New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1884-05-22
THE OPTEVT1L R1NG FAILURE.

THE ORIENTAL B1Nh FAIL ORE.
The recent failure of the Oriental Bank,
| though not brought about by any panic, well
| illustrates the risks which attend ambitious
banking at the present day, and the dangers to
| be encountered even when there is no suspicion
of fraud in the management Twenty-Five years
ago the Oriental Bank was regarded rs the one
depository and financial agency for Anglo
Indian, Anglo-CeylOnese and i'll fact all the
British possessions in Asia. Its standing
throughout that region was as firm as that OF
the Bank of England. In India its credit was
as high as, and sometimes higher than that OF the
Government At that time its deposits ranged
between $50, 100000 and $75,000,000; its
shares were at a heavy premium, and it was
offered more business than 1t could take. En-
couraged by prosperity, and driven to seek fresh
investments for its funds. it extended its
agencies all over the world, and in doing so 1t
necessarily put a great deal of its business be-
yOnd the control of its directors. Local man
ayers at distant points had to be cOnfidcd III,
and in many instances their Judgment proved
bad. As the Anglo Indian dcpOStOrS were re-
ceivng a higher rate Of interest than could be
got in England, large amounts were by degrees
invested in foreign enterprises such as coffee,
sugar and quninc plantations Nearly all these
investments turned out badly. The planters
lost money, could not meet their notes. and the
bank had to take over the properties, and then
manage them to avoid total loss.
This distant and deputed management was
not satisfactory, and the property became less
valuable in the banks hands. At the same time
prices were falling, OWING to new competition.
r., ~ nj to on
length the bank found that it had 100000
locked up in these so-callcd "cstatcS,' and that
this capital could not be realized. Then another
disaster occurred. The bank undertook to float
CHILEAN loan. The war with Peru came on,
and the result was Il serious loss to the ncgota-
tors. The fall in the price of silver also oc-
cured during this period, and that hit the
Oriental Bank heavily again. For several years
it has been known to the initiated that the in
sttutOn was IN difficulties. The collapse OF the
City OF Glasgow Bank shook credit generally
and startled depOsitOrs as well as shareholders
The deposits began to be drawn out just when
new capital was most necessary to keep the
bank on its feet The market value of the stock
next went down rapidly. It was made apparent
that the stockholders would not respond to
call for fresh capital, and at last the directors
concluded that the only course open was to close
the doors.
If the $40, 900, 900 locked mp in Oriental In
ycstmcnts can be realized the depositors may
finally secure probably 80 per cent OF their
money. But it will take years to realize upon
that property, and even then half Of it may be
sacrificed. The failure of the Oriental Bank
ruined thousands of persons, or brought them to
pinching poverty, and yet there is no suspicion
of foul play and considering the yicisstudos
which led to the catastrophe, and which could
not have been fOrescen, it is even difficult to
charge bad management. In fact, there seems
no remedy for such disasters One London
journal suggests that the lending Of money upon
any security not rcazable within year might
be prohibited, but this would crcllmscribe bust
ness almost fatally, and unless it were made the
Law for all banks would simply result in driv-
ing borrowers away from the institution that
adoptcd the rule. If it were the law however,
it would certainly have the effect of making the
banking business more safe, and perhaps that
would be worth while, even if there was some
loss of expansion.