Bank of Amsterdam - Deposits of Bullion and Coin

Deposits of Bullion and Coin

Deposits of coin constituted but a small part of bank capital. Most of the bank's capital originated with deposits of gold and silver bullion, intrinsically of higher value as bullion was not debased, unlike most of the circulating coinage.

The Bank of Amsterdam gave credit for deposits of gold and silver worth about 5 percent less than their mint price. It granted the depositor a receipt, which allowed him to claim his deposit 6 months later, upon returning to the bank the same value of bank money for which credit was given, and payment of a fee for the keeping—a warehouse rent of sorts—worth 0.25% for silver, and 0.5% for gold. This fee could, of course, be paid every 6 months, extending the period of deposit. The difference of fees has been attributed both to the difficulty of ascertaining the purity of gold and to a wish to encourage deposits of silver, it being the standard metal of the time. If a depositor did not claim his deposit back after six months, it fell to the bank, and the depositor was left with the credit he received in compensation.

The terms of deposit were such that deposits of bullion were most commonly made when the price was somewhat lower than ordinary, and taken out again when it rose. The proportions between the bank price (the credit which the bank gave for deposits of bullion), the mint price, and the market price of gold bullion were always nearly the same. A person could generally sell his receipt for the difference between the mint price of bullion and the market price. As a receipt was nearly always worth something, it was only rarely that deposits were allowed to fall to the bank through the expiration of receipts (which means the depositor neither paid additional keeping fees nor removed his deposit from the bank). This happened more frequently with regard to gold, due to its higher keeping fee.

The bank also took in coin, granting credit and receipts in exchange, and charging 0.25% for the keeping. These receipts were often of no value, however, and the deposit was allowed to fall to the bank.

The bank maintained it did not lend any of the bullion deposited in it, not even that part for which the receipts expired, and which could not generally be claimed.