Jersey's finance industry, which has come to dominate the island's economy in the 21st century, had its roots in a political decision in the late 1960s to repeal legislation which imposed an upper limit on interest rates which could be offered by banks and other financial institutions.
History of banking
It was not so long ago when anyone in Jersey who was short of some ready cash merely printed it.
In 1817, for instance, there flourished in the island 61 town bankers, plus 35 in the country parishes. Most of them issued their own notes. In fact, in 1859 there were so many people with print-it-yourself ideas that a journalist of the day was given to write:
- "Why anyone in Jersey should be in want of money or at least of a circulating medium we don’t understand, seeing that anyone is entitled at liberty to start a paper mint. It is patent to the meanest capacity that one has only to purchase a few reams of flimsy and engage the services of an engraver to forthwith command the contribution of Baker, Butcher, Clothier, Wine Merchant etc, comprising all classes from the lordly merchant to the polisher of boots".
Previous to 1813 the island was inundated with an amazing range of paper money from £1 notes down to a shilling. However, on 8 May 1813 a law was passed stopping any issue less than £1. This law was confirmed again in 1848.
The reasons behind the passing of the law were given in a preamble which said:
- "Recently notes of various amounts from 1s to £1 payable to the bearer have been put into circulation by a large number of individuals and which are received by the public without any regard to the solvency of the issuers, and this circulation of money, particularly of notes of small amounts, has occasioned great inconvenience, loss and even fraud, to the injury of the poor and uneducated inhabitants and the soldiers of the garrison; that it is of the highest importance to repress and prevent so manifest an abuse of public confidence and to maintain the good faith which should regulate all commercial operations, without which there can be no prosperity”.
This shows very clearly the island's peculiar financial structure of the day.
However, silver had disappeared from circulation and so great was the inconvenience caused to the public that three regular banks were allowed to issue notes of five shillings and ten shillings. This seemed to set off a chain reaction and everyone started producing notes again — even ordinary traders and publicans. The States of Jersey were faced with a situation that they had just passed legislation to stop, so they decided to strike £10,000 worth of coins and tokens from the Royal Mint.
These disappeared within weeks of their issue. Two interesting theories are given for this. The first is that so much suspicion was aroused among the country folk that when they came into market they refused to take paper money, believing that it was useless (and in most cases it was).
They insisted on having coins and, having obtained them, they hoarded them. Another more interesting theory, showing the sound economic sense of the Jerseyman, is that the coins fetched 5% more in Guernsey and Newfoundland; obviously a good business deal.
However, the States further clamped down on the money printers by decreeing that anyone issuing paper money should have an office in St Helier open for much of the day.
Banking in Jersey was to see some very dark days later in the 19th century, which culminated in perhaps the worst commercial depression that the island has ever seen. It all began when the Jersey Mercantile Bank suspended payment on 1 February 1873, following the failure of the new Harbour scheme in 1872. This caused a number of other banks to suspend payment and one can imagine the feelings of islanders as every day worse news was reported to them of growing financial disaster. Following the failure of the Jersey Mercantile Bank, one of the Judges of the Royal Court, Jurat Le Bailly, was charged with embezzlement and he was eventually sentenced to five years penal servitude.
Banking during the German Occupation was to be a difficult time for all concerned. In the 12 days before the Germans arrived, the people of the island began to prepare for the ordeal. The banks took immediate action when pressure on reserves of cash increased enormously as over 10,000 people evacuated. Further supplies had to be sent from Fngland and these arrived the day before the island was demilitarised. The island took in about £300,000 to meet the emergency, but the banks operated a brilliant system of withdrawal of all bearer bonds and securities held for account of customers. The banks' staff worked day and night, listing and packing into sacks documents worth millions of pounds in sterling which, at that period, could have been negotiated had they fallen into enemy hands.
So serious was the position that at one stage it was considered that burning the bonds would be the answer, but then the scheme of withdrawal was thought out and acted upon. Altogether 80 sacks of securities were shipped and delivered to London, and at one stroke thousands of pounds belonging to the people of Jersey had been saved from the hands of the enemy. Officials had worked day and night, the journey had been hazardous, but it had all been worth it.
Reichmarks began to flood the market at the beginning of the Occupation and it was a case of bad money forcing good money out of circulation. After a week of five Reichmarks to £1 the rate was raised to eight. A week later dropped to seven and remained at 9.36 for most of the war.
These rates, compared with the quotation of 11.10 to the £1 and par value of 20.43 at the end of August, 1939.
This represented a handsome profit to the German soldiers and the authorities, and until stocks were exhausted in the shops they had a field day. However, sterling was forced out of existence. Even German soldiers hoarded British currency and sent it back to France. At the end of 1943 the Germans eventually commandeered the sterling currency holdings of the branches.
The States had to borrow from the banks, issuing to them Treasury bonds of 2½ % and later at 1½ % interest. These borrowings meant an increase in bank deposits and balances rising as a result of States spending. This enforced borrowing by the States was a form of direct inflation encouraging price irregularities and a "black market".
The local bank managers, who had been advised by their head offices to stay at their posts, fought the Germans bitterly over the commandeering of sterling. At first the managers refused, so it was confiscated. The managers, in turn, refused reimbursement in Occupation marks and refused to sign a receipt for them.
A meeting was called by the Germans in May 1944 and both sides were firmly determined not to move from their entrenched positions. In the end the bank managers forced the Germans to add to the official receipt "received with all reserve."
The first English bank to appear in Jersey was the Hampshire Banking Company, which came in 1874, and was taken over by the Capital Counties Bank, later to become Lloyds, in 1879. Lloyds Bank made its entry in 1918.
The Midland made is solitary southward amalgamation by absorbing the CI Bank, which they bought for £60,000. Westminster Bank bought the Jersey Commercial Bank in 1908. Barclays arrived in 1921 and the National Provincial in 1927.
The Jersey Savings Bank had very quiet beginnings in 1835 and the roll call of honorary trustees - men who devoted their skill and time in a spirit of service to their fellow islanders - reads like a Jersey ‘’Who's Who’’. Men like the de Carterets, Coutanches, Balleines, Lemprieres, Le Bretons, Aubins and Mourant. It took the bank a century to reach their first million of deposits; in five years since 1960 the funds have grown by 15 million.
That, then, is a brief history of banking in Jersey. From it you can perhaps understand why it is that there are still some Jersey people who keep their money hidden in a sock under the bed. Old habits, encouraged by embittered forefathers, die hard.
- Banking collapses in the 19th century Added 2016
- The Finance industry in Jersey 1946-2003
- St Martin's Bank in Jersey