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2015 | OriginalPaper | Buchkapitel

6. Relationship to the Government

verfasst von : Roland Uittenbogaard

Erschienen in: Evolution of Central Banking?

Verlag: Springer International Publishing

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Abstract

As we have seen, DNB was established for payment system reasons but the fiscal option was clearly left open. From the analysis of the governance of DNB we concluded that while legally a private company, DNB was not structured to maximise profit for its shareholders. This leaves unanswered the question of what objectives DNB did have. This chapter centres on the question of how independent DNB was from the Government. This is relevant for at least two reasons. Firstly, from a fiscal theory point of view, we would expect the Government to have strong influence over DNB in order to make it serve its purposes. From the perspective of the payment system, the role of the Government would be to support confidence in the new payment technology, i.e. banknotes. Historiography on DNB is not very explicit about the relationship between DNB and the Government. De Jong points at the wisdom of securing DNB’s independence through the structure of its Charter, but he did not elaborate on the underlying incentives. Nor does De Jong devote much room to lending to the Government, which began in 1834. This ‘incident’ does not fit well in his linear history towards modern central banking.

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Vorheriges Kapitel Corporate Governance of DNB

Nächstes Kapitel DNB’s Role in the Payment System (1814–1852)

Charter 1814 art. 7. “ter meerdere geruststelling van ’s lands ingezetenen.”

De Jong I-1, 85 and 86.

Idem, 100.

Idem, 269.

Idem, 298 and 299.

The Bank remained a joint stock company, all shares were nationalised in 1948.

Art. 62 first Charter.

This was mainly a legal issue April 1838: doc 67 undated advice.

‘Minutes of a meeting between the Board and the Minister of Finance on the renewal of the Charter, d.d. 26-6-1838’, in: De Jong I-2, doc. 76.

“Memorie van den minister van financiën, den Minister van buitenlandsche zaken en den minister van Staat, van Gennep, d.d.16-18 juni 1838 betreffende de verlenging van het bankoctrooi.” In: De Jong I-2, doc. 71.

Minutes of an extraordinary meeting of the Governing Board 25-6-1838 concerning the renewal of the Charter. In: De Jong I-2: doc. 75: This was considered a novelty that, apart from the little respect for the management of the bank expressed by it, ‘would jeopardise the finally attained credibility.’ This credibility was based on the independence from government of the bank.’ Public opinion had ‘already several times clearly expressed itself against government interference in the bank.’

De Jong I-2: doc. 78.

De Jong I-2, doc. 76 and 79.

‘Introduction to the Archive of the CK.’ Nationaal Archief, Den Haag, De Nederlandsche Bank N.V., Archief van de Centrale Kas, entry 2.25.77.01, inv. nr. 16246; verkort: NL-HaNA, DNB—Centrale Kas, 2.25.77.01, inv.nr. 16246.

‘Letter DNB to Minister of Finance, d.d. 21-4-1815, concerning discounting government paper.’ In: De Jong I-2, doc. 13.

Idem, 171.

MB 15-4-1831.

MB 9-6-1834: “… onze pligt gaarne tot gemeen nut zal bijdragen.”

De Jong I-1, 176.

With the Charter renewal this discount was cancelled, as the Bank had to start servicing the Amortisatie-Syndikaat without charge.

De Jong I-1, 176 and 177 deals with all lending to the Government at once and never refers to it elsewhere.

Data kindly provided by F. Bos (see Chap. 2).

Pfeil (2009), pp. 86 and 87 and Riemens (1935).

Buyst et al. (2005), p. 14; It is interesting that the legislation to make this possible did not pass parliament. The SG developed into a general cashier for the Government, a broader role than DNB had in relation to the Centrale Kas. This role as cashier to the Government generates a large cash base for the SG that the Bank used for lending. This way money in the treasury could be mobilised. Pfeil (1996), p. 276.

de Graaf (2012), pp. 50 and 51.

This argument is also made by Van Zanden and Van Riel (2000), p. 268.

MB 21-11-2013.

Ibidem.

MB 28-11-1823.

De Jong I-1, 120–122 describes the operation, but does not mention that DNB kept its lombard rate in December at 4 % as requested by the King. This was recorded in the Minutes, not in the Annual Report.

AR 1823–1824 (Inv. nr. 768) the Board mentioned that the King had said (during an official visit in April 1824) that he regarded the Bank as ‘his eldest daughter.’ Apparently, the King referred back to a previous statement, in a meeting before establishing the AS, when he told the President (MB 12/2/1822) that ‘he would not sacrifice the (good health of the) elder sister to the success of the younger.’

Riemens (1935), p. 105.

Charter art. 43.

Discussed in Chap. 3: as an indication of the intentions of Willem I with DNB, which did not work out. The Domainbank and the establishment of the Société Générale show that the King had learned from the experience with DNB and had removed safeguards for independent governance.

‘Letter of C.S. van Lennep to C.C. Six van Oterleek (Minister of Finance), about extending the business of DNB to the Southern provinces.’ Doc. 14 and ‘Advice of J.H. Appelius to the King about extending the business of DNB to the Southern provinces.’ d.d. 7-5-1815. In: De Jong I-2, doc. 15.

‘Letter of the Chamber of Commerce of Rotterdam to the Minister of Finance about opening a DNB branche in Rotterdam.’ d.d. 7-8-1847. In: De Jong I-2, doc. 109.

‘Comments of Van Gennep to draft rules of procedure for DNB branche in Rotterdam.’, (no date) Summer 1839, In: De Jong I-2, doc. 87; the Minister of Finance asked for comments to this draft from Van Gennep who spoke of ‘a control inspired by narrow-minded fearfulness, totally making the branch subservient to the Amsterdam Bank’.

‘Letter of DNB to the Minister of Finance asking for a postponement of the obligation to open a branch in Rotterdam.’ d.d. 13-8-1839. In: De Jong I-2, doc. 88.

In a Rotterdam newspaper the delay had been criticised. In: NRC, 16-6-1847: “Are there private interests that have the power to prevent a measure that for the entire Exchange is important? If so, can this be allowed?”

‘Letter of DNB to Minister of Finance on establishing a branch in Rotterdam.’ d.d. 12-2-1852. In: De Jong I-2, doc. 140. ‘since 1847’ conditions had improved.

‘Letter of the Chamber of Commerce Rotterdam to Minister of Finance on establishing a DNB branch in Rotterdam.’, d.d. 2-10-1847. In: De Jong I-2, doc. 113.

‘Letter of the Minister of Finance to DNB on establishing a Rotterdam branch.’ d.d. 23-11-1847. In: De Jong I-2, doc. 116.

Letters Chamber of Commerce Rotterdam, In: De Jong I-2, docs. 109 and 113. See also Boele (1997), pp. 266–268.

Therefore Wijnne (1863) argued that if the monopoly was maintained, the Bank should be forced to open branches outside Amsterdam. Otherwise, deleting the monopoly and privileges for the Bank would create room for the market to step in. Branches were good for all, the provincial towns and the bank itself. Improving the circulation of paper money was an improvement. Business in the provinces would benefit and profits for the Bank would increase, Wijnne predicted.

Wijnne (1863), p. 23.

Wijnne (1863), p. 24 expected DNB to profit from opening branches for this reason.

Van Hall had been the lawyer for the Amsterdam cashiers during their conflict with DNB in 1839.

Until 1832 only fl 16 million worth of guilder coins were minted, but the overall circulation, consisting of old and worn coin was estimated at fl 100 million. The situation therefore improved little until 1830. But between 1816 and 1847, fl. 172 million in gold coins were minted of which an estimated fl 122 million worth were exported. Korthals (1996), p. 166.

Korthals (1996), p. 163. Though not the old silver specie because these were clipped and worn, and had low intrinsic value.

De Jong I-1, 148ff; Korthals (1996), p. 163.

De Jong I-1, 317ff; Korthals (1996), pp. 174ff; van Gelder (2002), pp. 184–186.

The denominations that were allowed to DNB according to its renewed charter art. 22: fl 1,000, fl 500, fl 300, fl 200, fl 100, fl 80, fl 60, fl 40 and fl 25.

Small denomination bank notes could be used by people unfamiliar to financial affairs, whose behaviour would be hard to predict. On the one hand their possible gullibility could lead to overissue, on the other hand, confidence could be lost without any rational explanation.

‘Letter Bank to Minister of Finance on issuing small denomination banknotes’, d.d. 30-7-1845. In: De Jong I-2, doc. 94.

De Jong I-1, 320–322.

‘Letter DNB to Minister of Finance on cooperation in the withdrawal of old silver coins from circulation.’ d.d. 5-10-1849, In: De Jong I-2, doc.123. “although we are willing to assist the government in this matter, we must prevent any inconvenience for our proper bank duties.”

In fact, this was the first fully fiduciary issue in the Netherlands. Compare: van Viersen Trip (1901), p. 28: This was successful in 1852: No matter how one thinks about the principle of issuing money without cover in specie, the Government did so and continued doing so, supported by the public, that never showed any distrust and continued using the coin notes.’

MB 29-2-1836: “although our specie reserve is still fl 20 million. There are 4 million gold coin that should not be issued now, because of their current high price and 5 million new silver coin that will disappear from circulation immediately if issued.” So, in fact the specie reserve that could be used in exchange for banknotes was nearly half.

Because of its different character from the Bank of Exchange, it was not immediately clear what DNB would have to do in order to achieve monetary stability. DNB would not be able to influence international specie movements, but after the demonetisation of gold, it realised it would be able to influence the quantity of money in circulation. From 1852 onward it started to attract all silver that entered the Netherlands (see Chap. 8 below).

Boele, C. (1997). De komst van de bijbank der Nederlandsche Bank in Rotterdam. In Rotterdam Jaarboekje.

Buyst, E., Maes, I., Pluym, W., & Danneel, M. (2005). De Bank, de frank en de euro. Anderhalve eeuw Nationale Bank van België. Tielt: Lannoo.

de Graaf, T. (2012). Voor handel en maatschappij, Geschiedenis van de Nederlandsche Handel-Maatschappij. Amsterdam: Boom.

Korthals, W. L. (1996). Van £ Hollands tot Nederlandse fl. De geschiedenis van de Nederlandse geldeenheid. Amsterdam: NEHA.

Pfeil, T. J. E. M. (1996). VII Van Thesaurier-Generaal tot Generale Thesaurie. In J. T. Smidt et al. (Eds.), Van Tresorier tot Thesaurier-Generaal. Hilversum: Verloren.

Pfeil, T. J. E. M. (2009). Op gelijke voet. Geschiedenis van de belastingdienst. Deventer: Kluwer.

Riemens, H. (1935). Het Amortisatie-Syndikaat. Een Studie Over De Staatsfinanciën Onder Willem I. Amsterdam: H.J. Paris.

van Gelder, H. E. (2002). De Nederlandse munten. Het complete overzicht tot en met de opkomst van de euro. Utrecht: Het Spectrum.

van Viersen Trip, G. W. (1901). Beschouwingen over het wetsontwerp van 1900 tot nadere regeling van het Nederlandsche Muntwezen. Groningen.

van Zanden, J. L., & van Riel, A. (2000). Nederland 1780–1914 Staat, instituties en economische ontwikkeling. Meppel: Balans.

Wijnne, H. A. (1863). De Nederlandsche Bank en de provinciën. Groningen.

Titel: Relationship to the Government
verfasst von: Roland Uittenbogaard
Verlag: Springer International Publishing
Buch: Evolution of Central Banking?
Print ISBN: 978-3-319-10616-8

Electronic ISBN: 978-3-319-10617-5

Copyright-Jahr: 2015
DOI: https://doi.org/10.1007/978-3-319-10617-5_6