837 



BANK; BANKER; BANKING. 



BANK; BANKER; BANKING. 



838 



A bank is very commonly used by customers as a place of securit; 

 to deposit plate, jewels, government and other securities, title-deeds 

 &c., for safe custody ; and the banker frequently manages the cus 

 tomer's public stock for him, receives the dividends, and sells out 01 

 buys in according to his directions, and in the case of selling it ii 

 necessary for the banker to have a power of attorney from the cus 

 tomer to enable him to effect the sale. Now, in any of these cases 

 any malversation on the banker's part is severely punished. If, being 

 in charge of goods, &c., for safe custody, he sells or pawns the goods, or 

 negotiates the securities, or pledges them, or deals with either in any 

 way with a fraudulent intent, or if, having a power of attorney, he 

 fraudulently uses it for his own purposes, he is in any of these cases 

 punishable as for a misdemeanour (20 & 21 Viet. c. 54); and the 

 reason why a banker is held by the law up to so rigid a standard o: 

 correctness, and why he is so severely punished in case of departure 

 from it, is that complete confidence is the essence of his vocation, lit, 

 deals not with his own but other people's property ; the consequences 

 of a departure on his part from the rules which experience has shown 

 to be indispensable, are incomparably more grave in the misery, anc 

 distress, and ruin which it causes, than in cases of ordinary offenders 

 against the law. Then he has not a valid excuse in ignorance. Bankers, 

 it is said, are in possession of peculiar means by which to become 

 acquainted with the position, the character, and capacities of those 

 who deal with them ; and it is their duty to employ all those resources 

 to distinguish between the applicants for accommodation who can bring 

 security in one of the best forms, namely, that of their character, 

 energy, and prudence, and the reckless and improvident trader. Pro- 

 vided they make reasonable inquiry, it is not probable that they will 

 often be deceived in their judgment of individuals in this respect ; and 

 provided they act with caution, it is impossible that they can ever 

 suffer themselves to be so far involved, even with the most respect- 

 able customer or firm of customers, as to be themselves injured in case 

 of failure of the latter. 



It perhaps may be difficult to form an estimate of the amount of 

 money held as deposits by bankers in the United Kingdom ; very high 

 authorities estimate it at an enormous number of millions sterling, and 

 have considered that probably 500 millions sterling is not much above 

 the proper mark, of which probably one-half is payable at call. This 

 gives some idea of the vastness of the trust which the community 

 repose in the banking body, especially when we consider that this 

 enormous sum is lent to them without security ; and, indeed, the 

 growing practice of opening accounts with bankers in other words, 

 lending to bankers so much money to be returned on demand has 

 been looked on by some as a most embarrassing question, owing to the 

 difficulty of deciding whether the evils inherent in the system do not 

 countervail the advantages; and considering it on the whole, as at 

 present conducted, to bear the character of a formidable evil, the 

 remedy suggested has been to enact that all gums bearing interest, 

 lodged with hankers, brokers, to., should not be demandable without 

 a month's or six weeks' notice ; and it is alleged that a regulation of 

 this sort would not interfere with anything that is valuable in the 

 existing system, while it would confer on it some portion of that 

 solidity of which it is at present so miserably deficient. It would 

 protect all classes against the effects of sudden and unreasonable 

 fears and panics : it would give time to the borrowers to collect 

 their resources, and to the depositors calmly to inquire into the 

 character and situation of those to whom they had intrusted their 

 money. 



III. ffittary and Constitution of the Bank of En'ilanil. This esta 

 blishment, unquestionably the largest of its kind in the world, was 

 projected by a Scotch gentleman, Mr. William Patterson, in 1694. 

 The scheme having received the sanction and support of the govern- 

 ment, to whom the whole of the capital was to bejent, the subscription 

 was filled in ten days from its being first opened. The government 

 being at the time much embarrassed for want of money, partly from 

 the abuses of taxation and the defective modes of impost that were 

 prevalent in those days, and partly from the difficulty of borrowing, 

 owing to the feeling of insecurity and the want of confidence in the 

 stability of the revolutionary establishment, the Bank arose out of a 

 loan of 1,200,OOOJ. for the public service. The government paying to 

 the subscribers 8 per cent, on the sum advanced, and 4000?. a year 

 for management, or 100,000/. a-year in all, agreed to incorporate them 

 by the name of the Governor and Company of the Bank of England. 

 The charter was granted to continue (by virtue of an Act of Parliament 

 of thai year) for eleven years certain, or till a year's notice after 

 August 1, 1705. 



Under the auspices of the then chancellor of the exchequer, 

 Montague, a complete re-coinage of the circulating medium had taken 

 place in 1098 ; and in the course of this year the Bank fell into great 

 difficulties, and, in fact, was compelled to suspend payment of its 

 notes, which had fallen to a heavy discount. By means, however, of 

 the* prudent course adopted by the directors, and by aid from the 

 government, the Bank contrived to weather the storm ; but it was 

 determined to increase the capital fron: 1,200,000?. to 2,201,1 111., 

 which was accordingly done. 



In 1708, the Bank undertook to payoff and .cancel 1J million of 

 Exchequer Bills, which they had circulated two years before at 44 per 

 cent., with the interest upon them in all 1,77S,028?. ; so increasing 



the permanent debt due from the public to the Bank (including 

 400,000?. then advanced as payment for the renewal of the charter) to 

 3,375,028?., on which they were to be allowed 6 per cent. The Bank 

 capital was also then doubled; that is, it became 4,402,343?. It was 

 in this year also that the Bank obtained the famous provision to the 

 effect that, during the continuance of the corporation of the Bank of 

 England, no partnership or body consisting of more than six persons 

 should " borrow, owe, or take up any sum or sums of money on their 

 bills or notes payable on demand, or in any less time than six months 

 from the borrowing thereof," and the exclusive privileges were con- 

 tinued till 1733; and they have since been prolonged to the 1st August, 

 1855, with the proviso that they may be withdrawn on a year's notice 

 to that effect being given to the Bank by the House of Commons, 

 through the Speaker, after the 1st August, 1855. 



In 1727, we find that the capital had increased to nearly 9,000,000/. 

 In 1746 it was 10,780,0007. 



In 1782 it was increased by 8 per cent., or became 11,642,400?. 

 In 1816 it was raised to 14,553,000?., at which it at present 

 stands. 



The Bank of England, as is well known, has had to struggle with 

 severe pressure at particular periods of panic, as they are called. We 

 cannot, consistently with the proper limits of this article, do more 

 than refer to the most striking of them. The first of these was that 

 of 1 745 the Black Friday, as the day was long called in the City 

 when, news having arrived that the Pretender had advanced to Derby 

 with his Highlanders, a run upon the Bank by the holders of its notes 

 took place, which it is said the directors succeeded for the time in 

 staving off by the device of paying each note in shillings and sixpences. 

 They received more solid advantage from the effect of a resolution 

 which was very numerously signed at a meeting of the merchants of 

 London, that they would receive the notes of the Bank of England to 

 any amount in payment of debts due to them, &c. ; on which, and on 

 the arrival of information of the retreat of the rebellious army, con- 

 fidence returned. 



In 1796, and the early part of 1797, there had been confident 

 assertions of the intention of France to invade this country, and runs 

 had taken place in consequence on many of the provincial banks, until 

 the panic spreading, extended itself, as always takes place in such 

 cases, to London, and the demands for cash on the Bank of England 

 multiplied so fast, and to such an extent, that on Feb. 25, 1797, only 

 1,272,000?. of cash and bullion remained in its vaults. This was 

 Saturday, and there was no prospect or hope that the run would have 

 subsided on Monday. This being the state of things, an order in 

 council was issued on Sunday, prohibiting the directors from paying 

 their notes in cash until the sense of Parliament could be taken. The 

 result of the discussions in Parliament was, that it was agreed that 

 this restriction should continue until six months after the signature of 

 a definitive treaty of peace, and an Act of Parliament was passed 

 accordingly. The apprehensions which the order in council of re- 

 striction had caused were again allayed by a meeting of principal 

 merchants, agreeing to accept and use every means to induce others to 

 accept, Bank notes as money in all transactions. A committee of 

 Parliament, which investigated the subject, reported that, at the 

 moment of issuing the order in council, the Bank was possessed of 

 property to the extent of 15,513,690?. after all claims had been satisfied. 

 Bank of England notes were not, it is to be observed, expressly 

 declared to be legal tenders ; but they were in effect made so. In 

 1801-8 their issues are stated to have been so much increased that 

 the notes fell to a discount of as much as from 8 to 10 per cent. 

 In 1804 the notes recovered their ostensible value, but from that 

 time to 1808 they were again at a discount of 2J per cent. 



Hitherto the issues had not exceeded 17J millions sterling or fallen 

 lower than 16J millions, in any one year from 1802 to 1808; but in 

 1809 they became 18,927,883?., and in 1810 reached 22,541,523?. The 

 issues of country bank paper were also much enlarged, without, as it 

 appears, there having been any adequate increase of business or activity 

 of demand for money in the community to make such steps justifiable; 

 the consequence was, that Bank notes in 1809 and 1810 were at a 

 discount of from 13 to 16 per cent. Hence arose a corresponding fall in 

 ;he foreign exchanges ; and the matter seemed deserving of the atten- 

 ;ion of the legislature, so far as that a committee of the House of 

 Commons being appointed in the latter year, recommended an early 

 return to specie payments ; but this recommendation not being acted 

 on, the notes of the Bank were at an average discount in 1812 of 20| 

 per cent, as compared with bullion ; in 1813, of 23 per cent. ; in 1814, 

 of 25 per cent. The mode by which they regained by 1816 nearly a 

 jar with gold, was the following r In 1797, at the period of the 

 estriction, it had been supposed that there were about 280 country 

 jaiiks in operation ; but in 1813 these had increased to upwards of 

 900. Wheat had been unusually high during the five years ending with 

 hat year, but the harvest of that year turning out to be above an 

 average one, and the continent being again opened to British com- 

 merce, a heavy fall took place in prices at the end of 1813 and the 

 >eginning of 1814. This having brought many farmers into insol- 

 vency, caused a want of confidence in the rural districts ; and it is 

 raid that, in 1814, 1815, 1816, no fewer than 240 country banks 

 topped payment, and 89 commissions of bankruptcy were issued 

 gainst bankers. Hence the field for the circulation of Bank of 



