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Acçao Companhia Confiança Nacional

Part VI – The renewal

A new crisis in 1846 on the eve of and amid new political turmoil (the Patuleia Civil War) eventually determined the expected institutional outcome of reconfiguring banking and financial institutions that would lead to the merger of the Banco de Lisboa with Companhia Confiança Nacional and the genesis of the Banco de Portugal.

Money Museum

The last moments

The period of civil war between Absolutists and Liberals, which Portugal lived between 1832 and 1834, as well as successive changes in governments, led to a situation of strong political and economic instability in the country. The government of Costa Cabral, between 1842 and 1846, endeavoured to invest in the country's modernization, through policies based on public works, education and health. However, the heavy indebtedness caused by these policies, based on the contraction of voluminous bank loans, led to the complication of the already existing economic crisis. This state of political and social uncertainty generated panic in the holders of banknotes at the Banco de Lisboa, and generated a flurry of exchange for silver notes. With a liquidity ratio already below prudential norms, the Banco de Lisboa was forced, after a few days of this rush to exchange notes, to suspend payments for the same. On May 22, 1846, the Directorate asked the Queen for a moratorium on payments.

Caricatures about Banco de Lisboa in ""Suplemento Burlesco" of the magazine "O Patriota"
Burlesque Supplement in the newspaper "O Patriota" nº1468
Historical Archive of Banco de Portugal

The mandatory legal tender

The mandatory legal tender, a legal obligation to accept a certain currency, was sometimes presented by the Government as a solution to the rush to metallic coins, which emptied the Banco de Lisboa's coffers and called into question the confidence in the issued note.

Board Representation to Congress on a Project on the mandatory legal tender, 1837

In 1837, the Bank's Board expressed its opposition to such a resource, justifying that confidence should come from the financial health of the institutions. However, 9 years later, in 1846, the situation of lack of public confidence forced the Banco de Lisboa itself to propose the legal imposition of acceptance of its notes.

SEE HERE

Board Representation to Congress on a Project on the mandatory legal tender, 1837
Historical Archive of Banco de Portugal
"Forced course" - Caricature of Cecília in the Burlesque Supplement of O Patriota

In May 1846, the mandatory legal tender of banknotes from the Banco de Lisboa was decreed for the first time, an unpopular measure received with disfavour by the public.

Burlesque Supplement in the newspaper "O Patriota" nº1197
Historical Archive of Banco de Portugal
Banco de Lisboa note from the 1840 decade issues

Despite the legal imposition that prevented the exchange of banknotes for metallic coins at the Bank, this was still done illegally in the markets, with a discount in value.

Money Museum

The Companhia Confiança Nacional

From 1838 onwards, companies were created to carry out operations with the State, financing it in exchange for benefits granted by the latter. These Companies, in general, also suffered from the political and economic instability that made their futures more uncertain. One of these companies, Companhia Confiança Nacional, created in 1844 following the auction of the Tobacco, Soap and Powder Contract, had its destiny linked to that of the Banco de Lisboa. The successive loans made to the Government and the lack of payment by the latter, leads the Company to a difficult situation, which will lead to the signing of the Decree of November 19, 1846, whereby the Company's assets and liabilities are integrated into assets and in the liabilities of the Banco de Lisboa.

Share from Companhia Confiança Nacional

Abraham Wheelhouse, an English merchant and businessman, purchased the first 30 shares of Companhia Confiança Nacional to the amount of 30 million réis. As the various stamps in this share show, subscription to the capital did not reach 50% and the Companhia was only able to pay the dividends for 1845. The institution was insolvent and ran into difficulties at the end of May 1846. However, the capital invested was not lost: on 28 June 1847, Wheelhouse received shares in the Banco de Portugal to the corresponding nominal amount.

Money Museum

The genesis of Banco de Portugal

The solution to resolve the country's monetary and economic crisis was the subject of prolonged debate by the Government from the summer of 1846 onwards. the second. This document would be the basis for the Law of November 19, 1846 that constitutes the Banco de Portugal.

D. Maria II, oil on canvas, Maurício José do Carmo Sendim

On November 19, 1846, D. Maria II signed the Decree establishing the Banco de Portugal

D. Maria II
Painted by Maurício José do Carmo Sendim
Banco de Portugal
Tapeçaria Sala Assembleia
Tapestry in the Assembly Room of Banco de Portugal

The tapestry that Guilherme Camarinha created in 1971 for the Assembly Room of Banco de Portugal reflects the continuity of Banco de Lisboa in Banco de Portugal. On the left side, D. João VI delivers to the Baron of Porto Covo, in 1821, the Law that rehabilitates the Banco de Lisboa. On the right side, the Visconde de Oliveira receives the Decree of November 19, 1846 from D. Maria II.

Tapestry of the Assembly Room
By Guilherme Camarinha, 1971

Livro da Porta

The operation of Banco de Lisboa continued at Banco de Portugal, with practically no interruption. Registration books such as the Livro da Porta, where the requests made to the Bank and the respective order were registered, started with the records of the Banco de Lisboa, and began to have those of the Banco de Portugal after its founding.

SEE HERE

Livro da Porta, 1846-1935
Historical Archive of Banco de Portugal

Banknote conversion book of Banco de Lisboa

The suspension was extended twice, until in November the banknotes became, in fact, irreversible. Despite the crisis of confidence, Banco de Portugal continued issuing in the name of its predecessor, but government measures were insufficient to curb the premium, which in April 1848 reached almost 60%. The amortization of all Banco de Lisboa notes would only be completed after 1859.

SEE HERE

Banknote conversion book of Banco de Lisboa, 1846-1857
Historical Archive of Banco de Portugal
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Part I

The situation

The presence of D. João VI and his court in Rio de Janeiro, resulting from the French invasions, as well as the British interference, favoured a political and economic environment, which promoted national discontent. The military pronouncements of 1820, in August in Porto and in September in Lisbon, demanded the king's return to Lisbon, and the establishment of a provisional government to prepare the convocation of a parliamentary assembly whose main mission would be the drafting of a Constitution.