The Newfoundland Bank Crash of 1894, known as Black Monday, was one of the turning points in

Newfoundland Newfoundland and Labrador (; french: Terre-Neuve-et-Labrador; frequently abbreviated as NL) is the easternmost province of Canada, in the country's Atlantic region. The province comprises the island of Newfoundland and the continental region ...

's pre-Confederation history. The financial woes of the former British colony were worsened when two of the colony's commercial banks, the Union Bank of Newfoundland (established in 1854) and the Commercial Bank of Newfoundland (established in 1858), both located in St. John's,

, Canada, closed their doors to the public on December 10, 1894. Fish merchants sat on the boards of directors of both banks and had approved large and risky loans to themselves, which left the banks with dangerously-low cash reserves leading into the crash. London banks suspended credit to the Commercial Bank of Newfoundland and requested payment on some of its loans. It was unable to meet these demands and was forced to close two days later. A bank run ensued on both the Union and the Savings Banks. The government-run Savings bank was able to weather the storm, but the Union was forced to close that day, never to reopen.

Aftermath

The crash had a disastrous effect on commerce and employment in the colony. Many families were left destitute. The crash brought Newfoundland to the brink of

bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor ...

and resulted in the Canada Newfoundland Confederation talks. It also highlighted the weakness of its economy and the truck credit system on which it depended. Over a million dollars in bank notes from both the Commercial and Union banks were rendered worthless, at least temporarily. Savings accounts suddenly decreased in value and the country was in danger of defaulting in its public debt. The banks' directors were arrested and charged with larceny and conspiracy (they were all acquitted in 1897). Unemployed workers held street demonstrations demanding food and jobs. The government faced growing instability and went through three prime ministers in two months. Canadian banks began arriving within two weeks of the crash: the Bank of Nova Scotia, the

Bank of Montreal The Bank of Montreal (BMO; french: Banque de Montréal, link=no) is a Canadian multinational investment bank and financial services company. The bank was founded in Montreal, Quebec, in 1817 as Montreal Bank; while its head office remains in ...

, the Canadian Bank of Commerce, and the Merchant's Bank of Halifax (now the

Royal Bank of Canada Royal Bank of Canada (RBC; french: Banque royale du Canada) is a Canadian multinational financial services company and the largest bank in Canada by market capitalization. The bank serves over 17 million clients and has more than 89,000& ...

). The Bank of Montreal accepted the government's account in early 1895, and the country adopted Canadian currency in January of that year. It was the beginning of heavy involvement by Canadian banks in the Newfoundland economy, which was an important factor in Newfoundland eventually joining Confederation in 1949.

External links

Newfoundland and Labrador HeritageNewfoundland Museum Notes - Newfoundland Banking Institutions and Currency
{{Financial crises 1894 in North America Bank failures History of St. John's, Newfoundland and Labrador Pre-Confederation Newfoundland 1894 in economics Financial history of Canada Financial crises 1894 in Newfoundland