Circular Notes of Australian Banks
The problem of travellers obtaining money while abroad is a perennial one. Modern travellers have numerous ways to access money when travelling, although the practicality of the methods can be debated. For much of the twentieth century traveller’s cheques were the principal method by which travellers to other countries could access their funds. The forerunners to the traveller’s cheque were the circular letter of credit and the circular note. Circular letters of credit and circular notes originated in the late eighteenth century and while circular notes were most popular in the nineteenth century, it was the circular letter of credit that survived into the twentieth century. The circular notes of several Australian banks are highlighted here, but before discussing these notes, the origin of the circular note and the circular letter of credit is related.
Prior to circular notes, there were several ways that travellers could arrange for money to be made available to them while in foreign climes. The most basic way was to take coin with them but, while many travellers on the grand tour took gold and silver as an immediate supply, very few resorted to carrying their entire allotment for their tour. Bills of exchange and letters of credit were the most useful tools available to the tourist and to the merchant.
A bill of exchange could involve a number of people, but usually four participated in the transaction. If a person in London wanted to send money to a person in Rome, the Londoner would deposit the sum with their banker or a merchant who dealt in bills of exchange. The banker (or merchant) would supply the bill to the Londoner, who sent it to the person in Rome or took it to Rome themselves. This person then presented the bill to the correspondent of the London banker (or merchant) in Rome, who accepted the bill and paid the recipient in Rome. The bill then became a debt between the London banker (or merchant) and his correspondent in Rome, which was settled at a point in the future by balancing transactions or remitting gold or goods to the value of outstanding bills.
A letter of credit was an arrangement between two bankers, which allowed a third party to draw money up to a certain amount. So, the Londoner would go to his banker and request a letter of credit to present in Rome. On arrival, he went to the banker in Rome and presented the letter of credit, drawing all or some of the credit as desired. The amount withdrawn became a debt between the London banker and his correspondent in Rome.
Both processes worked well, but they were not without their problems. Letters of credit were not always honoured and bills of exchange might be ‘taxed’ by the correspondent, with the recipient not receiving the full sum. Despite occasional irregularities, businessmen and travellers successfully used these tools before and after the introduction of circular notes.
Throughout Europe there were a great number of businesses that dealt with each other on a regular and frequent basis. This allowed a trust to build between the business houses and reliable connexions were established. While these connexions were often between foreign companies, it was common for larger trading houses to establish their own representatives in the major ports or cities where they operated. Consequently, enclaves of foreign representatives grew in a number of major European ports and cities. These representatives commonly became correspondents for their company or for other agents of their company.
The circular note, which was to become the standard instrument for British tourists to the continent for over a century, was the brainchild of Robert Herries, a Scotsman. Robert’s two uncles ran a business in Rotterdam, to which he was initially sent around 1750. The house of Herries enjoyed the patronage of Hope and Company, the largest Scottish business house in Rotterdam, and soon Robert Herries began business as a brandy merchant in Barcelona under their guidance in 1754.
Robert’s business interests steadily grew over a period of time until he became a well known and respected businessman. One of the Scottish families with which Robert became involved was the Coutts family. This family had a number of business interests, including a banking house in Edinburgh. Robert Herries was invited to be a partner in the mercantile business of the Coutts family in London, with the partnership being established on 25 December 1762. (The Coutts family had recently established a bank in the Strand in London, but Robert was not linked to this business.)
The partnership was not a steady one and Robert took an option in the partnership agreement to dissolve the partnership after three years. However, during that time he made the acquaintance of William Forbes, who was an employee of Coutts Brothers in Edinburgh. Sir William was later to become a famous Edinburgh banker in his own right in the firm of William Forbes, James Hunter and Company, which grew out of Coutts’ Edinburgh bank. In his memoirs, Forbes relates the rocky relationship between Herries and the other partners.
Robert Herries, like many a merchant and traveller of the time, was all too aware of the disadvantages of letters of credit and bills of exchange. Unlike others, he sought to create a practical alternative. He discussed his ideas with Forbes who records in his memoirs that travellers would use ‘an universal letter of credit in the form of promissory-notes, which should be payable at the principal places in Europe where travellers were likely to be.’ To facilitate this concept, Herries used his experience to establish a network of correspondents who would cash the notes on the current exchange rate, but raising no fee or commission to the traveller.
The traveller paid for the circular notes before commencing on their journey, so the credit for the circular note was certain. Herries made money by using the deposits in the period between the traveller purchasing the Circular Note and when he had to pay his correspondents. Although the concept and groundwork were meritorious, Herries found it difficult to sell his idea to the bankers in London. He had relied on them to sell his Circular Notes to tourists, instead of Bills of Exchange and Letters of Credit, but they appeared unwilling to promote his new idea.
In order to make his idea work, Herries established his own bank, the London Exchange Banking Company. The partners in the new enterprise included Sir William Forbes, James Hunter Blair, William Pulteney, Sir William Maxwell, and Robert Herris (Robert’s uncle from Rotterdam). The bank was established around 1769 at premises in 16 St. James’s Street, London.
Initially, the instrument launched by Herries was called a billet de change or ‘exchange note’, but was soon changed to a billet circulaire or ‘circular note’ . The notes were issued with an accompanying ‘Letter of Order’ (sometimes titled a ‘Letter of Indication’), which listed the towns and cities on the continent where the notes could be cashed. The letter also acted as an introduction to foreign bankers.
Although the early circular notes were payable after seven days sight, they were designed to be paid immediately. The seven day clause was only to be acted upon if the banker was unable to immediately supply the money. On cashing the circular note, the traveller signed two receipts, one of which was kept by the banker and the other was on the back of the circular note, which was returned to Herries in London.
Herries’ bank also issued ‘transferable notes’ which could be paid at a single point, but which could be used by anyone until they were cashed. Another innovation was the ‘circular letter of credit’ for a fixed sum. This allowed all or part of the fixed sum to be paid by any of Herries’ correspondents, with each correspondent recording the amount paid to the holder on the circular letter of credit. These instruments incurred commission to each agency providing funds and postal charges for correspondence with Herries’ agents. Unlike circular notes, money may or may not be deposited against the circular letter of credit. If the circular letter of credit had been issued against a deposit, then no charges were made for the use of the instrument by Herries, but if no funds had been deposited, then Herries would charge a commission. Lastly, Herries introduced ‘direct letters of credit’, which were payable at a single agency.
At the time Herries launched his services through his new bank, he circulated a pamphlet entitled ‘Remarks on the Plan of the Circular and Transferable Notes of The London and Exchange Banking Company’. In it he indicates that anti-counterfeiting devices are present, protecting the notes. His pamphlet commences:
The circular exchange notes have the singular advantage of being recoverable abroad, even at places which have no direct course of exchange on London, without subjecting the possessor to the usual charges of reimbursement on any intermediate third place. Their being indorsable only, to the agents of the company; secures the traveller from being personated by any impostor who might find or pick up his notes; and, together with various private marks, checks, &c. understood between the company and their agents, must effectually prevent every attempt to counterfeit them.
With an estimated market of up to one-and-a-half million pounds per year for British tourists to the continent, Herries was keen to capture a reasonable share of the market. Happily, Herries found his services to tourists were eagerly taken up. By 1790 Herries had 141 correspondents throughout Europe, most of whom were connected to the house of Hope and Company of Amsterdam, the firm that had launched Robert’s mercantile career.
Just when business was looking good, two events conspired to slow Herries’ trade in circular notes. Firstly, the French Wars virtually closed the continent to British travellers. Secondly, the London Exchange Banking Company was dissolved due to strained relationships. Herries had fallen out with the Coutts brothers, but Forbes and Hunter (partners in Herries’ bank) were still working with Coutts through their Edinburgh establishment. Forbes felt his loyalties were divided and ultimately decided it best to end the partnership with Herries. Subsequently, Herries, along with his two brothers Charles and William, his uncle Robert, Thomas Hammersly, and Charles Sackville, formed Sir Robert Herries and Company as a private bank specializing in travellers’ money.
Although unconfirmed, it appears that other bankers began emulating the business started by Herries, but the extent to which competition flourished is not known. In 1782 Hammersly left Robert Herries and commenced a partnership with Ransom and Morland in Pall Mall. Hammersley successfully promoted the concept of circular notes and with his patronage of the Prince of Wales he became a prominent banker. With both Herries and Hammersly selling circular notes through their partnerships, their use increased; but the French Revolution of 1789 reduced the number of travellers to the continent and business became slow.
Herries initially maintained an office in Paris and conducted business with the new government, although he later established an agent in Paris—an arrangement which lasted until 1795. In 1793 Britain commenced war with France, retarding travel to the continent even further, although travellers continued to venture to places other than France. In 1795 Hammersley commenced his own business, so successful had his investment in circular notes and traveller’s services become .
The war between France and Britain, while not entirely halting travel, led to significant disruptions to the postal services, which were essential to the business of circular notes. In 1798 Herries retired from business, frustrated at competition from within England, troubled by the French, and finally beaten by the war. His business continued in a new partnership of Herries Farquhar & Company (with his cousin Robert Herries, son of his Uncle, and Thomas Farquhar as principals), but Robert Herries was finished with banking and his grand concept of the circular note.
After the defeat of Napoleon in 1815 travel to the continent increased, slowly at first but rapidly from 1816. Herries Farquhar & Co. issued circular notes to the value of £72,750 in 1815 but this lifted to £153,000 in 1816 and business continued to grow until 1819 when it peaked at £244,000. While Herries, Hammersley and Coutts were satisfying the British market for circular notes, it was not long before competition for the market grew. As an example, in 1838 the Lafitte Joint-stock Bank in Paris began issuing notes payable to an individual, but which could be cashed at any of their branches in France. Three series of notes were introduced, with the low denomination notes of 25, 50 and 100 francs being payable one day after sight, the series of notes from 100 to 1000 francs payable three days after sight, and notes from 1000 to 5000 francs payable five days after sight. Issued at par, a one-quarter percent commission was paid when the note was cashed . While issued in France, it is not known whether these notes were also made available outside France, nor how successful the notes became.
Throughout the first half of the nineteenth century circular notes were the principal method of obtaining money for British travellers. As travel increased in the second half of the nineteenth century, so did options for travellers. Perhaps the greatest change arrived with the packaged tour, promoted by Thomas Cook. With travellers paying for most expenses before leaving Britain, there became a need to take only small amounts of money abroad. Ultimately, Thomas Cook introduced a voucher system in 1866, and the vouchers were issued along with their own circular notes. Following the introduction of traveller’s cheque by American Express in the 1890s, Thomas Cook followed the lead, which in turn led banks throughout the world to introduce them. So, while circular notes continued to be issued into the late part of the nineteenth century, their heyday was coming to an end.
The circular notes illustrated here are proofs prepared by Perkins Bacon and Company for two Australian Banks, the Union Bank of Australia and the London Charter Bank of Australia, and a specimen note prepared for the Bank of New South Wales by Charles Skipper and East. The Union Bank was a joint stock bank founded in London, for operation in Australia. Commencing business in 1838, it operated first in Tasmania, absorbing the Tamar Bank, and then opening offices in Melbourne and Sydney. It steadily grew its operations, opening in New Zealand in 1840, in Adelaide around 1850, in Brisbane around 1860 and Perth in 1878. Absorbing several banks during its period of growth, the Union Bank was to become one of the strongest banks in Australia. The dramatic failures of some banks in Great Britain in 1878, such as the City of Glasgow Bank, led to a change in the law that allowed banks to become limited liability companies. This was enacted in 1879 and the Union Bank, originally founded by royal charter, took the opportunity to restructure itself as a limited liability bank. From 4 May 1880 the bank became The Union Bank of Australia Limited.
The fifty-pound circular notes of the Union Bank, illustrated here, are of two types. One is issued by the Union Bank of Australia and the other by the Union Bank of Australia Limited. The text on both notes is in French, the international language of the day. Titled Billet de Credit Circulaire, the notes were payable in London. The text on the fifty-pound note reads:
Messieurs, Un Crédit pour la somme de cinquante livres sterling est ouvert par nous en faveur de M____ dont ___ toucher la Valeur sans frais quelconques au Cours à Usance sur Londres contre sa traite ci-jointe. Nous vous référons à la lettre d’Indication qui doit en même temps vous être presentée et vous prions d’agréer. Messieurs, l’assurance de notre parfaite considération.
This can be translated as:
Dear Sirs, A credit for the sum of fifty pounds sterling is opened by us in favour of M____ of which ___ must receive the value without any charges at the Rate of Usance on London against the attached draft. We refer you to the letter of Indication which must at the same time be presented to you and ask you to approve. Sirs, with assurance of our perfect consideration.
For this circular note, the French appears to be an imperfect translation from the original English, but the intent is reasonably clear. There are two spaces to be filled in on this note. The first space is for the name of the person, for whom the circular note has been issued, and the second, smaller, space is for ‘he’ (il) or ‘she’ (elle).
The notes illustrated here are for fifty pounds, although the Union Bank (in both guises) also issued ten- and twenty-pound circular notes. The smaller illustration is of the printing that appeared on the back of the circular note. The name of the person to whom the money is paid is inserted on the first line, below which are inserted the signature of the person and the date signed. This formed the receipt which was returned to the issuer of the circular note.
The London Chartered Bank of Australia was incorporated by royal charter in 1852. Based in London, the Sydney and Melbourne branches opened on 1 July 1853. A Brisbane branch was opened in 1882. The bank suspended payment in 1893 during the economic crisis of that year, but was restructured and reopened as a limited liability banking company in August the same year. As a result, the name of the bank changed to the London Bank of Australia Limited.
Illustrated here are two circular notes prepared for the bank and it appears that these were the only denominations issued by this bank (before and after it was restructured). The twenty-pound note is prepared for the earlier entity, the London Charter Bank of Australia, and the ten-pound note is prepared for the latter entity, the London Bank of Australia Limited.
The text on the twenty-pound note reads:
To The Bankers named in our letter of Indication. Gentlemen, This Letter will be presented to you by M ________ whose signature you will find at the foot of our Letter of Indication of which he is the Bearer. Please pay him without deduction the value of Twenty Pounds Sterling by negotiating his demand draft endorsed hereon at the current rate of Exchange on London. I remain, Gentlemen, Your obedient Servant.
The receipt on the back of this circular note differs to those of the Union Bank in that, while the name of the person is inserted, his signature is not required. Rather, the place and date of cashing is recorded.
The Bank of New South Wales was the first bank established in the colony of New South Wales, commencing business in 1817. It issued banknotes from its earliest times and issued circular notes, in the style illustrated here, in the denominations of ten and twenty pounds during the latter part of the nineteenth century. The circular notes were printed by Charles Skipper and East of London, who took over the printing of the Bank’s banknotes between 1867 and 1870. This suggests that the circular notes of the Bank of New South Wales, as illustrated here, were prepared after circa 1870. The circular notes of this issue have a yellow under-print of the denomination, as ‘£10’ or ‘£20’, and the edge of the paper is tinged blue. The text on these circular notes reads:
To the Bankers mentioned in our letter of Indication. Gentlemen, this letter will be presented to you by M____________ whose signature you will find at the foot of our Letter of Indication No.A___ Please pay him without deduction the value of Ten Pounds stg. at the exchange of the day on London against his draft on the London Office of this Bank endorsed hereon. I remain, Gentlemen, Your Obedient Servant.
The back of the notes carry a receipt similar to those of the other two banks mentioned above. While this specimen note is domiciled on Sydney, the Bank issued notes domiciled on most of the capital cities of the Australian colonies.
The circular notes of the London Charter Bank, the Union Bank, and the Bank of New South Wales, emphasize the need to pay the full sum to the bearer of the circular notes. Over a period of time, it was found that correspondents who cashed the circular notes found ways of imposing fees, taxes, or minor charges for cashing the notes. This was not permitted, but people presenting the notes often had no recourse to direct action if there was only one agent in a town who could cash the circular note.
Writers on the history of banking in Australia are remarkably silent on the use of circular notes issued in Australia. Butlin records that that the Oriental Bank, after issuing banknotes of the Australian Joint Stock Bank, in 1854 commenced issuing their own notes and in 1858 they commenced issuing circular notes. From the proofs illustrated here it is apparent that the Union Bank issued circular notes prior to its formation as a limited liability bank in 1880 and subsequently issued them after their restructure. The London Charter Bank notes can only be dated to before 1893 with any certainty, noting the use of the older name of the Bank, and after 1893 for notes with the new name. However, considering the broad popularity of these notes after 1816 in Britain, it would seem strange if these instruments were not issued in Australia from the middle of the nineteenth century. Evidence, apart from the reference to the Oriental Bank, is lacking.
The ten-pound note issued by the London Bank of Australia Limited shows the date as ‘189-‘, indicating the notes were used late in the nineteenth century. The circular notes issued by the Bank of New South Wales carry a date of ’18-‘, but the Westpac Archives contains a copy of a letter dated 9 August 1897 that refers to ‘Circular Notes & Letters of Credit’ and addresses the change of their agent in Moscow, due to the previous agent going into liquidation. This indicates that circular notes were still being used at the end of the nineteenth century, but for how long they were issued into the twentieth century in Australia is not known.
Also illustrated here are two Circular Letters of Credit, issued by the Bank of New South Wales. The first of these is printed by Charles Skipper and East and appears to be contemporary with the circular notes, illustrated earlier (although the Circular Letter of Credit has a date of ‘19__’ on the form while the Circular Note has ‘189_’). The second Circular Letter of Credit is a specimen prepared by Waterlow and Sons of London, and is prepared using intaglio print. This later specimen is attached to a letter dated 1 September 1957, which announces the introduction of the new style of Circular Letters of Credit. Also illustrated is a specimen Letter of Introduction that was designed to accompany the Circular Letters of Credit issued from September 1957.
As well as issuing Circular Letters of Credit for international travellers, Circular Letters of Credit were issued by numerous banks in Australia for internal travellers. While most banks had representation in all states, the local or ‘interstate’ Circular Letter of Credit achieved the same objective as the Circular Letter of Credit in English pounds for overseas travellers. Where local representation was not available, a bank’s customers were usually referred to other Australian banks as their correspondents. For example, The Queensland National Bank variously nominated The National Bank of Australasia, the Bank of New South Wales, The Commercial Bank of Australia, and the Bank of Australasia as their correspondents outside Queensland.
By the time the Bank of New South Wales’ Waterlow-printed Circular Letters of Credit were issued in 1957, circular notes appear to have disappeared. Holder states that the Bank of New South Wales commenced issuing traveller’s cheques from 1 March 1935, but does not state what facilities travellers were using before then. The National Bank of Australia announced in March 1936 that they would be issuing traveller’s cheques from 1 April 1936. A subsequent memorandum to National Bank staff on 7 April 1936 , advised that ‘The [travellers] cheques should be considered as auxiliary to, rather than in substitution of the Bank’s Circular Letter of Credit.’ The memorandum also advises that the traveller’s cheques were only for the use of travellers outside Australia and that ‘The Interstate Letter of Credit would be more suitable for anyone travelling in Australia and/or New Zealand.’
Arndt , writing in 1957, says that a ‘familiar form of bank draft is the traveller’s cheque which has largely superseded the circular letter of credit as the most popular means of financing travel expenditure.’ However, circular letters of credit lasted for some years yet. The National Bank of Australasia advised staff in February 1976 that ‘English Currency Travellers’ Circular Letters of Credit’ were no longer being issued. A month later The Commercial Banking Company of Sydney announced that they were ceasing to issue circular letters of credit in English currency due to the widespread fraudulent use of these instruments . A year later ‘Local Circular Letters of Credit’ also ceased to be issued by the National Bank . So, while records exist on the passing of circular letters of credit, nothing is recorded on the passing of circular notes, which appear to have become obsolete shortly after the beginning of the twentieth century.
One of the more intriguing aspects of the study of traveller’s instruments issued in Australia is that issued examples of circular notes and circular letters of credit produced for Australian banks are rare on the collector market. In lieu of examples of issued circular notes, the printer’s proofs and specimen presented here are a few fine examples of financial instruments used for so many years by so many travellers; an intriguing and largely forgotten commercial relic.
The proofs of circular notes from the London Charter Bank and the Union Bank of Australia, and the specimen circular note of the Bank of New South Wales are reproduced courtesy of John Pettit.
The Circular Letters of Credit and the Letter of Indication for the Bank of New South Wales are reproduced courtesy of Tony James.
This article was completed in September 2007.
© Peter Symes