I1ASK: BANKKH: HANK 



u; BAXKEIl; BANK 



the privilege of issuing on certain terns of compensation, 

 which it Is not material to date at length. On the other hand, it was 

 permitted to any society, or company, or partnership, though exceeding 

 ix iu number, carrying on the business of banking in l.ond..n. .-. 

 \. 11 Inn .'. wiles, to draw, accept, or endorse bills of exchange not being 

 payable to bearer on demand, repealing all former Acts to the 

 contrary. 



A moderate rate of Interest is allowed by some country bankers upon 

 deposits which remain with them for any period beyond six month* ; 

 mow ma.lt t this allowance for shorter periods. Where a depositor has 

 also a drawing account, the balance is struck every six months, and 

 UM Interact due upon the average is placed to his credit Upon drawing 

 amounts, a commission, usually of a quarter per cant., U charged on all 

 payments. The country banker, on his part, pays his London agent 

 for the tn.ul.1.- which he occasions, either by keeping a certain sum of 

 money in his hands without interest, or by allowing a commission on 

 the payments made for his account, or by a fixed annual payment in 

 lieu of the mme. 



The portion of funds in their hands arising from deposits and issues 

 which is not required for discounting hills and making advances in the 

 country, is invested in government or mercantile securities in London. 

 which,' in the event of a contraction of deposits, or demands by the 

 note-holders for gold, can be made immediately available. 



The establishment of banks throughout the kingdom has contributed 

 materially to the growth of trade. With.. nt the in it would hardly be 

 possible fora manufacturer employing any great numU-r of lianas to 

 collect the money required to pay the weekly wages of his people. It 

 is not a valid argument against their utility'that occasionally, by the 

 facilities they have afforded, the tendency to overtrading has been 

 encouraged ; but it is to be hoped that the light which has of late been 

 thrown upon the nature of this branch of 1 nisiness will be the means of 

 checking the evils, without much diminishing the good, which it is 

 calculated to effect. 



The framers of the act of 1844 undoubtedly contemplated a period 

 when the- only source of the ]>aper circulating medium should be the 

 Bank of England ; and the Bank seems accordingly to act towards the 

 provincial banks of issue as though they were intruders upon its 

 special province, and does not think fit in general to afford bankers of 

 that class the accommodation in some respects which it extends to 

 others. " It is very well known that the Bank of England will never 

 discount a bill of any quality whatever for a note-issuing banker." 

 (Evidence before Committee on Bonks, &c., 1858, Q. 2785.) The Bank, 

 it seems, has hud down rules which preclude it from discounting even 

 Rothschild's acceptance brought for discount by a banker of this class. 

 In .nuequenoe of this, these bankers are compelled to hold in their 

 tills, in seasons of pressure, a much larger amount of bank notes than 

 they would otherwise be under the necessity of keeping, if they had 

 the usual facilities of discounting with the Bank of England. The 

 disastrous condition in which a country banker issuing his own notes 

 might have been placed by this regulation during the panic of 1857, 

 will be seen at once when we remember that, according to the state- 

 ment of the authorities of the Bank, all discounts ceased for three days 

 in London, except at the Bank. The country banks of issue are there- 

 fore obliged to rely on their own resources; and when the aspect of 

 the foreign exchanges, and the state of the unemployed notes in the 

 hands of the Bank of England give warning that a season of peril may 

 be expected, they commence realising, collecting their debts, and 

 hoarding the Bank of England notes and coin, which by these 

 means they have accumulated. The reason why bankers ought to 

 look to the state of the foreign exchanges is the same reason as 

 that on which a merchant watches the state of imports and exports 

 as affecting the commodity in which he deals ; and the banker 

 ought to scrutinise the one as carefully and as closely as the 

 merchant watches the other; for the foreign exchanges indicate the 

 increasing plentifulnees or scarcity of the article money in which 

 the banker deals. 



The theory of the Act of 1844 was, that as the exchanges fall you 

 ought to contract the circulation in order that prices may fall, and so 

 exportation of commodities take place, and thereby a rectification of 

 the exchanges oome about But und. r the actual operation of that 

 measure, the Bank's course is perhaps not quite so accurate a guide at 

 all times for the country bank of issue to look to as it was certainly in- 

 tended to become ; because, although the foreign exchange* be i . 

 of this country the Bank is compelled by the Act, if there is a domestic 

 drain, from political or whatever other causes, to restrict its issues just 

 as severely as under an equivalent drain when it is the result of an 

 advene foreign exchange. The Act prescribes no different ml. 

 Bank to follow when there is an abstraction of bullion from its coffer* 

 because at that time it is profitable to send gold abroad, and when 

 there is an abstraction of bullion during period* when it does 

 to send gold abroad, the cause being different in the two cases though 

 the result is the same. The Act of 1844 is said to have pi 

 substantial benefits in causing much greater caution in K-mkers gene- 

 rally in the management of their business. The limitation of the 

 issues i* also stated to be a valuable result of the Act ; but the last 

 MOW to be of the lorn importance if it be conceded to the present 

 opinion of all the bent MthoriUa*, both in and out of parliament, that 

 to is quite impossible for a bunker to increase permanently his issue, 



that U, to keep out in the hands of the ponjile of the district over 

 which his notes circulate and pass as money, larger quantity than 

 the habits and wants of the district require for their daily transactions. 

 experience teaches a note-issuing banker this lesson the moment 

 he attempts to increase his issue : for l n* t i~ l . if he makes an advance 

 or loan of lOOOt upon security, by handing out one of hi* lOOOi. notes, 

 in the expectation that he shall enjoy the interest upon that note for a 

 lengthened period, U that amount of money is in excess of the wants 

 of the district, the affix* is that, very shortly, that note or notes in the 

 aggregate of the same amount, are brought in for payment in gold, and 

 he finds that where ha meant only to make a profit upon his credit, ho 

 is obliged to part with his capital, and the transaction turns out not to 

 be of a character to induce a repetition of it. Usually, however, the 

 issuing bodies throughout the country have afforded to them, l.y the 

 operation of the Act of 1844, and in the weekly returns of the Bank of 

 England published in the ' London Oaiette,' some index of the probable 

 state of the money market : they are in the habit of regarding the 

 reserve of unemployed notes in the Bank of England, as shown in 

 those returns, to indicate the power of the Bank to afford accommoda- 



tion by discount or loan on securities ; and so to infer whether it is 

 safe or not for themselves to give much or little acoommodat 

 their own customers : and this before 1844 there was no equal means 

 of ascertaining. 



As regards the limitation of issues the practical operation of the 

 statute is, to keep the amount really issued considerably below the 

 maximum permitted. At the times of fairs, and the peno i.- when 

 fanners' rents are usually paid, and other special seasons, tl 

 always a greater demand for the notes current in the district than U 

 usual ; now it is not always easy for a banker at these times to keep 

 the amount of notes, that are sent into circulation, within the 

 specific limit of the Act, and the oonseqiui is that the 



fear of incurring the penalty above mentioned, which attaches for 

 exceeding his legal issue, causes the banker, in the last week of the 

 four, to pay as much as possible in Bank of England notes, or in 

 gold, in order to keep within his maximum. This fear, therefore, 

 also causes him to keep by him a greater quantity of gold and Bank 

 of England notes, than otherwise probably ha would feel to be 

 necessary. 



In op|>oaition to the plan of a single central bank of issue for the 

 whole kingdom, it in alleged that the public would suffer, inasmuch as 

 the alteration would subtract from the private banker's means of 

 affording accommodation to those who were in the habit of regardiiig 

 his notes aa money, and finding they could use them as money. This 

 further inconvenience would occur, it is said, to retail dealers and 

 others, in case the circulation were exclusively composed of copper and 

 silver, and, as to the larger gums, of gold and Bank of England notes ; 

 there would be no obligation on a banker or any one to give gold i r 

 notes ; the consequence of that would be that a banker (and this is the 

 case it is stated at present in some districts so circumstanced) will not 

 give sovereigns in exchange for a Bank of England note without the 

 charge of sixpence or more. (' Evidence before Committee on Banks,' Ac., 

 1858, Q. 1828.) There appears to be enough of hardship in this state 

 of things, to moke it deserving of consideration with a view to 

 remedy. 



A desire has been frequently expressed by English writers on poli- 

 tical economy, that Parliament should make it obligatory on banks of 

 issue to lodge with the government, securities to the amount '. 

 issue of notes, as we have described la done in the United States ; and 

 the ground on which thin requirement is principally rested, 

 hardship on the traders and others in the districts in which any 

 particular banker's notes are in circulation, of Ix'ing practically ol 

 to receive those notes from their debtors, whilst they have no guarantee 

 whatever that they may not turn out to be worthless. They are, 

 therefore, it is argued, entitled to have the assurance of that which is 

 put ii|xin them for money being really what it assumes to be, so that in 

 case the bank fails, they should be secured from loss, and their case is 

 distinguished from that of the depositor in the bank, and they are 

 said to be justly entitled to a priority over him. and to ha . 

 claim* paid in full, whatever nmy be his fate, because he i> a voh 

 in coming forward to plnoc his money in the banker's bands he acts 

 quite spontaneously, and without coercion or obligation of any kind. 

 Th iintry Linker.-, however, are understood to consider that it 



would ! utter tor tin-in to aiuiiulon k*uiog altogether, ii 



issuing, subject to the deposit of the Mine amount of .-cciniu with 



the government. At present, they look ujxni their capital a. under 



M control; generally, it is true, invested in government 

 ties, but always saleable at the price they choose, and to be dealt with 

 r own will ; but if they impounded this capital with the j 

 i' would \HS beyond their control, and they w<>t 

 secure of getting it out again when it was wanted. I' 

 would amount to paying the notes in advance, by the ueem it y given, 

 whilst at the same linn-, there must be an amount of cosh L 

 reserve to pay them c.ver the counter when presented at the bank, 

 besides making provision for paying them in London. I'l;. . w oiild, in 

 fact, lie tin. MI to be made for the payment of the 



instead of two, as at present is the practice. 



As regards parsons who commence tanking now, in n neighUmrhood 

 where there is a bank of issue already established, it is manifest th.-y 



