El Banco de Londres, México y Sud America

On 27 April 1864, two British subjects, William Newbold and Robert Geddes, who were to be the future founders of the Banco de Londres, México y Sud America, arrived in Veracruz on the English steamer Conway. They were expressly commissioned by the Board of Directors of the English company to form a bank of issue, deposit and discount which was constituted on 15 February 1864, as the Bank of Mexico, Ltd. On 25 April of the following year the name was changed to the London Bank of Mexico and South America, Ltd., since it would also operate in Peru and Chile as well as in Mexico.

NewboldMr. Newbold reached Mexico City on 4 May 1864, and immediately started to look for an appropriate site in which to locate the new bank offices. On 20 June he rented for $2,100 annually a building at 3 Capuchinas Street in the busiest part of the downtown commercial area of the capital.

Two days later at the precise time when Emperor Maximilian and Carlota arrived in Mexico City, Mr. Newbold and Mr. Geddes left the Hotel Iturbide to establish themselves in the new Bank headquarters. Imported office equipment cost $761 to which were added office supplies amounting to $453.50. After the first month, William Newbold wrote to London to Mr. William A. Jones, President of the Bank of London, Mexico and South America :

"I would like to see the office completed and open to the public. Carpenters and painters are still working, but I have adapted a small room as an office in which we have been working for the past ten days."

The Bank began operations on 1 July, authorized by the Tribunal Mercantil (Mercantile Authority), in whose register William Newbold, manager of the Bank of London, Mexico and South America, verified that he had met the requirements of the Commercial Code (Código de Comercio) of 1854.

The first three years of operation of the bank from June 1864 to July 1867 were crowned with great success. During that interval they introduced and popularized practices such as cash bank deposits, the use of cheques, banks notes and fire insurance policies. At the same time, by tidying up and simplifying operations which were current in that period and by organizing and expanding the whole banking system with a professional approach, they promoted an increase in the circulation of wealth.

On 15 July 1867 Benito Juárez made his triumphal entry into Mexico City. One of his first acts was to abolish the laws which had been in force during the French intervention so as to nullify all the acts of the empire. Well aware of the constructive work of the Banco de Londres, México y Sud America, Juárez permitted it to continue operations and to grow without opposition. Judicial decisions of the imperial period were reaffirmed later on by law of 20 August 1867.

During the first years of its existence the bank received sizeable sight and term deposits. Víctor Lean & Co. received a cheque book and another record book for their deposit of $5,000 on 24 August 1864, making this the first bank cheques to be issued in Mexico.

With the same diligence exercised by the founders in the establishment, organisation and expansion of the bank, and benefiting, from past experience in dealing with local conditions, the bank put into circulation their first banknotes, dated 13 February 1865, in the City of Mexico. They bore the signatures of A. C. Thurburn, Chairman of the Board of Directors or of William A. Jones, Director of the Bank of London, Mexico and South America in London. Guillermo Newbold signed as Manager in Mexico and Roberto Geddes signed as head cashier.

The first issue in 1865, of only 1,400 banknotes with a value of $5 each, met with immediate public acceptance and many people asked tor notes in preference to silver pesos. By 15 November 1867, the issue of this first type of notes amounted to approximately 1,585 notes.

On 6 May and 16 July 1865 the Bank issued new banknotes in denominations of $10, $20 and $50. On 5 March and 4 June 1866, notes of $100 and $500 were put into circulation. And finally, on 18 January 1867, business firms and the general public were supplied with $1,000 notes which, like the smaller denominations, were freely accepted in territory occupied by the imperial armies as well as in areas held by the Republican forces. The national and international prestige of the Bank was so solid that four months after the restitution of the government of the Republic, the public in general accepted with complete confidence the new $5 and $1,000 notes. These were brought out with the approval of the Secretary of the Treasury, Matías Romero, famed representative of Benito Juárez in Washington during the intervention and empire. Matías Romero was concerned with the expansion of credit operations with private capital to take the country out of a severe economic slump.

William Newbold travelled to Veracruz in January 1873 to sail for England. Upon his departure from Mexico he left behind a host of friends, and pleasant memories of his fine manners, generosity, sincerity, vibrant personality and his wide knowledge of banking. Above all he was remembered for having established, operated and expanded, in a very short period of time, a credit institution which became the prime example of how to run a modern commercial banking enterprise.

During the month of January, 1873, the Bank issued a new series of $1,000 notes.

Upon Mr. Newbold's departure, Robert Geddes, former Cashier and General Accountant of the firm, became manager. He was replaced as Cashier by Frederick Hart.

Mr. Geddes managed the Bank until October 1873, at which time he was replaced by Thomas Horncastle, a wealthy English merchant who had resided for many years in the city of Celaya. Mr. Horncastle was manager for only 13 months and was succeeded by Robert Geddes who remained in this post until the end of 1880. He was followed by Edmond J. Anson, manager until 1884 at which time Henry Campbell Waters and Joaquin de Trueba took over the reins.

The English firm published no balance sheets, rendered no accounts, nor was it subject to close scrutiny. lts management was excellent, its conduct honest; all contracts were scrupulously executed and the exchange of banknotes was always assured since they had never presented any difficulty.

When the new Commercial Code of 1884 came into force, the Banco de Londres, México y Sud America was practically out of business because the law prohibited branches of foreign banks. Furthermore, the Mexican government made a commitment to the Banco Nacional de México not to allow the establishment of new banks of issue and to subject existing banks to federal control. The bank let the legal time limit expire without making any claim and on 21 January 1885, the government announced its suspension. The bank answered the government decision with a request for an injunction from the federal court, based on the premise that the new law was not retroactive in character. The case was not pressed and the problem was solved by acquiring the concession granted to the Banco de Empeados in 1886. In this manner the bank became a national entity with a license to continue in business, changing its name to the Bank of London and Mexico.

(Based on Apuntes para la Historia Numismática del Papel Moneda del Banco de Londres, México y Sud-America by José Luis Herrera Cedillo, 1981)