1893 banking crisis

The 1893 banking crisis occurred in Australia when several of the commercial banks of the colonies within Australia collapsed.

During the 1880s there was a speculative boom in the Australian property market. Australian banks were operating in a free banking system, in addition to few legal restrictions on the operation of banks, there was no central bank and no government-provided deposit guarantees. The commercial banks lent heavily, but following the asset price collapse of 1888, companies that had borrowed money started to declare bankruptcy.

The full banking crisis became apparent when the Federal Bank failed on 30 January 1893. On 1 May 1893, the Victorian government implemented a five-day bank holiday to address the panic. By 17 May, 11 commercial banks in Sydney, Melbourne and other locations across the country had suspended trading.

Many institutions temporarily or permanently closed their doors, including:

Whilst gold and securities were held by certain banks, many Australian institutions did not make representations to their London branches which held those deposits.

By 1894, the worst of the economic crisis was over and the task of rebuilding society started. Criticisms were levelled at board directors:

These comments of 1897 were made as the Federation Drought (1896 to 1902) commenced, which resulted in the forthcoming widespread death of livestock and strains of livelihoods. There were some reforms to regulation and law with a view to preventing future abuse.

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