'File 60/20 I (C 93) Imperial Bank of Iran: Bahrain, etc' [‎66v] (134/409)

against the Imperial Bank (his Highness told Mr. Jacks the exact opposite). He
realised perfectly well the benefits which Persian finance and commerce had derived
from the operations of the bank and he hoped that the country would continue for
a lonsj time to profit bv its activities. He feit very strongly, however, t.iat tiie bank
bad failed to move with the times. It was no longer merely a question of tne bank
advancing a few thousand pounds to the Government or to private traders. The
Government was determined to shake the country out of its state ot lethargy and it
must be able to count on the wholehearted support of the imperial Bank. T-hei
Government had come to the conclusion that it needed a State bank which was
State bank in name only, a bank over which it exercised undisputed control, and the
only way of achieving that object in its view was to create an entirely new oank witM
a capital supplied by the State. The National Bank had thus come into Demg. The
Imperial Bank of Persia which had hitherto enjoyed a virtual monopoly of banking
business in Persia, naturally resented this challenge to its position. His iJighness
himself had expected a considerable amount of friction between the two baiiks. His
efforts to reduce it to a minimum had been far from successful, but he did not bea .Fl
Mr. Wilkinson, whom he liked personally, any malice. Mr. Rogers, he was glad to
note, had come out to regularise the relations between the Imperial Bank and the
Government. His Highness was certain that, if only a little goodwill were displayed
on both sides, the two banks could at the same time settle their differences.
The Imperial Bank, the Minister of Court continued, professed itself anxious
to co-operate with the Government in every way. He suggested that the bank should
give tangible evidence of its goodwill. One of the most serious problems with which
the Government was faced at present was the need to adjust the trade balance. He
had always been told that the fall in the kran was very largely due to the immobili
sation of the oil royalty in London or, in other words, to the withdrawal from the
trade balance of a large proportion of the country's invisible exports. He had
followed the advice given to him by Mr. Wilkinson and placed £300,000 at the
disposal of the National Bank. This was a sacrifice on the part of the Government
which he thought the Imperial Bank, in view of the large profits it had made in the
past, could well afford to imitate. Mr. Rogers here observed that the sacrifice on the
part of the Imperial Bank had already begun. The bank held at present bills to the
value of £300,000 which it had discounted before the new regulations came into force
and which it was under a moral obligation to its clients to retire. It was quite
unable, however, to obtain the required exchange. Not only that, but half of the small
amount of exchange it did buy had to be placed at the disposal of the National Bank.
It was already oversold to the extent of £75,000, which was contrary to all its
principles and must lead to heavy loss. (This loss would amount to approximately
50 per cent, if silver had to be shipped to London.) His Highness, without
expressing any sympathy for the Imperial Bank, stated that he had not fully
understood the situation. The news obviously gave him great satisfaction as he
expressed the conviction that this sum of £600,000 (£300,000 from the oil royalty
and £300,000 supplied by the Imperial Bank) would suffice to fill the gap between the
demand for exchange and the supply during the current year, thereby helping the
Government to maintain the kran at its present artificial level.
(His Highness does not appear to realise that the £300,000 which may be
supplied by the Imperial Bank of Persia—if the board is willing to face the loss-
will only tend to alleviate the situation by relieving the open market of the demand
for this amount, whereas the £300,000 from the oil royalty are, in Mr. Rogers's view,
entirely inadequate for the purpose. It is clear that exchange will only be available
in the ordinary way by the rate being placed on a level at which it would be profitable
for exporters to purchase produce, and it must be remembered that there is at the
moment a world-wide slump in practically all raw materials and food-siuffs. , Tey-
mourtache, unfortunately, could not even be made to understand that an unduly low
rate would handicap the export trade.)
His Highness next referred to the question of the Imperial Bank's sole right of
note issue. He first of all stated very emphatically that the Government was quite
determined to secure this right and asked Mr. Rogers whether he did not agree that
it was derogatory for a sovereign State to allow its notes to be issued by a foreign
concern. Mr. Rogers said that he entirely sympathised with the aspirations of the
Persian Government in this regard. The bank, he added, was quite prepared to
relinquish its right in return for proper compensation. His Highness touched on
the possibility of the bank issuing new notes with a gold backing, a solution which
he said would be very much to the Government's benefit (though less palatable to its