BANK; BANKER t BANKINO. 



BASK; 11ANKKH: BANKIM;. 



I 



only against the bankrupt, and some of than may be made the 

 ground* of criminal proceeding*, and lew) to wvere puniahmenu. 



Prirate banker* (meaning thereby flrma formed by voluntary aeso- 

 cUUon, in dutinction from Uw bodice formed under the statutes 

 regulating banking oo-partnenhlps and Joint-etock banking ooni].\ni.- 

 l,> not, in general, allow interest to their oiutouien on the 

 sum* lodged with them, aa the U*t mentioned bodies are almost 

 univenally in the habit of doing throughout the United Kingdom. 

 Public banka are thoe* which are established under the itatutM above 

 referred to, and hereafter to be more fully explained. They are for 

 the most part bound to make periodical statements to their share- 

 holder* : in effect, to publish cuch statements as the legislature bos 

 to IK- .id.ipted to disclose the real condition of the banks, and tin- 

 actual mode in which they are doing buxiness ; but the history of bank- 

 ing shows, that whilut moet of these concerns are prosperous and enjoy- 

 ing most extensirely the confidence of the public, no device that baa yet 

 been discovered can guard either customers or shareholders from the 

 ruin that ha* occasionally been caused by the mismanagement, . itli. r 

 through ignorance and incompetency, or from a fraudulent disregard to 

 tln-ir dtitk-K. of those who hare the direction of the affairs of a bank. 

 The disasters which have arisen from the insolvency of large joint- 

 Block banks have not arisen from any inherent vice in the 



nor from any inaptnna of the joint-stock principle for dealing 

 with banking concerns, but from the criminal want of integrity of 

 those who guided the affairs of the establishments which have fallen. 

 The joint-stock banks are in general willing to receive smaller sums, by 

 way of opening accounts with customers, than private bankers ; in many 

 isnai as loir as 10/., and this circumstance, together with the attraction 

 of the interest which they very generally allow on their deposits, and 

 the confidence which the public place in the great number of persona 

 who hold shares in each bank of this description, liable to the whole 

 extent of their fortunes for the debts of the concern, have led to vast 

 increase in the sums deposited with this class of bankers within the 

 last ton or twelve years, so that the lowest estimate which is made by 

 good authority, of the aggregate amount of money held in deposits in 

 the various banks of the United Kingdom, reckons it at 500,000,000/. 

 sterling. 



One of the great benefits which is produced by a widely spread 

 system of banking lies in this, that it provides the means by which the 

 surplus capital of one part of the country is transferred to another part 

 where it is wanted, and where its use is of the highest value in 

 increasing the activity of trade, and giving employment to industry. 

 Thus the agricultural districts affording but little opportunity for the 

 employment of money, bankers in business there, finding no means of 

 employing their deposits in the discounting of local bills of exchange, or 

 in loans on other eligible securities, are in the habit of sending to their 

 agents in London such sums as they can spare with due regard to the, 

 requirements of their tills. On the other hand, in the great centres of 

 commercial and manufacturing activity, of the cotton, woollen, and iron 

 trades, and in the mining districts, the merchants are in the habit of 

 drawing bills of exchange in payment for the goods they have sold to 

 their customers, and a large proportion of these bills come up to 

 London to be discounted, which is done with the money above 

 mentioned as having been sent up from agricultural localities, and with 

 the deposits in the hands of the London joint-stock banks, which are 

 chiefly made by the small traders of the metropolis, and by widow?, 

 servants, mechanics, artisans, 4c. It is in this way that banks aid the 

 rapid and continual circulation of money between parts of the country 

 where it is not wanted for immediate use, and parts of the country 

 where the demand for its immediate use is pressing and urgent. 

 Another mode in which the utility of banks, and the general diffusion 

 of the habit of keeping accounts with bankers instead of hoarding 

 money at home, is displayed, is this : If every payment were required 

 to be made in coin or Rink of England notes (which, since 1844, are a 

 legal tender everywhere except at the Bank of England, as will be more 

 fully explained hereafter), the expense and trouble, and risks attending 

 on such a system would be incalculable. Banking to a very great 

 extent prevents the necessity of thin, ami therefore effects a great 

 economy as regards the currency or necessary supply of the circulating 

 medium. [CoRHESCT.] A customer of a bank, when he has a pay- 

 ment to make, instead of taking the necessary amount in coin or 

 Bank of England notes out of bis strong box, simply writes a cheque 

 or order upon his banker desiring him to pay the creditor the required 

 amount This the creditor presents to the banker, and if the creditor 

 has an account with his house, the banker may satisfy the ch< 

 transferring in his book the specified sum from the account of the debtor 

 to the account of the creditor, and so it will not be necessary that any 

 money should pass in the transaction. But if the creditor, or payee of 

 the cheque, has not an account with the same banker, it may, it is true, 

 be necoesary that the cheque should be cashed, by handing the specified 

 uni over the counter to the payee. In London, however, the great 

 centre of the money transactions of the realm, even in this case, by 

 means of the institution of the Clearing House (which will be explained 

 in detail hereafter) the system of cheques has the effect of canting 

 Inimenee aavingn of expense and trouble as regards the circulation. 

 The eflect, upon the whole, in this direction of the great development 

 which bu token pUe of Lit* years in the practice of using bankers 

 throughout Uw kingdom, Li seen in the following statement contained 



n the Report of the Select Committee of the Howe us on 



the Bank Acts, which aat in the mission of 1858 . " While, on the one 

 Hand, the great increase of retail transactions ha* caused an increased 

 demand for the smaller note* (of the Bank of England) . 



with tin- increMcd demand fur gold, y<"t. "ii tli great 



Itas been the effect of increased facilities in banking, that a saving of a 

 corresponding amount has been effected in the larger notes. The 

 effect has been *o great, that notwithstanding the great increase of 

 trade, the whole amount of Bank of England notes has actually 

 diminished since 1844, and under the present law still continues 

 gradually to decline." 



With i<-_- ...l t,, the notes of the private banks of issue, it is tn 

 at first sight, that a large jKirtinn of their profits must be derive<! 

 the interest which they make upon the money which these notes repre- 

 sent ; for, suppose a private banker to issue a note for lOu 

 parts with it to some one from whom he has obtained a securi 

 its repayment, with interest. The banker has therefore exchan. 

 promise to pay lOOOf. on demand for an obligation of equal at. 

 bearing the current rate of interest : therefore, so long as the note, 

 the intrinsic value of which does not exceed sixpence, remains 

 dilation, that is, until it is rn-esented for payment, and the 1 

 is obliged to pay the 1000/. in return for it, he will, snpp - 

 interest he makes to be five per cent., have derived an income > 

 from the note. Or, to put the case in another point of view : a customer 

 asks for a loan of 10007. upon a deposit of railway debentures or consols; 

 the banker makes the loan by lianding over the counter one of his own 

 notes for 10(W., and if the debt is not repaid according to the terms of 

 the agreement, he may sell the securities and place the proceeds out. at 

 interest, which interest, whatever it be, is in fact the interest 

 note, because he has never disbursed anything. No money has 

 passed out of his coffers ; he has coined, as it were, a pros] > 

 liability ; and, until the note is returned upon him, with a dem 

 be paid in gold or Bank notes, or credited in account, he 

 interest upon it. This view however does not appear to be coin 

 with that which private bankers, who issue notes, in general enter 

 the value to them of their note circulation ; for it was alleged 

 the above-mentioned committee, by various witnesses connected with 

 private banking, to be the opinion generally entertained among thorn, 

 that if they were obliged, according to a proposal that has often been 

 suggested, to make a deposit with government of consols to the M 

 of their issues, they would prefer to sacrifice the issues altogether. 



The most scrupulous attention to correctness and integrity, and 

 fidelity to the interests of those who confide in him, have been par- 

 tially shown to be the duty of a banker ; but it may be necessary 

 still further to elucidate this subject by showing some of the conse- 

 quences which may follow even slight departures from correctness, 

 and, though no moral guilt be incurred, may nevertheless press most 

 heavily on the offender or on his family. The books of a banker are 

 always kept on the principle of perfect correctness ; that 

 shall never be needed ; that from first to last they shall show . 

 and incontestably that which they are kept to show, namely, the 

 state of the affaire of the bank down to the minutest particular. The 

 banker is held to be under the obligation of knowing what is in his 

 books ; he cannot, for instance, escape from the consequences of n 

 or joining in a representation of the affairs of the bank different 

 that which the facts authorise, by alleging that he was not in the habit 

 of looking into the books, and did not know that, what he st;ii 

 sanctioned was untrue. It is his duty a duty that, the law d. 

 allow him to shake off to be aware of the position in which the Kink 

 stands before he undertakes to make statei t t ing that j > 



by relying on which, other persons may suffer. The foll..winc example 

 will render more clear what has been said : In the city of W. a bank 

 had been established for many years. It had acquired oonsid 

 provincial celebrity, and was said to have enriched more than one of 

 those who had been partners in it. In 1850 the then partner*. ' 

 B., took into partnership C., who was to have one-third share of tho 

 profits and assets. A. was not an active partner, though In 

 attended at the banking-house, without however seeing c> 

 taking any ostensible part in the management or conduct ol 

 business. B. waJ a practising solicitor, who nevertheless at; 

 closely to the business of the bank. C. was a retired solicitor : 1>. 

 a sum of money upon being admitted a the business, the 



and liabilities relating to which, it turned out. had 

 resented to him by A. and B. But for these n. 



hi' would not have becon tj held that, 



notwithstanding it was clear that A. knew nothing of any fraud in tins 

 representation of the t. i' i.-ern which h. ) imself 



totally in the dark, and having relied entirely mi a confidential clerk 

 (subsequent!. d to have been engaged in a long , 



honesty and fraud), and then I > a- to lie < -nt iivh 



: d culpability; yet, being bound to know the truth of u! 

 d. in such a case, he was as much jicr.sonally liable to ' 

 he had known tho falsehood of what he asserted, that 

 was liable to indemnify (.'. from the loss which lie had 

 to put him into the mine p .^itinn ;L if he had never cnter< 

 the partner.-hip. B., the other partner, knowing tho real *t 

 a Hal at the time the misrepresentation woo made, was of 

 liable to the same extent. 



