In the 19th century an offshore British bank in Malta called the Anglo-Egyptian Bank issued its own banknotes. It’s unusual to think of a private company issuing banknotes, more so in a small country like Malta. This article explains why this happened and why in Malta.

Context

The United Kingdom took over the Maltese islands with the Treaty of Amiens in 1802. A long and uninterrupted period of peace began to transform life in Malta. 

The Treaty of Amiens punished France for Napoleon’s warmongering.

It wasn’t long before the British military forces established a presence on the islands. This allowed them two advantages:

• They could control the Mediterranean.
• They could reinforce their Empire further East.

With the advent of steam shipping in 1825 Malta grew in importance. It became an emporium of British goods especially since these would be in transit to other locations¹.

One of the people who profited from this situation was shipping magnate Tagliaferro who built Capua Palace.

When the Suez Canal opened in 1869 Malta’s reputation as an emporium of British goods was further cemented¹.

Monetary policy

In June 1825 the British introduced their own currency to Malta:

• Silver crown and half crown.
• Shilling and sixpence
• The copper penny, halfpenny and farthing.

These were legal tender at a nominal value of twenty pence per scudo and twelve scudi per pound sterling².

The local currency was the gold and silver coins of the Order of St John of Jerusalem. Traders of various nationalities left other coins in Malta over the years. People accepted these currencies as legal tender. This cosmopolitan collection of coinage created confusion¹.

Imagine this pot pouris of foreign coins²:

• Sicilian and Neapolitan tari and piastra
• Spanish doubloons and dollars
• Mexican and South American doubloons and dollars
• French 5- and 20-franc pieces
• Imperial Maria Theresa dollars
• Belgian 5 franc pieces
• Italian 5- and 20-lire pieces
• Indian rupees

In August 1845, local banks resolved to continue accepting the following foreign currencies at established rates till the end of the year³:

• The Sicilian dollar.
• The Imperial Maria Theresa dollar.
• The Spanish pilar.

Local banks stuck to this agreement and extended it on an annual basis. Dollar currencies continued to remain in circulation at the former rates except when dealing with government^{2 3}.

The Chamber of Commerce established itself in 1848 to spearhead British trade in Northern Africa. An 1857 ordinance declared the Chamber the mercantile body of the island. This meant it had the authority to determine the official rate of monetary value and the rate of insurance, premiums and freight. The exchange rate was of great importance because of the multitude of currencies^{1 3}.

Banks and merchants renewed this agreement on an annual basis so they could continue to use Sicilian dollars. The introduction of British coins only added to these difficulties. On 14 October 1857, the authorities issued a Proclamation declaring sterling as the only legal tender¹.

After the Proclamation, it still took almost 30 years for the other currencies to fall out of use because they were convenient for trade¹. On 01 October 1885 the new Italian state issued a decree demonetising the coins of the Pontificial State and of the kingdom of the Two Sicilies.

In 1886, Sicilian dollars became the last foreign coins to go out of circulation. The government called in no less than 1.8 million Sicilian dollars in this year^{1 2}.

The Anglo-Egyptian Bank Company

Before coming to Malta its primary business was in Egypt as the name implies³. It established a steady growth during its time in the Middle East till the beginning of the First World War³. The main bright spots for the Allies were Palestine and Mesapotamia, with the capture of Baghdad in March 1917, and Jerusalem in December³. The AEB became the bankers there to the newly-formed British Administration in both these locations³.

The AEB then opened branches in Gibraltar and the Sudan³. The Anglo-Egyptian Banking Company Ltd opened its doors in Malta in either 1881⁴, or 1882^{3 5}. The Lord Commissioners of Her Majesty’s treasury agreed to transfer the banking business of the Treasury Chest in Malta to the AEB³. This was one of its first two overseas branches⁶.

At the time Malta had no central bank of its own because it had no monetary policy to speak of⁵. It was part of the Mediterranean Sterling block⁵. The AEB operated out of 233 Strada Reale Valletta (In front of the Chamber)³ It changed its name to Anglo-Egyptian Bank after a reform in 1887³.

The AEB obeyed the ’trade follows the flag’ dictum³. Contemporary historians suggest this should be a ‘flag follows trade'⁷ but Maltese history is the exception to this.

Custom currency

Five years after opening, in April 1886, the Malta manager asked his London board for approval to issue the bank’s own notes. He commissioned Bradbury, Wilkinson and Co to print notes in five denominations:

• Ten shillings.
• 1-, 5-, 10- and 20-pound notes.

These bore the date October 1886. The AEB issued 3 700 notes which was a face value of 8 500 Maltese pounds. No other evidence exists of another issue of notes by the AEB. This seems to be a hurried reaction to assert sterling at a time when the Sicilian dollar was being withdrawn^{1 3 4}.

The Italians were going through their own reunification at the time. The Bourbonic dollar had been illegally coined outside of the Italian peninsula. The problem was so bad that while the official Mint had struck 308 million coins, the amount returned by 30 November 1885 was 394 million⁸.

The reunification of Italy almost affected Malta in another way; the Pope almost moved the Holy See to Malta.

In Gibraltar the AEB had already issued currency because they were doing so well. They could afford to lend as they had a surplus of cash. They also were offering better interest rates than the Post Office offered^{2 6}.

The end of the bank

The AEB secured the British Army’s banking business soon after coming to Malta in 1881^{2 3 4}. In 1882 the entire business of the Treasury Chest in Malta was transferred to the AEB. Records from the AEB (held by Barclays) show that the bank experienced continuous growth.

After 1 January 1891 no one could issue notes without governmental permission. If granted, the issuer would be bound to deposit security with the Government and to pay a 1% duty per annum.

The AEB withdrew its notes from circulation in 1891², mindful of this new ordinance.

In 1921 the Malta government appointed the AEB its official banker^{1 4}.

In or around 1925 Barclays made an offer in London for the 12 000 shares of the AEB. The Bank’s board recommended this to its shareholders. Since the AEB’s profits had been falling since 1919 (from 142 000 pounds to 100 000 pounds) this was a wise move for them. The Cattaui family held the main controlling interest until Barclays bought the family out⁹.

Barclays consolidated its investments by merging AEB with the Colonial Bank and the National Bank of South Africa in 1925^{5 10}.

In 1934 the AEB/Barclays opened its first branch outside Valletta, in the burgeoning town of Sliema. They also opened a small branch in Gozo^{3 4}. Through an Act of Parliament, the new bank became Barclays (Dominion, Colonial and Overseas)^{9 10}.

The economy of the island was advancing since by 1936 Barclays Malta held 800 000 pounds’ cash balances against deposits of 3.5 million pounds.

The Bank continued to operate for 85 years until the Central Bank of Malta was set up^{3 4}.

References

1. Richard Soler; 1964-09; Banking and currency in Malta[↩][↩][↩][↩][↩][↩][↩][↩][↩]
2. Sammut, Joseph C.; Currency in Malta; Central Bank of Malta; 2001[↩][↩][↩][↩][↩][↩][↩]
3. Consiglio, John A; A history of banking in Malta; Valletta: Progress Press; 2006[↩][↩][↩][↩][↩][↩][↩][↩][↩][↩][↩][↩][↩][↩][↩][↩][↩]
4. Breve Storia Bancaria Moderna di Malta; Giovanni Consiglio; June 1983[↩][↩][↩][↩][↩][↩]
5. Financial Integration, Disintegration and Emerging Re-Integration in the Eastern Mediterranean, c.1850 to the Present; Adrian E. Tschoegl; The Wharton Financial Institutions Centre; 2002-08[↩][↩][↩][↩]
6. 1888 – Anglo-Egyptian Bank – Dominion Colonial and Overseas; The People of Gibraltar; 2015-06[↩][↩]
7. Ascent of Money, The; Niall Ferguson; United Kingdom 2008[↩]
8. From Scudo to Sterling; Joseph C. Sammut; 1992[↩]
9. Barclays International; Barclays.com; (Retrieved 2019-10-01) [↩][↩]
10. Egypt; Barclays.com; (Retrieved 2019-10-01) [↩][↩]

Remember: links were correct at time of publication.