Both Sides of The Coin: The Story of The Central Bank of Barbados 1972-2017

Chapter 1: Background to Establishment 1 The first banking institutions The process which culminated in the formation of the Central Bank of Barbados may be said to have started with the establishment of the British-owned Colonial Bank in Barbados. 1 In its own words, the Colonial Bank “was the product of favourable circumstances in the economies of Britain and the West Indian Colonies.” The mid-1830s were prosperous years in the United Kingdom (UK) and opportunities for investment abroad were being sought. In the colonies, the abolition of chattel slavery resulted in monetary compensation for the planters, a money wage for the former slaves and, therefore, an increased use of cash. With the increasing demand for funds for the sugar industry, particularly to equip the estates with labour-saving devices, the planters were also finding it difficult to rely on the old system of merchant- financing. Access to the greater financial resources of a bank was one solution to this problem. In the circumstances, a group of British merchants and bankers decided to establish a bank, with headquarters in London, to do business in the West Indies and British Guiana. This was in line with developments in other British colonies during the middle of the 19th century. Crick (1965) notes that, “Historically, the monetary and banking links within the Commonwealth grew from imperial or commercial enterprise”. The first directors meeting of the new bank was held in March 1836, followed in the next month by a publicity programme in England and the West Indies. Authorised capital was set at £2 million, with 20,000 shares of £100 each, 3,000 of which were CHAPTER 1 BACKGROUND TO ESTABLISHMENT