, by
Thomas de Keyser (1636). Established on 31 January 1609, the Bank of Amsterdam played a pivotal role in the 17th and 18th-century financial center of Amsterdam. 500 different coins – legal or illegal – from a wide variety of countries and regions circulated, but a good system to determine
exchange rates did not exist. At the bank, people could exchange their coins for fully-fledged and widely accepted
trade currencies. The Wisselbank protected foreign creditors by settling debts through the bank and offering depositors its own coins that were not debased. The bank was given a fourfold task: :# to ensure that the money entrusted by the merchants to the bank remained stable in value :# to solve their domestic payment problem :# to facilitate their international payments through an adequate supply of full-value gold and silver coins and a good
book-entry transfer system :# to ensure that the bank's foreign exchange reserves were protected from the influx of lighter currencies. The management of the Bank of Amsterdam was in the hands of three, later four commissioners elected by the city council. They were often former
schepenen or members of the
city council. Two of the commissioners had to be present daily at the office: they had the oversight of four accountants, two clerks with one servant, four counter bookkeepers, three receivers together with another servant,
ushers and an assayer (assay-master), who knew the secrets of trade in precious metals and minting. Each of the accountants had his own specific task: the first took the written orders for payment receipt, the second held in the
journal, the third balanced the book, and the fourth took care of the
ledger. In 1715 there were five and a year later six commissioners, the number the bank kept until the end of the eighteenth century. Two-thirds of the commissioners were merchants or bankers – which the other account holders trusted. Some of the commissioners had ties with the Dutch East India Company (13%) or the West India Company (15%), both account holders. Whoever did business with the VOC was obliged to do so via this Wisselbank [which always resulted in large turnovers].
Units of account The main objective of the Wisselbank's establishment was to maintain a stable silver
bank currency for the
Dutch Republic's burgeoning international trade which was immune from the numerous depreciations which occurred after its independence from Spain, as its constituent provinces kept wringing out more
stuivers (worth guilder) from a fixed quantity of silver. After 1618, it was able to fix the
Dutch rijksdaalder of 25.4 g fine silver at 2
Dutch guilders or 50
stuivers, guaranteeing a payout of 10.16 g fine silver for each bank gulden deposited. While initially successful in halting the depreciation of the Dutch currency, the Wisselbank was tested from the 1630s, when the provinces tried to further raise the gulden equivalent of coins imported from the southern
Spanish Netherlands: the
patagon of 24.55 g silver raised from 48 to 50 stuivers (or 9.82 g per gulden), and later on the
ducaton of 30.69 g silver from 60 to 63 stuivers (or 9.74 g per gulden). Fearing the loss of its Europe-wide reputation if 2.5-gulden rijksdaalders were repaid with cheaper 2.5-gulden patagons, the Wisselbank firmly upheld the original gulden banco of 10.16 g fine silver as distinct from the lower-valued circulating gulden: so the bank accepted the
patagon only at 48
stuivers, and the
ducaton at 60. In 1659, the Dutch Republic issued its own versions of the Spanish Netherlands coins, the silver ducat (patagon) of 24.36 g fine silver and the silver rider (ducaton) of 30.45 g fine silver, worth respectively 50 and 62.5 stuivers as currency, and 48 and 60 stuivers in the Wisselbank: hence, 9.67 g per gulden currency and 10.15 g per gulden banco (5% premium or
agio) as computed from the ducaton. From 1683, the Wisselbank introduced a system of receipts with the gulden banco's
agio allowed to float at 4 to 5% subject to supply and demand for banco vs currency. Both types of gulden were on the
silver standard, with gold coins and bars quoted at fluctuating exchange rates. Lucien Gillard calls it the
European guilder (
le florin européen), and
Adam Smith devoted many pages to explaining how the bank guilder worked.
Seventeenth century The modern practice of
corporate governance has its roots in the 17th-century
Dutch Republic. The first recorded corporate governance dispute in history took place in 1609, between the
shareholders/investors (most notably
Isaac Le Maire) and the directors of the
Dutch East India Company (VOC), the world's first formally
listed public company. In 1609, and 1611, Le Maire was the most important account holder at the Wisselbank. Between 1611 and 1620, the number of account holders in the Wisselbank grew from 708 to 1,202. In 1622, it was forbidden to trade in gold and silver without the authorization of the bank. After the
Treaty of Bärwalde in 1631, France transferred its financial support to the Swedish army with the help of
Jean Hoeufft and the Wisselbank. The city of Amsterdam, which owned the bank and guaranteed the deposits, derived from it a considerable revenue, but was responsible for the losses too. The bank seems to have hardly supported the
Dutch West India Company; but in 1637, the
Stadsbank van Lening did so. It provided the
Admiralty of Amsterdam and the mint masters in
Enkhuizen,
Harderwijk,
Kampen,
Medemblik,
Zwolle and
Utrecht with funds booked as private loans. In 1645, for which year ledgers of the Wisselbank are available, the
firm Coymans was the largest account holder at the bank with a turnover of over 4 million guilders. In July 1647, more than half a year before the conclusion of the peace treaty in Münster, the Spanish government made a proposal aimed at making Amsterdam the staple market for Spanish silver. In October the States General decided to authorize the admiralties to issue passports for the export of silver imported from Spain,
Andries Bicker was involved in the request. Amsterdam became a recognized staple market for Spanish silver from the New World. After the
Treaty of Münster between Spain and the Dutch Republic, a lot of silver from
Cádiz and
Potosí arrived in Amsterdam. From the beginning, the bank had to supply the provincial and the various local
mints with silver. While trading silver in stock was formally prohibited, its allure stemmed from the
silver standard in place. (All countries of Europe began to issue large-size silver coins.) In 1652, the Wisselbank made no profit. In a fire in the town hall, many coins melted and had to be cleaned; the bank was temporarily moved to the Jan Roodenpoorts tower. In 1654 quite a few people (10%) were in debt to the Wisselbank after the
First Anglo-Dutch War. In 1666, Jan de Neufville (1613–1663) and the Coymans company both deposited sums exceeding 3.5 million guilders with the Wisselbank. From 1666 the Wisselbank is quite actively purchasing millions of silver. In August
1672, the
bank was stormed by private account holders who wanted to withdraw their money.
Johan Huydecoper, Joan Geelvinck, and his father
Cornelis Geelvinck were commissioners in the year of disaster. In the following year the Wisselbank booked a loss. On 17 August 1657, the bank began to advance money on loan to the East India Company. Silver coins such as the
rijksdaalder and the coveted
Spanish dollar were in high demand in
Old Batavia, prized on the
Spice Islands, and sought after in Southeast Asia, ultimately proving to be lucrative exports. At first, the city had to give special permission for each loan. Later on, loans were made easier, and by decree of 5 October 1682, the East India Company could at any time have at its disposal 1,700,000 bank guilders. In 1683,
Christoffel van Swoll was appointed as governor-general of the East Indies; he had good connections as his father was an attendant (usher?) of the bank between 1656 and 1678. The
Qing dynasty became somewhat more receptive to foreign trade after gaining control of
Taiwan in 1683 following its conquest. Until then few people in China were engaged in coastal and foreign trade, but soon Batavia (and Manila) would become a popular destination for Chinese merchants.
Introduction of a system of receipts in 1683 The depositor received a "récépissé" drawn on the bearer, entitling him to take out the money deposited, at any time within six months, upon paying one-eighth percent, and upon re-depositing in the bank that amount of
bank money which was credited to him when the deposit was made. This receipt system had been adopted in Amsterdam for a short time in 1638, and 1656; after 1683, it proved permanent. If anyone wished to have a certain kind of coin from the bank, he had only to buy a receipt. The receipts offered the bank the potential of a new means of competition in the international struggle for precious metal supplies. The receipts enabled account holders to cover themselves ... to systematically hedge against the market's volatility. The Bank of Amsterdam introduced a form of
fiat money that successfully competed with the coinage of the time. After 1683, the bank was able to conduct more regular and aggressive policy interventions, from a virtually nonexistent capital base. By a decree of 16 April 1684, the bank commissioners secured the monopoly of the trade in silver and silver coins. The few exceptions made here were in favor of goldsmiths and silversmiths and merchants, who received the metal from foreign countries. The export of uncoined metal was allowed only when accompanied by a certificate given by the bank commissioners. These and many other orders were found insufficient to suppress private trade in precious metals, or private changing at Amsterdam. In October 1686, Spain devalued silver by about 20% and adopted a dual coinage standard (
plata nueva and
plata vieja). In 1688, the profits of the Wisselbank dropped considerably, and they did not recover for more than a decade. In 1689,
Albert Geelvinck took a seat on the city council, the Dutch West India Company, the
Society of Surinam and as commissioner at the Wisselbank; his brother
Joan Geelvinck (1644–1707), the former commissioner, became manager of the VOC. In 1693,
Joan Huydecoper, one of the
Heren XVII, succeeded his brother-in-law
Joan Coymans as commissioner.
Cornelis Bors van Waveren, a manager of the WIC and of the Society of Surinam, was appointed as commissioner. Around 1700, the top 25 account holders were generating nearly 25% of the business. More and more, the European trade in precious metals concentrated in Amsterdam. Amsterdam's combination of steady exchange rates, absence of capital controls, and low interest rates allowed its markets to flourish, and conferred something of a "reserve currency" status on the bank florin. Bills of exchange drawn on Amsterdam were a liquid form of short-term credit readily available in most European commercial cities. The bank florin was a reference unit of account for commercial transactions over much of Europe, and top-quality bills payable through the Bank were a reliable and liquid store of value.
Eighteenth century The annual production of silver hardly changed between 1660 and 1720. It grew steadily, with some lapses, in the 1730s and 1740s, as more a recent study shows. After a hundred years the annual production of silver doubled between 1761–1780, according to
William Arthur Shaw. The bank's metal stock was increased by large purchases at favorable times or by offering higher prices than the competition. Following the
Spanish War of Succession, Spanish mints inundated Spain with devalued silver. The debts incurred by King Louis XIV of France also contributed to a scarcity of both silver and gold. Consequently,
John Law introduced
paper money, which remained in circulation until his adversaries attempted a widespread conversion of their notes into precious metals. In 1721, the English and Dutch drew more money from Spain than France did. In 1721, there were 2,918 account holders, the highest number in two centuries of banking history. One of main bankers was
Andries Pels, dealing with France as well as Great Britain. Great Britain moved towards a
gold standard (and drew out silver in the form of
crowns, shillings and sixpences). Logically, this meant a flow of gold to England and a flow of silver to the Republic, where silver could be purchased relatively inexpensively for transportation to Asia. In Asia, silver fetched a higher price and thus represented more purchasing power there than in the Republic. The relative scarcity of silver in England and the silver glut in the Republic also explain why the English East India Company sought to satisfy its silver needs in the Amsterdam market. . From 1713 onwards, the bank reported on their profits. After the
Treaty of Utrecht, it took several more years before the bank's specie supply returned to a normal level, thanks to an increased supply of Spanish-American silver money. Around 1714/1715, the bank received many old French coins, like the gold
pistole. In 1722, the total value of precious metals stored in the bank amounted to 26 million guilders. Pistoles were melted into ingots and sold at a profit. Until 1725, on average, nearly half of the bank profits were attributable to the activities of ten assayers. This was followed by a sharp increase in the supply of specie from Spain in the 1730s, until the impressive sum of over 15 million guilders was reached in January 1737. Unlike at the beginning of the 1720s, when French gold dominated the bank's total metal supply, by the middle of the century it consisted mainly of Spanish specie. The Spanish dollar superseded the gold
ducat as the dominant currency of world trade. During the eighteenth century, the VOC no longer obtained their required gold and silver directly from the Wisselbank but instead obtained it through the mediation of private
assayers and mint masters. In January 1711,
Anthoni and Johannes Grill (III) were appointed as assayers, specializing in coin testing, but also dealing in
copper plates and iron. They supplied the
Dutch East India Company, between 1722 and 1731, with silver
ingots, which were made from melted coins, mainly Spanish American
reales de a ocho or "
pieces of eight" and marked with a VOC stamp. (Weight 1960 grams and 98.7% pure silver.) In ten years time the VOC owed 22.5 million gulden to the Wisselbank. The Dutch had very little to offer in Asia but silver and gold. Therefore, the VOC ships had to sail to Asia with silver bars and gold coins to pay for Asian goods. Once in Asia these ingots were melted down and minted again into coins such as
rupees, that could be used in the East. In the period 1726–1751, the mint houses produced silver
ducatons bearing the monogram of the VOC. In 1729, Dutch traders were allowed in a neighborhood of
Canton, then eight, later
Thirteen Factories. Despite some restrictions, silver continued to drive trade through its popularity in Europe. This, combined with a high demand for
Chinese tea, silk, cotton, and
Chinese ceramics, created chronic trade deficits for European governments, which were forced to risk silver deficits to supply merchants in Asia. Between 1736 and 1745, the VOC borrowed almost
f 50 million from the bank. The Wisselbank proved to be one of the most important sources for cash requirements in Asia. In the mid-eighteenth century 85 percent of VOC precious metal (gold and silver) went to India. This reduced the amount remaining in Europe. "The Bank of Amsterdam has for these many years past been the great warehouse of Europe for bullion, for which the receipts are very seldom allowed to expire, or, as they express it, to fall to the bank" as
Adam Smith wrote. According to
Nicholas Magens, the French and the Dutch gave more gold for silver than their neighbors.
Forged Dutch ducats secretly minted in their millions at the
Saint Petersburg Mint became widely known from 1735. In 1746, the mint masters asked for strict measures to be taken with regard to all the bad small coins (or change); they were supported by the bankers and cashiers. In 1747, and 1750,
Maria Theresa reduced the metal content of all her coins. The commissioners sanctioned, by the decree of 27 June 1749, the private trade in specie, and even ordered that the regulation of the values of the coins had to be fixed by commercial agreement. The mint masters in Prussia imported each year 100–200 tons of silver throughout the Seven Years' War, which was paid for in Amsterdam mainly by bills of exchange, and in Hamburg by
Kriegsgeld." Part of it was used to mint 40 million new coins, which were put into circulation in
Saxony and
Silesia, but also in Hungary,
Poland, Lithuania and
Courland. In 1754,
Ferdinand VI of Spain prohibited the circulation in America of all money coined in Spain; no doubt exchanging coins became an art. In 1755,
Essay on the Nature of Trade in General was published twenty years after the death of the author
Richard Cantillon.
August 1763 The Bank of Amsterdam shut twice a year (in January and July) for two weeks to balance its books; the account holders were expected to come and check their balance; for other business, they had to pay a fee. In 1763, the bank was closed from Friday 15 July until Friday 29 July. The financial crisis at the end of July 1763 was triggered when
Leendert Pieter de Neufville had to pay his obligations to
Johann Ernst Gotzkowsky. On Monday 1 August, the Wisselbank refused to transfer any money and De Neufville suspended payment the next day. Their reaction caused
financial contagion, a "run behaviour, whereby fears of widespread financial collapse lead to the withdrawal of funding from banks and other financial institutions." The immediate victims were a group of independent, private "
cashiers". (The deposits in the Wisselbank were virtually unenforceable, but everyone was free to demand the money that he had entrusted to his cashier.) The
deferrals resulted in an international
banking crisis in Amsterdam (38 bankruptcies), Hamburg (90–97), Berlin (33), Danzig, Leipzig, Breslau, Stockholm, and London. The bankers became unwilling to extend credit to one another, so that the failure of Neufville led to a general loss of market funding. On August 4, six prominent Amsterdam bankers proposed the idea of depositing their silver and gold bars at the Wisselbank, opting for this approach over using coins. On 5 August, the banks were closed and all bills drawn on Amsterdam were returned without acceptance or "protested". A run on the cashiers (
bank tellers) followed on Saturday, 6 August. The Bank of Amsterdam and the Stadsbank van Lening were open until two o'clock that night to accept gold and silver, which had never happened before. The Bank of Amsterdam's improvised solution to the crisis was for the bank to expand its receipt window (much like a modern
repo facility) to include unminted silver
bullion, a form of
collateral that was in abundant supply after the Prussian
demonetization. The Wisselbank introduced a new lending window that accepted bullion between 4–15 August. The amount of bullion went up in the next few weeks. After the
Seven Years' War the stock of precious metals held by the Wisselbank was never as large as in the years 1763–1765, that is, 31 million guilders, of which no less than 25 million were made up of Spanish specie, and sent from Hamburg. In the course of the 18th century, English and French competition on the Cádiz trade increased considerably so that the Dutch merchants, who used to occupy the first place, were pushed back to the third place. In January 1773, after the credit
crisis of 1772, the Wisselbank funded a city-operated loan facility for distressed merchants. ==Deposits of bullion and coin==