Santiago, Chile, Banco de Santiago de Bezanilla & Mc Clure, 100 pesos, 2-1-1861, extremely rare.

Currency:USD Category:Coins & Paper Money / Paper Money - World Currency Start Price:6,000.00 USD Estimated At:10,000.00 - 20,000.00 USD
Santiago, Chile, Banco de Santiago de Bezanilla & Mc Clure, 100 pesos, 2-1-1861, extremely rare.
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Santiago, Chile, Banco de Santiago de Bezanilla & Mc Clure, 100 pesos, 2-1-1861, extremely rare. SCWPM-unl; Galetovic-unl.

Serial A, number 1, and thus the first regular Chilean banknote, choice XF, with four small cancellation punches (as made, since this was the very sample sent from the Banque de France in Paris for examination and approval) and a handsome and most impressive example. Unique and of the highest historical significance.

The Banking Law proclaimed on July 23, 1860 was the first of its kind issued in Chile and was created by the specially appointed French economist Gustave Courcelle-Seneuil, who had deep faith in market self-regulation as a mechanism for emission of paper money. The Law represents one of the earliest attempts at a free banking system in the modern world and has been analyzed as such in economic circles. Briones (“Free-banking revisited: the Chilean experience 1860-1898,” 2002) notes the following (lightly edited):

In Courcelle’s words, emission could not go naturally beyond the real market demand for money. Under competitive supply of money any excessive emission from any single bank would only cause a loss of its credibility among noteholders. As a result, these would quickly convert their notes and thus cause the bankruptcy of the bank. Since no banker desires a default, this natural mechanism imposes a responsible behavior when issuing notes. Although financial difficulties would not result from an excessive emission, problems could result from a poor management and a bad portfolio of liabilities rendering banks unable to pay their debts at a given moment. Courcelle claimed that, in order to avoid this potential adverse scenario, banks needed no more than a reasonable amount of capital to respond to their obligations (and) this provision was explicitly included in the law.

The main features of the 1860s Banking Law can be summarized as follows:
· Convertibility: Notes had to be paid in specie (silver or gold) in sight and on demand (Articles 26 and 27).
· Freedom of entry: Every person apt to begin commercial activities can base a bank of issue (Article 1)
· Capital as issue backing: One of the key distinctions of the Chilean banking system is that the law did not force the banks to hold a metallic or specie reserve backing against its emission but just a minimal capital. We are thus under a variant of the pure fractional reserve model. The Chilean law restricted the stock of issued notes to 150% of the paid capital (Article 29). In addition, it established that the paid capital could only be constituted by specie or short term (less than 6 months) debt of “very well known and solvent people” (Article 6). Notes had to be double-coupon numbered and signed by the bank director and the governor of the Casa de Moneda (the State). One coupon had to stay at the Casa de Moneda as a control of the registered emission (Article 14).
· Transparency and accounting information: Banks were obliged to publish detailed monthly balances that had to be transmitted to the Finance Ministry (Articles 8 and 30). In addition, the President of the Republic was in charge of revising the accounting information when a new bank opened (Article 5). Banks were also obliged to indicate in a special account of the balance the loans to its managers and directors (Article 10). Non-compliance with these arrangements entailed important fines (Articles 24 and 25).

Authorized denominations were purposely high: 20, 50, 100 and 500 pesos.

This impressive example was printed in Paris, France and its singular and unique occurrence in the entire Chilean series is obviously an indirect result of Courcelle’s ties with his motherland. Only two banks were authorized to issue notes under the 1860 law: the early Banco de Chile and the Banco de Santiago de Bezanilla & Mc Clure (usually known as the Banco de Bezanilla & Mc Clure). The latter was authorized by decree number eighteen of the Ministry of Economy dated March 18, 1861. Its issue totaled 28,990 pesos, all of which were accounted for (and thus paid) when the bank was closed prior to 1865 (see p. 151 in Santelices, Ramon: Los Bancos Chilenos [1893]).

Since the subsequent banking law issued in 1865 required a thorough accounting and recalling of the previously issued notes, and since the issued denominations were high ones, as previously seen, it is no surprise that no issued notes of the 1860-1864 period of either bank are presently known. Since no other remainders or specimens of either bank are known, the current example is the sole survivor of the entire 1860-1864 Chilean period. It was the very example sent from France to Chile for its approval with the 1860 law requirements (note the small signature of approval next to the serial number). Its serial number A1 serves to identify it as the first printed note in the Chilean regular banknote series, and as such, its status as the country’s most historically significant and valuable note cannot be overstated.