TheFederal Bank of Australia was established inMelbourne in 1881, and opened for business in April, 1882. Initially successful, the company expanded toNew South Wales by absorbing the Sydney and Country Bank Limited in 1882. Banknotes were issued at branches in Melbourne, Sydney and Adelaide.[1] The headquarters was in a modest building on the corner of Elizabeth andCollins Street in Melbourne.[2]
The managing director was the politicianJames Munro, who wasPremier of Victoria in 1890-1892. He was also president on the Federal Building Society, established about the same time as the Federal Bank. Both institutions principally invested in speculative land companies, which boomed in the 1880s as the economy expanded, and property prices climbed to a frenzied peak in about 1890. The boom was followed by a crash, and the precipitous decline in property prices led to the collapse of building societies burdened by unsustainable debts, with the uncertainty soon spreading to banks.[3] Arun by depositors in late 1892 forced the Federal to close its doors "temporarily" on 30 January 1893.[4][5]
The doors never reopened, and the Federal became the first bank,[3] as opposed to building society, to fail as part of theAustralian banking crisis of 1893. A provisional liquidator was appointed on 3 February 1893.[6] The extent of the bank's debts, especially to English banks, was soon revealed.[7] James Munro, already in debt (much to his own companies), had resigned as Premier in early 1892, and left for the UK, but returned voluntarily, and was declared bankrupt in February 1893. His personal debts amounted to £97,000, and his companies owed over £600,000.
