BANK: BANKER; BAXK1NC 



BANK; BANKER; BANK 



Kogkixl note* was MOMsarily muck increased, as tLe vui.l in the 

 currency oauaed by the dmti action uf no many banks of issue (there 

 being at that time no legislative ractrmint ]>n the establishment of a 

 bank of issue except what ha been mentioned) iniut need* be filled 

 up. and the value of the note wa* in 1816 rained nearly to a par with 

 old. Thin facilitating TOT much the return to caah payments, by 

 Mr. Peel* Act of 1819 (5 Oeo. III. c. 78) it was fixed that the 

 resumption abould be made in 1823 ; in tin- interval the Bank was to 

 pav iu note*, if required, in bar* of standard bullion of not loos than 

 00 ouncea weight. However, a large amount of gold having been accu- 

 mulated in the Bank vault*, the directors recommenced specie 

 payment* on Hay 1, 1821. As regards the practical operation of this 

 Act on the currency much speculation and discussion has taken place, 

 into which we cannot here enter. [CuBRCtCT.1 



In the latter end of December, 1825, occurred that collapse of credit 

 and confidence which is known as the panic of 1825, in the course of 

 which the pressure upon the Bank for cash for the country banks was 

 so great that the gold in iu vaults was reduced extremely low ; inso- 

 much that, but for the fortunate discovery of. an old box containing 

 a quantity of one pound notes which had been overlooked, and which 

 were now brought out and issued, to the amount of one million, in 

 payments, the Bank must, according to the evidence of one of the 

 director* before a committee of the House of Commons, have suspended 

 payment. The Bank directors appear on this occcasion to have applied 

 to the government for an order in council restraining payments in 

 gold; but this the government, throughout the period of pressure, 

 steadily refused to grant. 



This crisis was owing chiefly to the immense number of speculative 

 schemes which had been set on foot in the course of the year 1824. 

 From a published table of these, we find the total amount proposed to 

 have been subscribed for these schemes (or bubbles, as many of them 

 were) was 248,000,000/. ; that the amount actually paid up was 

 43,062 ) 608/. ; and that the balance due on the whole, at the end of 

 1825, was 204,937,392*. 



In 1826 the Act of 1708 was partially repealed, so as to admit of the 

 formation of honking copartnerships for the issue of notes with more 

 than six partners, at any distance exceeding 65 miles from London ; 

 but these establishments were restrained from Laving any branches in 

 London ; and it was expressly declared that the partners, jointly and 

 severally, should be held liable for all the debts of the bank with 

 which they might be connected. 



On the other hand, the Bank of England had the privilege given 

 them of establishing branch banks in the provinces. This was viewed 

 with such alarm by the country bankers, who saw in it " the object of 

 supplanting the existing banking establiahments, and thereby rendering 

 the Bank of England masters of the circulation of the country ; " but 

 these apprehensions have not been borne out by the results. In some 

 places where the Bank had established branches, the experiment has 

 failed, and the branches have been discontinued ; and it is doubted 

 whether, upon the whole, the business done at those establishment* 

 has been a source of much advantage to the Bank. The present 

 number is believed to be eleven. An agent or manager is placed in 

 charge of each branch, which is visited at uncertain periods by an 

 inspector. The agents at all the branches communicate daily with the 

 Bank of England, advising every transaction which has been entered 

 into during the previous day, the total amount of moneys paid out, 

 the total amount received, the total amount of the bills discounted, 

 the total cash balances remaining, the notes received and cancelled, &c. 

 In places where branch banks are established, revenue payments are 

 made through them. They also receive many dividends that were 

 formerly received by the provincial banks. 



In 1833 considerable alterations were made in regard to the relations 

 of the Bank to the public by 3 ft 4 Will. IV. c. 98, by which it was 

 provided that no association, having more than six partners, shall issue 

 bills or notes payable on demand in London, or within 65 miles ol 

 that city, during the continuance of the exclusive privileges granted to 

 the Governor and Company of the Bank of England. But associations 

 " although consisting of more than six persons, may carry on the trade 

 or business of banking in London, or within 65 miles thereof, provided 

 they do not borrow, owe, or take up in England any sum of money 

 upon their bills or notes payable on demand, or at any less time than 

 six months from the borrowing thereof, during the continuance of the 

 privileges granted by this Act to the Governor and Company of the 

 Bank of England." 



All promissory notes of the Bank of England, payable on demand 

 issued at any place in England, out of London, where the business o 

 banking shall be carried on for or on behalf of the Bank, must be made 

 payable at the place where such notes are issued ; and it is made un- 

 lawful for the Governor and Company of the Bank of England, or for 

 any person on their behalf, to issue, at any place out of London, an; 

 promissory note payable on demand, not made payable at the place 

 where the same is issued. 



Hank uf Knyland note* iliaU It a, legal tender except at the Bank and 

 



One-fourth part of the debt owing from the public to the Bank 

 amounting to 8,671,70., was to be paid back to the Bank. It was on 

 this occasion proposed among the directors, that a sum equal to this 

 urn should be distributed rateably to the proprietors of Bank stock, on 



lie ground that the aviating capital was amply sufficient to answer all 

 "IB purposes of a banking capital 



In 1844 the enactment under which the Bank of England is still 

 1859) regulated was passed. Sir R. Peel, iu introducing the measure to 

 he House, explained the magnitude of the questions connected with 

 and the currency, in these terms : " There is no contract, 



niblic* or private; no engagement, national or individual, which is 

 inaffected by it The enterprises of commerce, the profits of trade, 

 the arrangements to be made in all the domestic affairs of society, the 

 wages of labour, the transactions of the highest amount and of the 

 owest; the payment of the national debt; the provisions of the 

 national exjienditure on the one hand, and the command which tin- 

 oin of the smallest denomination has over the necessaries of liiV ,.n 

 he other, are all affected by the decision to which we may come on 

 this great question." 



The Act 7 & 8 Viet, c. 32, is intituled " An Act to regulate the 

 ssue of Bank Notes, and for giving the Governor and Company of 

 he Bank of England certain privileges for a limited period ; " and 

 he most important enactments of it are those which provide for the 

 ssue of notes. This is to be carried on in a separate department from 

 the banking department ; and the issue department can only be carried 

 on according to a system of rules and regulations prescribed in the 

 Act. The issue department is constituted by transferring, appro- 

 mating, and setting apart to it, securities to the value of 14 millions, 

 of which the debt due by the public to the Bank is to be deemed part, 

 and also by transferring, appropriating, and setting apart to it, so much 

 of the gold and silver bullion then held by the Bank as was not 

 required by the banking department ; and this being done, there was 

 a be delivered out of the issue department such an amount of notes 

 as, with those then in circulation, should be equal to the aggregate of 

 ,he securities, coin, and bullion so transferred to the issue department 

 Then it was enacted, that " the whole amount of notes then iu cir- 

 culation, including those delivered to the banking department, should 

 X! deemed to be issued on the credit of the said securities, coin, and 

 Million." Also the Bank was prohibited from increasing the amount 

 of securities for the time being in the issue department, except as will 

 x mentioned presently ; but permission was given "to diminish the 

 amount of such securities, and again to increase them to any sum not 

 exceeding 1 4 millions, from time to time, as the Bank should see 

 occasion. After the constitution of the issue department, the Bank 

 was not to issue notes either into the banking department or to any 

 person or persons whatsoever, save in exchange for other Bank of 

 England notes or for gold coin, or for gold or silver bullion received or 

 purchased for the issue department under the Act, or in exchange for 

 securities acquired and taken in the issue department. 



Under the banking department it was permitted that the Bank 

 might issue all such notes as they should at any time receive from the 

 issue department or otherwise, in the same manner as ordinary banks 

 of issue. With regard to bullion they were limited to retain in the issue 

 department, at any one time, an amount of silver bullion not exceed- 

 ing one-fourth of the gold coin and bullion at that time held in the 

 issue department ; and all persons were to be entitled to demand from 

 the issue department notes in exchange for gold bullion, at the rate of 

 3/. 17*. 9tl. per ounce of gold of standard fineness, the gold to be melted 

 and assayed, if necessary, at the expense of the party tendering it. 



An increase of the security in the issue department was permit t<><! 

 to be made, in case any banker, who on May 6, 1844, was issuing his 

 own notes, should cease to do so ; then, on the application of the Bank, 

 an <>n lor in council might authorise an increase of the securities beyond 

 the 1 4 millions, and an issue of notes thereon to the extent of one- 

 third of the private bank notes withdrawn from the circulation. 

 Finally an account was to be published weekly, in a prescribed form, 

 of the amount of notes issued by the issue department, and of the gold 

 coin, and of gold and silver bullion respectively, and of securities in 

 the issue department. Also an account of the capital stock, and tli.> 

 deposits, and of the money and securities belonging to the Bank in thu 

 banking department 



By these arrangements, the functions of the Bank with regard to the 

 circulation were very materially remodelled ; and under the oj 

 of the Act it became, properly speaking, no longer a bank of iasuc, 

 but in its issue department was made merely the agent to can \ 

 effect the rules imposed by Parliament, without possessing any dis- 

 cretion or power of action of its own in the matter. An average 

 amount of about 20 millions' worth of Bank of England notes appears 

 at present to be permanently with the public for the purpcwies of 

 circulation, and over this quantity of notes the Bank has no power, 

 either to increase or diminish it ; for if the Bank sells securities in 

 order to draw in a portion of the notes out with the public. 

 securities would either bo paid for by the withdrawal of deposit 

 the Bank, or by cheques, in which case no notes would pans at all 

 if the Bank tried by any means to increase the number of notes in 

 circulation, the surplus would immediately be returned in deposits : so, 

 in either cose, the total with the public remains unaltered, 



The great object of these regulations was to place the convertibility 

 of the Bank of England note into gold at all times on a secure basis, 

 to cause the note circulation to fluctuate precisely in the manner i li.it 

 a purely metallic circulation would have fluctuated, and give the power 

 to the Bank of England of acting U]M.II the foreign exchanges when 



