Branch overprints

Before 1888, the Banco de Londres y México redeemed its own banknotes only at the branch of issue. Then, on 3 January 1888 Federick Howes, the manager of the Veracruz branch, announced that his office would now accept Banco de Londres y México notes from any branch at their face value . Now importers could use Banco de Londres y México notes, knowing they would be good throughout the country at their face value. They could borrow at the Banco de Londres y México, change the notes needed for tax payments into silver coins (or Banco Nacional de México notes) at the bank’s Veracruz branch, and use the rest to finance their transactions. Previously, importers would borrow from the Banco Nacional de México, receiving their loans in Banco Nacional de México notes, part of which they would use to pay customs duties and the rest to buy merchandise. These notes, however, could only be used in or near Veracruz, since Banco Nacional de México branches elsewhere would accept them only at a discount. This mean that if a Banco Nacional de México borrower wanted to transfer their funds or use them to buy products from outside the state they had to either pay the discount, use a money order (which were also discounted), or send specie coins (which was risky and expensive). With the new Banco de Londres y México policy, however, provincial merchants now had an incentive to finance transactions at the local Banco de Londres y México branch, and businessmen everywhere with business in Veracruz now had an incentive to prefer Banco de Londres y México banknotes.

The Banco Nacional de México, obviously, was not pleased and instructed their Veracruz branch to stop accepting Banco de Londres y México notes. Not only was the bank worried about the proximate advantage the Banco de Londres y México gained from its new policy, but it also worried that this move might presage the loss of their monopoly over tax payments. They hoped that “if the situation can be maintained it will greatly help us counteract the intentions of said institution”^{references needed from Noel Mauer, The Power and the Money: The Mexican Financial System, 1876-1932}.