During the 1880s there was a speculative boom in the Australian property market. Australian banks were operating in a free banking system, in addition to few legal restrictions on the operation of banks, there was no central bank and no government-provided deposit guarantees. The commercial banks lent heavily, but following the asset price collapse of 1888, companies that had borrowed money started to declare bankruptcy.
The full banking crisis became apparent when the Federal Bank failed on 30 January 1893. On 1 May 1893, the Victorian government implemented a five-day bank holiday to address the panic. By 17 May, 11 commercial banks in Sydney, Melbourne and other locations across the country had suspended trading.
Many institutions temporarily or permanently closed their doors, including:
Whilst gold and securities were held by certain banks, many Australian institutions did not make representations to their London branches which held those deposits.
By 1894, the worst of the economic crisis was over and the task of rebuilding society started. Criticisms were levelled at board directors:
The first result is that colonial banks have frequently opportunities for making larger profits in comparison with the volume of business than is possible with home banks. The second result arising from this possibility of larger profits is that there is a greater element of risk attaching to the business than attaches to the ordinary business of a British bank, and consequently need for greater caution in investments. It needs but a moment's consideration to reveal the fact that money advanced for the carrying on of our staple industry — the pastoral industry — is exposed to greater risk than money advanced on the comparatively steady staple businesses in Britain. Our staple industry is exposed to the caprices of climate and the invasion of insects, insignificant when considered singly but terribly significant when considered in the muss. Droughts, frequently recurring, blast the hopes of the pastoralist by robbing him of all prospect of return for his labour and anxieties, and that blasting of the squatter's hopes means loss to the institution which has advanced him money.
These comments of 1897 were made as the Federation Drought (1896 to 1902) commenced, which resulted in the forthcoming widespread death of livestock and strains of livelihoods. There were some reforms to regulation and law with a view to preventing future abuse.
Poets of the time were critical towards financial institutions and mortgagees. 'Bankers' ruthlessness... were so much a feature of the 'Australian way of life' fifty years ago , that they brought words of burning protest from the pens of some of Australia's leading poets.' 
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