Established in Hong Kong and Shanghai in 1865, the Hongkong and Shanghai Banking Corporation served the needs of the merchants of the China coast and financed the growing trade between China, Europe and North America. Today, the Hongkong and Shanghai Banking Corporation is a principal member of the HSBC Group -- one of the world's largest banking and financial services organisation.
During the early 1860s the European trading houses, or hongs, operating in the China coast were making substantial profits from trading goods carried by the famous clipper ships and had ambitious plans to expand. The local financial market in Hong Kong at the time, however, was only just beginning to develop.
In the first few years of Hong Kong's growth as a trading centre, the financing came almost exclusively from the major trading houses themselves. But by 1864 several Indian and London-based joint stock banks had set up branches in Hong Kong. Controlled from overseas directors who had little knowledge of or interest in the affairs of Hong Kong, this gave rise to a general feeling among the local business leaders that their interests would be better served by a bank owned, managed and operated locally.
The stimulus to action came when word reached Hong Kong that a group of financiers in Bombay were forming their own Bank of China, to be chartered in London and based in Hong Kong, but with no more than a small fraction of its shares allocated to the China-coast business community it was intended to serve. News of this reached Thomas Sutherland, the Hong Kong Superintendent of the Peninsula and Orient Steam Navigation Company (later to become Sir Thomas and the Chairman of the Orient Steam Navigation Company, a member of the British Parliament and a director of what was to become the Midland Bank).
On the basis of an article he read on banking in Scotland, Mr Sutherland worked overnight to draw up a prospectus for an institution to be operated on sound "Scottish banking principles." The next day he took it to his legal adviser, E H Pollard, and together they solicited support. Within a matter of days a provisional committee had been formed. The total capital was set a HK$5 million and all the shares allotted to Hong Kong were quickly taken up. When the representative of the Bank of China arrived from Bombay several weeks latter, he could find no one to take his shares or agree to become a director.
The provisional committee was chaired by the chief partner of a prominent trading firm and its members represented major international interest in Hong Kong. Far from being exclusively British, its composition was highly cosmopolitan. Membership included American, German and Scandinavian merchants, Bombay-based David Sassoon and Co., and two Parsee members representing the Indian trading houses.
The bank opened for business in Hong Kong, under the managership of Victor Kresser, on March 3, 1865, and in Shanghai, under David McLean, one month later on April 3. The Hong Kong office was located at 1 Queen's Road. To this day, the site and address of the Bank's successive headquarters have remained the same.
An early problem encountered by the bank's founders was the method of incorporation. At the time, a colonial bank requiring limited liability could incorporate either under a Royal Charter conforming to Colonial Banking Regulations -- which also conferred the privilege of issuing banknotes and holding government funds -- or under British banking legislation. In either case, the board of directors and the effective head office had to be situated in Britain, which would eradicate the original concept of a locally based institution. Following representations to London, however, the U.K. Treasury agreed to incorporation under a special Hong Kong ordinance complying with the Colonial Banking Regulations and, in December 1866, the bank, which had started a life under a local Companies Ordinance as the Hongkong and Shanghai Banking Company, assumed the name The Hong Kong and Shanghai Banking Corporation.