Currency boards and Chinese banks in Malaya and the Philippines before World War II

Abstract

This article examines the relationship between currency boards and the development of local Chinese deposit banking in Malaya and the Philippines before World War II. While in both countries Chinese banks filled an important gap in financial intermediation, the currency board system – an especially strict version of the classical gold standard – virtually ensured that these institutions remained small. Moreover, in the slump of the 1930s the currency board system's preclusion of a central bank and requirement to pay depositors in 100% metropolitan currency, together with the volatility of highly staple‐dependent export economies, pushed Chinese banks to the verge of bankruptcy or beyond. Examination of the 1930s crisis in South‐East Asia and the role of banks in it reveals more differences from than parallels with the 1990s experience.