Academic journal article The Journal of Caribbean History

Regulation of the Commercial Banking Sector in the British West Indies, 1837--1961

Academic journal article The Journal of Caribbean History

Regulation of the Commercial Banking Sector in the British West Indies, 1837--1961

Article excerpt

Introduction

This article examines the regulatory framework within which commercial banks in the British West Indies operated in the nineteenth and early twentieth centuries. Moneterists and other social scientists in the British West Indies assume that significant regulation of the commercial banking sector in the region only originated with the establishment of central banking in the 1960s following the achievement of political independence.1 This is sometimes highlighted by referring to the inability of the region's Currency Board system, established between 1900 and 1920, to affect the credit creation and restriction capabilities of the commercial banks. Its inability to restrict the banks' movement of capital out of the region is often pointed out as well.2

Throughout the nineteenth and early twentieth centuries, Britain had a very liberal regulatory regime and was slow in developing formal controls over banks. This policy was extended to the West Indies, given the nature of the political relationship engendered by imperial ties. As there were few prudential regulations and no exchange controls in existence, commercial banks in the British West Indian colonies, like those in the metropolis, were relatively free of restrictions on their day-to-day activities throughout this period.3 It is true that the reform of the currency system that was undertaken during this period, and which placed West Indian currency on the Sterling exchange standard, imposed some restrictions and eventually withdrew from the banks their longheld right to issue currency notes. The reform also meant there was the potential for some amount of restriction being imposed upon the banks' foreign exchange transactions.4 Nevertheless, there was virtually nothing in the regulations that had the potential to prohibit or influence the banks in their movement of funds and their allocation of credit. This only changed in the 1960s with the establishment of central banks as the various colonies became politically independent of Britain.

However, British policy during the colonial period did not mean an abrogation of duty in relation to financial stability and probity within the banking sector. Indeed, these concerns were constant throughout the nineteenth and early twentieth centuries, and are borne out in the various clauses of the regulations that were implemented, and the subsequent amendments to them during this period. In particular, a constant watch was placed on the currency note issuing powers of the banks, and the security arrangements of their banknotes in circulation. It is true that there existed some degree of inconsistency and haphazardness in the approach to regulation in the region by the authorities, but it is very evident that prior to the 1960s, there existed a strong tradition of regulation of the commercial banking sector in the British West Indies.

Commercial banking was first established in the British West Indies in the 1830s. The perception of increased profitable opportunities as a consequence of the impending full abolition of slavery best explains their establishment at that time. With full emancipation, it was envisaged that planters would require much larger advances for working capital, and that there would be a greater demand for consumer goods as a consequence of former enslaved persons working for money wages, which would stimulate the expansion of the retail and wholesale sectors. The first commercial banks were in fact established by British West Indian merchants who were involved in the financing of foreign and local trade, as well as advancing working capital for agricultural production. These included the Bank of Jamaica and the Bank of British Guiana, which were established in 1836. They were followed by the Planters Bank in Jamaica in 1839, and the West India Bank in 1840 in Barbados; branches of the West India Bank were established in Trinidad and Tobago, St Kitts and Antigua. A.S.J. Baster, in a work first published in 1929, mentions the Union Bank of Jamaica being established in 1839 and the St Vincent Commercial Bank in 1840, but there is no further reference to these banks in the records, and the assumption is that they never got off the ground. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.