Newfoundland Currency and Banking Institutions


Early currency in Newfoundland
Until the late 1700s, cash in Newfoundland was quite scarce and the majority of Newfoundlanders used dried codfish as the chief medium of exchange. Merchants and their customers carried out business under the truck credit system whereby the merchants outfitted the fishermen in the spring of the year and the fishermen repaid the merchants with dried codfish in the fall of the year (usually with the entire catch of the season).

As the population increased, as trade with other parts of the world developed, and as the military presence in Newfoundland grew, coins became more common (with British gold coins and Spanish silver dollars becoming quite common). In addition, notes valued from 5 shillings to 5 pounds were also available. Large business transactions between companies were handled with Bills of Exchange.
Banks in Newfoundland
In 1834, the year after the opening of the first session of the Newfoundland House of Assembly, a Bill was passed establishing the Newfoundland Savings Bank (this bank was very successful and it was eventually sold at a handsome profit to the Bank of Montreal in 1962).

Newfoundland had legalized currency for the first time later in 1834 when an Act was passed authorizing the Newfoundland Treasury to issue Treasury notes. Between 1834 and 1855, 1 pound, 5 pound, 10 pound, 25 pound, 50 pound, and 100 pound notes were authorized, but only the 1 pound and 5 pound notes were issued as currency. The higher valued notes were used as temporary loans by banks. Most of these notes were destroyed in 1857.

A branch of the British Bank of North America was established in St. John's in 1836, however the record of the issue of notes by this bank in Newfoundland is not clear because the bank also operated in cities outside of Newfoundland and no record of the notes that were used solely in Newfoundland was kept.

The Union Bank of Newfoundland opened for business in Newfoundland in 1854 and by 1857 it had helped put the local branch of the British Bank of North America out of business. The notes of the Union Bank of Newfoundland were first issued in pound denominations (1 Newfoundland pound was equivalent to 4 dollars in sterling). In 1882 a series of 2 dollar notes was introduced, and this was followed in 1889 by an issue of 5, 10, 20, and 50 dollars notes. These notes were very beautiful in design and workmanship.

The Commercial Bank of Newfoundland was incorporated in 1858 and it issued four series of notes over the next 30 years. This bank was formed chiefly by St. John's merchants.

The Decimal System
On January 1, 1865, decimal coins were introduced to Newfoundland but pound notes continued to be used for many years afterwards. In fact it wasn't until 1877 that a law was passed that required the accounts of the Newfoundland Government to be kept in dollars and cents.

The first regular issue of Newfoundland coins in 1865 consisted of a 1 cent, 5 cent, 10 cent, 20 cent, and 2 dollar gold piece (actually inscribed 'Two Hundred Cents - 100 Pence'). A 50 cent piece was introduced in 1870, and a 25 cent piece replaced the 20 cent piece in 1917 because of public confusion between the Canadian 25 cent piece and the Newfoundland 20 cent piece.

The Bank Crashes of 1894
The Union Bank and the Commercial Bank closed their doors, never to reopen, on December 10, 1894. They had 'crashed' as a result of a severe lack of coinage in Newfoundland. The lack of coinage was caused by many factors, but chief among them were dangerous banking practices (bank directors were often merchants who borrowed money in an unchecked manner from the very bank that they helped direct) and the drastic fall in the export of fish from Newfoundland between 1890 and 1894. There was a run on the Newfoundland Government's Savings Bank, but it had first lien on coinage at the Union Bank, and it had funds to meet demands.

As a result of the crash, many companies ceased to operate, the export trade stopped, tens of thousands of people became unemployed, and the poor faced worsening conditions. Local relief organizations were quickly established and supplies and funds began to arrive from Canada, the United States, and Britain. Official relief arrived from Britain in mid-March 1895. Later that summer about 70 schooners were outfitted, manned, and sent to fish off Labrador.

The directors of the Union Bank and the Commercial Bank were charged with publishing false statements and conspiring to defraud the shareholders of the failed banks. However it became impossible to prove the charges and the directors were either found not guilty or the charges against them were dropped.

Following the double bank crash of 1894, Canadian banks set up branches in outports (after the completion of the railway from St. John's to Port aux Basques in 1898), the Bank of Montreal became the Newfoundland Government's banker, and Canadian currency also became legal tender in Newfoundland.

The 20th Century and Canada
In 1901, the Newfoundland government began to issue cash notes of 40 cents, 50 cents, 80 cents, 1 dollar, and 5 dollars. In 1910, 25 cent and 2 dollar notes were also issued. At first, these notes were issued to cover the money that the Department of Public Works provided for road work. After 1910, the notes were additionally used by the Department of Marine Works and the Department of Permanent and Casual Poor Services.

All Newfoundland coins minted before 1917 were struck either at the Tower Mint in London, England if they have no mint mark, or at Birmingham, England if they bear the mint mark H (Ralph Heaton and Sons). Because of the threat to shipping in the Atlantic Ocean during World War I, Newfoundland coins were minted at the Royal Canadian Mint in Ottawa from 1917 to 1920, and they bear the mint mark C. As a result of a similar threat during World War II, Newfoundland coins in 1940 (and all later coinages) were again minted in Ottawa.

The last issue of Newfoundland coins was made in 1947, two years before Newfoundland joined Canada on March 31, 1949 (just before the stroke of midnight - immediately before the expiration of March 31).

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