TRANSACTIONS OF SECTION F. 595 



ing time to acceptors who were unable, for varioTis reasons, to take up tlieir 

 maturing acceptances, and consequently prevented a long chain of bankruptcies. 

 The next steps taken were designed to restore confidence among the banks, 

 who have always on deposit with them large sums of credit withdrawable at 

 call or short notice. The Government protected them by three important 

 measuies, which were very effectual in giving new confidence to the banks and 

 the public : 



(A) The General Moratorium proclaimed on August 6, and subsequently 

 extended, gave the banks and other debtors (with certain exceptions) power to 

 suspend payment for one month of debts payable before the date of the pro- 

 clamation. But Bank Notes and Treasury Notes were convertible into gold 

 during the Moratorium, being specially excluded. 



(B) The Currency and Bank Notes Act of August 6, 1914, authorised the 

 Treasury to suspend the Bank Act if necessary. An unlimited amount of Bank 

 Notes would then have been available if required. The power to suspend the 

 Bank Act was not used. 



(C) The same Act also empowered the Treasury to issue one-pound and ten- 

 shilldng currency notes, which were to be legal tender in the United Kingdom, 

 In a memorandum issued by the Treasuiy it was announced that currency 

 notes would be issued through the Bank of England to bankers as and when 

 required tip to a maximum limit not exceeding, in the case of any bank, 20 per 

 cent, of its liabilities on deposit and current accounts, in the form of an advance 

 by the Treasury, the security being a floating charge on the bank's assets in 

 priority to all other charges, bearing interest from day to day at the current 

 Bank Rate. By this measure the banks were placed in the position of being 

 able to obtain, if required, an advance of 225 millions of legal tender currency. 

 In the initial stages of the crisis the banks took nearly 13 millions. The 

 advances outstanding on June 9, 1915, only amounted to 139,000/. To give 

 time for the Treasury Notes to be printed, August Bank Holiday was extended 

 for the four days, Monday, August 3, to Thursday, August 6, inclusive. 



With the object of placing the bill market again in a position to entertain 

 new business, and thus provide international currency, the Government on 

 August 12, 1914, announced that the Bank of England, under Government 

 guarantee against loss, would discount at Bank Rate, without recourse to the 

 holders, all approved bills accepted before August 4. It was also announced that 

 the acceptors of such bills discounted at the Bank of England might postpone 

 payment at maturity by paying interest at 2 per cent, above Bank Rate varying. 

 The effect of this measure did much to restore British credit abroad. The 

 banks immediately sent large parcels of bills for discount to the Bank of 

 England. New bills accepted after the JMoratorium, however, came forward 

 slowly. Acceptors were not very willing to be drawn on except when the bills 

 were drawn against goods consigned to England, because, so long as the exchanges 

 were not working freely, there was still the danger of non-receipt of foreio-n 

 remittance at date of maturity. The banks also showed disinclination to buy 

 new bills from the brokers. 



The Chancellor of the Exchequer, in his speech on November 27, stated that 

 the total amount of bills discounted on the Government guarantee had been 

 120,000,000?. (This proved that of the 350,000,000?. to 500,000,000/. amount of 

 bills which were outstanding at the outbreak of war most had been disposed of 

 in the ordinary course.) 



On September 5, 1914, the Government announced that the following im- 

 portant arrangements had been made with the Bank of England : 



(A) The Bank of England will provide (where required) acceptors with the 

 funds necessary to pay all approved pre-:Moratorium bills at maturity. This 

 course will release the drawers and endorsers of such bills from their liabilities 

 as parties to these bills, but their liability under any agreement with the acceptors 

 for payment or cover will be retained. 



(B) The acceptors will be under obligation to collect from their clients all 

 the funds due to them as soon as possible, and to apply those funds to repayment 

 of the advances -made by the Bank of England. Interest will be charo-ed upon 

 these advances at 2 per cent, above the ruling Bank Rate. " 



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