Oct. 1906.] 327 Miscellaneous. 



most cases these debentures, though issued for sums from twenty pounds and up- 

 wards, are subdivided into detachable coupure (or slips) of £i or £5, so that>ven poor 

 persons may invest their savings in them. 



All debentures are repayable as the mortgages are redeemed. The capital 

 repaid by borrowers is followed by a redemption of the debentures of that series. 

 These are not repaid according to their consecutive numbers, but the numbers to be 

 paid off are determined by lot. By this means bonds are kept up to their par value, 

 and each bond is payable at par. Thus, if a three per cent is issued at £85, its market 

 value immediately rises, for there is a chance of its being drawn at once and the 

 holder will get repayment at par, that is, he will receive £100 for the £85 that he 

 paid. There is the further advantage that a certain number of these bonds get large 

 lottery prizes at the periodic drawings. Thus in the loan of £30,000,000 raised by the 

 Credit Foncier in 1879, the 1,800,000 bonds which were issued were repayable within 

 60 years by six annual drawings. On an average therefore thirty thousand bonds 

 worth £600,000 are repaid every year at par, and of these 600 bonds get prizes woith 

 £86,000, every year. 



The debenture-holders cannot demand payment until their bonds are drawn, 

 but they may sell them in the market at the current price. The bank pays its 

 debts by these ordinary drawings, and sometimes when mortgages are paid in 

 advance by special drawings. The rule which is strictly observed in regard to 

 all debentures is that there must be an equilibrium between the debentures and the 

 mortgage-securities. The reason is that if the debentures are not paid off, as 

 the mortgages are redeemed, then some of the bonds would not be covered by 

 mortgage securities, and therefore there would not be that double guarantee of the 

 mortgages and of the shareholders which makes the position of these banks so 

 exceptionally strong. Certain legal privileges are attached to these debenture 

 bonds. In France holders in due course are entitled to payment of their value 

 or interest as the case may be, and no court can attach those sums. They are also 

 authorised to be admitted as securities in which trust moneys may be invested. 

 They have also certain fiscal privileges in regard to stamps, registration and 

 transfer duties. The debentures it will be seen are an invention which is at once 

 most ingenious and fruitful in results, and it is pregnant with vast possibilities for 

 our country. The system of issuing debentures makes it possible even for a poor 

 country like Ceylon to find within its own limits all the capital necessary for its 

 development. A land bank in Ceylon founded under the most favourable con- 

 ditions, that is to say under the auspices of the Agricultural Society with 

 the guarantee and supervision of Government, will at once raise the confidence of 

 the public, and its debenture-bonds will draw all the petty hoards from every part 

 of the country into the coffers of the land bank. They will afford the best 

 and safest investments for savings, and by the adoption of the Fi ench method of 

 sub-dividing the bonds into coupures, they may be brought within the reach of 

 all who have any savings large or small to invest. They will add to the currency 

 of the country, for these bonds will pass by delivery or endorsement. There will 

 be neither legal nor fiscal expenses in the transfers. Money is placed with the 

 bank which gives in return an interest- bearing receipt. The holder of the receipt 

 gets the interest periodically, and his capital at the time when the bond may 

 fall due or at the periodic drawings. But it is easily convertible into ready 

 money by delivery or endorsement, For borrowers these debentures offer- 

 advantages which no other system can do. As the debentures are issued at the 

 same time as the loans are contracted, the loans may be granted for as long a 

 time as is necessary for the borrower without fear of unduly locking up capital. 

 By the method of a sinking fund, it affords an easy method of paying off almost 

 imperceptibly the capital debt. The sinking fund consists of small annual pay- 

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