644- TRANSACTIONS Ol^ SECTION ¥. 



Bank of Eisgiaiid, bal need not necessarily be included in tbe weekly puWislied 

 Btateiueut of accounts. 



3. For each bank to increase tbe stock of specie which it holds in reserve. 

 Such a course, which has sometimes been suggested, might be useful; but the 

 carrying it out would not have the effect of strengthening the central reserve, 

 which should be visible to all the world. 



With respect to the first proposal — Should the existing bankers' balances be 

 increased .'' — this merely means increasing the amount which tlie Bank can lend out 

 in competition with the other banks. The second proposal appears more closely 

 to meet what is wanted. 



Meanwhile, the reserve of the Bank itself, which is also the ultimate reserve 

 of every bank in the United Kingdom, has gone through a considerable change in 

 its composition since the year 1844, when the present Bank Act came into force. 

 Those of the notes entered in the weekly account as ' issued,' which are not in the 

 hands of the public, remain in the banking department, and form the reserve. 

 Against part of the notes issued by the Bank, securities are held, and specie is held 

 against the remainder. The amount of the issue against securities was originally 

 14,000,000^., it being assumed that the business of the country would always 

 require that amount to be in circulation. The Bank Act of 1844, by which this 

 arrangement was settled, also empowered the Bank to issue further amounts 

 against securities to the extent of two-thirds of the country note circulation of 

 England and Wales which might be withdrawn. Under this provision 4,450,000/. 

 has been added to the amount issued against securities, the total of which is now 

 18,450,000/. 



This brief statement shows the position of the banking reserve of the country 

 at the present time. The Bank of England, by raising or lowering its rate, 

 influences the amount of the reserve. This in a general way meets the difficulty, 

 but it sometimes happens that an import of specie has to be made to meet a special 

 requirement at an extra charge higher than the Market Rate, but we must 

 remember that every rise in the rate of discount above that of the countries 

 which surround us has an influence on the activity of our business, to which cheap 

 capital is as essential as the cheapness of other elements of production. 



In this country we have not followed the policy of other countries, which have 

 of recent years made great efforts to increase their reserves. 



The following figures will show what some of the leading banks of the world 

 have done during tbe last few years. 



The specie at the Bank of France was in 1877 81,088,000/, being, gold, 

 46,544,000/., and silver, 34,544,000/. ; in 1905 it was 157,420,000/. : gold, 

 114,572,000/., silver, 42,848,000/. 



The specie of the Bank of Germany was in 1877 25,030,000/., and in 1905 

 40,179,000/., being, gold, 29,819,000/., and silver, 10,360,000/. 



The National Banks of New York held : In 1876, specie, 3,600,000/. ; legal 

 tenders, 8,500,000/.— 12,100,000/. in all. In 1905, specie, 36,000,000/., legal 

 tenders, 15,000,000/.— 51,000,000/. in all. 



The average reserve of the Bank of England was : In 1870, 15,902,000/. ; and 

 in 1905, 25,307,000/. 



The figures of the London Bankers' Clearing House were : In 1868, 

 3,425,185,000/. ; and in 1904, 10,564,197,000/. These figures are only quoted as 

 indications of a greater activity in business. 



Meanwhile the balances to the credit of the banks of the United Kingdom, not 

 including the Bank of England, were : In 1894, in round figures, 625,000,000/.; 

 and in 1905, 800,000,000/.' 



A general levy of 1 per cent, on the deposits of the banks of the United King- 

 dom would, in round figures, amount to 8,000,000/. Supposing this suggestion 

 to be accepted, much more would have to be done before such an arrangement 

 could be brought into working order. A committee of representative men would 

 Lave to be formed, and arrangements made with the Bank of England as to the 

 custody of the specie and as to the course to be followed by them in any time of 

 ^pressure. 



