853 



BANK; BANKER; BANKING. 



BANK; BANKER; BANKING. 



851 



start under great disadvantages ; for the bank of issue has the means of 

 giving accommodation to its customers which are afforded by its 

 deposits, plus its circulation; but the others hare only the means 

 which their deposits afford, supposing each bank to follow the rule 

 already stated, of investing the capital of the concern in government 

 securities. In order to obviate the injustice which it is said arises in 

 this way from the operation of the existing law the theory of free trade 

 in hanking has been started : the right of issuing bank notes or 

 promises to pay, it is urged, ought to be left entirely unfettered ; for 

 country Bank notes are on the same footing in principle as cheques and 

 bills of exchange, and the power of issuing them, consistency requires 

 should be as free as that of issuing cheques or bills of exchange. Now, 

 when the Bank of England begins to restrict its advances, in order to 

 avoid the issue of more notes, as far as possible the country bankers, 

 even the most powerful houses will begin to hoard Bank of England 

 notes, in order to be prepared for any pressure which may come upon 

 them ; the consequence is immediately observed to be a large increase 

 in the amount of the bills of exchange, which are always in circulation, 

 and this increase is made in order to supply the void in the currency, 

 which is occasioned by the Bank of England diminishing the frequency 

 of its discounts and loans, and so withholding its usual supplies of 

 notes to the mercantile world. It would seem, therefore, that such 

 cases present quite clearly the fact, that bills of exchange form a part 

 of the currency, and in truth, the experience of large traders and 

 bankers is, that in ordinary times when confidence exists, the vast 

 majority of the commercial payments are made by means of cheques 

 and bills of exchange. These instruments, therefore, form part of the 

 currency : for if they were put down, the value they represent must 

 necessarily be represented by coin or Bank of England notes. What 

 then, it is asked, can be the justice of limiting and fettering one portion 

 of the paper currency when you leave wholly free two other parts of it, 

 in the whole representing immense amounts of money ; and why does 

 not the reason assigned for limiting the issue of banker's notes, 

 namely, that when unlimited, the issue of them operates unfavour- 

 ably on the currency and in trade, equally apply to the other two 

 cages? But this question must be left to the reader's investiga- 

 tion, with the remark that the operation of bills of exchange and 

 cheques on the currency, certainly has not as yet received the notice, 

 which, in the opinion of competent authorities on these matters, it 

 deserves. 



It does not seem possible to lay down a rule in regard to the amount 

 of reserve which a banker issuing notes ought to keep by him in order 

 to be safe, both as regards the claims of the note-holders and the 

 depositors : the state of the money market at the time, and the 

 nature of the business or occupation in which the population of 

 the district in which the Bank is, is engaged, are matters which 

 enter largely into the question. In times of complete quiet and con- 

 fidence, it may be possible to go on, for a period, almost without any 

 reserve at all ; especiaHy, for a house of large connections and numerous 

 customers ; because in such cases, it is found that the payments in and 

 the payments out nearly balance each other every day. Again, a banker, 

 carrying on business in a great centre of industry, whose customers are 

 manufacturers, merchant*, and tradesmen, and where there are not 

 unlikely to be sudden demands to considerable extents made upon 

 him, is bound to keep much more cash or Bank notes in hand than 

 would be necessary in general, if he were banking in an agricultural 

 district. 



With respect to the payment of interest upon deposits, this is very 

 seldom done by private bankers in London and the neighbourhood ; 

 the system is quite exceptional as regards private bankers in tlial 

 locality : in the country, especially in the North of England, it is not 

 so unusual. 



Banking Copartnffthips. This description of banks, which is fre- 

 quently but improperly confounded with joint-stock banking com- 

 panies bodies with very different attributes, characteristics, and 

 powers arose out of a statutory enactment, 7 Geo. IV. c. 46. A 

 banking copartnership is also perfectly distinguishable from an ordi- 

 nary banking partnership. By the combined operation of that statute 

 and the statute 20 & 21 Viet. c. 49, s. 12, these banking copartner- 

 ships may now be erected, consisting of ten or fewer partners. Every 

 member is liable for all the debts of the copartnership, whether he be 

 a member when the debt was incurred, or whether he only became so 

 after it was incurred, but before it is satisfied. In words, therefore, 

 the Act considerably enlarges the responsibility of a member of one of 

 these copartnerships, beyond what he would have lain under as a 

 member of an ordinary partnership; but, in practice, the difficulty, 

 expense, and delay of realising the intended boon to the creditor is 

 found to make it of little avail. These copartnerships are empowered 

 and must sue and be sued in the name of a person whom each of them 

 i bound to appoint, and who is called the public officer of the copart- 

 nership : and the creditor, having brought his action against such public 

 offiter and obtained judgment, sues out execution against any existing 

 member or members : if these executions are ineffectual, he may issue 

 execution against any persons who were members at the time the 

 contract was entered fnto ; secondly, against any persons who were 

 members at any time before such contract was executed; thirdly, 

 against any persons who were members at the time the judgment 

 was obtained : provided only, that execution cannot issue against any 



of the persons designated in these three classes, if three years have 

 elapsed. Such of these bodies as were issuing their own notes on 6th 

 May, 1844, may make their notes or bills of exchange payable in 

 London by their agent, or may draw any bill of exchange or note 

 payable on demand or otherwise in London, for any less amount than 

 50?. (3 & 4 Will. IV. c. 83, s. 2). These bodies are also allowed to carry 

 on the business of banking in London or within sixty-five miles, pro- 

 vided they do not borrow, owe, or take up in England any sum on 

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

 months from the borrowing, during the continuance of the privileges 

 of the Bank of England (3 & i Will. IV. c. 98, s. 3) ; and the acceptance 

 of a customer's bill at less than six months' date, on account of a 

 balance in favour of the customer, is a borrowing in point of law 

 forbidden by the statute. The average date of bills drawn in this 

 country by traders or by bankers in this country is within three 

 months, except the bills of the manufacturing districts : this enact- 

 ment therefore has an extensive operation. These bodies are obliged 

 to make an annual return of the names, &c., of all their members, 

 verified on oath; also returns of persons newly becoming members, 

 persons ceasing to be members, &c.; and it is most important for 

 every member to see that these returns are properly made, because 

 upon their accuracy may often turn the question of the liability or 

 non-liability of a shareholder, when a judgment has been obtained 

 against the company. The internal concerns of these bodies are com- 

 monly regulated by what is called a deed of settlement, to which all 

 the partners are parties ; their affairs are superintended by directors, 

 but the real effective officer, in truth the banker, is usually called the 

 manager. The capital is usually divided into shares, which are trans- 

 ferable commonly, under the restriction that the consent of the direc- 

 tors shall be a requisite to the transfer. Hence the purchase-money of 

 a share can only be safely paid over to the vendor of the share, after 

 the transfer has been fully completed. 



It is extremely important for directors to be at all times aware of 

 the transactions of the copartnership : it has been found to be far too 

 much the practice to leave everything to the manager, who, in that 

 state of things, by want of skill or knowledge or foresight, may involve 

 the concern to ruinous extents. On the other hand, directors may 

 incur heavy responsibilities by travelling out of the strict line of 

 their duty as bankers : thus, where some of the directors of one of 

 these bodies, by reason of unauthorised speculations in shipping, &c., 

 and of a fraudulent transaction by deed of arrangement with a debtor 

 of the copartnership, had involved it in losses, so that the copartnership 

 was insolvent and ceased to carry on business, it was considered that 

 the public officer might, notwithstanding that the body was in a state 

 of suspended vitality, recover from these directors the amounts of the 

 losses incurred through their misconduct ; the sums recovered to be 

 applied for the liquidation of the claims upon the copartnership. 

 Directors cannot bind the shareholders severally by any instrument or 

 writing which they may utter : thus, " We for ourselves and the other 

 shareholders of the company jointly and severally promise to pay," 

 signed by directors, is a document of no validity to bind the share- 

 holders individually ; though such a document appearing on the face 

 of it to be intended to bind the copartnership, would have that effect, 

 provided the directors signing it were authorised to sign promissory 

 notes. 



We have mentioned instances in illustration of the strictness with 

 which the law enforces, against private bankers, the rules it lays down : 

 these bodies are not less strictly dealt with : If a manager of a branch, 

 wholly without the knowledge of the directors or any member of the 

 copartnership, by fraud or circumvention of any kind, deceives a 

 customer of the bank who acts in reliance on his position as manager 

 of the bank, and loss ensues to the customer, the copartnership must 

 make it good. If a body of this class, in acknowledgment of money 

 deposited with them by a customer, gives an accountable receipt 

 signed by a clerk, the course of dealing being that the parties to whom 

 such receipts were given returned them to the Bank once a year to be 

 cancelled, when they were paid off, or allowed the interest for the past 

 year,and took fresh receipts in the room of those delivered up ; and after 

 the death of a customer, and pending a contest for the administration 

 of his estate, the receipt conies into the hands of a stranger, who 

 fraudulently obtains payment for it at the Bank, when the receipt was 

 given up and cancelled by tearing off the signature, still the courts of 

 equity hold that the company must pay over again to the real owner 

 of the receipt. 



These bodies, as we have observed, must not be confounded with 

 ordinary partnerships. The essential distinction between a banking 

 cojKirtnership, on a large scale, and an ordinary common law trading 

 partnership, consists in the power and privilege which, by the pro- 

 visions of the deed of settlement of the former, are given to a pro- 

 prietor to retire and withdraw his capital from the concern, without a 

 dissolution of the partnership, by transferring Ms shares. This power 

 and privilege constitute very main inducements to the investment of 

 capital in such concerns, and thereby enable the society, or partnership, 

 to raise a capital and carry on transactions, which it would be im- 

 practicable to raise or carry on upon the basis of an ordinary mercantile 

 partnership. The consequences which, as between a shareholder and 

 the company, arise, by operation of law alone, upon a transfer of 

 shares, cannot, therefore, be inferred from those which attach 



