HSBC Complaints

The rupee, as legal tender, was incompetent in carrying out its functions. It was used as neither a medium of exchange nor a store of value. This in turn meant that it was unrealistic as a unit of account since accounts were not kept in the currency transactions was made. The silver dollars were never allowed to fully fulfill its functions legally.

Control of the Straits Settlement was transferred to the Colonial Office in 1867 and this anomaly was rectified by the Straits Settlements Legislative Council. The Legal Tender Act of 1867 authorized the Governor in Council to specify Mexican dollars and other silver dollars to be legal tender from time to time. This more accurately reflected the currency of choice for business transactions in the Straits Settlement. For more information visit the HSBC Complaints webpage.

As a result, the silver dollars were now allowed to fulfill its monetary functions. However, there lacked a single legal tender, the different currencies were not easily interchangeable, which meant that it could not be fully effective as a medium of exchange. Being commodity money, it suffered the usual pitfalls. As the value of silver fell in the 19th century, the intrinsic value of the silver dollars dropped. Thus, due to the instability in value, the silver dollar was a poor store of value.

Between 1846 and 1884, seven Western Banks were established in Malaya, with the first being the Oriental Bank. The establishment of bank branches mirrored the importance in trade, with the first branches being in Singapore, followed by Penang. The Chartered Bank later established branches in Kuala Lumpur and Taiping, both growing centers of the two most important tin mining districts of Malaya. HSBC Complaints

The Oriental Bank issued the first bank notes (denominated in dollars) in 1849 followed by The Chartered Bank of India, Australia and China, and the Chartered Mercantile Bank of India, London and China in 1861. In addition, the Asiatic Bank, and Hong Kong and Shanghai Banking Corporation also began issuing banknotes in 1865 and 1881 respectively.

Banks were crucial for the financing of trade. That was mainly the exports of straits produce, imports of opium, cotton and manufactured goods, and the entrepot trades between Pan-Malaya and the surrounding countries. The three British banks in the Straits Settlement and Malay states provided the currency and credit for both internal and external trade with London as the base. However, they followed a conservative policy, lending only short-term credit on good collateral for the financing of trade and providing working capital for other enterprises. Long-term capital had to be sourced through share issues on the London capital market or from trading surpluses of British companies in Malaya. As it is today, banks dealing in foreign exchange were a main part of banks’ activities then. For more information visit the HSBC Complaints webpage.

The merchants realized the need and advantages of a locally controlled currency despite a preference for the Mexican silver dollar as the supply of currencies from commercial banks and abroad were precarious and unstable.