The Bank of Amsterdam or Wisselbank (Dutch: Amsterdamsche Wisselbank, lit. 'Exchange Bank of Amsterdam') was an early bank, vouched for by the city of Amsterdam, and established in 1609. It was the first public bank to offer accounts not directly convertible to coin. As such, it has been described by some as the first true central bank, even though that view is not uniformly shared. The Amsterdam Wisselbank was also active in the production of coins. For decades the assay master of the Bank sent out stocks of gold and silver to the various Mints in the United Netherlands to receive new coins in return.
Unlike the Bank of England, established almost a century later, it neither managed the national currency nor acted as a lending institution (except to the government in emergencies); it was intended to defend coinage standard. The role of the Wisselbank was to correctly estimate the value of coins and thus make debasement less profitable. It occupied a central position in the financial world of its day, providing an effective, efficient and trusted system for national and international payments, and the Dutch guilder was a de facto reserve currency in Europe in the 17th and 18th century. David Hume praised the Bank of Amsterdam for its policy of 100 percent specie-backed deposit reserves.
The bank's full-reserve policy relaxed over time as it lent money to finance overseas trade and to support the Dutch economy, but it remained liquid by requiring good collateral on its loans. This changed with the Fourth Anglo-Dutch War, when the Dutch East India Company defaulted on large unsecured advances from the bank. Despite several attempts to recapitalize, confidence in the bank never recovered. During the last decade of the Republic of the United Provinces, in 1790, the premium on the bank's money disappeared, and by the end of the year, it had declared itself insolvent. The City of Amsterdam assumed control of the bank in 1791. The Nederlandsche Bank was established in 1814, and took over money issue duties for the new Kingdom of the Netherlands, while the Wisselbank entered liquidation in 1819.
Established on 31 January 1609, the Bank of Amsterdam played a pivotal role in the 17th and 18th-century financial center of Amsterdam. 500 different coins – legal or illegal – from a wide variety of countries and regions circulated, but a good system to determine exchange rates did not exist. At the bank, people could exchange their coins for fully-fledged and widely accepted trade currencies. The Wisselbank protected foreign creditors by settling debts through the bank and offering depositors its own coins that were not debased.
The bank was given a fourfold task:
to ensure that the money entrusted by the merchants to the bank remained stable in value
to solve their domestic payment problem
to facilitate their international payments through an adequate supply of full-value gold and silver coins and a good book-entry transfer system
to ensure that the bank's foreign exchange reserves were protected from the influx of lighter currencies.
The management of the Bank of Amsterdam was in the hands of three, later four commissioners elected by the city council. They were often former schepenen or members of the city council. Two of the commissioners had to be present daily at the office: they had the oversight of four accountants, two clerks with one servant, four counter bookkeepers, three receivers together with another servant, ushers and an assayer (assay-master), who knew the secrets of trade in precious metals and minting. Each of the accountants had his own specific task: the first took the written orders for payment receipt, the second held in the journal, the third balanced the book, and the fourth took care of the ledger. In 1715 there were five and a year later six commissioners, the number the bank kept until the end of the eighteenth century. From the beginning till the end of the 18th century the average age of commissioners dropped from 46 to 33 years. Two-thirds of the commissioners were merchants or bankers – which the other account holders trusted. Some of the commissioners had ties with the Dutch East India Company (13%) or the West India Company (15%), both account holders. Whoever did business with the VOC was obliged to do so via this Wisselbank [which always resulted in large turnovers].
The main objective of the Wisselbank's establishment was to maintain a stable silver bank currency for the Dutch Republic's burgeoning international trade which was immune from the numerous depreciations which occurred after its independence from Spain, as its constituent provinces kept wringing out more stuivers (worth 1⁄20 guilder) from a fixed quantity of silver.
After 1618, it was able to fix the Dutch rijksdaalder of 25.4 g fine silver at 21⁄2 Dutch guilders or 50 stuivers, guaranteeing a payout of 10.16 g fine silver for each bank gulden deposited.
While initially successful in halting the depreciation of the Dutch currency, the Wisselbank was tested from the 1630s, when the provinces tried to further raise the gulden equivalent of coins imported from the southern Spanish Netherlands: the patagon of 24.55 g silver raised from 48 to 50 stuivers (or 9.82 g per gulden), and later on the ducaton of 30.69 g silver from 60 to 63 stuivers (or 9.74 g per gulden).
Fearing the loss of its Europe-wide reputation if 2.5-gulden rijksdaalders were repaid with cheaper 2.5-gulden patagons, the Wisselbank firmly upheld the original gulden banco of 10.16 g fine silver as distinct from the lower-valued circulating gulden: so the bank accepted the patagon only at 48 stuivers, and the ducaton at 60.
In 1659, the Dutch Republic issued its own versions of the Spanish Netherlands coins, the silver ducat (patagon) of 24.36 g fine silver and the silver rider (ducaton) of 30.45 g fine silver, worth respectively 50 and 62.5 stuivers as currency, and 48 and 60 stuivers in the Wisselbank: hence, 9.67 g per gulden currency and 10.15 g per gulden banco (5% premium or agio) as computed from the ducaton.
From 1683, the Wisselbank introduced a system of receipts with the gulden banco's agio allowed to float at 4 to 5% subject to supply and demand for banco vs currency. Both types of gulden were on the silver standard, with gold coins and bars quoted at fluctuating exchange rates.
Lucien Gillard calls it the European guilder (le florin européen), and Adam Smith devoted many pages to explaining how the bank guilder worked.
The modern practice of corporate governance has its roots in the 17th-century Dutch Republic. The first recorded corporate governance dispute in history took place in 1609, between the shareholders/investors (most notably Isaac Le Maire) and the directors of the Dutch East India Company (VOC), the world's first formally listed public company. In 1609, and 1611, Le Maire was the most important account holder at the Wisselbank. Between 1611 and 1620, the number of account holders in the Wisselbank grew from 708 to 1,202. In 1622, it was forbidden to trade in gold and silver without the authorization of the bank. After the Treaty of Bärwalde in 1631, France transferred its financial support to the Swedish army with the help of Jean Hoeufft and the Wisselbank.