work well into the 20th century.
- The Jersey banking crisis: A more detailed history written in 1916