L ^ ,A } \ \ ^ ? the fifth edition of a book so well known In the commercial world as ' Gilbart's Treatise on Banking,' we need My little beyond announcing its appcarniu <. It has the advantage of a doaen additional yean of experience on the part of the author In banking and monetary matter*, and, M a consequence, the bulk of the matter is increased. An elaborate Index alto materially improves the convenience of the book for purpose! of refereaea." This book is designed to be awful to the public at large, by circulating that kind of Information which, as it becomes more widely diffused, will tend to prevent a recurrence of, those evtla that have, in too many instances, resulted from the bad administration of > feme of oar banking institutions." London Morning CkronieU, Oct., 1850. "Mr. Gilbert 'i works on Banking hare attained a jnst celebrity. Plain and practical, they are suitable to the character and position of the writer, and to the wants and inclina- tions of the banking and mercantile community, for whom they are chiefly intended. They are not, however, without much interest for every inquiring mind, while for statesmen and political economists they are sources of much useful and even indispensable informa- tion. The present work treats of banking as an art. and its merits have already been recognised. The principal characteristic of Mr. Gilbert's book is, practical common sensu, a doe subordination of all the parts of the subject, so that none has an undue prom which, bciSK joined with a perspicuous style, accounts for the favor bis works have de ervedly met with." London Eeonomitt. "The work is divided into sections, which may be briefly described as o.n.p complete description of a sound system of Bank Book-keeping; an account of UK required from the offiqprt in a bank; general instruction* relating to (he administration of a bank, with reference to il ordinary business, during a time of pre*!ur< . the operation of the new banking laws introduced during the last few years." MHsWJfi PRACTICAL TREATISE * V ON ./ BANKING. 4 BT JAMES WILLIAM GILBART, F. R. S., GENERAL MANAGER OF THE LONDON AND WESTMINSTER BANK. " The best banking system may be defeated by imperfect management; and, on the other hand, the evils of an imperfect banking system may be greatly mitigated, if not overcome, by prudence, caution, and resolution." Report of the Committee of the Souse of Lords on the Causes of Commercial Distress, 1848. THIRD AMERICAN, FROM THE FIFTH LONDON EDITION. PHILADELPHIA: G. D. MILLER, PUBLISHER, NINTH STREET, FIRST DOOR ABOVE CHESTNUT. hifi Pnntad by T K. fc P. O CoUiM. TO THE RIGHT HON'OEABLE LORD MONTEAGLE, F. R S., COMPTROLLER GENERAL OF HER MAJESTY'S EXCHEQUER, ETC., ETC., ETC., WHO, AS A DIRECTOR OF THE PROVINCIAL BANK OF IRELAND, CHANCELLOR OF THE EXCHEQUER, AND AS FRAMER OF THE REPORT OF THE COMMITTEE OF THE HOUSE OF LORDS, APPOINTED TO INQUIRE INTO THE CAUSES OF THE COMMERCIAL DISTRESS OF 1847, DISPLAYED A PROFOUND KNOWLEDGE OF THE PRINCIPLES OP PRACTICAL BANKING, 3Tfus OTorit IS, WITH PERMISSION, RESPECIEULLY DEDICATED, BT THE AUTHOR. f fb * PREFACE BY THE AUTHOR " The best security against management of banking affairs must ever be found in the capacity and integrity of those who are intrusted with the administration of them, and in the caution and prudence of the public ; but no legislative regulation should be omitted which can increase and insure the sta- bility of establishments upon whiuh commercial credit so much depends." Speech from the Throne in 1837. IN the preface to flay " History and Principles of Banking," I made the follow- ing remarks : "Banking is both an art and a science. As an art, it is a branch of trade inti- mately connected with every man's business ; as a science, it forms an important portion of political economy. The knowledge of banking as an art, is acquired like that of other arts, by serving an apprenticeship, or engaging practically in its operations. The knowledge of banking as a science, may be acquired, like that of other sciences, by reading, observation, and reflection. These two branches of knowledge do not always accompany each other. Some, who are practically engaged in banking, do not study its principles; while those who have written upon its principles, have for the most part been political econo- mists and statesmen, who were unacquainted with its practical details. This publication will perhaps be thought worthy of some degree of attention upon the ground that it professes to be a scientific work, written by a practical man." The present work professes to treat of banking as an art. " Art is the appli- cation of knowledge to a practical end."* The practical end of banking, as of all other trades and professions, is to get money. This book treats of the means by which that tod is obtained, points out the rules to be followed, and the errors to be avoided, shows how these rules are applied by various banking institutions, and in different districts of the United Kingdom, exhibits the qualifications neoes- * Sir John HerscheL Viii nUFACK ary to the party by whom these rales are administered, and describes those moral virtues which are as indispensable as professional knowledge to the attainment of It may be supposed, that in discussing the " effects of the Act of 1844," and " the Laws of the Currency," I have wandered beyond the limits of practical banking. Bat these matter* are viewed only in their practical results. The prin- ciples of banking are deductions from facts. The science of banking is a collec- tion of these principles. It is of importance to have a correct notion of the nature of this science. In the physical sciences, as in chemistry and electricity, we often discover a principle, and then apply it to a practical end. But in banking, and in political economy, generally, we first collect our facts, and then ascend from facts to principles. Hence books, in which are described the practical operations of banking, and the actual results of legislative enactments, furnish the materials which enable us to arrive at sound principles. There are several classes of persons to whom I think this book may be more particularly useful. The first class includes those public men who have occasion to write or to speak upon our banking institutions. Statesmen, authors, and reviewers, however cor- rect may be their knowledge of banking as a science, often fall into mistakes when they attempt to describe its practical operations. Although it must be admitted that the principles of banking may be well understood without any acquaintance with details, yet it is equally true that if a public man have acquired a competent, degree of practical information, his opinions will carry greater weight, and he will be less liable to fall into erroneous conclusions. They, especially, who are desirous of altering the constitution of our banking establishments should be anxious not to weaken the force of their recommendations by making misstatements as to matters of fact . The public have a right to expect that they who attempt to improve a system should be well acquainted with the system they attempt to improve. The second class are those who are practically engaged in banking operations. Those directors of our joint-stock banks, who may have been appointed chiefly on account of their high character and local influence, may derive from this work some practical information, which will assist them in the discharge of their official duties. Young men, too, who occupy subordinate stations in our banking estab- lishments, may here acquire those enlarged views that will qualify them for higher appointments. One object of this work is, to aid the formation of good practical bankers. Even to experienced bankers, books on banking are useful, not only from the information they impart, but from the impressions they produce, and the recol- lections they awaken. In banking, as in morals, we often go astray, more from want of firmness than from want of knowledge. We have all need to be reminded f the importance of a steady adherence to sound principles. And the more BY J. W. GILBART. IX * ^ *T frequently the right path is pointed out to us, the less likely are we to wander into those which are forbidden. The shareholders in joint-stock banks are a class to whom the subject must be of the deepest interest. Upon the wise administration of their respective banks will depend the amount of their dividends and the safety of their capital. This . book professes to show in what way this wise administration may be secured. Shareholders may here learn how to judge of the conduct of their directors, and (what is of no less importance) how to regulate their own. To all persons who "keep bankers," it must be useful to know by what rules bankers manage their business. They will thus be able to conduct their account so as to give satisfaction to their banker. And they will be able to judge how far be may be disposed to grant them such assistance as they may occasionally require. A large number of persons, especially in London, have not yet discovered the ad- vantage of keeping a banker. They imagine that banks are merely places in which the opulent deposit their superfluous riches. The perusal of this work will be suffi- cient to show that the advantages of banking are not confined to the wealthy. I do not know that I can promise much amusement, except to those who find amusement in the pursuit of knowledge. Banking is considered a dry subject. So are all subjects until they are understood. I think I may say, that neither in the matter, nor in the style, will my readers find anything here which they cannot understand. They who wish only for such a general acquaintance with banking, as in the present day every man of education is expected to possess, may read the first hundred and thirty pages, omitting the third, fifth, twelfth, thirteenth, and fourteenth sections. They may then consult their own taste as to whether they will read any other portions of the work. Should they do no more than this, they will obtain as much knowledge of practical banking as they will probably require for the purposes of general society, even in the company of bankers. This book is designed to be useful to the public at large, by circulating that kind of information, which, as it becomes more widely diffused, will tend to prevent a recurrence of those evils that have in too many instances resulted from the bad administration of some of our banking institutions. To give useful information to the public has been the aim of this and of all my other works. When this book first appeared, there existed no other publication that described in detail the inte- rior operations of a bank. I am happy to say, that since that period several valua^ ble works of a similar kind have been published. And we are now presented monthly, in the "Bankers' Magazine," with excellent articles on practical banking, written chiefly by practical bankers. The first edition of this work was published in May, 1827 ; the second in January, 1828; the third in December, 1834; and the fourth in October, 1836. In the be- ginning of the year 1847, I determined to publish a new edition; but before I had x nutfACK BT J. w. prepared it for publication the pressure came, and Parliamentary Committees were appointed to inquire into the causes of the distress. My position required that I should make myself acquainted with the evidence given before those committees. I wrote out my reflections on tome portion! of this eridence, and have embodied them in the present work. Hence one cause of the increased size of the book, and f the delay which has attended its publication. This edition has the advantage of an elaborate Index, the uses of which are pointed out in the last section of the gaoont part. I have been so long known as a writer on banking, and my writings have met with so muck acceptance, that it is not necessary I should enumerate any claims I may be supposed to have on public attention. But there is one claim that gathers strength by time, that is, experience. And in publishing a new edition of a prac- tical work, it may not be inappropriate to state, that it is now upwards of thirty- six years since I first engaged in the business of banking, And I ha^ve been above twenty-two years a manager. I am thankful to acknowledge, that during those twenty-two years I have not had one unsuccessful year. J. W. G. lama, Suly ,UI'KS nrc sunie- times established in poor districts, with a view of obtaining a future profit from the prosperity which the bank uill introduce. (Evidence i the Select Committee of the House of Commons upon the Abolition of Sm.-i'.I Notes, p. -13.) 4. Another benefit derived from Iwmkers is, that they transmit money from one part of the country to another. is scarcely a person in business who has not occasion sometimes to send money to a distant town. But how is this to be done ? He can- not send a moose n^e.r with it on purpose; that would be too exp< : He cannot send it by jost ; that would be too hazardous. Besides, the sum may be some fraction of a pound, and then it cannot go By post. The post, too, takes a considerable time, as three letters at least must pass <>n the transaction. If he live in London he may obtain a hank post bill, but he cannot obtain that in the country ; and he may not be able to ob- tain it in London for the exact sum he wants. How, then, is the money to be sent ? Every country banker opens an account with a London banker. If, then, a person live at Penzance, and wants to send a sum of money to Aberdeen, he will pay the money into the Penzance bank, and his friend will receive it of the Aberdeen bank. The whole transaction is this. The Penzance bonk will direct their agent in London to pay the money to the London agent of the Aberdeen hank, who will be duly advised of the payment A small commission charged by the Penzance bank, and the postages, constitute all the expenses incurred, and there is not the least risk of loss. Commercial travellers, who are collecting money, derive great advan- tage from the banks. Instead of carrying with them, throughout the whole of their journey, all the money they have received, when perhaps it may be wanted at home, they pay it into a bank, by whom it is remit- ted with the greatest security and at little expense ; and they are thus de- livered from an encumbrance which would have occasioned great care and anxiety. 5. Wherever a bank is established, the public are able to obtain that denomination of currency which is best adapted for carrying on the com- mercial operations of the place. In a town which has no bank, a person may have occasion to use small notes, and have none but large ones ; and at other times he may have need of large notes, and not be able to obtain them. Burwhere a bank is established there can be no difficulty of this kind. The bank issues that description of notes which the receivers may require, and are always ready to exchange them for others of a different denomination. Banks, too, usually supply their customers and the neigh- bourhood with silver ; and if, on the other hand, silver should be too 4 The Utility of Banking. :i i abundant, the banks will receive it, either as a deposit or in exchange for their notes. Hence, where banks are established, it is easy to obtain change. This is very convenient to those who have to pay large sums in wages, or who purchase in small amounts the commodities in which they trade. 6. By means of banking there is a great saving of time in making mon- ey transactions. How much longer does it take to count out a sum of money in pounds, shillings, and pence, than it does to write a draft. And how much less trouble is it to receive a draft in payment of a debt, and then to pay it into the banker's, than it is to receive a sum of money in currency. What in- conveniences would arise from the necessity of weighing sovereigns. What a loss of time from disputes as to the goodness or badness of partic- ular pieces of money. Besides the loss of time that must necessarily occur on every transac- tion, we must also reckon the loss which every merchant or tradesman in an extensive line of business would certainly sustain in the course of a year, from receiving counterfeit or deficient coin, or forged notes. From all this risk he is exempt by keeping a banker. If he receive payment of a debt, it is in the form of a draft upon his customer's banker. He pays it into his own banker's, and no coin or bank notes pass through his hands. If he draw bills, those bills are presented by his banker ; and if his banker take bad money it is his own loss. 7. A merchant or tradesman who keeps a banker, saves the trouble and expense of presenting those bills or drafts which he may draw upon his customers, or which he may receive in exchange for his goods. He pays these into the hands of his banker, and has no further trouble. He has now no care about the custody of his bills ; no anxiety about their being stolen ; no danger of forgetting them until they are overdue, and thus ex- onerating the indorsers ; no trouble of sending to a distance in order to demand payment. He has nothing more to do than to see the amount entered to his credit in his banker's books. If a bill be not paid, it is brought back to him on the day after it falls due, properly noted. The banker's clerk and the notary's clerk are witnesses ready to come forward to prove that the bill has been duly presented, and the notary's ticket at- ' tached to the bill assigns the reason why it is not paid. But if any in- dorser of the bill has given a reference in case of need, that is, if any in- dorser has written on the back of the bill that some other party will pay it in case the accepter does not, then the notary takes the bill to the referee, and procures the money from him. This circumstance alone must cause an immense saving of expense to a mercantile house in the course of a year. Let us suppose that a mer- chant has only two bills due each day. These bills may be payable in distant parts of the town, so that it may take a clerk half a day to present them. And in large mercantile establishments it would take up the whole time of one or two clerks to present the due bills and the drafts. The salaries of these clerks are therefore saved by keeping an account at a banker's. Besides the saving of expense, it is also reasonable to suppose that losses upon bills would sometimes occur from mistakes or over- A* 5 A Treatut on Banking. sights, from miscalculation as to tho time n bill would become due, from ftfffon in marking it up, from forget fu I ness to present it, or from present- ing it at tho wrong house. In these cases, the indorse and the draw- ers, are exonerated ; and if the accepter do not pay the bill, the amount is lot. In a banking-house such mistakes are not so likely to occur, though they do occur sometimes ; but the loss falls upon the banker, and not upon his customer. 8. Another advantage from keeping a banker in London is, that by this means you have a continual referee as to your respectability. If a mercantile house in the country write to their agent, to ascertain the re- spectability of a firm in London, the first inquiry is, Who is their banker? And when this is ascertained, the banker is applied to through the proper channel, and he gives his testimony as to the respectability of his custom- er. When a trader gives his bill, it circulates through the hands of many individuals to whom lie is personally unknown ; but if the bill is made payable at a banking-house, it bears on its face a reference to a party to whom the accepter is known, and who must have some knowledge of his character as a tradesman. This may be an immense advantage to a man in business, as a means of increasing his credit ; and credit, Dr. Franklin says, is money. 9. The keeping an account at a banking-house, enables a trader not only to give a constant reference as to his own respectability, but it also enables him to ascertain the respectability of other persons who keep bankers. There are numerous cases in which a trader may wish to know this. A stranger may bring him a bill, and want goods in exchange ; or he may have drawn a bill upon a customer, and wishes to ascertain if this bill would be paid before he gave him any further credit If this bill is not made payable at a banking-house, he can obtain no information. But suppose the bill is made payable at a banking-house ; even then he can obtain no information, unless he himself has a banker. If he take the bill to the banker's, at whose house it is made payable, and say, " Gentlemen, I will thank you to inform me if the accepter of this bill be a respectable man. May I safely give goods or money in exchange for it?" They will reply, " Sir, we never answer such questions to strangers." But if 'the holder of this bill keep an account at a banker's, he has only to ask his banker to make the inquiry for him, and he will easily obtain the most ample information. Among nearly all the bankers in London, the prac- tice is established of giving information to each other as to the respecta- bility of their customers, tor as the bankers themselves are the greatest discounters of bills, it is their interest to follow this practice ; and indeed the interest of their customers also, of those at least who are respectable. 10. By means of banking, people are able to preserve an authentic rec- ord of their annual expenditure. If a person pays into his banker all the money he receives in the course of a year, and makes all his payments by checks, then by looking over his bank-book at the end of the year he will readily see the total amount of his receipts, and the various items of his expenditure. This is very useful to persons who have not habits of busi- ness, and who may therefore be in danger of living beyond their means. It M usclesi to advise such persons to keep an account of their expenses, 6 The Utility of Banking. they will do no such thing ; but when short of money at Christmas, to pay their tradesmen's bills, they may take the trouble of looking over their bank-book, and noticing how many checks were drawn for the purchase of unnecessary articles. A bank account is useful, also, in case of disput- ed payments. People do not always take receipts for money they pay to their tradesmen, and when they do, the receipts may become lost or mis- laid. In case of death, or of omission to enter the amount in the credit- or's books, the money may be demanded again. Should the payment have been made in bank notes or sovereigns, the payer can offer no legal proof of having settled the account ; but if the account was discharged by a check on a banker, the check can be produced, and the payment proved by the officers of the bank, who can be subpoenaed for that purpose. 11. Another advantage resulting from keeping a banker in London is, that the party has a secure place of deposit for any deeds, papers, or other property that may require peculiar care. Any customer who pleases may have a tin box, which he may leave with his banker in the evening, and call for it in the morning. In this box he might place his will, the lease of his house, policies of insurance, or any other documents he wished to preserve against fire. Stock-brokers and others, who have offices in the city and live out of town, have such boxes, which they leave over night with their banker, for the sake of security, in preference to leaving them in their own office. If a party were going to the country, he might send his plate or jewellery to his banker, who will lock it up in his strong room, and thus it will be preserved from fire and thieves until his return. So- licitors and others, who have deeds or other writings of importance left in their custody, can send them to the bank during the night, and thus avoid the danger of fire. 12. By keeping a banker, people have a ready channel of obtaining much information that will be useful to them in the way of their business. They will know the way in which bankers keep their accounts ; they will learn many of the laws and customs relating to bills of exchange. By asking the banker, or any of the clerks, they may know which is the readiest way of remitting any money they have to send to any part of the country or to the continent. If they have to buy or sell any stock in the public funds, the banker can give them the name of a respectable broker who can manage the business ; or should they be about to travel, and wish to know the best way of receiving money abroad, or be appoint- ed executors to a will, and have to settle some money matters, the banker will in these and many other cases be able to give them the necessary in- formation. 13. Banking also exercises a powerful influence upon the morals of so- ciety. It tends to produce honesty and punctuality in pecuniary engage- ments. Bankers, for their own interest, always have a regard to the moral character of the party with whom they deal ; they inquire whether he be honest or tricky, industrious or idle, prudent or speculative, thrifty or prodigal, and they will more readily make advances to a man of moder- ate property and good morals, than to a man of large property but of in- ferior reputation. Thus the establishment of a bank in any place imme- diately advances the pecuniary value of a good moral character. There 7 A Treatise on Banking. are numerous instances of persons having arisen from obscurity to wealth, only by means of their moral character, and tin- eonfidenee winch that character produced in the mind of their l;m!,< r. It is not merely by way of loan or discount that a banker serves such a } rson I well of him to those persons who may make inquiries respecting him ; and the banker's good opinion will In- the means of procuring him a hi^ln r degree of credit with the parties with whom he trades. These effects are easily perceivable in country towns ; and even in London, if a house be known to have engaged in gambling or smuggling transactions, or in any other way to have acted discreditably, their lulls will bo taken l>\ tin- bankers less readily than those of an honorable house of inferior property. , It is thus that bankers perform the functions of public conservators of the commercial virtues. From motives of private interest they encourage the industrious, the prudent, the punctual, and the honest, while they dis- countenance the spendthrift and the gambler, the liar and the knave. They hold out inducements to uprightness, which are not disregarded by even the most abandoned. There is many a man who would be deterred from dishonesty by the frown of a banker, though he might care but little for the admonitions of a bishop. SECTION III. BANKING TERMS. Query I. Is the word Bank a singular or a plural noun ? The word BANK, being a noun of multitude, may have verbs and pro- nouns agreeing with it in either the singular or the plural number, yet not without regard to the import of the term as conveying unity or plurality of idea. In the use of this term the following rules are usually ob- served : 1. When any operation or feeling of the mind is ascribed to a bank, the verbs and pronouns are placed in the plural ; as, " The bunk were anxious to meet the wishes of the public." " The bank have concurred in the measure proposed." " Are you one of the persons who tried the question with the Bank of Ireland, whether they conceited themselves bound to pay in gold at their branches ? " " The Bank of England pe- titioned against this bill, and were heard by their counsel ; but their rep- resentations produced no effect, and the bill having passed through both Houses, received the Royal assent." The following examples, wherein mental operations are ascribed to a neuter pronoun, arc violations of this rule : " The bank allows the party having the cash credit, to liquidate any portion of his debt to the bank at any time that may suit his cons- - nience, and reserves to itself the power of cancelling, whenever it shall think Jit, the credit granted." " It is usual for the bonk when it gives a cash credit to keep a watchful eye over the person having that cash credit* 1 2. When a reference is made to a bank merely as an institution, the term is considered to belong to the singular ; as, " The Bank of Scotland 8 Banking Terms. continued the only bank from the date of its establishment, in 1695, to the year 1727. In that year a charter of incorporation was granted to certain individuals named therein for carrying on the business of banking, under the name of the Royal Bank ; and subsequent charters were grant- ed to this establishment, enlarging its capital, which now amounts to one million and a half." " The National Bank of Scotland has 1,238 part- ners." " If this measure be carried into effect, the Provincial Bank must instantly be deprived of any sufficient means of reimbursing itself for the heavy expense to which it has been subject." " Has your bank an es- tablishment at Kirkcudbright ? " " The Bank of England has the control of its issues entirely within itself." , 3. When we notice the rules or habitual acts of a bank, the word be- longs to the singular ; as, " The Provincial Bank allows interest at the rate of two per cent." " The bank draws bills upon London at twenty- one days after date." " The bank discounts bills at the rate of four per cent." " The bank issues notes payable in gold at the place of issue." " The London and Westminster grants interest upon deposits ; it does not allow its officers to receive Christmas presents from its customers." In reference to cases that fall under this rule, there is, however, some contrariety of practice: "Do the Provincial Bank issue post bills? They do not." " Have the Bank of Ireland, at their branch in Cork, been In the habit of receiving gold to any amount in payments ? " " Have the Bank of Ireland any deposits at the Cork branch ? Do you know how their notes get into circulation ? Do they pay any interest on their deposits ? They have a great quantity of notes in circulation* * have they not ? " 4. When the word bank* is connected with a past participle by means of the neuter verb to be, it usually belongs to the singular ; as, " I am a director of the Bank of Scotland, which is established by act of Parlia- ment ; it does not hold a charter from the Crown, but, in common lan- guage, it is called a chartered bank." " Suppose a bank was enabled to take six per cent, on a cash credit, instead of four." " The Falkirk Union Banking Company has been returned to this house as sequestrated in the month of October, 1816." "A new bank was constituted as a fund upon which the sum of 2,564,000 should be raised, and it was called the Land Bank because established on land securities." 5. When the word bank is preceded by the indefinite article, a, an, by the demonstrative pronoun, this, that, or by the words each, any, every, one, it belongs to the singular ; as, " Do you not think that a bank that is possessed of a capital of one million may and will do more busi- ness than a bank that is only possessed of half a million ? " " In a mo- ment of pressure, an emergency like the present, that bank would get into great disrepute who called up any one of its cash credits." " What is the amount of the small note circulation in that bank as connected with its whole circulation ? " " Each bank has an interest to issue as much of the small note circulation as it can ? Certainly it has, provided the small notes can be kept out; but, as every bank makes an exchange at Glasgow twice every week, and the exchanges of each bank come back upon itself, and the balance is paid by a draft on Edinburgh at sight," 9 A Treatise on Banting. Ac. " I believe almost every bank in Scotland has an agent in Glasgow.* M Suppose one bank in Scotland made i/.t notes payable in Scotland, at the place where the notes were issued." u Is there any bunk in Cork now that issues notes ? ** When the word bank is introduced in either the singular or the plural number, the same number should be preserved throughout the sen- tence. Hence, the following sentence of Smollett's is inaccurate : "By the same acts the bank teas required to advance a sum n..t ,\, ,,,(. ing .2,500,000 towards discharging the national debt, if wanted, on con- dition that they should have 5 per cent for as much as they might ad- vance, redeemed by Parliament." 7. When the word bank is used in the singular number, it is consi*In a moment of pressure, an emergency like the present, that bank would get into great disrepute who called up any of its cash credits." I have not observed that any English writer, except Mr. McCulloch, tiered a bank to be a lady ; and this is only in the case of an Irish Kink. Under the article " Banking," in his Commercial Dictionary, IK; says, " The Bank of Ireland draws on London at twenty days' date. She neither grants cash credits nor allows any interest on deposits ; she discounts at the rate of 5 per cent." This mode of expression is, how- ever, very common with American writers.* II. Should we write accepter or acceptor of a biH of exchange ? The name of the agent to any verb is usually formed, in our language, by the addition of r or er to the verb ; as, indorser, talker, walker, speaker. What reason, then, can/ be assigned why, in the present case, we should depart from the analogy of the language ? We do not say, the drawer, the holdor, the payor of a bill ; why, then, should we say the acceptor ? When we speak of the accepter of a bill, why should we not spell the word in the same way as when we speak of the accepter of a present, or of a fee ? Yet all our English legal authors write acceptor : "A person who accepts for honor, is only liable if the original drawee do not pay ; and, to charge such acceptor, there must be a presentment for payment to such original drawee." Bayley. " A foreign bill is binding in this country on the acceptor, though he accepted by parol, or by writing un- connected with the instrument" Chilly. " Where the acceptor of a ftrged bill pays it, and is guilty of any negligence or want of due caution in making such payment, he cannot recover the money so paid, from the innocent party to whom he paid it" Roscoe. Scotch authors, however, * It hu now become more common with Enylitk writers, especially with reference to the Bank of England. 1849. 10 Banking Terms. write accepter. " An English inland bill has generally three parties to it, the drawer, accepter, and payee ; whereas, in Scotland most of the inland bills have, at first, but two parties, the drawer and the accepter ; and they are made payable to the drawer or his order." (See Glen, On the Law of Bills of Exchange in Scotland.) III. Should we write indorse or endorse ? Indorse is derived direct from the Latin, in dorsum, on the back. Endorse is derived from the Latin, through the French, endosser. In such cases, most writers adopt the Latin mode of spelling, in preference to the French, as indorse, in- quire, intire ; not endorse, enquire, entire. All legal authors write in- dorse. " A promise to indorse, though on sufficient consideration, cannot be treated as an actual indorsement.' 1 '' Bayley. " The liability of the indorser is discharged by want of notice, as in the case of the drawer." Roscoe. " A person who draws or indorses a bill, or indorses a note for the accommodation of the acceptor, or maker, or payee, or prior in- dorsers, has, on paying the instrument, a remedy over thereon against the acceptor, or maker, or prior party." Chitty. " A drawer or indorser cannot, in the character of indorsee, maintain an action against the ac- cepter, where the indorsement is after the refusal of payment." Glen. IV. Should we say indorsement or indorsation 1 In England we al- ways use the word indorsement. " No particular words are essential to an indorsement ; the mere signature of the indorser is, in general, suffi- cient." Bayley. " The indorsement may be upon the face, or at the back of the bill." Chitty. " An attesting witness to an indorsement is necessary, when the bill is for a less sum than 5." Chitty. In Scot- land the term more generally used is indorsation. " If a bill or note be granted to a woman while single, and she afterwards marry, the right to transfer it by indorsation would vest in the husband." " After a bill has been paid, no indorsation can take place, so as to affect the accepter, or any of the parties who would otherwise be discharged." Glen. The word indorsement is also used in Scotland, though more rarely. Both words appear to have precisely the same meaning. An indorsation is made, either by the indorser's writing, and subscribing an order to pay the contents of the bill to some particular person mentioned by name, which is styled a. full indorsement, or by merely signing his name on the bill, and delivering it to the indorsee, or person to whom it is indorsed, which is termed a Hank indorsation" Glen. " A fictitious indorse- ment to a bill is forgery ; such indorsation is clearly giving it a false credit." Glen. V. Should we say the presentment or the presentation of a bill of ex- change ? All writers agree in using presentment. " If upon the present- ment of the bill for acceptance to the drawee, he refuse or neglect to ac- cept it, the drawer is immediately responsible to the holder, although the bill has not become due according to its tenor." Chitty. " If the bill be payable after sight, and the drawee detain it some days without declar- ing his intention to accept, and afterwards incline to do so, the acceptance must be from the date of the first presentment." Glen. " Presentment for payment must be made by the holder of the bill, or by an agent com- petent to give a legal receipt for the money." Glen. " Upon a present- A Treatise ON Banking. ment for acceptance, the bill should !*> left with the drawee twenty-four hours, unless in the interim lie cither accept, or declare a it-solution not to accept. Hut a bill or note must not be left (unless it bo paid) on a pre- xfntmfnt for payment ; if it be, the presentment is not considered as nmtle until the money is called for." Bayley, VI. Should we write draught or draft 1 This word is derived from the verb to draw, and probably was originally written and pronounced draught. Hut custom, which is the law of language, has changed both the pronunciation and the spelling to draft. In the former editions of this work, 1 mentioned that Mr. Justice Bayley had always spelled this word draught ; hut in a recent edition of his work, since published, I find that draught has been changed to draft. VII. Should we write check or cheque ? This word is derived from the French, echecs, chest. The chequers placed at the doors of public-houses are intended to represent chess-boards, and originally denoted that the game of chess was played in those houses. Similar tables were employed in reckoning money, and hence came the expression, to check on account ; and the government office, where the public accounts were kept, was called the Exchequer. It probably obtained this name from the French fchiquier, a chess-board ; though Bluckstone states that this court was called the exchequer, from the chequered cloth which covered the table. Of the two forms of writing this word, check and cheque, the latter seems preferable, as it is free from ambiguity, and is analogous to EX-CHEQUER, the public treasury. It is also used by the Bank of England, " CHEQUE- OFFICE." In Bayley both forms are employed. " A cheque upon a banker was lost, and paid to a stranger the day before it bore date ; the banker was obliged to repay the money to the loser." u By the usage of trade, a banker in London will not render himself responsible by retaining a check drawn on him, provided he return it at any time before five o'clock on the evening of the day in which it was drawn." SECTION IV. THE GENERAL ADMINISTRATION OF A BANK. To be a good banker requires some intellectual and some moral qual- ifications. A banker need not be a man of talent, but he should be a man of wisdom. Talent, m the sense in which the word is ordinarily used, im- plies a strong development of some one faculty of the mind. Wisdom implies the due proportion of all the faculties. A banker need not be a poet or a philosopher, a man of science or of literature, an orator or a statesman. He need not possess any one remarkable quality by which he distinguished from the rest of mankind. He will possibly be a better banker without any of these distinctions. It is only necessary that he should possess a large portion of that practical quality which is called com- mon sense. Banking talent (using the word talent here in the sense of adaptation of character to any particular pursuit) consists more in the union of a number of qualities, not in themselves individually of a striking 12 Administration of a Bank. character, but rare only in their combination in the same person. It is a mistake to suppose that banking is such a routine employment that it re- quires neither knowledge nor skill. The number of banks that have failed within the last fifty years are sufficient to show that to be a good banker requires qualities as rare and as important as those which are necessary to attain eminence in any other pursuit. The dealer in money exercises intellectual faculties of a high order, and of great value to the community. His profession has a powerful bearing on the practical happiness of man- kind. " The philosophy which affects to teach us a contempt of money, does not run very deep ; for, indeed, it ought to be still more clear to the philosopher than it is to the or- dinary man, that there are few things in the world of greater importance. And so manifold are the bearings of money upon the lives and characters of mankind, that an insight which should search out the life of a man in his pecuniary relations, would pen- etrate into almost every cranny of his nature. He who knows, like St. Paul, both how to spare and how to abound, has a great knowledge : for if we take account of all the virtues with which money is mixed up, honesty, justice, generosity, charity, frugal- ity, forethought, self-sacrifice, and of their correlative vices, it is a knowledge which goes near to cover the length and breadth of humanity : and a right measure and man- ner in getting, saving, spending, giving, taking, lending, borrowing, and bequeathing, would almost argue a perfect man." (Taylor's Notes on Life.) But though wisdom, or, in other words, a high degree of common sense, does not imply the possession of any remarkable talent (the un- due development of any one faculty), it always implies the absence of any remarkable defect. One great defect in a banker is a want of de- cision. A banker ought to know how to balance the evidence on each side of a question, and to arrive speedily at a just conclusion. " Indecisiveness will be, ceteris paribus, most pernicious in affairs which require se- crecy. 1st. Because the greatest aid to secrecy is celerity. 2d. Because the unde- cided man, seeking after various counsel, necessarily multiplies confidences. The pre- text for indecisiveness is commonly mature deliberation ; but, in reality, indecisive men occupy themselves less in deliberation than others; for, to him who fears to decide, de- liberation (which has a foretaste of that fear) soon becomes intolerably irksome, and the mind escapes from the anxiety of it into alien themes. Or, if that seems too open a dereliction of its task, it gives itself to inventing reasons of postponement. And the man who has confirmed habits of indecisiveness, will come in time to look upon post- ponement as the first object in all cases, and wherever it seems to be practicable, will bend all his faculties to accomplish it." * Another defect is a want of firmness. A banker having, after a mature consideration, made up his mind, should be capable of a strict adherence to his previous determination ; he should know when to say, No ; and having once said No, he should adhere to it. Another defect is a hasty or impetuous temper. " He that answereth a matter before he heareth it, it is folly and shame unto liim." " He that is slow to wrath is of great understanding, but he that is hasty of spirit ex- alteth folly." " A wise man will hear, and will increase learning ; and a man of un- derstanding shall attain unto wise counsels." (Proverbs of Solomon.) Another defect is that of being swayed by any personal or constitutional prepossession. Almost every man, not excepting even the banker, * Taylor's Statesman. I would advise all bankers, and all other persons at the head of large establishments, to read this little work. B 13 A Trratite on Banking. has a sin by which he is most easily beset ; a constitutional defect, against inch it is necessary be should be upon his guard. It is a great advantage to a banker, and indeed to every one else, to kiinw himself. He should know wherein he excels, and wherein he is de- ficient He ought to know whether he is disposed from his temperament to be excessively cautious or excessively liberal ; whether his manners are courteous or abrupt ; whether he is apt to view matters on their gloomy or oo their bright side ; whether social intercourse renders him more or leas fit for his official engagements ; whether the presents and civilities he ves from his customers do, or do not, affect his transactions with them in matters of business, \\h-n he has made a loss, he should ex- amine whether the loss was occasioned by the ordinary operation of events, or produced by any little weaknesses of his own character. He should record all those instances in which he has shown a want of firmness, of discretion, of discrimination, or of perseverance ; and should guard in fu- ture against the exhibition of any similar defect : "Man, know thyself; all wisdom centres there." But while a banker should make himself acquainted with his own de- fects, he ought not to let his customers become acquainted with them. All wise men know their own defects ; none but fools publish them. Crafty men, who often have occasion to borrow money, are quick in per- ceiving the weaknesses of their banker. And if they find that by coaxing, or flattering, or gossiping, or bribing, or threatening, they can influence his conduct, he will always be at their mercy. On this account it is, per- haps, advisable that a banker should not have too much social intercourse with those of his customers who have occasion to ask him for any large amount of accommodation. Wisdom implies prudence and discretion, and these should regulate the whole conduct of a banker, not merely when engaged in banking transac- tions, but at all other times. We may apply to a banker the language we have elsewhere applied to a merchant : * The amusement* of a merchant should correspond with his character. He should ngagc in those recreations which partake of the nature of gambling, and hut in those at a frivolous description. A judj.'c is not always on die bench, a clergyman is not always in the jiulj.it, nor is a men hunt always on 'change : but <-a<-h if expected at all times to abstain from any amusements which are not consistent with his professional character. The credit of a merchant depends not merely on his wealth, bat also upon the opinion generally entertained of his personal qualities; and he should cultivate a reputation for prudence and propriety of conduct, as part of his M<-k. in trade." (Lecture* on the Ilulory and PrindpUt of Ancient Commerce, by J. W. Gilbart). A banker should have a talent for selecting suitable instruments. lie ought not only to know himself; he ought also to have a capacity for knowing others. He should know how to choose proper clerks for the discharge of the duties of the office. He should know also what parties to employ to procure him confidential information as to the character and circumstances of commercial houses, or of individuals. He should know bow to choose his partners or coadjutors, and should endeavour to select those who possess qualifications in which he is himself deficient. In all 14 Administration of a Bank. cases when he has any object to effect, he should know how to make use of other men. We may here, as in some other cases, apply to a banker the observations Mr. Taylor applies to a statesman : " The most important qualification of one who is high in the service of the State is his fitness for acting through others, since the operations vicariously effected ought, if he knows how to make use of his power, to predominate greatly over the importance which can attach to any man's direct and individual activity. The discovery and use of instruments implies indeed activity, as well as judgment; because it implies that judgment which only activity in affairs can give. But it is a snare into which active statesmen are apt to fall, to lose, in the importance which they attach to the immediate and direct effects of their activity, the sense of that much greater importance which they might impart to it if they applied themselves to make their powers operate through the most effective and the widest instrumentality. The vanity of a statesman is more flattered in the contemplation of what he does than of what he causes to be done ; although any man whose civil station is high ought to know that his causative might be beyond all calculation wider than his active sphere, and more important." (Taylor's Statesman.) A neglect of this rule has occurred in the history of some joint-stock banks, where the manager has impaired his own health, and damaged his bank, by taking upon himself a vast variety of duties which should have , been assigned to others ; forgetful that in large establishments the chief officer should confine his personal attention to those duties which are in- tellectual, or which are of the chief importance ; while the duties which are of a mere manual, or less important character, should be performed through the instrumentality of assistants. We shall illustrate the principle of working through others by a Scriptural example : " And it came to pass that Moses sat to judge the people ; and the people stood by Moses from the morning unto the evening. And Moses' father-in-law said unto him, The thing that thou doest is not good. Thou wilt surely wear away, both thou and this people that is with thee : for this thing is too heavy for thee ; thou art not able to perform it thyself alone. Hearken now unto my voice, and I will give thee counsel. Thou shall provide out of all the people able men ; and place such over them, to be rulers of thousands, and rulers of hundreds, rulers of fifties, and rulers of tens. And let them judge the people at all seasons : and it shall .be that every great matter they shall bring unto thee, but every small matter they shall judge ; so shall it be easier for thyself, and they shall bear the, burden with thee. So Moses hearkened to the voice of his father-in-law, and did all that he had saia." (Exodus xviii. 13 - 22.) l; And Moses said, I am not eloquent, but I am slow of speech and of a slow tongue." " Is not Aaron the Levite thy brother ? I know that he can speak well. Thou shall speak unto him, and put words into his mouth; and he shall be thy spokesman unto the people." (Exodus iv. 10-16.) A banker should know how to economize his own time. One mode ol doing this will be, as we have intimated, to assign inferior duties to others. His accountant should keep his books and make his calculations His secretary should write his letters (except those of a private or confi- dential nature), and he should only sign them. His chief clerk should attend to the discipline of the office. A banker at the head of a large establishment should not only be acquainted with the art of banking ; he ought also to be acquainted with the art of government. He ought to put a clever man at the head of each department, and reserve to himself only the duty of general superintendence. He should give these parties a pretty wide discretion, and not encourage them to ask his instructions about matters of comparatively trifling importance. If he does this, they 15 A Treatise on Banking. will never learn to think fur themselves, never feel that wholesome anxiety which result* from a sense of responsibility, and never acquire that decision of mind which arises from the necessity of forming :m inde- pendent judgment. Consequently, they will be less useful to him in their present position, nnd never become qualified fur higher offices. Another mode of economizing time is to observe a principle of onlrr. A banker should come to the bank every day at the same hour; attend to his affairs, one by one, in the same order; and leave the li.-mk at his usual time. By observing this routine, he will not only save much time, but he will avoid tumultuous feelings, and maintain a calmness of mind and of in-inner, that will be useful in all his affairs. He will also acquire from habit, a coolness of investigation and a promptness of decision, and ^ 11 get through a great deal of work without ever appearing to be in a hurry. Another mode of economizing time is, to make his interviews with his customers, or with other parties, as short as he con. He should not en- courage conversation upon any other topic than that which is the occasion of the interview. He had better receive his customers standing ; as in that case they will stand too, and are not likely to remain so long as if they were to sit down. And the furniture of the room should be so ar- ranged that the customer, if he sit down, should sit near the door, so that he may depart whenever disposed. He is not likely to remain so long as if seated comfortably by the fireside. It is also desirable that his room should be so placed, with reference to the other parts of the building, that while it has one door open to the public, it should have another door opening into the office ; so that he may easily pass into the office, to as- certain the state of a customer's account, or to consult with himself or an- other person, in doubtful cases, as to the course to be adopted. It is not advisable that the customer who applies, for instance, to have a heavy bill discounted, should witness the hesitation or the deliberation of the banker. Hence it is better, when it can be done, to establish the practice of the customer giving the bills to a clerk, who shall bring them into the bank- er's room, and take back his reply. A banker will take means for obtaining and recording information. He should not, as we have said, keep any books himself; but he ought al- ways to have in his room, ready for immediate reference, if necessary, the M General Balance Book," containing the weekly balances of the gen- eral ledger, which will show the weekly progress of his business for sev- eral years past ; the " Daily Balance Book," showing the daily balance to the credit of each of his customers in the current-account ledger ; the " Weekly Discount Balance Book," showing the amount of discounts, loans, or other advances which each customer has every Saturday night ; the ** Inspection Book," showing the amount of bills bearing the names of houses who 'do not keep an account with him ; the " Information Book," containing the character of all the houses about whom he has had occa- sion to make inquiries ; and, finally, a " Private Memorandum Book," in which is entered any special agreements that he has made with his cus- tomers. It is also useful to a banker to have a list of his c clas- sified according to their trades or professions ; such as corn merchants, 16 Administration of a Bank. ieatner factors, grocers, solicitors, &c., dec. The banker would thus see at a glance among what classes of society his connections are. When any public event was likely to affect any class, such, for instance, as the corn merchants, he would see how many of his customers are likely to be affected. By thus, too, bearing in mind the trade or profession of his customers, he would be able to judge more readily whether the bills they brought him for discount had arisen out of their business trans- actions. Of these books, one of the most important is the " Information Book." There is no doubt that a banker of great experience, and of a strong memory, may always bear in his mind a very correct estimate of the standing and character of all the houses that usually come under his notice. But this does not supersede the necessity for recording his in- formation in a book. His memory may fail, and that too on important occasions ; and certainly if he leave the bank for a short time, as he must sometimes have occasion to do, he will carry his memory with him. But if the Information Book be closely kept up, he will record his knowledge for the use of those who will have to take his place. It is no valid objec- tion to the keeping of such a book, to say that the position of houses is perpetually changing. Those changes should be recorded, so that their actual standing should always be readily referred to. If a banker is re- quested by a customer to make inquiry about a house, he should record the information he gets for his own guidance, in case any bills on that house should afterwards be offered him for discount. A banker will get information about parties from inquiry at their banker's, as we have mentioned at page 6. This information may be defective in two ways. In the first place, their banker may judge of them from the account they keep, that is, from the balance to their credit, and thus he may give too good an account of them ; or, sec- ondly, their banker may have an interest in keeping up their credit, and under this bias he may not give them so bad a character as they actually deserve. Another source of information is from parties in the same trade. Houses in the same trade know pretty well the standing of one another. Wholesale houses are well acquainted with the retail shopkeepers who buy of them. Most bankers have among their own customers some houses in almost every trade, who can give them any information re- specting other houses which they may require. The bills that pass through his hands will also often give him some useful hints respecting the parties whose names are upon them. It is of great importance to a banker to have an ample knowledge of the means and transactions of his customers. The customer, when he opens his account, will give him some information on this subject. The banker will afterwards get information from his own books. The amount of transactions that his customer passes through his current account will show the extent of his business. The amount of his daily balance will show if he has much ready cash. The extent and character of the bills he offers for discount, will show if he trust large amounts to individual houses, and if these are respectable. On the other hand, the bills hia customer may accept to other parties, and his payments, will show the B* 17 A Treatist on Banking. obM of people with whom ho deals, or who arc in the habit of giving him credit But one main source of infonimtion is to see the man. This, like other means of information, will sometimes fail ; but, generally 8|>< 'A- ing, the appearance and manners of a man will show his diameter. Some people always send their clerk to the banker with hills for discount, &c. This is all very well, if they want no extraordinary accommodation ; but if they ask for any thing out of the usual way, the banker had better say that he wishes to see the principal. And if he had a doubt whether his cus- tomer was tricky or honest, speculative or prudent, let him be guided by his first impression, we mean the impression produced by the first in- terview. In nine cases out of ten the first impression will be found to be correct. It is not necessary to study physiognomy or phrenology to be able to judge of the character of men with whom we converse upon mat- ters of business. A country banker has greater facilities than a London banker of ascer- taining the character and circumstances of other parties. In a country town every thing is known about every body, a man's parentage and connections, his family and associates, the property he has already received, and what he may expect to receive from his relations, and, above all, his personal habits and disposition. Upon the lost point we will make a short extract from an excellent series of " Letters to a Branch Manager," now in course of publication in the " Bankers 1 Magazine," under the signature of " Thomas Bullion." " Next in importance to a study of his accounts, the habits and character of a client are deserving of your attentive consideration. If a man's style of living, for exam [>!<, becomes extravagant, and he gives himself orcr to excess, you cannot too promptly apply the curb, however regular the transactions upon his account may seem ; because Tears may elapse before mere irregularity of living will make any impression on his banking account ; whereas irregularity in business will exhibit itself immediately, and for this reason, that whereas improvident habits of living involve a continuous waste in small sums, spreading over tolerably long periods, improvidence in business may involve in one fell swoop the loss, perhaps, of thousands. I hold, then, that you are not warranted in all cases in feeling satisfied of a man's perfect responsibility until his banking account exhibits indubitable evidence to the contrary." Bankeri Magazine^ December, 1848. A banker should always have general principles ; that is, he should have fixed rules for the government of his bank. He should know before- hand whether he will or will not advance money on mortgage, or upon deeds, or upon bills of lading, or warrants ; or whether he will discount bills based upon uncommercial transactions, or having more than three months to run. These are only a few of the cases in which a banker will find it useful to store his mind with general principles. One advantage of this adoption of general principles is, that it saves time. If a banker can say, in reply to a customer, u It is contrary to the rules of our bank to advance money upon bills of lading," the reply is conclusive. But if he hod not previously adopted any rule upon the sul>- ject, the reply would have taken up much more time. Another advantage is, that it gives decision of mind, and saves the banker from being " talked over " by any of his customers who may possess fluency of speech, or dexterity in debate. In this case, the banker whose mind is stored with 18 Administration of a Bank. general principles, though he may listen patiently to all his customer shall advance, will give the same reply which he would have given, had the ap- plication been made in fewer words. But although a banker ought to have a large stock of general princi- ples, and this stock will increase as his experience increases, yet it may not be always wise to explain these principles to his customer. It is generally best, when a banker gives a refusal, to give no reasons for that refusal. Banking science is so little understood that the public generally are unable to appreciate its principles. Besides, a man who wants to borrow money can never be convinced by reasoning that his banker is right in refusing to lend it to him ; nor, in fact, did the banker himself ac- quire his knowledge of banking by reasoning. He acquired it, not by reasoning, but by experience ; and he must not expect that his customers, who have had no experience, will, by reasoning alone, readily acquiesce in the banking principles he may propound to them. In most cases, therefore, he had better keep his reasons to himself. But while we contend that every banker should have general principles, we do not say that in no possible case should he depart from them. But he should not look for such cases ; they are rare, and when they do occur they will force themselves upon his attention. If under shelter of the truism, " all rules have their exceptions," he departs from his general principles whenever he finds it convenient or profitable to do so, he may as well have no general principles at all. It seems desirable that a banker in a large city should mark out for himself one or two main branches of business, rather than attempt to carry on banking in all its branches. We see this line of conduct adopted by some of the most eminent London bankers. A west end banker will not discount a bill ; a city banker will not lend money on mortgage. Different kinds of banking exist in different parts of the country, accord- ing to the character and circumstances of the district. And in London there are numerous classes of people, and it may be both proper and ad- vantageous for a banker to adapt his mode of business chiefly to the re- quirements of some one particular class. Different banks may thus pur- sue different courses, and all be equally successful. A banker will exercise due caution in taking new accounts. He will expect the new customer to be introduced by some person to whom he is personally known. The more respectable the introducer, the higher opinion will the banker entertain of the party introduced. If a party ap- ply to open an account without such an introduction, he is asked to give references to some well-known houses. He is expected to state to the banker the kind of business in which he is engaged, and the extent of ac- commodation, if any, that he is likely to require. He will state the kind and character of the bills he will have to offer to discount, and mention any peculiarity in his business or circumstances that may occasionally re- quire especial consideration. It is a great folly in a party opening an ac- count to make any representation that will not afterwards turn out to be correct. Every banker is anxious to avoid taking shabby accounts ; and especially such as are opened for the purposes of fraud, or to obtain a fic- titious credit, or to get undue accommodation. It is considered to be not 19 A Trtatite on Banking. dvisable to take the nccount of a party who has another hanker, especi- ally if he open the account for the purpose of getting additional discount. Tiie object of a party keeping two bunkers is, usually, to get ns much ac- commodation as he can from each. If an account is brought from another hunk, the reason of the removal should be distinctly stated, and tin- hanker will accept or reject it, according to circumstances. It is IMU! policy in a Banker to attempt to draw away the connections of another bank, by offering them greater accommodation. It is also usually bad policy to take the accounts of parties residing at a distance, as their transactions do not come under the notice of the banker ; and the fact of their pa>.siiig by the banks in their neighbourhood to go elsewhere, is one that should ex- eftb suspicion. It is not advisable for London bankers to take the ac- counts of private individuals who reside in the country. They should be referred to the bankers in their own districts. 1 A small banker should not attempt to take large accounts. Banks, otherwise well administered, have been ruined by one large account. If this account requires accommodation, it will absorb the banker's funds, so that he will be compelled to stint his other customers, or to have recourse to re-discount, or other modes of raising money. Even if it be only a deposit account, it may produce inconveniences. A small banker cannot so readily employ this large deposit profitably, and yet have it at com- mand whenever required ; and the additional amount ho must keep in his till will be proportionably greater than would bo kept by a large banker. Thus, if 100,000 be placed in a bank that lias already .2,000,000 of deposits, the additional sum kept in the till to meet daily demands may not be much increased; but should it be lodged with a banker \\liose de- posits are only 300,000, the increase of notes to be kept in his till will be very considerable. This shows that large deposits are not so profitable to small banks as to large ones. There is also a danger that a small banker will employ his large deposits in such a way as shall render him less ready to repay them punctually. Instances have occurred of small banks being greatly inconvenienced by the repayment of large deposits, which had been placed in their hands by railway companies. It is pru- dent, therefore, in a banker to apportion the amount of his transactions to the extent of his business. A very important part of the business of a banker consists in the dis- counting of bills. The bills presented to a bank for discount, may gener- ally be divided into the following classes : " 1st. Bills drawn by producers or manufacturers upon wholesale dealers. **2dly. Bills drawn by wholesale dealers upon retail dealers. " 3dly. Bills drawn by retail dealers upon consumers. " 4thly. Bills not arising out of trade, but yet drawn against value, as rent, dec. " 5thly. Kites, or accommodation bills. " The first two classes of bills are the best, and are fair legitimate bills for bankers to discount. u The third class ought not to be too much encouraged ; they are for comparatively small amounts, and are drawn by shopkeepers and trades- 20 Administration of a Bank. men upon their customers. To discount these bills freely would encour- age extravagance in the accepters, and ultimately prove injurious to the drawers. When a man accepts bills to his butcher, baker, tailor, uphol- sterer, &c., he may fairly be suspected of living beyond his income. Solvent and regular people pay their tradesmen's accounts with ready money. " The fourth class of bills, though sometimes proper, ought not to be too much encouraged. Persons out of trade have no business with bills. " The last class of bills should always be rejected. To an experienced banker, who knows the parties, the discovery of accommodation bills is by no means difficult. They are usually drawn for even amounts, for the largest sum that the stamp will bear, and for the longest term that the bank will discount, and are f presented for discount soon after they are drawn. The parties are often relations, friends, or parties who, from their avocations, can have no dealings with each other. " Not only the parties and the amounts of bills are matters of consider- ation to a banker, but also the time they have to run before they fall due. A bill drawn for a long term after date, is usually styled, not perhaps very properly, ' a long dated bill.' A bill drawn at a short term, is styled, ' a short dated bill.'" (History and Principles of Banking, p. 167.) In doubtful cases, the banker, before discounting a bill, will probably look through his books, and satisfy himself with regard to the following inquiries : What is the character of the customer ? This inquiry will be answered from the Information Book. What is the usual balance of his cash ac- counts ? This will be answered by the Daily Balance Book. What amount has he now under discount ? This will be answered from the Discount Ledger, and will suggest other inquiries. Is that amount greater or less than usual ? What proportion does that amount bear to the aver- age amount of his cash balance ? Is the amount chiefly upon few parties, or is it divided among a number ? Have their bills been discounted chiefly upon the strength of the customer,- or upon the strength of other parties ? Are his bills generally paid ? He will then proceed to inquire about the other parties to the bill. What is the character of the accepter in the Information Book ? What is the nature of the transactions between the customer and the accepter, as far as can be ascertained ? Has he had any bills upon him before, and have they been punctually paid ? Are there any bills upon him now running, and how soon will they be- come due ? In the discount of bills it is necessary to guard against forgeries. It has happened that parties carrying on a great business in London, have presented to their banker, for discount, bills drawn upon all parts of the country ; which bills, upon inquiry, have turned out to be purely fictitious. This is an additional reason for bankers making inquiry about the accep- ters of the bills they discount, even when they think they have reason to be satisfied with the drawers. Even this is no protection against forgery. Sometimes the name of a most respectable house in a provincial town has been forged. Where the amount is large, therefore, it seems advisable to send the bill down to some banker in the town, and ask his opinion as to 21 A Treat ist on Banking. the genuineness of the signature. Of rurs<- in thosr, and many other case* in which a banker is liable to be cheated, much must depend upon personal discretion ; no rules can be given for oil case*. To facilitate the detection of forged CHEQUES, it is advisable that the banker should have a primed number placed on every cheque, in every cheque book, and keep a record of the name of the customer to whom eacir book is given. When a cheque with n forged signature appears, tli<- hanker can then turn to this registry, and see to which of his customers he had given out this cheque. This plan has been found useful in tracing forgeries that have been perpetrated by the clerks or servants of the party keeping the account. Some bankers, moreover, place on their cheque books a printed label, requesting the customer will at all times keep the book under his own lock and key. To guard against forgery in the case of DEEDS or BONDS, all these docu- ments should be witnessed by an officer of the bank. And when a letter of guarantee is given by a third party, it should not be taken by the banker from the party in whose favor it is given, but the letter -should be signed at the bank, and the signature witnessed by one of the clerks. A banker is also liable to loss from the alteration of cheques. The words six, seven, eight, and nine, can easily be changed by the addition of y, or ty, into sixty, seventy, eighty, or ninety. Sometimes, too, when cheques are drawn for less than 10, if a space be left open before the word, another word may be introduced. Thus, a short time ago a cheque was drawn on a banker for 3, and the party who obtained it wrote the word sixty before the word three, and thus cheated the banker out of 60. Letters of credit, as well as cheques, have heretofore been altered, by the original sum being taken out, and a larger sum being substituted. This is now prevented by staining the paper with a chemical preparation. Country banks also stamp upon their drafts the words " under ten pounds," 44 under twenty pounds," and so on, to prevent an alteration to any sum beyond those amounts. The re-discounting of bills of exchange is an operation of much im- portance, and has a great influence on the monetary operations of the country. We quote from a former work of our own upon this subject : " Banks situated in agricultural districts have usually more money than they can employ. Independently of the paid-up capital of the bank, the sums raised bv circula- tion mad deposits are usually more than the amount of their loans and discounts. Banks, on the other hand, that are situated in manufacturing districts, can usually cm- ploy more money than they can raise. Hence., the bank that has a superabundance of money, sends it to London, to be employed by the bill-brokers, usually receiving, in re- turn, bills of exchange. The bank that wonts money sends its bills of exchange to London, to be re-discounted. These banks thus supply each other's wants, through the medium of the London bill-brokers." (The Ilistoru of Banking in America, by J. W. Gilbmrt; But this principle of the re-discount of bills has been, in some cases, grossly abused, by being employed to give a sort of vitality to dead loans. A country banker lends upon mills and manufactories a larger amount of money than he can conveniently spare ; then he asks the manufacturer to accept a bill for the amount, which the banker gets discounted in London or elsewhere. This bill, when due, is renewed, and the renewal is again 22 Administration of a Bank. replaced by another, and so the game goes on. As long as money is abundant all parties are pleased ; the manufacturer gets his advance, the banker gets his commission, and the London bill-broker gets employment for his funds. But a pressure comes. The London bill-broker can dis- cpunt no more, because the funds placed in his hands by his depositors have been withdrawn. The banker cannot get the new bills discounted elsewhere, and is unable to take up the old bills that are returned to him with his indorsement. The manufacturer, of course, cannot pay the money ; the banker stops payment, and the manufacturer is ruined. The places at which this system has been chiefly carried on, are Man- chester and Newcastle-upon-Tyne ; and it is in these places that the greatest failures have taken place among the joint-stock banks. In fact, I believe it must be confessed, that the joint-stock banks have carried on this practice to a much greater extent than it was ever carried on by the private bankers. This has arisen from the greater credit which they pos- sessed : it is one of the forms of the abuse of credit A London banker is always anxious to avoid dead loans. Loans are usually specific advances for specified times, either with or without security. In London, advances are generally made by loans ; in the country, by overdrafts. The difference arises from the different modes of conducting an account. In London, the banker is paid by the balance standing to the credit of the account. A customer who wants an ad- vance, takes a loan of such an amount as shall not require him to keep less than his usual balance. The loan is placed to the credit of his cur- rent account, until the time arrives for its repayment, and then he is debited for the principal and the interest. The country banker is paid by a commission, and hence the advance to a customer is made by his overdrawing the account, and he is charged . interest only on the amount overdrawn. Loans are divided into short loans and dead loans. Short loans are usually the practice of the London bankers : a time is fixed for their re- payment. Dead loans are those for the payment of which there is no specified time ; or where the party has failed to make the repayment at the time agreed upon. In this case, too, the loan has usually been made upon dead, that is, upon inconvertible, security. Without great caution on the part of the banker, short loans are very apt to become dead loans. A loan is first made for two or three months ; the time arrives, and the customer cannot pay ; then the loan is renewed, and renewed, and re- newed, and ultimately the customer fails, and the banker has to fall back upon his securities. The difference between short loans and dead loans may be illustrated by a reference to Liverpool and Manchester. The Liverpool bankers make large advances by way of loan, but usually on the security of cotton. The cotton is sold in a few months, and the banker is paid. At Manchester, the banker advances his loans on the security of mills and manufactories ; he cannot get repaid ; and after awhile the customer fails, and the mill or manufactory, when sold, may not produce half the amount of the loan. Dead loans are sometimes produced by lending money to rich men. A man of moderate means will be anxious not to borrow of his banker a 23 A Treatise on Banking. loan which he will not be able punctually to repay, as the good opinion of his banker is necessary to his credit. Hut a man of property has no scruples of the kind ; he has to Iniild a hoti^>, to improve his estate, or to extend his manufactory ; and he is unreasonable cnun^li to t \prt that his banker will supply him with thn necessary funds, lie believes it will be only a temporary advance, as he will shortly be in possession of ample meaiu. The banker lends the sum at first desired ; more money is want- ed; the expected supplies do not arrive, and the advance becomes a di-.-nl lock-up of capital. The loan may be very safe, and yield a good rate of interest, but the banker would rather have the money under Ins <>\\u con- trol. Dead loans are sometimes produced by lending money to parties to buy shares in public companies. There was too much business of this kind transacted by some bankers a few years ago. The party did not at first, perchance, apply to his banker to enable him to purchase the shares ; but the calls were heavy, and his ready money was gone ; he felt assured, however, that in a short time he should be able to sell his shares at a high profit ; he persuaded his banker to pay the calls, taking the shares as se- curity. Other calls were made, which the banker had to pay. The market fell, and the shares, if sold, would not pay the banker's advances. The sale, too, would have caused an enormous loss to the customer. The advances became a dead loan, and the banker had to wait till a favorable opportunity occurred for realizing his security. In this, and in other ways, a banker has often much difficulty with cus- tomers of a speculative character. If he refuse what they ask, they re- movp their account, and give him a bad name ; if he grant them their de- sires, they engage in speculations by which they are ruined, and probably the banker sustains loss. The point for the banker to decide is, whether he will lose them or ruin them. It is best, in this case, for the banker to fix upon what advance he should make them, supposing they conduct their affairs prudently ; and if they are dissatisfied with this, he had better let them go ; after they have become bankrupts he will get credit for his sagacity. The discounting of bills is an ordinary matter of business, and the banker has only to see that he has good names to his bill ; hut in regard to loans, a banker would do well to follow the advice which Mr. Taylor gives to individuals, and not make a loan, unless he knows the purpose for which it is borrowed, and to form his own judgment as to the wisdom of the party who borrows, and as to the probability of his having the means of repayment at the time agreed upon. " Never lend money to a friend, unless you are satisfied that he does wisely and well in borrowing it. Borrowing is one of the most ordinary ways in which weak men sacrifice the future to the present; and thence it u that the (..'rutim-le fur a loan is so proverbially evanescent; for the future, becoming present in its turn, will not be well pleased with those who have assisted in doing it an injury. Hy . ..r.-jiirin- with your friend to defraud his future self, yon naturally incur hi- future ili^.i. usure. To with- stand solicitations for loans is often a great tri.il of firmness ; the n .lly as the pleas and pretexts alleged are generally made plaiiMhle at tin < \|>c n-c of truth; for nothing breaks down a man's trath/olness more surely than j.r< uni.uy embarrass- ment, 24 Administration of a Bank. 'An un thrift was a liar from all time; Never was debtor that was not deceiver.' The refusal which is at once the most safe from vacillation, and perhaps as little apt to give offence as any, is the point blank refusal, without reasons assigned. Acquies- cence is more easily given in the decisions of a strong will than in reasons, which weak men, under the bias of self-love, will always imagine themselves competent to contro- vert." (Notes on Life, by John Taylor.) Sometimes, when an advance of money is wanted for two or three months, the party gives a note of hand. This is better than a mere loan, as it fixes the time of payment, and keeps the transaction fresh in the rec- ollection of the borrower. But care must be taken that the note, by re- peated renewals, does not in fact become a dead loan. Hence, when a renewal cannot be avoided, attempts should be made to reduce the amount. When public companies, of only a short standing, and not fully constituted, wish to borrow money of their banker, it is sometimes expedient to take the joint and several promissory note of the directors. By this means the banker avoids all knotty questions connected with the law of partnership ; and the directors will, for their own sakes, see that the funds of the com- pany shall, in due time, be rendered available for the repayment of the loan. We have said that dead loans are usually advanced upon inconvertible security. Sometimes that security consists of a deposit of deeds relating to leasehold or freehold property. In London, however, this kind of se- curity is not considered desirable, and the following rules are usually ob- served. No advances are made upon the security of deeds alone ; they are taken only as collateral security, and then only to cover business transac- tions, and in cases where the parties are supposed to be safe independently of deeds. The value of the property should be much higher than the sum it is in- tended to guarantee. When this is the case, and the parties fail, their creditors may take the deeds and pay the debt due to the bank. The main use of taking deeds is to have something to fall back upon in this way. A customer should never receive more accommodation from hav- ing deposited his deeds than that to which he is legitimately entitled. No banker takes deeds if there is the slightest probability of his being com- pelled to realize the property, as the legal difficulties are very great. In all cases in which deeds are taken, they are submitted to the inspec- tion of the banker's solicitor, who makes a written report upon the value of the property, as far as it can be discovered by the deeds, and upon its legal validity as a security to the bank. The rule of a banker is, never to make any advances, directly or indi- rectly, upon deeds, or any other dead security. But this rule, like all other general rules, must have exceptions, and when it is proper to make an ex- ception is a matter that must be left to the discretion of the banker. He should, however, exercise this discretion with caution and prudence, and not deviate from the rule without a special reason to justify such devia- tion. Among country bankers, in agricultural districts, advances upon deeds c 25 A Treat ue on Banking. are not considered so objectionable as in London. A landed proprietor who wants a temporary advance places his deeds in the hands of Ins banker, and takes what he requires. The banker thinks hi- r,ui hnvc no better security ; but the loon is usually for only a moderate amount, and is paid off within a reasonable time. In the country the charm-ii r ami cir- cumstances of every man is known. A landlord who wants an advance to meet immediate demands, until his rents come in, seems fairly entitli (' sell-existence, further advances are then made ; these, too, are found ineffectual, and ultimately the customer and the bank fall together. SECTIOM V. THE ADMINISTRATION OF A BANK WITH RE GARD TO PROCEEDINGS ON BILLS OF EXCHANGE. WHEN a banker has discounted a bill, it is handed to the accountant, who will see that it is drawn on a right stamp. The accountant will read it through, and see that it is properly drawn, and will observe that the sum in writing corresponds with the sum expressed in figures, and that no alteration has taken place in the amount, the date, the term, or the place at which it is made payable ; for these are material alterations, and would affect the validity of the bill. He will then calculate the time at which it falls due, and place this date upon the bill, or, if it was there before, he will check it, and see that it is right. He will then turn it over and see that it is indorsed by the party in whose favor it is drawn, and also that the subsequent indorsements are regular and properly spelled ; for if there be a variation of a single letter in the spelling of a name, the payment of the bill could not be legally enforced. He will also observe that the bill is indorsed by the party for whom it is discounted. He will then pass the bill through the books (these books arc described in the section on Bank- ing Book-keeping), and at the close of the day deliver it with the others to the banker. The banker will, on the following morning, put these bills away in his bill-case according to the dates at which they fall due. This point should be recollected by persons who have to get bills from a banker before they are due ; for, after they have given the amount and the names, the next question asked them will be, " When is it due ? " for, among a multitude of bills, the only way of readily finding any individual bill is to turn to those that fall due on the same day. Every day the banker looks out the bills that fall due on the following day, and hands them to the chief clerk (or, in some cases, the chief clerk himself has the charge of the bills), who, after checking them against the books, distributes them 28 Bills of Exchange. among the clerks who are to collect them. If the bill be not paid, it is noted on the same evening, and on the following morning returned to the customer for whom it was discounted, and his account is debited for the amount. But if the party has not the sum to his credit, and the banker does not like to trust him, he merely receives notice of its dishonor ; and notice is also given to every other party to the bill, with a demand for immediate payment. The bill has now become that hated object, a " past due bill " ; and after a while, if the parties are supposed to be " worth powder and shot," it is handed to the bank's solicitor. I shall give a short description of Bills of Exchange, and notice a few of those points of law and of business which are of most importance to practical bankers. A bill of exchange is a written order from one person to another, direct- ing him to pay a sum of money either to the drawer or to a third person at a future time. This is usually a certain number of days, weeks, or months, either after the date of the bill, or after sight ; that is, after the person on whom it is drawn shall have seen it, and shall have written on the bill his willingness to pay it. The party expresses this willingness by writing on the bill the word " accepted," and his name. If the bill be drawn after sight, he also writes the date of the acceptance. If the party in whose favor the bill is drawn wishes to transfer it, he writes his name on the back. This is called an indorsement ; and may be either special or general. A special indorsement is made to a par- ticular party ; as, " Pay to Messrs. John Doe & Co. or order." A general, or blank indorsement, is when the person merely writes his name. It is held by the lawyers (see Chitty on Bills of Exchange, p. 103) that a special indorsement cannot follow a general indorsement, and that in such a case the holder may sustain an action for the amount, though the bill be not indorsed by the party to whom it is thus specially assigned. In prac- tice, however, this is very common ; and bankers always refuse to pay bills not properly indorsed, even though previous indorsements may be general. But, in regard to post bills, the Bank of England pays no regard to any special indorsement that may follow a general indorsement. The following is the form of a Bill of Exchange : 1,000. London, 1st of May, 1827. Two months after date, pay to the order of Messrs. Quick, Active, Sf Co. (or me or mu order) the sum of One Tliousand Pounds, for value received. Hearty, Jolly, fr Co. Accepted, payable at To Messrs. John Careful fr Co., Messrs. Steady fr Co., Bankers. Southwark. John Careful fr Co. A Promissory Note is as follows : 1,000. London, 1st of May, 1827. Two months after date, we promise to pay Messrs. Hearty, Jolly, fr Co., or their order, the sum of One Thousand Pounds, for value received. John Careful fr Co. At Messrs. Steady fr Co., Bankers, The acceptance is usually written across a bill, but should always be on c* 29 A Treatise on Banking. the front, not on the back of the bill. An indorsement, as the name im- plies, should be placed on the back. The person who draws a bill is called the drawer ; the person on whom it is drawn is called the drawee ; after the bill is accepted the drawee is called the accepter. The person who indorses a bill is called the indorser ; the person to whom it is indorsed is the indorsee. The person who pays a bill is the payer ; the person to whom it is paid is the payee. These and similar terms may be illustrated by a circumstance said to have occurred on the cross-examination of a witness, on a trial respecting a mortgage. Counsellor, " Now, Sir, you ore a witness in this case ; pray do you know the difference .between the mortgager and the mortgagee ?" Wit' HIM, u To be sure I do. For instance, now suppose I nod at you, I am the nod-er, and you are the nod-ee." The word discountee, denoting the person for whom a bill is discounted, is not used in England, but I observe in the parliamentary evidence that it was employed by some of the wit- nesses from Scotland All bills, except those payable on demand or at sight, are allowed three days' grace. Thus, a bill drawn at two months from the 1st of May will fall due on the 4th of July ; but, if that day be a Sunday or a public holi- day, the bill will be due on the day before. Some bills, instead of being drawn after date or sight, state the time of payment, as " On the first of August pay, &c." These bills are allowed the usual three days of grace. Such a bill would fall due on the 4th of August. To remove all doubts upon this subject, an act of Parliament was passed (7th and 8th Geo. IV. ch. 5), which enacts, " that from and after the tenth day of April, one thousand eight hundred and twenty-seven, Good Friday, and Christmas-day, and every day of fast or thanksgiving appointed by his Majesty, is and shall for all purposes whatever, as regards bills of ex- change and promissory notes, be treated and considered as the LordV day, commonly called Sunday." This act does not extend to Scotland, but it has since been extended to Ireland. This act does not vitiate a bill dated on a Sunday. Some parties, when they indorse a bill, write at bottom, " In case of need apply to Messrs. C. D. & Co." That is, if the bill be not paid when due, Messrs. C. D. & Co. will, on the day after it is due, pay it for the honor of the indoreers. The notaries always observe the " cases of need " upon the bills that come into their hands, and apply to the proper parties. The advantage of placing a case of need upon a bill is, that the party in- dorsing it receives it back sooner in case of non-payment. It also makes the bill more respectable, and secures its circulation. Were it not for the space it occupies, it would be very desirable that the indorser of a bill of exchange should be compelled to state also his ad- dress. This would prevent forged and fictitious indorsements, and give a banker who discounts a bill a better opportunity of ascertaining the re- spectability of the parties. In cose, too, the bill was unpaid, he might immediately apply to all the indorsers, whereas now he has to find them out in the best way he can. The indorsers and drawer of a bill would have earlier notice of its non-payment, and have a better opportunity of obtaining their money from the antecedent parties. 30 Bills of Exchange. Bills are divided into Inland and Foreign. Inland bills are those in which both the drawer and the accepter reside in England. Bills drawn from Scotland or Ireland are considered as foreign bills. If a foreign bill be refused acceptance or payment, it should be immediately protested and returned. An inland bill is only noted, and then only when refused pay- ment. A foreign bill may be accepted verbally, or by letter ; but no ac- ceptance of an inland bill is valid, unless written upon the bill itself. When a merchant in one country draws bills upon a merchant residing in another country, he usually draws them in sets ; that is, he draws two, three, or more bills of the same tenor and date. These bills are sent to his correspondent by different ships. Thus, he secures the swiftest con- veyance, and his remittances will not be delayed by any accident that may happen to an individual ship. In drawing these bills, it is always ex- pressly stated whether each bill be the first, second, or third of a set ; as, " Pay this my first of exchange (the second and third not being paid)." On the payment of any one bill, the others are of no value. If a mer- chant, say at Paris, has a set of bills drawn on a merchant at London, he will sometimes send over the first bill to his correspondent in London, to get it accepted, and to retain it until claimed by the holder of the second. The merchant at Paris will then "write on the second bill, that the first lies accepted at such a house in London. He will then sell it, or pay it away. By this means, he is sure that the bill he negotiates will not be returned to him, and greater value is given to his bill, not only as it has the addi- tional security of the accepter's name, but, if it be drawn after sight, it will become due so much the sooner. When the second bill arrives in London, the holder takes it to the house where the first is deposited, and it is immediately given up to him. Foreign bills are often drawn at a " usance " after date. A usance from Amsterdam, Rotterdam, Hamburgh, or any place in Germany, is one month ; from France, thirty days ; from Spain and Portugal two months ; from Sweden, seventy-five days ; from Italy, three months. Where it is necessary to divide a month upon a half usance, which is the case when the usance is either one month or three, the half month is al- ways fifteen days. Bills drawn from Russia are dated according to the old style, and twelve days must be added to the date in order to ascertain at what time they fall due. A bill is sometimes accepted for the honor of the drawer, or of one of the indorsers. Thus, if a bill from Hamburgh be drawn upon a person in London, who refuses to accept it, another party, knowing the drawer or one of the indorsers to be a respectable man, may accept the bill him- self, for the honor of the party with whom he is acquainted. By this means, he prevents the bill being returned, with expenses. This kind of acceptance renders him liable to pay the bill on the day after it is due, but he can afterwards recover the amount from the party for whose honor he has accepted it, and, of course, from all preceding parties. But, to secure himself, he must not accept the bill until after it has been protested for non-acceptance, and he must write, " Accepted for the honor of A. B. & Co." upon the face of the bill. And when the bill is due, he must not pay it until it has been presented for payment to the drawee. 31 . A Treatise on Banking. Bills accepted, and mnde payable nt a banking-house, in tno manner, without the addition of the word ONLY, may be presented cither at the banking-bouse, or at the residence of the accepter. In either case, it is a legal presentment ( 1 As 2 Geo. IV. ch. 78), as far as regards the accepter. In practice, however, bills are always presented at the place where they are made payable. If a bill be addressed to a banking-house or any other place ONLY, the payment cannot be enforced until it has been presented at that place. If any particular place of payment be mentioned in the body of a promissory note, it must be presented there. When bankers receive any unaccepted bills, they send them out for acceptance, if they have four days to run. They are left at the house of the drawee, and are called for on the following day. On the day the bills are due, the tellers present them in the morning at the place where they are made payable. If not paid when presented, they leave a printed no tice or direction, of which the following is a copy : Dill for Drawn by Sir. On Mr. Lie* due at Mettrt. Steady & Co. A. Lombard Street. Pirate call between Two and Four o'clock. If not paid by five o'clock, the bill is sent to the notary's. It is brought to the banking-house the following morning, with the notary's ticket attached to it, stating the reason why it is not paid. The bill is then returned. If it be a foreign bill, that is, drawn from any foreign land, it must be pro- tested. Foreign bills are also protested for non-acceptance ; but inland bills are not, nor even noted, but the party who remitted the bill to the banking-house is advised of the circumstance. Bills under the value of 40*. are not subject to the stamp duty ; nor are drafts upon bankers payable to bearer on demand, provided the drafts ore drawn within fifteen miles of the banking-house, and they specify such place, and bear date on or before the day on which they are issued. A person drawing a cheque beyond this distance, is subject to a penalty of 100 ; the person knowingly receiving it, to a penalty of 20 ; and the banker paying it is liable to a penalty of 100. The post-dating of cheques to make them serve the purpose of bills of exchange is subject to the same penalties. (55 Geo. HI. ch. 184, 812, 813.) The following is the form of a Draft or Cheque : Jfh. 457. London, May 1, 1827. Mettrt. Hope, Rich, fr Co., Lombard Street. Pay John Dot, Etq-, or bearer, the turn of One Hundred Pounds. 100 Peter Thrifty fr Co. The words " or bearer" are essentially necessary, or the draft must be drawn on a stamp, and indorsed by the party who receives it Bills for 20*. and under 5 must specify the name and residence of the payee ; they must be payable within twenty-one days after date, and be attested by one subscribing witness. Every indorsement must be at- 32 Sills of Exchange. tested by a witness ; and must specify the name and residence of the indorsee. All bills drawn for a less sum than 20s. are illegal. A bill given for an illegal consideration cannot be enforced by the drawer, but it may be enforced by an innocent holder who had no knowl- edge of the illegal consideration, and who received the bill before it was due. The principal illegal considerations are those arising from usury, gambling, and smuggling. Bills drawn at not more than twelve months after date, are exempt from the operation of the laws against usury. The following is the Table of Stamp Duties upon Bills of Exchange : 4 s. s. Amounting to 2 and not exceeding 5 5 ct 5 5 20 (C 20 u 30 (1 30 (1 50 << 50 ct 100 u 100 (1 200 ( 200 u 300 (( 300 a 500 H 500 11 1000 (I 1000 d 2000 u 2000 H 3000 3000 " Not exceeding 2 months after date, or 60 days sight. Exceeding 2 months after dale, or 60 days sight. 8. d. s. d. 1 1 6 1 6 2 2 9 6 2 6 3 6 a 6 4 6 4 6 5 5 6 8 6 8 6 12 6 12 6 15 15 1 5 1 5 1 10 Foreign Bills drawn in sets : Not exceeding 100 Exceeding 100 not exceeding 200 200 500 500 1000 1000 2000 2000 3000 3000 " 1 6 each bill. 30 " 40 " 50 " 76 " 10 " 15 Foreign bills (those drawn from foreign parts) are not required to bear an English stamp, nor indeed any stamp at all. But bills dated from any place abroad, but actually drawn in England, on unstamped paper, are invalid. No action can be sustained to enforce payment, nor can they be proved in the Court of Bankruptcy against the estate of even the accepter. A banker should therefore use caution in taking bills where the drawers and the accepters are the same firm, one branch of the house residing in England, and the other branch residing abroad. Such bills may be fabricated in London for the purpose of raising the wind. If a woman accepts a bill, and is married before it becomes due, her husband may be sued for the amount, but she cannot. If a bill be in- dorsed to a woman, who afterwards marries, her husband must indorse the bill, unless she indorses it as the agent and by the authority of her husband. Should she have occasion to sue any of the antecedent parties to a bill, the action must be brought in the name of the husband, or else in the joint names of the husband and the wife. If a woman who is actu- ally married accept a bill by and with the authority of her husband, the acceptance is binding on the husband ; but if she accept a bill without 33 A Treatise on Banking. his authority, he cannot be legally compelled to pay it, unless it were given for article* ncceMary to her support A person under twenty -one yean of age, whether accepter, drawer, or indorser of a bill of exchange, cannot be sued at law, except the bill be drawn upon him for necessaries ; but if he draw a bill and transfer it to a third person, the third party may sue the accepter. The term " m-ces- vies is generally considered to include, not only those things which are essential to existence, but those also which are suitable to the rank of the party. Many articles are considered necessary to the son of a nobleman, which would not be necessary to a man of an inferior station in society. If the drawee refuse to accept a bill, the holder may immediately bring an action for the amount against all the other parties, without waiting un- til the bill becomes due. And should the word "at" be written before the name of the drawee, it makes no difference, especially if it be written in such a manner as if designed to escape observation. But it is the prac- tice of the London bankers to hold bills refused acceptance, and merely give notice of the circumstance to the party who sent it to the bank. If, however, it be an inland bill, drawn after sight, the bill is noted for non- acceptance. If it be a foreign bill, it is protested, and the protest sent to the last indorser. If the bill be not paid when due, it is then protested for non-payment, and, with the second protest, returned to the last indorser. When a bill is drawn after sight, the day on which it is noted or protest- ed for non-acceptance, is regarded as the day on which the drawee has seen it, and the time on which it will become due is calculated accord- ingly. If the accepter, drawer, and all the indorsers to a bill become bank- rupts, the holder may prove for the full amount under each commission, and receive a dividend under each, provided he do not receive altogether more than 20*. in the pound. But if he receive a dividend under one commission before proving under the others, he can only prove for the balance. If a bill be lost, immediate notice should be given to the accepter, and to the bankers or other parties at whose house it may be made payable. If, after such notice, they pay the bill to any person who had not given value for it, they are accountable to the loser. But a person who had given value for a lost or stolen bill to a thief or to a finder, con recover the amount from all the parties in the same way as though he had received it, in the course of business, from the lost indorser, provided the bill was not specially indorsed. But if it was specially indorsed, and the thief or find- er should have forged the indorsement, the holder cannot recover the amount, even though he may have given value for the bill, but he must sustain the loss. If a lost bill should have been specially indorsed, or if the loser can prove that the bill has been destroyed, he can bring an action against the accepter for the amount. But if he cannot prove that the bill is actually destroyed, and it was indorsed in blank, he cannot recover from the ac- cepter. For it is possible that a finder may pass it for a valuable con- sideration to another party, who would thus be a bonafde holder, and might compel the accepter to pay him the amount In this case, there- 34 Bills of Exchange. fore, the loser has no redress in law, but he may apply to a court of equity, and might obtain an order upon the accepter to pay the amount of the lost bill upon receiving a satisfactory indemnity. The loser of a bill should cause payment to be demanded from the accepter the day it falls due, and give notice of dishonor to the drawer and indorsers, in the same way as though he had the bill in his possession. A country banker gave change for a Bank of England note for 100 which had been stolen. It was done at the time of the races, and im- mediately on opening the bank. The party who brought it stated he had some bets to pay at the race-course, and gave a fictitious address, which was written on the note. The loser of the note brought an action against the banker, and recovered the amount. The judge who tried the cause, stated that, in his opinion, there had been laches, i. e. neglect on the part of the bankers in not making further inquiry, and under his di rection the jury returned a verdict for the plaintiff. Any material alteration of a bill of exchange vitiates the bill, and it cannot be legally enforced against any of the parties, unless the alteration be made before the bill be accepted, and also before it has passed out of the hands of the drawer. Thus, if a bill be left for acceptance by the drawer, and the drawee alter the date, time, or amount of the bill, and then accept it, the altera- tion does not affect the validity of the bill ; but if the bill be left for accept- ance by a third party, and the drawee then alters and accepts the bill, the bill is vitiated. Any alteration in the date, sum, time, name of drawer or payee, or appointing a new place of payment, is a material alteration, and requires a new stamp. But any alteration made only with a view of cor- recting a mistake does not vitiate a bill, provided it be made with the con- currence of all the parties. If a drawee accepts a bill, and before he gives the bill out of his possession cancels his acceptance, he cannot be compelled to pay it. A bill must be presented in reasonable time. But what is a reasonable lime is a question of consideration for the jury, and the decision has varied according to circumstances. If a bill be presented at a banker's after the hour of business, the presentment is not in reasonable time ; nevertheless such a presentment is a legal presentment, if the banker or any per- son on his behalf should be there to give an answer to the party pre- senting it. Cheques, and notes payable on demand, should also be presented for payment within a reasonable time after they are received. It has been held that a person who receives a cheque is not bound to present it at the banker's till the next morning ; and if the bank was at a distance he was not bound to put the cheque into the post-office until the next day. But, perhaps, it would not be safe to rely upon these decisions. No general rule can be given ; for the time which may be reasonable in one case may be unreasonable in another. If a banker receive a bill or note by post, he is not required to present it until the next day. " A man taking a bill or note payable on demand, or a cheque, is not bound, laying aside all other business, to present or transmit it for payment the very first opportu- 35 A Treatise on Banking. nitr. It hu long sine* bam decided, in numcroiu CAMS, that, though the party hj whom the hill or note is to IT |>ui imt nMirv t<> present the instrument for payment till the morning next after the day on which it was re- cdred. And later cm*ea bare e*tlIMic,l. tlmi the holder of A dkWM hiw tin- whole of the hanking hours of the next day within which to present it for payment" (Byfes's Lav *f WU of Esdwye, p. 183.) In ihe following case it was deciIfndon bankers not to pay any cheque presented by or on behalf of another banker after four o'cloek, hut merely t mark it if good, and pay it next day at the clearing-house. On the rjth.at noon. Ilnrri.-on-' clerk took tin- cheque to the clearing-house, hut no person attended for Bloxam & Co., who stopped payment at nine on that morning, and the cheque was therefore treated as dishonored. The plaintiffs, in going with the cheque to Harrisons', passed Bloxams' house. On a case stating these facts, the court held that there had Men n ladies in the plaintiffs in not presenting the cheque to Bloxam & Co. on the 1 1th for payment, or in his hankers in not presenting it at the banking-house, but merely at the clearing- house, and therefore gare judgment for the plaintiff." (Baylcy On Biilt / Bills may be negotiated after they are due, but the party receiving an over-due bill cannot acquire a claim which the party holding the bill did not possess. For instance, one party may draw an accommodation bill upon another. As in this case no value had been given, the drawer could not sue the accepter for the amount. But if the drawer had passed this bill /or value to a third party before it became due, that party could sue the accepter. But if the drawer passed it to a third party even for value after it became due, the third party could not sue the accepter, but would stand in the same situation as the drawer. If a party lodged bills with a banker for the purpose of being collected, and the amount when received to be placed to his credit, and the banker gets them discounted, and applies the money to his own use, the customer has no redress except against the banker. The party who has given value for the bills to the banker can enforce payment of them. As the giving notice of the dishonor of a bill or cheque is of consider- able practical importance, I shall make a few extracts upon the subject from Mr. Justice Bayley's Treatise on Bills of Exchange. " Though no prescribed form be necessary for notice of the dishonor of a bill or note, it ought to import that the person to whom it is given is considered liuhlc, und that payment from him is expected. " And the notice ought to import that the bill or note has been dishonored. A mere demand of payment and threat of law proceedings, in case of non-payment, is not sufficient. i j'cially if such demand be made on the day the bill or note becomes due. "Notice must be gircn of a failure in the attempt to procure an acceptance, though the application fur such acceptance might have been unnecessary; otherwise the per- son guilty of the neglect may lose his remedy upon the hill. The 'notice mast come from the holder, or from some party entitled to call for payment or reimbursement. u A notice from the holder or any other party will enure to the benefit of every other party who stands between the person giving the notice and the person to whom Bills of Exchange. it is given. Therefore a notice from the last indorsee to the drawer will operate as a notice from each indorsee. " It is, nevertheless, prudent in each party who receives a notice, to give immediate notice to those parties against whom he may have right to claim ; for the holder may have omitted notice to some of them, and that will be no protection ; or there may be difficulties in proving such notice. <: A notice the day the bill or note becomes due is not too soon ; for though payment may still be made within the day, non-payment on presentment is a dishonor. " To such of the parties as reside in the place where the presentment was made, the notice must be given, at the farthest, by the expiration of the day following the refusal : to those who reside elsewhere, by the post of that or the next post day. Each partv has a day for giving notice, and he is entitled to the whole day; at least, eight or nine o'clock at night is not too late. He will be entitled to the whole day, though the post by which he is to send it goes out within the day. " And though there be no post the succeeding day for the place to which he is to send ; therefore, where the notice is to be sent by the post, it will be sufficient if it l>c sent by the post of the following day ; or, if there be no post the following day, the day after. " Where a party receives notice on a Sunday, he is in the same situation as if it did not reach him till the Monday ; he is not bound to pay it any attention till the Mon- day, and has the whole of Monday for the purpose. So, if the day on which notice ought thus to be given be a day of public rest, as Christmas-day or Good Friday, or any day appointed by proclamation for a solemn fast or thanksgiving, the notice need not be given until the following day. " And it has been held that where a man is of a religion which gives to any other day of the week the sanctity of Sunday, as in the case of the Jews, he is entitled to the same indulgence as on that day. " Where Christmas-day, or such day of fast or thanksgiving, shall be on a Monday, notice of the dishonor of bills or notes due or payable the Saturday preceding need not be given until the Tuesday following. " And Good Friday, Christmas-day, and any day of fast or thanksgiving, shall, from 10th April, 1827, as far as regards bills or notes, be treated and considered as Sunday. " But these provisions do not apply to Scotland. " If the holder of a bill or note place it in the hands of his banker, the banker is only bound to give notice of its dishonor to his customer, in like manner as if the banker were himself the holder, and his cnstomer were the party next entitled fo notice. " And the customer has the like time to communicate such notice, as if he had re- ceived it from a holder. " And therefore by thus placing a bill or note in a banker's hands, the number of persons from whom notice must pass is increased by one. " Thus notice sent by a London banker to a London customer the day after the dis- honor is in time ; and if the customer communicate that notice the day following, that will be in time also. " It is no excuse for not giving notice the next day after a party receives one, that he received his notice earlier than the preceding parties were bound to give it, and th:it he gave notice within what would have been proper time if each preceding party had taken all the time the law allowed him. The time is to be calculated according to the period when the party in fact received his notice. Nor is it any excuse that there arc several intervening parties between him who gives the notice, and defendant to whom it is given ; and that if the notice had been communicated through these intervening parties, and each had taken the time the law allows, the defendant would not have had the notice sooner. " Sending a verbal notice to a merchant's counting-house in the ordinary hours of business, at a time when he or some of his people might reasonably be expected to be; there, is sufficient ; it is not necessary to leave or to send a written notice, or to send to the house where he lives. Sending notice by the post is sufficient, though it be not received ; and where there is no post, it is sufficient to send by the ordinary mode of conveyance. " And it is not essential the notice should be sent by the post where there is one ; sending to an agent by a private conveyance, that he may give the notice, is sufficient, if the agent give the notice, or take due steps for the purpose, without delay. " Notice to one of several partners is notice to all : and when a bill lias been drawn D 37 A Treatise on Banking. poo one of the partners, and by nim arrvpted and dishonored, it i on- / to give notice of *urh dUhonor to the turn . tor tin-, must necessarily be known to one of them, and the knowledge of one is the knowledge of all. "Upon an acceptance parable at a banker*, n.>n. . <>i n,.n j..i\ im m n<--l nut ! givm to the accepter ; for be makes the banker* hi* agenu ; presentment to them i presentment to him " A penon who ha* been once discharged by laches from his liability on a bill or note i always discharged. And, therefore, where two or more parties to a bill or note bare been so discharged, but one of them, not knowing of the laches, payi it ; h<- lr* it in his own wrong, and cannot recover the money from another of such As many bills drawn in fon-ign Inngungcs pass through the hands of a l..ni'lon banker, it may be useful to give a list of some of those words v. Inch express the amount and the time, the two main points in a bill of exchange : A>X>'*A, . frVmoa, l>utch, . Fr~*,. I hitch, /VencA, < >m- Two Three Sixty Ninety. Kin y.w,-i Dr.-i Sechzig Neunsig. Km Twee Drie Zcstig Nc-.'ini-. Un Deux Trois Soixante { ( *sSf**' or Uno Due Tre Sessanta Nonanta, or Noranta. Uno Dos Trrs Sesenta Noventa. Hum Dons Trcs Secenta Noventa. Twa Tre S.xti Nitti. l\n To Tre Tredsindstyre Halvfemtcsindstyre. , , Two months after date. Three days after night. . Zwei monate nach dato. Dn-i tape nach sirht. Twee maanden na dato. A deax mois de date. Drie dagen na zigt. A trois jours de rue. . . .Ad.. Mi dop.d.. *-* - Partvmtete, . . .A dotis mczes de data. A tres dias vista. Swedish, . . . Twa manander ifran dato. Tre dagar eftcr sigt. . . .To maaneder efter dato. Tre dage efter si^t. In all the above languages, " at sight " is usually expressed by a except the French, which expresses it by d rue. " At usance " is ex- pressed by a uso or ad uso. The names of the months so nearly re- semble the English, that a mistake can but rarely occur. The following are forms of bills in each of the above languages : FREVCU. IMlr, fc 28 SeptenAre, 1848. Bon pour 1 58 9 flbriEaffc Au ringt-cinq I>ecrmbre prochain, H noia pleura payer par ce marulat d fordre de nout- m(me* la tomme de amt cinauanle-huit livrtt tterlings 9 ttu-Uitiys valeur m notu-mima et q*e paurra sun-ant tavu de A d Ltmdra. Qnvur. , den 28 October, 1 M8. Pro 100 Sterling. Zvti monaU nock dato zahlat SSe gryen diren Prima Wtcfmrl an die Ordre de flerrn __ Em Hundart Pfund Sterling dm Werih erhalten. Sit bringm told* af Redtnung lout Dericht mm Oerren _ 38 Bills of Excluinge. DOTCH. Grouw, den 1st. November, 1848. FOOT 59 17 6 Tioee maanden na data gelieve UEd te betalen voor dezen omen prima Wisselbrief de se- cunda niet betaald zynde acm de ordre van de Heeren _ L negen fr K Hft>9 Ponden zeventien schdling en zespences sterling, de waarde in rekening UEd stelle het op rekening met of zander advys van de Heer __ _ te London. ITALIAN. Livorno, le 25 Settcmbre, 1848. Per 500 Sterline. A Tre mesi data pagate per questa prima de Cambio (una sol volta) aW ordine _ ., la somma di Lire cinque cento slerline valuta cambiata, e ponete in conto M. S. secondo fawiso Addio Londra. SPANISH. Malaga, dZOde Setb" de 1848. Son 300. A noventa diasfecha se serviran V* mandar pagar por esta primera de cambio d la orden de los S r " _ ___ __ Tres cientas libras Esterlinas en oro o plata valor red- bido de dhos S ra que anotaran valor en cuenta segun aviso de A los &* _ _ Londres. PORTUGUESE. 600 Esterlinas. Lisbon, aos 8 de Dezembro de 1848. A Sessenta dias de vista precizos pagara V _ por esta nossa unica via de Letra Segura, a nos ou a nossa Ordem a quantia acima de Seis Centas Livras Es- terlinas valor de nos recebido em Fazendas, que passera em Comta segundo o aviso de AoSen r Londres. SWEDISH. Bjorneberg, den 23 September, 1848. For Sterl. 100. Nittio Dagar efter date behagade H. H. emot denna prima Wexel (secundo obetald) betala till Herr eUe ordres Etthundra Fund Sterling torn stalles i rakning enligt avis. Herrar London. DANISH. Kjobenhavn, 9 December, 1848. Rbae 4,000. Tre maaneder efter dato behager de at betale denne Prima Vexd, secunda ikke, til Herr eller ordre med Fire Tusinde Rigsbank Daler, Valutta modtaget og stilles i Regning ifSlge adois. Herrer London. Bills of exchange form a large proportion of the circulating medium of Lancashire, and supply the place of country notes. The following ac- count is given by J. Gladstone, Esq., M . P. : * " We sell oar goods, not for payments in cash, such as are usual in other places, but generally at credits from ten days to three months, to be then paid for in bills on Lon- don at two or three months' date. Those bills we pay to our bankers, and receive from them bills or cash, when we have occasion for either, to make our payment*. The bank-notes or gold we require for our ordinary purposes and charges of merchan- dise of every description. The account is kept floating. The interest on both sides is calculated At the same rate, at present five per cent. Last year the rate was reduced ro four and the banker charges a commission of a quarter per cent, on the amount of 39 A Treatise on Banking. OM rid* of the account. That rharg U his mniinrrntion, and that of hu hankers in LoJos\ tat paring \':.<- ..:,:, i, n , ;) . !,,i,k, I m.n l,.nr m his , ii-tom. r* ; il'llmt COMMestte ia entire, the rtutomer U occasionally in his banker'* debt, but more fre- i(ucntlv the balance U in his favor. '"os that extend to the whole of Lancashire ? I believe the syntcm at Munches- Mr, Preston, and the other print -i|.al t-> us is .imi!nr: I urn not u'wan- i.f HIIV other. Then are tome small country l-miki-i- in tin- in i<;lilw>iirhood of Manchester lu, i-uc promissory notes, but I do not know any tiling of tln-ir prm-tici- ; none of t| : .- nn.i. i,-- apectable banks in Lancashire do issue r >nls, 216, Glml>t. If I sell a thousand pounds' worth of goods to a whole*alc ;;ro, ,- r , or any other \#T- soo who again distributes them to hi- customers in tin i mintry. win n In ncs to |,ny me the 1.000 he will do so in bill*, ninnin- from 10 to any other MIIII ; tin- .1. 1 ' <> may be paid in twenty or thirty lulls of i-xi-lmn-r, lirnwn on London, uml guncrnlly at two and sometimes three months' date." (Lords, 227, Gladstone.) Mr. Lewis Loyd, of the firm of Messrs. Jones, Loyd, & Co., estimated, in 1826, that the circulation of Manchester consists of nine parts bills of exchange, and the tenth part gold and Bank of England notes. Others think the proportion is as high as twenty to one, or even fifty to one. (See Evidence of Lewis Loyd, Esq., and of Mr. Henry Burgess, before the Committee of the House of Lords, pp. 294, 298.) Mr. Loyd sfau-d he had seen bills of 10 with a hundred and twenty inilmx DM nis upon them; and when the stamp duties were lower, bills wen- drawn of a less amount He gives the following criteria of accommodation bills : " Bills that are issued for speculation generally travel to London very rapidly, with very few indorsements upon them ; they ore wanted to be converted into bank-notes immediately, and come quite clean, and with- out any marks of negotiation upon them ; and, besides that, we know the parties upon them pretty well," In Scotland on accommodation bill is called a wind bill. It may be mentioned, that after the establishment of branches of the Bank of England at Manchester and Liverpool, the bill circulation of Lancashire was considerably diminished. Most of the banks made agree- ments with the branch bank, stipulating that in consideration of having a certain amount of discount, at a reduced rate of interest, they would not kMue for local circulation any bills they had discounted for their custom- ers. These agreements have been modified since the act of 1844 ; but still the main circulation of Lancashire consists of Rink of England notes. It would not now be possible to find a bill with a hundred and twenty indorsements. The late Mr. Leatham attempted to calculate the amount of bills in cir- culation, or, more properly speaking, in existence, during each yar. He, through Lord Morpeth, obtained % return of tin: number of stamps issued from 1835 to 1KJ9 inclusive, and based his calculations on the sup- position that each bill was circulated for half the amount \\hirh the stamps would cover, which was considerably under the amount. From the ex- perience of his own bank, compared with that of the principal discount offices in London, he found that the overage date of bills, including for- eign and inland, was three months. He then took the whole stamps for a year and divided them by four, which gave the amount circulating at onetime. By a similar induction, he estimated foreign hills at one sixth of the English, though the proportion was rather greater ; and he took the 40 Surplus Funds. same average for Irish bills in the years where no official returns had been made. Mr. Leatham's statement is as follows : Bill Circulation of Great Britain and Ireland, during the years undermentioned. 1815. 1821. 1825. 18526-27. Bill Stamps for Great Britain, creating the sum, 477,493,100 232,429,800 260,379,400 207,347,400 Estimated Irish Bills, 79,582,183 38,738,300 43,396,566 34,557,803 Foreign Bills, 92,845,880 45,194,683 50,629,327 40,317^072 Total, . ' . . . . 649,921,163 316,362,783 354,405,293 282,222,300 Average circulation, 162,480,290 79,090,695 88,601,323 70,555,576 The following is a similar return for the years 1835 to 1839. 1835. 1836. 1837. 1838. 1839. British Bills, 294,775,269 355,288,900 333,263,600 341,947,400 391,203,000 Irish Bills, 51,109,061 59,155,607 54,179,165 54,359,464 55,615,722 Estimated amount of Foreign Bills, 57,914,721 69,420,406 65,012,080 66,500,577 75,479,120 Bills created by bankers compound- ing for Stamps, .... 1,604,000 2,078,560 2,624,600 2,696,600 3;196,000 Total, . . 405,403,001 485,943,473 405,084,445 465,504,041 528,493,842 Average circulation, . . . 101,350,762 121,485,868 113,771,111 116,376,010 132,123,460 There are some knotty questions connected with bills of exchange ; such as, Ought bills of exchange to be regarded as currency ? Have bills of exchange any effect on the prices of commodities ? In what way do bills of exchange adjust the foreign exchanges ? We have discussed these questions elsewhere ; but, as they more appropriately belong to the sci- ence than to the practice of banking, we do not introduce them into the present work. SECTION VL THE ADMINISTRATION OF A BANK WITH REGARD TO THE EMPLOYMENT OF ITS SURPLUS FUNDS. THE means of a London banker consist mainly of his capital and his deposits. A certain portion of this sum is kept in the till, to meet daily demands ; another portion is advanced in the way of discounts or loans to his customers. The remainder forms his surplus fund ; of which a part will probably be invested in government securities ; loans to bill brokers, payable on demand ; in short, loans on the stock exchange, or in firstrate bills obtained through the bill brokers, and hence styled brokers' bills. The government securities are the more permanent of these investments. The amount will seldom vary. It is not deemed creditable for a bank to spec- ulate in the funds, or to buy and sell stock frequently, with a view of making a profit by the difference of price ; hence a banker sells his gov- ernment securities only in a season of pressure, as a means of precaution, or in order to meet urgent demands. On other occasions, he will, when necessary, reduce his short loans or brokers' bills. These form his fluc- tuating investments. In seasons when money is abundant his deposits will increase, and perchance, at the same time, the demand of his cus- D* 41 A Treatise on Banking. tourers for loan* or discounts will dimini-h. His surplus funds will thus increase. But these temporary surplus funds ho will on no account in- vest in government securities, as his deposits will be certainly, .-mil per haps suddenly, reduced, ami In- might have to reali-/ ument se curities at a lorn. He will in this case increase his loans to brokers, and his brokers' bills. And though ho will pot as much interest as In- ran, he will take a very low interest rather than keep the money unproductive in his till, or invest it in a more permanent form. \\Y will now take a short review of the different kinds of investment we have meni The three grand points for consideration are, convertihiliiy, exemption from loss, and a good rate of interest. But first we will notice tin cumstances which regulate the amount of cosh to be kept in the till. The amount of money which a banker will keep in his till depends upon circumstances. First, the amount of his deposits. It is natural to suppose that when his doj>osits are large he will keep mure mi.ney to meet them than when his deposits are small. Secondly, the amount of his daily payments. These will not at all times correspond with the amount of the deposits, for some accounts are more operatirr than others. On commercial accounts, for instance, the payments will be much heavier in proportion to the average balance, than on accounts which ure not commercial. The city bankers pay much larger sums every day, in proportion to the amount of their deposits, than the bankers at the \\ end. Thirdly, if a banker issues notes, he will keep a less amount of other money in his till. The popular opinion is, that he keeps im he has to provide payment for his notes as well as his deposits. This is true in seasons of pressure. But in ordinary times he keeps less, as he pays the cheques drawn on account of his deposits with his notes, ami tin .- notes often get into the hands of another banker, w ith whom he settles by a draft on London. His reserve to meet his notes is kept, not in his own till, but in London, where it probably yields him interest. Indeed, when his deposits are withdrawn in large amounts, they are more usually with- drawn by a draft on London than in any other way. Fourthly, the num- ber of the branches. If a bank has many branches, the total amount of cash kept in the tills of the head office and all the branches put together, will be considerably more than would be required if the whole of the bus!- ness were collected into one place. In the case of a run, the ditl'eruico is considerable, as every point open to attack must be well fortified. stoppage of one branch, even for a short time, would bring discredit upon the whole establishment. Fifthly, in London the amount of notes to he kept in the till will be effected by the privilege of clearing. Those hank- ers that ** clear," can pay bills and cheques upon them l>y the hills and cheques they have upon other bankers. Those hanks that do not i must pay all the bills and cheques upon them in hank-notes, before th y receive payment of the bills and cheques they have upon other hankers. Hence they must lock up every night with a larger amount of cash in their vaults. / We need hardly say, that with every banker the amount in the till will / fluctuate from day to day. Though a banker has a certain av< ** amount in his own mind, below or above which he does not swerve very 42 Surplus Funds. widely, yet the cash-book will seldom be exactly this amount. Sometimes he will strengthen his till, in the prospect of large payments that mav come upon him suddenly. At other times he will run his till low for a day or two, in expectation of large sums that will shortly be due to him. During the day, too, either the receipts or the payments may be heavier than he expected, and hence, now and then, the cashier reports to the chief clerk, or to the banker, the state of the till, in order that, if neces- sary, it may be replenished. The temperament of a banker, too, has some effect in this case. Some bankers are so cautious that they will " lock up " with a large amount of cash ; others are so anxious to make profit, that they will keep their cash very low. The state of the monev market will also influence the tills of the bankers. When money is abun- dant, a banker will lock up with more money than he wants, because he cannot employ his funds. When money is so scarce as to betoken a pressure, he will also lock up strong, so as to be prepared for any emer- gency. In fact, there can be no general rule for regulating the amount of the till. Every banker must be guided by the experience of his own bank. The directors of the bank of England consider that their reserve in bank-notes and gold should be equal to about one third of their depos- / its. From the accounts published by some of the London joint-stock banks, it would appear that the " cash in hand " is equal to about one ( fifth or one sixth of their liabilities. Even this, we conjecture, is a higher ) proportion than that which is generally kept by London bankers, espe- cially by those who settle their accounts with each other at the clearing house. To resume : After a banker has furnished his till, and supplied his cus- tomers with such loans and discounts as they may require, he has a sur- plus of cash. This surplus may be considered as being divided into two parts, though it is never actually so divided, the pjcrmanent sur- plus, which the banker is not likely to require, except in seasons of ex- treme pressure, and the temporary surplus arising from fluctuations in the deposits. We shall now notice those modes of investment to which we have referred. With regard to government securities, we have high authority from the testimony of practical bankers. The following are quotations given be- fore the Joint-stock Bank Committee, in the year 1836, by the late Vin- cent Stuckey, Esq., the founder of Stuckey's Banking Company, in Som- ersetshire, and James Marshall, Esq., the retired secretary of the Provin- cial Bank of Ireland. Mr. V. Stuckey : " What is your reason for keeping so large a sum in Government stock ? I have always found from my experience, except two days in my life, that I could get money more easily upon those securities than any other. " Is it easier, in times of emergency, to obtain money on government stock than on good mercantile bills ? I have always found it so. " You do not concur with any witnesses who state that they have found good ne- gotiable bills mere easy to obtain money upon than government stock? No; I have never found that with a good bill ; even of the house of Baring, I could get money more easily than on government stock. ' Do you consider that, generally speaking, in London the rate of interest at whicli you borrow money on exchequer bills and stock is notoriously lower than that at 43 A Trtmtuc on Banking. Mfc at Mnk-ssfil-- Tes, it U lower, and for that reason we Mr. - Win yo Idbm lb Come whrthrr H S th oe of the Provincial Bank to rave* any portion of its And* is the poblk securities! It has been its uniform proc- ure M to do. * By public m.m MM, wast do you understand ? The Console, for instance; there are various kinds of government stock ; exchequer bilU and Bank of England stock *r* Mttralhr considered M a pohtte sort of securit v. ' you bold stork in London only, or in 1 >uMin an well M in London 1 In Dub- lin, hat to a mated eaneut. bscauss it is not easily convertible there. 'i what ground is it that it is not easily convertible in Dublin ' From the lim- ited natai* of the merit et M compered with Ix>ndon ; we could nui .-> 11 i-\ > n un imma- tun without towering considerably the price. - Have there not been at various times, from various causes, runs on the Provincial Bank, which rendered U necessary to supply large amounts of specie to that country 1 There have repeatedly. " Do you consider, from your experience, that it would have been comix-tent to the hask to have maintained iu fall security, with -.<"... :;..:i t the directors, it' they had not been BO mend of very considerable' I'un.le.l pr..|M-rty in this country Certainly not; speaking of the last run that happened especially, 1 must say thai that dir from any former run in this respect. " Ton were conversant with the management of the Scotch banks prior to ronr con- lion with the Provincial Bank f Yes. Is it not the usage of all the Scotch banks in like manner to maintain a very ., ,.,.! tie portion of their funds as invested in the government securities ? I i>. !.%< the practice with all is generally so, but I con speak particularly to that of th.- three oldest banks, as they are common lv called, tin- three . h:;ricrcd hanks. The Hunk of Scot- land was erected by act of Parliament, the K,.\ .! Hunk of Scotland and the Mriti-h Linen Company are erected by charter, hut have- he, u i-. .,...-!, i/. .1 in the same \\ that there are three public banks in , that good bilk* of exchange are more convertible than even exchequer hills ; and, even if not convertible, the money comes back as the bills fall dm-, and thus the reserve is constantly replenished. The following \.<>d bill* of ClcJMafB Tbej are coming due every day, and are ili!!.!..!. , ,,MM.ii' 'I a MTV eligi- ble investment It it advantageous to a batik when it is in a position to get that I- : : ':.. \ K> jro consider that bill* of exchange may safely be relied upon, as aftij you never know them to fail? I have known e.vhr>|iier bill-, to tail, hut I hare aerer known bills of exchange to fuil. I am alluding to the panic of 1825. I mld not tell exchequer bills for several hours at that time Y'u could discount bills ? At that time money was obtained upon bills on the Mine day on which I could not tret money fur exchequer dills ; and having paid a l.ijb premium for exchequer hills, and met with i_aeat loss, I have rather an objr< -timi to Loti ten "Do TO mean to say, that you recollect a day upon which you could obtain money opoa bills of exchange,' and could not obtain mo'ney upon ttobfBSt hills ? I do." Some of the Scotch hankers, too, seem to be favorable to investments in commercial bills. Mr. Anderson, the general manager of the Union Bank of Scotland, gave the following evidence before the Committee on Banks of Issue, in 1841 : "Do TOO consider, in fart, that the holding of a reserve in government se<-nritii-i, fold, sad Baak of England notes, independently of the ordinary daily <>)> rail.. your bonne*. U, or is not essential to the perfect safety of a bank ? I not think that'll is qwte essential that they should be government securities. Available -.-, mi- list 1 sioay think qirite essential ; but then comes the question. What i- available ' "Are yoo of opinion that bills of exchange are a proper description of P- r. -. :. )> held hxlfpeadenily of the other species of resen-es that have been mentioned ? I faMld tbiok so. i > think that bills of exchange may safely be relied upon at all times? We hare Mr. Garner's authority for saying so. Is then ao essential difference _ exchequer bills and stwk, and hills of exchange as reserves? If t! ',:in-.- are ;..-if.-, ;|y well se- shoald think DOC, so far si the safety of the bank is concent* d. " The authority of Mr. Samuel (Jnrney, from his high standing in tl eity, is so constantly referred to upon this subject, that we copy his cvi- 46 Surplus Funds. dence. It was given before the Committee on Joint-stock Banks, in the year 1836 ; previous, of course, to the passing of the act of 1844. " Would not the result from that opinion be, that a properly conducted establish- ment, whether a private or a joint-stock bank, should have some government securities or exchequer bills on which always to rely as a resource in a moment of such emer- gency ? Experience has shown that it is not needful ; bills of exchange are quite as good a security to hold in time of difficulty as exchequer bills or stock ; in most re- spects very much better. " Cannot you conceive a state of things in the money market a state of mercantile discredit, for instance when it might be possible to procure money on government securities, when it could not be procured on private security in the shape of bills ? Such difficulty may possibly exist under very peculiar circumstances ; but I repeat my opinion, that bills of exchange have proved themselves to be a better investment for bankers than stock or exchequer bills. " It is quite intelligible why, in ordinary times, bills of exchange should be a prefer- able investment for money, inasmuch as there is no risk of loss by variation of pre- mium in the purchase and resale ; but would you wish the committee to suppose that in the case supposed by the question, of a great degree of mercantile discredit and doubt, an amount of exchequer bills would not be a more certain security on which to raise money than the bills of private merchants 1 That is a difficult question to an- swer; I doubt it. " Supposing a period of difficulty to arise, and two country bankers came up to London, one who could exhibit government stock to the extent of 25,000, and 25, 000 in bills of exchange, and the other banker exhibiting 50,000 in bills of ex- change only, which do you think would have the best means of procuring accommoda- tion in the London market to pay his engagement ? My apprehension is, that they would both get their supplies upon any particular emergency ; it is my judgment, that to a banker a good supply of bills of exchange of first-rate character is a better invest- ment for his funds, for which he is liable to be called upon on demand, than exchequer bills or any government security." A London banker never considers as a part of his reserve the bills he has discounted for his customers. Nothing could damage his credit more than any attempt to rediscount these bills. During the war, the London bankers had discount accounts with the Bank of England ; and during the panic of 1825, it is well known they discounted largely with that es- tablishment. But since that period they have not done so, and their in- dorsements are never seen in the money market. The practice is now more general of lodging money at call with the large money dealers. And it is in this way that the London bankers make provision for any sudden demand. It is rarely, however, that any large demand comes so suddenly as to occasion any inconvenience. And it may be observed, that such bankers as are members of the Clearing-house have the whole day to make preparation, one of the circumstances which enables them to lock up at night with a smaller amount of cash. In the morning the banker looks at his " Cash-book," and observes the ^f amount with which he " locked up " the preceding night. He then looks at the " Diary," which contains his receipts and payments for that day, as far as he is then advised. He then opens the letters, and notices the re- mittances they contain, and the payments he is instructed to make. He V will learn from these items whether he " wants money," or has " money to spare." If he wants money, he will " take in " any loans that may be falling due that day, or he may " call in " any loans he may have out on demand, or he may go further, and borrow money for a few days on 47 A Trfatisr on Hanking. tock or exchequer bttls. Should he have money to spare, ho will, ;>< r adventures discount broken' bill*, or lodge money on demand with th<: MlUbrokrr*, or lend it for fixed periods upon stock ur exchequer hills. There are some bill-brokers who usually nmko their rounds i-v.-ry morn- ing, first calling oa the parties who supply th.-m with bills, and thru call- ing on the bankers who supply them with money. Tin- stock brokers. too, will call after "the market is open," to inform the hanker how "thing* are going " on the Stock Exchange, what operations an- taking place, and whether money IN ahundant or scarce "in the h..u-.-"; also what rumors are afloat that are likely to affect the price of the funds. It is thus that a banker regulates his investments, and finds employment L for his surplus funds. In our opinion, it is best for a hanker not to adopt exclusively any one of the investments we have noticed, hut to distribute his funds among :..' \\ . .!<,. MM :h,-i: |.ra.-;:--,-il hanki-rs of hi-_'h sMiniin-z ha\ e bean in favor of government securities, as being at all times convertible. The objection on the part of others has been, that the value of these secu- rities very much fluctuates, and as their realization will be required only in H of pressure when the funds are low, it is sure to be attended with On the other hand, it may be stated, with regard to " loans on de- i, w that the recent failures of bill-brokers have shown that the " de- may not always be readily met And with regard to u brokers' bill*,* 1 the numerous failures among houses of the first standing have proved that great losses and most inconvenient " locks-up " may occasionally take place from such securities. Without condemning other modes of in- vestment, we are strongly inclined to favor government securities, though fully conscious of the losses they may occasionally produce. There is one consideration that must bo taken into account : a bank that has large surplus funds, if it makes no investments in government securities, will be strongly tempted to invest their funds elsewhere in other securi- ties that may not be so convertible. It is true that more interest may for a time be obtained, but ultimately the bank may, though in a state of per- fect solvency, be compelled to stop payment from being unable to realize Hi .:.'' -''' i 1 1 ' - . Another advantage of a large investment in government securities M, that the bank, by the publication of its balance-sheet, has always the meant of showing to its depositors that a large portion of its deposits is at all times amply secured. The Bank of England states the amount of their ** government securities " distinct from the " other securities." It may so be that the " other securities" are as good as the govern UK i cunties, and perhaps more profitable, but the public do not know that to be the case; and were all the investments in "other securities," they might not feel the same degree of confidence as to the prompt repayment of their deposits. The same principle applies to other banks. And it may reasonably be supposed that between two banks in similar circum- stance* as to other respects, depositors would rather lodge their money in a bank which had a large amount of government securities, than in one which had none. As we have referred in this section to some of the operations of the 48 The Stock Exchange. Stock Exchange, this may be a proper place to discuss the nature of these transactions, so far at least as concerns bankers. The reader is of course aware that the " Stocks," or the " Funds," or by whatever other name they may be called, are debts due from the na- tion to those persons whose names are entered on the bank books. The man who holds 100 consols is a creditor to the nation for 100, for which he receives 3 per annum ; and the price of consols is the amount of the money for which he is willing to transfer this debt from himself to another person. Now, if this man knows another who is willing to give him, say .90 for this 100 consols, they can go to the bank, and the seller, being properly identified, will transfer this 100 consols into the name of the person to whom he has sold it. His account is then closed in the bank books, and a new account is open in the name of the buyer ; for every holder of stock has an account in the bank ledger, in the same way as bankers and merchants open ledger accounts for their customers. The seller of the stock will also give a receipt to the buyer for the money in the following form : Consolidated 3 per Cent. Annuities Dividends due Jan. 5th, July 5th, and are usually paid a few days after. Transfer Days Tuesday, Wednesday, Thursday, Friday. Holidays accepted. RECEIVED this 184 of the sum of day of being the Consideration for Interest or Share in the Joint Stock of Three per Cent. Annuities, erected by an Act of Parliament of the 25th Year of the Reign of King GEORGE II., entitled, An Act for converting the several An- nuities therein mentioned, into several Joint Stocks of Annuities, transferable at the BANK of ENG- LAND, to be charged on the Sinking Fund; and by several subsequent Acts, together with the Pro- portional Annuity at 3 per Cent, per Annum, at- tending the same, by this day transferred to the said Witness Hand Witness JX^ 1 The Proprie- tors, to protect them- selves from FRAUD, are recommended to ACCEPT by them- selves or their Attor- nies, all TRANSFERS made to them. s. d. But parties do not usually treat with each other in this way. A broker is employed either to buy or to sell, as the case may be. The stock- brokers are an association consisting of about six hundred persons, who meet together in a building in Capel Court, Bartholomew Lane, close to the Bank. Each broker before admission must find three securities for E 49 A TrtatiM on Banking. 4800 each, which sum it applied to meet any claim* the other members of the "House** may hare upon him during the first two yean. The suretyship then eeeaes. The subscription paid by ea<-h m. mVr is ten guineas par annum. The Home is gorerncd by a committee of thirty Bot although all the "member* of the House" are called stock- broker* by the public, yet within the House they are dividi-d into two classes, brokers and jobbers. A broker, as the n.-un*- implies, is an apent who buys or tells for his customers out of th- ll.nis.-, and ho charges thorn a commission annn thr amount of the stock. A stock-jobber is a Hook merchant; but he does not deal with tin- puhlic ; In- dcais only with ttv* brokers ; and be is at all times ready cither to buy or to sell. The price at which he sells 1 more than the price at which he buys. If one broker has aa order from his customer to buy 100 consols, and another broker has an order to sell 100 consols, these two brokers do not deal together, but both go to a jobber. One will sell his consols to the jobber, say at 90, and the other will buy his consols from the jobber at 90J. Hence the difference between the buying and the selling price of consols is always , and thus in the newspapers the price is quoted in this way, 90 to 90}. A banker is, of course, one of the public, and when he wants to buy or to sell stock, he gives instructions to his broker, and the process is as we have now described. Were there no jobbers, a broker would not easily find at all times another broker who had occasion to sell the same amount of stock which he wished to buy, and he would have a difficulty in buying or selling small amounts. But there is no difficulty with the jobbers. The jobbers will not only buy and sell stock on the same day, but they will buy stock on one day, and agree to sell it at a future day, or vice, versa. These future days are called Che settling days, being the days on which the members of the House settle their accounts. They are fixed by the Committee of the Stock Exchange, and they now occur about once a month. Now, if a banker wants a sum of money for a short time, either to pay off a deposit or to make an advance to a customer, he will direct his stock-broker to sell, say 50,000 consols " for money," and buy them " for time," that is, against the next "settling day," or, as it is sometimes called, the next ** account day." On the other hand, if a banker hoe money he wishes to employ for a short time, he will reverse the operation, and ioiirr<, on luvount of .stock tin- for tsa jsan and upward*, and of nnrliuinnl ilividrnd.i, and also on account anJ bcquc*u, but which turn is not paid or provided for. VIL THE ADMINISTRATION OF A BANK DURING A SEASON OF PRESSURE. A f RKSSUBE on the money market may be defined a difficulty of getting money in the London market, either by way of discounting bills, or of loans upon government securities. This difficulty is usually accompanied by an unfavorable course of exchange, a contraction of the circulation of the Bank of England, and a high rate of interest. These three circum- stances have the relation to each other of cause and effect. The unfavor- able course of exchange induces the Bank of England to contract her cir- culation ; and the contraction of the circulation, by rendering money more scarce, increases its value, and leads to an advanced rate of interest. The removal of the pressure is in the same order, the foreign ex- changes become favorable, the Bank of England then extends her circu- lation, money becomes more abundant, and the rate of interest falls. The degree to which the exchanges are unfavorable is indicated by the slock of gold in the Bank of England; and when this is at its lmi st amount the pressure may be considered to have attained its extreme point; for as the amount of gold increases, the bank will extend her cir- culation, and the pressure will subside. (An Inquiry into the Causes of ike. Pressure on the Money Market during the year 1839, by J. W. Gilbart.) If we take a review of all the recent pressures on the money market, we shall find they have always been preceded by the following circum- stances. First, by abundance of money ; secondly, by a low rate of in- terest ; thirdly, by some species of speculative investments. The prin- cipal pressures that have occurred of late years, have been those of >, 1836, 1839, and 1847. The following is Mr. Horsley Palmer's opinion of the causes of the pressure of 1825, as stated to the Bank Committee of 1832 : Will TOO cute to the committee what, in jour opinion, w:i> t! . nature ond the Starch of las criafc ia 1825 t I have alway* co'tuidcrcd that the first step towards the u Season of Pressure. * excitement was the reduction of the interest upon the government securities. The first movement in that respect was, I think, upon 135,000,000 of five per cents.. which took place in 1823. In the subsequent year, 1824, followed the reduction of 80.000,000 of four per cents. I have always considered that reduction of interests, one fifth in one case and one eighth in the other, to have created the feverish feeling in the minds of the public at large, which prompted almost every body to entertain any proposition for investment, however absurd, which was tendered. The excitement of that period was further promoted by the acknowledgment of South American republics by this country, and the inducements held out for engaging in mining operations, and loans to those governments, in which all classes of the community in England seem to have partaken almost simultaneously. With those speculations arose general specu- lation in commercial produce, which had an effect of disturbing the relative values be- tween this and other countries, and creating an unfavorable foreign exchange, whicti continued from October, 1824, to November, 1825, causing a very considerable export of bullion from the bank, about seven millions and a half. Commercial specula- tions had induced some bankers, one particularly, to invest money in securities not strictly convertible, to a larger extent than was prudent ; they were also largely con- nected with country bankers. I allude to the house of Messrs. Pole & Co. ; a house originally possessed of very great property, in the persons of the partners, but which fell with the circumstances of the times. The failure of that banking-house was the first decisive check to commercial and banking credit, and brought at once a vast number of country bankers, which were in correspondence with it, into difficulties That discredit was followed by a general discredit throughout London and the in terior." p. 47. With regard to the pressure of 1836. there was in the beginning of that year no appearance of distress ; but, on the contrary, every symptom of prosperity, attended by its usual concomitant, a readiness to engage in speculative undertakings. The following description of this period is taken from the speech of Mr. Clay, on introducing his motion respecting Joint-stock Banks, May 12, 1836: " To what extent the operations of the joint-stock banks may have contributed to create the present state of excitement in the commercial world, must, of course, be mere matter of conjecture. That they have had some considerable influence is proba- ble, from the fact that the excitement and rage for speculation is greatest in those parts of the kingdom where the operations of those establishments have been most active. London has been comparatively unmoved, but Liverpool and Manchester have wit- nessed a mushroom growth of schemes, not exceeded by the memorable year 1825. I hold in my hand a list of seventy contemplated companies for every species of under- taking, which h'ave appeared in the Liverpool and Manchester papers within the last three months. This list was made a fortnight or three weeks since, and might prob- ably now be considerably extended. It is impossible also, I think, not to suspect that the facility of credit, and consequent encouragement to speculation, to which I have alluded, cannot have been without its effect in producing the great increase of price in almost all the chief articles of consumption and raw materials of our manu- factures. That increase has been enormous, not less than from twenty to fifty, and even one hundred per cent, in many of the chief articles of produce, of consumption, and materials of our manufactures." These appearances continued with little alteration until the month of July, when the Bank of England raised the rate of discount to four and a half per cent. It then became known that there had been a demand upon the bank for gold from the preceding April, and this measure was adopt- ed by the bank as a means of rendering the foreign exchanges more fa- vorable. This being found ineffectual, the bank in September raised the rate of discount to five per cent. Besides raising the rate of interest, the bank adopted other measures of increasing the value of money. A large E* 53 A TVwKfiM on Batting. IHlMMrt of AmWJCtn bills upon fint-nitr houses had IM TII offered for dis- oount and rejected. A high degree of alarm was immediately spread throughout the community. The dread of a |>.mir similar u> that of l *:. nlraost universally prevailed. Those who had i unwilling <<> rade became suddenly stagnant ; the prices of all fi.mim.d- ities fell considerably; and numbers of commercial houses, chiefly of the seooad das*, suspended payment. Many railway and other pn.j, < :.s now uto oblivion. The alarm that existed was kept tip by the monthly accounts of the Bullion in the Bank of Kngland. Tin- public returns showed a gradual decline from April, 1836, to February, IKH. It was therefore supposed, that the Bank of Kngland would be under the necessity, for her own nafety, of Still further contracting her issues, and thus increasing tin tsting pressure. This apprehension caused all persons who had money lo retain it m their possession, nnd bankers and others withheld accom- modation they would otherwise have Ix-en disposed to grant. This state of alarm was considerably augmented by the publication of the Report of the Secret Committee of the House of Commons upon Joint- stock Banks. This committee had been appointed on the motion of Mr. Clay, the Member for the Tower Hamlets, whose speech on the occasion might be termed a bill of indictment The joint-stock banks had rapidly increased ; they had issued small shares ; they had large nominal capitals ; they had circulated an excessive amount of notes ; they had promoted speculation. These were the charges brought against them ; and they had greater weight, from being advanced by a member who was known to be friendly to joint-stock banking. The report of the committee appeared to sustain all Mr. Clay's accusations. This report was highly creditable. to the talents and industry of the committee, but marked by a decided hostility of tone. While it enumerated all the actual or possible imper- fections of the joint-stock banks, it ascribed to them scarcely a single ex- cellence. At the same time, the committee deferred to the succeeding session the proposal of any measures for their improvement ; thus the public were led to suppose, that in the following session some astringent measures would be adopted with reference to joint-stock banks, but what they would be none could conjecture. (lad the report appeared at any other period it might possibly have done good; but as its appearance was contemporaneous with a pressure on the money market, and a high state of alarm, it unquestionably tended to weaken public confidence at a time when it required to be. strengthened. Persons who were unfriendly to joint-stock banks seized the opportunity . ^praising them, and believed, or pretended to believe, that the. hanks were unsound, and would certainly stop payment. Others, who were friendly, were apprehensive that the banks, being still in their infancy, would be found too weak to withstand the storm now r n< them. But though this alarm began with respect to joint-stock banks it did not end there. It was soon foreseen that if a few joint-stock banks were to top payment, the private banks in their neighlHiurhood would be. put to a tevere trial ; and if the banks should even be compelled to withhold their advances to their customers, the credit of individuals must sufler. 51 Season of Pressure. Hence the private bankers and the merchants, as well as the joint-stock banks, made preparations to meet any event that might occur, and by thus increasing the pressure on the London money market occasioned still fur- ther apprehensions. The alarm was augmented by the stoppage of the Agricultural and Commercial Bank of Ireland in the month of November, and the demand for gold which that stoppage occasioned in Ireland. The joint-stock banks of England now became subject to increased suspicions ; the ac- commodation they had been accustomed to obtain by the rediscount of their bills in the London market was considerably restricted ; and in the beginning of December, the Northern and Central Bank at Manchester, a bank having a paid-up capital of .800,000, with above 1,200 partners, and forty branches, applied for assistance to the Bank of England. This was afforded upon condition, in the first instance, that they should wind up all their branches except that at Liverpool ; and afterwards further as- sistance was granted, upon condition they should discontinue business after February, 1837. Soon afterwards, the old and respectable London bank- ing-house of Messrs. Esdaile & Co.' received assistance upon similar terms. The pressure which existed in England rapidly extended to America. A large amount of American securities, consisting chiefly of bonds of the respective States, had been remitted to the agency houses in England. This circumstance, in connection with the exportation of gold to America, attracted the notice of the Bank of England. A large amount of bills drawn from America upon first-rate London houses was rejected. In America the pressure became severe ; money was wanted to remit to England to meet the drafts that had been drawn upon England, either upon credit or against securities that could not now be sold. The rate of discount at New York rose to two, and even to three per cent, per month. From the pressure upon the money market, and from the great fall in the price of American produce, the cotton and other commodities sent from America to meet drafts upon the English agents could not be sold except at a ruinous loss. And other remittances not having arrived, sev- eral houses in the American trade, who were said to have given extensive credit to parties in America, applied for assistance to the Bank of Eng- land. ( The History of Banking in America ; with an Inquiry how far the Banking Institutions of America are adapted to this Country ; with a Review of the Causes of the recent Pressure on the Money Market. By J. VV. Gilbart. 1837.) Such was the character of the pressure of 1836. We next proceed to the pressure of 1839. The pressure of 1836 may be said to have com- menced from the month of May in that year. From that month the stock of gold in the bank gradually and uniformly declined until February, 1837, when it reached its lowest point of depression. From this point it uniformly advanced : the lowest point of the circulation was in Decem- ber, 1836, though even then it was not lower than it had been in the pre- ceding January. The bank raised the rate of interest from four to foui and a half per cent, in July, and to five per cent, in the following Sep- 55 A Treatise a* Hanking. hmber. During the whole of the ycnr 1S17, th<- amount of j;<>M in ihr md continued to increase ; th- hank extended IUT circula- tion, ami ho July dividend*, moneN I.., .,,,. abundant, and the market rate of interest experience.; able fall. The foreign exchange* continued t,. be favorable during tin- early part of 1838, and gold ac< in tin- rollers of the Hank of England. In the spring of that year the directors of tin- Hank <>f F.nu'land sent nearly a million of gold to America. M'm y hi came increasingly abundant, and rvit fell. In February tin- kink reduced tlu-ir rate ( ,f dis- atSJSJl lO ' ' I" : :.'. and t'ie interest on the loans irranted during the hu!tm_' f tlie funds was reduced in Mnrch to three and a half per cent. The low rate of interest caused large sums ( ,f money to l>e invented in American securities. Bonds of all kinds issued by the Mank of the I'nitcd ' > :ii the I'nion, and by ii'iineron- private un- dertakings, were poured upon the English market, and found eager pur- chasers. Several of the directors of the Hank of England, in their indi- vidual character as merchants, became agents for the distribution of these securities. About July the exchanges became unfavorable, and in the latter part of the year some symptoms of uneasiness were apparent in the money market ; but as the stock of bullion in the Hank of England was considerable, and the directors granted their usual loans in 1 >ecember at three and a half per cent., public confidence was not shaken. In the be- ginning of the year 1839 the exchanges became increasingly unfavorable. and the monthly returns of the bank showed a gradual diminution in the stock of gold. The price of corn rose so high as to admit of fon-i'_ r n wheat at the lowest rate of duty. This occasioned a further demand lor gold to be exported. The stock of gold in the Bank of Englaiid rapidly declined, until, in the month of October, it was no more than 2,536,000, while the liabilities of the kink upon notes amounted to 17,< iber, \ v hen it reached the lowest point of depression. From this point it continued to advance, and the pressure began gradually, but slowly, to ml It may be useful to notice the dili'erei, n the pressure of 1836 and that of 1839. If we measure the intensity of the pn--n:v by the between the largest and the lowest stock of gold in the 56 Season of Pressure. Bank of England, the former pressure will range from .7,801,000 to ,4,032,000, and the latter from 10,126,000 to 2,525,000. In the pressure of 1836, one joint-stock bank, a London private bank, two coun- try private banks, three large American agency houses, and a great many respectable merchants, stopped payment. In the pressure of 1839, there was scarcely a failure until the month of December, and then only among the second class of traders. In the pressure of 1836, the prices of nearly all commodities fell considerably, and almost immediately. In the pres- sure of 1839, the prices of most commodities remained for a length of time nearly the same. In 1836, the Bank of England did not raise their rate of interest above five per cent. In 1839, the rate of interest upon both discounts and loans was raised to six per cent. In 1839, the bank gave notice that they were willing to sell the dead weight, and they made arrangements for borrowing < 2,500,000 sterling from the Bank of France. In 1836, the bank adopted neither of these measures. In 1836, the Bank of England rejected all bills drawn or indorsed by joint-stock banks of issue. In 1839, they rejected also all bills drawn and indorsed by private banks of issue. (An Inquiry into the Causes of the Pressure of 1839.) The consideration of the pressure of the year 1847 we shall postpone to the next section of our work. From the statements we have made, it would appear that a season of pressure is always preceded by one of speculation ; and hence it follows that a banker who wishes to be easy in a time of pressure must act wisely in the previous season of speculation. It requires no ordinary firmness to do this. To act wisely in a season of speculation is far more difficult than to act wisely in one of pressure. But unless a banker act wisely in the previous time of speculation, his wisdom will probably be of little avail when the pressure arrives. While, therefore, money is still abundant, the public funds high, and other bankers liberal in accommodation, he should be doubly cautious against taking bills of a doubtful character, or making advances upon irregular securities. He should not suffer the desire of employing his funds, or the fear of offending his customers, to induce him to deviate from sound banking principles. He should also take this opportunity of calling up all dead or doubtful loans, and of getting rid of all weak cus- tomers. He should also, under any circumstances, avoid making ad- vances for any length of time, and investments in securities that are not at all times convertible, or the price of which is likely to sustain a great fall on the occurrence of a pressure. The discount of first-rate commer- cial bills having a short time to run, or short loans on stock or other unde- niable security, however low the interest received, seem to be the most safe and advantageous transactions. When the aspect of affairs seems to threaten that money will be still more in demand, and the failure of a number of merchants and traders may consequently be apprehended, it behoves him to prepare for ap- proaching events by avoiding all discounts of bills of an inferior class, and by keeping his funds in an available state. With a view to these objects, he will review all his loan and discount accounts, call up his loans of long standing, where it can be done without injury to the interest or reputation 57 A Treaiist on Banking. of his hank, avoid all overdrawn accounts, ami miner tin- amount of counts on ia of accounts. In performing these operatiocM he will exercise due judgment mnl .Ucrrti.m, making pn>p,-r ,' - n.-t,,,;,-, en his customers, nnd n-.ln.Mni: chiefly those hills which arc of an unbusineei character, or which are drawn IIJHUI doubtful people, or upon partiwi that he knows nothing about ; he will also mark particularly t'n. - account - ^ urr large discounts, but keep no corresponding balance to the credit of their current accounts. As the pressure advances, he will find that then- arc three .! nmnds upon bis funds I -. his customers will reduce their balances, ami keep l? money in his hands. Money lodged at interest will he taki-n awa\. because the parties can make higher interest elsewhere, or they will he tempted by the low price of stock to invest it in govenmn ni si enrities. Secondly, he will have a greater demand for loans and discounts, not merely from weak people whom he might not care about refusing, hut from persons of known wealth, whom it is his interest and his inclination to oblige. Thirdly, he will think it prudent to guai<: 'nld.-n de- mand* by keeping a larger amount of bank notes in his till. To meet all these demands, he will he compelled to realize some of his securities, and he will realize those first on which he will sustain no loss. If a banker has money lying at demand with n bill-broker, he will now have occasion to call it in. If he has money lent at short periods nt tin- Stock Exchange, he will, as he has occasion, take in the mom y as tl.e loans fall due. If he has discounted brokers' bills, he will receive ii .- amounts when due, and discount no more. Should these operations not be sufficient to meet the demands upon his funds, he will then sell his stock or exchequer bills, or borrow on them in the money market. A country banker who has kept his reserve in bills of exchange will be anxious to rediscount them, and will think himself lucky if he can do so readily and at a moderate rate of inter' It will be useless for a banker to attempt to call up dead loans, or to re- duce his discounts, after the pressure bus commenced. He should ha\e thought of these matters in the previo | of abundance. .A cannot get in any outstanding advances, he had better not ask for them. but merely charge the parties an increased rate of interest. If he- demand the money, he will not get it, and he ma\ a surmise that he is short of funds. This season of p; . in.wever, a -j"od opportunity for calling up advances, or getting rid of connections that he would, on other grounds, like to be without. The "scarcity of mom \," sure on the money market," are capital reasons to assign tor refusing ap- plications which, even otherwiv. he would refuse, and for calling up loans . under any circumstances, he would like to see repaid. I 'uring a pressure, a banker will have to give a great many r. : and some discretion will be necessary in th<- form of giving these red: Let him refuse in what way he may at such a season, hu will be sure to give offence. And the party refused will possibly publish the n -fu-al, and, from motives of ignorance or malignity, r-pr<-s<-nt the refusal as having arisen from want of means, and possibly may circulate a report that the- banker is about to stop paym.-nt. : mors about banks are. always Season of Pressure. rife in seasons of pressure, and they add to the general want of confidence which then prevails. During a pressure, a banker will have offers of new accounts to be transferred from other bankers, provided he will consent to make certain advances. Some caution must be exercised in this matter. It is quite possible that some perfectly safe parties, having large accounts, may be disposed to remove in consequence of their present bankers not being equal to the supply of their wants. In this case, the banker will be regu- lated by the value of the proposed account, and the extent of his own means. On the other hand, it is equally possible that weak people, to whom their present bank might not, in any case, have given advances, may use the " scarcity of money " as a pretext for making application to a new banker, stating their belief that their old banker was unable to meet their requirements. It behoves a banker to use much discretion in such a case, especially if it be a large account. If he errs at all, he should err on the side of caution. It will rarely be wise for a banker in a season of pressure to attempt to get away the customers of other bankers by offering them greater accom- modation. The best way of getting new connections is to treat well those that he has. It is better for a banker to employ his funds in supporting his old friends than in attempting to get new ones. If his funds are so ample that he can do both without inconvenience, very well. But caution is necessary in taking new accounts at this time, and he should be doubly cautious in making applications to parties. Unless he has the most ample and satisfactory information as to their circumstances, he had better wait until they apply to him. It would then devolve upon them to satisfy him that he would be justified in making the advances required. During the pressure, a banker will find that some of his wealthier cus- tomers, who, when money was abundant, took their bills to be discounted by a bill-broker, because he would cash them at a lower rate, will come back, and expect to have discounts from their banker. This is no fault of the bill-brokers. People put money in their hands avowedly for tempo- rary purposes. In seasons of abundance the bill-brokers are glutted with money. When the pressure commences this money is withdrawn. The consequence is, that in seasons of abundance the bill-brokers will discount at a lower rate than the bankers, and when money is scarce they discount at a higher rate, and in many cases not discount at all. Sharp-sighted people, who are acquainted with the London money market, will, when money is abundant, take all their first-rate bills to a bill-broker, and send to their banker all their inferior bills, which a bill-broker would not take. Now, if a banker has occasion to curtail his advances in seasons of pres- sure, he should begin with people of this sort. But if he has ample means, and the parties are wealthy, he may deem it worth his while to take their bills, charging a high rate of interest, and gently reminding them of their former delinquencies. Exhortations to good behaviour have always a greater effect when administered in seasons of affliction. And reproof at this time to a party who had thus wandered, may induce him to pursue in future a more righteous line of conduct. During a pressure, a banker will find that some of his customers will 59 A TrtatiM on Banking. , and will apply to him for ambiance. He will oftch be at IM to dteide whether he should <>r should not grant the assistance required. This hesitation will arise t'nun his doubts as to the xt.-nt to which he can prudently rely upon the ralrul.v. .!,- and anticipations ofliis customer. The party states that he must immediately stop p.-iyim -nt un- leM he has assistance ; but he has abundan.-e ,,:' |.i-,.|..- r iy, and lus dillicul- tice arise only from not being able to reali/r it. If I.. Mm sum he can then go on comfortably. The kuiki-r grants him thi> ^.\-.\. At';< r m while, he comet again, and states he must now stop unless In- has a fur- ther sum. The banker hesitates, but ultimately gives him this further :'n He comes a thin! tim- has not yet got enough ; and uot being able to get more. In- then slops, leaving tin- hanker ut best with a large luck-up, and probably with an ultimate loss. :ig a pressure, those hanks that allow interest on deposits will ho asked for a higher rate of interest It is quite right that those- parties who hare had deposits at the bonk for some time, should receive a higher rate of interest, proportionate to the increased value of money. But it may be questioned whether it is worth while to reeeive further lodgments, during a pressure, at a high rate of interest, unless they arc lodged fora fixed period. For, should the pressure increase, these sums are sure to be with- drawn, or else applications will be made for a higher rate of interest than the banker can prudently give. Nor must it be forgotten that it is not wise for a banker to give, during a panic, an extravagant rate of interest. Should he do so, he will give rise to an opinion that he is short of funds, and this may cause more deposits to be w ithdrawn than he would obtain from his high rate of inter During a pressure, a banker will pay considerable attention to the pub- lished returns of the Bank of England. The increase or diminution of the gold and silver in the issuing department will show the progress of the pressure. As these increase, money will become less scarce, the rate of interest will fall, and the pressure will subside. In this department, it is the progress of increase, or diminution, more than the actual amount, that should be the main object of attention. The hanking department resem- bles any other bank. Its means are the paid-up capital, the real or sur- plus fund, the public deposits, the priva; -, and the seven-day bills. These means are employed in public securities, private securities, and cash in the till. Its ability to make advances, at any given time, depends on the amount of cash in the till. The diminution of this amount sho\\ -< the increase of the pressure, and the banker will act accordingly. As far as past experience goes, all panics or pressures have resulted in a subsequent abundance of money. It would be a grand thing for a banker if he could know beforehand at what precise point this change would take place. But this he cannot know, and he had better not specu- late on the subject, but just follow the course of events as they occur. When, however, the point is fairly turned, he will act wisely in investing all his surplus funds in such convertible securities as are likely to advance in price, from the increasing low rate of interest. Exchequer bills are most likely to be the first affected, and then the public funds. He will, also, be more liberal in granting discounts, and other advances, and he 60 The Bank Act of 1844. will lower the rate of interest at which he takes deposits. At the same time he will be cautious in the bills he discounts. For, though money may be abundant, yet trade may be depressed, and the effects of the pre- vious panic may be the failure of a great number of persons in the middle class of society. The banker will therefore be cautious in extending his discounts, except on bills of an undoubted character. We will observe, lastly, that, in a season of pressure it is peculiarly ne- cessary that a banker should pay regard to the state of his own health, and to the discipline of his own mind, so as to guard against any morbid or gloomy apprehensions with regard to the future. He should attempt tc form a cool and dispassionate judgment as to the result of passing events ; endeavouring so to arrange his own affairs as to be prepared for whatever may occur, but taking care not to increase the present evil by predicting greater calamities. If he suffer a feeling of despondency to get the mas- tery of his mind, he will be less able to cope with the difficulties of his position. He will then, probably, refuse reasonable assistance to even first-rate customers, realize securities unnecessarily at a heavy sacrifice, and keep in his till an amount of unemployed treasure excessively dispro- portionate to the extent of his liabilities. This will increase the pressure. Fear, too, is always contagious. A banker of this melancholy tempera- ment will impart his apprehensions to others, and thus the panic will be- come more widely extended. SECTION VIII. THE ADMINISTRATION OF A BANK UNDER THE ACT OF 1844. IT would not be consistent with the practical character of this work to discuss, at great length, any theory of the currency. But the Act of 1844, though founded on a theory, was a practical measure, and has so impor- tant a bearing on the administration of banking affairs, that our work would be regarded as incomplete were the subject altogether omitted. We shall, however, endeavour to avoid any observations on its theory, and confine our remarks, as much as we can, to the operation of its practical enact- ments. In this part of our work it will be necessary to consider only those provisions of the Act which refer to the issue of notes by the Bank of England : those which refer to the country circulation will more prop- erly come under review in the section upon Country Banks. It may also be proper to remark, that, in our judgment, the Act of 1819 has no neces- sary connection with the Act of 1844 ; nor would there be any inconsis- tency in advocating the one and not advocating the other. (Commons, 3,409.) " The Act of 1844 " is the 7 & 8 Viet. cap. 32, and is entitled, " An Act to Regulate the Issue of Bank Notes, and for giving to the Gov- ernor and Company of the Bank of England certain privileges for a lim- ited period." It enacts that, from and after the 31st August, 1844, the F 61 A Treatise on Banking. department of the Bank of England shall be separated from tho Ilnnking department ; tliut tin- is-mini: department may I-MM- notes to the cxtrir ' 1 1. 1 ">n Heourities set npnrt for that purpose, of li the debt of '' 1 l.ank shall form a part; that no amount of note* al>\e . 1 -1, 000,000 shall he imu- against gold coin, or gold or silver bullion ; and that the r bullion shall not exceed OHO fourth the amount of p>ld coin and bul- lion. Any person H entitled to demand notes from the issuing depart- mge for gold bullion, nt the rate of .3 17*. 9J. per ounce. ild any banker discontinue his issue of notes, the Hank of Knjzland may, upon application, ! empowered by an Order of Council to increaw her issue upon securities to the extent of two thirds of the issue thus with- drawn ; but all the profit of this increased issue must go to the govern- ment. The theory on which this act wns founded, had, for several years pre- viously, been brought before the puhlic in pamphlets written by men of distinguished talent. Upon some of these pamphlets we wrote a critique, which appeared in the " Westminster Review" of January, 1841. That article was afterwards published separately, under the title of "Currency and Banking : a Review of some of the Principles ;md Plans that ha\e recently engaged public attention with reference to the administration of the Currency." In this review we made the following observations on the plan then proposed, and subsequently carried out in the act of KM*: " TV plan of making the amount of the riratlnt inn Jlucttuilf. in exact correspondence with the amount ofyotd in the Btmk of England. u This plan it open to the following objections : u t. Upon this plan then- must he 11 perpetual increase and diminution in the stock of gold; consequently, a perjM-uinl increase and diminution in the amount of the eur- rency. The inTease in tin- amount of the cum IK y would rai-c prices and stimulate peculation. The diminution in the amount of the currency would reduce prices ai.ri low price*, and again from low prices to high prices, from speculation to di- and from diitmsi to speculation. " S. Bat depression of price-, and their attendant mi>erir<. may not !>< experienced only when the foreign exchanges are unfavoruMo. K\i-eiv<- luution, an appn-hen- ioa of war, or political feelini;, maycau.se a dome-tic' demand for p>ld. and thi> would OMSS fcf while contraction of the currency !tn severe as that which would from an unfavorable exch:tn_ the hank directors would have no diM-ivtiunurv power, ht would be required 'to adhere to principle,' hy^ixii.L,' irold i. notes tor gold, the j could do nothing to a*- mine-.. According to Mr. Lord," a drain, from whatever CHUM it max :>ri-c, HUM ! met l.y a contra'" < the nureory. Mr. Palmer, in laying down his rule, put in a saving dau>c, ' exc ej.t wkUr mcial circumstances,' h'ut .Mr. I.oy.l makes no except^ ' carry this system into operation would recjuire a .separation of the issuing department from the other departments of the hu.sine.ss of the Kauk, and this \M.U .| OMHS still further meonrenieoces. The management of the isMiin^ depnrtmeiit would bs ssmsdiogly simple. The office of the directors would he a complete >iiui ure, and, I wih I could hare made this quotation without introducing the names. It would -' -' '.'. ./.r.. - .11:. r tru::. ,.vi,.l !,.! tiis of this kind without any reference t., men who may hare distinguished themselves as either the advocates or the of the doctrines we investigate. The Bank Act of 1844. for any thing they would have to do, their places might be as well supplied hy four- and-twenty broomsticks. A few cashiers to exchange gold for notes, or notes for gold, would be all the establishment required ; and could Mr. Babbage be induced to construct a 'self-acting' machine to perform these operations, the whole business of the currency department might be carried on without human agency. But the deposit department would require more attention. ' It is in the nature of banking business,' says Mr. Loyd, ' that the amount of its deposits should vary with a variety of circum- stances ; and, as the amount of deposits varies, the amount of that in which those de- posits are invested (viz. the securities) must vary also. It is therefore quite absurd to talk of the bank, in its character of a hanking concern, keeping the amount of its secu- rities invariable.' As therefore the deposits might vary, the bank would be a buyer or a seller of government securities ; and, as these variations are sometimes to a very large amount, the fluctuations in the price of the public funds and of exchequer bilk would be very considerable. Thus the property of those who held these securities would be always changing in value. Again, the deposits would be withdrawn chiefly in seasons of pressure, and the bank would then be compelled to sell her securities. But suppose the scarcity of money should be so great that the securities would be un- salable even at a reduced price, how then could the bank pay off her deposits 1 " 4. If the currency were administered upon this principle, the bank would be unable to grant assistance to the commercial and manufacturing classes in seasons of ca- lamity. " Mr. Loyd exclaims, ' Let not the borrowers of money, government, and commerce approach, with their dangerous and seductive influences, the creator of money.' But with all deference to Mr. Loyd, we contend that it is the province of a bank to afford assistance to trade and commerce in seasons of pressure. Mr. Loyd, as a practical banker, would no doubt afford assistance to his own customers in such seasons ; and if this be the province and duty of a private banker, the duty is more imperative on a public banking company, and more imperative still on a bank invested by the legisla- ture with peculiar privileges for the public good. Mr. Loyd says, ' Let the bank afford this assistance out of her own funds.' But, under Mr. Loyd's system, she could grant assistance only by selling securities ; and what relief would she afford by selling securi- ties with one hand, and lending out the money with the other t Besides, it is certain that, under such a pressure as Mr. Loyd's system must occasionally produce, these se- curities would be salable at even any price? 'But,' says Mr. Loyd, 'individuals may afford this assistance.' In seasons of pressure few individuals have more ample funds than what are necessary for the supply of their own wants When the distress is caused by a contraction of the currency, it can only be removed by an increased issue of notes. And there are many cases, such, for instance, as that of the Northern and Central Bank, in which assistance can only be effectually rendered in this manner. " We consider that any system of administering the currency, which prohibits the banking institutions of the country from granting relief to the commercial and manu- facturing classes, must be unsound. We should condemn such a system at once, even if we could not detect the fallacies on which it was founded. In political economy we can judge of principles only by their practical effects, and any system which produces these effects must be unsound. When seasons of calamity occur, it is not for the na tional bank to exclaim, Sauve qui peut. They ought to cooperate with the government in attempting to relieve the distress, and to preserve the tranquillity of the country " These remarks, written in the year 1841, might, if put into the past tense, almost serve for a history of the year 1847. The act of 1844 was formed upon the principle which is here condemned ; and the effects de- scribed have actually occurred. There have been great fluctuations in the amount of the circulation, in the rate of interest, and in the prices of the public securities. There have been great speculations, followed by great distress. The government funds have, in large amounts, been un- salable ; and the bank has been unable to afford relief to the commercial classes. A severe pressure has taken place ; and, in consequence of this severe pressure, the act was suspended. It has been denied that this pressure was produced or increased by the act. But how stand the facts ? 63 .! /'/ : : -i The act waa paaaed, and, a* prcd;.-vd, n piv-sui.- OMMi !)>< a.-t was continued, and the preaaure increased: tin- art was suspend' !, nn<] the prew> Then are not opinions : - _: of Parliament in the latter end -\\ all'i eted "o law* For regulating the issue id' hank-notes payable on demand." The following M an extract from the report of tin- Loral 1 * '"inn the came* of the preaturc : * A sadden and unexampled demand for forvL'n ...:-!. pr-..hi. d b\ a failure in manv aeaoriptfosM of agticalcaral prodace throughout the l'in;> tn, coincided with the unprecedented extent ofspeculat ion produced by increased facilities of credit and low ram of inlercm. and had for conn- time occasioned ..\.-r ti.rlm/ in many in. of commerce. This was more eepeviallv felt in railroad*, for which calls to a liir^e aasaaat were daily becoming; parable. ithont < orrcspondm^ fund* io im-i>t iln-m, ex- eept by ihe wuh.lniwal of rajutal from otln r I.IHMHS an.i invotnienU. '1 ! accomat for much of the preunre UIV!y il, To i!i - cituses may he added contemponuieoM rise of price in eiittmi: ami. with resect tn l,<.i:-. I with the Kit-t and West India trade, a oudden and y\:.-n-.i\.- tall in the ; , by which UM raluc of their most readily uvuiluhlu i^.-et> uiul'jr\\eiii -n at >lc]>re- are obvimi>1y U-ynni<>n of commercial ^.<-< ulatimi, en- C0raged or checked by the facility or the dillienlty of obtaining credit, by the advance of capital and the discount of bilU. the powers and ]>n f the Hank of Kit-land Oftat all time* enable that corporation ' an important inllu . m- mittee haTeconseni.-n:Iy felt it to be their duty t<> iti(|uirc into the cunr>e )>nrsin-d by the Uank acting under the provisions of the 7 and - .'. and they have come to the coadosioQ that the recent panic was materially aggravated by the I.JH -ration oftliat statate, and by the proceedings of the bank itself 'II..- cib-< t inay b<- f... . d. directly. to the act of 1 844, in the legislative restriction imposed on the means of accumniixhi- tion, whilst a large amount of bullion was held in the coffers of the bank, and during a time of favorable exchangee; and it may be traced to the same cause, indirectly, as a CDBseaaence of great fluctuations in the rate of discount, and of capital previously ad- vanced at an unusually low rate of interest. This >ur>c the bank would hardly ha\-- Mt iuelf justified in taking, had not an impression exi-ted that, by the separation of the SWM and the banking departments, one indexible, rule for reu'iilatinj the bank had been snbstitated by law in place of- the discretion formerly vested in the The nature and extent of tho pn-sMire i> thus desed by the Gov- ernor and Deputy-Governor of the Hank of Knpland : " The panic began by the fmlures in the corn trade. The prie- of wheat had risen to about IM*. Large arrivals of prain from the continent of Kurope and from Amer- ica, coupled with the prospect of an early and abundant harvest, caused n sudden fall in price to about 60., with a corrc-p'/Tidm;; decline in Indian com. The failure of moat of the corn speculators followed this great reduction in price, and their failure earned the stoppage of an eminent di-connt broker having a lar-ji- country connection. Tab latter failure, by closing one of the principal chann -i tlio, eoMtrr aad London, caused distrust to extend into the country. Credit became af- Cecied by these fiuiarM, and several Ix.ndon firms of high stand in- a!-,, fail, d Then followed in rapid suoceasion the failure of the Koval Hank of Liverpool, tin- Liverpool Banking Company, the North and South Wales Hankin- Company, some privat- oaalii banks, ana the Union Bank of Newcastle, followed by a tremendous run upon ' !!':; . ii tBaak To :!:.-- .'.i-:i-t. r- -uci i-c.ji ! alarm. aad aa atasOM lOUl prostration of credit ;.,n bankers and discount brokers 64 The Bank Act of 1844. refused to grant the usual accommodation to their customers, and necessarily obliged every one requiring assistance to resort to the Bank of England. Money was hoarded to a considerable extent; so much so, that notwithstanding the notes and coin issued to the public in October exceeded by 4,000,000 or 5,000,000 the amount with the public in August, still the general complaint was of a scarcity of money. Credit was so entirely destroyed, that houses trading to distant countries carrying on their busi- ness through the means of credit, by a renewal of their acceptances as they became due, were no longer able to meet their engagements, and were forced to stop payment- This was the state of things previous to the issuing of the government letter in October." (Lords, No. 12.) The Committee of the House of Commons delivered a report in favor of the continuance of the bill without alteration, in opposition to the opin- ions of by far the majority of the witnesses who were examined. Those witnesses who are friendly to the act contend that it has se- cured the convertibility of the Bank of England note, that this conver- tibility was endangered in 1825, in 1837, and in 1839, and would have been endangered in 1847 but for this act. (See the Evidence before the Committee of the House of Lords, Questions Nos. 1406 to 1409, and No. 3169.) By the phrase " securing the convertibility of the note " it is not meant that the issue department of the Bank of England held a sufficient amount of gold and silver to pay off all the notes it had issued. It is obvious that the gold and silver in hand must always be fourteen millions less than this amount, inasmuch as fourteen millions of notes are issued against securi- ties. By " securing the convertibility of the note " is meant, that the issue department of the Bank of England was in a condition to pay off any amount of notes of which payment was likely to be demanded for the purpose of exporting the gold ; the issue department was always in a con- dition to meet any foreign demand for gold. This is called " securing the convertibility of the note." It has been contended, that the act has retained in the vaults of the Bank of England a larger amount of gold and silver than would otherwise have been retained. And as this amount is set apart for the express pur- pose of paying the notes, their payment is so far additionally secured. On the other hand, it has been maintained that, by thus reserving all the gold to pay the notes, we endangered the payment of the deposits. And had the banking department stopped payment, a domestic run would have taken place upon the issuing department, and thus the payment of the notes would still have been endangered. The following is the evidence of a director of the Bank of Liverpool upon the subject : " With regard to securing the convertibility of the notes, what is your opinion of the bill? " I do not think it has secured the convertibility of the notes at all. The notes re- mained convertible up to the suspension of the bill ; but I believe that if the bill had not been suspended then, or some similar measure adopted, notes would have ceased to be convertible. Looking to the general state of things throughout the country, and to what I know to have been the state of things in London, and the position of trade generally, to the alarm that was spreading rapidly through the country, and to the iact that the power of the bank had bcun reduced to such a point, that if there had Deen any apprehension of the failure of the country banks, it could not further support them, and that very little might have occasioned (I might perhaps go further, and say, F* 65 A Treat itf on Banking. id) the feilnre of bank* in larpe town* and in the country ; belier- Is* *Jlifoneortwoc.-.*\:\ that th. i.- would hare h*rn f thr<-<- hundn-'l . ..un- uy banks woaM nave taken six or seven millions, or ot .t ir. IMIH ,. :il -i, ,,n ,i ),.!\.- taken ircntiluons; and that if the ran for gold had onoe be^un, it would proKahly have COM oa till tbsj IIDHSlin Win llliiin ' >< -inp all thi-. my linn opinion iv that the bio of 144 nas BOt Mcnnd ronvertibilitv, and I state the ^rounds on which that M.) It seems useless at present to speculate upon such a state of things, OB we nor know that before the pressure arrived to such a hciirlit ;is to c;ius<- the banking department to stop payment, the net would IK* suspi m!r<|. Hut it seems fair to ask, whether the precautions of the act are not dispro- portionate to the danger? We ought to consider not merely the ^reat- neas of the evil, but also the probability of its occurrence ; and is it wise to inflict upon ourselves a vast number of serious evils merely to guard against a danger that may never occur ? It may further be asked, w lieth- ic stringent measures that were necessary last year to keep the hank- ing department from stopping payment, would not have been equally ef- fectual under the previous state of the law in preserving the convertibility of the notes? It should be recollected, too, that previous to the passing of the act of 1844, the bank had the power of rectifying the exchanges by means of foreign credits, as they did in the year 1839. (Several of the witnesses made suggestions for rectifying this exchange l.y utlier means than the exportation of gold. See Commons, 97, 201N. 'jol':*. W79, 2614, 'Jii'JO.) Hut the directors, being now relieved from all responsibility with regard to the issue department, have no inducement to engage in such an operation. Indeed, they might be censured for interfering with the principle of the act, that the exchanges shall be rectified by a transmission of gold and silver. It would appear from the evidence, that the sole advantage now claimed for the act is, that it has secured the convertibility of the note. Other ad- vantages, however, were expected to result Those expectations are thus disposed of in the report of the Lords' committee : - It i* tree that to thorn who may have expected that the 7 and 8 Viet. c. 32, would HTifctuaJly prevent a recurrence of cycles of commercial excitement and depression, the contrast between the yean 1845 and 1847 must produce a grievous disappoint- To those who anticipated that the act would put a check on improvident pointment cannot be less, if reliance is to be placed (as the com- : may) on the statement of the governor of the hank, and of other that 'speculations were never carrixl to MX h an enormous extent as in I84 s*d ! bugMnriag of 1847.' If the act were relied on as a security against vio- lent flnetvatioos in the Talne of money, the fallaciousness of such anticipation is con- etaivdr proved by the fact, that whilst the difference 1* tween the highest and lowest rate of diseoaat WM in the calamitous yean 1837 and 1839 hut 2j to :H !"'r c,-nt . th<- dMbrence in 1847 roae to 6J. If it was contemplated that the numlicrand the exti-m of coouBcrasJ failures would have been lessened, the deplorable narrative of the governor of the bank, recording the failure of thirty-three houses comparatively in lur^i- Im-i- aes*, in London kme, to the amount of 8,129,000 is a conclu-: !i the 66 The Bank Act of 1844. enormous extent to which railroad speculation has been carried be considered as an evil to which a sound system of banking could have applied a corrective, such a cor- rective has not been found in an act, since the passing of which, during a period of three years, an increased railway capital of upwards ofj 22 1,000,000 has been author- ized to be raised by Parliament ; and when the enormous sum of 76,390,000 is stated, on high financial authority, to have been actually expended on railways in two years and a half. If the power of obtaining banking accommodation on moderate terms were considered to be promoted by the act of 1844, it cannot be said that this im- portant object has been attained, since it appears in evidence that in 1847, in addition to an interest of 9 or 10 per cent., a commission was also frequently paid, raising the charge to 10, 20, or 30 per cent., according to the time which bills had to run." The report might have added, that if it was expected that the amount of notes in the hands of the public would fluctuate in exact correspon- dence with the fluctuations in the amount of gold in the Bank of England, that expectation has not been fulfilled. From the censure cast on the Bank of England, before the act was passed, for not producing this cor- respondence, it may be inferred that such an expectation was entertained. (Evidence taken before the Committee on Banks of Issue, Nos. 2677, 2713.) Those who are opposed to the act of 1844 bring against it the following accusations : First- The Act of 1844 is accused of having produced an abundance of money and a low rate of interest, and thus stimulated to excessive spec- ulation. We showed, in the last section, that these are always the precur- sors of a pressure. According to this Act, all persons are entitled to demand from the issue department of the Bank of England, Bank of England notes in exchange for gold bullion at the rate of 3 17s. 9d. per ounce of standard gold. When, therefore, the foreign exchanges are favorable to the importation of gold, this gold, consisting of gold bars and foreign gold coin, which could not be used as money in this country, is taken to the issue depart- ment, and instantly converted into Bank of England notes. The amount of notes is thus increased beyond what the transactions of the country re- quire. Money becomes plentiful, the rate of interest falls, and the low rate of interest gives facilities to speculative undertakings. It must be acknowledged that, previous to the passing of this act, the bank directors had adopted the principle of purchasing all foreign gold that might be offered them at 3 17s. 9d. an ounce ; and it formed a fea- ture of their system of management, as explained before a committee of the House of Commons in the year 1832. When the advocates of the act say that it is only during a season of pressure that the act comes into operation (Commons, 5121), they can mean only that it is during such a season that the system established by the act differs from the system pre- viously in existence. The act is as much in operation when it gives out notes as when it gives out gold. It must also be acknowledged that on the 31st August, 1844, when the act came into operation, there was a large amount of gold in the bank, and a low rate of interest consequently prevailed. This gold had accu- mulated, not literally in consequence of the act, but in consequence of the principle embodied in the act. From the adoption of this principle, the 67 old in ihe vaults of the bank still further increased aft. r tli- passing of It must I- acknowledge*!, that although tin- act rv<|u,: sue department at all time* to issue notes against L">!d, it dues n<>t require that the Bank of England shall at all time* issue I 1 i.ooo.ntxi ;r.;unst wvuritir*. The act merely requires tliat the amount skull nut exceed .1* 1-1,000,000. And a Indt'ii hanker wlm u.i^ < \amiM- d a- before the Lords 1 Committee, mid I.-- 'hat when the act I-.-HIM- operation, the bank would nut issue at lii-st more tlian 11.000.000 gainst securities, and that the remaining .11,000,000 would not In- issued until the rate of interest had advanced to three and a half or four per Hut the act did not require the Hank of England to adopt this course ; and it* adoption would pn.liahly have been considered by some j departure from its principle. I 'or it is n fundamental principle of the act, that the amount of the circulation shall jerk up and down in evict cou- nty to the importations or exportations of p>ld. And hence during a favorable course of exchange, money must be abundant, and interest must be low. It is alleged that the act still further reduced the rate of inter* promoted speculative undertakings, by placing the Hank of England in n position in which the directors were led to adopt a new system of man- agement In September, 18-44, soon after the act was passed, the directors, whose rate of interest had never previously been lower than four per cent., re- duced it to two and a half per cent. The object of this reduction was to invest a larger portion of their funds in the discount of bills. It stated that, to effect this object, the directors not only reduced their rate of dis- count, but also canvassed for business, and thus e taken to the bank ; but the notes thus drawn from the bank make money still more plentiful, and the market rate falls to three and a half or three p. r cent. Now, should the bank reduce her rate to three per cent, tl CH The Bank Act of 1844. would again follow. For the additional notes thus drawn out would make money so abundant as to reduce the market rate of interest to two and a half or two per cent., and so on. But in seasons of scarcity, precisely the opposite effect follows. For when the bank raises the rate of discount, it has the effect of raising the market rate still higher. Thus, if the bank should be discounting at 5 per cent., and the market rate should be 5 4 per cent., let the bank raise her rate to 6 per cent., and the market rate will immediately become 7 or perhaps 8 per cent., or even higher upon inferior bills. For the bank rate of discount will be the market rate for only the first class of bills, such bills as could be discounted at the bank ; and all bills of the second class will have to pay an advanced rate, and those of a still more inferior character will not be discountable at all. In 1844 the rate of discount was lower than in any previous season of abundance of money. This low rate of interest was produced, in the first place, by the principle of the act of 1844, which caused the issue of a large amount of notes against gold and silver bullion ; and, secondly, by that provision of the act which separated the two departments, and thus brought the banking department of the Bank of England into competition with other bankers and money dealers, as discounters of bills. (Com- mons, 2275, 5189, 5347-5350.) The directors of the bank seem to think that the spirit of the act of 1844 required that the bank should em- ploy its reserve. " If we keep the notes in the reserve, instead of giving them out to the public, the effect that ought to be produced by gold coming into the country is counteracted ; it induces a larger amount of capital to come into the country, because you do not allow that portion which has come in to be employed. If you do not put out the gold, or the representative of gold, you entirely prevent its having any effect upon the circula- tion. The exchange will be kept up, and gold will continue to come in." (Com- mons, 3009.) Thus it appears that, although there is no positive enactment in the act respecting the management of the banking department, the directors so understand its spirit as to believe that when gold is going out of the coun- try they ought to take measures to prevent its exit ; and when gold is coming into the country, they ought to endeavour to drive it back again. The first object is attained by raising the rate of interest very high ; the second, by reducing it very low. It must, however, be acknowledged, that, apart from any efforts of the banking department, a large impor- tation of gold will under the act necessarily cause a low rate of interest Secondly. The next charge against the act of 1844 is, that it does not admit of those occasional expansions of the amount of notes in circulation which are often required by the domestic transactions of the country. It is alleged that one imperfection of the act was strikingly manifested in the beginning of the year 1846. The Parliament required that all rail- way companies that intended to apply for an act should lodge ten per cent, on their capital within fifteen days after the meeting of Parliament. It was impossible to say beforehand what amount of notes would be required to make these payments. It was variously estimated at from 12,000,000 to 25,000,000, while all the notes in the hands of the public amounted to 69 A Trtatite on Banking. only about 30,000,000. Ultimotely the railway companies of Ireland and .Scotland were allowed to make their pn\m-nts m DuMiu and Edinburgh, reapectivcly ; and the payments in Ixmdon did not amount to inmc than ,14,000,000. (Lord*, 1209, 1211.) This large sum was paid by f^jf^n* of the banking department of the Bank of England lending out the money as Cut as it was received. Had the act of 1844 not been in \i>t- eoee, the Bank of England (as in the case of the West India loan, and of previous loans) might have lent out the money before the time of pavim -nt arrived, and no apprehensions would have been entertained. The notes in circulation would have been largely increased for a few days, and then again have subsided to the former amount As it was, the payment was not made through any virtue in the act. And had it been required under different circumstances, or when the banking department had a smaller reserve, it could not have been made at all. (Lords, 1209.) It is further alleged, that the act of l-ll ivquin's an immediate con- traction in the amount of the notes whenever gold is exported for merely a temporary or specific purpose. Between March 13 and April 24, 1847, .2,237,200 was exported in payments for corn. An equal amount of notes was of course cancelled by the issue department. These notes must have been taken out of the hands of the public, or from the banking department of the Bank of England. About the same time, the govern- ment had occasion to borrow of the banking department about 3,500,000 to pay the April dividends. The banking department, consequently, for a while limited their discounts, and even refused to grant loans on ex- chequer bills. Great pressure was consequently felt, though it did not last for a long time. Now it is alleged, that if the act of 1844 had not existed, the directors would have allowed the gold to be exported without immediately contracting the notes in circulation. They would have lent the money required by the government, without refusing the loans and discounts to the public ; and the contraction of the circulation, by being extended over one or two months, instead of a few weeks, might have produced no inconvenience. By the act of 1844, the circulation of the country banks was restricted to a certain amount The average of the twelve weeks ending the 27th of April, 1844, was fixed for the maximum. During some months in the year the country requires more notes than this maximum ; and, as the banks can issue no more notes of their own, they obtain Bank of England notes from London. In the year 1845 acts of Parliament were passed for the regulation of the notes issued in Scotland and Ireland. Beyond cer- tain fixed amounts the banks in these countries are required to hold gold equal to the amount of notes in circulation. In both countries this circu- lation fluctuates. In Scotland, the highest amount is in November. In Ireland, the highest amount is in January or February. In these months hey require more gold, and this gold they obtain from the issue depart- ment in exchange tor Bank of England notes. Before the act of 1844, the circulation of the country parts of England, of Scotland, and of Ire- land, expanded or contracted as required by the wants of the public, without affecting the London circulation of the Bank of England ; but under this act the expansion of the circulation of -the country bunks, the / \* The Bank Act of 1844. banks of Scotland and of Ireland; are attended by a contraction of the cir- culation of Bank of England notes in London. This may not be a matter of much consequence in ordinary times, when the banking department of the Bank of England has a large reserve ; but in seasons of pressure, such as occurred in 1847, this drain on the London circulation may be more severely felt. It may be further stated, that the withdrawal or discontinuance of a certain amount of bills of exchange, through loss of credit or otherwise, would render a larger amount of bank-notes necessary to fill up the space formerly occupied by those bills of exchange. But for such a circum- stance no provision is made by the act. (Lords, 232-235.) Thirdly. It is alleged that the act of 1844 tends to produce and to ag- gravate pressure, and at the same time deprives the Bank of England of the power of granting adequate assistance, even when the pressure is most urgent, and when assistance can be rendered without any danger of af- fecting the foreign exchanges. This objection assumes that a pressure is an evil. It assumes, that, to advance the rate of interest to a rate which no profit can afford to pay ; to deprive solvent houses of the means of meeting their legitimate engage- ments ; to cause a universal reduction of prices, and thus to baffle the cal- culations of even the most prudent ; to reduce wealthy merchants to the condition of paupers ; to deprive manufacturers of the means of executing their orders, and thus to throw thousands of industrious people out of em- ployment ; to sell to foreigners large amounts of goods and manufactures at less than the prime cost, thus causing a great national loss ; to paralyze the national industry ; to stop the progress of useful works, and to destroy confidence and credit, the objection assumes, that a pressure which pro- duces effects like these is a national evil. And such must be the opinion of those who suspended the act, and of those who approve of that suspen- sion ; for it was to prevent or to remove evils like these that the act was suspended. It is alleged that the act tends to produce such pressures. By issuing notes against all the importations of gold, it causes abundance of money, lowers the rate of interest, and stimulates to speculative undertaking (thus the low rate of interest in 1844 and 1845 stimulated the railway specu- lations), and then, speculation is always succeeded by pressure. If, therefore, similar causes produce similar effects, and if the future shall resemble the past, the operation of the act of 1844 will tend to produce pressure. It is further alleged, that when a pressure occurs without being pro- duced by the act, then the act tends to aggravate the pressure. An un- favorable course of the exchange may be produced by a large importation of corn. The act requires that the exchange shall be rectified by an ex- portation of gold, and that this exportation of gold shall be attended by a contraction of the domestic circulation (according to the present meaning of the word circulation) to an equal amount. It is hardly necessary to show that these regulations must aggravate a pressure. It has been said, that the pressure of 1847 was produced by the railway speculations and the famine, and therefore it was not produced or in- 71 ' A Treatuf on Banting. by the act of 1844. We do not |x-iv -iv the soundness of this ling, and it Meant to show a forgrtfulness of the peculiar operation of the act The act requires thnt the amount of notes m circulation sliall fluctuate in exact accordance with thr amount <>f bullion. Railway *\ < ulationa, famine, foreign loans, or a hundred other things, may turn the foreign exchanges, ana cause gold to be exported, but it in the act \\ hi.-h causes our circulation of notes to be contracted in proportion as the < mtlateil in ruriosnondoocici with thin incrrased amount of gold. Herein. \\<- think, is the injurious operation of the act. When the exchanges are favorable, gold is imported. The gold is in bars and foreign coin, and could not pass as money. But the act issues notes against this gold, thus increasing the circulation, lowering the rate of interest, and giving rise to speculations of all kinds. These speculations, cooperating possibly with other causes, turn the exchanges. Notes are then taken to the bunk, and gold demand- ed, for the purpose of being exported. This contraction of the circulation of notes produces pressure, and the apprehension of further pressure pro- duces panic. They who contend that the act of 1844 has not " in the slightest degree tended either to create or to increase the pressure" (Lords, 3106) of 1647, seem to be inconsistent in contending, at the same time, that the act has preserved the convertibility of the bank-note. It was the pressure and the high rate of interest, and low prices consequent upon the pressure, that checked the efflux of gold, and turned the exchanges. Now, if the act had no effect in producing or increasing that pressure, the converti- bility of the note, by whatever causes it was secured, was not secured by the act. If the act did not in the slightest degree either create or increase the pressure, in what way, we ask, could it preserve the convertibility of the note ? It appears to us that those who contend that the act preserved the convertibility of the note are bound by consistency to admit that the act produced or increased the pressure. It is further alleged, that the act aggravates a pressure by the u panic " which it creates. It is stated that, during the pressure of 1847, notes to the amount of 4,000,000 were hoarded under the influence of panic, and this hoarding was occasioned by the provisions of the act. It must be acknowledged, however, that something of this kind has taken place in former pressures. We noticed this circumstance with reference to the pressure of 1836 (The History of Banking in America, by J. W. (Jil- hart, page 96), and again with reference to the pressure of 1839 (An Inquiry into tke Cause* of the Pressure on the Money Market in the Year 1699, by J. W. Gilbert, page 38). ** A contraction of the circulation leads to a general apprehension of danger. Hence the bankers and others keep larger reserves of bank-notes on hand, in order to be prepared for the worst, and thus the evils of the contraction are considerably increased. ' That portion of the notes of the Bank of England which is passing from hand to hand, may be called the active circulation. That portion which is hoarded, or kept in reserve to demands, may be called the dead circulation. Now, it is The Bank Act of 1844. quite certain that the dead circulation, while it remains in that state, has no effect upon the prices of commodities, the spirit of speculation, or the foreign exchanges. These are affected only by the active circulation. In seasons of pressure the dead circulation is increased at the expense of the active circulation, because people hoard their money to meet contin- gencies. Hence we find the pressure is often more severe than the re- duction of the bank circulation would seem to warrant. But the fact is, that the pressure is in proportion to the reduction of the active circulation, and not in proportion to the reduction of the whole circulation. On the other hand, in seasons of abundance, the dead circulation is diminished, the active circulation proportionably increased, and hence the stimulus given to trade and speculation is much greater than the returns of the Bank of England would warrant us to expect.' " (History of Banking in America, p. 96.) If this disposition to hoard or, more properly, to make provision for future or contingent demands existed in 1837 and 1839, when the Bank of England had the unrestricted power of issuing notes, when there was the most unbounded confidence in her ability to render assistance, and when every solvent person expected, if necessary, to receive that as- sistance, it is natural to suppose that this disposition would be stronger in 1847, when the Bank of England had become divided into two depart- ments, one of which could issue no notes except against gold, and the other had barely notes enough to meet its own obligations. For this al- teration in the condition of the Bank of England, and the consequent feel- ings it inspired, the act of 1844 is clearly responsible. It is said that this desire of " hoarding " arose from PANIC ; and that the sum thus " hoarded " amounted to 4,000,000 of notes. It is diffi- cult to state where prudence ends and panic begins. This hoarding was no doubt carried on by all the joint-stock and private bankers, who, having received from the public large sums of money payable on demand, deemed it prudent to put themselves in a condition to repay these sums in case they should be demanded. And, from the number of banking establish- ments that exist in London, and throughout the country, it is reasonable to suppose that the sums thus hoarded must have been considerable. (Evidence before the Commons' Committee, 70, 1737, 4605, 5776.) Many private parties, too, from distrust of their bankers, probably kept their hoards in their own hands. No blame, however, can attach to the bank- ers ; for although this " hoarding " increases the pressure, yet, were they not to adopt this course, their banks might stop payment, and thus a heavier calamity would fall upon the public. It is further alleged that the act of 1844 has deprived the Bank of Eng- land of the power of granting assistance by the issue of notes during a pressure, even when the pressure is most urgent, and the foreign ex- changes are favorable. Before the passing of the act, when there was no separation of departments, the bank directors restricted their issues when the exchanges were unfavorable, but extended them when the exchanges were favorable. Hence, during the pressure of 1837, they granted as- sistance by a further issue of notes to the Northern and Central Bank, because the exchanges had become favorable. Between the periods of G 73 A Treatise on Banking. an efflux and an influx of gold there is always an interval of time. This val is usually the higher point of the pressure; ami heretofore the Bunk of England would relieve the pressure by extending her issue of notes, in anticipation of the gold about to arrive. By this means solvent houses were prevented stopping. Confidence was restored, " hoarding " was itimmitfrf^ and the pressure removed. But the art of allow this. No additional notes can be issued until the gold has returned. The same course must be followed whether the exchanges are favorable or unfavorable ; and to anticipate the return of the gold, by a further issue of notes, under any circumstances, however urgent, would be a departure the principle of the act That such a departure, however, may be with immense advantage to the public, is obvious from the i !;' -. immediately followed the suspension of the act in October, 1847. (C0SMOM, 5387 -5389.) Jt is chiefly in this respect that the system established by the act differs from the system previously in operation. And some of the witnesses, looking no farther than this, merely recommended that a power to suspend the act in cases of severe pressure, should be lodged either with the government or the bank. We feel no regret that the Legislature did not comply with this recommendation. It is this inflexibility of the act which makes the commercial classes feel the unsoundncss of its whole principle. Had a dispensing power been granted, we should merely have fallen back upon the previous system, with the additional disadvantage that the bank would never be able to adopt a better system, even if so disposed. The directors had for several years professed to govern the issue of notes by the foreign exchanges, but departed from that principle according to their discretion. The act of 1844, by its inflexible enactments, put this princi- ple to the test of experiment The principle could not bear that test, and hence the act was suspended. There is now a chance, at least, that we shall get a better system. The following is the language we addressed to the joint-stock banks at the time the act was passed : ' It must be acknowledged that the principle of regulating the currency by the stock of bullion in the Bank of England, as proposed by Sir Rob- ert Peel, is one which the joint-stock banks, as well as the private banks, have strongly condemned. But since we cannot obtain the adoption of our own views, the question for our consideration is, Whether the existing system or that now proposed will best promote the interests of our estab- lishments ? And we shall probably determine that it is better to have a uniform law, the operations of which may be subjected to some degree of calculation, than unknown laws, which arc applied or suspended accord- ing to the impulse of caprice. ** The proposed measure is an experiment ; and so excellent is the machinery, that the experiment interferes as little as possible with exist- Big interests. And the old machinery being retained by the continuance of the country issues, the return is easy to the former system, if neces- sary, before any serious injury can be inflicted on the country. 44 As practical bankers, we contend that experience is the only test of the soundness of a theory. Let, then, * the currency principle ' be tried by this test If it succeed, the joint-stock bankers, in common with every 74 The Bank Act of 1844. other class of the community, will share the advantage. If it fail, then other principles will, perhaps, be tried ; and, notwithstanding all the de- nunciations we have heard upon the subject, it may perhaps be ultimately found that the principle of ' competing issues,' as practised in Scotland, is the only effective principle by which the currency throughout the United Kingdom can be managed." In the year 1844, I addressed four letters to the joint-stock banks, un- der the signature of Nehemiah. " The first was written a short time pre- vious to the opening of Parliament, the second soon afterwards, when an impression prevailed that a plan would be proposed for the establishment of one bank of issue ; the third, immediately after Sir Robert Peel had announced his measures in the House of Commons, and before the depu- ties from the joint-stock banks had held their meetiug for the purpose of considering them ; and the fourth, after those measures had become law." The object of the third letter, from which the above quotation is taken, was to advise the joint-stock banks not to discuss the principle of the cur- rency in their communications with the government, but to endeavour to obtain some practical modifications of the measures originally proposed. My advice was followed, and the modifications were obtained. The joint- stock banks have had no meeting respecting the pressure of 1847. They have consequently expressed no opinion respecting it ; nor did they pro- pose any witnesses for examination before the parliamentary committees. It was not thought advisable that the joint-stock banks, as a body, should interfere with public questions, except such as have a special reference to themselves, as joint-stock banks. It was therefore determined to watch the proceedings of the committees, but not to call a meeting of " the dep- uties," unless some measures were recommended that might practically affect the joint-stock banks. It is obvious that " the currency principle " has been tried and has failed. It seems now to be the proper time to try the antagonist principle, that the amount of the domestic currency should be wholly unaffected by the importations or exportations of bullion. We doubt not that the talent and ingenuity which framed the act of 1844 can construct a plan for bringing this principle also to the test of experiment. When this is done, we will judge of the soundness of the principle by its results. So far as it has hitherto been tried, it has never failed.* * It would appear from the recent Message of the President of the United States of America, that his principle has been tested by the operation of the " Constitutional Treasury." " During the present year, nearly the whole continent of Europe has been convulsed liy civil war and revolutions, attended by numerous bankruptcies, by an unprecedented fall in their public securities, and an almost universal paralysis of commerce and in- dustry ; and yet, although our trade and the prices of our products must have been somewhat unfavorably affected by these causes, we have escaped a revulsion, our money market is comparatively easy, and public and private credit have advanced and improved. " It is confidently believed that we have been saved from their effect by the salutary operation of the Constitutional Treasury. It is certain that, if the 24,000,000 of specie imported into this coumtry during the fiscal year ending on the 30th of June, 1 847, had gone into the banks, as to a great extent it must have done, it would, in the absence of this system, have been made the basis of augmented bank paper issues, probably to 75 A Treatise on Banking. We have thus endeavoured to trace (impartially, a* wo In-lit -v ) the practical operation o the Act of 1M 1. (Tin- n-ad.-r \\ill timl soiw fur- ther observations on this act in the section on " The Administration of Ike Banting Deportment of the Bank of England.") It is reasonable to ftuppOK, that under similar circumstance* it will produce similar effects. What will be its effects under other circumstances, we have yet to learn. >tave yet to learn what will be the operation of the act mult -r u large rtation of gold, ab tni'iio, from a favorable state of tin- exchanges; what will be the effect of the act during a pressure, when it shall not be suspended ; and how its effects may be increased or mitigated by any dif- it system of management on the part of the banking department. We have yet to learn how the act will work financially during a large falling off in the public revenue, an increase of taxation, or contracts for large government loons ; and how it will work during a war, in which we may have to maintain armies on the continent, or to subsidize foreign . :- \\ . baTC ml ' learn ulu-ihrr tin- i>suintr uejiartiiii nt \\ill l>e ultimately removed from the Bank of England to the Exchequer, and we shall have a paper .currency issued \>\ tin- p.venmient nmler tin; authority of an act, the provisions of which may be suspended (as heretofore) by the same government ; and also whether the future suspensions of the act will ever be influenced by party or political considerations. And finally, we have yet to learn how the act will work in case of any large importations of gold from the mines of Russia or California. We may be reminded that, should the act work unfavorably under any of the above circumstances, there is one remedy always at hand, the remedy which lias already been applied, to suspend it. And no doubt, under any government, men will be found who will have the courage to apply this remedy. But this will not remove the previous evil. The sus- pension, too, may be long delayed, and in the mean time much evil may arise. In the next pressure the nation will be like " a cat in an air- pump. 11 The animal will not be allowed to die, but at what precise period of exhaustion relief will be afforded will depend upon the views and theories of the philosophic statesman who may at the time be performing the experiment It will not be safe for practical bankers to calculate with too much con- fidence upon the suspension of the act. They should make their arrange- ments on the supposition that it will not be suspended. And it behoves them to inquire what are the principles upon which, under such circum- stances, their establishments ought to be administered. This we shall now proceed to do. I not less than 60,000,000 or 70,000,000 of dollars, producing, as an inevita- ble coaseaaence of an inflated currency, extravagant prices for a time, and wild spec- ulation, which most bare been fallowed, on the reflux to Europe the succeeding year of so much of that specie, by the prostration of the business of the country, t',.- suspen- sion of the bankf, and moat extensive bankruptcies. The rcntraining effect of the sys- tem MOB lilt tendencies to excessive paper issues by banks, has saved the government from heavy loss as, and thousands of our business men from bankruptcy and ruin. The witfdom of the system has been tested by the experience of the last two years, and it is the dictate of sound policy that it should remain undUturbcd." 76 The Bank Act of 1844. We pointed out at the passing of the act the course which we thought prudent bankers ought to pursue. " Permit me now, with all deference, to point out the course which I think the joint-stock banks should pursue. In future, the amount of notes in circulation will be regulated by the foreign exchanges. When the ex- changes are favorable, money will be abundant ; when they are unfavor- able, it will be scarce. The evils arising from a scarcity of money can only be avoided by following a prudent line of conduct when money is abundant. We, then, as prudent bankers, ought at present to check our desires of making large profits and declaring high dividends, and be con- tent to employ our funds at a low rate of interest, rather than lock them up in hazardous or inconvertible securities. We should call up our old over-drafts, and our dead loans, and, if necessary, increase our capital, so as to place ourselves in the position most favorable for meeting an adverse state of the foreign exchanges. In cases of pressure on the money m#r- ket, arising from an unfavorable course of exchange, the Bank of Eng- land will not be able, as heretofore, to relieve that pressure by a further issue of notes, and, so far from granting assistance to other banks, she may, from the extent of her transactions, be more in need of assistance herself. We must, therefore, conduct our banks, individually, on a prin- ciple of self-dependence ; we shal I have to limit our overdrawn accounts, to avoid all advances on inconvertible securities, and to call up such an amount of capital as shall secure to us the means at all times of giving reasonable accommodation to our customers. On the recurrence of a pressure similar to that of 1839, the cry will be sauve qui pent, ' every one must take care of himself.' " (Letters of Nehemiah.) The knowledge we have acquired of the working of the act will tend to give additional force to these recommendations. The attention of prac- tical bankers will also be called to other points besides those which are here named. It will become a question with them to what extent they should continue to allow interest on their deposits. Some of the joint-stock banks in Lon- don allow interest on the minimum balance of a current account. Others allow interest only on deposit receipts. But most London bankers, whether private or joint-stock, allow interest on the daily balance to their country connections. In seasons of abundance, however, they usually limit the amount on which they allow interest, to prevent themselves being glutted with money from the country banks. But should the act of 1844 produce those frequent alternations from abundance to pressure, and again from pressure to abundance, which we think it will produce, then it will become a matter of consideration how far the practice of allowing interest on de- posits can be continued. It can never be worth a banker's while to allow interest on money which remains in his hands only so long as it cannot be employed, and is taken from him the moment it becomes valuable. During the year 1847 vast sums were withdrawn from both the London and the country bankers, not from any distrust of these bankers, but with a view to make more profitable investments. The rate of interest had been for some time previously very low. Consols had been at par ; and when consols fell so low as to yield 3^ per cent, interest, and the railway G* 77 A Trtaiitf on Banking. issued debenture* bearing interest at five per cent., Ian:-- sums were withdrawn from all the banks, as well on from the savings bunks, for the purpose of being invested in these securities. The bankers hud no to complain of this, as they were called upon only to fulfil their en- ix ntt ; '! ".: tli. % will (.n.kiMy !* unwilling in future to allow interest oo deposits of this description. Another circumstance which the operations of the act of \^\\ mil lead practical bankers to reconsider, will be the extent to which they should invest their surplus funds in government securities. Many I inkers have considered it as a sound principle to invest a certain portion of their funds Ifij ,, -:,<:, n: - BJHttl ft, ^ I have hud l>efore (.ur readers extracts from evidence given before parliamentary committees in favor of this principle, and we oiprossoH our own convictions respecting the same doctrine. I'm we must acknowledge the operations of the act are sufficient to show that this principle should be acted upon with caution, and should be limited in its application. The act will cause money to be alternately abundant and scarce. When money is abundant, the funds are high ; and when money b scarce, the funds are low. In seasons of abundance the. Linker will be full of deposits; in seasons of pressure his deposits will be withdrawn, and he will, moreover, be asked to assist his customers by further advances. He will, therefore, always have occasion to sell out of the funds when the price is low, and thus he will sustain loss. It will, consequently, be his interest to employ his surplus funds in other investments, or even t<> keep his money unemployed in his till, rather than invest it in government se- curities. His risk will be greater if the act should be capriciously sus- pended. In October, 1647, several banks are said to have sold out of the funds only a few days before the appearance of the government letter. After the issue of that letter the money was not wanted ; but, as the funds immediately rose, the money could not be replaced but at considerable loss. The reports and proceedings of the joint-stock batiks brought to light some transactions of this kind, and it is probable that the private banks sustained heavy losses by similar transactions. Another lesson that will be more deeply impressed upon the minds of practical bankers, will be to conduct their establishments in such a way as to be self-dependent in seasons of pressure. The events of the year 1847 are sufficient to show to what extent de- pendence can be placed on the Bank of England. Several of the direc- tors complained that every body looked for assistance to the Bank of England. No expectation could be more complimentary to the bank, nor bow more strongly the confidence she had inspired under her previous government In no preceding pressure had she refused assistance upon the ground that she was unable to grant it. But in former pressures there was no separation between the issuing and the banking departments. Her C strength lay in the power she possessed of expanding the circulation. power she surrendered to the act of 1844. She then became like M any other banking concern issuing Bank of England notes." Her locks are now shorn. ( Common*, 769, 3223 - 4 , 394 1 - 2, 4566, 5389. ) The Bank of Liverpool had been one of the oldest and most respectable of the connections of the Bank of England. They had, from their com- 78 The Bank Act of 1844. mencement, never issued any but Bank of England notes, and had always a pretty large discount account with the branch at Liverpool. Yet, in the year 1847, their minute book contains several entries similar to the follow- ing : " The manager stated he had seen the agent of the branch bank this morning, and that he would not discount any thing for us to-day." Even in the comparative light pressure of April, 1847, the bank suddenly restricted their discounts ; and in October, 1847, they were quite unable to meet the public demand, although in some cases they lent consols instead of money. Indeed, it was because the means of the bank were unable to supply the demand for notes that the act of 1844 was suspended ; yet the governor, and all the other witnesses who supported the act of 1844, stated their opinion that the pressure of 1847 was not so severe as some preceding pressures. How much sooner, then, would the means of the bank have been exhausted if the pressure had equalled its predecessors in severity ! While bankers should not depend on the Bank of England, neither should they depend on the bill-brokers. A broker, as the name implies, is an intermediate party between the borrower and the lender. When money is abundant, the bill-broker has large funds at his disposal, with which he will discount at a lower rate of interest than the bankers. When a pressure arrives, these funds are withdrawn, and his occupation is gone. Some bill-brokers have large capitals of their own, and take in deposits, repayable on demand ; and to this extent they may be regarded as bankers. When money is abundant, sometimes cunning people, instead of going to their own banker's, will take their bills to the bill-brokers, who will dis- count them at a lower rate ; and when the pressure arrives, and the bro- kers no longer discount, they think to return to their banker's. It is said that some country banks have occasionally adopted the same system. But it is clearly a bad system for any bank to adopt. A bank that is dependent on re-discount, will most likely feel some inconvenience in a season of pressure, even when the bills are all undoubtedly good. But if the bank has, from a desire of making large profits, been induced in seasons of abundance to re-discount inferior bills, the results may be more serious. For in a season of pressure, a large portion of those bills will not be paid, and the bank will have to provide payments for its own in- dorsements, while its former channels of re-discount will be closed. All the joint-stock banks that stopped payment in 1847, had been accustomed to re-discount ; and though some of them were unsound in other respects, yet the immediate cause of their stoppage was the inability to re-discount. We again refer to the proceedings of the Bank of Liverpool. " The manager stated that out of two small sums of 10,000 sent to London to the broker's, only one had been done." " We had then 100,000 at call with certain bill-brokers, who were unable when applied to, to return us more than .25,000." The governor of the bank stated that the failure of the corn speculators caused the failure of an eminent discount-broker having a large country connection ; and this failure, by closing one of the principal channels of discount between the country and London, caused distrust to extend into the country. Banks should not only avoid depending on the Bank of England, or on 79 A Treatise on Banting. bill-brokers ; they should alto avoid depending on other bank*. Some banks in manufacturing districts are in the habit of discounting with hunks in agricultural district*, a very good practice, as we think. Hut the banks requiring the discount should always recollect tliut win -n a pi. ssure arrives, the discounting bank may have other ways of employing its funds. Country banks, too, should not rely too much on their London agents. Some London bankers have, no doubt, immense power. At the same time, in seasons of pressure, they have immense claims upon tln-m. (CosMMtw, 8844-8.) If free from a run upon themselves, they will endeavour so to administer their funds as to afford reasonable assistance to all their connections. And no one connection should expect to m more than this reasonable amount of assistance. But they may them- selves be exposed to danger. The panic of 1847 was not a hanking panic, but a commercial panic ; and therefore the London bankers were comparatively free from molestation. But banks had failed in Liverpool and Newcastle, and this might have caused a banking panic in London. The panic of 1825 commenced by the failure of a country bank. In such a case the London bonkers could have rendered but little assistance to their country connections. It must be recollected, that the act of 1844 was suspended upon the application of the London bankers. The gover- nor of the bank stated to the Committee of the House of Lords, " The London bankers and discount-brokers refused to grant the usual accom- modation to their customers, and necessarily obliged every one requiring assistance to resort to the bank of England. 11 The most effectual way of acquiring this self-dependence that we have been recommending, is to call up an adequate amount of capital. During a pressure, as we have already said, a banker has three additional claims on his funds. In the first place, a large amount of his deposits may be withdrawn. Secondly, many of his customers, and some probably of the wealthiest, will require addititional assistance, in the way of loans and discounts. And, thirdly, he will think it prudent to keep a larger sum in his till to meet contingent demands. On the other hand, the bills he holds will not all of them be regularly paid ; the temporary loans he has granted will have to be renewed ; and should he call up any of his permanent, or dead loans, it will resemble calling spirits from the deep. In this case he will find the benefit of a large capital ; and it is only by means of a large capital that all these operations can be performed with comfort to himself and satisfaction to his customers. But if we increase our capitals to the full extent that may be required in seasons of pressure, we must not ex- pect to pay high dividends. It is obvious that, with the same extent of business, a bank with a large capital must pay a lower dividend than a bank with a small capital. It seems therefore likely that the average rate of banking profits will be reduced. " The fluctuations in the value of money produced by attempting to C Mgulale the currency by the foreign exchanges are injurious to both the . London and the country bankers. In seasons when money is abundant, / the bankers obtain but a low rate of interest on their loans and discounts ; and they are tempted to make imprudent investments in order to employ their funds; And when, on the other hand, money is scarce, the amount N The Bank Act of 1844. of their lodgments is reduced ; the rate of interest allowed on the perma- nent deposits is advanced ; a larger sum is kept unemployed in the till ; and there is more danger from losses, either by the failure of parties in debt to the bank, or by the necessity of realizing government securities. Those country bankers who are in the habit of re-discounting their bills in London are induced, when money is abundant, to carry this system to a great extent, because they can obtain money at two or three per cent, in London, and lend it in the country at four or five per cent. But when money becomes scarce they have to pay an exorbitant interest or are denied discounts altogether, and they are then compelled to refuse their customers their usual accommodation, and then great distress is occasioned in the provinces. Except under peculiar circumstances, both the extremes of abundance and scarcity of money are unfavorable to large banking profits, a state in which money is easy without being abundant, and valuable without being scarce, is the most conducive to the prosperity of both the banking and the commercial interests of the country." (An In- quiry into the Causes of the Pressure on the Money Market during the year 1839.) While, however, the profits of a banker from the ordinary operations of his business may be diminished, it is possible he may have opportuni- ties of making other profits by those fluctuations in the prices of public securities, which usually occur in the different periods of a circle of the currency. In the first period, immediately after a pressure, money is abundant without speculation ; in the second period, money is abundant and speculations abound ; in the third period, speculation begins to decline and money is in demand ; in the fourth period, money is scarce and a pressure arrives. It is impossible to say how long each of these periods may last, as they will be influenced by political events, the abundance of the harvests, the direction which speculation may take, and the state of the public mind. Their approach or decline is generally indicated by the stock of gold in the Bank of England. During the first period money will be abundant, because the importation of gold will cause an increased issue of bank-notes ; because, the import of commodities being diminished, there will be fewer bills drawn from abroad upon English houses and offered for discount to the London bank- ers ; and because trade will have become paralyzed at home, and prices will have fallen, so that less money will be required to carry it on. A banker at this period, will have more money than he can employ. But at this period, the prices of the public funds and of other securities are low. The act of 1844, by causing great fluctuations in prices, gives great advantage to prudent capitalists, at the expense of the less prudent or less wealthy classes of the community. " All fluctuations in trade," says Mr. Gurney, "are advantageous to the knowing man." (Lords, 1324.) To those who are not " knowing men," these fluctuations are injurious. The abundance of the circulation produces a multiplication of contracts, and then the contraction of the circulation produces an inability to fulfil them. (Lords, 3845.) And those who have stock or any other kind of salable property, are obliged to realize in order to fulfil their engagements. Bankers may, during this period, make advantageous in- 81 A Trtalitf on UanLing. i ; and a* they may calculate that another pressure will not ar- rive for two or three years, they may purchaae a limited amount of secu- rities that haw six or twelve month* to run, During tin- second p-riod, money will be in demand, though there may bo no great advance m :ln- rale of interval. The securities pun- IK IMC I l>\ the !>ank.T in tin- tirst (<. nod, wilt now be (ailing due or advancing in price. But this will !>< ;ln- period of his greatest danger, and he must have a can- not t<> let Ins de- sire of getting higher interest lead him to moke undue advnnrt s UJMUI the commodities or securities that may be the subject of speculation. The third period will be the most profitable for the banker in his direct busi- ness. Money will bo in full demand at a good rate of interest, and his deposits will hardly have begun to decline. He should now sell out stock and exchequer bills, or any other securities likely to be affected by the approaching pressure. He should make advances only by discounting v. ! || s BJ inik:!^' shr! loan*. I ! should \seed liis accounts of such customers as have deeply engaged in the previous speculations ; and put himself in a condition to support liberally through the pressure those who may be entitled to his assistance. It seems therefore probable that bankers will, under the act of 1844, endeavour to make up for diminished profits by dealing more largely in securities. According to the evidence of Mr. Pease, the fluctuations in UK currency have already produced similar effects in the departments of trade and commerce. * I Mated, M clearly aa I was able to do, that the mnn who bought from hand to month, which is the common case, and did not watch those fluctuations of capital, so as to bar when things were unusually depressed, and to sell when things rose again, failed. The only man who succeeded in making money, succeeded in rum-ing on a speculative kind of business, that has arisen from the want of regularity in the values of money sad produce. The man who did not so speculate buying largely at one time, sad selling very freely at another did not succeed." " It is of great 'iinnort- ance that persons who do not desire to carry on a speculative business, should have some assurance that it is moderately productive. That assurance they have lost, by bete* raddenly deprived by those fluctuations of that which they thought they had se- cured by their industry." (Common*, 4700, 4702.) Though we would not confound this kind of speculation with that which takes place by means of time bargains on the Stock Exchange, yet we do not think it desirable that banks should deal in the public securities mere- ly with a view of making a profit from the fluctuations in price. Some- times the banker will be out in his calculations, and, instead of selling at a profit, he will have to sell at a loss, or else submit to a lock-up of his funds. And at all times there is a danger that he will acquire a specula- tive feeling, which will lead him to disregard the steady pursuit of his SECTION DC. THE ADMINISTRATION OF THE BANKING DE- PARTMENT OF THE BANK OF ENGLAND. BT the act of 1844, the banking department of the Bank of England was separated from its issuing department ; and was to be managed like 82 The Bank of England. "any other banking concern issuing Bank of England notes." Taking this view of the banking department, we propose to inquire on what principles it ought to be administered. We shall do this, however, not so much with the view of bringing forward any notions of our own, as to lay before the reader some account of those principles which the bank directors have adopted for their government. This will lead us, perad- venture, to discuss some principles of practical banking to which we have not hitherto had occasion to refer. We shall then trace the operations of this department since the passing of the act of 1844. The Bank of England is governed by a court of directors, consisting of twenty-four members. These are selected from the mercantile classes of London, virtually, by the other directors, who form what is called a House List. They recommend certain persons to be chosen as directors, and the proprietors always follow this recommendation. The court hold their meetings every Thursday, and they then receive a report of the transactions of the preceding week. The executive administration, in the mean time, is in the hands of the governor and deputy-governor, who may be advised or assisted by the committee of treasury. This committee is composed of those directors who have held the office of governor, of the existing governor and deputy- governor, and of the director who is intended to be the next deputy-gov- ernor. A director is at first an ordinary director, and attends the weekly meetings of the court. In turn he becomes, for one year, a member of the committee of treasury ; then deputy-governor for two years ; then governor for two years ; and afterwards a permanent member of the committee of treasury. This committee meet once a week, and at such other times as they may be called together specially by the governor. Sometimes they discuss the measures that are to be submitted to the next meeting of the court ; but the court do not now so readily as formerly adopt their recommendations. The governor and deputy-governer, for the time being, make all loans and advances, and sometimes raise the rate of discount, without waiting for the opinion of the court. They conduct all negotiations with the government, and, subject to the sanc- tion of the court, have the whole administration of the affairs of the bank. Each director must hold 2,000 bank stock ; the deputy-governer, 3,000 ; and the governor, 4,000. It was the rule that every director should take his turn for becoming governor, but recently it has been determined to place in that office the director whom the other directors shall, by ballot, think best qualified. Several suggestions were made be- fore the parliamentary committees, for improving the composition of the court of directors. It was proposed that all the directors should not be taken from the commercial classes, but that some should be selected from the banking and manufacturing interests. It was also asked, wheth- er a permanent governor, either for life or for a number of years, would not be preferable to the present system. The act for separating the two departments came into operation on the 31st August, 1844, and the following was the first return made under the act, showing the condition of the banking department on the 7th of Sep- tember, 1844 : 83 A TVeolwe on Banking. '. i IV. IMCB DEPARTMENT. Oorcmrnent il. Other seruritirs, (..'1,1 coin and bullion, Silver bullion, . BAKK1NO DEPARTMENT. Or. . 11,015,100 3,984,900 12,657,208 1,694,087 28,351,295 Proprietors' capital, NM Otar deposit*, Scvcn-d*y and other bill*, . 14,553,000 3,564,729 . 3,630,809 8,644,348 . 1,030,354 31,423,240 Government securities, . 14,554,834 < Mlior securities, . . 7,835.616 Notes, 8,175,025 Gold and silver coin, . 857,765 31,423,240 It will be seen from the above, that the means or funds of the banking department for carrying on its business, consists of, 1. The paid-up capital ; 2. The rest, or surplus fund ; 3. The public deposits ; 4. The other deposits ; 5. The seven-day and other bills. These funds are in- Tested in " government securities " and in " other securities," and the remainder is kept as a reserve in the till. 1. Viewing this as the condition of a private and independent bank, the first thing that would strike the mind of a practical banker would be the large amount of the PAID-UP CAPITAL. The capital is 14,553,000 ; while the total deposits are only 12,275,157. The object of a large capital is, in the first place, to secure the public confidence ; then, to have the means of repaying the deposits whenever demanded ; and also, of affording to the customers of the bank every reasonable accommodation in the way of loans or discounts. But after making due provision for these objects, this amount of capital appears unnecessarily large. Were it only ; 7,000,000, that would be amply sufficient for carrying on the present extent of business, and the rate of dividends might then be in- creased. AH above this amount could only be invested in government securities, never likely to be required for banking purposes ; and if re- quired, could not be suddenly realized, or at least not within the period in which they are likely to be wanted. 2. The next thing that would appear remarkable for a private bank, is the large amount of the REST, or surplus fund. The Rest, or surplus fund, or Guarantee Fund, as it is sometimes called, consists of the accumulation of surplus or remaining profits after the payment of the dividend. The object of this fund is not to guarantee the public for the security of their deposits, but to guarantee to the share- holders the uniformity of the dividend. If, in any one year, the profits fall below the amount required to pay the usual dividend, the deficiency * The Table on the next page will give a more detailed account of tome of the (Ms* fa the above return. 84 The Bank of England. is taken from the rest or surplus fund. The amount of this fund should be regulated by the extent of the business and the probable loss that might arise in conducting that business. If the fund is five or six times the amount of the deficiency that might possibly arise in making up the annual dividend, it would appear to be sufficient. For if, after making up this deficiency for one, two, or three years, it should appear that the 00 o W>P' I &11S * ;S to at ' o to O CO -a W Ol M to i w a> w o o o I 1 -^ OD ? irt . Hi P 2. B S- ??' . pt* 111" ^i : S. " 2. >< 1 . ^ QQ i . *| " |'P W g* 00 to w o A Trealut on Banking. profits of the bank had become permanently diminished, then the course would be to reduce the dividend until the surplus fund hud recovered its former amount Banks that have made large profits have cither increased the dividend, or distributed them among the shareholders in the form of bonuses, or have added them to the capital. The Bank of England hnve adopted all theae plans. Yet, after all these distributions of increased dividends, bo- nuses, and additional capital, the bank had on the 7th of September, 1K-M, * rest, arising from surplus profits, of : 3,564,729. No other " kinking concern carrying on business with Hank of England notes," would think it neceasmry to keep such a rest. Neither the kind nor the extent of busi- ness carried on, is ever likely to require any thing like this amount to meet any occasional louse-. The amount is altogether excessively dispro- portionate to the purposes for which a surplus fund is usually applied, and at the same time it tends to give on erroneous view of the profits of the bank. This rest is employed in the business, and yields profits, but it pay* no dividends. The profits go to swell the dividend on the capital, and hence the capital appears to yield a profit of 7 per cent. But the dividend of 7 per cent is not mode upon the capital alone, but on the capital and rest together, and hence upon the funds employed it amounts to only about 5} per cent 3. The DEPOSITS. The Public Deposits are thus classified : Exchequer account, 2,198,000 For payment of Dividends, 315,000 Saving Banks, &r., 501,000 Other public accounts, 617,000 3,631,000 The u Exchequer account" is the current account with the govern- ment, and this account is credited with the amount of the taxes as they are lodged in the bank. In the beginning of January, April, July, and October, this account is debited for the amount necessary to pay the quarterly dividends, and the amount is carried to the credit of the ac- count u for payment of dividends." The balance here standing to the credit of this account is the amount of the dividends that had not then been claimed. The next account is called " Savings Banks, &c." The trustees of the savings banks throughout the country are required to lodge the deposits in the Bank of England to the credit of the Commissioners for the Reduction of the National Debt, who afterwards invest it in the public funds. We do not know what is meant by " &c.," nor yet by the ** other public accounts." We believe there are certain accounts con- nected with the Court of Chancery that are required to be kept with the Bank of England ; and, by the last bankruptcy law, the effects of bank- rupts* estates are required to be lodged in some one or other of the branches. These may form the " other public accounts." 86 The Bank of England. The Private Deposits are thus classified : Railways, 30,000 London Bankers, 963.000 East India Company, 636,000 Bank of Ireland, Royal Bank of Scotland, &c., . 1 75,000 Other Deposits, . . . . . . . . 5,631,000 Deposits at Branches, 1,209,000 8,644,000 With regard to both the public and the private deposits, a banker would inquire whether they were fluctuating or permanent ; whether repayable at fixed periods, or liable to be suddenly withdrawn. He would thus as- certain what proportion could be profitably employed, and what amount should be kept in the till, to meet constant or occasional demands. He would observe on inspection that the balance of the " exchequer account " increases gradually during the quarter, from the receipt of the taxes, until the commencement of the next quarter, when it is largely reduced by the payment of dividends. He will, therefore, provide for these quarterly payments ; but his provision will be less ample when informed, that, as the public deposits decline, the private deposits will increase, and more especially those of the London bankers. This is partly in consequence of the bankers holding powers of attorney to receive the dividends due to parties who reside in the country, and partly because the abundance of money caused by the payment of dividends increases their own deposits, and thus enables them to keep for a time larger balances in the Bank of England. We have already said that no rule can be given as to the amount of notes which any banker should keep in his till, the proper amount can be ascertained only by experience. But we should imagine that in ordinary times the deposits in the Bank of England are sufficiently steady to prevent any perplexity on the subject. We may be asked what we mean by " ordinary times," since now every year differs from its pre- decessor, and the steadiness and uniformity which heretofore characterized banking and commercial affairs are no longer known. We reply, that by " ordinary times," we mean those times that are the least affected by the foreign exchanges. For some years past it has been the practice to reg- ulate the issue of bank notes by the foreign exchanges. When the foreign exchanges bring gold into the country, bank notes are issued against it, money becomes abundant, and the bank deposits increase. When the exchanges take out gold, the bank notes are diminished, and the bank de- posits decline. This system has, in a great measure, been acted upon by the bank directors since the year 1832, and it is now rigidly enforced by the act of 1844. These extraordinary seasons of great influx or great efflux of gold appear to be subject at present to no general rules. But at other times there seems to be no reason why the Bank of England should not profitably employ a large portion of her deposits. We may observe, however, that, as the bank allows no interest on any of her deposits, she sustains no loss even when they are not employed ; but were they to be employed, her profits would be greater. 87 A Treatise on Banking. 4. With regard to the INVESTMENTS, a hanker \vonUi inquire first, Are they safe ? Secondly, Are they convertible ? Th- -re seem- no Around to^MMfan faAt vilery. their ei.nvertiliility w not ao obvious. The (Jnv. -rnment s'<*-k. Kvhemier hills, and East India bonds, must be considered in ordinary times, ami to a reasonable amount, as strictly convertible. But this is not the cane with the ( Jovern- inent annuities. They could not be Bold in the market ; ami even l.y private negotiations, tow buyers would be found, except the insurance offioa*. Even with them the negotiations would probably occupy consid- erable time. As to the city bonds, railway bonds, and mortgages, they would in a season of pressure be altogether useless. It may bo said, that the bank's capital being so large, a portion may, without inconvenience, be locked up in dead securities. This observation is valid to a certain extent, but not to an indefinite extent, and, after giving it due weight, the amount thus invested seems too large. The annuities form a large portion of the amount of the " Stock and Annuities." The first is an annuity of .585,740, usually called the "Dead Weight," which commenced on the 5th April, 1823, and is to continue for forty-four years from that time. Other annuities arose out of the Bank Charter Act of 1833. The government were to pay to the bank one fourth of the permanent debit of 14,686,800, amounting to jtf 3,67 1,700. At first it was arranged that the bank should receive in payment of this sum 4,000,000 three per cent, reduced annuities; but it was afterwards changed to an annuity for twenty-six years, and will expire in 1860, at the same time as the " Long Annuity." The bills discounted, and the short loans called " Advances on bills of exchange, exchequer bills, stock, &c.," are most legitimate banking in- vestments. The plan of granting short loans was commenced in 1829, to obviate that tightness in the money market which was felt for a month or six weeks before the payment of the dividends, through the gathering in of the taxes into the exchequer. The rate of interest charged was usually about one per cent less than the discount charged on bills. The loans were repayable to the bank at about the time that the dividends were paid to the public. Notices were issued, stating the rate of interest, and the kind of securities on which loans would be made, and the time of repayment. The first notice was issued on the 3d of December, 1829, and the prac- tice continued until after the passing of the act of 1844. Advances on deficiency bills are a kind of short loans made to the pnv- emment, whenever the taxes are less than sufficient to pay the public dividends. These advances seem to be very legitimate. The bank has one large customer. A customer who keeps large deposits will some- times require large advances. These advances may, peradventure, be wanted at a time when it may not be exactly convenient for the banker to make them. All large accounts may at times be attended with some in- convenience. But if a banker takes such accounts, he must make his ar- rangements accordingly. In the present case, the bank has the advan- tage of knowing, by the progress of the lodgments on the " Exchequer account," whether such advance is likely to be required. 88 The Bank of England. When the government requires these advances, the bank must either make them out of her reserve in the till, or sell public securities to obtain bank-notes, or restrict her advances to other parties. It is peculiarly un- fortunate that the government is more likely to require these advances in seasons of pressure, inasmuch as in those seasons the taxes are usually less productive and are less punctually paid. Hence the bank may be called upon to make advances to government at the same time that simi- lar advances are required by the commercial classes. In some cases the bank might not have the means of making advances to both parties. Had the government required such advances in October, 1847, the commercial distress must have been considerably increased. 5. THE RESERVE. A practical banker would, at first sight, consider this reserve as too large. From the amount and character of the depos- its it would not appear that so large a reserve was necessary, and a portion might well be employed in earning interest, instead of lying unproductive in the till. But, before we condemn the bank directors, we must give this matter further consideration. We have already stated, that, even before the passing of the act of 1844, the directors had been in the habit of issu- ing their notes against gold and silver bullion ; and when a large amount of notes had not been thus issued, the deposits in the bank were increased. Now, when this act came into operation, August 31st, 1844, the bank had in this way acquired a large amount of gold and silver bullion ; in- deed, she does not ever before appear to have had so large an amount in the whole course of her history. If we look to those years which preceded pressures (for in these years gold on hand is usually large), we shall find that in 1824 the amount was 13,810,080 ; in 1836 the highest quota- tion is 7,801,000; and in 1838 it is 10,126,000; but on the 7th of September, 1844, the amount returned in the issue department is, gold .12,657,208, and silver 1,694,087, while the sum of 9,032,790 was retained in the banking department. Notes, of course, had been issued against all this bullion, and the deposits in the bank had conse- quently increased. " Well," it may be said, " this will account for the increase of the deposits, but not for the increase of the reserve. Why were not the deposits invested ? " We will explain this. There are some classes of investments which the bank directors can make indepen- dently of other parties. For instance, they can purchase government stock, exchequer bills, and railway bonds, just as they please. But, as we have stated, it is not prudent in a banker to invest the temporary in- crease of his deposits in this way, as, when the deposits are withdrawn, he may have to sell these securities at a lower price, and thus sustain loss. There are other classes of investments for which the bank is, to a certain extent, dependent on other parties ; such, for example, as the dis- counting of bills and the granting of loans. The bank directors cannot invest their money in these ways unless there are parties willing to receive it. Now, while a portion of the notes issued against gold and silver bul- lion are lodged with the bank in the form of deposits, another portion, and sometimes the largest portion, do not go into the bank, but are circulated among the public, and soon find their way into the hands of bankers, bill- brokers, and money dealers, who, from the abundance of money, will A Treatue on Banking. discount bills and grant short loans at a lower rate of interest than the bank. The bank will, therefore, have no further application*. \Vhen her bills and loans fall due, they will bo paid, and the immunt will go to increase her reserve. Thus it appears that the notes which, in .1 Live- able course of the foreign exchanges, are issued against gold and silver bullion, will tend in two ways to increase the bank reserve ; first, by in- creasing her deposits, and secondly, by diminishing her securities. This will account for the large amount of the reserve. The rule laid down by the directors is, that the reserve should be about one third the amount of the deposits. Having given these explanations, we shall now proceed to notice the operations of the banking department of the Bank of England since its separation from the issuing department by the act of 1844 : I. The operations of the Banking Department, from the passing of the act in 1844, to September 5, 1845. The act came into operation on the 31st of August, 1844, and almost immediately some important changes were introduced. Up to that date the bank had never discounted at a lower rate than four per cent. This rate, in ordinary times, had seldom varied, and all bills discounted at the same time were charged the same rate. But, on the 5th of September, the rate of discount on bills was reduced from four to two and a half per cent, and on notes to three per cent. On the 18th of March, 1845, the bank introduced the principle of a minimum rate of discount ; fixing two and a half per cent as the rate on first-rate bills, and charging a higher rate on other bills. The object of these changes was to employ a portion of the reserve in the discount of bills. This line of conduct was by no means unwarranted by the practice of "other banking concerns." It is an established principle in practical banking, that a banker, when he cannot employ his surplus funds at so high a rate of interest, as he wishes to obtain, should employ those funds at a lower rate, rather than keep them unemployed in his till. And it is also an established practice to charge different rates of discount on difl'-r- ent bills, according to the class or character of the bills, the respectability of the parties, the time they have to run, and a variety of other circum. stances. In adopting these regulations, therefore, the directors were only performing the work assigned to them, of conducting the banking depart- ment " like any other banking concern issuing Bank of England notes." These changes gave rise, in the parliamentary committees of 1847, to some discussion upon the question as to whether the Bank of England governed the market-rate of interest, or the market-rate of interest gov- erned the bank-rate. There can be but little difference of opinion upon this subject. The "market-rate" of interest is the rate which bankers and bill-brokers charge for discounting first-class bills to the public. When the foreign exchanges are bringing gold into the country, and notes are issued against this gold, the abundance of money in the hands of the bankers and bill-brokers causes the market-rate of discount to fall below the bank-rate. If during this season the bank charges a high rate, she gets but few bills. On the other hand, when gold is going out of the 90 The Bank of England. country, and money becomes scarce, the market-rate is higher than the bank-rate. If during this period the bank charges a low rate, she must soon limit her discounts, or her reserve will be exhausted. But, though the bank cannot change the course of the current, she can give it in- creased strength. Though she cannot make money dear when it is cheap, nor cheap when it is dear, yet when it is cheap she can make it cheaper, and when it is dear she can make it dearer. Hence, every al- teration in the bank-rate has always an immediate influence on the market-rate. Such was the case in September, 1844. The large importations of gold had reduced the market-rate of discount to 2 per cent., while the bank charged 4 per cent. But when the bank reduced her rate to 2^ per cent., the market-rate went down to 2, and even to 1| per cent. To engage actively in discounting bills was a new feature in the bank man- agement. In 1832, the then governor stated to the committee of the House of Commons, that he thought the bank should be a bank of cir- culation and of deposit, and only occasionally a bank of discount. But the act of 1844 placed the bank in a new position, and led to the adoption of new principles. Formerly the bank had invested her surplus funds in government securities. But when she purchased, the price advanced ; and when she sold, the price fell. This produced a fluctuation inconve- nient to the public. Often, too, she purchased when the price was high, and sold when the price was low ; and thus sustained loss. It was there- fore deemed preferable to invest a portion of her reserve in the discount of bills. The sums thus invested would return as the bills fell due, and the reserve could at any time be strengthened by checking the dis- counts. The directors having determined to invest a portion of their funds in discounts, it became necessary to reduce their rate of interest to nearly the market-rate, or they would have got no bills. An eminent London banker, distinguished by his support of the act of 1844, says, " If the bank is to continue as a large discounting body (of the expediency of which I entertain considerable doubts), I think it very desirable that its rate of interest should conform to the real market value of money." , (Lords, 1632.) The directors seemed to think it necessary that they should in some way employ their reserve, in order to prevent the too great accumulation of bank notes in the issue department. (Commons, 3009.) We here give no opinion as to the best way of em- ploying the bank's reserve, but we are quite ready to admit, as the gov- ernor admits in reply to a question, that " the true principles of banking are, first, that a bank shall never place itself in such a position as that it shall be unable to meet its liabilities ; and next, that it shall employ the whole of its resources at the greatest profit that it can with reference to prudence, looking to its reserve." (Commons, 3722.) In thus coming into competition with the money dealers, reducing the rate of interest, exciting a feverish state of feeling in the public mind, and giving facilities to the formation of companies for speculative purposes, the bank directors are accused of having violated their public duties as the bank of the government, and thus sacrificed the interests of the nation to 91 A Trtalitc on Bmting. the interests of their proprietors. We shnll not meddle* with this question. tare here nothing to do \vith the public duties of the bank directors, ire considering the hanking department ns " any other banking con- cern.** Generally speaking, Providence 1ms BO constituted human so- , that all banking companies, and all individuals too, will most tuafly promote the public interests, whrn hy honorable means they pro- mote their own. If this in not the case with the Bank of England, it must hare arisen from the acts of the Legislature ; and the fact if it be a fact b presumptive evidence npiinst the wisdom and the justice of thoae laws by which she was placed in that position. At the close of this period, we find that the London discounts had in- creased from ,113,000 to .'2,365,000, and the "City Bonds, &c.," bad increased from 3,357,000 to 4, 009 ,000, owing, it is presumed, to the purchase of railway debentures. The circulation of the issuing department had increased from 28,351,295 to 28,953,300 (see the Returns at the end of this section), and the minimum rate of interest charged by the bonk was 21 per cent. II. The Administration of the Banking Department from September 6, 1845, to September 5, 1846. During this period there were three alterations in the minimum rate of interest On October 16th, 1845, it was raised from 24 to 3 per cent. ; on November 6th to 3J per cent. ; and on August 17th, 1846, it was again re- duced to 3 per cent. In fixing the rate of discount, the directors took into account the amount of bullion in the issue department, the reserve in the banking department, and the amount of the discounts. The amount of bullion virtually regulated the other two ; and thus the interest was gov- erned by the foreign exchanges. At the same time, the directors, as practical bankers, would pay the greatest attention to their reserve, as it was only from this source that any advances could be made. Hence, sometimes one object of raising the rate of discount was to diminish the number of applications. It was thought better to protect the reserve by raising the rate, than by positively refusing to discount. In the beginning of 1846, a circumstance occurred which increased both the deposits and the discounts of the bank, and added greatly to her profits. The railway companies, who were desirous of obtaining acts of Parliament to authorize the construction of their lines, were required to pay into the Bank of England, within fourteen days of the meeting of Parliament, ten per cent, on the estimated amount of their capital, to be returned when the company had obtained the act, or when the application had been re- jected. Every body wondered beforehand how so large a sum could be paid out of the amount of notes then in circulation. But the bank acted with the railway deposits as she had been accustomed to act with the public deposits previous to the payment of dividends. As fast as the money came in, it was lent out ; and thus a transaction of large magnitude was effected without much difficulty. This shows the importance of a government bank. Had the deposits been required to be lodged in the exchequer, and there to remain until reclaimed by the railway companies, the operation could not have been effected. The bank could have per- formed h with greater facility previous to the passing of the act of 1844. 92 The Bank of England. She could then have lent out her notes before the lodgments were re- quired to be made ; there would have been no previous apprehensions, nor any tightness during the operation. III. The Administration of the Banking Department from September the 5th, 1846, to September the 4th, 1847. In September, 1846, the minimum rate of discount was 3 per cent. On January the 14th, 1847, it was raised to 3| per cent., and on the 20th of the same month to 4 per cent. ; on April the 8th to 5 per cent., and on the 5th of August to 5 per cent. During the whole of this period the foreign exchanges were unfa- vorable, and the circulation of the issuing department declined from .29,760,870 to .22,396,845. (By deducting 14,000,000 from this sum, we see the amount of gold and silver bullion on hand in the issue department. ) This was attended by a decline in the reserve of the bank- ing department, and an increase in the amount of loans and discounts. The bank directors did not raise their rate of discount above 3 per cent, until the month of January, 1847. For this they have been severely cen- sured by parties who have had the advantage of not being compelled to form any opinion until after the result was known. The month of April was an important month. From the deficiency of the harvest, large importa- tions of corn took place. These imports were paid for in gold, which was suddenly withdrawn from the issue department, for exportation. Contemporaneous with this export of gold, the government required to borrow 3,500,000 upon deficiency bills, in order to pay the dividends. Under the old system this might not have been a matter of much impor- tance, but the case was different under the act of 1844. The banking de- partment was rather in danger of getting into what the Americans call a " fix." To avoid this " fix," the directors raised the rate of discount to 5 per cent. ; they refused to led money even upon exchequer bills ; they limited their discounts ; and they borrowed 1,275,000 on consols. These measures caused a severe pressure on the money market, but it soon subsided. From this period the foreign exchanges were favorable to this country. The operations of this month of April, 1847, have given rise to much discussion. The advocates of the act of 1844 have pointed to the transactions of this month to prove that the management of the issue department cannot be safely intrusted to the bank directors. They say that if the bank had advanced its rate of interest, they might have prevented the unfavorable course of exchange, and consequently have avoided the pressure which then occurred. On the other hand, it has been stated that the bank ought to be guided in its rates of interest by the amount of its reserve ; that from November, 1846, to April, 1847, the reserve was above one third of its deposits, a greater reserve than any other bank would think it necessary to keep ; that the demand for gold was so sudden, and for so large an amount, that no ordinary rules could have prevented it ; and even had it been prevented, it might have been injurious to the country, ns it would have checked the importation of corn, which was then required in consequence of the deficiency in the harvest. There can be no doubt, 93 A Trealue on Banking. lhat, under the act of 1644, m sudden exportation of gold must cause a sudden contraction of the amount of notes in circulation. This " self- acting machine " acts oy jerks, like a steam-engine without a tK-uh.,i- and its advocates look to the banking department to supply the fly-wh< -I, and to cause the machine to move smoothly and equably. It may be doubled whether the banking deportment has the power of doing this. when this is not done, the advocates of die act throw the blame upon that department They resemble the court preceptor, who, when tin- royal pupil did any thing wrong, inflicted the beating on his fellow- student. If on this occasion the bonk did wrong, it may be feared that it was her court connection which led her astray. The government were then negotiating a loan of eight millions for the relief of Ireland. And M there was a feeling in the court that, in the face of the government ne- gotiating a loan, it would be on act of want of courtesy to put up the rate of interest immediately." (Commons, No. 3001.) In the secret history of the Bank of England we may possibly find other instances of similar faults. But if on the present occasion she was influenced by such consid- erations, she did not act " like any other banking concern." The events of April, 1847, also lead us to remark that the London bankers never vary their rate of discount with a view to regulate the for- eign exchanges. If it behoves the banking department to do this, it has certainly to perform duties which are not considered to belong to **any other banking concern." Nor do the London bankers suddenly and abruptly stop discounting for those customers in whom they have OBlfidence. Tii-- t'ri-i[ii<-nt occurrence of such susj.i-nsion of loans and discounts as occurred in April, 1847, would form on insuperable barrier to the banking department ever acquiring that kind of business which is carried on by the London bankers. No merchant would like to depend on such a bank for the means of making his daily payments. We be- lieve, however, that most mercantile firms that have a discount account with the Bank of England, have another banking account elsewhere, and some have also accounts with the large bill-brokers. The pressure that existed in April, 1847, has been attributed to the publication of the amount of the bank's reserve. It was said, and said truly, that the bonk might very prudently reduce her reserve for a few days below the average amount, knowing that, by bills falling due, or by other means, she would soon receive a sum that would replenish her cof- fers. But the public, seeing only the amount of the reserve, and knowing nothing of the sums about to be received, might become unnecessarily alarmed, and hence a panic might ensue. Upon this ground, some par- ties questioned the policy of publishing the bank accounts in thr-ir present form. But the remedy for this is not to suppress the returns, but to cir- culate throughout the community such an amount of knowledge as shall enable them to judge accurately respecting banking affairs. Other par- ties, of a higher class than those we denominate the public, have fallen into erroneous opinions by a literal adhesion to these returns. Almost up to the time of the suspension of the act of 1844, it was contended by who **sit in high place*" that there could be no pressure on the since there were then more notes in the hands of the 94 The Bank of England. public than in former seasons when no pressure existed. And before the Parliamentary committees of 1847, it was stated by the governor and deputy-governor that it could make no difference to the public whether the bank advanced three millions, or any other sum, to the government on deficiency bills, or advanced the same sum in loans and discounts to the commercial classes, inasmuch as the returns would show that the amount of notes in circulation would be the same. The events that followed the suspension of the act showed the fallacy of these opinions. It was shown that the amount of notes in the hands of the public is not of itself a cer- tain criterion by which to judge of the amount of banking facilities en- joyed by the commercial classes. IV. The Administration, of the Banking Department from September, 1847, to September, 1848. During this period the minimum rate of interest was advanced from 5^ to 6 per cent, on the 23d of September ; to 8 per cent., by authority of the government letter, on the 25th of October. It was reduced to 7 per cent, on the 22d of November ; to 6 per cent, on the 2d of December ; to 5 per cent, on the 23d of December ; to 4 per cent, on the 27th of Janu- ary, 1848 ; and to 3^ per cent, on the 16th of June. At the commencement of this period a great number of commercial houses failed, not only in London, but also in Liverpool and Glasgow, and other large places. The following is the account given by the Governor of the bank to the committee of the House of Lords : " An unprecedented large importation of food, caused by a deficient harvest, re- quired in payment the export of a large amount of bullion, to the extent of about 7,500,000, from the coffers of the bank, and probably not less than 1,500,000 from other sources, together 9,000,000. From this great reduction in the available capi- tal of the country, in addition to the still larger amount invested in railway expendi- ture, acting suddenly upon a previous high state of credit and excessive speculation, arose the pressure in the money market. There was an abstraction of 7,500,000 from the bullion held by the bank, and consequently a diminution in the notes to that extent." (Lords, 12.) During this period the bank acted with great liberality. The following is a list of the advances made between the 15th of September and the 15th of November : " 1 . The Bank of England being applied to by a very large firm in London, who had at that time liabilities to the extent of several millions sterling, advanced 150,000 on the security of debentures to that amount of the Governor and Company of the Copper Miners in England, and thereby prevented them from stopping payment ; it was dis- tinctly understood that the operation was for that purpose. 2. The bank advanced 50,000 to a country banker on the security of real property. 3. On the urgent rep- resentations of several parties of the first importance in the city of London, the bank advanced 120,000 to the Governor and Company of the Copper Miners, on the guar- antee of approved names, taking at the same time a mortgage on the company's prop- erty for 270,000 to cover this sum, and the amount of 150,000 debentures before advanced upon ; it was stated that the stoppage of this company would have thrown ten thousand people out of employment. 4. The bank advanced 300,000 to the Royal Bank of Liverpool, on the security of bills of exchange, over and above their usual discounts to this bank. This advance unfortunately proved inadequate, and the Royal Bank, having no more security to offer, stopped payment. 5. The bank assist- ed another joint-stock bank in the country with 100,000 on the security of bills of exchange, over and above usual discounts. 6. The bank advanced 130,000 on real property to a large mercantile house in London. 7. The bank advanced 50,000 to 95 A Treatuc on Banking. mercantile hooM on the guarantee of approved names. 8. The bank ad- 1 50/WO IPS joint Mock issuing bank on bills of exchange, and agreed to open disroant account with the aaid bank, on condition that it should withdraw its \^ne*, but the joint-stock bank Mopped payment before the amuiRcmcnt could be rumjili ! 1. 9. Ita bank advanced 13,ot M) on real property to a large Sttablishmcnt in London. 10. The bank assisted, sad prevented from failing, a large establi-hm. -m in l.n.-i-|.< .!. by forbearing to enforce payment of upwards of 100,000 of tlu-ir m-< vpian.. -s, mid engaging to give farther aid if required. 11. The bank assisted a very lurp- joint- Mock hank in the country with advance* on loans on hill* of exchange to ih<> extent nf about 800,000, OTCT and above usual discounts. 12. The bank advanced . ion .< i to a country banker on real property. !'< The bank advanced n joint-stork Imnk in the coantnr X 200,000 on the security of local bills, besides discount im: 60,000 of London bills. 14. The bank assisted another joint-stock Imnk in tin- country with mi advance of X 100,000 on local and London bills. 15. The Imnk advanced 100,000 to a large SMrcsnriUi boose in London, on approved personal security. 16. The hank saisted a large house at Manchester to resume payment by an advance of 40,000 on approved personal security. 17. The bank advanced 30,000 to a country bank on real property. 18. The bank assisted many other houses, both in town and country, by advances of smaller sums on securities not admitted by the bank under ordinary circumstances; nor did the bank, during the period in question, reject at their London ytaHishimiu any one bill offered for discount, except on the ground of insufficient security." ( Comma**, 8645.) Some of those advances were not made till after the appearance of the government letter on the 25th of October. Up to that dute the efforts of the bank were inadequate to allay the pressure, while they largely re- duced the bank's reserve. On Saturday, the 23d of October, a deputa- tion from the London bankers waited on the Government, who then deter- mined to suspend the act of 1844 ; and on the same day gave intimation of their intention to the Bank of England. On Monday morning, a letter appeared from Lord John Russell and the Chancellor of the Exchequer, authorizing the directors of the Bank of England to enlarge their dis- counts and advances, and promising that if by so doing the existing law should be infringed, the government would apply to the legislature for a bill of indemnity. The letter suggested that these advances should not be made at a lower interest than 8 per cent. The effect of this letter was immediate. Confidence was restored, the hoarded notes were brought into circulation, and discounts were everywhere readily obtained. From these causes no infringement of the act took place. The state of the bank reserve at the date of the suspension of the act occupied the attention of the Parliamentary committees. On Saturday, the 23d of October, the notes on hand amounted to < 1,547,270, and the coin to jf 447 ,246. This, it should be remembered, was the amount at the London office and at the thirteen branches put together. At the same time the public deposits were .4,766,000, and the private deposits 8,58 1,000, of which 1,615,000 belonged to the London bankers. The questions put to the governor on this subject seemed designed to show that the bank, no far from being able to assist others, was not in a condition to meet her own engagements. But the governor contended that the amount of the reserve should be taken on tlie Friday night, before they were ac- quainted with the intention of the government to issue their letter. The reserve then was .2,376,000. The directors had from 2,000,000 to jf 2,500,000 of stock which they could have sold, and a large amount of die bills they held fell due in the following week. From these sources N The Bank of England. they would easily have increased their reserve. On the other hand, some of the witnesses declared that no large amount of stock could have been sold, and that, had a run taken place on the London bankers such as that which had taken place on the banks at Newcastle, the bankers' de- posits must have been withdrawn, and the Bank of England itself might have been placed in jeopardy. As we have considered in a previous section the operation of the act of 1844, it is not necessary to pursue this subject any further. After the government letter was issued, the bank still continued to make advances with caution, and, with the view of not infringing the act, they borrowed money on the Stock Exchange at seven per cent., though they had the unlimited power of issuing notes. Soon afterwards the gold began to return, and money became abundant. From the high rate of interest, the amount imported was large ; and, from trade having been paralyzed by the pressure, the demand for it was very small. As the gold increased, the bank rate of interest was reduced. By September 2d, 1848, the circulation of the currency department amounted to 26,883,505, and the bank reserve to 9,410,952. The following is a copy of the official returns for the four years that have passed under review. To show the further progress of the bank since September, 1848, we have added the returns for the week ending the 2d of February, 1849 : BANK OF ENGLAND WEEKLY RETURNS. Account, pursuant to Act 7 and 8 of Victoria, cap. 82, for the weeks ending as follows. ISSUE DEPARTMENT. Notes Issued, 1844, 1845, 1846, 1847, 1848, 1849, Sept. 7th. Sept. 6th. Sept. 5th. Sept. 4th. Sept. 2d. Feb. 2i 28,351,295 28,953,300 29,760,870 22,396,845 26,883,505 28,330,845 Government Debt, 11,015,100 11,015,100 11,015,100 11,015,100 11,015,100 11,015,100 Other Securities, . 2,984,900 2,934,900 2,984,900 2,984,900 2,934,900 2,984,900 Gold Coin and Bullion, 12,657,209 12.982,591 13,057,997 7,373,815 12,177,567 13,828,773 Silver Bullion, . . 1,694,087 1,970,709 2,702,873 1,023,030 705,938 502,078 28,351,295 28,953,300 29,760,870 22,396,845 26,883,505 28,330,845 BANKING DEPARTMENT. 1844, 1345, 1846, 1847, 1848, 1849, LIABILITIES. Sept. 7th. Sept. 6lh. Sept. 5th. Sept. 4th. Sept. 2d. Feb.2d. Proprietors' Capital, 14,553,000 14,553,000 14,553,000 14,553,000 14,553,000 14,553,000 Rest, 3,564,729 3,608,180 3,864,479 3,986,593 3,826,382 3,576,625 Public Deposits,* . 3,630,809 6,474,705 7,318,919 7,722,704 6,021,591 3,922,307 Other Deposits, . 8,644,318 8,507,213 ,557,109 6,791,373 8,824,607 11,328,544 Seven-Day and other Bill*, . . . 1,030,354 1,021,639 935,830 842,711 1,016,921 1,144,824 31,423,240 34,164,787 35,229,337 33,896,381 33,242,501 34,525,300 * Including Exchequer, Savings Banks, Commissioners of National Debt, and Dividend Account*. i 97 A Treatise on Banking. IMA, ISM, 184T, 1M'. 1849, a.pi*k 8-pcRK fcpc4ih. fepiu. F.b *. X X * . X I4.U4.834 I3.4K.M3 W.961,731 11,698,340 W,4,735 13.888,967 7.SJM16 11,917.081 ,B3,6W 17,603,119 11,368,814 10.314.6M 8.I7S.O* M",M6 9,831,08* 4,189,830 8,784,796 9,f3,460 8S7,76 471,598 619,967 688.088 ftg.167 774,919 31,40^0 XHIM.787 X ,S,337 33,898,381 33,!a,C01 34,086,800 We have thus taken a review of the first four years of the proceedings of the Banking Department of the Bank of England. Whatever may t><- the future operations of that department, this portion of its history will always be interesting. This period is remarkable also as containing one of those monetary cycles to which we must always be liable as long as our cur- rency M regulated by the act of 1844. Each year has a peculiar char- acter. The first commenced at a period of full currency ; money was abundant and cheap, the minimum of the bank-rate being 2 j per cent. In the second year the exchanges fluctuated, and the rate of interest fluc- tuated also. During the whole of the third, the exchanges were unfavor- able ; gold was exported, and the rate of interest advanced. At the com- mencement of the fourth year came the pressure ; then a favorable course of exchange brought back the gold, the rate of interest was reduced, and again money became abundant This period is, moreover, important as an indication of the principles on which the banking department will hereafter be governed. The governor and deputy-governor were examined before the Parliamentary committees in March, 1848. They stated that they approved of the reduction of in- terest in September, 1844 ; but they expressed regret that the bank had not advanced the rate of interest in November, 1846, and that they suf- fered the reserve to fall so low in October, 1847. Should these sentiments be acted upon in future, we may expect that the " banking department " will reduce its rate of interest as heretofore ; but when money becomes scarce, it will advance its rate at an earlier period, and be less liberal in making advances. The following question was put to the governor by a member of the committee of House of Commons : " You have described as part of the operation of the act of 1844, that you were during the year 1847 obliged to lend consols instead of notes, on account of the limit prescribed by the act ; that you borrowed on consols in April ; that you were obliged to raise the rate of interest to 9 per cent. ; that you refused loans on ex- chequer bills ; that there was a pressure in April and a panic in October ; and that Government were obliged to interpose by a letter, in order to protect the public from the restrictive effects of the act : Do you call that a satisfactory history of any system ? " ( Commons, 3450.) We must, however, distinguish between the " system " as established by the act of Parliament, and the administration of the banking depart- ment in consequence of the establishment of that system. We have given in the preceding section our opinion of the system. But the ad- Including DMd Wtlfhl Annuity. 98 Joint-Stock Banks. ministration of the Banking Department of the Bank of England under the system has, in our sober judgment, been distinguished by a high de- gree of both wisdom and liberality. The administration of the banking department since September, 1848, does not call for any particular remark. We have had the usual indica- tions of the first stage after a panic. The bullion in the issue department has increased from 12,883,505 to 14,330,845 ; the notes in reserve from 8,784,795 to 9,553,460. Money has been abundant, and the rate of interest low. On the 2d November, 1848, the bank reduced the minimum rate of discount to 3 per cent. This would probably have been done at an earlier period but for the political aspect of the continent. The same reason possibly has induced the directors to maintain the same interest to the present time (February, 1849), although this appears to be an abandonment of the principle adopted in the year 1844. SECTION X. THE ADMINISTRATION OF JOINT-STOCK BANKS, WITH INQUIRY INTO THE CAUSES OF THEIR FAILURES. THE chief points in which a joint-stock bank differs from a private bank are, the number of its partners, the permanency of its capital, and the form of its government. A private bank has not more than six part- ners ; a joint-stock bank may have a thousand partners. If a partner in a private bank die, or become insolvent, his capital is withdrawn from the bank ; in the case of a partner in a joint-stock bank, his shares are transferred, and the capital of the bank remains the same. In a pri- vate bank all the partners may attend to its administration ; a joint-stock bank is governed by a board of directors. The business principles on which these two kinds of banks are administered are the same, and the observations of the preceding sections will equally apply to both. The topics, therefore, to which we shall in this section more particularly direct our attention, will be those that have a special reference to the constitution of joint-stock banks. We shall describe these banks as they now exist, and then notice those modifications which are imposed on new banks by the "Act to regulate Joint-stock Banks" (7 and 8 Viet., cap. 113), passed in the year 1844. After the 6th of May, 1844, it was not lawful for any new company of more than six persons to carry on the trade or business of bankers in England, unless by virtue of letters patent to be granted by her Majesty according to the provisions of that act. I. All joint-stock banks have a certain amount of paid-up capital. The payment of a certain portion of the capital before the commence- ment of business, is a pledge that the project is not a mere bubble, and this is especially necessary when the proprietors have no further liability. But even with unlimited liability a certain amount appears to be neces- sary. The employment of capital judiciously is sometimes a means of acquiring business ; and in case of loss, there should always be a suffi- cient capital to fall back upon without recurring to the shareholders. 99 A Treatise on Banking. There is an evil in a bonk having too small a capital. In this case, the bank will be but a small bank ; the number of proprietors will be few, and the number of person* eligible to be chosen directors will IK* I hence there will not be the same guarantee fur good inana^-m.-nt. It H bank with a small capital have also a v. TV small business, it hud much !" I H an in.!- j-'ivii'iil xt.tKNlmii-nt, anil IM-CH inr tin- braii'-h ot':i larger bank. If, on the other hand, it lias a large business, with a I circulation, large deposits, and large loans or discounts, its losses will sometimes be large, and hence the whole capital may !* swept a\\a\ . It i* true, that while it avoids losses, the shareholders will receive large dividends, but these large profits had much better be left in the bank as an addition to its capital, than shared among the proprietors in the form of dividends. There is danger, too, that the high premium on tlioso hares may induce many shareholders to sell out and form other, and per- haps rival, establishments. On the other hand, there is an evil in a bank having too large a capital. In this case, as the capital cannot be employed in the business, the direc- tors are under the temptation of investing it in dead or hazardous securities for the sake of obtaining a higher rate of interest ; perhaps, too, they may speculate in the funds, and sustain loss. Hence it is much better that a bank should commence business with a small capital, and increase the amount as the business may require. It is difficult to state in all cases what proportion a capital ought to bear to the liabilities of a bank. Perhaps the best criterion we can have is the rate of dividend, provided that dividend be paid out of the business profits of the company. When we hear of a bank paying from fifteen to twenty per cent dividend, we may be assured that the capital is too small for the business. The liabilities of the bank, either in notes or deposits, must far exceed the amount of its capital. As a general maxim, the greater the capital the less the dividend. Let the whole capital be employed at any given rate of interest, say three per cent., then the capital raised by notes or deposit, produce, after paying all expenses, a certain sum as profit. Now, it is evident that if this amount of profit be distributed over a large capital, it will yield a less rate per cent, than when distributed over a small capital. Sometimes, however, a large capital may have increased the rate of dividend, in consequence of having been the means of acquir- ing a large increase of business. It may have done this in consequence of inspiring the public with confidence in the bank, and thus inducing them to make lodgments or circulate its notes ; or it may have enabled the bank to make large advances, and thus gained the support of wealthy and influential customers. Although the proportion which the capital of a bank should bear to its liabilities may vary with different banks, perhaps we should not go far astray in saying it should never be less than one third of its liabilities. I would exclude, however, from this comparison all liabilities except those arising from notes and deposits. If the notes and deposits together amount to more than three times the amount of the paid-up capital, the bank should call up more capital. It may be said, that the hank is liable also for its drafts upon its London agents, and for the payment of those 100 Joint- Stock Banks. bills which it has indorsed and reissued : admitted ; but in both these cases the public have other securities besides that of the bank. Presuming that banks are to commence with a moderate amount of capital, and to increase that amount as the business increases, the question is suggested, what is the best way of increasing the capital ? The Eng- lish banks have followed two ways of doing this ; one, by a further issue of shares ; and the other, by further calls upon the existing shareholders. The capital of all the joint-stock banks in England is divided into certain portions, called shares ; each proprietor holds a certain number of these shares, and pays a certain sum upon them. If he wishes to transfer a portion of his capital he cannot transfer a half share or a quarter share, but must transfer a whole share, or a certain number of shares. Thus, if the capital of a bank be 500,000 it may be divided into 5,000 shares of 100 each, or 50,000 shares of 10 each, and a certain proportion of the amount of each share will be paid up ; and this proportion is called the real or the paid-up capital. Thus, if one tenth of the above capital is paid up, then 50,000 will be the real or paid-up capital, and 500,000 will be called the nominal capital. In the chartered banks, on the other hand, there is usually no nominal capital, and the real capital is not divided into shares or portions, but any fractional sum may be trans- ferred. The capital is then called stock. When there is no nominal capital, nor any way of increasing the amount of the real capital, this is the best way. But, in the other case, it is more convenient to have the capital divided into shares. Some persons have objected altogether to a nominal capital ; but their objections have been directed more to the misrepresentations that may at- tend it, than to the thing itself. They say, " a bank announces that it has a capital of 500,000, whereas few shares are issued, and but a small sum is paid on each share ; hence people are misled, and the bank acquires a confidence which it does not deserve." The objection here is against representing the nominal capital to be paid-up capital ; it does not bear upon the principle of a nominal capital. In fact, we are misled by words. What is called nominal capital, is nothing more than a further sum, which the directors have the power of calling up. If this sum had not been called capital, it would not be objected to, as it could lead to no misapprehension. But the inquiry simply is, ought the directors to have the power of calling upon the shareholders for a further amount of capital beyond that already paid up ? Were they not to have the power, the bank would at its commencement probably have too large a capital, and after its business had advanced would have too small a capital. And if the bank, by any unforeseen occurrence, became involved, and should have occasion for further sums to extricate itself from its difficulties, it could not make any further call upon its shareholders, although a very small advance might prevent its utter ruin. In case of a very large capi- tal, such as two or three millions, a nominal capital may not be neces- sary, as so large a sum is likely to be in all cases amply sufficient. But in banks of a second class, it will always be best to give the directors the power of making further calls upon the shareholders. The second way of increasing the capital of a bank is, by the issue of i 101 A Treatue on Banking. new shares. The whole amount of share* to be issued is fixed in tin- fin instance, and the bank commences as soon as a certain proportion l>n been issued. If the bank were not allowed to commence business until the whole of the shares were taken, a small amount would ! ii\- niter into unwarrantable speculations with tin- funds committed to tlieir can-, it is not supposablr that they will be particularly scrupulous as to the general management of the affaire of others "6. A bank director should 1x3 one who can bestow some- attention upon the affairs of the establishment. It has appeared in evidence that gentlemen have been appointed, and have accepted the office of directors of banks, who gave little or no attention to the affairs; who, in fact, ap- pear to have considered that the office of director was conferred on and accepted by them more for the purpose of complying with the letter of the deed of settlement, which enjoined the appointment of a certain num- ber of directors, than from any idea of their being expected, or of its be- ing necessary for them, to know any thing regarding the management. The consequence of this has been, that the duties which the shareholders devolved upon, perhaps, six individuals, were confined to two, or possibly only one, and the others approving, without suitable knowledge or proper inquiry, of all their acts, the moss of shareholders, as well as an extensive commercial circle, have been involved in the disastrous results of misman- agement It is altogether an anomaly that any man, or body of men, should have the credit, honor, and distinction of being managers and di- rectors of a bonk, and yet not exercise any of the active functions and im- portant duties that relate thereto. Upon what principle can they undertake, as by accepting the office they unquestionably do, to discharge a solemn trust, in faithfully administering the affairs of a bank, into which they make it no part of their business to look ? Were the fact not very well known, it would seem absurd ; yet it is not the less absurd that it is known/' (Philosophy of Joint- Stock Banking, by G. M. Bell.) Mr. Taylor, in his " Statesman," makes the following observations upon the age of members of public boards : " Boards, or other cooperative bodies, should be so formed that youthfulness and eldetiincM mar meet in due proportion in their counsels. If any such body be wholly composed of elderly men, it will commonly be found to be ineffective, so far as inven- tion of new courses and intrepidity of purpose are required, and, perhaps, also unequal to anr unusual amount of spontaneous activity. If, on the other hand, it !* composed wholfy of young men, its operations will probably bo wanting in i > irvuiii>|x:ction ; and the foresight by which it will be guided will be too keenly iliiv.-fil t<> UK- ><>>j'ctt of a sanguine expectation, too dully to prospects of eril and counteraction The respec- tive positions in life of the young and the old operate to these results not less tlum their temperaments ; for the young hare their way to make, their reputation to earn, and it is for their interest to be enterprising, as well as in their nature; the old have ascertained their place in life, and they have, perhaps, a reputation to lose." The new act requires that provision shall be made in the deed of partnership " for the retirement of at least one fourth of the directors yearly, and for preventing the reelection of the retiring directors for at least twelve months." III. Joint-stock banks have a principal officer, called a manager. " The prudent and satisfactory management of a joint-stock bank very materially depends upon the upright and consistent discharge of those so- 104 ' Joint- Stock Banks. cial duties and reciprocal interchanges of confidence which ought to char- acterize the directors and manager. " The manager, from his experience, and the importance of the office he fills, is entitled to the kind consideration and entire confidence of the directors. He is selected by them to occupy an arduous and highly re- sponsible situation, and ought to be rewarded, not merely with an adequate pecuniary remuneration, but with the respect and friendship of the di- rectors, by whom he should be considered in every respect, so far as re- gards the bank, at least upon an equally elevated footing. Without the confidence and friendship of the directors, he can neither take his place at their meetings free from restraint, discuss with them matters relating to the welfare of the establishment with composure, nor appear before the customers with that satisfaction and independence which is required to the proper discharge of his duties. Having placed him in the position of manager of the bank, it is their duty always to contemplate him in that light, to respect and confide in his opinions and conduct, which in many cases have been formed by long years of active and arduous employment in the profession ; and to speak well of him among their friends and ac- quaintances. In the degree in which the manager is respected, and well spoken of by the directors, will respect and confidence be extended to him, and consequently to the establishment, by the public, and a good opinion entertained of their judgment and discernment in his selection. " The conduct of the manager ought to be characterized by great cir- cumspection and uprightness. He ought, unquestionably, in every in- stance, to be chosen for his business qualifications, and not because he is a rich man, a gentleman, a man of fashion, or a man with an extensive circle of friends. To choose him on account of any one of these qualifi- cations, and not principally from his practical experience of banking, would be similar to appointing a man to the care and management of a steam-engine, who knew nothing of its mechanism, nor the nature of its operation, but was recommended solely because he had a taste for travel- ling ; or it would be like placing a man at the helm to pilot a vessef over quicksands, and through a reef of rocks, who knew nothing of a seafaring life, but was fond of contemplating the grandeur of the elements. The manager of a joint-stock bank ought to be chosen exclusively for his ex- perience in banking ; other qualifications are well enough in their own place, but ought never to be taken into consideration in choosing a person to act as manager of a bank. In this way a stimulus is given to persons of talent, who may be looking forward to the reward of a life of toil and drudgery ; and thus merit is patronized and protected. In a well-regulated office no one will be promoted over the head of another, but a prudent se- lection being made at the outset, a system of regular promotion should be uniformly practised. " The manager of a bank may be contemplated in three important points, in his intercourse with the customers and the public ; with the directors ; and with the subordinate officers of a bank. In each of these departments he has important duties to perform. He must be scrupulously diligent in his attention to the affairs of the bank, courteous in his inter- views with the public, affable and unreserved in his communications with 105 A Trtatite on Banking. the directors, and kind and conciliating towards the subordinates of the bank, treat in thrm as those who may he ne day placed in a similar situa- tion with himself. The days arr now gone past when a man of Ims-ness wa considered in the light of a machine, n more automaton for tin- purpose of forming figures and casting up accounts ; but it is still n< << -ssary, enlarged as our views of the powers and capabilities of tin- human mind are, in order to the proper management of any business, that it Iw can Tu' tended to. The manager of a joint-stork hank, hein^r allowed a compe- tent salary, cannot IK- justified in occupying his time with any oilier em- ployment which may (ccasion his absence from the duties of the hank. But it is not intended to insinuate that he must be a man of one idea, and restrained from turning his mental acquirements to his own amusement or profit This would be as absurd as it would be unreasonable. Nor is it meant that a man of business may not be also a man of great erudition, and, it may happen, of literary and scientific eminence. On the contrary, it cannot be denied that, in the present day, this is often the case. What is contended for is, that the bank is entitled to, and ought to have, his close and chief attention. As it is obvious that he cannot manage any other trade or profession, without sacrificing or delegating more or less the duties he owes to the bank, it seems also very doubtful whether he can be justified in taking a prominent part in public or political affairs. There are two arguments against his being a public character : the first is, that he may be drawn away during the hours of business; the second, that, by becoming a par- tisan, he is certain of being more or less obnoxious to a portion of the in- habitants, and, it may be, of the bank's customers. A man whose mind is occupied in framing political speeches, in promoting political schemes, and whose time is partially given to political, magisterial, or other i\ ings, cannot possibly, from the exciting nature of such subjects, give that cool, deliberate, and uniform attention to the duties of the bank which they necessarily require. " The customers ought always to be treated with civility and kindness, their business transacted promptly and cheerfully, and every inquiry re- garding their accounts, or any matter of business, readily and satisfac- torily explained. When an accommodation is to be declined, it ought to be done in as polite and inoffensive a manner as possible, the manner of a refusal being of paramount moment to the character of a man;; "The shareholders, being, in other words, the proprietors of the hank, are to be received with that freedom and confidence which is due to their character as such, but without compromising or revealing to them either the business and accounts of each other, or of the customers of the hank. " Next to being secret and cautious, a manager ought to be prompt and decided in all his measures, free from party influence, and firm in his purpose. A habit of promptitude and decision is very essential to the proper regulation of the business of a bank, and acquired by forethought and circumspection. It is, perhaps, a constitutional virtue which cannot be enjoyed by every one in the same degree, but it is nevertheless a vir- tue which every one may acquire by proper attention. Nothing makes a manager look more silly and contemptible than a hesitating, dubious, and 106 Joint-Stock Banks. capricious manner. His answer ought to be prompt and satisfactory ; he should be sufficiently acquainted with business to say at once whether an act can be done or not, and should appear free from restraint, and not dis- posed to alter an opinion when once formed." (Bell's Philosophy of Joint- Stock Banking.) IV. In joint-stock banks the administrative functions are usually dis- tributed between the directors and the manager. With reference to both private and joint-stock banks, the distribution of the administrative functions is a most important topic of inquiry. By what parties ought these functions to be exercised ? We have spoken of " the banker," as though a bank consisted of only one person, and this one person administered all the powers and functions of the bank. But few banks consist of only one person. One class of banks consists of two, three, four, five, or six persons, some or all of whom attend to the practical administration of the bank. Another class of banks consists of a great many, it may be of several hundred persons, who appoint some dozen or score of their own number to administer the bank on their behalf. But how many soever the number of partners may be in a bank, the administrative functions are in fact practically exercised by a small num- -ber of persons. A private bank may consist of as many as six partners, but it is rarely, we believe, that so many as six are actually engaged in the business. When more than one are thus employed, their duties may be distributed according to their seniority or other circumstances. In ordinary matters there may be a division of labor, and each partner may preside over a distinct department of the business. But in all im- portant cases there is usually one leading partner who practically guides the others. When a bank has risen speedily to eminence, it has gener- ally been through the talents of some one man. It does not follow that this one man did not receive great assistance from the advice or sugges- tions of his partners. It is the part of a wise man to avail himself of the knowledge and wisdom of others ; and he will often gather much useful information from men far below himself in general talents. There is, per- haps, more uniformity, consistency, and energy in the proceedings of a bank managed by a few partners, than by many. On the other hand, banks have sometimes been ruined by placing too much power in the hands of one or two of the partners. In a joint-stock bank, though the number of directors may be large, the daily exercise of the administrative power is practically in the hands of a few persons. In some banks this power is vested solely in the manager ; sometimes in one or two managing directors ; sometimes in a permanent committee of two directors and the manager ; and in other cases, in a changeable committee, on which each member of the board takes his rota of service for two or three weeks in succession. In all cases, however, the board of directors lay down the general principles on which the bank is to be administered ; reports are made to them at their weekly meeting, of the actual condition of the bank in all its departments, and all very im- portant matters are reserved for their special consideration. V. Some joint-stock banks have many branches. 107 A Trtatitc on Banking. When the law existed in England that no bnnk should have more than nix partner*, the branch system scarcely \ist.-.i. In some cases, a bank had a branch or two a few miles distant, but no instance occurred of a bank extending itself throughout a county or a district. But with joint- stock banking arose the branch system ; the In "--'i t<> Mis|>icinn. Another danger arises fn>m the incompctcncy or negligence of the managers of branches. Among a number of men, it is not likely that all are clever, and all prudent ; and one case of neglect on the part of one manager may, in times of alarm, throw discredit on the whole establish- ment Besides, there is sometimes danger even from the zeal of the branch managers. Each manager is naturally anxious to increase the business of his own branch ; and he will perhaps find that the most easy way of doing this is to extend his loans and discounts. Hence each manager tries to employ as much capital as he can ; and the urgent remonstrances he receives from head quarters, requiring him to restrict his discounts, are either evaded or delayed. Thus the bank proceeds until some heavy de- mand for money arises at head quarters, and it is then found that all the capital of the bonk had been absorbed by the branches. These advances cannot bo suddenly recalled, and thus the bank may be ruined. What number of branches a bank ought to have, and what distance they ought to be from the head office, have been the subject of much dis- cussion. No general rules can be given. The subject may very safely be left to the discretion of the banks themselves. Several of the banks in Scotland have from thirty to forty branches. The Provincial Hunk of Ireland, whose head office is in London, have branches spread ull over Ireland. I am not aware that in these cases any danger or inconvenience has been experienced. When branches are found troublesome or un- profitable, they will very soon be discontinued. In some instances, even in Scotland, the branches of the larger banks have been withdrawn in con- sequence of being unable to sustain a competition with the local banks of the district. Had the act of 1826 permitted joint-stock banks of issue to be estab- lished in London, we should probably by this time have had ten or a dozen banks having their head quarters in London, and extending their branches throughout the country. But as the law prohibited joint-stock banks being established within sixty-five miles of London, it necessarily gave rise to banks occupying particular districts in the country. The ad- vantages which are alleged to belong to the district system are the follow- ing : That the bank will be better adapted to the wants and habits of the people ; that a local feeling will be excited in its favor, hence the inhabit- ants of the district will take shares, and the occurrence of runs upon the bank will be less probable ; that a better system of management may be expected, as it can more easily be governed, and will be more under con- trol; that a panic in the district will not affect the other parts of the country, and hence supplies may be more easily obtained ; that banks will be of a moderate size, and hence will be attended with the advantages arising from numerous banks acting as checks upon each other, in- of a few large banks who may combine for objects injurious to the nation ; no Joint- Stock Banks. and that as each bank will have an agent in London, the bills they draw will thus have two parties as securities, and the public will have a pledge that there is no excessive issue in the form of kites or accommodation bills. On the other hand, it may be contended, that in Scotland the large metropolitan banks which have branches extended throughout the coun- try, have generally been more successful than the provincial or district banks ; that there is a greater security to the public for the notes or de- posits ; that advances are not so likely to be made to speculative parties merely on account of their local influence ; that the capital raised in one part of the country can be employed in another ; that the transmission of money from one part of the country to another is more rapid and direct ; that the establishment of the bank, being on a larger scale, you have a superior class of directors, and can command the services of higher talents in those who are employed as officers. It does not appear that these two systems are necessarily at variance with each other. County or district banks have no doubt many advan- tages, but .they do not seem to supersede banks on a larger scale. VI. Joint-stock banks have an annual meeting of shareholders, to whom is usually exhibited a balance-sheet showing the assets and liabilities of the bank. All banks do not exhibit a balance-sheet. The practice is said to be open to the following objections : 1. That it is not a fair criterion by which you can form any judgment of the real condition of the bank. You might see that the bank had a certain amount of securities, or had advanced a certain sum upon loans ; but whether those securities were available, or whether those loans could suddenly be called up, are points upon which the balance-sheet could give no information. The Agricultural and Commercial Bank of Ireland pub- lished a very satisfactory balance-sheet a few weeks only before they stopped payment. 2. It lays the bank open to attacks from its rivals or opponents. The balance-sheet will show in what way the funds of the bank are employed, but it will not state the reasons why they are so employed. The oppo- nents of the bank may attack every item of the balance-sheet, and the directors may not be able to repel those attacks without a breach of con- fidence that would be injurious, to the establishment. Suppose, for in- stance, the balance-sheet should show that the bank had advanced a few thousand pounds upon mortgage. This might be justly considered as a departure from the sound principles of banking ; yet it might in this case be justified by some peculiar circumstances, which, nevertheless, the di- rectors could not publish without serious injury to the parties concerned. The production of a balance-sheet is advocated upon the ground that it would enable the shareholders to judge of the ability and prudence of the directors. But how can they do this without knowing the reasons by which the directors are influenced in their decisions ? 3. It causes a great deal of speculation in the shares. The sharehold- ers and the public would form their opinions of the bank from the state- ments in the balance-sheet ; and according to these opinions the price of the shares would fluctuate in the market. Suppose it were seen that the 111 A Trtatue on Banking. bank had invested a large portion of its funds in government securities, and it was known that during the year tin- price; of those securities had experienced a considerable fall, would not the hank shores immediately fall too? Again, suppose at the end of a year like INM<>, it should a |. pear that the bank held a considerable amount of overdue hills, the apprehen- sion of IOM would cause the bank shares to fall; soon afterwards these - might be paid, and then the shares would rise again. Thus, the pub- lication of balance-sheets would keep the prices of shares in perpetual fluctuation, and furnish a most fruitful source of speculation and gam- bling. 4. It is perfectly inefficient as a protection against fraud. The balance- sheet, it teems, is to be a check upon die directors, and yet the directors themselves are to prepare the balance-sheet. They must be stupid knaves indeed, if they produce such a balance-sheet as shall expose their own knavery. Besides, the balance-sheet merely shows the state of the bonk on one day in the year. Would it not be easy to put the bank on that dav in such a condition as would give satisfaction to the shareholders ? VII. At the annual meeting, the directors announce the amount of the profits and the mode of their distribution. The first appropriation of the profits is, to pay to the shareholders a dividend on the capital. But all the profits are not usually thus appro- priated ; a certain portion is generally retained as a rest, or surplus fund, or, as it is sometimes called, a guarantee fund. This last title has led to an erroneous impression with regard to the nature and purposes of this fund. It is not designed as a guarantee to the depositors for the amount of their deposits, these are guaranteed by the paid-up capital and the lia- bility of the shareholders, but as a guarantee to the shareholders for the uniformity of their dividends. Should the profits in any one year fall be- low the sum necessary to pay the usual dividend, the deficiency may then be taken from the surplus or guarantee fund. The amount of this fund, therefore, will be regulated by the amount of the transactions, and the consequent danger of loss. But it sometimes happens, that, after paying a liberal dividend, the surplus fund accumulates far beyond the sum necessary for the above purpose. In this cose a portion of the fund may be employed either in still further increasing the dividend, or it may be distributed to the shareholders in the form of bonuses, or it may be added to the capital. The course to be adopted must depend upon circumstances. When the capital is small, it will probably be best to make an addition from the surplus fund ; but when the capital is suffi- ciently large, the best way will be to give an occasional bonus to the pro* prietors. This is usually better than increasing the dividend ; for if the dividend be once increased, the same rate of dividend will always be ex- pected ; and it is better not to make any advance, unless there is good reason to believe that the same rate will always be maintained. When urging the establishment of a surplus' fund, we are met with the remark, that we are not bound to do any thing for posterity, inasmuch as posterity have done nothing for us. We recollect meeting with this joke many years ago, we think in "Joe Miller." As it is so frequently re- peated, we presume it is thought to be witty. \\ c profess not to be a 112 Joint- Stock Banks. judge of witticisms. As a piece of reasoning it seems very unsound. To deny ourselves present gratifications in order to make provision for the future, is one of the most important lessons that reason teaches to man. Nor is it for posterity, in the present case, that the provision is made. All bank proprietors should wish that it may be so ; but it is very probable that within their own lifetime some untoward events may occur that will require a portion of the reserved fund to keep up the ordinary dividend. Those persons are under a mistake who object to a reserved or surplus fund on the ground that it takes away the profits from the existing share- holders, and gives them to the future shareholders. This is not the fact. An existing shareholder who keeps his shares until the fund is in some way distributed, receives of course his portion of the fund. But an exist- ing shareholder who sells out his shares before the fund is distributed, re- ceives the value of his portion of the fund in the price of his shares. The amount of the surplus fund will influence the market-value of the shares. In proof of this, we may observe that after a bank has declared a bonus, the market-price of the shares usually falls, as in fact, cceteris paribus, it ought to do. We consider it of high importance that a bank should maintain an am- ple surplus fund. Without such a fund, the dividends will fluctuate very widely, and sometimes there may be no dividend at all, even though upon a series of years the bank may have been very successful. Even if it is known that a bank has met with losses, its credit is not so much affected when it has an ample reserved fund to fall back upon. And besides the ordinary losses in the way of business, a bank will sometimes, in a season of pressure, be called upon to sustain loss by the realization of securities, and it is very convenient to have a surplus fund sufficiently ample to bear all these contingencies. Such a fund, too, has a moral effect in strength- ening the reputation of the bank in public estimation. It is regarded as an indication that its affairs are governed by a wise and prudent adminis- tration. It will assist us in forming a correct judgment as to the principles on which joint-stock banks ought to be administered, if we take a view of those banks that have fallen, and notice the causes to which their failure may be assigned. In investigating these causes, we shall find that the disasters which have befallen joint-stock banks have arisen, not from any unsoundness in the principles of joint-stock banking, but purely from mal- administration. It was predicted by their opponents that they would be ruined by the excessive issue of their notes : but the banks that have failed have been chiefly those that did not issue notes. It was stated they would be ruined by carrying on an extensive business with a small capital ; but among the banks that have stopped have been some of the largest capital. It was supposed they would be ruined by unprincipled men get- ting to be directors, who, having no property of their own, would care little about squandering the property of others. But the fallen banks are chiefly those which were governed by honorable men ; and the greatest sufferers have been the directors. Nor can it be said that the joint-stock banks have made their losses by engaging in speculations unconnected with banking. Private bankers have done so. But joint-stock banks are j* 113 A Treatise on Banking. confined by their deeds of settlement to the business of banking. Nor has it appeared rvept, |>< -rliajw, in the Isle of Man Bonk tliat they ha\e violated their deeds in this respect Tu what, then, must \. th- failure of so many joint-stork banks ? N\ reply, 'I'., mal-administratum ; <>r, in other words, to bad management And this leads us to in<|mn-. In what way has this maladministration been exemplified . ; \\ hat an- erroneous principles that have led to these fatal results? Withm temp'.in:: ;:Ue them all, we will endeavour to specify a few of I. Taking the unsound business of other banks. One cause of the rapid extension of joint-stork hanks in 1836, was the "merging*' of numerous private hanks. 1 obtained from the managers the names of these private banks, whieh were printed as an appendix to .: "II stof] f Hanking in America, 1 ' published in 1N.T7. This list was afterwards extended, and inserted in the Hanker* 1 Magazine, for 1844. Thus it appears that one hundred and thirty-fight private banking estab- lishments have merged in joint-stock bonks. Some of the private banks sold their business after the joint-stock banks had come into operation. Others formed a joint-stock bank upon the private bank, the senior partner often becoming a director, and the junior partner the manager, of the new bank. In by far the majority of cases, these unions, or " merges," were ad- vantagcous to both parties. The private bankers obtained the value of the business they had surrendered, and an interest in the future prosperity of the bank they bad joined. On the other hand, the new joint-stock hank acquired a business already formed, and also obtained the advantage of the practical knowledge and superintendence of experienced lmi But in some instances the bargain was a disastrous one for the joint- stock bank. The bad and overdrawn accounts were taken without due examination, and soon afterwards occasioned considerable loss. The loss of the purchase-money was generally by far the smaller loss of the two. A joint-stock bank in the West of England purchased a private bank in a country town for a large sum, and took the overdrawn accounts without a guarantee. These accounts were considered good at the time, but a few years afterwards the parties failed, and the joint-stock bank lost consider- ably. A joint-stock bank gave to the Northern and Central Hank the. sum of 6,500 for their business at Leeds, after they had stopped. The :,,-. counts they took over were afterwards the occasion of great loss. The Isle of Wight Joint-stock Bank was formed upon a private hank, but a few months only had elapsed when they found they were insolvent from the losses that would arise from the bad accounts they had accepted. M immediately determined to wind up, and transfer their business to the National Provincial Bank of England. Other instances might be adduced of joint-stock banks having been founded on private banks which are now supposed to have been, at the time, in a state of insolvency. II. Some banks have sustained losses by making advances on dead security. Instead of the word " some," we think we might use the word " all " ; for among the banks that have failed we doubt if we could find one that 114 Joint- Stock Banks. had not sinned in this respect. But the greatest sinners were those banks that were established in places of the greatest trade. All the banks at Newcastle advanced money on collieries, and also on other public works. The banks of Manchester made advances on mills and manufactories, as did also some of the banks at Leeds. These advances were attended with several evil effects. In the first place, there was a lock-up of capital, which restrained the operations of the bank. To relieve themselves from this restriction, they took bills for their loans, and re-discounted them in the London money market. The facilities thus obtained induced them to extend this system of advance. Bills were perpetually renewed, and per- petually re-discounted. At last a pressure came, and the renewed bills could not be re-discounted. The bank could not take up the old bills that were returned, and consequently stopped payment. Sometimes, too, the bank tried to relieve itself from this pressure by increasing its drafts on its London agent. It has for a long time been the practice in Lanca- shire to pay for cotton with a three months' banker's bill. Banks in diffi- culties avail themselves of this practice to make all their advances by drafts on London, instead of cash. The Bank of Manchester had at one time an enormous circulation of this kind. Another effect was, that, however good the security might be at the time the advance was made, when a change took place in the state of trade, its value fell much below the amount of the advance ; and in some cases it could not be sold at any price. But the evil did not stop here. As the property given as security would have been worth nothing if not worked, the bank was induced to make further advances to carry on the works on their own account. A colliery, if not kept in operation, soon gets out of order ; and it will then require a considerable sum to set it at work again. Hence some of the collieries at Newcastle were worked by the banks ; and mills in the neighbourhood of Manchester were carried on in the same way. The plan, however, does not often succeed. It is generally throw- ing good money after bad. The ultimate loss is usually increased. We may just observe in passing, that the banks in the East Indies get in- volved in the same way, through making advances on indigo works. These works are of no value except kept in operation ; and hence it has occurred that a bank which has made an advance, is compelled to carry on the works to keep up the value of its security. To show that a bank governed by the strictest rules may sometimes be drawn into transactions of this kind, it may be observed that at the present time an iron concern in Wales is said to be carried on by the Bank of England. It belonged to the Governor and Company of the Mines Royal. The bank made an advance on mortgage to this corporation during the pressure of 1847, and now takes the profits of the works. Some joint-stock banks have made advances upon buildings. This has occurred chiefly in places where there has been an increasing population. A few years ago a joint-stock bank in a town of fashionable resort, advanced large sums to builders upon the security of the houses they were erecting. The houses did not let ; they could not be sold for any thing like the cost price ; the builders were ruined, and the loss fell upon the bank. The bank had recourse to the expedient of re-discounting the builders' bills ; but after a while it 115 A Trtalitt on Banking. waa compelled to stop payment. In n^riruliurel districts, tanks have aometimea made considerable advances to farmers and graziers. Indeed, it is alrmwt a universal practice to do so at some seasons of the \.-.-.r. These advances are not individually uf large amount, and an- not usually attended with much lorn, nut with any tiling like tlic losses incurred t>y advances on collieriea, mills, and houses. But it is a lock-up of i-.-i[.it:,l until the year cornea round. And when the system has b-en earned t-> loo great an extent, the bank has become embarrassed through the want 111. Some banks have lost large amounts through advances made l.y way of loan or discounts to men engaged in speculative undertakings. Two of the banks that stopped at Newcastle-upon-Tyne sustained great loans through advances to corn-merchants. Speculations in corn are usually carried on more by bills than by loan. A merchant buys a quan- tity of corn, and places it in the hands of a factor, and draws bills for something under the market value, leaving the factor a margin to guard against loss. He gets these bills discounted, buys more corn, which he also places in the hands of his factor, and then draws fresh bills. 'I Vis second batch of bills he also gets discounted, and buys more corn ; and thus he goes on in the same course. Now if he thinks the market will rise (as all speculators do), he will not allow his factor to sell the corn ; but when the first bills fall due he will renew them, and with the produce of the new bills, when discounted, he will pay the old ones. It is thus that a large speculation may be carried on with a small amount of capital (and that may be borrowed from the bank), and all the speculation is kept afloat by bills. These bills are always for large amounts, and when the parties fail the losses are usually heavy. The failures in the corn trade in 1847 fell heavily on the banking and moneyed interests. It was the stoppage of Messrs. Lesley, Alexander, dc Co., the corn factors, that caused the stoppage of Messrs. Sanderson & Co., the bill-brokers. Wool is another " heavy article," as it is called ; that is, it costs a great deal of money, and the bills are usually for large amounts. Occasionally there is much speculation in this article. A joint-stock bank that failed in Yorkshire is said to have lost large sums by persons engaged in this trade. Builders are generally a speculative class. Banks that advance money to parties engaged in this trade have usually to take possession of the buildings. We have already noticed an instance of this in the conduct of a joint-stock bank. People who speculate in railway and other companies are dangerous customers to a bank. A joint-stock bank that failed at Leeds is said to have lost considerably by advances to share-brokers and others, upon the security of their shares. It may be remarked, that it is generally bad policy in a bank to make a very large permanent advance to any one customer. The word ** large* 1 is a relative term, and must be undertsood with reference to the extent of business that the customer is carrying on, and to the means of the bank. It is not the business of bankers to supply their customers with capital to carry on their trade. But it is their business to make tern- 116 Joint- Stock Banks. porary advances, and these advances may sometimes be large. In such cases, the banker should have a kind of security, that shall not only se- cure the debt, but shall prevent its becoming permanent. Almost every bank that has failed can point to some one, two, or three large accounts to which it mainly ascribes its failure. The temporary stoppage of the Royal Bank of Liverpool is attributed to an advance of this sort. But the worst form of illegitimate advance is that which is made by a bank to one of its own directors. Some of the banks at Manchester sinned grievously in this respect. A bank that is known to act imprudently in making large advances, will occasion a suspicion that its smaller advances are made with, at least, equal imprudence. A large number of imprudent small transac- tions may be as fatal to a bank as a smaller number of a larger amount. A sum which appears small as a loan, will appear large as a loss. A man- ager who accustoms himself to examine all the circumstances connected with the small bills he discounts, will acquire a habit of investigation that will guide him with safety in dealing with large transactions. But if he get into a laxity of manner in regard to small amounts, he will ultimately deal less carefully with large sums, and be in danger of making great losses. In every case the rules of sound banking should be strictly applied. IV. Some banks have become involved in difficulties through a general want of system and discipline in conducting its affairs. This laxity usu- ally shows itself in two ways, the absence of a good system of book- keeping, and the want of a proper control over its branches. We could not adduce a more striking illustration of this observation than has been furnished in the history of the Agricultural and Commercial Bank of Ireland, as related before a Committee of the House of Commons in the year 1837. The following are extracts from this evidence. The books at the head office had not been posted for four months. There were no stock books, showing the amount each shareholder had paid on his share. There were no books showing the amount of the circulation. An auditor states : " They showed us no general account ; their books were in a perfect chaos." They had no account at the head office by which they could check any transaction at the branches. Bills were sent away to be re-discounted without any entry of them being made in the bank books. At the branches there was no regular system of accounts. At no one branch was there a system of accounts that formed an ade- quate check upon the amount of notes in circulation ; " and from one branch we were told that returns had not been made to the head-office for fourteen months, and from another for six weeks, and there was no ques- tion about it from the head office." (It is to be feared that some of the English country banks are too neglectful in regard to book-keeping. See the case of the Honiton Bank, in Burgess's Circular to Bankers, Feb- ruary 2, 1849.) We will not intimate that any thing like this has ever existed in a joint- stock bank in England. We never heard that any one has had any diffi- culty in making out a statement of its affairs. With some banks, how- ever, there has been a laxity in regard to the government of their branches. The system of inspection was not well understood ; the re- 117 A TVeolue on Banking. turns from the branch were not so ample as they should have been ; mm the order* of the head office were not rigorously enforced. We could mention the names of several fallen banks that lost very considerably by tlu-ir branches. In some cases the banks had opened brandies in towns that required an amount of capital disproportionate to the means of tho bank, and their administration luul been intrusted to parties who h;nl neither banking nor local knowledge. A good system of book-keeping cannot be too highly valued. Its ob- ject is not merely to secure accuracy of accounts between the bank and its customers. A further object is to classify and arrange all the transac- tions in such a way as easily to produce a weekly balance-sheet, showing the actual condition of the bank. Nor must it be supposed Unit such ab- stracts or balance-sheets are intended merely for the use of the directors. They are of the utmost use to the manager, and should be the subject of his constant study. A manager who, day after day, attends only to indi- vidual transactions, and that, too, possibly in a state of mental excitement, may involve his bank in difficulty, even though each transaction may, upon its own ground, be perfectly justifiable, unless he attends to those summaries and classifications of his transactions which are presented in the weekly balance-sheet He will there see on one side the means of the bank, and on the other the way in which his funds are employed. He will notice if his loans, or overdrawn accounts, or past-due bills, are un- duly increased. If a good system of book-keeping does not prevent a manager from going wrong, it will prevent his going wrong without know- ing it If he act unwisely, his balance-sheet will stare him in the face and remind him of his faults. It is a great defect not to take an accurate estimate of the losses every half year before striking the balance of profit and loss. It is clear, that common sense and common honesty require that the loss should be taken into account as well as the profit Yet some of the banks that failed went on, year after year, exhibiting a balance-sheet to their shareholders showing a respectable profit, which enabled the directors to declare a fair dividend, and to make an addition to the reserved fund. While the an- nual balance-sheets thus showed a steady increase of profit, the bad debts had actually eaten up the whole of the capital. Another defect is, not to have an account in the general ledger show- ing the amount of bills re-issued or re-discounted. The amount of these bills not due should appear on both sides of the account, on one side as a liability, and on the other as an asset For want of doing so, some banks have not been able to ascertain easily what amount of bills they have under re-discount But it is important to know this ; for it may be expected that, during a season of pressure, no small portion of these bills will be returned unpaid, and the bank must find funds to take up its in- dorsements. If they fail to do this, it amounts to a stoppage of pay- ments. In (act, the amount of such bills suddenly returned has in some cases been the immediate cause of a bank stopping payment We hare no horror of numerous branches. When we see that in Scotland the largest and most prosperous banks have each a large num- ber of branches, we are led to believe that branches are not attended 118 Joint- Slock Banks. with any dangers which cannot be overcome by wise administration. At the same time, we are ready to admit that numerous branches require a peculiar mode of government, and a rigid system of discipline. The chief officer of such a bank should be a good banker, and something more. He must be a good administrator ; that is, skilled in the adminis- trative department of good government. In the first place, each branch must have a good system of book-keep- ing, and the system must be uniform at every branch. Secondly, Care should be taken to appoint efficient officers. Thirdly, A code of laws should be drawn up, and the branch manager should be distinctly informed as to the extent to which he may exercise his discretion, and what cases must be referred for the consideration of the directors. Fourthly, Weekly re- turns must be made to the head office of all the transactions, and a half- yearly balance-sheet attended with full supplementary details. Fifthly, Special reports should be occasionally required, as special circumstances may occur, either with reference to the branches generally, or with refer- ence to a branch individually. Sixthly, An inspector should be appoint- ed for the purpose of visiting the branches. His duties will be to explain the instructions of the directors, and to see that they are properly ob- served ; to maintain a uniform system of transacting business at all the branches ; to instruct the officers of the branch in their duties when ne- cessary, and to communicate the knowledge he has acquired in visiting the other branches ; to answer any difficult or knotty questions that may be proposed to him by the manager, and to consult with the manager as to the best means of promoting the interests of the branch ; to observe the talents and capabilities of the several officers, and to recommend for pro- motion any who seem to have qualities that might be usefully employed in a higher department in the bank. In large banks there are usually several inspectors. (We shall hereafter notice in detail the mode of con- ducting business in the Provincial Bank of Ireland, as an illustration of the above remarks.) Branches should always be kept in strict subordination to the head office. Prompt obedience to orders is a duty that must be rigidly en- forced. The chairman of the Northern and Central Bank stated to the Parliamentary committee, that at some of the branches where the heaviest losses had occurred, the managers had not obeyed the orders they had received from the directors. Similar accusations were made against some of the branch managers of the Commercial Bank of England. It is quite impossible for any bank to be well administered as a whole, if every branch is allowed to exercise an independent authority. Upon this ground, some parties object altogether to the appointment of local direct- ors at the branches. A local board, consisting of the branch directors and the manager, are more likely than the manager alone to assume in- dependent authority, to postpone carrying out the directions they may re- ceive from head quarters, and to take upon themselves the responsibility of acting somewhat at variance with the strict letter of their instructions. And although local directors may sometimes be useful in extending the connections of the bank, or in aiding the managers with information or advice, yet, for the above or other reasons, they are now in England but 119 A Treatise on Banting. t very seldom appointed. The branch in under the sole care of a manager. The general manager of tho bnnk is not merely the manager of ihe head office, Vat has authority also over all the brandies. Whenever neces- sary or expedient, ho issue* cirrulnr letters of instruction to the branch manager*, and these instructions the branch managers arc expected to V. Some hanks have been unfortunate in consequence of having made no provision to meet contingencies. This class of banks has not fallen into nny of the practices that u> h.i\< enumerated. They have not, on the whole, been badly managed, but they have traded to the full amount of their means, and have kept no re- j, either in government stock, exchequer bills, or bills of exchange, to those contingencies to which all banks are liable. One bank of this __ had, during the railway speculation, received from some of these companies a large amount of deposits. A portion of these deposits was lodged, as its agent, with another bank. That bank stopped. This bank was, consequently, unable to pay back the deposits to tho railway compa- nies. From this circumstance, and the known connection between the two banks having damaged its credit, it was compelled also to stop pay- ment. Another bank had but a small capital, but for a number of years it was exceedingly well managed. In 1847 it had discounted, and again re-discounted, a large amount of bills on a first-rate London house that failed. The London house afterwards paid 20*. in the pound. But the directors concluded from this circumstance that a bank with a small capi- tal was not in a condition to bear a large loss, and they resolved to wind up the concern. After sustaining the losses and expenses of winding up (and in such a case some losses necessarily occur), the bank realized nearly the whole of its paid-up capital. We doubt not that some of the other banks that have wound up their affairs have done so from causes similar to those we have described. We consider that this head of our inquiry is not less instructive than the four by which it was preceded. They will teach us the vices we ought to avoid ; thu will teach us the virtues we ought to cultivate. The lessons we here gather are, that we ought not only to avoid all mismanagement, but we ought also to provide for those contingencies to which, even with good management, we are exposed. We ought to raise our capital in proportion to our business, or else keep down our business to a level with our capital ; we ought to have a surplus fund adequate to meet any unforeseen loss; we ought to have a reserve of convertible securi- ties ready to meet contingent evils ; and, finally, we ought always to keep our bank in such a condition, that, even if not successful, we shall till be in a condition to wind up our affairs without inconvenience to the public. VI. We may observe, that these erroneous principles of administration have sometimes been the result of a defect in the constitution of the bank, of the appointment of incompetent persons, or of an unwise distribution of the administrative functions. Joint-stock banking did not grow up gradually in England as in Scot- On the introduction of this system into England, the directors were 120 Joint- Stock Banks. necessarily unacquainted with the practical operations of banking.* For all the practice and experience were confined to the private bankers, whom the new system was intended to .subvert. In some places there was a prejudice against directors who were in business. Hence, officers in the army, barristers, solicitors, medical men, retired tradesmen, and country gentlemen, were considered as the most eligible directors. These boards of directors, all of whom were unacquainted with banking, and some of whom were destitute of business habits, had to encounter difficul- ties which would have tried the most experienced bankers. The want of experience in a board of. directors did not, however, pro- duce any dangerous consequences when they appointed an efficient mana- ger. He prudently advised and instructed them. They gradually in- creased their knowledge, adopted his principles, and were guided by his counsels. By their daily intercourse with him, by their own reflections, by the direction given to their thoughts, and by the experience they ac- quired, they became in a few years as conversant with their duties as the manager himself. We believe this was almost uniformly the case with those joint-stock banks that were formed within five or six years after they were allowed to be established in England. As a proof that such was the case, it may be stated that the greater portion of the banks formed during that period have, at the present moment, the same managers they had at their commencement. But, after joint-stock banks were started as matters of speculation, they increased more rapidly than efficient managers could be found. The new banks naturally enough looked to Scotland. But the Scotch banks had the sagacity to raise the salaries of their principal officers, to prevent their emigration to England. In some cases, those Scotchmen who were appointed managers of English banks, had never held office in a bank be- fore, or else it was an office so inferior that all they knew about banking was merely the routine of the office. Wherever efficient managers were appointed, whether English or Scotch, the same effects were produced "as in the former cases. The inexperienced directors acquired the knowledge and experience necessary to the discharge of their duties, and the banks prospered. But sometimes the case was reversed. The manager was inefficient and the directors inexperienced, and then the effects were dis- astrous. In some cases the manager labored under an inconvenience from being taken from a lower social position. Not a few of the managers were previously bankers' clerks ; and the appointment to the office of bank manager did not, in England (as it does in Scotland and in Ireland), raise him to the same social position as a banker. This was injurious to the bank in several ways. It lessened his influence with his directors. From * The chairman of the Northern and Central Bank gave the following answers to a Committee of the House of Commons : " Is there any one of your colleagues in the direction of the bank that had previous experience in banking business ? I do not think there was one. " Had the directors of the joint-stock banks about you many of them had previous banking experience? I do not recollect one." Committee on Joint-Stock Bank*, 1837. K 121 A Trcatite on Banking. the days of Solomon to the present time, the degree of deference paid to even good advice has depended upon the social rank of the party who offered it : * 4 Wisdom is better than strength ; nevertheless the poor man's wisdom M despised, and his words are not heard." (Ecclft. viii. 16.) The public, too, had been so long accustomed to private hanking, that, seeing the manager paid by a salary, they could not bring their minds to view him as the banker, but considered him as holding an office analo- gous to that of chief clerk in a private bonk. It may be feared that in some banks the directors took the same view, and thought that the influ- ence and the salaries of the two offices ought to correspond. These im- pressions have now passed away. In some cases the manager was superseded in his functions by the ap- pointment of managing directors. The manager was a man of banking knowledge and experience, but he had placed over him a couple of manag- ing directors who had neither knowledge nor experience. Consequently, his voice was never heard in the board-room, and, with the name of manager, he acted only in the capacity of a chief clerk. The manager was thus deprived of the opportunity of discharging the most impor- tant of his functions, that of giving advice to the directors, and was required to confine his attention to the more easy duty of obedi- ence. In other cases the managing directors and the manager formed a secret committee, who alone were acquainted with the actual condition of the bank. The directors of the Bank of Manchester stated, in their first re- port, that " two of their body, who are out of business, alone have access to the accounts, and are authorized to advise with the manager, when re- quisite, on the current transactions of the bank. At the same time, each of the other directors engaged, individually, to refrain entirely from in- specting any of the customers* bills or accounts; thus combining all the secrecy of a private bank with the advantages of a public institution." The Bank of Manchester had at that time the largest paid-up capital of any joint-stock bank in England. Three of its directors were examined before the Bank Charter Committee, in the year 1832. They presented to the committee a list of twenty-three joint-stock banks then formed, and strongly urged that measures should be adopted to require from them an adequate amount of paid-up capital. It is somewhat remarkable, that, out of these twenty-three banks, the only one that has stopped payment is the Bank of Manchester. Another has ceased to exist, but it was by a trans- fer of its business. In some cases a bank has been ruined by its manager ; in others, by the manager and the managing directors conjointly; in others, by the managing directors without the manager ; and in others, by one, two, or three directors, who, though not formally appointed managing directors, have, by their influence with the board, virtually monopolized that office, and discharged its functions. It may be questioned whether any case has occurred in England of a bank being ruined by the acts of its whole board, where all the directors were honest and intelligent men, and each was accustomed to think and judge for himself. VII. We may observe, that sometimes joint-stock banks have been led 122 Joint- Stock Banks. into erroneous principles of administration by the proceedings of the pro- prietors. The constitution of joint-stock banks appears theoretically absurd. The manager, the banker, who is presumed to have some knowledge and experience in banking, is placed under the command of a board of directors whose knowledge and experience are supposed to be inferior to his own. These directors are again placed under the control and instruc- tion of a body of proprietors whose knowledge of banking is much less than that of the directors. Practically, however, the system works well. But when an attempt is made to carry out the theory, the effects are in- jurious ; and some joint-stock banks have fallen into danger through the operations being too much regulated by the proceedings of the pro- prietors. Sometimes the directors have been influenced by the applauses of the shareholders. , It is natural to all shareholders to wish for large dividends upon the capital they have invested. Hence they applaud most loudly those direc- tors who contrive to declare the highest dividends, to make the largest bo- nuses, to keep up the shares at the highest premiums in the market, and then to distribute more shares at par. The directors, knowing these to be the feelings of the shareholders, very naturally attempt to gratify them. But those transactions that yield a large immediate profit, are either attended with a risk of loss or a lock-up of capital. But the profit is immediate, the danger is remote. With the applauses of the shareholders ringing in their ears, the directors become too giddy for reflection, and recklessly engage in a course of action that ends in ruin. This evil is increased when there are two joint-stock banks of about equal strength in the same place. The spirit of rivalry is natural to man. The competition between the two boards of directors is not which bank shall be governed with the greatest prudence, and with the strictest regard to sound banking princi- ples, but which shall produce the most glowing reports, which shall de- clare the largest dividends, and which shall keep up its shares at the high- est price in the market. A strong competition is carried on, which ends in the destruction of one or both of the rival banks. Such feelings are said to have prevailed at Manchester ; and at that place several boards of directors were presented with services of plate, by their respective share- holders, within a short time of the stoppage of their banks. Sometimes directors are induced to act unwisely from the censures of their shareholders. Every one who knows any thing of banking must know that it cannot be carried on without occasional losses. A bank that is so conducted as never to make a loss, will seldom make much profit. And sometimes these losses will be so great as to absorb a large portion, of the profits of the year. The object of having a surplus fund is to provide for these contingencies, so that the usual dividend may be maintained. But when an occasion arises for making use of a portion of this fund, there is often what is called "a stormy meeting," and the shareholders walk away sulky and dissatisfied. This produces a bad effect on the minds of the directors. It is a great mistake to suppose that boards of directors are in- 123 A TVwrtue on Banking. different I* l|0 applauses or censures of their shareholders. As a general rule, the fact is lamentably the reverse. In Home cases they have had so much dread of " the general inn-ting " that they could not muster courage enough to make honest reports. Had they done so in the first M^n^t their banks might have been saved from destruction. Sometimes directors are in danger of being led astray by the admoni- tions and instructions of their shareholders. A very prudent class of proprietors exhort the directors to practise the strictest economy. When rightly understood, this exhortation is worthy of the rounds of applause with which it is usually attended. But it is liable to be misunderstood. In banking, as in housewifery, the lowest* priced article is not always the cheapest The largest portion of the ex- penditure of a bank consists of salaries. Hence an exhortation to econo- my amounts to, " Keep down the salaries of your officers " ; and as the manager has the largest salary, he will most likely be the heaviest suf- ferer. We believe that if the suggestion were made in these terms, it would receive no support from any body of shareholders. Were it cus- tomary to announce to the proprietors the advances made in the salaries of the managers, we think the announcement would be received with the same feelings as were manifested in the following instance. At the elev- enth annual meeting of the proprietors of a bank in one of the northern counties, held on the 5th of February, 1846, " the chairman informed the meeting that, appreciating highly the services of the manager, and the prosperity of the bank fully justifying them in doing so, the directors had raised his salary to 1,500 a year; at which the proprietors present ex- pressed their hearty concurrence. And it was recommended to the di- rectors, by the proprietors present, still further to augment the manager's salary, with the increasing business and prosperity of the bank." At that time the paid-up capital of the bonk was 260,450. In the " Banking Almanac for 1849," this banking is stated to have a capital of 300,000, and a reserved fund of 30,000. The following is an extract from the sixth report of another joint-stock bank: " The manager having claimed for his nominees the 1,000 shares at par to which they were entitled by his agreement when originally engaged, the same have been issued to them, which increases the number of paid- up shares, entitled to participate in the present dividend, to 32,080." A more mischievous recommendation, when thus understood, can hardly be conceived. Next to having a dishonest manager, the greatest evil is to have one that is badly paid. If he is known to be poor, his ad- vice will have less weight in the board-room ; the directors individually will treat him with less respect ; his wealthy customers will not disclose to him their private affairs ; the needy class, when refused discount, will in- sult him by threatening to complain to the directors ; and his inferior i.ili- cere will be less prompt in their obedience. But worse than all this will be the effect produced upon his own mind. He will not be, and he cannot be, so efficient a manager when badly paid, as he would be if he received a liberal remuneration. It is the besetting sin of men of business, that they never pay attention to mind, though among no class are mental phe* 124 Joint- Stock Banks. nomena more strikingly exhibited. The amount of his salary is the only tangible means by which a manager can judge how far his services and his character are appreciated. It is not the money alone, but the feelings of which the money is an indication, that produces an effect on the mind. It is a law of our nature, that the kindness, liberality, and generosity of others will produce corresponding feelings in ourselves. And it is an- other law of our nature, that when the mind is under the influence of such feelings, it is capable of intellectual efforts of a. higher order. But we forget ; we were writing about pounds, shillings, and pence, and our pen has darted off into philosophy. We will now return. Sometimes the shareholders fly at higher game, and canvass the sala- ries of the directors. Such discussions are always unpleasant, as they are carried on in the presence of the parties interested. Among all the charges brought against the directors and managers of banks that have failed, we have never met with the accusation that they received exces- sive salaries. We are tempted to fancy, that, had their salaries been higher, the banks might not have failed. As far as salary is concerned, they certainly would have had a greater interest in preventing the failure. In some banks, however, directors have paid themselves for their services in ways far more costly to the bank. Take the following instance : " The qualification for directors of the Northern and Central Bank was 100 shares. It was, however, ascertained that each of the original directors took 1 ,000 shares, and that besides these, other shares were, at later dates, distributed among the directors and their near connections. Instead of paying the calls to the bank, the directors and their nominees were severally debited with the amount in a private ledger, locked up, and the key deposited with the chief accountant. In addition to this, each director had a current account with the bank, and many of them had overdrawn their accounts to a very large amount. Nor was this all, for it further appeared that many of them were also indebted in large sums of money on notes of hand, which being placed u* the account of securities, did not appear in the books as a debit against the directors. Upon combining these several items of debt, it was ascertained that there was no less than 290,000 due by the directors, and that there was near 14,000 due by the managers and clerks." (Committee on Joint-Stock Banks, 1837.) It is not creditable to any bank to receive the services of its directors as a matter of charity ; nor is it wise. A director who is paid for his services may justly be called to account for neglect of duty. In this case, too, he cannot expect payment in any other way. In his transactions with the bank he is then on the same footing as any other customer. It has been said, that the directors are such honorable men that they will attend to their duty as strictly if badly paid as if liberally paid. If so, they ought to be liberally paid, as it is very desirable that such honorable men should be most closely attached to the bank. But we doubt the fact. In matters of almsgiving, men will give only what they can conveniently spare. If a director is to give his time for nothing, he will give only that portion of his time which he cannot more profitably or more agreeably employ else- where. In matters of business, men will apportion their services accord- ing to the return they receive for them. There is no way of securing constant punctuality of attendance on the part of directors, but by paying them liberally for that attendance. In some cases where payment has not been given, or given only to the managing directors, it is said that the K* 125 A Treatise on Banking. gorernment of the bonk has faU'-n into the hands of a few persons whoso punctuality of attendance has been almost their only banking virtue. But tin- main advantage of liberal payment is its effect upon the minds of tin- directors. Every honorable man will attend to his duty with alacrity and energy, and will even make extra exertions for the benefit of the bank, when ho finds that his services are handsomely and liberally appro- We need hardly say, that the faults we have pointed out in the admin- istration or constitution of joint-stock banks are by no means inherent in the system. They are accidental circumstances, arising from its estab- lishment in a new country, by parties who had no previous opportunity of understanding its principles. The system is no longer new, its princi- ple* are now well understood, and it may reasonably be expected that the calamities of the past will never recur. SECTION XL THE ADMINISTRATION OF THE OFFICE. In this section we shall consider the following topics : I. The Arrangement of the Office. II. The Selection and Appointment of the Clerks. III. The proper Distribution of their Duties. IV. The Amount of their Salaries. V. The System of Promotion. VI. The Rules of Discipline. VII. The Training of Clerks for higher Offices. I. The Arrangement of the Office. The proper situation of a bank is a matter of some importance. It should be situated in what is deemed the most respectable part of the town. If it be placed in an inferior locality, approachable only by nar- row and disagreeable streets, and surrounded by buildings the seats of smoky and dirty trades, it is not likely to be so much frequented, nor to acquire so large a business, as though it were more pleasantly situated. Another point to be observed is, that the bank itself should be a handsome building. The necessary expenditure for this purpose is no sin against economy. It is an outlay of capital to be repaid by the profits of the business that will thus be acquired. A portion of the building will pro- bably be set apart for the private residence of the manager, or of some other officer of the establishment It is desirable that this portion should be entirely separated from the office. The communication should be only by a single door, of which the manager should keep the key. The build* ing should be so constructed that what is going on in the private house, whether in the kitchen, or the nursery, or the drawing-room, should not be beard in the bank. The office being thus isolated, must then be fitted 126 Arrangement of the Office. up in the way that will most effectually promote the end in view. And here are three points to be considered, space, light, and ventilation. A chief consideration is space. A banker should take care that his clerks have room enough to do their work comfortably. Every account- ant knows that he can often work faster if he can have two or more books open at the same time ; but if his space is so confined that he must shut up one book and put it away, before he can use another, he will get on more slowly. The cashiers, too, will be much impeded if they are obliged to stand too close to each other ; and the public will be huddled together, and will often count incorrectly the money given to them, and thus take up the cashiers' time to put them right. Want of space will ne- cessarily occasion errors, from the confusion it produces, and from one clerk being liable to interruption from the noise or vicinity of the others. A banker should therefore take care that his office is large enough for his business ; and that it will admit of being enlarged in case his business should increase. Ample space is also conducive to the health of the clerks, as there will be more air to breathe, and the atmosphere is less likely to become polluted by the burning of lamps and candles. Another consideration is light. It is well known in every London bank that fewer mistakes are made by the clerks in summer than in winter. Abundance of light prevents mistakes, and saves all the time that would be employed in the discovery of errors. Light is also of great importance to the cashiers in detecting forged signatures, and bad or counterfeit money. Thieves are also less likely to attempt their robbe- ries in a light office than in a dark one. Faint or illegible hand-writing can be more easily read, and hence mistakes are less likely to occur. The clerks, too, perform their duties with more quickness and cheerful- ness. The gloominess of an office throws a gloom over the mind ; but " light is sweet, and a pleasant thing it is for the eyes to behold the sun." The lightest part of the office should be devoted to the clerks. We have observed sometimes a violation of this principle. The entrance door has been placed in the middle of the front, with a window on each side, and the counter thrown across the room, so that the lightest part of the office has been given to the public. It is better that the entrance be placed at the right or the left corner, and the counter be made U> run from the window to the opposite wall. The light will thus fall lengthways on the counter, and the space behind the counter will be occupied by the clerks. Ventilation. Volumes have been written by medical men upon the advantages of fresh air, and on the unwholesome atmosphere of crowded cities. If the air that circulates in the streets of towns and cities is impure, what must be the state of those offices or rooms where twenty or thirty per- sons are breathing close together during the whole of the day, and gas- lights are burning during the evening ! In such cases we are told that a person afflicted with consumption of the lungs may communicate the com- plaint to others, as they must inhale a portion of the atmosphere which he has breathed out. The air in a close office is not only rendered impure by the number of people that breathe it, and by the burning of gas, but it also contains very frequently particles of dust arising from the floor, 127 A Treatiie on Banking. thiaugh the number of people constantly walking in and out. It is almost impossible for portions so circumstanced to enjoy for a length of time even moderate health. A portion of this evil may be mitigated by a good system of ventilation. To obtain this should be regarded as an object of the first importance. If a banker does not insist upon the architect p. rf..rming this in the most effectual manner, be must bo content to be often put to inconvenience through the illness and consequent absence of his clerks. Having made due provision for space, light, and ventilation, it \\ ill now become necessary to arrange the counter, desks, and other furniture, so as to enable any given number of clerks to discharge their duties with the greatest efficiency, and so as best to promote the public conveni< nee. It ianot necessary, or possible, to give very minute instructions on this head, as much will depend upon the form of the building, the extent of the busi- ness, and other circumstances. We will notice only a few general objects to be kept in view. It is desirable at all times to make those arrangements that shall best promote the convenience of the public. The counter should be readily accessible, and of sufficient length to meet the requirements of the business ; and the cashiers' desks sufficient- ly wide apart for the public to be promptly served, and to stand without jostling one another. Some banks have two counters, one for paying, and the other for receiving. At other banks the cashier does not enter the credits, but merely agrees the amount with the customer, and then pusses them to a clerk, who enters them in the Waste Book. In tlie same way, when a cheque is presented for payment, he gives it to a clerk be- hind him, who enters it, and hands the notes to the cashier, who pays out the gold and silver. When the business is large, extra or supernumerary cashiers are appointed, who take the place of the regular cashiers when they are absent at dinner or otherwise, so that during the whole of the day all the cashiers 1 desks are occupied. To relieve the counter, the payment of bills that have been presented in the morning and not paid, is usually received at a separate desk or office. All these are expedients that should be adopted when necessary, to save the time of the public. There are few things that try a man's temper more than to be kept waiting a long time at a Banker's counter; and he will be very apt to give vent to his impatience by quarrelling with the clerks, or reproaching the establish- ment Another object is, to place near together those clerks whose duti< - \\ ii! require them to have frequent communication with each other. If this rule be not observed, the clerks will lose much time in the course of the day in passing from one part of the. office to the other ; and the work will not be so expeditiously performed. It is especially desirable that the ledger keepers should be placed close behind the cashiers ; so that if a doubtful cheque be presented for payment, the cashier may be able to bow it to the ledger keeper, and be informed if he may pay it, without being observed by the party presenting it. Another point is, to place the desk of the chief or head clerk in such a position that he can see all over the office. " A master's eye will dc more work than both his hands.' 1 In this case, if the counter is crowded, 128 Selection of Clerks. the chief clerk will perceive it, and appoint additional clerks to assist the cashiers. If disputes take place between the clerks, or between the cashiers and the public, he will come forward and settle the matter before the dispute is carried to high words. He will observe, too, the customers who come frequently to the counter, and from their transactions he will often draw conclusions respecting their circumstances which will be ser- viceable to the bank. It is generally best that many of the clerks should be so placed as to look towards the counter. It has been said that this draws off their attention from their work ; but we do not think this is gen- erally the case, although it may occasionally relieve the irksomeness of their duties. A dishonest person standing at the counter, and watching an opportunity of committing a robbery when the cashier is engaged, will be more likely to abstain from making the attempt when the eyes of other clerks have a command of the counter. This arrangement will depend in some measure on the direction of the light. The clerks should not have their faces or their backs towards the window, but the light should fall on them sideways. These matters may appear trifling, but they will not be deemed unimportant to those who are intrusted with the practical administration of an office. It is only by attention to minute things that the business of an office can be well conducted. II. The Selection and Appointment of Clerks. When a bank is first formed, they sometimes advertise for clerks ; but this is usually for clerks of a higher rank, who have had some experience in the business of banking. When a bank is established, it has seldom occasion for new clerks of this class. A vacancy in one of the higher de- partments is filled up by the next clerk in rank, and so on in order, and the new clerk comes in as a junior. Applications for this post are usually so numerous that the only difficulty is in making the selection. Those recommended by parties known to the bank, as customers or sharehold- ers, usually have the first claim. In some banks the nomination of the junior clerks is regarded as a portion of the patronage of the directors, upon the understanding, however, that they nominate none but such as are properly qualified, and who shall prove their fitness to the satisfaction of a committee of directors. In making inquiries into the qualifications of applicants, it is necessary to ascertain, in the first place, their age. In London, the age at which clerks are admitted into a bank is usually about nineteen. As their first duty is to collect payment of bills, it is necessary they should have ar- rived at a sufficient degree of strength to be able to make some resistance were an attempt to be made to rob them of their bill-case ; and also that they should have arrived at an age to be conscious of the responsibility of their* office. In the country parts of England, and in Scotland, clerks are taken at an earlier age ; but the duties are different from those dis- charged by the same class in London. Another consideration is the class of society from which clerks are taken. Candidates for the office of bank clerks are usually the sons of the middle class of tradesmen, or of professional men, as clergymen, officers in the army or navy, or persons in the service of Government. 129 A Treatise on Banking. During the last war, bankers 1 clerks were generally tne sons of trades- men, as the sons of gentlemen could usually find employment under Gov- ernment But now that places under tin- t;,,\, rmneiit nre not so easily oht;i;n. :. in. IU'-TS of what an- railed respectable families are found among the candidates for admission into the service of banks. Each class has some advantages. The sons of gentlemen have generally a l-ti< r literary education, and have usually a more courteous address. On the other hand, they have no notion of business, and no business habits. They have been accustomed to go a-hunting and a-fisbing with the sons of men of large property, and they look upon banking business as a drudgery to which they submit from necessity, but which is much !><- neath the destiny to which they think they are entitled. On the other hand, the sons of tradesmen have been accustomed to notions of business from the ordinary conversation of their fathers' fireside ; they know they must get their own living; they look upon their admission into a bank as a lucky event, and, consequently, apply themselves to their duties with heartiness and cordiality. Another inquiry of those who are candidates for admission into a bank is, how they have been employed. Lads just come from school, of course know nothing of the business of a bank, and, if taken at all, they should be taken upon trial for three or six months, so that their qualifications may be discovered before they are permanently appointed. Those who have been two or three years in a merchant's counting-house are gener- ally found to be the most efficient. But to have been in the office of a Mock-broker or a solicitor, or to have studied for one of the learned pro- fessions, is no recommendation. Clerks from country banks, and espe- cially those from the banks of Scotland, when introduced into London banks, are at first usually considered to be slow. It is also proper to inquire into the parentage of the candidate. For although honesty and dishonesty do not run in the blood, yet it is probable that religious and virtuous parents have given their children a religious and virtuous education ; and a youth who has been accustomed to see ex- amples of excellence at home, will be the most likely to exhibit those ex- cellencies in his own conduct. A high degree of moral principle is in it- self a necessary qualification in a post of trust and responsibility, and it is usually associated with a cultivated and improved state of the intellectual faculties. " If there be in the character not only sense and soundness, but virtue of a high order, then, however little appearance there may be of talent, a certain portion of wisdom may be relied upon almost implicitly. For the correspondencies of wisdom and goodness are manifold, and that they will accompany each other may be inferred, not only because men's wisdom makes them good, but also because their goodness mokes them wise. Although, therefore, simple goodness does not imply every sort of wisdom, it unerringly implies some essential conditions of wisdom ; it implies a negative on folly, and an exercised judgment, within such limits as nature shall have prescribed to the capacity." (Taylor's States- man.) Testimonials are to be received with caution. Young men who come to London in search of a place, often bring with them a host of testimo- 130 Duties of Clerks. nials, which they expect will place them at the head of any list of candi- dates. When upon other grounds there is an intention of engaging the applicant, these letters of recommendation may sometimes be read. It may be useful to observe by whom the testimonials are given, and whether those persons have had opportunities of judging of the adaptation of the party for the office he seeks. It may also be noticed what qualities are, and more particularly what qualities are not, ascribed to the appli- cant. It has been said, that when a lady is praised for being " amiable and accomplished," it may be inferred that she is neither young nor hand- some. So if a testimonial speaks highly of a young man's " industry and integrity," it may generally be inferred that he does not possess much tal- ent. It is true that these qualities are of more importance than talent. But while they are more important, they are also more common ; and if a young man possesses any kind of intellectual superiority, the fact will certainly not be omitted in his testimonial. HI. The distribution of the duties of the various clerks is a matter of no small importance. Experience is the only efficient guide in making such arrangements. We may, nevertheless, lay down a few general princi- ples. The great division of the business of a bank office is into the cashier's department and the accountant's department. In London banks there is a third, the tellers, or out-door department. In the distribution of duties, it is desirable that the accountant's department should be a check upon the other departments. The cashiers must not have the con- trol of the books, nor the accountants the care of the cash. The account- * ants' books should show what amount of cash is in the hands of the cash- j iers ; and it is the business of the cashiers to show that they have that - amount of cash which corresponds with the accountant's books. If the same officer has the care of the cash and the command of the books, he may abstract a portion of the cash, and alter the books to make them cor- respond. It is further desirable, in large establishments, that two books which act as a check upon one another, should not be kept by the same clerk. While it is not proper to indulge a spirit of suspicion in regard to individuals, it is advisable that the duties of a bank office should be so dis- tributed that the intromissions of any one clerk, either by the abstraction of cash or the falsification of the books, should be liable to immediate de- tection by the entries in some book kept by another clerk. For the same reason, it is proper that any document issued to the public (such as de- posit receipts, drafts on London, &c.) should be signed by two officers, of whom one should belong to the cash, and the other to the accountants' department. There ought to be a complete division of labor in a bank. Every clerk should have fixed duties to perform, and every duty, however unimportant, should be assigned to some particular clerk. If any thing is neglected, there should be no doubt as to who is to blame. No one should be able to say, " It was not my business ; it was yours." Nor ought any duties to be assigned in common to two or three clerks, to be performed by them as each may find time. In this case, each will do as little as he can, and nothing will be done well. If any dispute arises among the clerks as to the due division of their labors, a reference should be made 131 A Trtatue on Banking. to the chief clerk, who will give to each man his work, and hold him re- sponsible for its proper performance. IV. The Amount of their Salaries. rding to Adam Smith, the wages of Inbor are regulated by the fol- lowing circumstance* : 1. The agrceableness or disagreeableness of the employments themselves. 2. The easiness and cheapness, or the- diffi- culty and expsjflsje of learning them. 3. The constancy or m< niix'.-un -y of employment in thorn. 4. The small or great trust \\liicli must he re- posed in those who exercise them. 5. The probability or improbability of success in them. Mr. Mill makes the following observations with regard to the salaries of clerks : u A clerk from whom nothing is required but the mechanical labor of copying, gains more than an equivalent for hia mere exertion if he receives the wages of a bricklay- er's laborer. His work is not a tenth part as hard, it is quite as easy to learn, and his condition is Ins precarious, a clerk's place being generally a place for life. Tl liiu'li'-r rate of his remuneration, therefore, most be partly ascribed to monopoly, the small de- gree of education required being not even yet so generally diffused as to call forth the satnral number of competitors, and partly to the remaining influences of an an not like to drire a hard bargain with people whom they are in constant int. T< -oiir-t- with ; and because they dislike to have near their persons, and continually in their sight, people with the appearance and habits which are the usual accompaniments of a mean remuneration. Similar feelings operate in the minds of men in IHI.MIU-.SS with respect to their clerks." (Principle of Political Ecotamy, by John Stuart Mill, Vol. I pp. 461-475.) There would be considerable difficulty in applying the rules laid down by political economists with regard to the wages of labor to the case of bank clerks. A banker does not hire a clerk because he is the cheapest man he can get, nor does he dismiss him as soon as he can get another man to do the same work at a lower price. He would not find it his in- terest to do this; for his work is of a peculiar kind. II is clerks must have a certain degree of education and of manner, and be taken from a certain class in society. They are not allowed to engage in any other employ- ment ; they have to maintain a respectable appearance ; they must be qualified, not merely for the lowest post in the Link, but must be pre- pared to take higher posts should vacancies occur. And in every post they are intrusted with a large amount of properly, and upon their integ- rity and prudence much reliance must at all times be placed. All these circumstances serve to show, that, in fixing the amount of their salanc , the banker should be anxious to err (if he err at all) on the side of liber i He ought also to take into consideration the effect which the amount of 132 Salaries. salary produces on the mind and condition of the party receiving it. If an advance of salary quickens the attention or the zeal, or strengthens the fidelity of a party, or induces him to cultivate those talents which add to his efficiency, or if it enables him to move in a higher class of society, and gives him a station and an influence which enable him to be useful to the bank, then is such advance of salary, though entered in the books under the item of expenditure, an outlay of capital which is repaid to the banker with interest in the effect it produces, an outlay that becomes probably one of the most profitable of his investments. We have great pleasure in transcribing the following letter from Mr. Samuel Jones Loyd. It was addressed to the chief clerk of his London bank. We abstain from all eulogium, as the letter will speak for itself: "DEAR MR. KIRBT, The inclosed draft for 1,000 I request you will place to the credit of the ' Clerks' Christmas Fund.' At the close of the first year since my accession to the head of this concern, I am desirous of offering to those through whose assistance I have been enabled to bring it to a satisfactory conclusion, some substantial proof of my sense of their services, and of the interest which I feel in all that concerns their comfort and happiness. The year now closing has been marked by some circumstances of an accidental and temporary character, which have tended to throw an unusual degree of labor and trouble on the clerical department of the office. Of the readiness with which this difficulty has been met and overcome I am very sensible ; and for this, as well as for the uniform zeal and integrity with which the general duties of the office are discharged, I beg that the clerks will accept my grateful acknowledg- ment, and that you and they will believe me to be the faithful friend of you all. " S. J. LOYD. u Lotlbury, December Mfh, 1845." In all banks the junior clerks have lower salaries than the senior clerks. In Scotland, a clerk usually serves an apprenticeship of three years, dur- ing which he receives but a small salary. This plan has been introduced into some of our country banks. In London it does not exist. In the private banks, a junior clerk usually commences with GO a year, and a portion of the Christmas money. In the joint-stock banks, where no Christmas money is allowed, the commencing salary is usually 80. But the rules of advance are various, and, indeed, must be so, depending as they do upon the prosperity of the banks, and other contingent circum- stances. One bank may assign a certain fixed annual increase to each clerk, whether he advance in rank or not. In this case, his salary will be regulated entirely by the number of his years of service. Another bank may have a fixed salary for each post, and a clerk has no increase of sal- ary except when he takes a step in rank. Another bank may adopt a scale of salaries combining the principles of the other two. For instance, every post in the bank may have a fixed minimum salary. But each clerk holding a post for a certain period (say for five years), has an annual advance for that period. Then he stops, and receives no further advance until he is promoted to the next post, where again he becomes entitled to the annual advances belonging to that post. We give no opin- ion as to the respective merit of these plans. But there is one principle we would enforce, that the salaries of the clerks should be regulated by the prosperity of the bank. If the bank is prosperous, the clerks ought to share in its prosperity ; and if the bank is unfortunate, the clerks must consent to share in its ill fortune. But, under any 4 cirumstances, a scale L 133 t* Banking, of aalariee dosjiieUi It prevents caprice on the part of the bank, and jseloiHT on the part of the clrrks. The amount of salary in each case snoaU be feed by rule, and not by favor. With refennoe to thk subject we quote from Mr. Taylor's work, en- titled M The ffamemnn.** a work which he states to have been the result of twelve yean* official experience : ' It b oftaa MM. that to orssr to got dBdent serriee good pay mnrt be offered Hut * tt apaobrtSMnt* of young men. On the contrary, it will i of the temptation, by bringing into a/ -tivity the most __.j which abate* or patronage are engendered, will' lead to the : dagrw of contentment b of eatential importance where the understanding b the ajiMinna There b DO pontion to ttrong a* that of a man who stands upon his hand ; awl if he M not indoced to the activity or just thinking and clear reasoning, he ' f ha aoaroai to h. Upon the whole, therefore, I would say, that what is aha to good appointments in the first instance, and thenceforward to drriv- t ffoaa thorn, b to offer small remuneration to the beginner, with successive proportioaed to the merit* which he shall manifest, and of such increas- ; M hall be calculated to keep easy, through the progressive wants of single 1 Ma, the mind of a prudent man. Upon snch a system, if unfit men he- ttaoatial ftrnflfrr thall make good an entrance into the service, they will ha BMC* sasBjr got rid of ; rince, finding that they have got but little in hand, and' have bat Uttto more to took to, they will hardly be des'iron* to continue in a career in which My ana* expect to tee their competitor* shoot ahead of them." The following is an account of the total amount of salaries, morning money, gratuities, dec., paid to the servants of the Bank of England in London and at the branches, and of the number of persons to whom the aid amount was paid, for the year ending the 29th of February, 9*0 Clerk* and porter*, ) SS PrinMra and engraven, . . . \ 211,903 10*. \0d. M Clerk* and porters at the branches, . . ) 40, Average S33 each. of nonaioM paid in the tame period, 193 pensioners, average 161 each, In all banks the clerks give sureties for their integrity, two, of 500 each ; and in some banks these amounts are in- oo accession to higher offices. Of late years, societies have been formed, both in England and Scotland, for the purpose of giving, on the part of clerks and others, the amount of security required. These socie- tinaJlefethat, --y-fy^y.^^'jy* ^* *****4 e d with various inconvenience* and ob- > ** a ff ,fy? **" ****f' *ccand in which persons of the highest respecta- B forego valuable appointments, from either the prent difti- M*iai*JBW,or a repugnance to place their relatives or friends and JJP** levolvad therein. The society undertakes, on the ****^ ^y 8 "*'-?. *.**** ?" l '* J IMlk * *<* i case of default by fraud or dishon- / aay IOMM whxa *aay ha asaniiad! to an amount specifically agreed upon, and 184 Securities. by such means obviates the necessity for private sureties, as well as the obligations arising therefrom, which qften prove as prejudicial to the best interests of employers as to the party seeking guarantee. " The association offers to the public the following advantages : " To the employed. It obviates the difficulty of obtaining the requisite securities for personal integrity, which has often placed an insuperable barrier in the way of many persons of the highest character and ability ; it affords facilities to those in pur- suit of employment, and relief from the embarrassment attendant upon asking, with the uncertainty of obtaining, private suretiship ; and removes that weight of obligation and discomfort which such engagements necessarily impose. " To the employer. The ample capital of the association, with the power and su- pervision lodged in the Board of Trade, renders the policy of the company much more valuable than that of any individual, inasmuch as it is not liable either to doubt or de- preciation. In large establishments, both public and private, where the securities are numerous, and the sureties often resident in many different parts of the country, and known only by repute, it becomes nearly impossible to watch over their continued ex- istence and solvency; and cases of default have frequently occurred when, upon inves- tigation, it has been found that all the sureties have been dead for many years. " The rates are from 10s. per centum per annum, and upwards (according to the na- ture of the employment), on the amount of security required. " No charge is made for stamp duty except in special cases ; the usual legal ex- penses of surety bonds will therefore be entirely avoided by persons who enter on their respective duties under the guarantee of this society. " A reduction is made in the premium on the sixth annnal payment" The Lords of the Treasury, and a great many banking companies, have accepted the guarantee of these societies. A new society has recently been formed, entitled " The United Guar- antee and Life Insurance Company," the object of which is to grant po- licies for fidelity of trust, combined with policies of insurance on life, or with deferred annuities or endowments. The following are extracts from the prospectus : " Public guarantee and life insurance are, in principle and practice, so closely assim- ilated, that they may be fairly recognized as the relative accompaniments of each other, and their specific advantages are here mutually presented to the public at a con- siderable reduction of premium. " In order to provide against the numerous cases of hardship and constant uncer- tainty to which private bondsmen are exposed, the directors confidently recommend the combined application of the two principles to all classes who may be called upon to assume the risk, or who may stand in need of it from others. " The superiority of the policies of a public company has, in consequence of the se- rious losses which have arisen from decayed or depreciated sureties, induced the heads of public institutions and private mercantile firms to require those engaged in their service to provide the guarantee of a public company, in lieu of, and in pref- erence to, that of private individuals. How much more valuable must that surety be- come when strengthened and additionally secured by the contingent personal interest (increasing yearly in value) of insurance on life? " The life policies thus issued, payable either at a given age, say 50, 55, 60, and 65, or at death, should that event take place before, or for the whole term of life, and the deferred annuities, so granted in conjunction with the fidelity policies, will, in the event of breach of trust, be cancelled, and the premiums paid thereon forfeited. This, however, can only occur by a voluntary act of the insured themselves, and will not in any other respect affect the value of the life policies or annuities. " Particular attention is requested to this system of granting deferred annuities, in conjunction with policies for the fidelity of the annuitants ; by which it will be seen that, upon paying a moderate sum annually to this company, any youn^ man of ap- proved character may secure, in addition to a policy for his fidelity, a certain provision of 50_per annum for the remainder of his life, commencing at the age of 50 or upwards. " To the provident among that numerous class of persons who either hold or are 135 A TVrrttM on Banking. ._ _ __ r M company offers the most complete ! Did age, which May tins be MCfred by the insured them- tt b* SftaaUWtly apparent that the MU so frosted taftBmly preferable to those e cosBpasdas ; a*d that they bold out to dse isMrad SMciallT interested in their Si occupation* of trui nt that the rinks thus combined will render the surety thov provided by private sureties and other out to the employers increased security, by specially iaterested in their own good conduct; and to t! share of confidence from their employers, and the common form of policy, and they are ro- _ , >ayinp for the dishonesty of others. ^, ___ at any 'time wish to discontinue the surety policy, the life policy 8M be affected ihsiebj, but will remain in force upon payment thenceforth of an SBsssl pnaafem to be specially calculated. To penos* whose Kvse are hssared in this company, and who may, at any future time, fuqsjsfs policies for their fidelity, the directors will be prepared to grant the same, m eoafbrmhy with the regulations of the company, on the payment of a moderate ad- eUsssa to Iks premica chargeable on the life policies alone/' The claims of the society are further set forth in a pamphlet on M Public Guarantee and Private Suretyship," published by its secretary, Mr. James Knight In the year 1841 the Bank of England took measures for discontinuing the system of requiring sureties from the clerks. Every clerk subscribed annually two shillings per cent, upon tHe amount of his surety bond. When be bad subscribed in the course of five years (or immediately, if he chose) ten shillings per cent, the liability of his sureties ceased. Every newcle * i, when admitted, ten shillings per cent, on the amount of the bond be would otherwise give. These contributions are invested in the Three per Cent Reduced, or Consols. This fund is fixed at 6,000 slock. When at this amount, the interest is given to the "Clerks' Widows' Fund," a fund established by the clerks, with the assistance and inoufl of the bank. When the claims have reduced the guarantee fund below 6,000, the interest goes to this fund until it has increased to this amount If the claims reduce the fund so low as 4,700, then the clerks are required to make a further contribution until the fund is again raised to 6,000. But this contribution is never more than two shillings per cent per annum on the amount of their respective bonds. Nor can any claim be brought against the fund greater than the amount of the bond that would hare been required from the defaulter. The clerks still give their personal bonds, which are for the full amount of their deficiencies. TAjsisan admirable plan for a large establishment. In adopting it, the ***clDra fcnre sjhown a sound discretion, as it makes all the clerks inter- ested in watching over one another. At the same time, they have mani- fested that ktnrfness and goodwill which have, we believe, at all times dis- tinguished the directors of the Bank of England in their conduct towards WIT OsBffcs V. The System of Promotion. It need hardly be observed that some posts in a bank are more import- 136 Promotion of Clerks. ant than others ; and it is always desirable that the most clever men should occupy the most important posts. This object is desirable, but how is it to be attained ? The three main divisions of employment in a London bank are, the cashier's department, the accountant's department, and the teller's or out- door department. All the clerks enter, in the first instance, in the tellers' department, and their first duties comprise the collection of the payment of bills. The senior tellers are occupied within doors in various duties connected with the out-door operations. From this department, as vacan- cies occur, the clerks are promoted to higher posts in either the cashiers' or the accountant's department. It is, of course, only in large banks, where there is necessarily a great subdivision of labor, that these three departments exist in a separate form. In smaller banks,' though the duties are the same, yet one clerk may, in one day, perform duties belonging to each of the three departments. The Cashiers' Department. The cashiers * of a bank stand at the counter, and attend to the public. These officers, in Scotland, are called tellers ; but in Scotland their duties are less important, as tellers pay no cheques until they have been marked by the accountant, who is their su- perior officer. We should form a very inadequate idea of a cashier in a London bank, if we considered him only as a mere counter of money. Quickness in counting .money is indeed one very necessary qualification. But, besides this, he should have such a mental organization that he can recollect the general average of each customer's balance, so as to be able to pay their cheques without a too frequent reference to the ledger- keeper. He should also possess a quickness of eye in detecting forged signatures. a self-possession, so as to be cool and collected when the counter is thronged with people, a command of temper, so as not to be irritated by undeserved reproach, and not only a general courtesy of manner towards the public, but a peculiar urbanity towards the customers of the bank, with a readiness and an anxiety to promote their convenience in any matter on which they may require information or advice. In fact, it may justly be said, that there is no class of clerks on which the reputa- tion of a bank with the public so much depends as on the cashiers. And hence, in London banks, those clerks who are deemed the quickest, the most able, and the most gentlemanly, are usually promoted to this office. The Accountants Department refers to the keeping of the books and the accounts. The main qualifications for the clerks in this department are, good hand-writing, accuracy in figures, and method in the arrangement of their work. Slowness is no positive disqualification, provided it be as- sociated, as it often is, with application and perseverance. An accountant is not compelled to do any given quantity of work within a given time. By a proper arrangement of his duties, he can usually contrive to keep himself pretty equally employed during the whole of the day, and on busy occasions he can perform what remains in the evening, after the hours of public business. A steady perseverance is of the first importance. But we must distinguish between those qualities required in the clerks of the accountant's department, and those required in the accountant himself. * In the United States termed Tellers. Ato. EDITOR. L* 137 A Trratiu on Banting. The chief accountant in a bank is not a mere book-keeper. It is ont thing to keep a set of books previously prepared and arrangrd, mid an- otbsr.to frame a set of hooks, or a new system of book-keeping, adopted for aBT operation that is proposed to bo carried on. In tin l.-.n.-r case, insnMd powers are required that are by no means common. And even where a system is established, the chief accountant of a bank will often have occasion to ooosidor the best way of passing certain tnms:i<-tii.ns through the books, of framing abstracts of operatiotiH which the books gkgv not Mtmediattly supply, of making difficult calculations, and of ex- atnawtg lagoritrr sn4 complicated accounts, and exhibiting them with c If* rues* ap3 brevity. A good system of book-keeping, and a clc;ir- hraded accountant, would have prevented many a bank from stopping Prom this statement of the qualifications of cashiers and accountants, it will appear that most clerks will be more fitted for one office than the other, and h is desirable that each clerk should be placed in the depart- aneat for which he is best adapted. Where there is no peculiar adaptation, and where there is no marked difference, among the clerks, the promo- tion should go according to seniority, not seniority in regard to age, hut seniority according to the time they have been in the bank. But it will en, not only in the first, but also in subsequent steps of ad- that the clerk who is entitled to a vacant post by length of is not so well qualified for it as some of his juniors. But even in this ease, the individual should not be passed over, if he can perform the duties with an average degree of efficiency. Should he, however, be wholly unqualified, or fall below mediocrity in his qualifications for the office, there should be no hesitation in promoting over him some other clerk batter adapted for the office. As, however, all such cases will give rise to some suspicion of favoritism, and as the party who is passed over is sure to think himself unfairly treated, it is desirable that the clerk thus promoted should possess such a marked superiority over the other, that no doubt can exist of the justice and propriety of the arrangement. On this subject, we again quote Mr. Taylor's " Statesman " : Tn* claims of promotion are twofold : first, merit ; second, length of service. And tfce diaVwlties to be eosMJdered are those which arise when these claims clash ; that is, whsa (fee most matiloriomi officer it not he who has served the longest And, hnvin- regard to UM large public interests and the deep individual conn-rumens with which they deal, it may be stated broadly, as a general rnle, that merit, or in other words, in- mmMosM abflky, sboald be toe one essential consideration to be regarded in their pro- Bat 4s sjeestkm tbea arises, Will the judge be always incorrnptihle and in- bow are injustice, favoritism, and abusive promotioi | Aad if sot, how an injustice, favoritism, and abusive promotion to be ve. is, that there can be no perfect protec- (like most other principles) resolves itself ti-.ii will be adequate in the main, if the by merit, at agstnst seniority, be applied only where there is a of merit. For there are divers securities, each of which may be poo, the aggregate of which will afford in the main all Imt tae difltmctoon of merit in marked. If motive* of favoritism he at work, the mo* sals and Metal oncer will, at all events, have a fair chance of * mvoriM. Bert if be labor aadsr some defect (as nnsightliness, ill manners, Ac.), Tst impairing Us public Btility, tends to throw him out of favor, he will mws .mat hold apoa the stlflstarwt of bis principal, which be wants upon Discipline. his good will. Farther, of this intellectual order of men, there will hardly ever be ten brought together, of whom one will not have a generally acknowledged superiority to the rest. Even the vanities of men make them just, as umpires ; and he who cannot pre- tend to postpone nine others to himself, will not consent to postpone himself to any but the best of the nine. It will be found, then, that a man's reputation amongst his fellows in an office will seldom fail to be according to his deserts, and that where the superiority is marked, the award of common repute will be both just and decisive ; and being so, it will rarely happen that the patron will be induced by any motive of favorit- ism to brave the reproach of disregarding it. In short, it is the nature of industrious ability, acting through various methods and upon various motives, to vindicate its own claims under any system in which those claims are recognized ; and the system which shall conform to this natural tendency, and be so framed as to legitimate tile rising of what is buoyant, will be found to work the best. " There is, however, a certain moderating hand to be applied, even in the preferment of merit. Except in urgent and peculiar cases, in cases of extreme necessity on the part of the service, or extraordinary endowments, and character also, on that of the in- dividual, preferment should proceed, as Lord Bacon teaches, 'per gradus, non per saltus? For, besides the ordinary evds attendant upon sudden elevations, it should be observed that the hope, and not the fact, of advancement is the spur to industry ; and that by a large dispensation of reward at once, which cannot be followed by like rewards in fu- ture, the patron sinks his capital, and forestalls that revenue of reward which should furnish him with resources of inducement through successive years. Moreover, if a man be advanced largely at once, there will not only be little room left for his further promotion, but that little room will seem less when measured upon the scale to which his ambition will now expand itself; for he who has advanced by a stride, will not be content to advance afterwards by steps." VI. The Rules of Discipline. As the discipline of the office must depend very much upon the chief clerk, a description of his duties will describe many of the duties of the other clerks. The office of chief clerk requires qualifications of no ordinary kind. It need hardly be said that he should possess a thorough knowledge of the business of the office. He ought also to possess certain moral qualifica- tions, such as a command of temper, a love of order and regularity, a rigid adherence to discipline, accompanied by kindness of disposition and of manners towards his colleagues, a gentlemanly and courteous de- meanour, and, above all, he will be expected to exemplify in his own conduct those precepts it may become his duty to inculcate upon others. The following are the principal duties of a chief clerk : To see that the clerks come at proper time in the morning,-are not absent unnecessarily during the day, and that they do not leave the bank at night until they have finished their work. To see, by occasional in- spection, that all the books of the office are kept in a proper manner ; and where he finds this not to be the case, to give such instructions and ad- monitions as the circumstances may require. To see that during the day the counter is properly appointed, and that no delay takes place in attend- ing to the wants of the public. For this purpose, it is desirable that his desk should be so placed as to command a view of the counter. To see, by occasional inspection, that the customers' books are written up in a proper manner ; and in case of complaint, he will personally investigate the matter, and explain it to the customer. To see, early in the morning, that the balance was correct on the preceding night ; and when otherwise, he will himself attend on the second or third evening, and direct that 139 A Treatue on Bmking. proper meaea be employed to discover the difference. To count, at such tMMSM may be deemed proper, the \\w\v-\ <>f the several cushion, and when necessary to report thereon to the banker. To sec that all tin- ofli- . ... ,..; .,,<;, >}.. ,,,.. \, - vuanl- r.-i.-h otlii-r ntxl the piihlic in a courteous end gentlemanly manner, and to maintain throughout tin* efltoe a proper state of discipline and subordination. To take charge of the stationery mad other matters us-d in the office, and to prevent any loss or waste of any portion of the property of the hank. Besides the points of discipline hinted at in the ahove description, there ere others that may require more particular notice, as Pmehudily of Attendance. To insure punctuality of attendance in the morning, some banks adopt the practice of keeping a book, in which every clerk writes his name on his arrival ; and when the time has ex- i line is drawn, which shows who has arrived in time and who has arrived l.v Punctuality of attendance is an index of character. It may fairly be isjfcrred that those who are the most punctual in the morning will be most attentive to their duties during the day ; that they have formed the most Millar habits, and are, consequently, the most deserving of promotion. Those, too, who are the most punctual are the most deserving of occa- sional holidays. They who are habitually late must be regarded as hav- ing chosen to take their holidays by piecemeal each day, and they can therefore hare no claim to other holidays besides. In all applications for promotion or leave of absence, it is deserving of inquiry, whether the party is usually punctual in his attendance. With regard to absence from illness, it cannot be supposed for a moment that any clerk would pretend to be ill when he is not so, in order to have an excuse for absenting him- self from the bank. An act of this kind would show such a want of per- sonal honor ee should be a disqualification for holding any oil ice in a bank. M Few things occasion more dissatisfaction and annoyance to the supe- riors in a bank than the absence of clerks on every slight attack of illness. Unless a clerk feels himself quite unable to perform his duties, it is very injudicious for him to absent himself. It interferes with his promotion, for h superiors will be reluctant to advance him to any post where his ab- sence would be more inconvenient than while ho is engaged in an inferior situation. In addition to this, the superior in the office may attribute the attack of * bile * or 4 indigestion ' to the indulgence of a convivial taste, which it will be well for a clerk to avoid obtaining a character for. And, under any circumstances, a man who continues at his post as long as he is able, will stand much higher in the estimation of those with whom he is engaged, than he who forsakes his duties on every trivial occasion." (MM BaaJftr't Clerk, p. 151, an excellent little work, published as one of the series in the Guide to Service, by Mr. Charles Knight.) A clerk should take care of his own health. We think it is better for bJMjp eiend than to sit at his work. His desk should be raised to such a height that he can do this without stooping. He should at all times avoid pressing hb chest *gjunst the edge of the desk, as that may produce se- The post most friendly to health is that of cashier. 140 Punctuality. He is generally standing ; his attention and mental faculties are in more constant activity, and he is obliged to talk, which is useful to the lungs. It may be doubted whether the exercise of the intellectual faculties, when not carried to excess nor attended with anxiety, is ever injurious to health. Those mental operations which are connected with the office of a bank clerk are in themselves beneficial. It is the confinement, the impure air, and the keeping of the body too long in one posture, that affects the health. Hence, clerks should live at a distance from the bank, and walk to and fro. If they reside at the bank, they should take exercise in the open air, either in the morning or the evening. When the weather is bad, they can walk up and down the room, with the windows open. Any kind of amusement that should throw the body into a variety of attitudes, would be useful. Singing is friendly to health, if not carried to excess, nor practised in confined or crowded apartments. Boating, in modera- tion, is serviceable. Gardening is highly beneficial. A clerk who wishes to enjoy good health should never keep late hours, nor get into debt, nor gamble in the funds. He should also have a hobby, that is, some kind of fixed amusement to employ his time when absent from the bank, in order to change the current of his thoughts, and to counteract those evils that sometimes arise from a monotony of occupation. If this hobby should be of a kind to be useful or instructive as well as recreative, all the better. The great disease against which he should guard is consumption. He will be more subject to this in youth than in more advanced age. And it has been remarked that healthy young men, fresh from the country, when appointed clerks, have become more susceptible of consump- tion than less robust persons who have been seasoned by a residence in London. The Bank of England have a medical gentleman who attends at the bank one hour every day. He is employed by the directors upon matters connected with the health of their clerks. Every clerk, when appointed, is examined, to ascertain that he is in good health. If he applies for leave of absence on the ground of ill health, he undergoes a medical examina- tion. If absent from illness, he is visited by the bank surgeon, who re- ports to the directors upon the nature of his complaint, and its probable duration. If a clerk complains that his employment is injurious to his health, he is examined, and in some cases his employment is changed. If he applies for a pension on account of age or illness, he is also ex- amined. In each of these cases a formal medical report is drawn up, and laid before the directors. The present surgeon is Mr. Alfred Smee, F. R. S., of Finsbury Circus, a son of the chief accountant of the bank. It is not his duty to prescribe for the clerks ; but in the case of the porters or messengers, he acts as their medical attendant, and is paid bythe bank. It is worthy of inquiry, whether this excellent arrangement might not be extended, and adopted by other banking institutions. Why should no> every large company give a fixed salary to a medical man to attend to the health of all their clerks ? This would often be useful in preventing ill- ness, or in checking its first approaches. It would thus preclude, in some cases, those inconveniences which are now felt through the absence of 141 A TVssriM on Banking. clerks ; white it would be a boon to the establishment, and save them what, in some inurm***. must be a heavy item of expense. It ig dfttfriHfr, on several accounts, that all the officers of especially those who are intrusted with cash or other prop- once a yew have leave of absence for at least a week or a This fhfftM not even be optional ; it ought to be a fixed rule vim which they should be expected to comply. These absences should be arranged to ** fcm place at those seasons of the year when they will be of ..;,,:.,;..-.:,, :'!,. !,;.-. ne-x,,!' the kink. These holidays outfit to he rosjiJiljT granted on the ground of kindness and humanity ; but u In -re do not exist, motives of self-interest alone would prompt a in such applications. In the first place, a great in- is often experienced in large establishments from the illness of the clerks when they are denied proper seasons of relaxation. In this ease, the test of time from ill health is greater than that which would be oooasionrid by holidays. A sick clerk, even when he attends to his du- ties, is neither so quick nor so correct, nor can he get through so much work, as a clerk who, by proper recreation, has been kept in perfect health. These occasional holidays tend very much to improve the efficien- cy of an office. When a clerk is absent, the next in seniority takes his place ; and when all the clerks have been absent in turn, every duty in the bank becomes perfectly familiar to at least two persons, so that in the i of those absences which airse from unavoidable causes, little inconve- i comparatively is felt But while the bunk is thus rendered inde- nt of any one individual, it must not be supposed that the absence of a clerk lessens the importance attached to his services. When a clerk is really efficient, an occasional absence renders his value more apparent, and increases the estimate formed of his character ; while the indulgence he has received will stimulate his energies and increase his desire to resjdei himself more than ever useful to his principals. Another advantage to a banking establishment from the absence of their clerks is, that it furnishes an additional guarantee for their honesty. We have known instances of frauds being carried on for several years by clerks who were constant in their attendance, while a single day's absence would necessarily have led to a detection of their dishonesty. When a clerk takes his holidays, all the property under his care is given over into other hands, and the knowledge that he will be called upon to do this periodically, may deter him in the first instance from commencing a career which must thus be necessarily exposed. The following is stated in a city article of the Time* to be the arrange- of the Bank of England on this subject : " It b mot reoendly known that the Bank of England hare recently entered into an t by which all the penons on the establishment are allowed leave of ab- ssstscsa* twy JMT, the holiday varying in length according to the length of service. Tfr^csrrr^osi mm pisa. She whole number of persons U divided into four portion*, and essBjS^SMSB fovr portion* take* the vacation in one of the four periods of i *** **js ssjjacei^of ihe dividend*, and precede the shutting, these being the pe- *T*J? *?? yU?*** bsstasss U done. So complete is the system, tlmt tin; parties iMr hoUdar la dtt srtag quarter one year, take it in the summer (juurtcr ..-V !..! B>< :i AfOSffc :ill the four, I that one may not have an an fair 142 Bank Books. advantage over the other. The shortest holiday, we understand, is about nine days, and the longest about three weeks." Customers' 1 Books. It should be a great object with the chief clerk to see that the customers' books are written up correctly and neatly, in a good hand-writing, and free from blots or erasures. These are the only books that go out of the bank, and therefore they are the chief means by which the customers can judge as to the manner in which the business of the office is conducted. It is not advisable that the writing up of these books should be left to the junior clerks. They should be placed in the hands of clerks of some standing. The same book should always be written up by the same clerk ; and, when it can be so managed, the credit and debit side should both be in the same hand-writing. One of the best writers in the office should be appointed to this post, and his salary should be proportionate to its importance. It is the practice of all bankers to let the customers' book be a copy of the ledger with the sides reversed ; thus the credit side of the ledger is the debit side of the customers' book. The reason assigned for this is, that the ledger is the banker's account against his customer, and the book is the customer's account against the banker. Hence the customer, when he looks at his book, has at his left hand the sums with which he has de- bited his banker, and at his right the sums which are to the banker's credit. Cashier's Deficiencies. It cannot be expected that a cashier can re- ceive and pay away money for a whole year, and yet never make any mistakes. Some deficiencies will be sure to arise. Each cashier is con- sidered liable to make good his own loss. But, to meet these deficien- cies, some banks allow to each cashier a certain sum, say 20 or 30 per annum, which is called risk-money. Others pay such deficiencies as may arise during the year, giving an admonition to any cashier whose deficiencies are unusually large. Superior accuracy in this respect is also considered as one test of superior merit, and therefore as forming one claim to promotion. When a cashier takes his holidays, he delivers up his cash to the chief clerk, who counts it and sees that it is correct, and then delivers it to the clerk who is to act for the cashier, who signs an acknowledgment in the money-book that he has received the right amount. The cashier, on his return, will make a similar entry. It is said to be the practice in some establishments for the chief clerk to count the cash of all the cashiers every Saturday night. But when, from the extent of the business, this cannot be done, he counts the cash of each cashier individu- ally, at such times as may be most convenient to himself, giving the cashier no previous notice of his intention to do so. He immediately re- ports to the banker any deficiency he may discover. In all banks it is understood that the cashier is not allowed to apply any part of the bank money, even temporarily, to his private use, nor to lend any sum, however small, to the other clerks, upon their I. O. U.s or other engagement. Any violation of this rule, though with no fraudulent intention, is consid- ered a sufficient ground for instant dismissal. Gambling in the Funds, or in Shares. Some banks make it a rule to dismiss any clerk that is found to be engaged in transactions of this kind. 143 A TVesrtM on Banking. The erfl effects of such practice* are Tcry great Speculative engage- mm* will lurioirily distract their minds, and draw their mti utinn : their official dutiea. If unfortunate, thrir personal comforts may be di- minished: they may incur debts that will require years of saving to liqui- date* or they may be tempted to actions which would ruin themselves and dB*nce their families VII. The Training of Clerks for higher Offices. Whatever natural talents a young man may have when he enters a bank, he cannot be expected to perform his duties well until IK- has been instructed. There is a good way and a bad way, a quick way and a slow way, of performing even the most simple operation. Incorrect or slovenly habits, when once acquired, are not easily abandoned. When, therefore, a young man enters a bank, he should be placed under the tuition of an- Other clerk, well qualified to instruct him with regard to all his immediate dutic*. It is also desirable that the chief clerk should not have much ifftT"**! labor, but should have leisure to walk round the office, stand for awhile at the elbow of each clerk, observe his peculiar defects, and give such instructions as he may deem necessary or useful. The senior clerks generally should also be ready at all times cheerfully and courte- ously to give instruction to their juniors. There are many ways of ascertaining the relative merits of a clerk. There it one obvious way ; that is, to inspect the books which he keeps. k can readily be seen if they are kept in a good and neat hand, if there are any blots or erasures, and if they indicate any great degree of care- lessness or otherwise. Quickness is generally an evidence of cleverness. A clerk who can courfl notes very fast, or who can cast up a long column of figures very quickly, and yet accurately, is generally a clever man. Quickness of hand denotes quickness of head, and it will generally be found that these two kinds of quickness go together. We do not say that this mechanical quickness of head proves soundness of judgment, but neither does it prove the reverse. In a clerk it is a decided recom- Another teat of the cleverness of a clerk is, the opinion formed of him by his fellow-clerks. When men associate together day after day for a number of years, both their excellencies and their defects become known to each other, and each man falls into the position to which his qualities entitle him. The opinion which any one clerk expresses of the relative merits of the other clerks will generally be correct, when his own interest is not concerned. The opinion he may express will, in fact, be the opinion of the office, formed, not only on his own experience, but also on the ex- perience of all the other clerks. The report of the chief clerk will generally express this united opinion of the office. But it is well for a banker to keep himself well acquainted, At all times, with the sentiments generally entertained by. the chief clerk mpecnng the other clerks, and not ask his opinion merely when there is an opening for promotion. On these occasions, feelings of kindness, or the may induce a chief clerk to speak of the party in a somewhat from that which he would employ in ordinary times. 144 Training of Clerks. With a view to the proper training of clerks, it is desirable that there should not be too many in proportion to the work. If the clerks are un- employed for any considerable portion of the day, their habits of atten- tion, of industry, and of quickness are impaired, so that they do less work even in those hours in which they are occupied. The duties of each clerk should be sufficiently heavy to require a continuous application of the mind during the whole of the working hours. If a banker find that the clerks have time to read books or newspapers, or to carry on either gam- bols or quarrels among themselves, during the hours of business, he may safely infer that he has too many hands. By reducing the number, he will make each clerk more efficient, and the work will be better done. He will also be able to increase their salaries individually. It is better that the same amount of money should be distributed among a smaller number of effective men, than among a larger number who are less effec- tive. The amount of Christmas money received by each will also be greater. For the purpose of training the clerks, it is desirable that their labors should be so subdivided as that the duties of one office should be a train- ing for the office immediately above it. The clerk, on his entrance into the bank, will thus have to perform those operations that require the least degree of professional knowledge, of knowledge peculiar to the business of a bank, and will advance step by step (each step requir- ing but a small addition to his previous knowledge) to the higher posts. When it is ascertained for which department the cashier's or the ac- countant's the teller is best adapted, he should be put into that post the operations of which will form the best training for those duties which, when promoted, he will have to discharge. The occasional absences of the clerks are conducive to their improve- ment. The juniors thus learn to perform the duties of their superiors. New arrangements are formed temporarily for a different division of la- bor, and, the hands being fewer, an additional stimulus is given to exer- tion. It is also useful, when it can be done, for the clerks to change oc- casionally, and do each other's work. Every clerk should be encouraged to suggest any improvements for abridging or facilitating his own labor. When a bank has several branches, it is often advisable that an occasional absence at one branch should be supplied by a clerk brought from an- other branch. A good inspector of branches will inspect the cashfbr's and the accountant's department, as -well as the manager's ; and when he finds any improvement at one branch, he will introduce it into all the other branches. But the greatest stimulus to improvement in the clerks is an impartial system of promotion. It is, perhaps, desirable that instances should occur sometimes of a clerk who is entitled to a higher post, from seniority, being unfit to take it, in order to show that superior merit is regarded. But it should always be obvious that the clerk who is promoted has superior merit. If a clerk is put over the head of another from favoritism, or ca- price, on the part of the banker, or from the influence of friends, custom- ers, or shareholders, or even for qualities good in themselves, but not in- creasing his efficiency as a clerk, then will great evils arise from his ap- M 145 was entitled to the post from Moiority , -ifiv: ial m< A TVwftM on ho should bo M woll qualified as the man who of training clerks is the daily balance. The boohf are NJanwl every night, before the clerks leave the bonk. But mietakoe will sjeosjsjarily occur during the day, and to discover theae will occupy a little time. The total amount of error is called " the \\ the balance " can leave the bank as soon as their own work is done. The smaller the number of clerks on the balance, the better. Thus, in a bank of forty-two clerks, six would bo sufficient to be on the balance. If % larger number say twelve were retained, the juniors would do iKMhmg t or else they would be employed on the inferior books, from which they would learn nothing. But when only six are retained, they must all work, and, what is better still, they must all think. They will all quire a thorough knowledge of the whole system of book-keeping, and he able to ascertain in what way errors in one book may counteract er- rors in another book, and how the errors discovered will bear upon " the difereooe." In large establishments, almost tlie only way in which a jynr>f clerk can learn the whole system of book-keeping, is from Ix-m^ 44 upon the balance." But this is an effectual one. It also gives him an opportunity of showing his talents. Some clerks are far more quick in discovering the difference than others are ; and this quickness is generally a fair criterion of the general talent of the party. The clerk who " skulks " the balance, avoids the best means of improvement, and the best opportunity of showing his talents. But such persons have usually no talents to show. A clerk who acts in this way betrays a conscious- of being a fool. e have here We have here spoken of that kind of training which is adapted to the asking of clever clerks. But as in the joint-stock banks a clerk may be- come a manager, it is desirable that those clerks who are deemed the oat clever should be put under a course of training that will, with expe- rience, qualify them for that office. It is, in some respects, more difficult to do this in a large establishment than in a small one. In a bank that has forty clerks, one clerk sees only a fortieth part of its operations. In a hank where there are only ten clerks, one clerk sees a tenth part, and may easily acquire a tolerable knowledge of the whole. A hank that has many branches has a great facility for training clerks to become mana- gete. Whe a branch manager is absent from illness, or any other cause, ova of the senior clerks of that or some other branch will take his place, and thus gradually become accustomed to the duties of the office. The clerks thus selected for this kind of training should be young men who are quick aod efficient in the discharge of all tln-ir official duties, and, lossess a good temper, gentlemanly appearance and manners, literary information, with a desire of improving their knowl- They should not be young men who have en- 146 Training of Clerks. tered the bank until they can get something better, but those who look to banking as their profession, and are ambitious of attaining to the highest posts in the establishment. But beyond the qualities we have enumerat- ed, it is necessary, above all things, that they should have habits of business. " Habits of business is a phrase which includes a variety of qualities, industry, arrangement, calculation, prudence, punctuality, and perseverance. And these virtues are exercised, not from the impulse of particular motives, but from habit. If you hear a man boast of being industrious, you may safely infer that he does not possess the habit of industry, for what a man does from habit, he does mechanically, without thinking of the merit of his actions, though they may be highly -meritorious. Habits of business are essential to a merchant. But though essential to a merchant, they are not peculiar to him. They are as necessary to a professional man as to a merchant, as necessary to ladies as to gentlemen, as necessary for the government of a family as for the government of a commercial establishment. The greater the intel- lectual talents of the individual, the more necessary are habits of business to keep him steady in his course. The more canvas he spreads, the more ballast he requires. If we examine the history of those illustrious characters who have risen to eminence as the masters, the legislators, or the instructors of mankind, we shall find they have been as much distinguished by their habits of business, as by the superiority of their intellect. While, on the other hand, we could easily point out, in every science and in every path of life, some young men who, though of towering genius, have become lost to themselves, and have disappointed the hopes of all their friends, through a want of habits of business. They have burst upon the world with more than noontide splendor, they have attracted universal notice, they have excited big expectations, and suddenly they have darted into an oblique course, and passed into oblivion." (Lectures on Ancient Commerce, by J. W. Gilbart, p. 94.) If a clerk be intended to be trained for a manager, it may be questioned whether he will be improved by remaining a long time as a clerk. The two offices are very distinct, and they call into operation distinct qualities and operations of mind. A very old banker's clerk (unless he has been a chief clerk) is generally, from the very length of his service, dis- qualified for being a manager. Seven to ten years' experience as a clerk is quite long enough, and after that period the sooner he becomes a man- ager the better, provided he has the necessary qualifications. Even dur- ing that time he should have been occasionally employed in those opera- tions that require the exercise of his faculties as a man of business. It has often been said, that good servants make bad masters. If this be true, it is probably the result of an intellectual more than a moral defi- ciency. A lengthened service causes the mental faculties to move in a routine from which they cannot be suddenly aroused into an attitude of independence, so as to be able to trace causes and effects, to balance op- posing considerations, and to engage in those reasoning processes which are required by the exercise of authority. Hence it is, that before a clerk is appointed a manager, he should undergo some kind of training. The best training for being a manager is that of being chief clerk, or of hold- ing an equivalent post next to the manager. It will necessarily follow that the holder of such a post will have occasionally to take the place of the manager, and the manner in which he may then act will be a fair cri- terion by which to judge of his qualifications for that, or a similar sit- uation. Among the means of training clerks for superior offices, we should give 147 A TYvofue on Banking. t bifb nak to the formation of a library of banking books, to which the whole of the ostaNianmnnl should at all times have access. Tin- n -marks in letter, addressed to the nm ringer of a country bank, in tin- N . IN;.;. ... >,,,!, wts ;it' f - ru.ini- pubhfaed ill tin- sixth vnhmr of the Batter*' AfflgoriiM, are, we think, not inapplicable to this MI!.J ,-t : " 1 with you would advise your directors to celebrate their success by ending to each of their branches monthly a copy of the Bankers' Maga- IMM. It would be sent direct from London, the last day of the month, I believe, free of expense; and as the number of next month will com- mence a new volume, they could not begin at a better time. I am sure ibis would be a profitable investment of Rome portion of your surplus fund*, and would yield an ample return in the results arising from the in- creased knowledge and skill of your managers. Here they will le.-irn point* of law and of practice, with which they were previously unac- quainted, and be better prepared to deal with such cases when they occur in their own experience. It seems peculiarly necessary that manners of branches, who have not the opportunity of immediately consulting with any of the directors, should be supplied by the bank with the means of flfrtaininy this kind of information. Losses are sometimes incurred by joint-stock banks, through the want of knowledge of a little banking law on the part of their principal officers. The managers would not be the only gainers. The other officers of the branches would have the opportunity of self-improvement ; and thus routine clerks might become intelligent bankers, and you would train in your own establishment a constant supply of able men, to take the places, when necessary, of the existing managers. It is one of the excellencies of our system, that the junior clerks may look forward to being placed at the head of the establishment ; but this can only take place in those instances wherein the clerks endeavour to acquire that professional and general knowledge which is necessary in the pres- ent day, in order to discharge the duties and maintain the position of a manager. Unless they do this, those who are now clerks will remain clerks as long as they live, and the next generation of managers will be taken from the more instructed classes of society.' 1 The manager of a joint-stock bank in the midland counties, on whom we called last summer, informed us that his directors had recently voted 100 towards the formation of a bank library. To the directors of other banks we would say, * Go and do likewise." In training clerks for intellectual offices, it is advisable not to give them too many instructions with regard to minute details. They should be taught to think for themselves. A man's talents are never brought out until he is thrown, to some extent, upon his own resources. If, in every difficulty, he has only to run to his principal, and then implicitly obey the directions he may receive, he will never acquire that aptitude of percep- tion, and that promptness of decision, and that firmness of purpose, which * aawntially necessary to those who hold important and responsible of- * C8B " T??^ roso^ho are backward in this respect should be intrusted at fiat with some inferior matters, with permission to act according to thetr^iscretion. If they act rightly, they should be commended ; if other- wise, they should not be censured, but instructed. A fear of incurring Training of Clerks. censure, a dread of responsibility, has a very depressing effect upon the exercise of the mental faculties. A certain degree of independent feeling is essential to the full development of the intellectual character. It should be the object of a banker to encourage this feeling in his superior officers. Those bankers who extend their commands to the minutest details of the office, exacting the most rigid obedience in matters the most trivial, harshly censuring their clerks when they do wrong, and never com- mending them when they do right, may themselves be very clever men, but they do not go the way to get clever assistants. At the same time, they exhaust their own physical and mental powers by attending to mat- ters which could be managed equally well by men of inferior talent. After a clerk has become a manager, his education has yet to be com- pleted. Lord Bacon observes, that reading makes a wise man ; writing, an exact man ; and conversation, a ready man. Whatever knowledge he may have acquired by reading or otherwise, however exact he may have been in the discipline of the office, the young manager has yet to become a ready man. He has to apply his knowledge promptly and independent- ly, and, at the same time, wisely. This habit he will acquire by tindfe. The exercise of authority over other men produces an independence of mind which is friendly to the maturing of the understanding ; while the necessity for giving immediate decisions in conversation with his custom- ers will have a tendency to produce promptness of judgment. There is no profession in which experience is more useful than in banking. But it is useful, not so much in the amount of knowledge that is acquired (though that is important), as in the improvement it imparts to those in- tellectual faculties which are called into exercise. It is by 'constant prac- tice that these faculties gather strength. Habits are formed by repeated acts, and they can be formed in no other way. Before closing this section on the administration of the office, we may observe, that although the duties of a chief clerk are quite distinct from those of a banker, yet in small establishments they are often performed by the same person. In branch banks, generally, the manager is both the banker and the chief clerk. But as the branch increases, the manag< r will gradually transfer to the second officer the duties of the chief clerk, and confine his own attention to those of a banker. It is too much the practice in England to view a bank manager as holding the same relative position in a joint-stock bank which a chief clerk does in a private bank. This is an error. A manager is not a banker's clerk, he is a banker. And although he may reserve some important cases for the consideration of his directors, yet they are usually such cases as a private banker would reserve for consultation with his partners, or on which, had he no partners, he would take time to form his own determination. It may also be observed, that although the government of the office will generally be left entirely to the chief clerk, and it is not necessary that the banker should be made acquainted with all the trivial delinquen- cies of the clerks, yet there are certain acts of misconduct that must al- ways be reported, and when reported must be dealt with by the banker himself. In a well-disciplined establishment these cases will be rare, but they will occur sometimes, and then the mode of reproof or punishment M* 149 A Trtatite on Banking. will be rrgulated by the kind of ofieace and :!i- character of the party. rv set of dishonesty, however trifling the amount purloined, must bo followed by instant dismissal Acts of delilwrate disoU-dience to orders, grass dbrespect to nii|M-nor officers, or acts of immorality that would bring discredit on the bank, will generally be vwited witli the same pnn- hment But extreme puimhmnit should IK indicted only in oases. Mere accidental errors, though they may ROIH- ; .HP- occasion grmt loss, must not be treated in the same way as those faults which M rise from gross neglect, or which imply a deficiency in personal honor. It is generally a good rule, that a hanker should not reprove a clerk in tlic presence of the other clerk*. By following this rule, he can adapt his re- proofs to the character and position of.the party ; for a valuable clerk, even when really culpable, is not to be treated in precisely the same way as another whose services are of less importance. Nor is it any violation of justice, that those faults which arise from inadvertence should be differently from those that arise from bad habits. Nor will it to impair the discipline of the office should it be known that a good will sometimes got a young man out of a scrape, while he who had not that good character would be punished more .; a less important offence. Another rule to be observed in administering reproof is, in reminding a clerk of his defects, to commence with telling him of his good qualities. There is a credit as well as a debit side in every man's character; and it seems hardly fair to run over all the debit items, and say nothing of the other side of the account. This plan, too, in , instead of diminishing, the pungency of the reproof, while it re- from the mind of the party any impression that the banker is iiiflu- by motives of personal dislike. SECTION XII. - BANKING BOOK-KEEPING. ** ALTHOUGH the business of keeping books is extremely easy when once the accounts are properly arranged, yet the adaptation of the prin- ciple of double-entry to extensive and complicated transactions, so as to receive the full benefit of the system, is a process which requires the most complete knowledge, not only of the practice, but also of the science, of book-keeping/ 1 ** Book-keeping, like all other arts, can only be mastered by industry, perseverance, and attention. The learner must think for himself, and endeavour to understand the why and wherefore of all that he does, instead of resting satisfied with vague notions and words devoid of sense." 14 The study of book-keeping affords an excellent means of intellectual discipline; that b, when its principles are exhibited as well as their appli- cation. When the reasoning powers are called into exercise as well as tbememory, the student who has carefully attended to the instructions, aixrVbo is the matter and not the tlaoe of rules, will experience ,, ,jjfli. culty in unravelling or adjusting any set of accounts, however complicated or diversified." (Double-Entry Lluridaled, by B. F. Foster.) LfiO Book-keeping. We have commenced this section with these quotations in order to quicken the attention of the reader to a subject, which, by those who do not understand it, is considered complicated, and by those who do under- stand it, is considered dull. It is, in fact, neither the one nor the other. But still it is a subject on which it is difficult to write in such a way as to avoid the possibility of being misunderstood. We purpose in this section : I. To notice those Preliminary Operations with which a young Book- keeper should become acquainted. II. To describe the system of Banking Book-keeping as published in the former edition of this work. III. To state those Improvements of which this system has been found to be susceptible. IV. To trace the Resemblance between Banking Book-keeping and Mercantile Book-keeping. I. Preliminary Operations. When a young man enters a bank as a clerk, he should be instructed to be careful with regard to his hand-writing, or, in his anxiety to write fast, he may forget to write well. If he write a bad hand, he should not be above taking a few lessons from a professor of penmanship, who will teach him to write fast and well at the same time. But, however badly he may write, he should try to write plain. Plainness is of more conse- quence than neatness or elegance. He should be very careful in writing the names of the customers of the bank. If he write them illegibly, there will be a loss of time in making them out, or they may be misunderstood, so that money may be posted to the wrong account, and thereby loss arise to the bank. On this account also, when two or more customers have the same surname, he should be very careful to write the Christian names fully and distinctly. The necessity for writing quickly, and the want of carefulness at first, are the causes why so few bankers' clerks comparatively write a good hand. But they should remember that this is a most important qualifica- tion, and a deficiency in this respect may be an insuperable bar to pro- motion. Without this attainment, a clerk cannot be put to write up the customers' books, nor to make out the country accounts, nor to write the letters, nor to fill the office of secretary. " You ought to be careful to write a plain hand. You impose upon your correspondents a very unne- cessary and a very unpleasant tax if you require them to go over your letters two or three times in order to decipher your writing. A business hand is equally opposed to a very fine hand. A letter written in fine, elegant writing, adorned with a variety of flourishes, will give your corre- spondent no veiy high opinion of you as a man of business." (Lectures on Ancient Commerce, by J. W. Gilbart, p. 239.) The plan of writing-masters who advertise to teach good and expedi- tious writing in a few lessons is as follows: The pupil rests his hand upon the paper without touching it with his little finger. All the motion is then made from the wrist Those who have to write their names 151 A Treatite on Banking. nrany tima ta mcoejsion, such ns in signing bank-notes or in accepting bills, will find thai on thin plan they cnn i: i through their work in much laaa time than if they bend their fingers with every stroke of the pen. The young clerk should aim be taught to make his figure* clear and plain, m> that a 2 cannot be mistaken for n 3, nor a 3 for a 5. lie should also take care that the tail of his 7 or his 9 docs not run into the line be- low, and thus turn a into a 6, nnd also that the top of his 4 Hoes not reach ao high as to turn a in the line above it into a 9. He should be careful, too, in putting his figures under one another, so that the units hall be under the units, the tens under the tens, the hundreds under the hundreds, and the thousands under the thousands. Otherwise, when )< op the columns together, he will be in danger of making a u wrong He will also learn to use both hands at the same rime. In counting gold or stiver coin, he will count with two hands instead of one, and thus do double the, work. In entering a number of cheques or bills, while he holds the pen in one hand he will hold a cheque in the other, and then turn over the cheques as quickly as he enters them. He will always turn them over one on the back of the other, so that they will be in the same order after he has entered them as before, and when they are "called over" they will come in the same order in which they are en- :! i. He must also learn to ** cast " quickly and accurately. The two main qualifications in this operation are accuracy and quickness. To insure. accuracy, a clerk will cast every thing twice over. The first time he will begin at the bottom of the column, and the second time at the top. If he begin both times at the bottom of the column, the association of figures will be the same ; and if he has fallen into an error the first time, he will be apt to fall into the same error the second time. But if he changes the order, the association of the figures will be different, and he will not be likely to fall into the same error. Quickness can be acquired only by practice. But he will accelerate his speed by making his figures plain, and placing them strictly in a line under one another. He should also learn to cast without speaking, for the eye and the head will go faster than the lips. He must also be taught to " call over." When he first comes into the bank, he will call this sum, .315 10*. 6rf., three hundred and fift. -i n pomids ten shillings and six pence, but he will soon learn that more than half these words may be suppressed, and he will say, three, fifteen, ten, six. And so in the larger amount, ^4,785 13*. 4 will say, or rather think, "4 and 6 an 10, and 11 are 'Jl. :md ' n;mks, all the transfers are passed through the Received- Waste-Book. By some London houses the Day-Book is called the Cosh-Hook, mid its two divi- sions are called the " RECEIVED-CASH-BOOK " and the "PAID-CASH- BOOK.** 5. CctttKT-Accotmr-LtDOEi. In this book every customer has a separate account. The sums received to his credit are posted from the credit side of the Day-Book, and the Ledger folio is placed in the Day- Book, in a column ruled for that purpose. The debit side is posted from the cheques themselves, and the Ledger folio placed in the debit side of the Day-Book on the following morning, when the Day-Book is mark* <1 against the Ledger. The entry of a cheque in the Ledger includes the date of payment, the name of the party to whom it is payable, and the amount. The entry of a credit includes the date, the word " Cosh," and the amount When the cash is paid into the bank by a third party, it is usual to enter it in the Ledger as " Cash per A. B." When a credit arises from a bill lodged for collection having become due, the name of the acceptor is substituted for the word cash. Some banks follow what is called the progressive plan of keeping the Ledger. By this plan the balance is brought out every day, and thus we see the progress of the account. In the ordinary way, each page of the Ledger is divided into the debit and the credit side, and each side has ruled columns for the date, the transaction, and the amount. But in the 'progressive Ledger there is only one column for the date of both the credits and the debits ; one space for a description of the transaction, whether credit or debit ; and then three cash columns. The first column b the debit column ; the second is the credit column ; and the third is the column into which the daily balance is brought out. The advantage of this plan is, that you can see at once what sum a party has on his ac- count, without the delay of adding up the debit and the credit columns. Most banks that allow interest on the balance of the current accounts, keep their Leiger on the progressive plan ; and, besides the columns I have mentioned, there are, on the right side of the balance column, a space for inserting the number of days the balance may remain station- ary, and two interest columns, one for the interest of a credit balance, and the other for the interest of a balance overdrawn. Most banks divide the Current-Account-Ledger into two or more parts, and the names of the depositor* are placed in alphabetical order, from the beginning of the first Ledger to the end of the lost 6. DEFOSIT-RECEIFT-BOOK. Deposit Receipts are receipts granted for sums of money that are likely to remain a considerable time, and upon which interest b allowed. These receipts are distinguished from current accounts. Cheques cannot be drawn against any sum lodged as a deposit receipt; but when the amount, or any part thereof, is with- drawn, the receipt itself must be produced at the bank, and delivered up. The Deposit- Rcccipt-Book b not kept ledger-wise ; that is, each person Book-keeping. has not a separate account opened for him in a distinct part of the book but the receipts are entered chronologically, according to the date of the lodgment. The entry includes date of lodgment, name of depositor, pro- fession, residence, amount, interest paid, principal and interest. The last two particulars are, of course, not entered until the receipt is cancelled. If a party is desirous of withdrawing only a part of the lodgment, the whole receipt is entered as paid, and a new receipt made out for the sum which remains. IT. The Bill Department. Bills are divided into two classes, bills deposited, and bills discount- ed. Bills deposited are bills lodged in the bank for collection, to be placed, when due, to the credit of the depositors. Bills discounted are those for which the money has been advanced, and which are therefore the property of the bank. These two classes of bills are entered in sepa- rate sets of books ; but, as the books are kept in nearly the same manner, I shall describe them together. 1. BILL-REGISTER. ) These books are kept, as the word regis- DISCOUNT-REGISTER. ) ter seems to imply, chronologically, the bills being entered immediately after each other, in the order in which they come into the bank. The entry includes date when deposited or dis- counted, name of ingiver, drawer, accepter, date, term, when due, amount, daily amount. The bills are numbered, and the register-number placed upon each bill. The daily amount of the Discount-Register is en- tered in the debit side of the Day-Book, under the head " Bills Discounted this day." I advise that the headings of the columns of this, and of all the other books, be printed. This saves time and prevents mistakes. 2. BILL-LEDGER. ) In these books a separate account is opened DISCOUNT-LEDGER. ) for each party ; and the same bills which have previously been entered in the Registers are entered in these Ledgers ; but the entry is much shorter. A full description of a bill is given in the Register only, and the register-number is placed as a reference in every book in which the bill may subsequently be entered. The entry in the Bill, or Discount Ledger, includes date when deposited or discounted, name of accepter, when due, and amount. In some banks the Discount- Ledger is kept upon the progressive plan, which is very useful, as it shows at once to what amount any party may be under discount. In ad- dition to this, some banks place in the Discount Ledger an account of all bills they may have discounted, to which the party is an accepter. These bills are distinguished from those which have been discounted for the party himself, by being placed on the left-hand side of the page. This account is also kept on the progressive plan. A Discount-Ledger kept in this way will have three cash columns ruled on each side of the page : the three on the left-hand will be headed " Where Accepter," and the three on the right-hand will be headed " Where last Indorser." Between the two sets of columns will be entered, date when discounted, register- number, name of accepter or drawer, when due. The advantage of this plan is, that on turning to any party's account, you see at once the whole 159 A TVeoliM on Banking. of his engagements to the bank, whether arising from bills that liavo been discounted for himsewr bills to which ho is only the aco*p:< r. 3. BlLt-JocKKAL. PiscotJNT-JocRNAL. In these journals the bills are entered under the respective days on which they fall dm-. For this purpose, the day of the week, and of the month, is placed at the top of eaehpage. This book may be made to last exactly a >:,,-. l>> having headings for every day, from the 1st of January to the 31st !' I >> < < mbcr, omitting Sundays. The entry includes the rcgister-numt>iT, name of de- positor, or for whom it was discounted, accepter, and amount. The Dis- count-Journal has three cash columns, one for the amount of each bill, another lor the bills paid, and another for those unpaid. The entry is made in the first column, on the day the bill is discounted ; and in the other two on the day the bills fall due. The total amount of bills paid each day copied from the Journal into the received side of the Day- Book. Those unpaid are entered into the transfer column of the Day- Book, and in the Past-Due-Bill-Book. The Bill-Journal need only have one cash column, as most banks find it more convenient to credit their customers* wOOOUB 1 * with all the bills on the day they fall due, and debit them on the following day for those that remain unpaid. Those banks, however, that prefer it, may have separate columns in the Bill-Journal for the paid and the unpaid bills ; and, in that case, the unpaid bills are re- turned on the following day to the depositor, without being passed through his cash account This is sometimes called being "entered short." Some banks moke one book serve the purpose of both a Bill- Journal and a Discount-Journal ; one page of the book being used as a Discount-Journal, and the opposite page being used as a Bill-Journal. 4. THE LISTS. Each banking-house divides London into a certain number of districts, according to the extent of its business. Each district is called a walk, and usually takes its name from the direction in which it lies ; as the East Walk, the West Walk, and so on. To each walk is assigned a book, in which is entered every day a list of the bills due in the walk ; and hence the book is called a List Each List takes its name from the walk to which it belongs; as the East List, the \\t List, &c. The page is divided into four columns, the first and third of which are cash columns. In the first column is entered the amount of the bill ; in the second, the name of the accepter and the register-number. This is done the day before the bills are due. After the teller has returned from presenting these bills for payment in his walk, he " answers " each bill ; that w, he places against it an account of the cosh he has received for it, whether cheques, bank-notes, or money. The amount is entered in the third column ; and, in the fourth, the description of each kind of cash. If the bill be not paid, he writes L. D. for " left direction," and then enters the bill in the " Unpaid List." In the Uinr AID- LIST are entered all the bills not paid when presented for payment. In the course of that day or the following, these bills are 44 answered," either by being paid, or by being passed to the debit of a customer's account, or bv being transferred to the Past-Due-Biil-Book. In some banks the Unpaid-List is called the " TAKE-UP-BOOK." Cfceo,oei upon other banks are entered in the Lists in the same way 160 Book-keeping. as bills, unless the bank sends a clerk to the Clearing-house, and then they are entered in tke " Clearing-out-Book." From this description it will be seen that when a sum is received to the credit of a current account, it is entered in the Received-Waste-Book, copied from thence into the Day-Book, and from thence into the Current- Account-Ledger. When a cheque is paid to the debit of a current ac- count it is entered from the cheque itself into the Paid- Waste-Book, the Day-Book, and the Current-Account-Ledger. When a sum is received for a deposit receipt, the sum is entered before the receipt is granted in the Deposit-Receipt-Book, and afterwards in the Receipt- Waste-Book and Day-Book. When a deposit receipt is paid, it must be discharged in the Deposit-Receipt-Book, then entered in the Paid- Waste-Book, and afterwards in the Day-Book. When a bill is discounted, the discount is calculated by the accountant, who at the same time observes if it is drawn on a proper stamp, and is in every respect a regular and negotiable instrument. If the party for whom it is discounted have a current account, the full amount of the bill is placed to his credit, and he is debited for the interest. If he have no account, he is paid the amount minus the discount, and the entry is made in the Paid-Waste-Book. The bills discounted each day are entered in- dividually in the Discount-Register, and the total amount copied into the Day-Book. The bills are also entered individually in the respective ac- counts in the Discount-Ledger, and under the days they fall due in the Discount-Journal. When these bills are due, the amount paid each day is entered in the Day-Book in the cash column, and the amount unpaid is transferred to the Past-Due-Bill account, and is entered in the Day-Book in the transfer column. W 7 hen a bill is deposited, it is entered in the Bill-Register, the Bill- Ledger, and the Journal. When due, it is placed to the credit of the party by whom it was lodged, and is copied from the Journal into the Day-Book, thence into the Current- Account-Ledger. If unpaid, the ac- count is debited on the following day, and the bill is returned to the de- positor. At the commencement of each day, all the entries made the preceding day in the Day-Book are marked against the respective books by the ac- countant, or under his superintendence. He also marks the Cash-Book, and checks the adding up. The Customers' Books are then compared with the Current- Account-Ledger. The debit side of these books is usu- ally written up the preceding evening from the vouchers by the tellers, or out-door clerks. The accountant writes up the credit side, and sees that both sides agree with the Current-Account-Ledger. III. The Country Department. In this department is managed the business of the country banks, and of those customers who live in the country. When the letters are deliv- ered in the morning by the postman, one clerk takes them and enters in the Waste-Book the cash inclosed in the letter to the credit of the respec- tive parties. Another clerk takes the letters and enters the bills in tho N 161 A Trtttut on Banking. '.-Ledger, and the Rill Journal. The letters are thftii handedTto a ford clerk, wm copies off into a bsjpk all the pay- sMsUt, which are to be made immediately in cash. This book is usually called the Draft-IVjok, as th party receiving tho money signs a draft for the amount, which m as good as signing a receipt If the payment is to 'e to a banker, he imieifgf notice in a printed form, called a momo- i ; but if the payment is ordered to be made to a private individual, I call for it. and claim the exact amount. The following is the sent to a banking-house. The right-hand side is filled up l>\ the ) to whom it is sent, and the memorandum is paid through the 1,1834. O$O London, December \, 1834. Ifasrs. Asa** Ck. 3o-3 Metm II0 ^ Ric ^^ C - / | for Alettr*. Steady fr Co. Om tm ~*of[E.F.,E*i.] OgO 100. 4 Or*. A fourth clerk now takes the letters, and enters all the advices (that is, hills adritfd to be paid when due) in the Advice-Book and in the Advice- Journal. The corresponding clerk who answers the letters usually man- ages the stock department Hence he observes the orders to purchase or sell stock, to procure powers of attorney, and other business of that kind. When writing a reply to the letters received, he notices if all the items in the letters are marked by the proper clerks. If any thing is wrong, he is informed of it. Bankers 1 letters are usually short and plain, comprising only two or throe lines. The following example includes all the ordinary Mean*. HOPE, RICH, & Co., Banker*, London. Country To*m, May 1, 1827. Gcvrunw, Inclosed we remit you sixteen bills, value X 1,750, and cash 250. niiag together 4 SjOOO to oar credit ; and we subjoin a list of payments and advices, to be Made to onrdebit. We will thank you to purchase 10,000 new Fours, in the MBMfjBMS Wealthy, gentleman, of Stately House, near Prince Town; and for- ward w a power of attorney for Hie, and dividends of 200 Consols, now standing in * BMM of SMSA Thrifty, spinster, of this place. Please inform us of the respccta- Ulity of Maws. John Careful & Co., of South wark, they bonk at Messrs. Steady & Co, Lossbari Street The bill you sent us to present here for payment has been paid, and w credit jroa 50, the amount. We herewith send you the M^nature of our rchi- tfvV Mr- Joha K**a, who is going to London, and whose drafts to the extent of XVX)0 we wbh yoa to boBor to our debit. On Mr. Keen's return, which will be in hosrt a week or tea days, he will bring with him oar paid notes. We are, Gentlemi n. Your obedient Servants, KEEN, BUST, & Co. [EPLT.J Mean. KIEV, BUST, & Co., Banter*, Country Town. I*ndon, May 2, 1 827. Onrrumw, We hare received yonr favor of yesterday's date, inclosing un- *ies, valac J.OOO, which we have patted to yoor credit, and note your lists of pay- Book-keeping. ments and advices. We also credit you 1,476 16s. Gd., per Messrs. Good & Co., on account of John Green. We have inquired of Messrs. Steady & Co., as to the respec- tability of Messrs. John Careful & Co., and are informed they are highly respectable. We now inclose a stock receipt for Mr. James Wealthy's 10,000 new Fours, 10,012 10s. to your debit; and also Susan Thrifty's power of attorney, for which we debit you I Is. 6d. ; also a dishonored bill on Badluck, noted 100 Is. 6e?., to your debit ; and your weekly cash account and monthly account current, which we trust will be found correct. We debit you 50 for the bill you had the goodness to present for us ; and we now inclose another on White, 120, which we will thank you to get ac- cepted and return. We have opened a credit in favor of Mr. John Keen for 3,000, and will forward your paid notes by him as requested. We are, Gentlemen, Your obedient servants, HOPE, RICH, & Co. Those London bankers who act as agents to banks, or to other parties in the country, will have occasion for the following books. The first seven are kept in the same manner as the corresponding books in the Town Department. All the entries in the Country Ledger, as well as those in the Town Ledger, must first pass through the Waste and Day- Books. The credit side of the Ledger is posted from the Bill-Journal and the Day-Book. The debit side is posted from the vouchers them- selves, and, like the debit side of the Town-Ledger, will mark against the Paid-Day-Book and the " Clearing-in-Book." 1. A Country-Ledger. 2. Country-Bill-Register. 3. Country-Discount-Register. 4. Country-Bill-Ledger. 5. Country-Discount-Ledger. 6. Country-Bill-Journal. 7. Country-Discount-Journal. 8. Advice-Book. In this book are entered an account of bills advised to be paid on account of the Country Banks. This book is kept ledger- wise, each bank having a separate account. 9. Advice-Journal. This book is similar to the Bill-Journal, and it contains the advices under the heading of the days on which they are to be paid. 10. Credit-Book. This book contains an account of the credit grant- ed by a country bank in favor of any party. Each party has an account open for him in this book, and the amount of his credit is placed to this account. He is debited for such cheques as he may draw, and the cheques are then passed to the debit of the country bank in the Country- Ledger. 11. Acceptance-Book. In this book are entered those bills which have been received from the country, and which require the acceptance of the party on whom they are drawn. The entry includes the date when taken out, the name and residence of the drawee, the register- number, and the amount. There are also two vacant columns, in one of which the clerk who takes the bill for acceptance enters his initials when he brings it back ; in the second column are entered the initials of an- other clerk to whom the bills when " brought in from acceptance " are delivered. Though this book is connected with the country department, it is usually kept in the town office. 163 A TreatiM on Banking. 19. Siock.Rook. London bunkers have usually powers of attorney from their eorreapondcnts in tho country, authorizing them t<> receive divi- dends on the p>\ mm. nt funds. All these arc entered in a book called th- Stock-Hook. The book is divided into several parts for the different kind* of ntuck, as 3 per Cent Consols, 3 per Cent. Reduced, &c., ozc. In each division are entered the powers of attorney held l>\ the hunk. The entry includes date of the powers, names <>t'the attorney, n.mies of the holders of the stock, and lite amount. These entries should be made tolerable distance apart from each other, to leave room to notice any alteration that may take place in the amount of the stock either by sales or new purchases. Every country bank keeps an account with a London bank. The country banker receives from London a weekly statement of his cash ac- counts, and a monthly account current The cash account is a copy of the London banker's ledger. But as the London banker does not con- sider as cash any thing which may not be immediately turned into Bank of England notes, the cash account does not exhibit a statement of the umduf bills which the country banker may have remitted, nor of the bills which he may have advised to be paid. By means of a monthly account current he has a full view of all these transactions. On the credit side of the account current is entered the total amount of each remittance, whether it consists of bills or cash. These are followed by entries of M extra " sums of cash that have been lodged to the credit of the country bank by parties resident in London. On the debit side of the account current is placed the total amount of the "advices"; that is, of bills ad- rtsed to be paid, and also any "extra" payments of "drafts" to per- sons in London. Then the account is balanced, and we have an easy check by which any error that may have crept into either the cash ac- count or the account current is detected. For if both accounts be correct, the amount of advices not yet due, added to the balance of the account current, will be equal to the amount of bills not due, added to the balance of the cash account. IV. The Note Department. Those banks that issue notes, will have occasion for A NOTE-REGISTEH. In which the denomination, number, and date of the notes will be entered when prepared for circulation. The total mount of notes, as soon as they are received from the stamp-office, or at least as soon as they are signed by the banker or manager, are entered to the credit of " note account," and arc afterwards taken down daily as part of the "cash" in the possession of the bank. If the notes on hand be deducted from the balance of the note account, the remainder will show the amount of notes in circulation. Another way is to open an account for ** Notes in Circulation," and to credit this account for the notes on hand ercry morning, and debit it for the notes on hand every ni^ht : the balance will show the amount of notes in circulation. Then' should also be a book for the " Register of Cancelled Notes," in order to keep an ac- count of those notes which, having become unfit for further use, have 164 Book-keeping, been cancelled and destroyed. The notes when cancelled are placed to the debit of the " Note Account." V. The Branch Department. In those banks that have branches, the head office keeps an account with each branch in the same way as a London banker keeps an account with a country bank. There is usually an additional " Bill-Register " for the bills payable at branches. Each branch has also two Bill-Registers, for the bills payable at head-office, and the bills payable at branches, and frequently another for the bills sent for collection to agents, where the branch does not remit all its bills to the head office, but direct to agents in other places in order to be collected. Every country banker has also similar Bill-Registers for " Bills payable in London," " Bills payable at Bristol, Manchester, &c.," as the case may be ; and of course correspond- ing accounts must be opened in the General-Ledger. There must also be a book for entering " Branch Notes paid." These notes may either be placed as the debit of the branch on the day they are oaid, or they may be carried daily or weekly to the debit of an account to be called " Branch Note Account," and may be placed to the debit of the branch on the day they are sent home. VI. The General-Ledger. Into this Ledger, under the various accounts, will be entered the totals of the corresponding headings or accounts specified in the Day-Book. The accounts in this Ledger denote the various classes of operations, and the balances show at all times the exact state of the bank. Every Satur- day night the totals and balances of these accounts should be taken off on r directors of a bank can see at once the actual state of their affairs, and ^an trace the progress or decline of different branches of their business. 165 A TVttliw on Bonking. THE RANK1\< COMPANY. Amowt mtd Baltmm if At GMBRAL LEIXJRR on * **. B-^Dr TiUMofAccottoU. g n *)*nft Cr Amount*. Cr. I. LODOMKWTS. London Cnrrcnt Accounts. trv ditto. Bill* Deposited (in Ixmdon) Ditto (from the Country). - in Circulation. Credits on Agent*. II INVESTMENTS. i )i-onntcfl (in Tx>ndon) Ditto (from the ( 'ouniry). l'.i>! l)u.' Hills. ' GoviTniiu-nt Stock. East Iinlia Bunds. KM-IU-.JIHT Hilln. Loans to Customers. Ditto to lirokcrs. Interest At i ount. III. EXPENDITURE. Bank Premises. K.-nt. Taxes. Salaries. Stationery. Incii|-nt:il Kxpcnso*. Law Expenses. IV. CASH ACCOCKT, WITH BRANCHES. Hrnncli A. Itruni-h H. Bran Branch D. V. PKOPBIXTOBB'ACCOCNTB. Paid-up Capital. Preliminary KxpeBMt, Divul. nil Account. Unclaimed Dividends. Surplus Fund. Profit and Loss. Fund for Bad Debts. GoMtl Account of Cash. - - - Book-keeping. It will be observed, that the accounts introduced into the preceding balance-sheet are such as would be necessary to a London bank that had country agencies and branches, and issued notes. No such bank exists. But I have introduced all these accounts that each bank may take those which are adapted to its transactions. It will also be observed, that I have kept the country business distinct from the town business ; so that the comparative extent of each may be immediately perceived. I have intro- duced cash columns for the amounts as well as the balances ; for although the balances are sufficient to show the actual state of the bank, yet the amounts are necessary to show the business that has been done since the previous half-yearly balance. 1. The first class of accounts, under the head of LODGMENTS, are all credit accounts ; that is, the balance is on the credit side. CURRENT ACCOUNTS are those which are usually kept by the London bankers, and are called by the Bank of England " Drawing Accounts." DEPOSIT RECEIPTS are more permanent lodgments, upon which the joint- stock banks allow interest. The account " BILLS DEPOSITED," not be- ing a cash account, might be omitted without deranging the balance of the General-Ledger. If introduced, its balance must be placed on both sides the balance-sheet, or the totals will not agree. The General-Ledger is no check upon the accuracy of this account. It should therefore be checked periodically, by taking off the daily amounts current from the Journal, and comparing the total with the balance of " Bills Deposited in the Gen- eral-Ledger." Some banks distribute their bills deposited into several accounts, as " Bills Deposited by Agents," " Bills Deposited by Branches," " Bills Deposited by Private Parties," &c., &c. On the debit side of the General- Ledger these " bills deposited " are mixed with the bills discounted in different accounts, according to the places where the bills are payable, as " London Bills," " Manchester Bills," " Branch Bills," &c. Those de- posited bills that are payable in the place where the bank is established, are usually distinguished from the discounted bills ; one account being called " Local Bills Discounted," and the other, " Local Bills Deposited." NOTES IN CIRCULATION. When the notes are made payable at any other place beside the place of issue, this account will only show the " apparent circulation," as the notes that have been paid by the agents, or at the other branches of the bank, cannot be brought into the account until they have been returned for re-issue. I have classed this account under the head of Lodgments, because it denotes a portion of the debt due from the bank to the public. CREDITS ON AGENTS. When a bank grants a Bill, or Letter of Credit, upon their agents, the money received is placed to the credit of this ac- count. When the bill is due, or the credit paid, it is placed to the debit of this account, and to the credit of the agent's cash account. The busi- ness of some banks requires a subdivision of their credits, as " Credits on London Agents," " Credits on Bristol Agents," &c. Some banks have also an account for "Credits on Branches"; but where all the credits granted are payable on demand, they are usually placed at once to the -credit of the cash account of the branch on which they are drawn. 107 A TremliM on Banking. ImrBSTMBim. The accounts I* to this class am all debit ; that b, the balance (if any) is always <> il d l>it side. I . -.;,.-. r. - I I.'.] that :i!i ll..' h:Ms lire pay- able in London, as the London bankers not discount bills pa\ ;ihV else- hsm. The division into two mvo ,n-s i- merely t<> show -h. compai eatent of the town and the country business. 'II-* 1 first account m< the bilb discounted for parties resident in London, and tin -<. mi in- otodes the bilb dbcountcd for pnrtics resident in tin- country. \\ !,- - bUb are payable at different places, they an- n;f -rn-d, as 1 hav- a' to different accounts, as " London Hills," 1 " Hristol Hills/' Hills," Ac. It is not usual, in these CBSes, to distinguish the bilb discounted and the bills deposited, but to place tin -in on the same account ; for instance, tin 1 account " London Hills " all bilb payable in London, whether discounted or dc. If thought proper, however, they may be easily divided into i "London Bills Discounted," and "London Bills rATDci-BlLLS. When a discounted bill is not paid, it is transferred to the debit of this account. " Bills deposited " never pass into this ac- t; but if unpaid, are returned to the parties by whom they \\ere de- When the bank purchases " Government Stock," " Exchequer Bills," " India Bonds,'' \c., the purchase-money is passed to the dehit of an ac- count raised for the purpose. Upon re-sale, the account is credited for the money received, and the difference between the money invested and the money received is passed, at the end of the year, to the debit or the credit of profit and loss account. LOANS. This account is debited for the amount of any loan granted to a customer, or to any other party, on security. N\ hen a customer wants a temporary advance, the usual way, in London hanks, is, not to let him overdraw his account, but to place to his credit the sum he may require, and debit the loan account. The interest is charped upon the full amount of the loan. When the loan is repaid, this account is credited. 3. EXPENDITURE. The accounts under this head require little expla- nation. "Bank Premises" is debited for the expense of altering, paint- ing, Ace., the buildings and offices connected with the kink. The other accounts are debited for the different classes of expenditure as they occur. At the end of the year these accounts are credited, and the several amounts are placed to the dehit of " profit mid loss account." SB ACCOUNT WITH BRANCHES. The title of this class of ac- counts it sufficiently explanatory. I will only observe, that in some hanks each branch keeps a distinct cash account with every other branch, and with the several agents of the bank with whom it may have transactions. Bat, in other banks, each branch passes all its transactions through its * "" the head office. It debits the head office for \\h k may remit to either a branch or an agent, and it credits the head office for whatever sums it may receive from a branch or an ; . 6. PBortiETORs' ACCOUNTS. This class of accounts refers to the in ternal operations of the bank. MB Book-keeping. PAID-UP CAPITAL. If the capital has been paid up at different times, this account may be divided into " First Instalment," " Second Instal- ment," " Third Instalment," &c. PRELIMINARY EXPENSES. Several joint-stock banks have passed to an account of this sort the expense of forming the company ; and these expenses are discharged out of the profits, by equal portions, in the course of five or ten years. This is considered a more equitable mode than to pay these expenses out of the profits of the first two or three years. SURPLUS FUND. When the whole of the annual profits are not di- vided among the partners or proprietors, the surplus is transferred to an ac- count, called " Surplus Fund," where it remains for the purpose of being applied to meet any losses or contingencies that may occur in after years. PROFIT AND Loss. To the credit of this account is placed all interest and commission received ; and to the debit is placed all interest paid. These entries are made at the time the transactions occur. At the end of the year this account is credited for all the profits that have been made during the year upon Government Stock, Exchequer Bills, &c., and is debited with the several items of expenditure. The Profit and Loss Ac- count may be subdivided into several accounts, as " Interest Received on Bills Discounted," " Commissions Received," "Interest paid on Deposit Receipts," " Charge for Agency," &c., &c. When it is not thus divided, a complete abstract of the account should be made out at the end of the year. GENERAL ACCOUNT OF CASH. The introduction of this account makes the General-Ledger a perfect check upon the other books. For by this means the total of all the balances of the debit side of the General- Ledger are equal to the total of all the balances of the credit side. To the debit of this account is passed, every day, the total amount of the credit side of the Day-Book ; and the account is credited for the amount of the debit side of the Day-Book ; consequently, the balance of this ac- count will be always on the debit side, and will be equal to the differencfe between the sum of all the other debit balances, and the sum of the credit balances ; that is, it will show the amount of cash in the bank. The General-Ledger is always kept on the progressive plan (see page 158), so that the balance of any account can be seen upon inspection ; and its progress from any past period can be distinctly and readily traced. VII. Periodical Balances. DAILY BALANCE. It is well known that bankers try their balance at the close of their business every night, with a view of correcting any er- rors that may have occurred during the day. The process is very easy. If to the amount of the Cash-Book last night, we add the amount of the cash received to-day, and deduct the amount of the cash we have paid, the remainder will be the amount of the Cash-Book to-night. If, on triai, we find this is not the case, there must be some error. Suppose, for in- stance, the Cash-Book last night amounted to 100,000, and we have re- ceived 40,000 and paid 50,000 to-day, then will the Cash-Book to- night amount to 90,000. The trial stands thus : o 169 A Treat i* on Banking. 1000 Paid- Par Book . . . llook to-night . . '...,,,, XI , The daily balance, therefore, is nothing more than i!. <>f tin liny-Book; and the only books employed are the Ii..\.|'.,.,.k and the f\gh Rooir Bttt as these book*, when finally closed, include the amount of several other books, the trial is usually made (for the purpose ,,;' avoid- ing alterations) on a half-sheet of paper, called the trial paper, previous to ihose entries being made, and then the amounts of t . nil books are stated separately, in the following manner : Or. BANKING HOUSE. Cr. Amount of Camh-Book lait night . 1:.. .- MBJh BSJM "< H-'l 1 Do. of Bill-Journal Do. of Dbooum-Juurnal Amount of Paid-Pay-Book Do. of Clearing;- in-H(K)k* Do. of Balance * of the Clcnr- I !<><>k to-ni'_'lit . Do. of Balance ot Murv- ' Do. of Discount-Register The balance of the clearing t is always to the credit of the house ; for, if the clearing M takes out," then the bank notes paid away at the Clearing-house are entered in continuation of the clearing-out; so that, in this case, the balance is usually thrown a small sum on the other When the clearing is finally closed, the notes forming th an- entered in continuation of the clearing-in, and subsequently in the (',, -h- Book. The notes entered in the clearing-out are, of course, n< in the Cash-Book. WEEKLY BALANCES. The daily balance checks the Waste-Books, the Discount-Register, the Journals, the Day-Books, the Lists, and the Mooey- Books. If any errors occur in any of these books throughout the day, the balance will be wrong. But the daily balance does not check the Current-Account-Ledger, though this is the most important l>ook of all. The Ledger is therefore "marked off" every morning against the I Book, the Bill-Journal, and the Clearing-in-Book : but this is not u sufii- cieot check. Hence the balances of all the accounts in the Currcnt- Account-Ledger should be taken off weekly in a book called the Cur Acconnt-Batance-Book, and added together, and the amount made to agree with the balance of "current accounts" in the General-Ledger. IMS is usually done by the London bunkers quarterly or half yearly. When the Ledger is kept on the progressive plan, it may be done weekly without much trouble. The " Current-Account-Balance-Book " should berated so that the names of the parties having accounts may be placed tinder one another at the left-hand, and all ti. the left-hand page, and the whole of the right-hand page, divided into double cosh columns : a baak doe* not " clear" these itemi are of coarse omitted. Far eeosK of the book* in the clearing department, see the section on Lon- 170 Book-keeping. one column for the balances of the accounts when in cash, and the other for the balances overdrawn. On this plan it will not be necessary to write the names more than once in seven weeks. In the same way the balances of the Discount-Ledger should be taken off weekly in the "Discount-Balance-Book." The balances of the General-Ledger are also taken off weekly in the " General-Balance- Book " in the way I have already described. HALF-YEARLY BALANCE. The weekly balancing of the Ledger does not preclude the necessity for a half-yearly balance. The usual days for balancing are the last days of June and December. Some banks, how- ever, balance on the last Saturday in June and December, and others on the 30th of June and on Christmas-eve. On the balancing day the fol- lowing operations are passed through the books: 1. The current ac- counts will be debited for any interest or commission that may be due from the party to the bank. 2. The Current- Account-Ledger will be; balanced, and the balance will be brought down as the commencement of the transactions of the ensuing half-year. 3. The customers' books must be balanced, and made to agree with the Current-Account-Ledger. 4. The interest due upon the outstanding deposit receipts must be calcu- lated, and the sums added together. 5. The General-Ledger must be balanced, and at the December balance the amount standing to the debit of the several classes of expenditure must be passed to the credit of those accounts, and to the debit of profit and loss account, and the several sums of profit that have been realized upon Government stock, India bonds, &c., are transferred to the credit of profit and loss account. For each half year a book must be provided to be called the Half- Yearly-Balance-Book. This book will contain the' following entries : 1. A balance-sheet showing the balances of the respective accounts in the General-Ledger in the same way as the weekly balance sheet. 2. A debtor and creditor balance-sheet, showing the exact condition of the bank. 3. An abstract of the profit and loss account, viz : Abstract of Profit and Loss Account, from Jan. 1, to Dec. 31. Dr. a To Bank Premises . . . By Interest on Bills dis- By Interest on Loans By Commission on Cur- Stationery rent Accounts .... Incidental Expenses . By Profit on Exchequer "Bills &c Total Expenses .... Loss on bad bills, &c. . . Balance in favor of the 171 A TrtaJUf on Banking. \ \ Ion of nil the babooes of the current accounts. 5. A list of all the outstanding deposit receipts, and the interest due 6. A list of all discounted bills rvrrrnt, i. c. bills not yet due. 7. A list of all deposited bills current. 8. A list of all other securities, dbtfegoiehiBf those that belong to the bank from those that are lodged by its customers. At the end of the year the final balance of the profit and loss account transferred to other accounts according to the purposes to which it is t be tppBtHJ If intended to be held as a *' surplus fund, 11 it is transferred to that account. If intended to be divided among the proprietors, it is transferred to a * dividend account," \\hieh is raised for that purpose. If the balance of the profit and loss account should be against the hunk, tin n ist remain ** on the wrong side " until further profits shall turn Un- balance the other way. Beaidei the books connected with the business of banking, every joint- stock bank will require, 1. A SIUBEHOLDERS'-RF.GISTER. In this book the names of the shamhcilrtfra are entered chronologically in the order in which they be- come shareholders. The entry includes the date, the name, residence, number of shares, and sum paid. 2. TRANSFER-REGISTER. In this book are entered the transfer of hares from one proprietor to another. The entry includes date of trans- fer, from whom transferred, r . 't> r s;amp. London, tie . . day of . 18 To tke Diredon of Banking Company. PbsMtojwqpcn tktiteceuary document for transferring . . Shares, from At amnderatiomfor irAicA .... Sluirr* it Broker, of If a proprietor in a joint-stock bank wishes to dispose of his shares, he directs a stock-broker to sell them in the market. A Her the sale the broker gires notice to the directors of the bank in the pn <-, lin<: form. The deed of transfer is then made out according to a printed form pre- pared by the bank. This agreement is liable to a stamp duty, varying according to the amount of the purchase-money. When shares nre trans- ferred for a nominal consideration, say five or ten shillings, the stamp duty is thirty shillings. The debtor and creditor balance-sheet will contain the same amounts as the balance-ebeet of the General-Ledger (see page 166), but differ- ently mnfiiil. They may be disposed according to the following form : 172 Book-Keeping. Statement of the Affairs of the B ml:, on Dr. TRF, BANKING COMPANY. Cr. DUE TO THE PUBLIC ON CURRENT ACCOUNTS. Head Office, Town . . Ditto, Country . . . DUB TO THE BANK ON OVERDRAWN ACCOUNTS Head Office, Town . . Ditto, Country . . - - - - Branch B .... Branch B Total Overdrawn Acct's. BILLS DISCOUNTED. Head Office, Town . . Ditto, Country . . Branch C Total Current Accounts . DEPOSIT RECEIPTS. Head Office Branch B .... Total Amount of Bills ) Discounted . . . $ LOANS. Head Office .... Branch A Branch B Branch C Total Amount of Loans INVESTMENTS. Government. Stock . . Exchequer Bills . . . India Bonds .... Other Investments . . Total Investments . . Total available Assets . EXPENDITURE. Head Office .... Branch A Branch B Branch C Branch B .... Branch C Total Deposit Receipts . INTEREST ACCOUNT. Head Office Branch B Branch C Total Amount of Interest. FUND FOB BAD DEBTS. Head Office PAST-DUE BILLS. Head Office .... Branch A Branch B Branch C Total Amount of Past- > Due Bills .-.'..{ SUNDRY ACCOUNTS. Stamp Account . . . House Account . . . Ditto Branch A. . . Ditto Branch B. . . Ditto Branch C. . . Total -- - Branch A Branch B Branch C Total Amount of Fund ) for Bad Debts . . \ PAID-UP CAPITAL SUNDRY ACCOUNTS. Forfeited Shares . . . Dividends - GENERAL ACCOUNT OF CASH. Head Office .... Branch A Branch B Branch C Total amount of Cash . Total . . . Unclaimed ditto . . . Surplus Fund .... Profit and Loss .... Total Sundry Accounts . Total .... 173 A Tnatite on Banking. The following is the scale of stamp dutie* upon tho transfer of shares WlM tlM pvdMM moMjr U under X SO . . 010 For X 10 mod under . . 50 . . .in so .... 150 . i iu 1M . . . . 300 . . .30 .100 . . . . 5 than a small on--. I: admits of a more extensive application of the principle of a division of 1,-ihor. In a small bank, one clerk may keep two or three books of various kinds, or perhaps act as both cashier and accountant. Hut in a larjje hank, each clerk is uf general kept wholly to one employment. T) ..... diets of this separation of occupations is the same in banks as in inanniaet.n-ies ; and the description of these effects given by Adam Smith will equally apply , baft "Whs freal iarrmi in the quantity of work whirh, in consequence of the divi-ion of Ubor, UM MOM number of people arc capable of performing. is owin_- to three dif- ; flnt, to the increase of dexterity in every particular workman; the Mviafof time which U commonly lo>t in |.ain^ tn.m om- species of work to aaodwr ; aad lastly, to the inrention of a (yri-iit immlT of iiiin-liiiu-s which ciliuu aad abridge labor, sad enable one man to do the work of many." The increase of dexterity by constant practice is very observable in 174 Book-keeping. the practice of " casting up." A clerk who is much accustomed to this operation will cast up a long column of figures with singular quickness and accuracy. It is also very observable in " calling over." Besides owing to the abbreviations we have mentioned in p. 152, a clerk in call- ing over will speak so rapidly that an unpractised ear will hardly be able to follow him. Mr. Babbage gives the following instance of great dex- terity acquired by practice : " Upon an occasion when a large amount of bank notes was required, a clerk in the Bank of England signed his name, consisting of seven letters, including the initial of his Christian name, five thousand three hundred times during eleven working hours, and he also arranged the notes he had signed in parcels of fifty each." The loss of time in passing from one operation to another is as obvious in mental processes as in those which are purely mechanical. " When the human hand or the human head has been for some time occupied in any kind of work, it cannot instantly change its employment with full effect. The muscles of the limbs employed have acquired a flexibility during their exertion, and those to be put into action a stiffness during rest, which renders every change slow and unequal in the commencement. A similar result seems to take place in any change of mental exertion ; the attention bestowed on the new subject is not so perfect at the first com- mencement as it becomes after some exercise." * The invention of expedients for facilitating and abridging labor is also as common in a bank as in a manufactory. Mr. Francis has recorded, in his History of the Bank of England, a variety of improvements introduced into that establishment by Mr. William Rae Smee, a son of the chief accountant. He proposed art "alteration in the cheque office, by which he stated that the work which employed three principals and twenty-one clerks would be done more effectually by two principals and seven clerks. In the circula- tion department, the posting which formerly took fifty now employs only eight clerks. And the whole of that department, if now conducted upon the old system, would probably require nearly eighty additional assistants. In the National Debt Office Mr. Smee introduced such measures that " the directors were enabled so far to consult the accommodation of the public as to enable the transfers in the various offices to be made eight or nine days later than usual, the business which formerly occupied about thirty-two days being accomplished in about twenty-three." t Similar improvements have been introduced into commercial book- keeping. " The old method of journalizing and posting each transaction separately, unneces- sarily swells the accounts in the ledger with a multiplicity of figures, which greatly in- creases the difficulty of balancing, and, to say nothing of extra labor and loss of time, the liability to error is always in proportion to the number of entries, and vice versd. If a hundred sums are posted when one would answer, then a hundred chances of error are incurred where only one was necessary ; and in the event of an error in ad- justing the accounts, a hundred entries must be called over and examined, instead of one. (Double Entry Elucidated, by B. F. Foster, p. 18.) * The Economy of Machinery and Manufactures, by Chnrles Babbnpe. t History of the Bank of England : its Times and Traditions ; by John Francis. Vol. II. p. 141. 175 A Trtalist on Banking. The expedients introduced to improve any system of book-keepinr, ,\ i'.- . . the sai ng of time t business. Sometimes an entry may be shortened by omitting some of the particulars. Thus, 1 where we have been accustomed to eu-.-r uith every bill, the name of the last endorser, the drawer ami his residence, the ac- ceptor and his residence, the date, term when due, and the amount, u. may properly, perhaps, omit some of these items. Or where we have re- pealed the same entry in several books, we may enter it in iVwr hooks, or, perhaps, make the individual entries in only one book, and enter the total amount in the others, or, at other times, tin- whole form of a book may be changed, and we may, by a now arrangement, obtain h.- same results more clearly and in less time. Almost every bank will occasion- ally make some alteration of this kind as its business may require. And even each accountant has usually some little expedients of his own for facilitating his daily operations. Wo will notice a few of those amend- Bsaati that have been adopted with the view of saving time and labor in some of our banking establishments. Some large banks have adopted " the horizontal system of book-keep- ing," which is in some respects an improvement on the systems described in the former editions of this work. The chief difference is in the mode of ruling the Received and the Paid- Waste-Books. The Received-Waste-Book, instead of being ruled as described in p. 155, has four cash columns, three at the left hand as you face the book, and the fourth at the right hand, with a space between the third and i . . '.' V JteOM of a credit entry, instead of t).-:ir_ r plac-'d under one another, a* in the former system, will be placed -,-;. ;i .i-e'y in the first three columns, and the total in the fourth column. Thus, if a sum of .543 10*. Id. be received from Mr. Smith, and this sum con- sists of 3 10*. Id. in coin or money, 100 in a Bank of England note, and .440 in a cheque on Jones, Loyd, At Co., the entry will stand thus: Ms*a*y.^ s"- * SradrU*. NUM. Total. L . d > -/. Smith. f. d. * 10 100 440 Jo-ics, Loyd, & Co. 543 10 7 Thus h is seen thit tho first column is for moncv, the second column for bank notes, and the third column for ' sundries/ 1 that is, for all other articles; and these three columns are added together " horizontally," and the total brought OUt into the fourth cash rolnmn at the- ri^'nt hand. It will be observed, that the cashier has to add the items together, hot long- 176 Book-keeping. ways, but cross-ways, not longitudinally, but " horizontally." After a little practice, one way is just as easy as the other. Some cashiers prefer having two columns only at the left hand, and two at the right hand, with the space between the second and third co- lumn ; as the numbers of the bank-notes, and the names of the bankers on whom the cheques are drawn, can then be placed on the same line ; but this is not a matter of much consequence. Now, if you " cast up " the first left-hand column, you will have at the close of the day the total amount of money, that is, coin, received during the day. If you cast up the second column, you will have the total amount of bank notes. The third column will give the total amount of " sundries." And the amount of these three columns together will be equal to the fourth column, containing the total amount of the credits. If this should not be the case, there must be some error, which must be dis- covered forthwith. Thus the horizontal Received- Waste-Book is a check upon itself. As soon as the cashier gets to the bottom of a page, he casts up his book, and sees that the three columns are exactly equal to the fourth. Thus he keeps his book right as he goes on. Whereas, in the former system, any error in the Received-Waste-Book would not be dis- covered till the General Balance was tried at the close of business, and not then, perhaps, until after a long course of " marking off." To simplify my explanation, I have described the Received-Waste- Book as having only four cash columns, and these are perhaps enough for a small bank. But large establishments have sometimes seven or eight, perchance in the following order : 1. Money, that is, coin. 2. Bank- notes. 3. Parcels of bank-notes, called sundries. 4. Country notes. 5. Checks on clearing bankers. 6. Checks on bankers who do not clear. 7. Checks on our own bank. a space. 8. The total amount of the credit. The horizontal Paid-Waste-Book is ruled with three cash columns ; one to the left for the amount of the cheque paid ; then an open space for the name ; then a column for the bank-notes ; and another for the money, that is, coin. The London bankers do not pay away any bills or country notes in exchange for cheques, but only Bank of England notes and coin. The entry stands thus : Amount of Cheque. Name, and No. of Bank-Note. Bank Notes. Money. s. d. White. 1473. a. < When all are added together, the t,,-d of the three columns at the. left must be equal in amount to the total of the two columns at the rl^ht hand. The articles paid must be equal to the hank-notes and money which tawed in payment We 101111 now point out some of the advantages of the horizontal sys- | ;:: |f k- ,' Mj U a-'e- 1'.. '**. Pint As alt t the receipts and payments of money, that is, coin, are en- individually in the Received an the amo-.in: of Innk-notes ,,n hand at received to-day, and deduct the amount paid way, the rnsasintifir should be the amount on hand to-night. Wh--n this is ih the bank-notes are right. In the same way we may check the 178 Book-keeping. money columns, the clearing columns, &c. Thus, when the trial balance is wrong, we can check these items separately, and thus more readily dis- cover the error. Without this expedient, we should have to " mark off" the whole business of the day. It will be observed that the above Waste-Books refer only to receipts and payments on current accounts. All other receipts and payments are entered in a Supplementary-Receipt-Book and a Supplementary-Paid- Book. These books are ruled in the same way as the other Waste-Books, and they embody entries in connection with deposit receipts, received or paid, credits or debits to interest accounts, debits to salaries, taxes, inci- dental accounts, &c., &c. All these items are then entered in the Day- Book, from whence they are posted into the General-Ledger. A book is also provided, usually called a Transfer-Book, in which are entered all the cheques on the bank paid in by other customers, as these merely cause a transfer of the amount from one customer to another. Books which are designed chiefly as registries or summaries should be kept on the horizontal system. Thus, a London bank which keeps an ac- count with the Bank of England, will have to lodge to its credit notes, gold, silver, post-bills, cheques, dividend warrants, &c. To keep a registry of this, a book may be opened horizontally, the first column at the left hand being the date, and then these words being entered over separate columns, at the top of the page ; afterwards a col- umn for the total amount of all these items, then a credit column for the cheques drawn each day, and then the daily balance. If this book be made of such a size as to contain about thirty lines, then each page will contain the transactions of a month. And, by adding up the columns, the figures at the bottom of the page will show the separate amounts of notes, gold, silver, &c., paid into the Bank of England in the course of a month. By comparing the different pages, it will be seen on what months the largest or the smallest sums are paid into the bank. In constructing tables, it is also best to follow the horizontal system. Thus, to keep a record of the weekly returns of the Bank of England, it is best to arrange the items into columns, with the heading at the top of each column, the first column containing the dates of the several returns. It will then be easy to trace the fluctuations in any one item ; such, for instance, as the " Public Deposits," the " Private Deposits," the " Rest," &c. Some of the Returns published in the Appendix to the Parlia- mentary Evidence of 1847 have been arranged on this principle. We will now notice some further improvements that have sometimes been adopted by large banks in their system of book-keeping. The great object of all these improvements is, as we have already mentioned, either to save time directly, in making the entries, or indirectly, by preventing or discovering errors. These are, 1. The abolition of the Discount-Register. Here the bills are entered at once in the Discount-Ledger, under the names of the respective parties for whom they are discounted ; and the total amount of bills discounted each day is entered in the Day-Book, from the Interest-Book, which con- tains the calculations of discount. The only objection to this plan is, that the space in the Discount-Ledger does not admit of so full a description 179 A TVratiM Ml Banking. of the bill as it anally given in the Discount-Register. The Bill-Hoi.' is also abolished in the same way. J, The adoption of a Cbeck-Ledgrr facilitate* the discovery of error*. and thus diminishes the time employed in searching for them. Though tbsi book is called a Check-Ledger, it is M..I kept |aager>wisr. It is ruled a cash column on each aide the pot'". In tin- column opposite your left hand you enter, from the cheques tlin:i-.-l\.-s, all tin- Hiek sub- divided into various books, according to the nature of the transactions. There is the Invoice-Book, containing an account of all goods purchased ; the Sales-Book, containing an account of all goods sold; a book for Bills Receivable," containing a list of all bills in the merchant's hands, which when due he will rrreirc ; another for bills payable, containing a Ik; of all bilk be baa accepted, and which when due he will have to pav ; ISO Book-keeping. a Cash-Book, containing an account of all cash he receives or pays away ; and several others, varying according to the character and extent of the business. Now all these subdivisions of the merchant's Waste-Book re- semble those of the banker's in two things first, they are all kept chro- nologically they contain a record of the transactions in the order of time in which they occurred : and, secondly, all the transactions thus re- corded must afterwards, upon the system of double entry, pass, either individually or in totals, through the book which merchants call a Journal, and bankers call a Day-Book. The words " Journal " and " Day-Book " have the same meaning ; and in this instance the use of the two books is similar. But in the mer- chant's Journal individual transactions may be entered, while in the bank- er's Day-Book they are always entered in totals. Thus the total amount of " Bills Discounted," and the total amount of credits and payments on current accounts, are entered in the Day-Book, but not the individual items. Another difference is, that over each entry in the merchant's Journal you state to what account it is to be posted ; for every entry is posted to two accounts to the debit of one account, and to the credit of the other. And this is denoted by Dr. being placed before the name of the account to be debited. Thus, if a merchant buys some goods for ready money, the Journal entry is preceded by Goods Dr. to Cash ; implying that the account " Goods " is to be debited, and the account " Cash " to be credited. On the other hand, if he sells goods for ready money, the transaction will be journalized thus, Cash Dr. to Goods. If he sells goods upon credit to John Brown, it will be, John Brown Dr. to Goods. If he sells goods for a bill of exchange, it will be, Bills Receivable Dr. to Goods. If he sends goods abroad as a speculation, in the ship Adventure, he may raise an account for the ship, and say, Ship Adventure Dr. to Goods. The entries in the banker's Day-Book are made daily, but the entries in the merchant's Journal are generally made once a month. THE LEDGER. We have stated that in the merchant's Ledger even- entry is made twice one account being debited, and another credited and these two accounts are indicated in the Journal. This is what is called book-keeping by double entry. If it be asked, whether bankers keep their books by double entry ? the answer is, that those bankers who have no General-Ledger (and this is the case with not a few of the private bankers) do not keep their books by double entry. The Current- Account-Ledger is not kept by double entry. It contains none but per- sonal accounts, and its accuracy is tested only by the periodical balancings, p 181 A TYiMfiM on Hanking. Thn banker** Ledger, that correspond* in this rcupert with ill.- men-hunt'* Ixxlger, is n. ' Ledger, l.ltt the ( M-||,-IM!- L-iliT. This is kept by double entry. In n ledger kept hy d, .!!! entry, tin- sum . 1 the debit h^iy**** will be equal to the sum of all tin; credit hal- onoes; and the MUD of all the debit amounts will be equal to the sum of all the credit amounts. When this i* not the ease th.-iv is .-in error in some of the accounts. This is the case with tin- LIMIT'S < ;. ner.d- Lsdger. But, a* the transactions are not posted individually, hut only in totals, the double entry does not appear on the face of tin a. -omits. (i bill be discounted for a customer, and the amount placed to the credit of his current account, the Journal entry, on the principle of mercantile book-keeping, would stand thus : Bill* Ducnnted Dr. to Currtnt Accotmtt. But the bill discounted is placed to the debit of the account of " Bills Dis- counted,* 1 in a total of all the hills discounted on that day. And the mount is placed to the credit of Current Accounts, in the total of all the sums received to the credit of Current Accounts on that day. Thus, the "double entry," though equally real, is not so apparent as though the Inns** litMM were posted individually. So, again, if a country banker should discount a bill, and the customer ask fora draft on his agent in London, the Journal entry, on the com- mercial system, would stand thus : BUI* Discounted Dr. to Dra/lt on London. It would go to the debit of " Bills Discounted," in the total of all the bills discounted that day, and it would go to the credit of " Drafts on London, 11 in the total of all the drafts on London issued on that day. The accounts in a merchant's ledger are usually classified into !' r- sonal Accounts, Real Accounts, and Profit and Loss Accounts. The Accounts are the accounts of persons who may owe the mer- ey, or to whom he may owe money. The Real Accounts are denoting property, such as cash, bills receivable, bills payable, merchandise, ship adventure, &c. The Profit and Loss Accounts an; rent, poniaiissionn, expenses, and all other accounts which are ultimately transferred to the debit or tin- credit of the Profit and Loss Account. The banker's General-Ledger has no Personal Accounts, as these are all kept in the Current- Account- L<-d:_ r er. Tin- usual accounts are those I have enumerated in page 166, and are all either Keul Accounts or Profit and Loss Accounts. It would be quite possible (but not desirable) to introduce all the Per- sonal Accounts into the banker's General-Ledger, and thus to form the rent* Account-Ledger and the (renerul-Ijedger into one, and keep the whole by double entry. In this case we should omit the totals of Current Accounts, now introduced into the General-Ledger, and insert every triuaaclMNi individually. If John Hrown drew a cheque on the hank, the Journal entry would stand thus : J'Jm Drown Dr. to Guk. 182 Book-keeping. And if he paid in money to his credit, the Journal entry would stand thus : Cash Dr. to John Brown. All the entries passed to the Dr. and Cr. of these Personal Accounts would of course pass to the Cr. and Dr. of Cash. Indeed, all the entries to the Dr. and Cr. of Cash would be the same as are now made in the Check-Ledger, except that the debtor column would be called creditor, and the creditor column would be called debtor. By the use of such a Check-Ledger as we have described, page 179, (for there are various kinds of Check-Ledgers,) the Current Accounts are virtually kept by double entry ; and we have the additional advantage that, when there are more than one Ledger, we are enabled to check each Ledger separately. To accountants in banks where a General-Ledger is not kept, it appears strange that " Cash " should be credited for money which is paid away, and debited for money which is received. But this strangeness will vanish, if for the word " Cash " they would fix in their mind the word " Cashier." If they had an account with a cashier, they would of course debit him, as they do their banker, for all moneys they paid into his hands, and credit him for all moneys they drew out. And the difference between the amounts of these debits and credits would be the balance either in their favor, or against them. In thus comparing the commercial and the banking systems of book- keeping, I have hitherto supposed that all merchants keep their books by double entry. But this is not always the case with the smaller houses. And then their system more nearly resembles the system of those bank- ers who do not keep a General-Ledger. " In keeping books by single entry, the Daily-Books are kept in the same manner as in double entry, with the exception of a column of ref- erence to the Ledger in each book, which takes the place of a column of reference in the Journal this book being dispensed with. The entries are posted directly from the Daily-Books into the Ledger. In the Ledger, by single entry, strictly speaking, there ought to be only one kind of ac- counts ; namely, Personal Accounts, including all persons to whom a merchant becomes indebted, and all persons who become indebted to him." ( Wallace's Pocket-Guide to Commercial Book-keeping.) It will be seen from this account, that, in mercantile book-keeping by single entry, the merchant's Ledger resembles the Current-Account- Ledger of the banker. In single entry the merchant dispenses altogether with his Journal ; but the banker usually retains his Day-Book, even when he does not keep a General-Ledger. But, in this case, the Day-Book contains only the debits and credits, individually, of the Current Ac- counts, which are posted afterwards into the Current-Account-Ledger. In the horizontal system, as we have stated, the debits and credits of the current accounts are not entered individually in the Day-Book, but the total amounts are taken from the Paid and Received Waste-Books. 183 A Trtatue on Banking. SECTION XIII. HANKINtS CALCULATIONS. Wnn a bill is discounted, the party is credited for the full amount, nnd debited for the interact The interest is calculated from the day on which the bill u discounted to the time it falls due. The shortest way is i make uee of an interest book ; hut if it be done with tin- pen. the follow- ing rule may be useful. Multiply tin- amount of the bill by the numlx r of days. To the product add our thin! of itself, one tenth of that third, and one tenth of that tenth. From the total strike off four figures to th. right for decimals. This will give the interest nt 5 per cent, in pouinl> and decimal parts of a pound. The decimals are to be brought into hillings and pence, by multiplying by twenty and twelve. The interest of any sum at a different rate per cent, may be found in the same u.i\ . -,i multiply the principal by twice the rate of interest, and strike off fire figures for decimals instead of four. Rumple. It is required to find the interest of 500 for ninety days at 5 and 3J percent. 500 principal. 500 principal. 90 number of d*y. 7 twice the rate of interest 1.3d 45,000 3,500 1-IOth 15,000 90 number of drs. 1-IOth 1,500 150 l-3d 315,000 l-10th 105,000 l-10th 10,500 1,050 431550 20 300 631000 12 3*. 3d. at 5 per cent. 4 6*. 3d. at 3i per cent 3-78000 It must be observed, however, that this method of calculation is not exactly correct ; it produces nearly a farthing too much on every 10/. of safest. In calculating large sums, therefore, the amount of these far- thngs must be deducted. This mode of calculation is founded upon the rule, that whenever you haye to divide by any number under 100, you may divide by 100; after hatkg added to the dividend such a proportion of itself as the difference ***** ei1 ** divisor and 100 bears to the divisor, the result will be the same as though you had divided in the usual way. This rule is best ex- fbjinml by an example. t 8tt *iAA* 3r k** 8 to dlvi multiplied by 'M gives 7,300. You hare then only to divide any sum by 7,:N)<), SJMJ you have the intereat of that sum for one day at 5 per cent, per annum. The in- terest of any sum for one day at any other mte than 5 per cent, may be found by multiplying the principal by twice the rate of interest, and divid- ing the product by 7:1,000. But the best way is to make use o.f Gilmer's Interest Tables, published by Sims & M ( In tyre, of Belfast. Similar Tables haw also been published by Mr. Coulthart, manager of the Ashton- uoder-Lyne Joint-Stock Bank. Banks who compound for the stamp duty on their notes and twenty-one day bills on London calculate the sum to be paid, by ascertaining the amount in actual circulation every Saturday ni^ht. The amounts for all the Saturdays in the half year being added together, and divided hy 26, the number of weeks, the quotient shows the average amount in circula- tion during that period, and the duty paid is at the rate of 3s. (id. per cent upon this average amount. This is at the rate of 7s. per cent, upon the average annual amount. To ascertain what denomination of notes remains the longest in circu- lation, let the total average circulation for any given period be represent- ed by the number 1,000; and let the amount of each particular denomi- nation be represented by a proportionate part of 1 ,000. Then let the total amount of notes paid during the same period be represented by 1,000, and the amount of each denomination of notes be proportionally ascertained ; then place these two series of numbers in juxta-positiun, and it will immediately be seen what denomination of notes remain out the longest For instance, if the averai."' amount of a banker's circulation consist of 20,000 in 5 notes ; 15,000 in 10 notes ; 10,000 in 20 notes; and 5,000 in 50 notes, then the proportionate numbers will stand thus : TouJ Ctrtttteikn. 5. 10. 90. .vi. 1,000 400 300 200 100 Then, if during the same period the amount of notes paid of different denominations have been 15,000 in 5 notes ; 15,000 in 10 notes ; J.OOO in .20 notes; and 8,000 in 50 notes, the proportional numbers will stand thus : 8. ]0. 20. W>. 900 300 240 160 By placing these numbers under the preceding ones, it will be per- J that the amount of 5 notes paid is less than the proportional in circulation ; and, consequently, notes of this denomination re- " Banking Calculations. main out the longest; the 10 notes remain out a less time; the ,20 a still shorter term ; and the 50 notes the shortest term of all. To ascertain how long a banker's notes remain out, take the average amount in circulation for any given period, say three months ; ascertain the amount of notes paid during that period. If the amount paid during the three months is twice the average amount in circulation, then the notes have remained out six weeks. If the amount paid is three times the amount in circulation, then the notes have remained out one month. The term which any particular denomination of notes remains in circulation can of course be ascertained in the way I have already described. These calculations are easily made by a table of logarithms. The following Account shows the Average Amount of Bank of England Notes in Circula- tion, distinguishing the Denominations, together with the number of Days the Notes re- mained out, in the October Quarter 1843, 1844, 1845, 1846, and 1847 : October Quarter, October Quarter, October Quarter, October Quarter, October Quarter, 1813. 1844. 1345. 1816. 1847. Amount. Days. Amount. Days. Amount. Days. Amount. Days. Amount. Days. 5 4,379,000 83.0 5,651,000 86.3 5,911,000 77.8 6.143,000 80.6 5,816,000 74.0 10 3,440,000 91.3 3,681,000 91.4 3,992,000 78.3 4^046,000 79.5 3,759,000 73.6 20 1,221,000 67.4 1,417,000 66.7 1,473,000 58.6 1,458,000 58.9 1,398,000 G4.3 30 3-:2,000 23.2 204,000 23.0 236.000 21.1 228,000 20.8 218,000 19.3 40 264,000 17.4 221,000 17.2 205,000 15.5 193,000 15.0 180,000 13.3 50 1,543,000 46.2 1,751,000 48.5 1,773,000 39.8 1,660,000 40.1 1,636,000 37.0 100 1,894,000 34.9 2,249,000 31.1 2,383,000 29.0 2,213.000 27.1 2,291,000 26.2 200 392,000 14.8 399.000 14.4 400,000 12.9 373,000 12.3 362,000 10.9 300 370,000 12.2 397,000 12.4 338,000 10.8 381.000 10.8 354,000 9.0 500 870,000 14.1 827,000 13.8 903,000 12.1 794,000 12.0 803,000 10.3 1,000 2,924,000 12.2 3,082,000 10.3 3,432,000 10.1 2,921,000 8.9 2,355,000 7.3 In calculating commissions for 1 per cent., divide by 100 ; for ^ per cent., by 200 ; for \ per cent., by 400 ; for per cent., by 800. In calculating the dividends on stock, if it be in the 4 per cents., the half yearly dividends will be one fiftieth part of the principal. Hence, .multiply by 2, and divide by 100. If the stock be 3 per cents., the half yearly dividend will be ^g^ths of the principal. Hence, add to the principal one half of itself, and divide by 100. If the stock be 3| per cent., add to the principal one half and one quarter of itself, divide by 100, and you have the half-yearly dividend. If the stock be 3^ per cent., add to the principal one half and one eighth of itself, divide by 100, and you have the half-yearly dividend. Examples. What is the half-yearly dividend on 13,476 10s. 8d 3 per cents., 3 per cents., 3 per cents., and 4 per cents. ? 3 PER CENTS. s. d. 13,476 10 8 6,738 5 4 202.14 16 3^ PER CENTS. s. d. 13,476 10 8 6,738 5 4 1,684 11 4 2J8.99 7 4 189 3i PEE CENTS. 8. d. 13,476 10 8 6,738 5 4 3,369 2 8 235.83 18 8 4 PER CENTS. s. d. 13,476 10 8 2 269.53 1 4 A Treatite on Banking. 3 mm cart*. 3J raa CBHTS. 31 I-KH CKKTH. J JL , .1 i. d. XML 14 16 81899 7 4 835.83 18 8 SO SO 80 1.. s: 16.78 IS IS 18 II 51 1048 9.44 7.36 i. d. Antwer. 3 percent. 208 2 11 31 per cent 818 19 10 3{ per rent. 235 16 9 4 percent 869 10 7 In making calculations respecting the purchase or sale of stock, multiply the amount of stock by the price, and divide by 100. Stock-brokers have seldom any occasion to make these calculations, as there are books published expressly for their use. To compute the half-year's dividend on any amount of stock in tin- 3 or the 3| per cents., within one penny. Rmlf. Multiply the amount of stock by 3 or 3|, respectively. Take the unit of the pounds produced by that multiplication for penon, ami the remaining figures of the pounds for shillings. But when the unit of the pound* produced by this multiplication is more than 4, and also when there are shillings or pence in this product, then on<> penny must !>< added to the result for the unit, and one penny for the shilling and pen'-e. Example 1. What is the half-yearly dividend on 13,476 10*. 8d. in the 3 per cents. ? i. d. 13,476 10 8 3 Multiply by 3. 20)4042.9 12 SOS 8 9 Add 2 he paid U fixed by the bill ; but the amount of British money (or money of the country in which tin- drawer rssidsi). to be girta for the purchase of tho bill is by no means fixed, but is eoatiaaally varying. '..'ie two terms of comparison lietweon the money of one place and that of another, ooe ie fixed, the other U variable. Tho place whose money is reckoned at the fixed price it, in commercial language, said to receive the variable price : the other in saidtofiw the variable price. Hence, the higher the i-x.-han_"- between nny two pteess, the ssore it U in faror of that which receives the variable pri--,- : the lower, til-- more in Aivor of that which gives tho variable price: the exchange l..-iii ; : said to !-< favorable or unfavorable to any place, according as a smaller or larger amount of the cansutij of that place U required for discharging a given amount of foreign payment- Tbm London receives from Paris a variable numl>cr of francs and centimes f,>r 1 Merliag; sad taking the par at 25 francs 34 centimes for 1, exchange will be 5 per veai. ia mvor of London when it rises to 26 francs 62 centimes, and about 5 per cent. again** London when it falls to 24 francs 7 centime-. Bill merchant* stndy the exchanges, not only between the place at which they re- sids sad all other places, but also between all those other places thcm--U -. l-y which ateaas they ere generally enabled to realm; a profit by buying hills in one |>Ucc ntxl wlliagthem in another; in this way preventing SOY great fall in the price of bilU in thoe countries in which the supply exceeds the d--m.m I. and any ^n-.u ri-e in tho-.- MMintries in which the supply happen* to Iw deficient Sometimex ,-xehan_'e opera- tkms are conducted with little outlay of capital. Thin, if a bill men-bant in London can sell a bill on Amsterdam at half percent, premium, and buy one at 1'aris at half CceaL discount, and with the Utter buy one at Paris on Amsterdam at par. he will gained I per cent bv the transaction, without the employment of any capital ; the bill remitted from Paris to Amsterdam arriving in time to meet the bill drawn there apon hi* correspondent. Again, a bill merchant, in order to take advantage of a preatram on the exchange, may obtain a credit abroad upon which he may draw bilk, Bnder the calculation that at some future and not very distant period he will be Me to replace the funds at a lower rate of exchange, and thereby rcali/.e a profit by the opsrauoa. The central point* for sii'-h tran-u<-tioiu are Hamlnirgb. Amsterdam. y***** Paris, Hew York, and above all, London, the great money change of the . : ' In thu country the buying and selling of bills on foreign countries is conducted by ^y^sfl saehttaaeaetions centering in the metropolis. In London, the days for tho "*stfoa of foreign bill* are Tuesdays and Fridays, the /..;'./ /*f duijii. The go RHUtd to thr 12 4$ Florins and Stivers. ' 12 7| do. 12 8 do. ' 26 5 Francs and Cents. 26 5 do. 13 14i Marcs and Schillings. 25 75 Francs and Centimes. 26 2 do. 26 5 do. 122 J Batzen. 10 11 Florins and Kreusers. 10 12 do. 30 37 Lire Tosc. and Cent. 26 5 Lire and Ccntesimi. Do. Marseilles . . Frankfort Vienna Trieste . Leghorn . Genoa . do. 1 do. 1 do. 1 do 1 do. 1 do. 1 The following are the places to which England gives an uncertain amount of sterling for a fixed amount of foreign money : Madrid Cadiz . Naples . . Palermo . Messina . Lisbon Oporto . . Gibraltar . Venice . .' St. Petersburg Rio Janeiro New York Calcutta . To ascertain the amount of English money that ought to be received for a foreign bill, divide the amount of the bill by the rate of exchange. Thus, suppose the following bill, for 300 francs, were negotiated at the rate of 25 francs 65 cents the pound sterling, then divide 300 by 25'65, and the result will be the amount in English money. Londres, le 18 Janvier, 1849. B. P. F*- 300. Au vingt Fevrier prochain veuillez payer centre ce Mandat a Tordre de Messieurs , la somme de trois cents francs valeur en compte quc vous Variable according to the Exchanges. 3 months 36 pence for 1 Dollar of Plate. do. 36| " " 1 do. do. 40 " " 1 Ducat. do. 119i " " 1 Onza. do. 120 " 1 do. 60 days/d 54 " do. 53 i " 1 1 Milreis. do. do. 48 " 1 Hard Dollar. do. 47 6 Lire Austriachi. do. 38 " 1 Silver Rouble. do. 30 " 1 Milreis. do. 47 i " 1 United States Dollar. do. 23 " 1 Company's Rupee. passerez de mime avec ou sans avis de A Messieurs Banquieri, Paris. Q 193 A Trtalitt on BatJnug. S*S)>000( 11 4 m IfM M IMS ) 35700 ( IS MM 15-65)28260(11 2565 2610 -45 Answer, 11 13*. llrf. We mar observe that all bills arc drawn in the money of the country in which they are to be paid. In the cases referred to in the third paragraph of the above quotation, the calculation is more complicated. To ascertain when it is more ad- TUntlgnoni to send money from one country to another through a third country, there must be two " rule-of-three " calculations, instead of one ; and if the number of countries is increased, the number of calculations will be increased. But these calculations may be abridged by what is called ** the Chain Rule," or *' Conjoined Proportion," or " Compound Arbitration." The rule given by arithmeticians is the following : Place the numbers alternately, beginning at the left hand, and let tin- last number stand at the left hand. Then multiply the first row continually for a dividend, and the second for a divisor. ErampU. If 12 Ibs. at London are equal to lOlbs. at Amsterdam, and 100 Ibs. at Amsterdam are equal to 120 Ibs. at Paris, how many Ibs. at London are equal to 40 Ibs. at Paris ? 12 10 12X100X40 = 48000 100^120 10X120=1200)48000(40 40 48000 Answer, 40 Ibt . This rale is capable of two modifications. The example we have ,is when it is required to find how many of the first sort of coin, or measure, mentioned in the question, are equal to the l.-i be required to find how many of the last sort of coin, weight or measure meotiooed in the question, arc equal to the quantity of the first In this cane, the following is the Place the numbers alternately, beginning at the left hand, and 194 Banking Calculations. let the last number stand on the right hand. Then multiply the first row for a divisor, and the second for a dividend. Example. If 12 Ibs. at London make 10 Ibs. at Amsterdam, and 100 Ibs. at Amsterdam make 120 Ibs. at Paris, how many Ibs. at Paris are equal to 40 Ibs. at London ? Lea. Right. 12= 10 12 X 100 =1200 100 = 120 10 X 120 X 40 = 48,000 40 1200 ) 48,000 ( 40 48,000 The above examples will explain the principle of the Chain rule. The following example, taken from Mr. Waterston, will show its application with regard to the transmission of money. London and Paris, through Hamburgh. Find the arbitrated rate be- tween London and Paris when the exchange of London on Hamburgh is 13 marcs 12 schillings banco for 1 ; and that of Paris on Hamburgh 184 francs 50 centimes, for 100 marcs banco. This question comes under the second branch of the rule. It is to as- certain how many francs will be obtained for 1 sterling when sent to Paris by way of Hamburgh ; therefore, 1 = 220 schillings banco = 13 marcs 16 schillings. Schillings 16 = 1 marc banco. Marks banco 100 = 18450 cents = 184 francs 50 cents. Cents 100=1 franc. 1 Then 1X16X100X100 160,000 divisor. 220 X 1 X 18450 X 1 XI = 4059.000 dividend. Answer, 25 francs 37 cents. It will be seen from the above example, that on the right-hand side the marcs, having also fractional parts, have been reduced to schillings, and the francs to cents ; and hence it has been necessary to introduce on the left-hand, the number of schillings in a marc, and the number of cents in a. franc : 161, and 100 = 1. Although in this case the remittance is said to be through Hamburgh, yet in practice the operation would be made by purchasing in London, bills on Hamburgh, and remitting those bills to Paris, unless bills on Paris direct could be purchased on more favorable terms. The calculations which refer to the transmission of gold from one country to another, are very important. To these we will now refer. In England, the precious metals are weighed by the pound Troy. The following is the table : 24 Grains .... make 1 Pennyweight. 20 Pennyweights . .1 Ounce. 12 Ounces 1 Pound. Standard gold is what is called 22 carats fine ; that is, 22 parts of pure gold are mixed with 2 parts of alloy. This alloy consists chiefly, we be- lieve, of copper. Our silver coins have 18 pennyweights of alloy in the pound. A pound weight of gold is coined into 44J guineas, and in the same A Treatise on Banking. for tovereigna. An ounce of standard gold is worth in Great _ . . 43 17*. 10JM, gives an exchange of 13- 10$ ; and the exchange at Hamburgh on Lon- don, at short, being 13-10, it follows that gold is 0.17 percent, dearer in London than in Hamburgh. The course of exchange at New York on London is 108$ per cent. ; and the par of exchange between England and America being 109$ per cent, it follow* that the exchange is 1-08 per cent, against England ; but the quoted exchange at New York being for bills at 60 days' sight, the interact must be deducted from the above difference." The real par of exchange between two countries is that by which an ounce of gold in one country can be replaced by an ounce of gold of equal flneneat in die other country. In England, gold is the legal tender, and its price b fixed at 3 \*lt. \Q\d. per ounce. In France, silver is the currency, and gold, like other commodities, fluctuates in price accord- 196 Banking Calculations. ing to supply and demand. Usually, it bears a premium or agio. In the above quotation, this premium is stated to be 7 per mille ; that is, it would require 1,007 francs in silver to purphase 1,000 francs in gold. At this price the natural exchange, or that at which an ounce of gold in England would purchase an ounce of gold in France, is 25.32 J. But the commer- cial exchange that is, the price at which bills on London would sell on the Paris exchange is 25 francs 25 cents, showing that gold is 0.30 per cent, dearer in Paris than in London. Tables have been constructed to show the results of each fluctuation in the premium of gold in Paris. In the next section we shall insert a table of this kind with reference not only to Paris, but also to Hamburgh and to Amsterdam. At Hamburgh, again, the exchange is the other way. The price of a mark of fine gold is 435 1 marcs banco, which gives an exchange of 13.10^ marcs and schillings against the pound sterling. But the commer- cial exchange is 13.10|, which makes a difference of of a schilling; and it follows that gold is 0.17 per cent, dearer in London than in Ham- burgh. The Money Table of the United States stands thus : 10 Mills . ,',.''., . . . . make 1 Cent. 10 Cents ..".- 1 Dime. 10 Dimes 1 Dollar. 10 Dollars . . . . . . . . .1 Eagle. The following regulations were adopted in the year 1834 respecting gold and foreign coins : " Be it enacted by the Senate and House of Representatives of the United States of America, in Congress assembled, that the gold coins of the United States shall con- tain the following quantities of metal ; that is to say, each eagle shall contain 232 grains fine gold, and 258 grains standard gold ; each half eagle, 116 grains fine gold, and 129 grains standard gold ; each quarter eagle shall contain 58 grains fine gold, and 644 grains standard gold; every such eagle shall be of the value of 10 dollars: every such half eagle shall be of the value of 5 dollars ; and every such quarter eagle shall be of the value of 2 dollars and 50 cents; and the said gold coins shall be receivable in all payments, when of such weight, according to their said respective values ; and when of less than such weight, at less values, proportioned to their re- spective actual weights." " Be it enacted, &c., that from and after the 31st day of July next, the following gold coins shall pass current as money within the United States, and be receivable in all payments, by weight, for the payment of all debts and demands, at the rates follow- ing ; that is to say, the gold coins of Great Britain, Portugal, and Brazil, of not less than 22 carats* fine, at the rate of 94 cents and 8-10ths of a cent per pennyweight ; the gold coins of France, 9-10ths fine, at the rate of 93 cents and l-10th of a cent per pennyweight ; and the gold coins of Spain, Mexico, and Columbia, of the fineness of 20 carats, 3 grains, and 7-16ths of a grain, at the rate of 89 cents and 9-10ths of a cent per pennyweight.^ Under the above Acts of Congress the English sovereign was made a legal tender at the rate of 94-^ cents per pennyweight. Hence, the full weight of the sovereign being 5 dwts. 3.274 grs., it was made equivalent to 4 dollars and 87 cents ; or 487 dollars equal 100. But, accord- ing to a rule established in 1789, and ever since retained in exchange * This is the usual mode of expressing the fineness of gold. The ounce is divided into 24 carats. If, out of this mass, 2, 3, or 4 parts out of the 24 consist of alloy, the whole is said to be 22, 21, or 20 carats fine. Q* 197 A Trtatisf on Banking. operation*, the par of the dollar in paid at 4*. 6;ir (| 1 I t. ; . ,, r 9f per cent. In this way, when the exchange is nomi- nally 9f } premium, it i* really at par. The above calculations uro sub- ject to some slight modification!! by an Act of Congress fixing the amount of alloy in both the gold and silver coins at one tenth ; but commercially the par of exchange between England and America is usually quoted as equal to 109ft P* r <*( When we read in the above calculations that gold is so much d.-an-r in one country than the other, we must nt intVr that gold can therefore be - % nt thither at a profit We must take into account the expense of con- veyance. It generally considered that the charges and loss of interest mmdiip! on sending gold to America, do not amount to much less than 3ft percent Before closing this subject, we will make some remarks on our ex- changes with India. It has l-<-n ^n, that with this country we give an uncertain amount of sterling for a fixed amount of foreign money ; that is, we give so many pence (say 23 or 24) for a rupee. The lower the ox- change, that is, the fewer pence we give for the rupee, the more favorable is the exchange for England. For, the lower the rate, the more favorable is the exchange to that country in whose currency the rate is reckoned. The following is the Table for East India Money : 15 Piee make 1 Anna. 16 Annas 1 Rupee. 100,000 Rupees 1 Lac. 100 Lacs 1 Crore. Taking the rupee at 2*., a crore of rupees is equal to 1 ,000,000 ster- ling. A lac is, of course, 10,000. The figures expressing Indian money are not easily understood by Europeans. The capital of the Bank of Bombay is stated at 52,25,000 rupees, and the capital of the Bank of Bengal at 1,10,13,580 1 7. These figures should be respectively read thus : Fifty-two lacs, twenty-five thousand rupees ; One crore, ten lacs, thirteen thousand five hundred and eighty rupees, one anna, and seven pice. The East India Company in London issue bills on India. They also discount in India, bills drawn on London, taking as collateral security the bills of lading and the policies of insurance of the goods against which the bills are drawn. Their advances are usually to the extent of three fourths, or sometimes three fifths, of the estimated value of the goods. The rate of exchange is publicly announced, and undergoes modification from time to time, according as the Company may have occasion to accumulate funds in London or in India. (See the Evidence of W. P. Paton, Esq., and J. D. Dickonson, Esq., before the Committee of the House of Commons, on Commercial Distress, 1848.) In making further observations upon the subject of this section, we may observe, that there is often a great facility acquired in performing arith- metical operations by varying the numbers, and especially if we can sub- stitute ten or a hundred for some other number. And sometimes we 198 Banking Calculations. may change the operation, and use multiplication for addition, or the re. verse. Thus, if we have to multiply by 15, we can multiply by 10 by adding a cipher, and then add half the sum. If we have to take three fifths of a number, we may take the sixth tenths. Instead of dividing by 25, we may multiply by 4, and divide by 100; or, instead of multiplyirg by' 25, we may multiply by 100 and divide by 4. To calculate the interest on large sums at any rate per cent., it is usu- ally best to find the interest at 1 per cent, (as you have only to divide by 100), and then multiply by the rate per cent. It is useful sometimes to know how many persons enter a bank in the course of a day, and during what hours the greater number arrive. To do this, set a person in the hall, with a paper marked 9 to 10, 10 to 11, and so on. Then, when a person enters a bank between the hours of 9 and 10 o'clock, he will make a mark like a figure 1. This mark he will repeat as every additional person enters. He will go on in this way all through the day. When the bank closes^ he will ascertain by counting the marks how many persons have entered the bank during each hour, and how many altogether. The cashiers should go to dinner during the hour in which the fewest people come tb the counter. And if a clerk wants a day's holiday he should fix on the day on which the fewest people enter the bank. It is in this way that a man standing in the street is able to keep a register of the number of omnibuses that may pass him during the day. Occasionally we find that " calculating boys " have been exhibited who have performed arithmetical operations with wonderful rapidity. In some cases they have explained their mode of doing so. It would appear that they have in their mind a large multiplication table, not ending at 12 times 12, but extending to 50 times 50, or 100 times 100 ; secondly, they have a great rapidity of finding equivalent numbers by which the ques- tions are more easily worked ; and thirdly, they have a great power of memory, by which they can carry on operations in their mind without committing them to paper. They seemed to have these endowments by nature ; but they may all, in a degree, be acquired bv application. A large multiplication table may be learned ty perseverance. A facility of finding equivalent numbers may be aquired by study and practice. And even arithmetical operations may be performed by the memory. Let a person try to work a sum in the rule of three in this way, in perfect dark- ness, and he will find it not so difficult as he would at first imagine. But the facilities thus acquired by application would, of course, be vastly infe- rior to the endowments exhibited by these " calculating boys." It is re- markable that these boys are not found to retain this wonderful faculty after they are grown to be men. The various systems of artificial memoiy profess to teach the art of remembering figures. This is done by turning figures into letters, and then forming a word from those letters, or by associating a symbol with the number, or by adding the letters to the end of the word. Thus, sup- pose the floor of the room in which you are sitting were divided into nine compartments, and had a figure and letters in each compartment ; thus : 199 A' TVecfiM on Banking. I. s. 9. B.C. D.F. Q II 4. ft. 6. J.K. L. M.N. 7. a. 9. P.Q. R. 8. T. V. Now, if you wished to remember the number 29, you might form the " foot," and the consonants f and t would give you 29. If you wished to recollect 86, form the word " room." So, if the number were 58, it would be represented by the word "log." The word "book" would represent 17; the word "paper," 778; and "ledger," ;V. The advantage of having two letters to one figure is, that you can more easily form words ; for if one letter will not form a word, the other may. Besidm, if you should forget what letter represents any figure, by running over the alphabet you will call it to mind. We have supposed these numbers and figures placed on the floor. Now stand in the centre of the room, with your face toward the window. Divide the wall before you into the same compartments as the floor, and place over the wall on the ceiling the number 10. You have then before you all the numbers, from 10 to 19 inclusive. Divide the wall on your right hand in the same way, and place over it the number 20. Over the wall behind you place 30 ; and over the wall at your left hand place 40 ; and over your head in the centre of the ceiling place the number 50. You have now a local place for all the numbers, from 1 to 50. And if you wwh at any \jrne to recollect any one of these numbers, your mem- ory will be assisted by calling to mind its locality in this room. You may go further than this. You may place in each of these fifty squares a symbol ; that is, the figure of a tree, a flower, a bird, a beast, a fish, or any thing else. For instance: In the compartments on the floor you may place trees, the name of each tree beginning with the letter belonging to the compartments. The compartments from 10 to 20 may each have a flower ; from 20 to 30, a bird ; from 30 to 40, n beast ; and from 40 to 50, a fish. And then, if you wish to recollect any matter, you may form some fanciful association between it and the symbol. Dr. Grey's system is different from that we have described. He rep- the numerals by the following consonants and vowels : 8 4 I f i o 5 6 1 n au 890 k n w ci on y Then, to recollect a date, you will alter the termination of the word, and 200 Banking Calculations. place those letters that correspond with the figures. Thus, he calls Alexander the Great, Alexzta, and the last three letters show that he died 331 years before the Christian era. Julius Caesar is called Julios, showing that he died 46 years before the same period ; and Romput shows that Rome was founded 753 years before the Christian era. These systems of artificial memory have not been found in practice to answer the eulogiums of their professors. Nevertheless, they are occa- sionally useful in assisting the recollection of figures. The following questions may be instructive or interesting to those young men who may be disposed to work them : When a banker discounts bills having two, three, six, nine, and twelve months to run, charging at the time the discount of 4 per cent., what rate of interest does he ob- tain on the money actually advanced at these respective dates ? Suppose a banker should lend 100.000 consols at 90, from the 1st of January to the 13th day of February, at l-16th continuation, and should part with the money at 10,000 a day in the discount of bills at 2 per cent, all of which bills should fall due, in equal proportions, on the 10th, llth, and 12th of February, what would he gain by the transaction ? If a banker buy consols at 90 on the 1st of December, receive the half-yearly divi- dend on the 8th of January, and sell the consols again at 90 on the 1st of February, what interest per cent, per annum does he receive for his money after deducting the income tax ? If a Long Annuity (which expires in January, 1860) is bought at 8< on the 1st day of March, 1849, what rate of interest does it yield after paying the income tax of sevenpence in the pound on the annuity? Suppose there were thirty clerks in a bank, the junior had 80 per annum and the senior 500. and they increased in arithmetical progression, what is the ratio of their increase, and what is the total amount of their salaries ? Suppose you were asked to make an advance on a lease which had twenty years to run, and on which there was a net profit rent of 100 per annum, what advance would you make upon it, calculating its present value at 7 per cent., and taking a margin of one third its value ? If a bank which has 20 paid up on each share, pays a dividend of 6 per cent., how much is that per share ? If a bank gives an annual bonus of 7s. per share, on which 10 is paid up, how much is that per cent, per annum ? One ounce of standard gold is worth 3 17s. lO^d. A sovereign is worth twenty shillings. What should be its weight 1 ? A pound weight of silver is coined into sixty-six shillings. What are the respective weights of a sixpenny-piece, a shilling, and a half-crown ? A ton weight of copper avoirdupois is coined into 240 in penny-pieces : What is the weight of a halfpenny-piece ? What is the weight of a cubic foot of gold, and into how many sovereigns may it be coined ? What is the weight of a cubic foot of silver, and into how many shillings may it be coined 1 What is the weight of a cubic foot of copper, and into how many farthings can it be coined ? A cubic foot of gold will displace a cubic foot of water, but how much water would be displaced by a cube of silver of the same weight 1 ? The gold that came to Solomon in one year was six hundred three score and six talents. Supposing tfiis to be pure gold, how much alloy must be added to reduce it to standard gold, and what then would be the nnmtar "of talents ? Supposing this standard gold to be taken to the issue department of the Bank of England, under the Act of 1844, and bank-notes received in exchange at the rate of 3 17s. 9e/. per ounce, what amount of bank-notes would be received, taking the Hebrew talent as equal to 113lbs. 10 oz. 1 dwt lOgrs. troy? Supposing payment of these notes should after- 201 A Trtatite on Banking. to MfmifM, which are coined at the rate of 3 17.. 104ndon '! t If the price of gold at Hamburgh U 435 per marc, and tin- cxi-lian^f at llamtuir^li oa LBWJM b 13-101, how much per cent, is gold dearer in Iluinlmr^li tlmn in SECT. XIV. BANKING DOCUMENTS. Br banking documents, I mean such reports, bonds, deeds, letters, or other writings, as an and in connection with bunking. I. I shall notice those Documents that are used in the formation of a Joint-stock Bank. When any persons propose to form a joint-stock bank in any district, they procure the statistical returns of the district ; such as the tables of the population, the exports and imports, the duties paid, the returns of the sales in the various markets, and every other information re- specting the trade and wealth of the district. If these prove satisfactory, they take notice of the banks already established there, and observe whether they are joint-stock banks or private banks, whether strong or weak, and whether likely to oppose or to join any new establishment. If the existing banks be joint-stock banks, the projectors procure from the I^TBp^fflK" a list of the shareholders, in order to observe the strength of their proprietary, and whether they reside chiefly in the ilistri.-t. Having satisfied themselves that a new bank would be successful, the first document drawn up is a prospectus. This document usually sets forth the great advantage of joint-stock banking to both the public and the t>hareholdcrs, and then points out the facilities of the district in which the bank is proposed to be established. Previous to issuing the prospectus, some leading persons in the district re requested to become members of a provisional committee for the for- mation of the bank, and they obtain the assistance of an influential solicitor, to whose office the applications for shares are usually addressed. The committee then appoint a secretary, or sometimes the office of sec- retary b filled by the solicitor. * The last three qorstion* are taken from (Faferstofi't Manual of Commerce, where t Sec the Table No. 18, in the next section Banking Documents. Attached to the prospectus is the form of an application for shares, similar to the following : BANKING COMPANY. HEAD BANK,. Capital, in Shares, of each. APPLICATION FOB SHAKES. To tJie Provisional Committee of the - Banking Company. GENTLEMEN, I beg to apply for shares in the above bank, upon the conditions of the published prospectus. If the shares be granted, my utmost in- fluence shall be exerted in support of this bank. I am, Yours respectfully, Name Business or Profession .Residence .... As the applications come in, they are entered in a book prepared for the purpose. In the first column is entered the date of the application ; then follow the name, profession, and residence of the applicant ; then the number of shares applied for, and in a further column the number of shares granted. After the committee have determined what number of shares to allot to each applicant, letters are addressed to the respective parties in the following forms : SIE, I am instructed by the Provisional Committee of the Banking Company, to inform you, that they have allotted you shares in the Company ; and you are requested to pay the sum of upon each share, to , where you will receive the certificate. I am, Sir, Your most obedient Servant, A. B. Secretary. SIR, Your application for in the Banking: Company has been laid before the Provisional Committee, who regret, that in conse- quence of the numerous applications, they are unable to comply with your request. I am, Sir, Your obedient Servant, A. B. Secretary. The certificates granted upon receipt of the first payment on the shares are different. Some use the following form : . BANKING COMPANY. DEPOSIT CERTIFICATE. No. 18 This is to certify, that the bearer hereof has paid the sum of __ i>03 A TVMfwe 011 Banking. of X. each, allowed to him in the capital stock of the above Banking For the ProvWonal Committee of the _^_______ Banking Company. Other bank* adopt the form of a receipt, thus : BANKING COMPANY. Received of Mr on account of the aboro bank, the wm of being the deposit of __^_____ per hare on afe Wtof admitted a holder of hares. 18 AAcr the sums have been received, a general meeting of the share- is called in the following form : - BANKING COMPANY. _ 18 Sim, I am instructed by the Provisional Committee to inform you. that the first general meeting of the shareholders in the above Banking Company will be held at the _ i_ on _ . next, for the parpoee of submitting a report of their proof nig a board of directors, and Hiding revolutions for the immediate constitution of the Company. The chair will be taken at twelve o'clock. Lett you should be unable to attend, I annex a form of proxy for voting, the blanks of which yon most fill op before it is placed in the hands of a shareholder. I am, Sir, Your obedient Servant, PROXY FOR VOTING. BANKING COMPANY. I, the undersigned, a shareholder in the above Banking Company for . shares, do hereby appoint also a shareholder fhardn, to vote for me, and on my behalf, at the first general meeting of shareholders, to be held ia on instant. Witness my hand this day of 18 Name . No. of shares. At the general meeting the provisional committee make a report of their proceedings. Resolutions are then passed, 1. That the report be received and printed; 2. That certain shareholders then named be ap- pointed directors ; 3. That the thanks of the meeting be given to the provtctooal committee. The bank is now formed, and the government is 204 flanking Documents. assumed by the directors. They appoint the manager and other officers ; they prepare the deed of settlement ; and they adopt the measures ne- cessary for the commencement of business. II. The Deed of Settlement. This is the deed of partnership, which must be signed by all the share- holders. It fixes the name of the bank, the places where business is to be carried on, and the denomination and number of the shares. It regulates the appointment of directors, the qualifications of share- holders, and the mode of holding meetings, transferring shares, and making dividends. It also provides for the winding up of the affairs of the bank, in case it should not be successful. So many joint-stock banks have printed their deeds of settlement, that any new bank would find no difficulty in procuring a copy. All banks now introduce a clause, pro- viding that if one third or one fourth of the paid-up capital be lost, the bank shall be dissolved : and generally there is a clause authorizing any alteration of the deed by two successive meetings of the shareholders specially summoned for that purpose. III. Bonds of Security by the Officers. The following form may be adopted for a manager : Know all men by these presents, that we, A. B. of . C. D. of E. F. of and G. H., are held and firmly bound to W. X. and Y. Z. in the sum of five thousand pounds of lawful money of Great Britain, to b6 paid to the said W- X. and Y". Z. or their certain attorney, executors, administra- tors or assigns, for which payment to be well and truly made, we bind ourselves and each of us, and any three, or two of us, and our and each of our heirs, executors, and administrators, and the heirs, executors, and administrators of any three, or two of us jointly, severally, and respectively, firmly by these presents. Sealed with our seals. Dated this day of . in the year of our Lord one thousand eight hundred and Whereas the above-bounden A. B. has been appointed chief manager of a certain public joint-stock banking company, called the , of ' which company, and for the general purposes thereof, the above-named W. X. and Y. Z. have been appointed trustees. And it was agreed, that on the appointment of the said to be such manager as aforesaid, he should with sureties enter into a bond to guarantee his fidelity and honest conduct while in the service of the said company. And whereas each of them, the above bounden C. Z)., E. F., and G. H. has, at the request of the said A. B. agreed to become surety for him as aforesaid to the extent of Jive thousand pounds : Now the condition of the above-written bond or obligation is, that if the said A. B. do and shall from time to time while he shall continue in the service of the said company as the chief manager of the said company, diligently and faithfully serve them, and devote the whole of his time and attention to their business, and give such reasonable attendance at their banking-house, as the directors for the time being of the said company shall from time to time require, and do and shall keep all the secrets of the said company, and inform the said directors of the company for the time being of all such letters, writings, papers, and occurrences whatever as shall from time to time come to his knowledge respecting the said business, R 205 Treatitt on Banking. Bt 4 6, tad ihtii KM p all the cash accounts, ledgers, books, deeds, writings, an4 papers, batoagiaf yr nlarinf to the said concern in a proper and business- like maaawr, aad regularly answer the letters of their correspondents, and do and saafl mke das cart of the moneys, securities for money, and property belonging 10 |jt nii company, or placed in their custody, and do and shall from time to iin> iKTttr^l far, reader, aad make over to the directors for the time being of the said rompanr, all sack cash, bills, notes, and other securities as shall from tnno to tioM corns, or without his wilful default might have come to his hands, and shall not embesak, coaceal, or waitr, nor permit (as far as in him lies) to be embezzled, con- cealed, or watted by others any of the property of the said company, or which shall i intrusted to their care, and do and shall receive all the customers of thi- with civility, and make up the notes or memorandums of their r, and do and shall as far as in him lies cause, the clerk or ekrks of the said company to give full and due attendance at their said banking- hoase, aad there to conduct and demean himself or themselves diligently and faith- aad hi an orderly manner: and also if the said A. B. do and shall in all other rc- dfligvntly. skilfully, and faithfully demean and conduct himself as the chief man- ager of the said company : and moreover, if they the said C. D., E. F. t and G. //., their baks, exervtors, or administrators, or some of them, shall and do well and sufficient I y i aad keep indemnified .the said company and the directors and all other i thereof from and against all losses, costs, charges, and expenses which shall or may happen or come to them for or by reason of any act, deed, matter or thing r, wilfally and improperly done, or wilfully and improperly omitted to be > by the said A. B. in or during the said sen-ice, then the above-written obligation be raid, bat otherwise the same shall be in full force. Provided always and it is hereby declared, that under the said obligation, the said C. D., his heirs, executors, or administrators, shall not be liable to a greater sum in the whole than two thovtandjive &/ pounds, nor the said E. F. his heirs, executors, or administrators to a greater am in the whole than one thoutami five hundred pounds, nor the said G. II. bis heirs, executors, or administrators to a greater sum in the whole than one thousand pounds. As witness the hands and seals of the said parties. The following is the form for a clerk : Know all men by these presents, that A. B., C. D., and E. F., are held and firmly boand to M'. X. and y. Z., in the penal sum of one thautand pounds of lawful money of Great Britain, to be paid to the said W. X. and Y. Z., or their certain attorney, ex- afjsjort, administrators, or assigns, for which payment to be well and truly made, we biad Mrselres and each of us, and our and each of our heirs, executors, and adminis- trator*, and the heirs, executor*, and administrators of any three or two of us jointly, atvsnlly, sad respecthrely firmly bylhese presents. Sealed with our seals. Date'd thi Whereas the above boonden A. B. has been appointed a clerk in a certain public c**P**7 called |he t of which company and for the gen- eral pwposes thereof the above-named W. X. and Y. Z. have been appointed trustees. Aad it ** agreed that on the appointment of the said A. B. he should with sureties ** !* * DO 4 to guarantee his fidelity and honest conduct. / And whereas the hove bosokden C. D. and E. F. have at the request of the said A. B. agreed to become ewstj far USB M aforesaid to the extent of five hundred pounds each. Now the con- dWosM of the above-written obligation is, that if the said A. B do and shall, while he ml CSsjmwM ia the service of the said company as such clerk, diligently and faith- Banking Documents. fully serve them, and devote the whole of his time and attention to their business, and give such reasonable attendance at their office, as the directors' or manager for the time being of the said company shall from time to time require ; and do and shall keep all the secrets of the said company, and inform the directors of the said company for the time being of all such letters, writings, papers, and occurrences whatsoever, as shall from time to time come to his knowledge respecting the said business ; and do and shall from time to time account for and make over to the directors or manager for the rime being all such cash, bills, notes, and other securities as shall from time to time come or without his wilful default might have come to his hands, and shall not em- bezzle, conceal, or waste, nor permit (as far as in him lies) to be embezzled, concealed, or wasted by others, any of the property of the said company, or which shall have been intrusted to their care. And also if the said A. B. do and shall in all other respects diligently, skilfully, and faithfully demean and conduct himself as such clerk of the said company. And moreover, if they the said C. D. and E. F., their heirs, executors, and administrators, or some of them shall and do well and sufficiently save harmless and keep indemnified the said company and the directors and all other mem- bers thereof from and against all losses, costs, charges, damages, and expenses, which shall or may happen or come to them for or by reason of any act, matter, or thing whatsoever wilfully and improperly done, or wilfully and improperly omitted to be done by the said A.'B. in or during the said service, then the above-written obligation shall be void, otherwise the same shall be in full force. Provided always, and it is hereby declared, that under the said obligation the said C. D., his heirs, executors, or administrators, shall not be liable to a greater sum in the whole than Jive hundred pounds ; nor the said E. F. his heirs, executors, or administrators, to a greater snm in the whole than Jive hundred pounds. As witness the hands and seals of the said parties. . IV. Declarations of Secrecy. The following is the form for the directors and trustees : We, the undersigned persons, being respectively the directors and honorary direct- ors, and trustees of the public Joint-stock Company called .. do severally declare that we will respectively, faithfully, and impartially discharge the several duties devolving on us as such directors as aforesaid, according to the deed of settlement of the company, bearing date the day of , and any laws and regulations that may be made in pursuance thereof. And we do hereby pledge ourselves, and as inviolably as if we had taken our oaths thereto, that we will observe the strictest secrecy on the subject of all transactions of every descrip- tion of the company, with their customers for the time being, or with any other bodies or persons whatsoever, and on the subject of the accounts of all bodies and individuals from time to time having accounts with the said company. Dated this day of , 18 The following is the form for the officers : Declaration of Secrecy by the Managers and Clerks. We, the undersigned persons, being respectively managers, accountants, cashiers, tellers, and clerks of the Banking Company, do severally de- clare, that we will respectively, faithfully, honestly, and impartially discharge the sev- eral duties devolving on us as such managers, accountants, cashiers, tellers, and clerks 207 A Trcatiif on Banking. , BKOrdJBg to the directions of the directors of the company, and any laws thai may be made by them And we do hereby severally pledge our- IVB* BBrf as mviobhiy a* if we had taken our oaths thereto, that we will observe the crkMM secnqr OB UM SBhject of all transactions of every description of the company win ttVir CMMMTS for Ike *M being, or with any other bodies or persons whatso- r. aad OB UM subject of the state of the accounts of all bodies and individuals from i to time baviBf aeoomnu with the said company. Dated this __ day -* , , V. Letter* of Guarantee? WM rrfemct to Advance* or to Bill* Discounted. Rill-brokers usually give a letter of guarantee, instead of indorsing the bOb they hare discounted with the bankers. And sometimes one party will guarantee to the bank the bills discounted for another. (1.) n tit Directors of 0* Banking Company. IB consideration of your paying the cheques of Mr. , or , otherwise advancing him sums of money, I hereby guarantee the repayment thereof upon demand, to the extent of one thousand pounds. I am, &c. (2.) To At Dincton of the Banting Company. GKVTUMBJI, In consideration of yonr discounting a bill for , drawn by A. B. or C D. dated , at months, I hereby guarantee the due pay- neat of the same at maturity. I am, &c. (3.) GnrrunEw, IB consideration of yonr discounting the alwve bills, I hereby guarantee lha pBBeftul payment thereof as they respectively fall due. I am, &c. (4-) VsWrunm, Mr. M STsjufcr may have occasion to offer you sundry bills for discount la OMtUeratioa of yoar discounting such of them as you approve of, which I request JOB to do, I hereby guarantee the punctual payment of such bills when due. I am, &c. remarks on this subject, as well as on other matters con- ta " CVyfan on CbuMtry UanL-iny," by J. II. Rogers, (fc. n Usoo, pvfeUtber.) Banking Documents. VI. A Form of Letter, To be signed by a Party lodging Deeds or oilier Documents as Security for Advances of Money. (1-) To the Directors of the Banking Company. GENTLEMEN, I have sent you the title deeds, and other writings, relating to my several freehold and copyhold estates and properties, in or near , in the county of ,and which documents I hereby declare are deposited with you, as a security for all sums of money now or hereafter to become due from me, either solely, or jointly with others, to the said banking company, either upon banking account, or in any other manner howsoever (including interest, commission, and all other usual banking charges) ; and I hereby engage, upon request, to execute to you, or to the trustees of the said company, a mortgage of the said tenements and premi- ses, for the better securing the said sum or sums of money, intended to be hereby se- cured, such mortgage to contain a power of sale, and all other usual covenants, and to be at my expense. I am, &c. (2.) GENTLEMEN, Having this day borrowed of you , upon a deposit of the under- mentioned securities, which sum is to be repaid to you, with interest at _^ per cent per annum, on the next, I hereby authorize you, in case the said sum of shall not be repaid as aforesaid, to sell the said securi- ties, or any part thereof, whenever you may think proper so to do, and repay your- selves the sum of and interest, returning to me the surplus (if any), or hold- ing it for my account ; and in the event of any deficiency, I hold myself responsible to you and the survivors of you for the same. I am, &c. (3.) . GENTLEMEN, In consideration of the loans, advances, or discounts which may be made to me, or upon my request by you, I hereby charge all or any title deeds or other prop- erty belonging to me, which! may place or leave in your hands, with the repayment of all such loans, advances, or discounted bills, together with all costs, interest, and charges thereon ; and I hereby undertake to make an assignment by way of mortgage, with power of sale, whenever called upon so to do, of the property which I may or shall be entitled to under such title deeds. I am, &c. VII. Memorandum of Agreement with reference to the Lodgment of Deeds. MEMORANDUM, that on the day of ' , in the year of our Lord one thousand eight hundred and forty- , hath delivered to , at their office in _, in the county of , the several title deeds and documents men- tioned and comprised in the schedule hereunto annexed, for the purpose of securing to R* 209 A TVeaJiw on Banking. the proprietors the said hankinc company for the time being, of whomsoever the MM haakiajt company may from time to time conit, all and every sum and sum* at any time hrrcarsV ba due or owing from , OB the balance of hi* account current with the said banking com- fhr moaey paid or advanced, or to be paid or advanced, by the said bank- aaid . or at his request, or by any bond or bill of exchange drawn or endorsed by the said or by any promissory note or other contract whatsoever, win. tartmat for the same respectively, from the several times at which toy respectively ball be advanced, or at which the said bonds, bills, notes, or other contract* respectively thall become due, and thenceforth until payment thereof respec- tively after the rale of per centum per annum, with commission and other Mai beaker's caatfM, so as the same do not exceed in the whole the sum of . . Aad the said doth hereby promise and agree wfeh aad to m said banking company that he the said , whaaavcr tibimfftfr reqaired by the said banking company, shall and will effectually eoavey aad aware all and singular the hereditaments and premises comprised in the aaid deeds aad writings onto and to the use of the said banking company, in such saaaaer M shall be lawfully required by them, free from incnmbrance* ; subject, never- theteaa, to redemption on payment by the said of Mrh sam of money M shall be therein expressed to be secured with interest in And in the said indenture of mortgage shall be contained all usual I covenants, with power of sale in case default shall be made in payment of the principal aad interest to be thereby secured, or any part thereof. As witness the I of the aaid ^__ , the day and year first above (The tchfdule above rtfemd to.) VIII. Cash Credit Bond. Almoat every bank that grants cash credits has its own form of bond. I think the following as good as any that I have seen : Know all men by these presents, that we, A. B^ of , C. D^ of i aad E. F. t of , are jointly and severally held o W. X. of , and Y. Z. of , of the society or co-partnership called the of pounds of lawful money of Great Britain and Ire- P**d to the Mid F. G. and H. /., or their certain attorneys, executors, ad- s, aad aa"gna, ' or w bich payment, to be well and truly made, we bind onr- at, aad aaeh aad every of us, and onr, and each and every of our heirs, executor*, aad adminUtratora, jointly, severally, and firmly by these present*. Sealed with onr *!. Daicdthtt _ of _ _ . '*** ** *^ Tl ^o"d A. B. hat opened an account with the above-mentioned mtg< ^h OJi>i tha^ - . _ , at their ... - . -- , and is desirous of being accommodated r MM aaeiatj or eo pailMiship, from time to time, in some one or other of the 1 w **fc *ka are in the habit of affording accommodation, ami to aooety or co-partnrnhip to take the said account, and to accommodate Banking Documents, him from time to time, in some one or other of the modes aforesaid, the said A. B. and the said C. D. and E. F. as his sureties, have agreed to enter info the above-written bond or obligation with such conditions as hereinafter is expressed. Now the condition of the above-written bond or obligation is such, that if the said A. Z?., C. D., and E. f., or some or one of them, or their, or some or one of their heirs, exe- cutors, or administrators, do and shall, on the demand in writing, under thb hand of any one of the public officers of the said society or co-partnership, called ,, well and truly pay or cause to be paid to the said society or co- partnership, all and every such sum and sums of money as upon the balance of any account current, which now is, or at any time or times hereafter shall be open between the said A. B. and the said society or co-partnership, shall or may, from time to time, be due and owing from or by the said A. B., his executors, or administrators, together with all discount, interest, postage of letters, and commission, according to the usage and course of business, but nevertheless to the extent only of prin- cipal money, exclusive of interest and costs, in case such balance shall exceed the sum ; and so that the above-written bond or obligation shall, and may be, a continuing secu- rity to the said society or co-partnership to the amount of > prin- cipal money, besides such interest and costs as aforesaid, notwithstanding any settle- ment of account, or other matter or thing whatsoever, then the above-written bond or obligation shall be void ; otherwise, the same shall remain in full force and virtue. Signed, sealed, and delivered in presence of . The following is the form of cash credit bond used by one of the banks in Scotland. It will be seen that the latter part has a reference to the peculiar law of Scotland, and hence it is not adapted for the use of banks established in England : We, A. B., C. D., and E. F., considering that the directors of the banking company, established in Edinburgh, under the title of the , have agreed to allow us credit upon a current account, to be kept in the name of the said A. B., in the books of the said bank at its branch office in , or at such other office or offices of the said bank as the directors thereof may from time to time appoint, to the extent of pounds sterling, upon granting these presents ; therefore we, the said A. B., C. Z)., and E. F., hereby bind and oblige our- selves conjointly and severally, and our heirs, executors, and successors whomsoever, to content and pay to the said , or to , the present manager of the said bank, or to his successors in office as manager, for be- hoof of the said bank, and the whole partners therein, or to the assignees of the said bank, or of its said manager, or his foresaid, the aforesaid sum of Jive hundred pounds, or such part or parts thereof as the said A. B. shall receive or draw out by orders or drafts on the said bank, in virtue of the aforesaid credit, and also such sum or sums of money as the said bank or its said manager shall stand engaged for on account of me, the said A. B., by accepted or discounted bills, letters of credit, guarantees, or in any other manner of way not exceeding in all the said sum of Jive hundred pounds, over and above what of the proper cash of me, the said A. B., may happen to be lodged on the said cash account ; and that at any time when the same shall be demanded, after six months from the date hereof, with the legal interest thereof from the time of ad- vance until the same be repaid, and a fifth part more of the said principal sum of pen- alty, in case of failure or proportionally cffeiring to the sum due, and it is hereby de- dared, that a stated account, made out from the books of the said bank, and signed by 211 A Treatise on Banking. thereof, for the time with reference to this pres- t without any other voucher to constitute and ascertain a i *, and no MHpaiuion shall pau open the change so con- I a*d Metmioed, bat on conrigwUioa only. And we consent to the n- K itra- tM tMtvoC ! tk book* of council and Kwion, for others competent, that letters of nonuaf . o tis days' change and all other nocoMary execution, may pass opon a de- ewa, to to iattrpOMd komto, in common form, and for Unit pnrpoae we constitute our whetW, th present written upon stamped paper by DC. Letters of Credit, OnutttJ by Ott Bank upon it* Ayentt or Branch/a. BAKX1KG COMPAKY. There has this day been lodged at this office by _ _ the for the credit of _ whose drafts to that yon will honor, and charge the same to the account of the Company. I am, Sir, Your obedient Servant, _____^_^___^___ Manager. Accountant. BANKING COMPANY. No- n (Not Transferable.) BIB, You. will be pleased to credit in the sum of ____^__^_^_______ and charge the same to the account of the _____^_______ Banking Company, with this branch. I am, SIB, Your obedient Servant, _____^^^____ Manager. Entered Accountant, (a.) BANKING COMPANY. Paris. 18. Thta IMS* wffl be presented to you by to whom jrwi will be pleated to pay to the extent of deducting your charge*, fcr yor reimbursement his drafts on this bank, which will meet with due I am, &c. 212 Banking Documents. (4.) Messrs. New York. This letter will be presented to you by Mr. , In whose favor we beg to establish a credit for pounds sterling. You will please hold this sum, or any part thereof at his disposal, less your usual charges, and take in exchange his drafts upon this bank, which will be duly honored. It is under- stood that this credit is to be available for one year from this date, at which period, if Mr. . has not made use of it, you will consider it cancelled. We shall forward you, in our next letter, the signature of Mr. to, which we refer. I am, &c. X. Deposit Receipts. These are receipts for money, upon which the bank allows interest. The following form may be used : . BANKING COMPANY. 18 No. . Received from the sum of sterling to the credit of his deposit account with the Banking Company. By Order of the Board of Directors. Entered Accountant. Manager. The following form is a much better one, but, unfortunately, it is ille- gal. According to law, we cannot introduce the rate of interest allow- ed, nor the notice required, unless the receipt be stamped. It may be hoped, that in the next Stamp Act, the Chancellor of the Exchequer will introduce a clause permitting the use of such receipts as the following. It is used by a highly respectable bank in one of the Midland Counties : BANKING COMPANY. No. 18 Received from the sum of for which we are accountable with interest at the rate of per cent per annum, on receiving days' notice. Interest to cease from day of notice. For the Directors and Proprietors of the Banking Company. Manager. No interest allowed unless the money remains three months. XI. Requisition Notes. These are notes or memorandums which are used by some banks to enable their customers to state with less trouble what they require, and 213 A Trttlite on Banking. to pecify the ceah they pay into the bank. They are usually placed on the counter, to be ready when wanted. The following are the forms most in us*: 0-) REQUISITION Now. fcri/ 1| SpcciflcaUon of Mone precootod to the Cahu Banking Company J far U mm of Applieca*. LKTTXK or CREDIT. KpKiflcaUeo ofMaMy. Bftnk of EnffUod Note* 18 Gold . . Wanted, the Bunking Company's Letter of Credit on Local Notet .... in favor of Bill* for . Applirnnti Entered to Credit of. (3.) PATMKXT TO CREDIT or CURRENT Accouxr. BpKMcttkM W Moo*r. Paid to the . 18 Buk of Eagbnd Notes Gold Bflvw and Copper . . LoealMMH . . . . Bilk .... Company, the sum of _ to be placed to the en in current account with >dit of laid bank. By J in the Bank's Cash Book, (4.) IWbr. ArrucATiox VOR ACCOCHT. NamM of Peraooj compoalng the Firm. ProbabU return . Ad rape* required Seewitj proposed OAr tt te Board per Minute, I is 5 214 Banking Documents. (5.) BILLS DISCOUNTED to ,on , 18 No. When Payable. Postage. WhenP'ble. Daya Amount of Bill. Discount. Proceeds. XII, A Letter Summoning a General Meeting of the Shareholders, BANKING COMPANY. -.18- SlB, I beg leave to inform you that the Annual General Meeting of the Proprie- tors of this Company, pursuant to the deed of settlement, will be held at twelve o'clock on instant, at the _! in this place, for the purpose ol electing Directors, and for the despatch of other business. A list of all the Proprietors qualified for the direction by holding fifty shares and upwards, is annexed. I am, Sir, Your obedient Servant, , Manager. Most large banks have also a printed form for their letters of ordinary correspondence, as the following : SIB I beg to acknowledge the receipt of your favor of the inclosiag sundries and undue bills the credit of your account. Your advices have due attention. You are credited for the following sums received. I am, Sir, Your most obedient Servant, .for Xin. Special Contracts. Those joint-stock banks that are not formed under the Act of 7th Geo. IV. Cap. 46, sue and are sued in the names of their trustees.* And to enable them to do so, those parties who open accounts with the bank * These banks obtained in 1844 the power of suing and being sued in the names of their registered public officers. 215 A Treatise on Banking. into speck) contract. This may be done by a letter addressed to personally, in a form similar to the following : 7*4. OKVTLBJIEX, YOB ranging thai th ________ Banking Company shil! pay 10 whatever mua BUT be doe to me on my current or other account* with it, I bmhy *f*i * *prate contract with you, to pay to yon or the survivors of you, aflfcy 4tBMBd. the balance, if any, which shall at any time hereafter be due by no to UM ff>H Banking Company on those accounts or otherwise, I am, Gentlemen, Your obedient Servant, XFV. Notice* of Calls for further Payment on Shares. BANKING COMPANY. , 18 SIB, I beg to inform yon that the Board of Directors of this Company, agree- ably to the powers contained in clause No. of the deed of constitution of the Company, hare made a third call of per share on each of the share* ia the Company, and that the same will become payable on the i 7 58 5 . " 27 f 8 32 | " } 4 1-84 * " 06} 8 67 5} . 28* 9 36 | "|5 2-30 i "08 9 75 6 . 29i 10 40 433 13 9 6 2-76 | " 09* 10 83 6}. 30} 11 44 * " i f " 10i 11 92 7 . 32* 12 48 } " * } " 12 12 1- 7}. 33i 13 52 } " i l " 13* 13 1-08 8 . 34A 14 56 434 ", 15 " 14} 14 1-17 8} . 36 15 60 * " 16 15 1-25 9 . 37i 16 64 i i * " 17* 16 1-33 9} . 39i 17 68 ' f I " 18} 17 1-42 10 . 39} 18 72 435 13 10* | " 20 18 1-50 10}. 41 19 76 * i 4 " 21* 19 1-58 11 . 42* 20 80 } i I " 22i 20 1-67 11} . 43i 21 84 " " 23} 21 1-75 12 . 44} 22 88 436 ' I 16* " 25* 22 1-83 12} . 46 23 92 * ' I 23 1-92 13 . 47* 24 96 } * 24 2- 13} . 48* 25 1- f ' I 25 2-08 14 . 49} 26 1-04 437 13 11* 26 2-17 14} . 51 27 1-08 * ' } 27 2-25 15 . 521 28 1-12 i " * 28 2-33 15} . 53* 29 1-16 } 1 29 2-42 16 . 54} 30 ' 1-20 438 " * 30 2-50 16} . 56 31 124 * 17 . 57* 32 1-28 } " * 17} . 58} 33 1-32 } 18 . 59} 34 1-36 439 13 12 18} . 61 35 1-40 * " 4 19 . 621 36 1-44 } ;; t 19} . pZ 37 1-48 } 20 . 64} 38 152 440 " } 20} . 66 39 1-56 21 . 67* 40 1-60 214. 6? 22 . 69} 22} . 71 23 . 9*U 72* >o* . 24 . 74} 24} . 76 25 . 77} METHOD op USE. (For example, take Paris.) Ascertain the premium on gold at Paris say 9 per mille; in the left-hand column, against 9, will be found the rate of exchange per pound sterling produced francs 25-37*. From that rate, deduct the exchange on London at short say francs 25 27J. leaving a remainder of 9} centimes per pound sterling. In the second column, it will be found that fi} centimes in the pound sterling are equal to '39 per cent. ; consequently, gold is '39 per cent, dearer in Paris than in London. NOTB. [f the rate of exchange produced by gold in Paris be lower than the exchange at short on Lon- don, gold will be dearer in London than in Paris. PRUSSIAN COIN. Thaler, Silbergrossch, and Pfenning. 1 thaler = 30 silbgr. ; 1 silb. = 12 pfennings. FRANKFORT. Gulders, Kreutzers, and Hellers. 1 gulder = 60 kreutz. ; 1 kreutss = 4 hell. DUTCH. Guilders and Cents. 1 guild. = 100 cents. BELGIUM AND FRANCE. Francs and Centimes. 1 franc = 100 centimes, s* 221 A Trtatue on Banting. XIX. 4 TtMt of Englith Money* reduced into M \\ , on Aita.j. JW, ag. Pf. 1 . \\ hi. h wMfer W MM! so UM matter Mood till the reign <>t' Henry the Ki-htli, who, in 1 504, r* coined shilling*. , lUurruiWT, FAKTBIXO. Camden dcrires the word 'penny* from the - The MOtaM Eoglioh fnury, /*?, or fining, was the first silrer coin struck in Eng- land ; nay, and tiM only one current among our Saxon ancestors ; as is agreed by Cmtm, Bp ihni. Dr. Hicks, 4c. The penny was equal in weight to our three-pence ; fire of them nuulc one shill- ing, or sdlling, Saxon ; thirty, a mark, or mancnse, equal to our ~s. Cxi. HMD the time of King Edward the First, the penny was struck with a cross so jeepiy talented in it, that it might be cosily broke, and parted, on occasion, into two part*, thonrc railed kalf-pautiet; or into four, thence callr.l fmrthim/t, or farthings. Bl AM prince coined it without indenture ; in lieu of which, he first struck round halfpence and farthings. He al*o reduced the weight of a penny to a standard; ordering that it should i thirty-two grains of wheat, taken out of the middle of the car. This penny was the f***y tttrit*y. Twenty of these pence wore to weigh an ounce ; whence the penny became a weight, as well as a coin. " Tfce penny sterling is now used less as a coin, and subsists chiefly as a money of account, containing the 1 2th part of a shilling, or the 240th port of a pound." (From XX. Form of Bond of the Guarantee Society. Campania' Farm. AGREEMENT, } No 5 GUARANTEE SOCIETY. AftTicuts OF AORKEMEXT made and entered into the day of , in (V year of ow Lord one thovtand eight hundred and , between the three di- rector* of the Guarantee Society, whote name* an hereunto subscribed, on the part and be- uid Society of the fir* part, and of the second Whereas the said parties hereto of the second part have applied to the said Guarantee Society for a guarantee to the extent of pond*, against any loss to be sustained by the said : , by or feMfb any fraw) or dishonesty of ,of , while ployed by the said . in the capacity of And the said mctecy hare agreed to enter into such Guarantee accordingly, on the terms d embjeet to the provisions and conditions herein contained and hcn-undcr written. Now tbesa presents witness, that in consideration of the premises, and of the sum of paid on behalf of the said s pieejiasi for such guarantee from the day until the H d*7 * , one thousand eight hundred and forty- , g^^^ both inclusive, being one year and part of another year: It is hereby treed and declared, that from the said day of * * * */ of _ and thence for one year, namely, to the last day of 221 Banking Documents. . , one thousand eight hundred and forty- , inclusive, and for every successive term of twelve calendar months for and in respect of which the pre- mium of shall be paid to the said society, and the said society shall agree to accept the same (such payment to be made on the last day of in each year, or within fifteen days thereafter, at the office of the Guarantee Society) dur- ing the service of the said in the capacity aforesaid, the funds and property of the said society shall, on the terms and subject to the provisions and conditions herein contained and hcreunder written, which are to be taken as part of this agreement, and subject also to the provisions of the deed of settlement of the said society, be liable to pay and satisfy unto the said , at the expi- ration of three calendar months after satisfactory proofs and full particulars of the loss, and of the nature and extent thereof (verified, if the said society shall so require, by declaration under the statute of 5 and 6 Wm. IV. c. 62) shall have been received at the office of the said society. All such loss, not exceeding pounds, (provided such loss shall have happened within eighteen calendar months next preceding the re- ceipt of such proofs and particulars,) as the said may sustain from any fraud or dishonesty of the said , to be committed after the said day of , and during his uninterrupted continuance in the said service in the capacity aforesaid. Provided always that the Notice of fraud said shall within ten days after the discovery of to be given with- any matter in respect of which any claim may be intended to be made, in tea days< give notice, in writing, at the office of the Guarantee Society, of such intended claim, and, as far as the case will admit, of all the particulars thereof; and from and after such discovery, the guarantee herein contained shall, as to loss by any act of fraud or dishonesty subsequent to such discovery, be at an end : Provided, also, and it is hereby agreed, that the funds and property of the said society gfven'to be'the for the time being remaining undisposed of, and inapplicable to prior fu ' lds JR^ prop- claims and demands, according to the provisions of the said deed of set- ty, after dis- tlement, shall alone be subject to any claim in respect hereof, and that JJuu^ f prior neither any director executing these presents, nor any proprietor or holder of shares in the capital of the said society, shall be individually liable in respect of any such claim, or under this agreement, beyond so much of the amount of the shares then held by him or her in the said capital, and not subject to prior claims and de- mands, as shall not for the time being have been paid up. Provided, also, ' Society to have and it is hereby agreed and declared, that the said power to prose- shall, in case of making any such claim in writing as aforesaid, forth- cute- with, upon being required by the said society, when lawful, arrest the said for any offence or offences that he may have committed, in respect of which such claim shall have arisen, and personally appear upon any examination or examinations of the said , and at Ms trial ; and in that case the said society shall be at liberty, at their own costs and charges, to carry on any prosecution or prosecutions for such offence or offences, and to commence and carry on, in such name or names as they may be advised, and for their own benefit, any actions, suits, or other proceedings against the said , for the recovery of any moneys or chattels lost by his fraud or dishonesty, or for dam- ages in respect thereof, bping hereby indemnified against all costs, charges, damages, and expenses in respect of such prosecutions or other pro- ceedings. And it is further agreed and declared, that when any such Any p ayrnent OB loss shall have been satisfied by or on behalf of the said society, an in- account of fraud . , . , . . * . or dishonesty to dorsement m satisfaction of all claims shall be made hereon, and signed be indorsed her- 225 A Trralist on Banking. ihM bj the person or persons to whom the amount of cuch lou shall be paid MM*. ** MtMMi ad thereupon theM presents shall be given up to ami for tiM tsatitt trfttn said society, to be of no farther force or effect against la wines* whereof, the said parties hereto hare hereunto subscribed their IBM day and yes* first abore written. to (As sijmifiirss /!* (Ares Director*. :'' .." i COHDITIOXS Or IH8DRAXCB. la the event of any loss for which the society shall be liable, such loss shall be borne by UM society, ratably only, and in common with any other person or persons who hare already, or shall hereafter during the continuance of this guarantee, become se- curity for the said in the service or employment above mentioned, ac- eordiaf to the amount for which each shall be guarantee. UM abore agreement is subject to the condition that the answers which hare been ffassi aad signed by the said and by the said to tb ejections lettered from A to I, both inclusive, submitted by the society, and con- JMi ! a paper called" Form of Proposal for Guarantee," and dated are in all respects true and correct, otherwise the said agreement to be void. That no premium shall be returned under any circumstances after the signing of the above agreement. Jnyutend XXL Provident Clerks' Benevolent Fund. BULES AND REGULATIONS. 1. Tide. That this branch of the association be called "The Provident Clerks' i Fund," in connection with " The Provident Clerks' Mutual Benefit Asso- * Qt>jct. That the object of this branch of the association is to provide funds, by a, bequests, or otherwise, for the purpose of granting temporary or permanent relief to distressed clerks, who are or have been members, their widows *. Jfmosn. That the following persons shall be members of this branch of the and be entitled to vote at all general meetings of this branch of the asso- AnttM*sftben of the Benefit Department who were admitted as clerks on joining fioyed in any public or private establishment within Great Brit- aisv, who sokKribe to this fund not leas than one guinea annually, or have given a do- riba of not lett than tea gvineas. S^tcrAtrt. That persons ("not being clerks) may become , by ft donation of not less than ten guineas, or an annual subscrip- 226 Banking Documents. tion of not less than one guinea, and be entitled to vote at elections for annuitants in proportion to the amount of their donations or subscriptions, according to Rule No 21. 5. Management. That this branch of the association shall be conducted by the same board of management as the benefit department. 6. Treasurer. That John Abel Smith, Esq., M. P., is the treasurer, and, by virtue of his office, is also a member of the board of management. In the event of death or resignation, the office of treasurer to be filled up by the board. 7. Trustees. That there shall not be less than four trustees, and the funds of this association shall be invested in the names of two or more of the trustees for the time being. The present trustees are, Thomas Baring, Esq. Thomson Hankey, jun., Esq. William George Prescott, Esq. Baron Lionel de Rothschild, M. P. And in case of death or resignation, vacancies to be filled up by the board, subject to the approval of the surviving trustees ; the said trustees, by virtue of their office, to be members of the board of management. 8. Auditors. That the following gentlemen be the auditors of this branch of the association, viz. : John Beadnell, Esq. James William Gilbart, Esq., F. R. S. Sir John Pirie, Bart., Aid. George Pollard, Esq. William Smee, Esq. any two being competent to act, who shall audit the annual accounts, to be laid be- fore the members at the annual general meeting. Vacancies to be filled up by the board. 9. Officers. That the board may appoint such officers to this branch of the associa- tion as may be deemed necessary, with power to remove them and to appoint others, and to fix the amount of their respective salaries or remuneration : the officers to give such security as the board shall require. 10. Expenses. That all expenses shall be equitably divided between the benefit de- partment of this branch of the association ; and the proportion to be borne by each shall be settled by the board, previously to making up the annual account. 1 1 . Special Meeting of the Board of Management. That a special meeting of the board may be convened on any emergency by a requisition to the chairman, signed by five members thereof; the requisition to state the object of such special meeting ; and the chairman shall call such meeting within one week of receiving the requisition. 12. Annual General Meeting. That an annual general meeting of the members of this branch of the association be held in February in each year, on such day as the board may appoint, when the annual report of the state of the funds, together with the account of the receipts and expenditure of the past year, shall be laid before the meet- ing. In case of any questions being submitted to the decision of such meeting, the same to be decided by a majority of votes. 13. Sjjecial Meeting of Members. That a special meeting of members may be con- vened by a requisition to the chairman, signed by thirty members at the least ; the re- quisition to state the object of such special meeting ; and the chairman shall call such meeting within one mouth of receiving the requisition. 14. Permanent Fund. That the sum of 10,000 3 per cent stock, now invested, or 227 A TVeolwe on Banking. to fJtjdvmViJt, (hall constitute the permanent fund of this branch of the association, and kail oo no acrount be reduced below that amount. That the board may apply the interact of the invested fund, together with sm-h pro- portioa of the annual subscriptions as they may deem fit (after payment of the ex- penses), to the objects of the association. That the farther increase of the permanent fund shall be at the discretion of the board, except that the amount of all bequests, together with the proportion of the profit* to be received from the benefit department every five years, shall be always added ID A* invested capital. I*. GssMsty /NNC/. That the board be empowered to apportion such part of the available income of this branch of the association aa may be deemed expedient, as a caraalty fund, from which to grant temporary relief as hereafter mentioned. 16. Keitrf That no member, his widow or family, be eligible for permanent relief noli! he has belonged to the association for three years, unless by the sanction of the annual general meeting. 17. Temporary Relief. Th&t temporary relief may be granted from the casualty And to distressed clerk*, who are or have been members, their widows, or families, regard being had in all cases to the number in family, and the length of time the party may have been a member of the association, as follows : First, By loans, on the security of two responsible persons, or other sufficient se- curity, of sums not exceeding 10 at one time, without interest, or of sums above 10 and not exceeding X 25 with interest, to be repaid by quarterly instalments, within two years. Secondly, By gratuities of sums, not exceeding 10 at one time, in coses of long and expensive illness, or other serious calamity, together with medical assistance, at the discretion of the board. Thirdly, By weekly allowances of sums not exceeding at the rate of 20 guineas per annum, nor for a longer period at any one time than six months. Fourthly, By weekly allowances to orphan children of deceased members, under fourteen yean of age (both parents being dead), the amount to be fixed by the Ixmrd according to the emergency of the case, but in no instance to exceed 20 guineas to one family ; and such allowance, or a proportion of it, to cease as the children respectively attain the age of fourteen yean. That should any member of the benefit department, who was a clerk at the time of Us entrance, and has regularly paid his premium for fire yean at the least, be unable, from distress or otherwise, to continue his payments, the board may have the power, hi their discretion, to continue the payment of his premiums from the casualty fund. by way of loan to such members, upon such security as the board may deem fit ; the polky being deposited with the association, and any bonus declared upon such policy beta* first applied to the repayment of the loan. li. rtrmme* Relitf. That permanent relief be granted by way of annuity, to dis- (Jerks, who are or have been members of this branch of the association, and ** ** M Nindaen, or other infirmities, are rendered incapable of obtaining ' "** **??"!* IB ' 1 *' uU ** electe< * b 7 ballot, as appointed by the subsequent rules, Md the annuities be on the following scale, viz. : I/ been a member 3 to 10 years, . . . 25perannum. 10 to 20 yean, ... SO " " yean and, upwards,. . 35 " 898 Banking Documents. That annuities be granted to widows of members who are incapable of obtaining their living, on the following scale, viz. : If husband been a member 3 to 10 years, . . . 15 per annum. " "10 to 20 years, ... 20 " " " 20 years and upwards, 25 " but such annuities to cease, should such widow marry again. That all annuities be paid quarterly. That the board have power to increase or decrease, proportionately, the above scales of annuities, according to the amount of funds at their disposal, and such increase or diminution to apply equally to all annuities already granted. That should it come to the knowledge of the board that any annuitant has been elected by fraud, or has assigned his or her annuity, or, finally, that his or her means of living has improved, so as not to require the aid of the association, the board shall have the power to suspend the payment of such annuity, or to reduce the same as they may consider fit. 19. Applications for Relief.- That applications for either temporary or permanent relief, be made according to such forms as the board may require ; and every applicant must be recommended by two respectable parties, who are acquainted with the case ; that applicants for annuities must send in their testimonials and other documents at least two months previous to the election ; and any wilful misrepresentation will in- validate the election of such annuitant. That the board shall take into its consideration the cases of the various applicants, and, where practicable, make personal inquiries into the truth of their statements, and select such as, in their judgment, are eligible to be balloted for, as well as those deserv- ing of casual relief. 20. Elections. That the election of annuitants shall take place once a year, or oftener, at the discretion of the board, and at such times as they may appoint. That notice shall be given by public advertisement or otherwise, of the number of annuitants to be elected ; and balloting papers be issued for that purpose, with a list of the candidates. 21. Voting. That all members, defined by the first section of the third rule, whose premiums are duly paid, shall be entitled to one vote for each annuitant to be elected ; and that all members or subscribers who have given a donation of ten guineas, or a subscription of one guinea, to this branch (payable annually or half-yearly), be entitled lo one vote for each annuitant to be elected, and an additional vote for every additional donation of ten guineas, or annual subscription of one guinea. That all subscriptions in arrears must be paid up before the party be entitled to vote. That clerks, being members of the Benefit Department, as well as subscribers or donors to the Benevolent Fund, be entitled to vote in respect of both qualifications. That members and subscribers may give all their votes to any one candidate, or di- vide them as they please, according to the number to be elected ; they may vote by proxy, the polling paper being first signed by them. . That in the event of an equality of votes for any two candidates, the chairman to give the casting vote ; and should any dispute arise as to the election of any candidate, a scrutiny may be demanded on behalf of such candidate, provided a requisition, signed by six members or subscribers at the least, be addressed to the chairman, demanding such scrutiny, and agreeing to pay the expenses of the same. 22. Alteration of Rides. That none of the foregoing rules be altered, amended, or repealed, unless at a special meeting of the board of management, convened for that purpose, who. being so assembled, shall have power to alter, amend, or repeal any of T 229 A Trtatitc on Banking. the ralea, and rabstiiute new ones in lira thereof ; bat such alterations, amendment, or NpMl of flriMt or substitution of new one*, shall not take effect unless they have re- ceived the sanction of the annual general mooting, or of a special general meeting, ODBvroed for the pnrpoM. S3, &MBW Bit That a book shall be kept, to be called " The Situation Book," in which the members who are out of employment may enter their names, particulars of their former employment, and the nature of that which they are now seeking. Thw hook to be open for the gratuitous inspection of merchants, bankers, and others 84. fWw / /hews*. " I give and beqncathe nnto the treasurer, for the time being, of the ' Provident Clerks' Mutual Benefit Association,' in trust for the purposes of the Benevolent Fund of that Association, the sum of - , to be paid within -^ months next after my decease, out of such part of my personal estate as may lawfully be bequeathed and appropriated to charitable purpose!. XXII. St. Clement Danes Savings' Bank Government Annuity Insti- tution. Offict, 18, SerlJt Place, two doom from Carey Street, Lincoln' t Inn, London. The following is the Government Table, and shows the sum required to be paid for an Immediate Annuity of Twenty Pounds, and in proportion for any sum not lest than 4/. nor exceeding 30/. per annum : r d. 271 4 265 1 4 259 4 252 18 11 217 1 8 241 5 11 235 12 7 230 1 5 224 11 8 219 3 8 213 15 9 208 6 2 202 14 4 196 17 5 190 14 11 184 8 1 AGE. .. d. If IS and under 16 377 15 6 16 17 374 4 1 17 18 370 16 7 18 19 367 14 6 19 20 364 19 11 to SI 362 12 S SI 22 360 10 5 M 23 359 4 S3 24 357 12 6 M 25 356 4 7 26 354 15 3 S6 27 353 3 17 M 351 .1 8 M u 348 17 1 S9 30 346 9 5 80 31 343 18 10 31 341 5 5 as VI 338 9 5 S3 34 335 9 11 34 35 332 6 9 3ft 36 328 19 11 M 37 325 9 11 37 M 321 17 7 M 39 318 2 11 3* 40 314 6 7 40 41 310 7 9 41 4S 306 5 10 41 43 801 18 6 43 44 S97 7 10 AA ^* 4ft S92 12 6 4ft 46 S87 IS 6 44 47 2*2 7 10 47 48 S76 16 AGE. If 48 and under 49 49 50 50 51 51 52 52 53 53 54 54 55 55 56 56 57 57 58 58 59 59 60 60 61 61 62 62 63 63 it 64 65 65 66 66 67 67 68 68 69 M 70 70 71 71 72 72 73 73 74 74 75 75 76 76 77 77 78 78 79 79 " 80 178 171 14 165 7 159 9 153 12 147 16 142 2 136 11 131 3 125 14 120 1 114 4 108 4 101 7 94 11 88 1 90 or any greater i 81 14 10 Banking Documents. XXIII. Comparative View of the Expectation of Life according to the different Tables of Mortality. Aim North- Carlisle Goverment Annuitants. North- Carlisle GovernmentAnnuitanta. AgO. ampton. odnisie. Male. Female. Age. ampton. Male. Female. 25.18 38.72 50.16 55.51 40 23.08 27.61 27.02 31.12 i 32.74 44.68 50.13 55.59 41 22.56 26.97 26.39 30.46 5 40.84 51.25 48.93 54.23 42 22.04 26.34 25.74 29.81 10 39.78 48.82 45.57 51.05 43 21.54 25.71 25.08 29.14 15 36.51 45.00 41.76 47.19 44 21.03 25.09 24.42 28.48 20 33.43 41.46 38.39 43.99 45 20.52 24.46 23.75 27.81 25 30.85 37.86 35.90 40.81 50 17.99 21.11 20.30 24.35 30 28.27 34.34 33.17 37.57 55 15.58 17.58 17.15 20.79 31 27.76 33.68 32.59 36.91 60 13.21 14.34 14.39 17.32 32 27.24 33.03 32.00 36.26 65 10.88 11.79 11.63 14.00 33 26.72 32.36 31.40 35.61 70 8.60 9.18 9.22 10.99 34 26.20 31.68 30.79 34.96 75 6.54 7.01 7.12 8.46 35 25.68 31.00 30.17 34.31 80 4.75 5.51 4.94 650 36 25.16 30.32 29.54 33.68 85 3.37 4.12 3.12 4.84 37 24.64 29.64 28.91 33.04 90 2.41 3.28 1.95 2.83 38 24.12 28.96 28.28 32.40 95 0.75 3.53 1.18 1.55 39 23.60 28.28 27.65 31.76 100 ... 2.28 . .. 0.50 PART SECOND. OF BANKING INSTITUTIONS. I Tn B* of RQUUrt II. LONDON PKIVATB BANK*. III. JOINT-STOCK BANKS IN LONDON. IT. Conrrmr PRIVATB BANK*. V. COUNTRY JOINT-STOCK BANK*. VI. Tai BANK* OF oeriAXD VI! T BANK* OP IULAND. VIII. MORAL AND RELIGIOUS DUTIES OF BANKJNO CtMPAXiM. IX. TKN Mixtrrm* 1 ADVICB ABOUT KKKPINO A DANUBE. X. SDMMART. SECTION I. THE BANK OF ENGLAND. THE Act of Parliament by which the bank was established, is entitled ** An Act for granting to their Majesties, several duties upon tonnage of hips and vessels, ana upon beer, ale, and other liquors, for securing cer- tain recompenses and advantages in the said Act mentioned, to such per- sons as shall voluntarily advance the sum of 1,500,000 towards carry- ing on the war with France." After a variety of enactments relative to " the duty upon tonnage of ships and vessels, and upon beer, ale, and other liquors," the Act authorizes the raising of 1,200,000 by volun- tary subscription, the subscribers to be formed into a corporation, and be styled, u The Governor and Company of the Bank of England." The turn of 300,000 was also to be raised by subscription, and the contrib- utors to receive instead, annuities for one, two, or three lives. Towards the 14200,000 no one person was to subscribe more than 10,000 be- fcjB the first day of July next ensuing, nor at any time more than 20,- 000. The corporation were to lend their whole capital to Government, for which they were to receive interest at the rate of 8 per cent, per annum, and 4,000 per annum for management ; being 100,000 per annum in the whole. They were not allowed to borrow or owe more An the amount of their capital ; and if they did so, the individual mem- bers became liable to the creditors, in proportion to the amount of their lock. They were not to trade in any " goods, wares, or merchandise whatsoever * ; but they were allowed to deal in bills of exchange, gold or silrer bullion, and to sell any goods, wares, or merchandise, upon 'which they bad advanced money, and which had not been redeemed witnin d*i* month* after the time agreed upon. The whole subscription hav- ing been filled in ten days, a charter was issued on the 27th day of July, MM. This charter has been repeatedly renewed. ' The Bank of England. The charter granted in 1708 prohibited any other bank having more than six partners, issuing notes in any part of England. The charter of 1833 continued the privileges of the bank until the ex- piration of one year's notice, to be given within six months after the ex- piration of ten years from August 1, 1834. But if such notice should not be given, then the charter was to be continued until the expiration of twelve months' notice, to be given after the 1st day of August, 1855. According to this charter, no other bank, having more than six partners, can issue notes payable on demand in London, or within sixty-five miles thereof. Bank-notes are to be a legal tender, except at the bank or branch banks. The amounts of the notes in circulation, and of the de- posits, and of the bullion and securities in the bank, are to be sent weekly to the Chancellor of the Exchequer for the time being. These accounts are to be consolidated every month, and an average state of the bank ac- counts for the preceding three months to be published in the London Ga- zette. Any joint-stock bank that does not issue notes may carry on busi- ness in London. The following is the clause relating to this subject : " And whereas the intention of this Act is, that the Governor and Company of the Bank of England should, during the period stated in this Act, (subject, nevertheless, to such redemption as is described in this Act,) continue to hold and enjoy all the ex- clusive privileges of banking given by the said recited Act of the 39th and 40th years of the reign of his Majesty King George III. aforesaid, as regulated by the said recited Acts of the 7th year of his late Majesty King George IV. or any prior or subsequent Act or Acts of Parliament, but no other or further exclusive privilege of banking : And whereas doubts have arisen as to the construction of the said Acts, and as to the extent of such exclusive privilege, and it is expedient that all such doubts should be removed : Be it therefore declared and enacted, that any body politic or corporate, or society, or company, or partnership, although consisting of more than six persons, may carry on the trade or business of banking in London, or within sixty-five miles there- of, provided that such body politic or corporate, or society, or company, or partnership, do not borrow, owe, or take up, in England, any sum or sums of money on their bills or notes payable on demand, or at any less time than six months from the borrowing thereof, during the continuance of the privileges granted by this Act to the said Gov- ernor and Company of the Bank of England." In the year 1844 the bank charter was again renewed until the expi- ration of twelve months to be given after the 1st day of August, 1855. The following are the principal provisions of this important Act (7 & 8 Viet. c. 32) : Bank to establish a Separate Department for the Issue of Notes. " I. Whereas it is expedient to regulate the issue of bills or notes payable on de- mand : and whereas an Act was passed in the fourth year of the reign of his late Majesty King William the Fourth, entitled ' An Act for giving to the Corporation of the Governor and Company of the Bank of England certain Privileges for a limited Period, under certain Conditions ' ; and it is expedient that the privileges of exclusive banking therein mentioned should be continued to the said Governor and Company of the Bank of England, with such alteration as are herein contained, upon certain conditions : may it therefore please your Majesty that it may be enacted ; and be it en- acted by the Queen's most excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assem- bled, and by the authority of the same, t/tatfrom and afler the thirty-first day of August, one tfiousana eight hundred and forty-four, the issue of promissory notes of the Governor and Company of the Bank of England, payable on demand, shall be separated and T* 233 A Treatue on Banking. kept wholly distinct from the general hanking business of the Raid governor y ; and the boataeea of Mid relating to such issue slmll IK- thrn forth con- Mid carried on by the Mid governor anil company in a separate department. > be called 'The ISMM Department of the Hank of England,' subject to the rules and refutation* hrrinftrr contained : and it shall bo lawful for the court of directors of tbe eatd governor and company, if ther vhall think tit, to appoint acommittr. , .1 . ..m feMe* of director* (or the conduct and management of such issue di-jxiriinrnt uf tho ; of Knciand. and from time to time to remove the members, and define, iilto mid regvlate tbe constitution and powers of such committee as they Khali think tit, sul>jvt les, or regulations, which may be made for that purp>M-: Provided, by-law*, rales, or regulations, mid utwt depart /*<* mid governor and company. ofth Tstve by Dank of England. to any by-law*, rales, or MvertbetoM. that tit mid utwt department thull always be kept separate and distinct from ll MftAy flfOrtMl /*<* II. And be it enacted, That upon the thirty-first day of August, one thousand e%bt baodred and forty-four, there shall be transferred, appropriated, and set apart by tbe tkid gorernor and company to the issue department of the Bank of England seen- rUes to the value of fourteen million pounds, whereof the debt due by the public to the said governor and company shall be and be deemed a part ; and there bhall also at tho MM tine be transferred, appropriated, and set apart by the said governor and com- pany to tbe said issue department so much of the gold coin and gold and silver bullion then held by the Bank of England as shall not be required by the banking department thereof; and thereupon there shall be delivered out of the said issue department into ibe amid banking department of the Bank of England such an amount of Bank of England notes as, together with the Bank of England notes then in circulation, shall be equal to the aggregate amount of the securities, coin, and bullion so transferred to tbe Mid issue department of the Bank of England ; and the whole amount of the Bank of England notes then in circulation, including those delivered to the banking department of the Bank of England as aforesaid, shall be deemed to be issued on the credit of such securities, coin, and bullion so appropriated and set apart to the said israe department ; and from thenceforth it shall not be lawful for the said governor and company to increase the amount of securities for the time being in the said issue department, sare as hereinafter is mentioned, but it shall be lawful for the said governor and company to diminish the amount of such securities, and again to increase the same to any ram not exceeding in the whole the sum of fourteen million pounds, and so from tone to time M they shall see occasion ; and from and after such transfer and appro- priation to the said issue department aa aforesaid it shall not be lawful for the said governor and company to issue Bank of England notes, cither into the banking de- partment of the Bank of England, or to any person or persons whatsoever, save in ex- change for other Bank of England notes, or tor gold coin or for gold or silver bullion received or pun-hated for the said issue department under the provisions of this Act, or m exchange for securities acquired and taken in the said issue department under tbe provision* herein contained : Provided always, that it shall be lawful for the said governor and company in their banking department to issue all such Bank of England note* a tbey shall at any time receive from the said issue department or otherwise, in fri tmm* nnrr in all respects as such issue would be lawful to any other person or Proportion of Silver Bullion to be retained in the Issue Department. III. And whereas it is necessary to limit the amount of silver bullion on which it ball be lawful for tbe issue department of the Bank of England to issue Bank of Igi > j W it Undine enacted, That it shall not be lawful for tho Bank of mad to retain in the issue department of the said bank at any one time an amount 4TaibwMMMMjMfiH one fourth part of the gold coin and bullion at such time held by a Bank of England in tbe issue department. AO Per*** may demand of the line Department Note* for Gold Bullion. IV. And be it enacted. That from and after the thirty-first day of August, one; mmmmmt fbt baadred and forty-four, all persons shall be entitled to deinund from The Bank of England. the issue department of the Bank of England Bank of England notes in exchange for gold bullion, at the rate of three pounds seventeen shillings and ninepence per ounce of standard gold ; Provided always, that the said governor and company shall in all cases be entitled to require such gold bullion to be melted and assayed by persons ap- proved by the said governor and company, at the expense of the parties tendering such gold bullion. Power to increase Securities in the Issue Department, and issue additional Notes. " V. Provided always, and be it enacted, That if any banker who on the sixth day of May, one thousand eight hundred and forty-four, was issuing his own bank notes, shall cease to issue his own bank notes, it shall be lawful for her Majesty in Council, at any time after the cessation of such issue, upon the application of the said governor and company, to authorize the said governor and company to increase the amount of se- curities in the said issue department beyond the total sum or value of fourteen million pounds, and thereupon to issue additional Bank of England notes to an amount not exceeding such increased amount of securities specified in such Order in Council, and so from time to time : Provided always, that such increased amount of securities speci- fied in such Order in Council shall in no case exceed the proportion of two thirds the amount of bank notes which the banker so ceasing to issue may have been authorized to issue under the provisions of this Act ; and every such Order in Council shall be pub- lished in the next succeeding London Gazette. Account to be rendered by the Bank of England. " VI. And be it enacted, That an account of the amount of Bank of England notes issued by the issue department of the Bank of England, and of gold coin, and of gold and silver bullion respectively, and of securities in the said issue department, and also an account of the capital stock, and the deposits, and of the money and securities be- longing to the said governor and company in the banking department of the Bank of England, on some day in every week, to be fixed by the Commissioners of Stamps and Taxes, shall be transmitted by the said governor and company weekly to the said commissioners in the form prescribed in the schedule hereto annexed marked (A), and shall be published by the said commissioners in the next succeeding London Gazette in which the same may be conveniently inserted. Bank of England exempted from Stamp Duty upon their Notes. " VII. And be it enacted, That from and after the said thirty-first day of August, one thousand eight hundred and forty-four, the said governor and company of the Bank of Englana shall be released and discharged from the payment of any stamp duty, or composition in respect of stamp duty, upon or in respect of their promissory notes payable to bearer on demand ; and all such notes shall thenceforth be and continue free and wholly exempt from all liability to any stamp duty whatsoever. Bank to allow 180,000 per Annum. " VIII. And be it enacted, That from and after the said thirty-first day of August, one thousand eight hundred and forty-four, the payment or deduction of the annual sum of one hundred and twenty thousand pounds, made by the said governor and company under the provisions of the said Act, passed in the fourth year of the reign of his late Majesty King William the Fourth, out of the sums payable to them for the charges of management of the public unredeemed debt, shall cease, and in lieu thereof the said governor and company, in consideration of the privileges of exclusive banking, and the exemption from stamp duties, given to them by this Act, shall, during the continu- ance of such privileges and such exemption respectively, but no longer, deduct and allow to the public, from the sums now payable by law to the said governor and com- pany for the charges of management of the public unredeemed debt, the annual sum of one hundred and eighty thousand pounds, any thing in any Act or Acts of Parliament, or in any agreement, to the contrary notwithstanding : Provided always, that such deduc- tion shall in no respect prejudice or affect the rights of the said governor and company to be paid for the management of the public debt at the rate and according to the 235 A Trealue on Banking. mrms aiuiided hi M aot named In the forty-eighth year of the reign of his late Majesty King George the Third, entitled An Act to authorize the advancing for the PuMic Street matm certain Conditions, a Proportion of the Balance remaining in the Hank of BngiandTfor the Payment of Unclaimed Dividends, Annuities, and Lottery Prizes, and for regulating the Allowance* to be made for the Management of the National BB Btmk to allow la* Public the Profit of increased Circulation. U IX. And be it enacted, That in case, under the provisions hereinbefore contained the securities httd in the said issue department of the Bank of England shall at any time be increased bevond the total amount of fourteen million pounds, then and in each and wry rear in which the same shall happen, and so long as such increase shaU eocuinne, the said governor and company shall, in addition to the said annual mm** of one hundred and eighty thousand pounds, make a further payment or allow- i to the public, equal in amount to the net profit derived in the taut issue dejxtrtmtnt " CMTllMf mwyfa* such additional securities, after drdin-tim,' the amount of the t occasioned by the additional issue during the some period, which expense* include the amonnt of any and every composition or payment to be made l>v the Mid OTeroor and company to any banker in consideration of the discontinuance at any time hereafter of the issue of bank notes by such banker ; and such further payment or allowance to the public by the said governor and company shall, in every year while the public shall be entitled to receive the same, be deducted from the amount by law parable to the said governor and company for the charges of management of the unre- deemed public debt, in the same manner as the said annual sum of one hundred and eifhty ntnnmnd pounds i* hereby directed to be deducted therefrom." Dank to enjoy Privileges subject to Redemption. u XX VII. And be it enacted, That the said Governor and Company of the Bank of P-jf-** shall have and enjoy such exclusive privilege of banking as is given by this Act, upon such terms and conditions, and subject to the termination thereof at such time and in such manner as is by this Act provided and specified ; and all and every the powers and authorities, franchises, privileges, and advantages, given or recogni/ed by the said recited Act passed in the fourth year of the reign of his Majesty King Wil- liam the Fourth, as belonging to or enjoyed by the said Governor and Company of the Bank of *H****. or by any subsequent Act or Acts of Parliament, shall be and the same an hereby declared to be in full force, and continued by this Act, except so far M the same are altered by this Act; subject nevertheless* to redemption upon the terms and conditions following ; that is to say, at any time vpon twelve months' notice to be fin* after the first day ofAwfttst, one thousand eight hundred and fifty-five, and upon re- payment by Parliament to the said governor and company or their successors of the um of eleven million fifteen thousand and one hundred pounds, being the debt now due from the public to the said governor and company, without any deduction, dis- count, or abatement whatsoever, and upon payment to the said governor and compar- and their successors of all arrears of the sum of one hundred thousand pounds per an- ""i, in the last-mentioned Act mentioned, together with the interest or annuities pay- able noon the mid debt or in respect thereof, and also upon repayment of all the prin- cipal and interest which shall be owing unto the said governor and company and their eomsors upon all such tallies, exchequer orders, exchequer bills, or parliamentary fc*d*wheh the said governor and company or their successors shall have remaining in their hands or be entitled to at the time of such notice to be given as last aforesaid, thMimi hi such case, and not till then, the said exclusive privileges of banking C****** by this Act shall cease and determine at the expiration of such notice of twelve months ; ami any vote or resolution of the House of Commons, signified under the "dof the Speaker of the said house in writing, and delivered at the public office of ha said governor and company, shall be deemed and adjudged to be a sufficient no- We hare noticed the provisions of this Act in a former part of our Ml The Bank of England. work. We shall here only give a summary of the business operations of the bank. The Bank of England is a bank of issue. She can issue to the extent of 14,000,000 against that amount of securities set apart for that pur- pose. She can issue to any further amount' against lodgments of gold and silver, as regulated by the above Act. This amount of 14,000,000 may be issued either at the office in London or at the branches. Were she to reduce the number of her branches she would not be required to issue less than this 14,000,000 ; and were she to increase her branches, she could issue no more. If other banks discontinue their circulation, she may upon application receive permission to extend her issues to two thirds the sum thus withdrawn ; but all the profit of this increase must go to the Government. She cannot issue any note for a less amount than five pounds. All the notes are payable in gold on demand. The payment of those issued in London can be demanded only at the London office. But the payment of those issued at the branches may be demanded either at the London office or at the branches where they were respectively is- sued. Bank of England notes are a legal tender in all cases, except when tendered by the bank herself. The Bank of England is also a Bank of deposit, of loan, and of dis- count. She allows no interest on any portion of her deposits, nor per- mits any account to be overdrawn. She charges various rates on the bills she discounts, but does not go below the rate she announces to be her minimum. She does not act as the London agent of country banks ; but is the agent of the Bank of Ireland, and the Royal Bank of Scotland. She does not accept any bills that may be drawn by those banks, or by her own branches, they are all drawn without acceptance. She does not issue any circular notes on foreign countries, nor grant letters of credit on foreign banks. She remits money to and from her branches, and from one branch to another. She issues at the London office bank- post bills, drawn at seven days' sight. The Bank of England is also the banker of the Government. She has always a large amount of public deposits, on which she allows no interest. She receives the public revenue, and pays the dividends on the National Debt. The profits of the bank are derived from hex capital, her rest, public and private deposits, the seven-day bills, her agencies, and her circulation. From these funds she makes investments in public securities and private securities. These bring dividends and interest. She also has a profit on the 14,000,000 of notes in circulation. This profit is the difference be- tween the expense of maintaining the circulation, and the interest re- ceived on the securities set apart to meet this circulation.. The bank has an annual payment from the Government for managing the National Debt. She also receives a commission from those banks to which she is the London agent. A profit is also obtained on bullion transactions. The bank buys gold at 3 17s. 9;i|>>r, called the Cambrian: The brunch bank u to be a secure place of deposit for persons having occasion to make ae of a bank for that purpose ; such accounts are termed drawing accounts. The facility to the mercantile and trading classes of obtaining discounts of good and unex- ceptionable bill*, bonded upon real transactions, two approved names being required poa every bill or note discounted ; these are called ditcount accounts. The application of parties who desire to open discount accounts at the branch, are forwarded every Saturday to the parent establishment for approval, and an answer is generally received in about ten days. When approved, good bills may be discounted at the branch with- oat farther reference to London. Bills payable at Swansea, London, or any other place where a branch is established, are discounted under this regulation. The divi- doads on aay of the public funds, which ore payable at the Bank of England, may be received at the branch here, by parties who have opened ' drawing accounts,' after sign- ing powers of attorney for that purpose, which the branch' will procure from London. No charge U made in this case, except the expense of the power of attorney and its portage. Purchases and sales of every description of Government securities arc effect- ed by the branch at a charge of one quarter per cent., which includes brokerage in London, and all expenses of postage, &c. A charge of one quarter per cent, is also i oa paying at the Bank of England, bills accepted by persons having drawn ac- i at Swansea, such bills to be advised by the branch ; also for collecting payment of bills at the other branches, and on granting letters of credit on London, or on the other branches. The branch grants bills on London, payable at twenty-one days' date without acceptance, for sums of ten pounds and upwards. Persons having drawing accounts at Swansea, may order money to be paid at the bank in London, to their credit at this place, and vice cersd, without any expense. The branch may be called poo to change any notes issued and dated at Swansea, hut they do not change the note* of the bank in London, nor receive them in payment, unless as a matter of cour- tesy when the parties are known. Bank post bills which are accepted and due, are received at the branch from parties having drawing accounts, and taken to account without any charge for postage ; but unaccepted bank post bills, which must be sent to London, are subject to the charge of postage, and taken to account when due. No interest is allowed on deposits. No advance is made by the branch upon any descrip- tion of landed or other property, nor is any account allowed to be overdrawn. The notrs of Mesm. Walter's Bank at this place, of Messrs. Williams & Rowland, Ncuth Beak, and of the Brecon Old Bank, are received in payment at the branch. Any other eoontry bankers may open an account for the like purpose. The notes are the sasM as those issued by the parent establishment, except being dated Swansea, and made payable there and in London. No note issued exceeds the sum of 500, and nooe are for a less amount than 5." The Bank of England has opened fourteen branches. But the Exeter branch was removed, in the year 1844, to Plymouth ; and the Gloucester branch has recently been closed. The following tables will show the cir- culation in notes, and bank post bills, of each branch : 238 The Bank of England. _ cltpCOGO 'OT-NC^O t^Op >. (N C > ' (N UJ *}< ~ c -H > COCOr-l j so" to < -I 1l C.* * fe <3 GO W K r-l OQ B JS- { CJOQCO c POOTf.N.oScOCNOCOC 35 r, \ ^-uSCO-^O'^'t'CDCOOCO*. *? e O g r3COO?^^U5CX)eO(N ; QCOOOOO-^ 1 'COIO^ OO oj X3 !^ "S ^ CO O ^ t^ IO_ < CO ~-r-^-"-rco"CO'CO"6iif< 66 as : ! | g * l -tf-*gv.V5 : " .2 9 3 OD CO ! _- o- 2 1 -S O 3 a 1 S pq S H *-. * oSy.ajMjasassft.fi 3d 239 A Treatise on Banking. branch has recently been closed. At one timo the ire Banking Company issued only the notes of this branch ; but previous to 1844, they resumed the circulation of their own notes, and hence in the years 1843, and 1844, the circulation of this branch de- clined. Whether it be from this cause, or from the operation of the Act of 1844, that the branch has been discontinued, we do not know. It is clear, that under this Act, the Bank of England has few motives for ex- tending her branches. She cannot increase her circulation of notes ex- cept under ftptffiHil circumstances, and then all the profit must go to the Government The Bank of England consented to establish branches in the year 1836, at the suggestion of Lord Liverpool, in order to extend to the prov- ince* the advantage of a secure circulation. This was considered the grand desideratum at that time, in consequence of the numerous failures that had recently taken place among the country bankers. This object WM flflfeclodt and effected with greater facility, in consequence of the establishment of joint-stock bonks, who made arrangements for issuing Bank of England notes. These branches were not merely banks of circulation. They were banks of deposit, of discount, and of remittance. In these respects they came into competition with the country bankers. This, in some cases reduced the charges previously mode on banking transactions. As banks of discount, they charged the same rate which was charged at the London office, a charge usually below that of the country banks. As banks of remittance, they granted letters of credit at a shorter tenn As banks of deposit, they charged no commission. But, on the other hand, they allowed no interest on the balance, and they allowed no account to be overdrawn ; and they would not receive from their depositors any country notes, unless the banks had previously opened an account with them, and made a lodgment to meet their notes. While, therefore, the branches have obtained a large circulation, and hare transacted a good business as banks of discount and of remittance, they have not made much progress as banks of deposit. The deposits at all the branches amount to only ; 1,200,000. When it is considered that the branches are established in large towns, and that many of them have existed for above twenty years, this amount is far from considerable. Here is another anomaly of the Act of 1844. The Bank of England m placed in a position in which it is her interest to withdraw some of her branches. At the same time, the banks of issue in the neighbourhood of those branches are not allowed to extend their issues so as to fill up the vacuum which is thus occasioned in the amount of the local circu- Tke Law* of the Currency with Reference to the Bank of England, la March, 1841, I was, at the request of the joint-stock banks, ex- amined as a witness before a Select Committee of the House of Com- rooos "appointed to inquire into the effects produced on the circulation of A* OOOBtry by the various banking establishments issuing notes payable -MO The Bank of England. on demand." The charge advanced at the time against the issuing joint- stock banks, and generally against all banks of issue was, that they did not make the amount of their circulation correspond with the amount of the circulation of the Bank of England. With reference to this accusa- tion, I laid before the committee a variety of tables, designed to show the laws which regulated the circulation of the Bank of England, of the country banks, of the banks of Ireland and of Scotland, respectively. The inference was designed to show that no correspondence could exist between the circulation of these several banks. These tables cannot be introduced here. But the following is a summary of my evidence on this subject, taken from an article on " The Laws of the Currency," which I published in the " Foreign and Colonial Review " of April, 1844: " We have before us two reports from the Committee on Banks of Issue, laid before the House of Commons in the years 1840 and 1841. The committee report the evidence, and abstain from giving any opinion upon the great questions involved in the inquiry. They, however, recom- mended the passing of the Act 4 & 5 Viet. c. 50, requiring a monthly registry of the circulation of the Bank of England, and of the other banks of issue, with the amount of bullion, to be published in the Royal Gazette. It may therefore be expected, that, in a course of years, a suf- ficient number of facts will be recorded to enable future generations to form ' well-grounded opinions ' on this important subject. " In the mean time we will make use of the information we already possess. We will take the monthly returns of the circulation for the period that is past, that is, from September 1833 to the end of 1843, and endeavour, by observing their various revolutions, to discover if they are governed by any fixed causes or principles, to ascertain if those prin- ciples are uniform in their operation ; and if we should discover that the revolutions of the currency are regulated by any uniform principles, we shall call those principles the Laws of the Currency. " We shall begin with that portion of the currency which consists of notes issued by the Bank of England. On looking over the monthly cir- culation of the Bank of England, given in the Table, No. 34, in the Ap- pendix to the Report of 1840,* we observe, that the circulation of the months in which the public dividends are paid is higher than in the sub- sequent months. Thus, the average circulation of January is higher than that of February or March. The circulation of April is higher than that of May or June. The circulation of July is higher than that of August or September. And the circulation of October is higher than that of No- vember or December. This, then, we may consider as one law of the circulation of the Bank of England, that it ebbs and flows four times in the year, in consequence of the payment of the quarterly dividends. This law does not apply to any other bank, as all the Government divi- dends are paid by the Bank of England. " Again, the purchase and sale of Government stock and exchequer * This table, extended to the latest return, is published in the Banking Almanac for 1849, p. 24. It will be seen that the laws of the circulation of the Bank of Eng- land remain the same as before the passing of the Act of 1844. u 241 A Treatise on Banting. bills by the Rank of Englnn i>Bi*eircmlaiioB* means of coarse the amount of notes in the hands of the 8fae the patting of the Act of 1844, the word has been nometimes nued in a teat*, M M to include also the notes in the banking department of the 242 The Bank of England. favor of this country, bullion is imported and sold to the Bank of Eng- land ; and when the exchanges are unfavorable, gold is exported, and the exporters obtain the gold from the Bank of England, either by pur chase or by demanding payment of her notes. In most cases, however, the circulation does not fluctuate so much as the bullion. For when notes are issued against a large importation of bullion, money becomes abun- dant and cannot be employed, and hence it is lodged by bankers and others in the Bank of England, on deposit. But so long as the bank keeps her securities of the same amount, the increase of the bullion will always be about equal to the increase of the circulation and the deposits added to- gether. And, on the other hand, when an adverse exchange draws bul- lion from the bank, the deposits decrease as well as the circulation ; and the decrease in both together will be equal to the amount of gold with- drawn ; that is, supposing the securities to remain the same. " By ' securities ' is meant Government stock, exchequer bills, loans, discounted bills, or any thing else on which the bank may have advanced money. It is a principle of management by the bank, to keep the total amount of their securities equal, or nearly so ; and so long as this rule is acted upon, the tendency of exportations or importations of bullion to produce the variations we have described, must be considered as one of the laws of the circulation." One Bank of Issue. Mr. Cotton, who was the Governor of the Bank of England when the Act of 1644 was passed, stated in the evidence before a Committee of the House of Commons, in 1848, that the ultimate object of that Act was the establishment of one bank of issue. (Commons, 4561.) I was ex- amined on this subject before the committee on banks of issue, in the year 1841. The following is a summary of my evidence : 1. If we had only one bank of issue we should have sometimes too much money and sometimes too little for the wants of trade. " I think it is one of the inconveniences of a metallic currency, and would, in fact, be one of the inconveniences of a sole bank of issue, that at one part of the year we should have too much money, and at another part too little ; be- cause, as money would not fluctuate in amount, and the demands of trade would fluctuate, the amount of money would not be proportionate through- out the year to the demands of trade." "I have shown from Appendix 34, that even taking the whole circulation together, there is a difference varying from two to four millions, in the total amount of the circulation ; and, therefore, after supposing all these transfers to have taken place, if they could have taken place at all, and that the surplus of one district was to supply the wants of another, still there would be a very great inequality in the amount of money, as compared with the de- mands of trade." " It appears from Appendix 34, that the total amount of notes in Eng- land, Scotland, and Ireland, varies very considerably in different months of the year. Supposing, then, that you had one bank, and that all the notes in circulation were the notes of that one bank, which did nothing 243 A Treatise on Banking, but isw> notes against gold, and gold against notes, how would you em- ploy tho*e mrtBt which were not wanted in the slack periods of the sea- son? **..'..." It is evident from Apix-mlix 31, that during some part of the year there is not employment for the entire amount of money that it required in unortw Mason of the year ; and if you had one bunk of issuo. as you could not contract the circulation, you would have a surplus circulation, which would have the effect of lowering the rate of interest, and promoting speculation. 11 2. One bank of issue would reduce the means of the country bankers to a/ord >rirff rontrm-tion would bo very considerable, so as to produce very great distress." "Now, whether you have different bank", ut of the circula- tion of England and Wales, consisting of about .28,000,000, you miftt collect eight millions and a half, and lock them up in the custody of the (government previously.to the payment of the dividends ; then you pay out in a mass these eight millions and a half, and that in a state of con- tracted currency; and thus you go on, four times in the year, producing the most violent and most extravagant fluctuations : whereas now, by the excellent plan adopted by the Bank of England, in issuing her notes before the payment of the dividends, by means of loans, which are dis- charged after the payment of the dividends, notwithstanding you pay ei^ht millions and a half of dividends, you produce a fluctuation in the currency of only two millions and a half." 8. The principle of one bank of issue cannot be applied to the various currencies of the United Kingdom. " What is the general conclusion which you propose to draw from the tables yon have put in ? " * The general conclusion I would draw is, that the Ilank of England is governed by certain laws which do not apply to the country circulation ; that the country circulation of England is also governed by laws pern- liar to itself; that the circulation of Ireland is also governed by laws pr- coliar to itself; that the circulation of Scotland is also governed by laws peculiar to itself; that those re-pfrtivo circulations are all governed by uniform taws, as is shown by their arriving at nearly the same point at the sane period of the year; and therefore that you cannot introduce any system by which all those various circulations, governed by different can be amalgamated into one system; that such a sy-t< m would he at M6 The Bank of England. variance with itself, and would tend to destroy that beautiful system of country banking which now exists in this country, a system which has tended very much to the prosperity of this country, which, by receiv- ing the surplus capital of different districts, and giving out the capital for the encouragement of trade, calls forth all the natural resources of the countiy, and puts into motion the industry of the nation, and at the same time supplies a circulation which expands and contracts in each district according as it is required by the trade or agriculture of the district. Those expansions or contractions take place at different periods of the year in different districts ; the circulation expands when the wants of trade require it, and when no longer wanted it again returns ; and I think this beautiful system, in the language of the resolutions passed by the deputies from the joint-stock banks, ' has greatly promoted the agricul- ture, trade, mining, and general industry of the nation, and that equal ad- vantages cannot be produced by one bank of issue.' " We shall conclude this section by copying the correspondence between the First Lord of the Treasury and the Chancellor of the Exchequer and the Bank of England, respecting the suspension of the Act of 1844. " GENTLEMEN, " Downing Street, 25th October, 1847. " Her Majesty's Government have seen with the deepest regret the pressure which has existed for some weeks upon the commercial interests of the country, and that this pressure has been aggravated by a want of that confidence which is necessary for carrying on the ordinary dealings of trade. " They have been in hopes that the check given to transactions of a speculative char- acter, the transfer of capital from other countries, the influx of bullion, and the feeling which a knowledge of these circumstances might have been expected to produce, would have removed the prevailing distrust. " They were encouraged in this expectation by the speedy cessation of a similar state of feeling in the month of April last. "These hopes have, however, been disappointed, and her Majesty's Government have come to the conclusion, that the time has arrived when they ought to attempt, by some extraordinary and temporary measure, to restore confidence to the mercantile and manufacturing community. " For this purpose, they recommend to the directors of the Bank of England, in the present emergency, to enlarge the amount of their discounts and advances upon ap- proved security ; but that, in order to retain this operation within reasonable limits, a high rate of interest should be charged. " In present circumstances, they would suggest that the rate of interest should not be less than 8 per cent. " If this course should lead to any infringement of the existing law, Her Majesty's Government will be prepared to propose to Parliament on its meeting, a Bill of In- demnity. They will rely upon the discretion of the directors to reduce as soon as pos- sible the amount of their notes, if any extraordinary issue should take place, within the limits prescribed by law. "Her Majesty's Government are of opinion that any extra profit derived from this measure should be carried to the account of the public, but the precise mode of doing so must be left to future arrangement. " Her Majesty's Government arc not insensible of the evil of any departure from the law which has placed the currency of this country upon a sound basis ; but they feel confident that, in the present circumstances, the measure which they have proposed may be safely adopted, and at the same time the main provisions of that law, and the vital principle of preserving the convertibility of the bank-note, may be firmly main- tained. "We have the honor to be, Gentlemen, " Your obedient humble Servants, " The Gmiemnr and Deputy Governor (Signed,) "J. RUSSELL. of tlie Bank of England." " CHARLES WOOD. 247 A TYvof to on Banking. Bank ofKnyland, S5M October, 1847. W haw UM IKMOT to acknowledge your letter of thia day's date, which w+havt Mkbouuod to UM Oowt of Directors, and w inclose a copy of iu resolutions "We hare th honor to be, Gentlemen, ^ .iur most obedient Servant*, " JAMKS MORRIS, Governor. " II. J. PRMCOTT, Deputy Governor. - TV ta* fir* I*rd of tnt TYvMTV and At At a Coort of Director*, at the Bank of England, Monday, 35th October, 1847 : JhsaM, I. That thu Coort do accede to the recommendation contnined in the letter from the Kim Lord of the Treasury and the Chancellor of the Exchequer, dutcd this day, and addressed to the Governor and Deputy Governor of the Bank of England, which kMJwtbeeo read. S. That the minimum rate of discount on bills not having more than 95 days to m be 8 per cent. S. That the advances he made on bills of exchange, on stock, exchequer bills, and other approved securities, in Hums of not less than two thousand pound*, and for a pe- riod to be Axed by the Governors, at the rate of 8 per cent per annum." " GnrruXRV, " Downing Street, 23indalr, & Co. . . . two 3. Baraett, Hoare, 4 Co ...... five 4. Botaaqoet, Frank*, it Whatman . . three ft. Brown, Jaasoo, 4 Co. . . . . six. 6. Cornel 4 Co. ...... four 1. Drniaoq, Heywood, Kcnnanl, & Co. . . four 8. Fuller* ft Co ....... three i. Halifax, Mills, ft Co. . . . .six 10. Hanbury*, Taylor, 4 Lloyd ... fire 11. Hanker* Co ....... four II Jones, Lloyd, 4 Co. ..... fire IS. Lnbbock, Forster, & Co ..... three 14. Martin*, Stones, & Martins . . . four 15. Macterman, Peters, Mildred, Masterman, & Co. ....... U. Prescott, Grote, Cave, ft Co. . . 17. Price, Marryatt, & Co ...... two 18. Koharu, Curtis, & Co ..... four It. Bsgtn, Oldiag, ft Co ...... four 0. Sapte, Ifsspntt, Banbury, ft Ca . three ft. Smith, Payne, ft Smith ..... six & Spooner, Atwoods, ft Co. ... two 9*. ijwsasoa, Salt, 4 Sons .... three K. Williams, Deacon, Labouchere, & Co. . five . Wilitt, Peraral, 4 Co ...... six Total, 104 partners. four Rentlencet. 54, Ix)inl>:vnl-street. 50, Cornliill. 62, Lombord-gtreet 73, Lombard-street. 32, AU-hurch-luiu . 29, Cornliill. 4, Lombard-street. 65, Moorgatc-street. 67, Lombard-street. 60, Lombard-street. 7, Feiu-lnirrh-M! 43, Lothbury. 11, Maii^ion-IIouse-street. 68, Lombard-stivi-t. ( 34 & .'IS, Nicholas-lane, Lorn- ( bunl-st! 62, Threadneedle-street. 3, King William-street. 15, Lombard-street. 29, Clcment's-lane. 77, Lorn bard -street 1, Lombard-street 1'7, (iraccchnn-h-street 2O, Ijombard-str ivhiu-lane. 76, Lombard-street S. A Lut if Ante BtaJdng rrmt Wat of TtmpU Bar, *ko an not Member* of the Clearing Jhw if U* Fiim. 1. Boarerie, Norman, 4 Mnrdock ill. Marten, 4 Co. . . Cork*, BUddlpa, 4 Co. 4. Cooiu 4 Co. . . . . 5. Mr-rt DnUBOMMd . Mallrtt, Bobimoa, 4 Co. . ,, 7. Hcrrie*. Farqnhar, 4 Co. . 8. CtMtte UopkiMon 4 Co. . KMMOOI 4 Co. . 10. Sir Saaad Soots f Co. 960 No of Partner*. three 1 1 , Haymarket three 25, Old Boml-.-trcet five 43, Charinjf-CroM. four 58 & 59 Strand, five 49, Charing Cross, four 14, Great George-street four 16, St. Jamcs's-street two .*}. K-i;<.|it.8treet. four I. 1'all M... three 1 , Cavenduh-sqnam London Private Bankers. No. of Name of the Firm. Partners. Residences. 11. Strahan, Pauls, & Bates . & .. . four 217, Strand. 12. Richard Twining & Co six 215, Strand. Total, 47 partners. 3. A List of the Banking Firms East of Temple Bar. No. of Name of the Firm. Partners. Residences. 1 . Abraham Baner & Co one 71, King William-street 2. William and John Biggerstaff . . . two 8, West Smithfield. 3. James Bull, Son, & Co two 85 & 86, Cheapside. 4. Child & Co four 1, Fleet-street. 5. Roger Cunliffe one 24, Bucklersbury. 6. Cunliffes, Brooks, & Co. .... two 24, Lombard-street. 7. Robert Davies & Co two 187, High-st, Shoreditch. 8. Dixon, Brooks, & Dixon . . . . three 25. Chancery-lane. 9. Drewett & Fowler . . . . . two 4, Princes-street. 10. John Feltham & Co. .... two 42, Lombard-street. 11. Goslings & Sharpe five 19, Fleet-street. 12. C. Hill & Sons two 17, West Smithfield. 13. Messrs. Hoare five 37, Fleet-street 14. Hugh & John Johnston & Co. . . . three 15, Bush-lane. 15. SirC. S.Kirkpatrick,Dalrymple,MacGre-) f 29 Gracechurch-street gor, Twigg, & Co ) ' 16. Poeklinton & Lacy .... two 60, West Smithfield. 17. Praed, Fane, & Co four 189, Fleet-street. 18. Puget, Bainbridge, & Co. . . . . four 12, St. Paul's Churchyard. 19. John Shank one 76, West Smithfield. 20. John & W. S. Stride .... two 41, West Smithfield. 21. Thomas G. Tisdale one 15, West Smithfield. Total, 54 partners. The Clearing Banks are banks of deposit and of discount, and they act as agents to the country banks. The banks in Fleet-street and in West- minster do not usually discount bills for their customers, nor act as agents to country banks. Their connections embrace chiefly the clergy, the gentry, and the nobility. Their loans to their customers are chiefly upon landed security, and they are supposed to hold a large amount of exche- quer bills and other Government securities. None of the London bankers allow interest on deposits, or charge commission on town accounts. Those who act as agents to country banks charge a commission on the debit side of the account, and some of them allow interest on the daily balance. In- stead of a pro rala commission, some country banks pay their agent by a fixed annual payment, or by keeping in his hands a certain balance with- out interest. None of the present London bankers have ever issued notes, though, until the year 1844, they had legally the power of doing so. Several of them issue " Circular Notes," for the use of travellers on the continent. The following is a summary of part of the evidence delivered before the Bank Committee of 1832, by George Carr Glyn, Esq., respecting the London bankers : " There are sixty-two private banks in the metropolis, none of which for the last fifty years have issued notes of their own, though it would seem that such of them as con- sist of fewer than six partners might lawfully circulate their own paper if they pleased. As they act entirely with the Bank of England paper, it is doubtful whether there be 251 A Treatite on Banking. ay limit to UM number of partners of which London private hank* may consul They receive deposits, upon which they nay no interest. The system of allowing in- Meet on deposits WM ferasriy tried in London ; but the houses that attempted it in- variably failed. The depoeto held by the London bankers are generally composed of very large MOU, which ait aseaatarily payable on demand ; and hence they cannot be maoe a*o of to the same extent a* tbo*e which are intrusted to country bankers, and which, wheaever iatarast i* allowed, are usually left with them for a stipulated \ Oo UM other band, in all ordinary transactions, the London banks charge no coinmis- . "Ik* London bank*, in order to be able to meet their engagements, usually keep a lam dcpoait, Marly equal, perhaps, to half of what they hold in reserve, in the Bank uf England; a portion of their cum in fuml- they necessarily hold ut home, in bank paper, and a small amount in gold. Their deposit in the lunik they consider as so many notes in their drawer, liable to be called out by the daily fluctuations in the ac- rovats of tbeir customer*. The balances in their hands, often very large, are frequently withdrawn without notice; hence their intercourse is almost hourly with the Bank of Kajctand. from which they receive every facility. ~ In order to turn their funds to pront, the London bankers employ as much money as they can among*! their customers. They invest a considerably larger proportion of ihstr deposits in bills of exchange and promissory notes, than in public >r<-uriti' -. The citT banker U, however, under a disadvantage in this respect, which is not felt by the banker at the west end of the town. The latter may, to a certain extent, depend apoa the OM of the money deposited with him, as his accounts are usually those of comatnr rautanen, and individuals out of trade ; whereas the former, whose accounts are principally those of persons actively engaged in commercial or money operations, rsui hard! v know three davs beforehand what the amount of his deposits may nc at any given period. The London bankers are obliged to employ their money occasionally at a very low rate of interest. In some cases, it may have been within the last twelve months, Si per cent. ; but the average has been from 3 to 34, and it has fairly kept at that rate. The highest rate has been 4 for short bills, but 5 has been charged for bills of twelve or eighteen months." We shall now describe the mode of conducting the clearing, or the way in which many of the London bankers make their exchanges with each other. Thaw exchanges arc made at the Clearing-house. At this house, which is situated in Lombard-street, in a part of the old Post-office, a clerk attends from each banking-house twice a day. First, he goes at eleven o'clock with those bills which he has upon other bankers. Each bill is receipted by the house through whom it is presented, and the cheques have the name of the house written across them. He drops the bills payable at each house in a separate drawer provided for the purpose, and he enters in his book, under separate accounts, those bills that may be dropped into his drawer. At about twelve he returns home. He goes again at three o'clock with a fresh quantity of bills and cheques, which he delivers in the several drawers as before. He then enters in his book those cheques that may have been delivered in his drawer. From three to four he receives further supplies of cheques brought to him from home by other clerks. These cheques he enters in his book, and they are then delivered in the proper drawers. As soon as the clock strikes four, no further cheques are taken. He then casts up each account, and strikes the balance. These balances are then transferred to the balance-sheet. The balance-sheet is a half sheet of paper, with a list of clearing bankers printed alphabetically in a row down the middle. On the left-hand side is a space for the debtors. On the right-hand side is a space for the cred- itors. The clerk begins with the house at the top of the list. If this house owe* him money, he places the balance on the left side of the MS The Clearing- House. name. If he owes money to this house, he places the amount on the right side. Thus he proceeds through the whole list. He then goes to the clerk of each house, and calls the balance to him ; and if they both agree, they mark it with a pen. If they differ, they examine where the error lies, and make the accounts agree. He then casts up each side of the balance-sheet, and strikes the balance. If the total amount of debits exceeds the total amount of credits, he will have to receive the amount of the difference. If the credits exceed the debits, be will have to pay the difference. If a banker does not choose to pay a bill or draft brought home from the Clearing-house, it is sent back, and dropped in the drawer of the house by whose clerk it was presented. On the bill or draft is stated the reason for its non-payment: this is usually, " no effects," or a no advice"; some- times, " not sufficient effects," or " refer to the accepter." If this draft was delivered, in the first instance, in the morning clearing (that at twelve o'clock), it is usually returned before four o'clock ; but in all cases, it must be returned before five o'clock, or else it will not be taken back, and the banker is considered to have paid it. If returned after four o'clock, it is debited and credited on the back of the balance-sheet. All this is usually done by five o'clock, when the clerks go home for a Bhort time for two purposes : one purpose is, to fetch the money they nave to pay; and the other is, to see if their balance on the sheet agrees with the balance of the books at home. At about a quarter or half-past five they return, and any clerk who has money to pay, pays it to any clerk who has money to receive. It is common, however, for three or four clerks to form a sort of club, and pay principally among themselves. Hence, when one member of the club has money to pay, he will pay it to some member of the same club who has money to receive, in prefer- ence to paying it to any one else; by this means his friend obtains his money earlier than he otherwise might, and gets off sooner. It is obvious that all the money that is to be paid must be equal to all the money that is to be received. If this should not appear to be the case, there must be some error ; and the Clearing-house is then said to be wrong. Two in- spectors are appointed with salaries, to detect errors of this kind by ex- amining and marking off the sheets. Their signature is also necessary be- fore any money can be paid from one clerk to another. All the articles in the clearing are entered at home in a book called the Clearing-Book. On the left-hand are entered the bills and drafts upon other bankers. These are called the " clearing-out." On the right-hand are entered the drafts which are drawn upon the house, and which have .come in from the clearing. These are called the " clearing-in." If the "clearing-out" is a greater sum than the "cloaring-in," the clerks say, " the clearing brings in" ; that is, the clearing clerk will bring in money from the Clearing-house. In the other case, they say, " the clearing takes out"; that is, he will takeout money from the Banking-house to pay away .at the Clearing-house. The balance of this book should agree with the clearer's balance -sheet, excepting the differences of the preceding night, which he may have settled. When this is the case, the clearer is right; if not, he is wrong, and he must discover the error. The clearer v 253 A Treat** o* nay bo wrong through error* made either in his own book at tho Clear. ins-hou* f or in Mi. U>ok at home. The error at home may be either in the " clearinp-in" or in the " clearinp-out." If the ernr IKS in .it will make the Banking-house wronp; if in tho clear- i. it will n-'t Sijipnue, for instance, the clearing-out is wronp, rut ;.li. the house will be 1,000 over, and tho clearer will l>e 1.000 short. But if the elearinp-in be wrong, cast 1,000 too much, it will not effect the balance of the house, because the Cash-Book will, mnwquently, be 1,000 lew; and these two amounts, those of the Cash-Bonk and the Paid-Day- Book, (into which the amount of the Clear- mg-In-B<>ok ia entered,) are placed on the same side of the trial-paper. But tliin error will make the clearer wronp. The way in which the clearer discovers hia errors is, by marking off his book against the Clear- ing-Book, and by recasting both the books. An error may have occurred at the Clearing-house. If the clearer has placed a wrong balance on \\\- aheet, or has wrong cast his balance-sheet, the Clearing-house will be wrong, and the inspectors will make it their business to discover the error. But if the clearer has entered an article wrong in his book, and the rink of the house upon whom the draft is drawn has entered it wrong al.no, then the Clearing-house will be right, and both these clearers will be wrong ; one being as much over as the other is short. All the articles in the clearing-out must mark against either the jour- nals, the Received Waste-Books, or the Lists. To secure greater accuracy, the clearing-in is entered not only in the regular Clearing-Book, but also in another book by itself, which for distinction is called the Clearing-In- Book. The amount of the clearing-in is entered in the Paid-Day-Book previous to the daily balance. On the following morning, the Clearing In-Book is marked against the debit side of the Ledger, and the Ledger Folio placed against each entry. No gold, silver, or copper, is taken to the Clearing-house ; the differ- ences under 5, that may be left between the clerks who receive and pay with each other are carried to account on the following day. Country notes are not paid at the Clearing-house, but are taken round to the banking-houses, and exchanged for tickets called memorandums, which are passed through the afternoon clearing. The following is the form of these memorandums : London, lit May, 1827. Due to Metirt. Steady $ Co. One Thousand J'oundt. For Country Notet, to be paid in the clearing of thit day. For Meun. Hope, Rich $ Co. & 1,000. A Clerk. Drafti that are paid into the Banking-house after four o'clock arc taken to tbe house* upon whom they are drawn " to be marked" ; that is, it is acked if tbee drafts will be paid in the clearing of the next day. It -<,, OM of tbe cleric* mark* the cheque by placing his initials upon it. If the 254 The Clearing House. cheque is refused to be marked, it is returned as dishonored, on the following day, to the person who has pai$ it in. Had it not been sent to be marked, the draft would not have been refused payment until the next day, and it could not be returned to the customer till the day after- wards. The operations on the Stock Exchange cause a great number of cheques to be drawn on bankers, and thus increase the operations at the Clearing-house. A person who wants to buy 100 consols, gives his order to a broker, and pays him possibly by a cheque on his banker, which the broker takes and pays to his own banker. He then buys the 100 consols from a jobber, and pays him by a cheque. The jobber possibly replaces this stock by buying a 100 consols from another broker who is ordered by his principal to sell that amount of stock. The jobber gives the broker his cheque upon his banker, and the broker probably will give his princi- pal the produce of the stock by a cheque. No money has passed between the parties, and the result of the whole is, that the buyer of the stock has 90 less in the hands of his banker, and the seller has 90 more. Four cheques have been drawn, and these have caused transactions with five different bankers. The total number of credit and debit operations in all the banks is eight. 1. The banker of the buyer of the stock pays his cheque through the clearing, and debits his customer. 2. The banker of the broker who buys the stock, credits him with the purchaser's cheque, and debits him for the cheque he gives to the jobber. 3. The banker of the jobber credits him for the cheque he has received from the buying broker, and debits him for the cheque he gives to the selling broker. 4. The banker of the broker who sells the stock credits him for the jobber's cheque, and debits him for the cheque he gives to his customer who is the seller. 5. The banker of the seller credits him for the cheque of the broker, who has sold the stock, and will debit him for any cheque he may draw against it. Should neither the buyer nor the seller of the stock keep a banker, then only three cheques would be drawn. Besides these daily transactions arising out of real business, the brokers have large transactions in what are called "time bargains." This is what is usually meant by "gambling in the funds." The parties buy or sell consols against the next settling day. No real purchase or sale is ever intended. When the settling day arrives, the losing party has to pay the difference that has arisen from the fluctuations in the price. A settle- ment takes place among the brokers in a way somewhat resembling the settling between the bankers at the Clearing-house. All the differences are paid by cheques. A broker may give twenty, thirty, or forty cheques to as many different brokers, and he may receive an equal number from other brokers. All these cheques are paid by the respective bankers through the Clearing-house. Besides settling days for consols, there are also settling days for foreign funds, and for shares in railway companies. 255 A Trtatitf. on Banking. The diflVrf tiocn in these caaea are also settled by cheques upon the clear- ing banker*. Mr. Thomas, inspector of the Clearing-house, stated to the Hull ion Committee, in the year 1810, that the average amount of drafts puid every day at the Clearing-house was 4,700,000 ; and the average amount of the balance paid in bank notes was , 2*20,000. Sn,.t:m. * the bank note* brought to the Clearing-house of an evening exciv.i. .1 X 500,000, and on settling days at the Stock Exchange, the amount of drafts paid was above 14,000,000, At that time the Clearing house had been established thirty-fire years, and the number of clearing bankers wa forty-six. The following is a copy of a Clearing Balance-Sheet, and a List of the Bankers who clear. The name of the house to whom each sheet belongs is placed at the top, and is then, of course, omitted in the alphabetical DEBTORS. CREDITORS. ..<*. *, d. Barclay. Barnard Barnetti Bosanquet Brown Curriei Fullert Olyn Ilanbury Hankoy Jones Lubbock Maeterman Prescott Price Robert* Rogers Smith Spoon er Stevenson .-r. in- Vcre Williams Willis i The following is the amount of transactions passed through the clearing by each banking-hou.se, during the year 1840 : 107.Mt.SM ..... Barclay. 1S.MMM ..... Barnard. ***, * lUroetU. Bosanquet. Brown. Carries. Deanisoa. 250 8,000.000 Dorrion. 000 Fullers. 105.3IKi.nni) ( ;] >n . '.mio l!;inhury. 15,000.0110 ]l.,i.k, y : I0<,ooo.0d() ). 24,200,000 LaUbroke. The Clearing-House. 33.700.000 Lubbock. 90.000,000 Masterman. 30,000.000 ..... Prescott. 15,300.000 Price. 80,880,600 ...'.. Robarts. 9,000,000 Rogers. Stevenson. 16,000,000 Spooner. 64,000,000 . . . . Smith, 37,000,000 Stone. 10,400,000 Vere. Weston. Whitmore. 56,000,000 Williams. 20,500,000 Willis. 974,580,000 The following is an account of the aggregate demands made through the Clearing-house, and the amount of bank notes with which they were dis- charged, during the year 1839 : Demands. Bank Notes. January 82,762.400 6,348,500 February 76,164,700 4,960,200 March 75,879,200 5,621,500 April 85,839,200 5,836,000 May 80.587,600 5,615,000 June 67.413,900 5,060,000 July 83,865,200 6,284,800 August September October November December Demands. 87,610,500 74,237,700 87,478.200 81,729,200 70,833,800 Bank Notes. 6.164,900 5,129,800 5.706,800 4,793,100 4,755,000 954,401,600 66,275,600 A kind of clearing takes place between the Bank of England and some of the London bankers. Most of the London bankers keep a drawing account with the Bank of England: And when cheques or bills are presented to a banker for pay- ment by the bank, he pays them by a cheque, which is passed to the debit of his account. It is also said that some bankers have an agreement with the bank that no cheque shall be posted to their debit until after three o'clock in the afternoon. Hence, if the bankers draw large cheques in the morning, they can provide for them in the course of the day. This so far resembles a clearing, that no notes pass in settling the daily trans- actions. But it is merely an arrangement between the Bank of England and each banker individually, and has no reference to any settlement of accounts among the bankers themselves. The following is the evidence on this subject given before the Committee of the House of Commons, by the Governor of the Bank of England, in reply to questions put by Mr. Glyn, a London banker : "Mr. Glyn. Do not the private banks clear with the Bank. of England, by the use of cheques upon the Bank of England ? They have the option of doing so. " That is a substitute for the notes which would be used, and that so far economises th bank-notes ? Yes. "Does not that observation also apply to joint-stock banks? do not they clear, through the medium of cheques, upon the Bank of England? Yes; but as far as regards clearing, it is a question between the joint-stock banks and the private bankers. " But so far as regards the private banks and the Bank of England, the economy of bank-notes between them is carried to the greatest possible extent, inasmuch as the private banks use cheques upon the Bank of England? Yes." (Commons, 3266- 3270.) The banks of Newcastle on Tyne adopted a sdmewhat similar, but a more extensive plan of clearing, through the means of the branch of the Bank of England. The plan was thus described in a letter addressed to me, about two years ago, in reply to my inquiries on the subject : v* 257 A Treatise on Banking. The banks here do not clear. They used to do so, and for that pur- pose had a room at Messrs. Ridley's bnnk ; hut, from some objection raised by Messrs. Lamhton*, the system was discontinued. ''j have, however, adopted a plan of exchanges, which, from tin- facilities granted by the branch bank, answers nearly the same purpose as a clearing, without the e\p. use. 1 must inform you that they ull ha\e drawing accounts with the branch bank, and the plan now adopted is as MudJet namely : 44 At two o'clock every day, each bank pays in, to its credit with the branch hank, all bills and cheques on other banks received up to that hour. The amounts so paid in are passed to credit in totals, and the bills and cheques are then sorted into charges upon the respective banks, and presented at their counters by the Bank of England, who receive in pay- ment a cheque upon themselves. So that, in tact, each bank is credited in total with what it pays in, and debited with the cheque given for what it has to pay; thus obviating the necessity of any bank-notes passm-_ r . 44 This of course gives the branch bank some trouble, and they there- fore strictly confine the facility to those banks issuing Bank of Lngland paper ; and as the Union Bank issues its own paper, it is consequently ex- cluded, and is obliged to exchange separately with the other bankers." Several of the bankers at the West-end of London keep an account with a City bank. They do not, however, in all cases pass the whole of their transactions through the Clearing-house. They pay and receive with the clearing bankers individually, and sometimes leave their unpaid bills with their city agent They occasionally pay into the City bank the cheques they may have on the clearing bankers, and on the other bank- ers too. The stock-brokers usually write across every cheque they draw, the name of the banker of the party in whose favor it is drawn ; and if they do not know the name of the banker, they write " & Co." The banker on whom it is drawn will then pay it only in the clearing. If a broker intends a cheque to be paid in bank notes across the counter, he writes on it the word 4t cash " ; such cheques are given only to persons who do not keep bankers. Many persons now cross the cheques they draw with the name of a banker, to guard against fraud in case the cheques should be lost or stolen. The cheque can then only be paid to the banker whose name is on the cheque. If it be crossed with the names of two bankers it will be refused payment to either, unless the matter be satisfactorily explained. Clearing bankers never make payments to each other, except through the clearing. The effects of the clearing-house are thus described by Mr. M'Culloch, in his Commercial Dictionary : " ^Lf" ** hugoit proportion both of the inland bills in circulation in the country, 4 si*o^flh tin- Committee of ! .inkers fur admission to the Clearing-house. This ww refused. The directors also applied for permission to have a drawing account at the Bank of England. This, too, was refused. Notwithstanding these difficulties, the bank continued to advance, and, by the date of the First Annual Report, March 4th, 1N;J5, the paid-up capital, increased by two colls of 5 each upon the shareholders, nrnourit- At the commencement of the year 1835, the Bank of England institut- ed legal proceedings to prevent the London and Westminster Bank ac- cepting bills drawn at less than six months after date. Supported, how- ever, by the legal opinions of Sir John Campbell, Sir William Pollett, and Mr. Pemberton, the trustees continued to accept such bills, and resisted the proceedings of the Bank of England. By the end of December, 1835, the number of shares issued had in- creased to 17,818. Soon afterwards the directors made a fourth call of 5 per share, payable the following April. This made 2Q paid upon each share, and the whole paid-up capital exceeded -100,000. The div- idend on the year ending December, 1835, was at the rate of 4 per cent At the commencement of the year 1836, the bank extended its branch- es. In addition to the branch at Waterloo-place, Pall Mall, opened on the same day as the head office in Throgmorton Street, the bank opened, on the 4th of January, a branch at 213 High Holborn, and another at 87, Whitechapel ; and on the 29th of February, another was opened in Wel- lington Street, Southwark. In the following June a branch was opened at 155 Oxford Street In this year the bank obtained a large accession of country business, in consequence chiefly of the formation of a great num- ber of new joint-stock banks throughout the country. In this year, too, the directors issued 9,333 shares at a premium of 4 10*. per share, by which the sum of 41,998 10*. was realized as premiums. The total paid-up capital on December 31st, 1836, amounted to 597,225, on which a dividend was paid at the rate of 5 per cent. In the beginning of the year 1837, the suit brought by the Bank of England was terminated, by the Master of the Rolls granting an injunc- tion to restrain the London and Westminster Bank from accepting bills at less than six months after date. The country joint-stock banks then adopted the practice of drawing upon the London and Westminster Bunk ** without acceptance," in the same way as the Bank of Ireland draws upon the Bank of England. No practical difficulty was experienced, and the London and Westminster Bank lost none of its connections in conse- quence of this adverse decision. At the end of the year the directors de- clared the usual dividend of 5 per cent 260 The London and Westminster Bank. On the 26th of December, 1838, the bank removed its business from No. 38 Throgmorton Street, to their new building in Lothbury. In the report delivered in March, 1839, the directors refer in the following terms to the then condition of the bank : " The pleasure which the directors feel in making their Fifth Annual Report is augmented by the circumstance of its being delivered to the proprietors in their own building, an event that seems to justify a glance at the past history of the bank. " When the directors consider, that during the five years of the existence of this establishment, they have had to contend against the fears and prej- udices of the public mind, the uncertainties and the intricacies of the law, and the opposing influence of existing interests ; and that this conflict has been carried on in seasons of great commercial embarrassment, and under circumstances of peculiar difficulty ; and that, amid all these disadvan- tages, they have nevertheless acquired a paid-up capital of nearly six hun- dred thousand pounds, between eight and nine hundred respectable pro- prietors, a large and increasing business in London, and a country con- nection that embraces one hundred and fifty banks and branches, they do feel that the result of the first experiment of establishing a joint-stock bank in London has been highly satisfactory, and that the confidence they ex- pressed in their First Annual Report has been abundantly confirmed." The same report makes the following allusion to the other joint-stock banks established in London : " It may be expected that some notice should be taken in this report of the extension of the system of joint-stock banking in London. This will not, in the opinion of the directors, militate against our interests, as those principles, which we were the first to advocate, will be thus more widely disseminated. Hence all banking companies that may be respectably and honorably conducted will be regarded by this bank, not as rivals, but as allies. At the same time, the shareholders should bear ift mind, that as joint-stock banks multiply in London, each bank will have to depend mainly upon the support of its own proprietary. And the London and Westminster Bank having been first in the field, ought not to suffer itself to be passed in the course by later and more youthful competitors. But if the exertions of our shareholders be at all proportionate to their num- bers, their wealth, and their respectability, the London and Westminster Bank will not only have the honor of being the first joint-stock bank in London in the order of time, but in other respects also will be enabled to maintain the preeminence." In March, 1840, the dividend was raised to 6 per cent, upon the profits of the preceding year ; and this rate has since been constantly main- tained. In 1841 the directors issued ten thousand of the unappropriated shares at par to the existing shareholders, in the proportion of one new share to the holder of three shares. This raised the number of shares issued to 40,000, and the paid-up capital to 800,000. In February, 1842, the bank opened a drawing account with the Bank of England. In the report delivered March, 1841, the directors observe, " During the past year the banking institutions of the country have occupied a large portion of public attention. The directors trust that the events and dis- 261 A Treatise on Banking. that have taken place will hnve the effect of diffusing a correct knowledge of the principle* of joint-stock banking, and that institutions like the London and Westminster Bunk will be allowed to exercise the same legal rights and privileges which arc accorded to other hanking es- ttblwhmrnv" In the Mine year, Mr. Gilbart, the general manager, was mined for four days before a Select Committee of the 1 1 ,,!- . ,f ( \,m- mona, at the request of a meeting of deputies from the joint-stock hank-. In the report of March, 1844, we read, "As the speech from the throne has called the attention of Parliament to ' the state of the law with rpnrd to the privileges of the Bank of Knirlaml and to other banking es- ttfsnshments,' the directors have cooperated with the represrntati\> other joint-stock banks in bringing under the consideration of the Govern- mant the defects of the laws relating to banking companies, which they feel sure the Legislature will not refuse to remedy." In this year the bank obtained the power to draw, accept, or indorse any bills of exchange not payable to bearer on demand ; and immediately commenced accept- ing the bills drawn by its country connections, and issuing circular \< of credit for the use of travellers and residents on the continent. In the year the bank obtained the power of suing and being sued in the of its public officers, and accordingly registered the names of its trustees for that purpose. In addition to the usual dividend of 6 per cent., the directors gave in March, 1847, a bonus of 2 per cent out of the profits of the preceding year. At the same time they announced the distribution of the remain- ing ten thousand unappropriated shares at par among the existing share- holders, in the proportion of one new share to every four shares pre- viously held. This raised the paid-up capital of the bank to one million tterling. On the 31st of December, 1817, Messrs. Young & Sons (formerly Messrs. Westoft & Young), of South wark, retired from business, and the customers of the bank, according to the wishes of Mr. Young, transferred their accounts to the Southwark Branch of the London and Westminster Bank. At a general meeting held on the 1st of March, 1848, the report an- nounced that, with the exception of outstanding instalments amounting to 3,273, the paid-up capital of the bank was one million sterling. A divi- dend at the usual rate of 6 per cent was declared, and 4,223 4s. lOd. was added to the surplus fund. The chairman stated that, in the week preceding the letter of the Gov- ernment suspending the act of 1844, the bank had sold Government secu- rities to a large amount, which could not afterwards be replaced but at an advanced price. The loss thus occasioned amounted to nearly .20,000. The following is the paragmph in the report referring to this sub- ject: Prom the severe pressure on the money market during the latter part of the year, it was deemed advisable to realize some portion of our Gov- ernment securities; and although the profits of the year have, conse- quently, been curtailed, yet the directors feel assured that thr: liberality which they were thus enabled toVjxerci.se towards its customers will tend MB The London and Westminster Bank. to the advantage of the bank. The whole of the stock that was sold has since been replaced." At this me'eting the proprietors recommended to the directors that the general meetings should be held half-yearly, and that the first meeting should be held earlier in the year. The directors accordingly called a special meeting on the 19th of July, for the purpose of receiving a half- yearly report, and for making such alterations in the deed of settlement as would enable the proprietors to meet on the third Wednesday in January, instead of the first Wednesday in March. Th/siresult of this resolution is, that the annual general meeting of the bank will in future be held, under the deed, on the third Wednesday in January, and a half-yearly meeting may be called specially by the directors either on the third Wednesday in July, or on any other day, whenever it shall be deemed necessary or ex- pedient. From this half-yearly report it appeared, that, from losses in the pre- vious year, it had become necessary to take .5,161 3s. Id. from the sur- plus fund to make up the half-yearly dividend. But in the second half- year the profits exceeded the dividend by .7,237 3s. 2d., making on the whole of the year 1848 an addition to the surplus fund of .2,076 Os. Id., after paying the dividend of 6 per cent, on the increased paid-up capital of 1,000,000. II. Its Principles. At the time the London and Westminster Bank was announced, it was contended by the advocates of the previous system that the principles of joint-stock banking were wholly inapplicable to the wants and habits of the population of London. Had the founders of this bank possessed zeal without discretion, they would probably have disre- garded the peculiarities of the field of their operations, and have adopted entirely the system of banking so long acted upon in Scotland. They seem, however, to have combined the enlightened views of statesmen with the caution and practical knowledge of men of business. Hence, they followed or discarded the principles of Scotch banking according as they found them adapted, or otherwise, to the local circumstances of the London population. They seemed not so anxious to introduce a new sys- tem of banking, as to guard against the imperfections of the one previous- ly in existence. From the original prospectus and other documents issued by the company, we lea'rn that the following principles were those ulti- mately adopted. 1. That the bank should consist of an unlimited number of partners. This is essential to its character as a joint-stock bank. It was ascertained that within the previous twenty years about twenty private banking houses had stopped payment in London ; that by most of these failures the public had sustained considerable losses, and that great difficulties and embar- rassments had been occasioned by the interruption to business and the want of confidence which these failures had occasioned. A bank com- posed of several hundred partners, all of whose property would be an- swerable for its obligations to the public, seemed the most effectual way of preventing the recurrence of these evils. To show the strength of the company and the extent of the confidence to which they are entitled, a list of the shareholders is published with the annual report of the directors. 263 A TVeotfw on Banking. the Act of 1844, these names have also !><-.-n published at the of oach year in a Suppli-im-nt to tin- Ri/n/ (tn-.rttr. The following is an analyst* of those published in th<> \< 1847: > ... IJii; !. ,:r.. ! u-ii :. It! : u ' -. oV. ; <-!TL-> in- n, .'U : im-.li- cal men, 13; natal and military officers, 45 ; solicitors, barristers, and writer* to the signet, 9 ; mon of title, 12; gentlemen and others, 781: making a total of 1,066. These are resident as follows : la Loadoa, sad within ftnssimil< In Ireland 11 In other countries, . . . 18 Total, . . 1,066 675 In other parts of England, . . 380 la Scotland, 42 2. A second principle adopted was, that the bank should have a large paid-up capital. It was observed that the London bankers did not carry on business with their own capital, but merely upon their credit : they were supposed to be men of property, and, in some cases, this supposition constituted the whole of their working capital. Hence, in some instances, London bank- ers had stopped payment who were perfectly solvent ; hut tli.-ir property was not engaged in their business, and could not suddenly be rculi/r.] to pay their debts. To obviate these inconveniences, to be prepared at all times for a withdrawal of its deposits, to be able to give adequate accom- modation to its customers, and to support public confidence in* seasons of extreme pressure, a large paid-up capital was deemed requisite. No idea seems to have been entertained of remaining satisfied with a small capital in order to pay larger dividends. The directors do not appear to have regarded themselves as mere agents, employed to obtain the most rapid return for a sum of money ; but they acted as the founders of an estab- BnVnent destined to take a high rank among the national institutions of the country. The capital of the bank was fixed at 5,000,000 sterling, divided into 50,000 shares of 100 each. All these shares are in the hands of the partners, and the paid-up capital of the bank is thus 1,000,000, with a power in the directors of calling up an additional sum of 4,000,000 sterling. 8. It was observed that the London private banks were adapted only for the rich. An indispensable condition of having an account was that a certain sum should be kept unproductive in the banker's hands. Thus the middle class of society, who had the means of employing the whole of their capital in their respective occupations, were altogether excluded from the advantages of banking. To remedy this defect, the London and Westminster Bank determined to open accounts with persons who had not the means of keeping large balances unemployed, but who were willing to pay the bank a small commission for conducting their ac- counts. The principle of commission is not practised in Scotland with regard to current accounts, as the banks look for payment chiefly by the sue of their notes. In this country the principle is adopted in the provin- ces, and even by the London bonkers in regard to their country accounts. The application of this principle to London accounts was an improvement introduced by the London and Westminster Bank, and it brought the ad- 264 The London and Westminster Bank. vantages and conveniences of banking within the grasp of a large class of the community to whom they were previously denied. The expense of keeping a banking account was also reduced by the prohibition of pres- ents or Christmas boxes to the clerks. Although the system of Christmas boxes is sanctioned by the Bank of England as well as by the private bankers, it is, we consider, a practice more honored in the breach than in the observance. Whether these presents are regarded as taxes upon the customers, or as charitable donations to the clerks, they were deemed to be equally objectionable. 4. A further attempt was made to popularize the system of banking in London, by allowing interest upon small sums of money lodged on de- posit receipts. All the witnesses examined before the Parliamentary Committees of 1826 had borne testimony as to the beneficial effects of this system in Scotland. And although the London and Westminster Bank, not being a bank of issue, could not regard these small deposits as an instrument of increasing its circulation of notes, yet it was thought that the system might be rendered a source of profit to the bank, and certainly an advantage to the community. The savings banks could receive no more than 30 from a depositor in each year, and only 150 in the whole. Those parties who had further sums they wished to deposit in a place of security upon the principle of receiving interest on the sums thus lodged, were provided with such a place in the London and Westminster Bank. Sums from 10 to 1,000 are received on deposit, and interest allowed at a known rate, and they are at all times repayable upon demand without notice. The London and Westminster Bank have not adopted the system of cash credits as practised in Scotland. These credits are valued by the Scotch banks chiefly as an instrument for the issue of their notes ; and it may be questioned whether the system can be rendered a source of profit to a non-issuing bank without imposing heavy charges in the form of in- terest and commission upon the customers. 5. While, however, the founders of the bank were thus regardful of the industrious classes of the community, they were not inattentive to the in- terests of the wealthy. Professional men, merchants, and gentlemen of fortune have often large sums of money in their hands for a short time, waiting favorable seasons of investment. For these sums the private bankers would allow no interest. The London and Westminster Bank determined to take temporary or permanent lodgments of sums of 1,000 and upwards, upon special agreement as to the rate of interest and time of repayment. The rate of interest is usually governed by the state of the money market, and the principal is repaid at a fixed time, or at a few days' notice, as may be agreed upon. Parties may lodge money upon an interest account who have no current account, and those who have cur- rent accounts may transfer any portion of their balance to an interest ac- count ; but the bank allows no interest on the balance of a current ac- count. It is considered that a large portion of the fluctuating balance of a current account must be kept in the till to meet the daily cheques drawn by the customers ; that the remainder must be invested in the most avail- able, and therefore the least productive securities ; and that considerable w 265 A Traalin on Bunking. M incurred by books, rlwvjwM, ml- iiduetm-.,' these : tinl hrnop {lint the brink rould not afford to jji'isnt any rate of > it would be worth while for the < .A i! . may have l<- a. -counts, a curn-nt account, ami a de- posh ace ' ion one he receives interest, upon I'M- other the re- oeives none. The London and \\Vstminster Hank think it l ::< -r to keep thfuft two accounts distinct, than to adopt any system of amalgam*) 6. Another principle of the Iwuik not announced in tin- pro-; but adverted to in some of the Annual Reports is that of keep., large portion of its funds at all times in a convertible state. In tin; Re- port of March, 1839, the directors state, "Although a low rate of in- tcrrst prevailed duniiu the last year, the directors did not allow the desire of making large profits to tempt them into advances upon inferior securi- ties, or to lock up their funds in inconvertible investments ; they feel as- tared, that any departure from sound principles in banking, e\ n when attended with immediate profit, must always rrsu/t in loss to the proprie- tor*, and danger to the establishment." Again, in the Report delivered in March, 1844, we read, "Throughout the whole of last year money was exceedingly abundant, and, consequently, cheap. 15 it although a low value of money affects most severely those banks that have the largest paid-up capital, and which have been so managed as to retain the full com- mand of their funds, yet the directors did not suffer the desire of ol>tain:i>ir a higher rate of interest to betray them into advances upon doubtful or in- convertible securities." In conformity with this principle, we find, from the account of assets and liabilities attached to the Annual Reports of the directors, that the amount invested in (Jovernment securities is consider- ably more than the whole capital of the bank. The propriety of such a course must have been abundantly evident during the existence of the bank, for it would be impossible to find so many "pressures" on the market, or so much fluctuation in the value of money, within any similar period in the history of banking. It may be presumed that the directors poke from their own experience, when they stated in their Kejxtrt of March, 1840, "The years 1837 and 1838 were remarkable for the abundance and cheapness of money, and the year 1839' for scarcity and pressure. Neither of these extremes is favorable to large banking profits : a state in which money is easy without being abundant, and valuable without being scarce, is most conducive to the welfare of both the hanking and the commercial interests of the country." 7. The last principle we shall mention as adopted by the London and Westminster Bank is the system of branches. Thi system, to the extent to which it is now carried, doos not -> -m to have been contemplated by the original founders of the bank. The first prospectus announced merely that a bank would be established in the . with a branch at the West-end of the town. But a power to estab- lish other branches was inserted in the deed of settlement, and it was soon observed, that, from the increasing extent and business of London, there were districts which were inadequately supplied with banking accommo- dation. In these districts the inhabitants were compelled either to forego all banking facilities, or to submit to the inconvenience of keeping their M The London and Westminster Bank. account with a bank at a distance from their habitation. It was to meet the public wants, more, perhaps, than with any sanguine expectation of reaping any large amount of immediate profit, that the directors extended their branches. Peradventure, too, it was feared that unless the London and Westminster Bank occupied these districts, the inhabitants might he induced to form among themselves small joint-stock banks with inade- quate capital, and thus have impaired the respectability of the system. In one instance this in fact actually occurred. The mode of conducting business is the same at the branches as at the City-office. A customer's cheque can be paid only at the branch on which it is drawn, but he may have money placed to his cred.it with that branch at any of the other es- tablishments. Those country notes that are made payable at the London and Westminster Bank, are, as matter of courtesy, paid at any of the branches. Each branch makes both daily and weekly returns of its transactions, which are laid before the directors ; and the affairs of all the branches are subjected to the personal inspection of the general manager : at the same time all the arrangements tend to localize the branches, so as to give them as much as possible the character of independent banks. The managers are selected for their experience in banking, and they give immediate replies to the inquiries of both their customers and the public. They are ready to afford every facility to the parochial and other authori- ties, in conducting the financial arrangements of the districts. They al- low the same rate of interest on deposits which is allowed at the City- office : and in making advances or discounts, they are not restricted to the amount which their own funds can supply. Thus each district has, in a branch bank, all the advantages that could be derived from an independent local bank, combined with the additional security and accommodation to be obtained from a more extended and wealthy establishment. Most of the branches have, since their establishment, transferred their business to other premises. The Westminster Branch was opened on the 10th of March, 1834, at No. 9, Waterloo-place, Pall Mall, and was removed to its present premises, No. 1, St. James's-square, on the 30th of December, 1844. The Bloomsbury Branch was opened on the 4th of January, 1836, at No. 213, High Holborn ; and the adjoining house, No. 214, was added for transacting business with the public on the 1st of October, 1838. The Southwark Branch was opened on the 29th of February, 1836, at No. 12, Wel\ington-street, in the Borough, and was removed to No. 3, in the same street, on the 26th of December, 1839. The St. Marylebone Branch was opened on the 15th of June, 1836, at No. 155, Oxford-street, and was removed to No. 4, Stratford-place, Ox- ford-street, on the 23d of April, 1844. Though the system of branches appears to be an extension of the orig- inal views of the Directors, yet the principles on which the business is .conducted have undergone no change. It is a proof of the consideration and practical knowledge brought to bear upon the subject, in the first in- stance, that no alteration or improvement has since been found necessary. The success of the company has been attributed more to the general ap- probation with which these views have been received than to any extended 267 A TruUue on Banking. MMHn of private solicitation. Thin, if correct, must lo the more gratify* ing to the directory as the prosperity uf the bunk is thus u public homage to the oundneai of its prin<-ipli-. 111. In Government. The government of the lunik is in a board of director*, niHMlrting of not (Vwrr tlmn twelve members. Thrco go out annually by rotation, but are eligible for n n.-ction. The present number n fifteen, but it can be increased at any time by a vote of the gem ml meeting of proprietors. There is no govenior, or deputy-governor, or permanent chairman. Five of the directors arc trustees, and are also registered aa the public officers of the company, in whose names, or any one of them, the bank may sue and be sued. The payment of the direc- tor* is fixed by the shareholders at their general un < tin^s. This sum was voted annually until the year 1839. Up to that year inclusive the annual profits are Mated in the reports before the payment to the directors n deducted. In subsequent years these payments are deducted first, and the profits are announced " after defraying the whole expense of manage- ment, including payment to directors. 11 By the resolutions of the general meetings appended to the Annual Re- ports, it appears that the first payment to tin- directors was a sum of 2,500, voted at the general meeting in March, 1836, for the services rendered in the two preceding years. la subsequent years, the payment was 2,500 annually, until March, 1817, when the sum of < 4,500 was voted for the year 1846, and the same amount was to be continued in each future year.* A Table, Aowiy At amount of Paid-it/i Capital, Annual Profits, Dividend^ and Surplus Hmd, of (Me Lou DOW AND WESTXINSTBB !UNK,O/ the 31 *t of December in each from U* Opening of the Bank. DM*. Paid up Capital L8MN MfJTQ WJJUS 117,180 :, .: M i ' . - wtjm >. i "'" ..... I 800,000 no 00 ' ..... -' HI :.., m rn rofiu of the Yew t Dlrldenda. ft rf. .. ./. 3,540 1 6 MM is 1 n MO in 10,818 1^ 32,433 11 1 :.' '."'> 4 ;}2,4"t in 8 29,864 13,639 11 11 2'..864 4- ii i-i 3 35,836 11 1 4 -v '...".I s 10 35,836 LI 51,300 9 41.507 1 55,118 II VI 4S.OIM) 51,696 1 7 48,000 51.081 is 11 48.000 n II 66,344 1 48,000 72,175 i:> 9 48,000 n i . .. 16,000 J .''-.-'.' 1 4 10 54,000 o' 62,076 60,000 Surplus Fund. i. d. 1,205 8 5 I.'.MI; 6 4.:.J7 ii 7,067 11 30.839 4 33,100 11 46,215 3 : \i: 63,126 K) 10 66,822 16 5 < 15 4 88,248 16 4 98,424 12 1 88,650 7 585,926 10 1 100.647 16 11 102,723 16 11 102,723 16 11 Tb abort article WM prefixed to a volume of the Reports ami otlicr puMir docu- eatt prtotod(aot paMuhed) in 1847, uml.-r tin- title of A K.-mnl of tli.- 1'n-.. ,,!!.,-< Hnt Thirtren Yean of the London on.-' The first annual meeting of the proprietors was held on the 13th of De- cember, 1837, at the bank premises in Princes-street. The number of hares on which the <2 deposit and the first call of <5 per share had been paid was then 31,080, making a paid-up capital of ^\~.~>\M. Upon this capital a dividend was declared at the rate of 4 per cent, and : 2,932 0*. 9d. carried to the credit of" the Guarantee Fund." In the year 1838 the directors made a call of 3 a share, payable the '21ft of May, 1838, which increased the paid-up capital to 10 a share. And in this year the dividend was raised to 5 per c< -nt. At the meeting in June, 1839, the directors stated that the deed of set- tlement required all the effects of the bank to be taken strictly at the mar- ket value of the day on which the accounts are made up. The half year's profits were consequently lower, from the exchequer bills held by the bank being valued at their then low price in the murk'-t. It was resolved at this meeting that the time of balancing the books of the company be in future the 30th day of June and the 31st day of 1 > - ccmber in each year, instead of the 20th day of May and the 20th day of November; and that the half-yearly meetings of the company be in fu- ture held in the months of January and July. 270 The London Joint-Stock Bank. At the general meeting held on the llth of January, 1840, the direc- tors announced their intention to issue 12,432 of the reserved shares, in the proportion of two to every five held by each shareholder. The shares were issued at 1 premium, and these premiums were added to the guarantee fund. At the meeting on the 1 1th of July, 1840, the report stated that out of these 12,432 shares, 12,254 had been claimed, and the remaining 178 had been sold on account of the bank at a premium of 3 each. The report further stated, that "the manager, Mr. Pollard, having claimed for his nominees the 1,000 shares at par to which they were entitled by his agreement when originally engaged, the same have been issued to them, which increases the number of paid-up shares entitled to participate in the present dividend to 32,080." In the latter end of the year 1840, Messrs. Wright & Co., a very old banking-house, having many connections among the Roman Catholics, stopped payment. The London Joint-Stock Bank determined to open a branch at the West-end of London, and appointed two of Mr. Wright's partners to be their managers. The directors made the following announcement of this event to the shareholders at the meeting held the 13th of January, 1841 : " Circumstances having occurred which appeared to present a favora- ble opportunity to establish another joint-stock bank in the western part of the metropolis, the directors resolved to open a branch of this bank in the premises recently occupied by Messrs. Wright & Co., No. 6, Henri- etta-street, Covent-garden. " Business was commenced at the branch in question, which is called ' The Western Branch of the London Joint-Stock Bank,' on Saturday the 5th ultimo, and the directors have every reason to expect that it will ma- terially contribute to the prosperity of this establishment." At the same meeting the directors announced their intention to issue the remainder of their shares : " On reference to the statement of assets and liabilities, the proprietors will perceive that the number of shares has been increased, by the issue of reserved shares during the past year, to 44,512 ; and the directors are of opinion that the time has now arrived when it is expedient to complete the number originally contemplated, by the issue of the remainder, which they have accordingly resolved to do. " As the directors have learned, with much satisfaction, that the princi- ple adopted on the former occasion was very generally approved of, they have decided, in the present instance, to follow the same plan, as nearly as possible, by issuing at a premium of 1 each, one for every three shares held by the present proprietors, and by dividing the payment for the shares into four instalments of ^2 10s. each, payable on the 15th of April, 31st of May, 29th of July, and 15th of September next. The pre- mium to be received on the said shares will again be carried to the credit of the guarantee fund. " There will then remain to complete the number of 60,000 shares the small excess of 651, which will be disposed of by the directors to the best advantage for the benefit of the bank." At the meeting in July the directors stated that, having been unable to 271 A Treatise on Banking. afree with the aseigneea of Messrs. Wright & Co. upon terms for the purchase of the premise* in Henncttn-strret, and the opportunity ollcring btaining the premises that had recently been occupied by Messrs. llammcwley <&e Co. (who had also failed) in Pall Mall, the directors de- termined upon removing the business of their Western Branch to the lat- ter house. The house in Henrietta-street was taken by the Cununercial Bank of London, who then ojK-ned a Western Branch. At tin- general meeting held on the 12th of January, IMv!, the direc- tors announced, that the instalments on the last issue of shares having been received, tin* [>ai9 12*. IQd. was taken from the reserved fund to make up the bait- yearly dividend. In January, 1847, the directors announced the following plan for the future regulation of the guarantee fund : 14 In meeting the shareholders at the usual period, the directors have satisfaction in laying before them accounts which show that during the last six months the bank has realized a net profit of ,31,f> s O 17v. " The question how this profit ought to be appropriated has necessarily brought under the serious consideration of the directors the present state of the guarantee fund, and the amount to which it should attain in order to carry out fairly the design for which it was instituted. And the result of their deliberations has been a resolution that it will not be expedient that it should at present exceed 120,000 except by the accumulation of its own interest, and such sums as may be too small to apply to a bonus. But that at the end of each year, in addition to the dividend of 6 per cent the surplus profit should be divided among the shareholders, provided such surplus amount to 2*. per share in the capital of the company, other- wise that it should be added to the guarantee fund. In accordance with this decision, the board will have on this occasion the pleasure of paying to die shareholders a bonus of 2a. per share, in ad- The London Joint- Stock Bank. dition to the usual dividend, and the guarantee fund will then amount to .120,117 14s. 3d." In January, 1848, the directors declared a bonus of 7s. 6d. a share, in addition to the usual dividend of 6 per cent. ; after sustaining a loss of 6,000 by the defalcation of one of their clerks on the establishment of the Western Branch. In January, 1849, the directors declared a bonus of 7s. a share, in ad- dition to the usual dividend of 6 per cent. A Statement of the Paid-up Capital, Profits, Dividend, and Surplus Fund, of the LONDON JOINT-STOCK BANK, on the 3lst December in each Year. Date. Paid-up Capital. Profits of the Year. Amount of Dividend. . d. . d. 217,560 11,634 9 8,702 8 310,800 21,243 12 6 13,209 310,800 27,068 6 10 17,285 11 3 445,120 47,922 8 10* 19,148 589,700 61,027 5 4t 28,819 600,000 48,671 19 * 36,000 600,000 31,420 16 6 36,000 600,000 37,041 14 4 36,000 600,000 41,440 14 6 36,000 600,000 65,820 11 9 36,000 * . " 6,000 o5 600,000 62,131 7 4 36,000 01 22,500 05 600,000 62,005 18 111 36,000 ! ... , 21,000 o5 Totals, 600,000 517,428 19 9 388,663 19 3 Surplus Fund. s. d. 2,932 9 10,966 13 4 20,749 8 10 49,523 12 8 81,731 18 94.403 17 2 89,824 13 8 90,856 8 96,297 2 6 120,117 14 3 123,759 1 7 128,765 6 128,765 6 *This sum includes 12,778 8s. 9d. received from premiums on shares sold. " 14,466 Os. Od. ditto ditto. 3,025 12s. 6d. ditto ditto. S These annual amounts of profits include the sums applied as interest of the surplus fund. Prospectus for 1849 : THE LONDON JOINT-STOCK BANK. Head Office. PRINCES-STREET, MANSION HOUSE. Western Branch. 69, PALL MALL. Capital, 3,000,000 in 60,000 Shares of 50 each. The business of the bank is conducted on the following principles : Accounts of parties, properly introduced, are received agreeably to the present cus- tom of London bankers, with tliis advantage, that interest is allowed on current ac- counts kept at the Head Office. Interest at the rate of 1 per cent, per annum will be allowed on the smallest bal- ance which may appear to the credit of each account, kept at the Head Office, at the close of any day during the preceding month : provided the monthly minimum balance, on the average of the half-year, shall not be under 200. Sums of money received on deposit, at such rate of interest, and for such periods, as may be agreed upon, reference being had to the state of the money market ; and, if required, bills or promissory notes, at not less than six months' date, will be deliv- ered to depositors, in lieu of receipts, for sums of not less than 100. The agency of joint-stock, and other country and foreign banks, undertaken on such terms as may be agreed upon. Investments in, and sales of, all descriptions of British and foreign securities, bul- 273 A Trtatbt on Banking. dividend* recdred, and every other description of bank. SM bviisMS nffA mosjsy SMACJ transacted. Tlie boanl of ilirvcton mints weekljr, when a full statement of the affairs of the aak U lakl before Circular Ix-ttrr of Credit granted on the Continent, and on the ehicf commercial I Of the world. III. The Union Bank of London. The Union Bank of London was formed chiefly by ^< nil. m. n who were, by birth or otherwise, connected with Scotland. The capital was fixed at 3,000,000 in 60,000 shares of 50 each. The bank adopted the principle of allowing "2 per cent, interest on the minimum balance of a current account : " Panics keeping current or drawing fftffHllrt* will be credited on the first day of every month, on the smallest balance at the credit of their account at the close of business on any day during the post month, provided that such balance shall not be less than 100. The total amount of interest will be passed to account every six months. 11 The bank was opened on the 4th of February, 1839, at No. 8, Moor- gate-street ; and a branch was opened on the 25th of March following, at temporary offices in Argyle-street, Regent-street, until a bank-house should be erected on the freehold ground which the directors had pur- chased for that purpose. Previous to the opening of the bank the directors engaged, as general manager, Mr. William Wilson Scrimgeour, one of the principal officers in the discount department of the Bank of England. The first meeting of shareholders was held on the 8th of July, 1840. The report stated that on the 30th June the paid-up capital was 210,025, being 5 per share paid on 42,005 shares, held by 738 proprietors. A dividend was declared at the rate of 5 per cent. ; and, after liquidating a portion of the preliminary expenses, ^2,000 was set apart as the foundation of a surplus or guarantee fund. In the Second Annual Report, made to the general meeting of pro- prietors the 12th of July, 1841, the directors stated they had made an additional call of S> per share, which had been most promptly re- funded to by the proprietors ; and the paid-up capital then amounted to 422,700. The report also stated that, a favorable opportunity having offered itself for opening a branch at Charing-cross, the directors availed themselves of it, by purchasing the premises No. 4, Pall Mall East, lately occupied by the Metropolitan Bank, which had withdrawn from business. Mr. Wight, the -manager of the Metropolitan Bank, was appointed the manager of the branch, At the general meeting held in July, 1844, the directors stated that, **the premises now occupied by the bank having become in.-nli-ijua'' the convenient transaction of its extended business, the directors had availed themselves of the opportunity of purchasing from the Grea* Western Railway Company, their extensive freehold premises in Princes 271 The Union Bank of London. street, which will secure a permanent position for the bank in the most convenient situation in the city." The directors state in their report of July 1847 : " The directors consider they are justified in increasing the rate of dividend, and they have therefore declared a dividend for the last six months of 3| per cent., which, with 2| per cent, paid in January, will make the dividend 6 per cent, clear of income-tax, for the whole year." The report also states : " The directors have considered the subject of the appropriation of the reserved shares, and have resolved that they shall be offered in the first instance to the shareholders only, in ratable proportion to the shares held by them, and on such terms as shall be equivalent to a liberal bonus. And the proprietors may rely on the directors giving ample notice of, and selecting such period for, this appropriation as shall be most desirable for the interests of the bank, and advantageous to the proprietors individ- ually." In the report of July, 1848, the directors again refer to this subject : " With respect to these shares, which were alluded to in the last an- nual report, it is almost superfluous to refer to the unprecedented mer- cantile crisis which has marked the eventful period since the last general meeting, as having rendered it inexpedient to appropriate them at a time when it might be inconvenient to many proprietors to avail themselves even of so advantageous an investment." Table of the Paid-up Capital, Annual Profits, Dividends, and Amount of Surplus Fund, of the UNION BANK OF LONDON, during each Year ending the 30th of June. Date. Paid-up Capital. Profits of the Year. Amount of Dividend. Surplus Fund. . . t. d. . t. d. . . d. 1840 210,025 12.501 5 10,501 5 2.000 1841 422,700 17,851 s 15,851 5 4.000 1842 422,900 23,145 0. 21,145 6,000 1843 422,900 23,145 21,145 8.000 1844 422,900 24,613 16 1 21,145 11,468 It) 1 1845 422,900 28,630 12 2 21,145 18,954 8 3 1846 422,900 23,145 Q 21,145 20,954 8 3 1847 422,900 42,070 5 5 25,374 37,650 1.3 8 1848 422,900 34,474 25,374 46,750 13 8 3 8 182,825 10 46,750 13 8 Totals, 422,900 229,576 Present Prospectus : UNION BANK OF LONDON. Capital 3,000,000, in Shares of 50 each. DIRECTORS. Sir Peter Laurie, Alderman, Governor; William Mountford Nurse, Esq., Deputy Governor; George Webster, Esq. ; John Barnes, Esq. ; J. W. Sutherland, Esq. ; James Farquhar, Esq. ; Peter Laurie, Esq. ; John Council, Esq. ; Charles Lyall, Esq. ; John Chapman, Esq. ; Henry Hulbert, Esq. ; Archibald Boyd, Esq. ; Lieut. Col. Matheson, M. P. ; John Scott, Esq. Principal Office. 2, Princes-street, Mansion-house. William Wilson Scrimgeour, General Manager. Regent-street Branch Office. Argyll-place ; Henry T. Clack, Manager- Charing Cross Branch Office. 4, Pall-mall, East; Alexander Wight, Manager. Secretary. Walter Laurie. 275 A Treat iff on Banking. TW capital of tlM bank in 3,000,000 sterling, in 60,000 shares of 50 each ; 42,290 f dWM shares (CM each of which 10 bus been paid, making the paid-up capital JC 4M.900) are held by nearly 600 proprietors, whoM names are TEMMS. Osrmrf Xnvmts. Parties keeping current or drawinjj accounts will he credited on the dm dar of every month with a month's interest, at the rate of 2 JKT rent per annam. on the smallest balanrc at the cn-.lit ol unt at tin- .!,. f UiMness on any da? during the past month, provided that such balance ahull not bo lc,is than 100. Toe total amount of inn-rot will be passed to account cvci -y six months. Drpotit Aetwutt*. The rate of interest at present allowed on money placed on de- rail at tea daya* notice, fa JC S per cenu, but which will rise or fall, pro nitil, with the Beak of Kagtand rate of discount for first-class bills, being always one per cent, under that rale. The maximum not to exceed 5 per cent, Receipts for the sums so de- posited will be granted to the parties; or, for the convenience Mtors going broad, bills or promissory notes, at not less than six months' date, including interest till maturity, will be issued. GENERAL BUSINESS. The agency of country and foreign banks, whether joint-stock or private. Circular notes and letters of credit issued for all parts of the continent of Europe 4 elsewhere. Parchascs and sales effected in all the British and foreign stocks and securities, and the dividends received without charge. The half-pay, Ac, of officers, being customers, also received without charge. W. W. SCRIMOBOUR, General Manager IV. The Commercial Bank of London. This bank commenced at No. 3 Moorgate Street, Lothbury. Its sbares were 1,000 each. The first manager was Mr. Sparkes, who had been a private banker at Exeter. The present manager, Mr. Alfred R. Cutbill, was cub-manager of the London and County Bank. A SMfwuml of the Paid-up Capital, Profits, Dividend, and Surplus Fund, of the COM- MERCIAL BANK OP LONDON, on the 31 st of December in each Year. Data. Paid-up Capital. Profits of the Year. Amount of Dividend. Surplus Fund. s. d. s. d. t. d. 1841, . . . 80,000 3,619 19 5 2,684 14 3 935 5 2 184*, . . 80,000 4,584 4 3 4,000 1,519 9 5 1843, . . . 80,000 3,249 3,200 1,563 9 5 1844, . . 80,000 4,945 12 2 4,000 2,514 1 7 1845, . . . 100,000 6,981 16 8 4,987 6 9 4.508 11 6 1846, . . 122360 1 -', ) 16 8 7,042 8 6 10,066 19 8 1847, . . . 188,280 12,382 13 2 .'472 14.825 5 8 1848, . . 128380 10,257 19 4 7,696 16 17,386 9 Totals, . . 128,280 58,622 1 8 41,235 12 8 17,386 9 The ft" ret annual meeting was held on the 30th of June, 1841, when the paid-up capital amounted to 80,000, on which a dividend was paid t the rate of 4 per cent per annum. The bank had opened a Western Branch in Henrietta Street, Covent Garden, in the premises formerly oc- cupied by the private bank of Messrs. Wright & Co., who had become bankrupt*. 276 The London and County Bank. At the annual meeting in 1842 the dividend was raised to 5 per cent. In the year 1843 the dividend declared was 4 per cent., and in 1844 it was 5 per cent. At a special meeting, held on the 3d of June, 1844, it was resolved to reduce the shares from 1,000 to 100 each. In July, 1845, the directors met their proprietors for the first time in their new house, in Lothbury. The rate of interest was advanced to six per cent. Present Prospectus : COMMERCIAL BANK OF LONDON, LOTHBURY, AND 6, HENRIETTA STREET, COVENT GARDEN. Capital, 2,000,000, in 20,000 Shares, of 100 each. DIRECTORS. John Taylor, Esq., Chairman. Thomas Barnewall, Esq., Deputy Chairman. Charles Dickson Archibald, Esq. ; William Beresford, Esq., M. P. ; William SprottBoyd, Esq.; John Alfred Chowne, Esq. ; William Cooper, Esq. ; James Alex- ander Douglas, Esq. ; Charles Hill, Esq . ; Jonathan Hopkinson, Esq.; Edward Ox- enford, Esq. ; John Savage, Esq. ; Joseph Thompson, Esq. ; Joseph Underwood, Esq. ; Richard Walker, Esq., M. P. ; Thomas Winkworth, Esq. MANAGER. Mr. Alfred R. Cutbill. SOLICITORS. Messrs. Amory, Nelson, Travers, & Wynn, and Messrs. Norris & Sons. Accounts of parties received and kept on the plan generally adopted by London bankers. Parties having current accounts with this bank have the advantage of transferring any surplus balance to a deposit account bearing interest; and sums of money are re- ceived on deposit from parties not keeping current accounts, at such rate of interest, and for such periods, as may be agreed upon. The agency for country and foreign banks undertaken on such terms as may be agreed upon. Purchases and sales of British and foreign securities, &c., effected, dividends re- ceived, and every description of banking business transacted. V. The London and County Bank. This bank was originally called the Surrey, Kent, and Sussex Bank, and it was intended that its head office should be fixed in Southwark. It afterwards assumed the above title, and took the premises formerly occu- pied by the private bank of Messrs. Lees, Brassey, & Co., at No. 71 Lombard Street. From thence it removed to No. 21 Lombard Street, the premises formerly occupied by the private bank of Messrs. Esdaile & Co. It has forty-five branches, all in the country. The following Private Banks have been absorbed in the London and County Bank : 1. Aylesbnry, 2. Chatham, 3. Cranbrook, 4. Oxford, J. & T. Chapman. Jeffreys & Hill. Wilmhurst & Co. Davenport & Co. x 2' 5. Petcrsfield, 6. Sandwich, 7. Petworth, 77 Hector & Co. Emmerson & Co. John Stoveld. A Treatite on Banking. 11e branches at Abingdon, Arundel, Cambridge, Canterbury, Chi-h < icr, Romford, St. Albnn'*, nml Stoncy Stratford, w< sequence of the failure of private bonks in those places. Present Prospectus : THE LONDON AND COUNTY JOINT-STOCK BANKING COMPANY Subscribed Capital 500,000, in Shares of 50 each ; 20 paid. Panut Ettablukmtmt, 21 Lombard Street. DiRKcroas. John Sadleir, Esq., M. P., Chairman. John Griffith Frith, Esq., William Cory, Esq.; Juntos William Deacon, Esq. ; J. A. Durham, Esq. ;* Swynfen Jerri*, Esq. ; John Cuthbert Jorncr, Esq.; J. H. Lance, Esq ; Kirhard Spriagett, Esq. ; Clement Tabor, Esq. ; John Wheelton, Esq. ; James Rhodes, Esq., HtftriiHf Dinctor. Tausraas, Wm. Cory, Esq. ; James William Deacon, Esq. ; Swynfen Jerris, Esq. GaxKRAL MANAGER. Henry Luard, Esq. STAXDIMO COCWSEL. Sir John Jerris, M. P., Attorney General; Russell Gurncy, Esq^Q.C. SKCRKTABT. R. P. Nichols, Esq. SOLICITORS. Messrs. Wilkinson & Gurncy. Branch Banks of the Company. Abingdon and Wantage, Arnndrl and Worthing, A.hfora, Ayleahary and Thane, Baabary, Buhop's Stortford and Saf- fron Waldeii, Rraintree, Brighton, Buckingham, Cambridge, Canterbury, Chanani, Chelmiford, Chirhester, Croydon, Maldon, Dorking, Oxford and Witney, Dorer, Petersneld, Graresend Pclworth and Midhurst, Greenwich, Koiiifonl and Chipping Halstead, Ongar, Hastings and Battle, Rye, Hertf)r cnpitnl, a MOttaf shall be railed to consider the pn>)>n<-ty of dissolving it; and that it. in opposi- tion lo the view of anv shareholder, it !* drt. trnmn.-d. notwithstanding the loss, to he may call on those shareholder* who so resolve 10 purchase his ahares, and tho* release him from all future res|>on-ihility. A proportion of the profits is reserved o form a permanent gnnrantre fund ; and , the entire future profits will be divided union- the 4. A balance-shaet, dearly showing the state of the financial affairs of the company. will be open to the hMparrion of the shareholder* seven days previous to each annual meettaf. . MMTtholdcn are entitled to one vote for five shares ; to two votes for twenty shares ; to three votes for fifty shares ; and to five votes for one hundred shares anil pwanis. By order of the Directors, R. P. NICHOLS, SI, Lombard Stntt. Secretary. The total number of places at which business is carried on in London by joint-stock banks is fourteen, of which seven are to the east, and seven to the west of Temple-bar. No. I. Analysis of the Rehtnu made to the Commissioners of Stamps and Taxes by thi Joint-Stock Banks of London, in January, 1849. London and London i- n - lnn n.nk Commercial London and Wwtmiiutar Joint Slock '}," Bank County Total. BMfc Bauk. *U**. odjoafa H.^ Panka raridanl In London and wHMa 15 miUa, . . .761 r ; 373 110 99 1 .' Da. la other pan* of EnUod, 361 177 109 63 263 963 . . 44 17 80 5 146 . . .14 1 1 1 1 18 19 9 7 10 45 1,199 828 670 179 363 3,138 No. ILAbttract of the Affairs of the Joint-Stock Banks, from their last Reports. Capital Capital Amount of Reaerved Amount Paid-up Dividend Babaertbad. Paid-up. Dapmita. Fund, of Shares. perShr. par Cant. ail TTsstmln 6,000,000 1,000,000 3,089,659 102,723 100 90 6 . . 3,000,000 600,000 S,3,OS6 198,765 50 10 6*3} Bo. Uaka Bank of London, 3,000,000 422,900 2,614,723 46,750* 60 10 6 . . 641,400 138,380 406,217 17,386 100 90 . . . M 1,800 1,364,730 27,650 60 20 12,141,400 9^30,9*0 9^23^90 323,174 T*4a to tha anoaut tran*ferred from tha Proflt and Loat Account, without tha accumulationa. WMk dMsa, It aaMBU to 10,000, which I. inraatad in Bank Slock. Two joint-rtock banks have been discontinued in London. 1. " The Metropolitan Bank,* 1 which was formed in 1839, and wound tip in 1841. The manager, the premises, and the customers were transferred to the Union Bank of London, who then opened a branch at Charing-cross. 2. The Clearing-House. " The St. Marylebone Bank," opened in 1836, was wound up in 1841. The business of the bank was transferred to the St. Marylebone Branch of the London and Westminster Bank. THE CLEARING-HOUSE. The joint-stock banks are not admitted into the Clearing-house. This exclusion puts them to some inconvenience, and to considerable expense. There are certain classes who cannot conveniently keep their account with a bank that does not clear. The banks have to keep a larger amount of money in their tills, and thus there is a loss of interest. They have to employ more clerks, to present their bills and cheques at the houses of the clearing bankers, and thus there is a greater expenditure in salaries. In lending money on the Stock Exchange they have to stipu- late for payment in bank notes, and not by a clearing cheque. In selling stock they have to make the same agreement. In these cases they have sometimes to submit to less favorable terms, as it is not always conve- nient, and never agreeable, to the stock-brokers to supply bank notes in the middle of the day. Other inconveniences are also occasionally experienced. The exclusion of the joint-stock banks inflicts also some inconvenience and loss on the clearing bankers. The joint-stock banks present all their bills and cheques at the counters of the respective clearing bankers three times a day, and receive payment in bank notes. On the other hand, each clearing banker presents his bills and notes at the same hours on the several joint-stock banks, at their respective counters, and receives pay- ment in bank notes. To meet the claims made upon them daily by the private banks, the joint-stock banks have to keep in their tills a larger amount of bank notes than they would keep were they members of the Clearing-house. And, on the other hand, each clearing banker has also to keep a larger amount of bank notes to meet the claims made upon him at his counter by the joint-stock banks. The customer of the private banker must also make provision the day before they fall due for any bills he may have made payable at his banker's. For should those bills be in the hands of the joint-stock bank who will present them early in the morning, and if provision is not previously made, the bills will be dishon- ored. Stock-brokers, too, have sometimes sustained annoyance from this cause. They have sold stock for parties who keep their account with a joint-stock bank, and when their cheque has been presented for payment by the joint-stock bank, it has not been paid. The answer given has been that it must come through the clearing ; and as the joint-stock bank could not pass it through the clearing, it has been returned dishonored to the broker's customer. These inconveniences and annoyances to all par- ites will necessarily multiply as the business of the joint-stock banks shall increase. The Clearing-house was established about seventy- five years ago, by some of the London bankers, for the purpose of facilitating their exchan- ges with each other. It was at first by no means generally approved, and some of the principal bankers refused to have recourse to it. After the number of clearing bankers had increased, a committee was formed x* 281 A Treatise on Banking. tor it government This committee is composed of five or six of the leading banker*, and any new bank that de-sin- to havr tin- pri\iirj(o of dealing, mutt now apply for jwrmission to the committee. The object the clearing bankers had in view was to exchange bills and cheques against bills and cheque*, and thus bo enabled to carry on tlu-ir business with a less amount of capital. Hut while the bunkers cnd-.,\- oured to promote their own interest, they promoted at the same time tin- interest of the public. The sums liberated from employment in tliis way became available for employment in agriculture, manufactures, and com- merce. WhenrvT any banker, tln-n-torc, is excluded from the Clenrin_'- houeo. and b consequently obliged to keep a larger amount of cash in his coffer*, hk available capital is so far reduced, and thus the agriculture, manufactures, and commerce of the country receive less encouragement. The establishment of the Clearing-house has led to new arrangements in several branches of business. The stock-brokers, for instance, now settle all their receipts mod payments by cheques, to be paid through the flnerlirf hnnsfi The cheques a broker draws on his banker are paid at the Clearing-house by cheques of other brokers, which he lodges to his credit The colonial brokers also, and other clases of commercial men, have fixed days for settling their accounts, and on these days draw cheques on their bankers in the morning, and pay in cheques to meet them at a subsequent part of the day. Thus the institution of the Clear- ing-house has become entwined with the commerce of the country, and could not be discontinued without deranging every branch of business. It has also received the sanction of the law of the land, the courts of law having decided that the presentment of a bill of exchange at the Clear- ing-bouse is a legal presentment In this case, as in many others, the custom of bankers and merchants has become law. Many of our com- mercial laws have had the same origin. They have at first been mere regulations established by merchants for their own convenience ; these regulations have been adopted by other classes' of the community ; they have been followed for a number of years ; and then the Jaw has recog- nised them as a portion of the commercial institutions of the country. Such was the origin of allowing three days' grace upon bills of exchange, nA such has been the case with the Clearing-house. The Clearing- house is no longer, therefore, a private subscription-room, from which tlif- parties admitted may exclude whomsoever they please at their own ca- price. They may exclude improper banking companies, as the Edinburgh hanks refuse to exchange with any bank that is not respectable ; but they are bound in justice to admit all respectable banks who may apply for ... : . i. ** Another amendment which I would propose as connected with the currency of London, would be a regulation of the Clearing-house by the Legislature. Although the Clearing-house was a voluntary association of bankers at first, yet it has now existed for 60 years, and has become interwoven with several branches of London trade ; it is therefore for all practical purposes a public institution, and, like a market or any other public institution, might become the subject of legislative interference. The exclusion of banks in London from the Clearing-house whose capi- The Clearing-House. tal now amounts to about two millions sterling, and who have about 2,000 partners, is not only a great inconvenience and a great loss to those banks, but is a great inconvenience also to the public in general, and such an interference with the freedom of trade, as carried on by individual companies in London, as alone would justify the interference of the Leg- islature ; and, besides, it is quite unreasonable that an association of om- nibus proprietors should be indicted and tried for a conspiracy because they have tried to run a rival omnibus off the road, and yet that a body of bankers may conspire for a similar object without any interference of the Legislature at all." (Evidence of J. W. Gilbart before the Commit- tee on Banks of Issue, March, 1841.) The following evidence was given by the Governor of the Bank of England, before the Committee on Commercial Distress, in answer to questions from Sir William Clay : "It must be known to you, I suppose, that the joint-stock banks of London are ea eluded from the Clearing-house 1 Yes. " Are you of opinion that that exclusion (which of course it is perfectly within the right and discretion of private banks to insist upon, if they please) tends to public in- convenience, inasmuch as it lessens, pro tanto, that economy of the circulating medium which the Clearing-house is calculated to produce ? Allowing joint-stock banks to clear with other bankers, I have no doubt would produce an economy in the use of bank notes. ".And economy in the circulating medium ? And economy in the circulating me- dium. " Have you any means of ascertaining the amount to which the admission to the Clearing-house of joint-stock banks would economize the amount of circulation now required for the use of London 1 I have not ; I have heard it stated at half a mil- lion, but I cannot say if that is correct. "I believe that the chairman of one large London joint-stock bank, namely, the London and Westminster, did state publicly that they were under the necessity of keeping a reserve of 150,000 in bank notes, more than it would have been necessary for them to keep if they had been admitted to the Clearing-house ? I know that he made some statement of that sort ; I cannot say what it was. " That must imply, not perhaps the necessity of a corresponding amount being kept by all private banks, but something approaching to it, inasmuch as all cheques on such banks held by joint-stock banks must be presented in the course of the morning at the banks, instead of being brought to the Clearing-house in the evening? Yes. " It is, therefore, not merely the amount of notes which the joint-stock banks are obliged to keep in reserve, but the amount of extra bank notes which the private bank- ers are obliged to keep in reserve ? Yes. w ' There are, besides the London and Westminster, four other joint-stock banks in London ; I believe their capital, from the published reports, amount to 2,645,000 paid-up capital, and their deposits to 8,864,000, together 1 1,509,000, of which these joint-stock banks have the control 1 I cannot say whether those figures are correct or not. "But assuming that those figures are correct, and that it is also correct that one of these banks, namely, the London and Westminster, is compelled to keep 150,000 more of notes in reserve, because they are not admittted to the Clearing-house, is it not probable that the sum you have mentioned of 500,000 is not too large an esti- mate of the increased quantity of circulating medium, which is. rendered necessary by the circumstance of these joint-stock banks not being admitted to the Clearing-house ? Assuming as a fact, that the London and Westminster Bank keep 150,000 of notes more than they would otherwise keep in consequence of not being able to clear, probably, I should say, that that statement is correct. "But at all events, without assuming that these figures are exactly correct, is it not true, that that exclusion must, in reality, produce the necessity for a larger amount of circulating medium to supply the daily necessities, of the public ? Yes." 283 A TruUite on Banking. Stcrio* IV. THE COUNTRY PRIVATE BANKS. THESE bank* cannot have more than six partners. They are banks of deposit, of loan, and of discount. As bank:) of deposit, they usually al- low interest on both deposits and balances of current accounts, and charge ft commission on the amount of the transactions. In commercial or manufacturing district* their advances arc usually made by way of dis- count ; in agricultural districts, frequently by loans. They remit money by issuing bills or letters of credit on London, or they direct their agents to make payments to bonkers or other parties resident in London. As banks of circulation, they have at various times occupied a large portion of public attention, and have been the subject of much legislation. Those bankers who wish to issue notes must take out a license, which will cost 30 and must be renewed every year. They may re-issue any notes not above the value of 100 as often as they think proper. And should any of the firm die or remove from the business, the notes may be issued by the remaining partners. But they cannot be re-issued by a new firm, which does not include any member belonging to the firm by whom the notes were first issued. If the half of a note be lost or stolen, a banker cannot be compelled to give a new note in exchange for the remaining half. But if it cnn be proved that one half of a note is burnt, or otherwise destroyed, then the holder may perhaps recover the note from the banker. In inch cases, the bankers always pay the value of the note on receiv- ing a respectable indemnity. Bankers may be compelled to pay whole notes that have been lost or stolen, provided the holder has given actual value for them. The stamp duty on country notes is as follows : . s. s. d. Note* not exceeding 11 ... ... ... 5 each. Exceeding 1 1 and not exceeding 22 10 " Ditto 22 5518" Ditto "55 10 1 9 " Ditto "100 " tt 200 20" Ditto "200 a 300 30" Ditto "300 " u 500 50" Ditto "500 100 86" Country banks are allowed to compound for the stamp duties on their IBs, at the rate of seven shillings per cent, per annum upon the amount in circulation, and to include, on the same terms, their bills drawn on London at twenty-one days after date. But whether a country banker compounds for the stamp duties or not, he must make a return to the Government of the amount of his notes in circulation every Saturday night These returns are consolidated, and the result published in the London Gazette. The following are the enactments respecting country bankers in the Act 7 & 8 Viet c. 32, passed in 1844 : Country Private Banks. No New Bank of Issue. " X. And be it enacted, That from and after the passing of this Act, no person other than a banker, who, on the sixth day of May, one thousand eight hundred and forty-four, was lawfully issuing his own bank notes, shall make or issue bank notes in any part of the United Kingdom.'' Restriction against Issue of Bank Notes. " XI. And be it enacted, That from and after the passing of this Act, it shall not be lawful for any banker to draw, accept, make, or issue, in England or Wales, any bill of exchange, or promissory note, or engagement for the payment of money payable to bearer on demand, or to borrow, owe, or take up, in England or Wales, any "sums or sum of money on the bills or notes of such banker payable to bearer on demand, save and except that it shall be lawful for any banker who was on the sixth day of May, one thousand eight hundred and forty-four, carrying on the business of a banker in England or Wales, and was then lawfully issuing, in England or Wales, his own bank notes, under the authority of a license to that effect, to continue to issue such notes, to the extent and under the conditions hereinafter mentioned, but not further or otherwise ; and the right of any company or partnership to continue to issue such notes shall not be in any manner prejudiced or affected by any change which may hereafter take place in the personal composition of such company or partnership, either by the transfer of any shares or share therein, or by the admission of any new partner or member thereto, or by the retirement of any present partner or member therefrom : Provided always, that it shall not- be lawful for any company or partnership now consisting of only six or less than six persons to issue bank notes at any time after the number of partners therein shall exceed six in the whole." Bankers ceasing to issue Notes may not resume. " XII. And be it enacted, That if any banker in any part of the United Kingdom who, after the passing of this Act, shall be entitled to issue bank notes, shall become bankrupt, or shall cease to carry on the business of a banker, or shall discontinue the issue of bank notes, either by agreement with the Governor and Company of the Bank of England or otherwise, it sltall not be lawful for such banker at any time thereafter to issue any such notes." Existing Banks of Issue to continue under certain Limitations. " XIII. And be it enacted, That every banker claiming under this Act to continue to issue bank notes in England or Wales shall, within one month next after the pass- ing of this Act, give notice in writing to the Commissioners of Stamps and Taxes, at their head office in London, of such claim, and of the place, and name, and firm, at and under which such banker has issued such notes during the twelve weeks next preced- ing the twenty-seventh day of April last ; and thereupon the said commissioners shall as- certain if such banker was on the sixth day of May, one thousand eight hundred and forty-four, carrying on the business of a banker, and lawfully issuing his own bank notes in England or Wales, and if it shall so appear, then the said commissioners shall proceed to ascertain the average amount of the bank notes of such banker which were in circulation during the said period of twelve weeks preceding the twenty-seventh day of April last, according to the returns made by such banker in pursuance of the Act passed in the fourth and fifth years of the reign of her present Majesty, entitled ' An Act to make further Provision relative to the Returns to be made by Banks of the Amount of their Notes in circulation ' ; and the said commissioners, or any two of them, shall certify under their hands to such banker the said average amount, when so ascertained as aforesaid ; and it shall be lawful for every such banker to continue to issue his own bank notes after the passing of this Act : Provided nevertheless, that such banker shall not at any time after the tenth, day of October, one thousand eight hundred and forty-four, have in circulation upon tlie average of a pe.riod of four weeks, to be ascer lainea as hereinafter mentioned, a greater amount of notes than the amount so certified. Provision for United Banks. " XIV. Provided always, and be it enacted, That if it shall be made to appear to the Commissioners of Stamps and Taxes that any two-r more banks have, by written 285 A Trtatite on Banking. ent (which contmrt or agreement shall be produced to the said com- OM Matted within the twelve week* next preceding udi t. m\- . da j of April M aforesaid, it ihall be lawful for the said commissioners to as- _ i average JDOnl of UM note* of earh such bank in tin- inannrr hereinbefore directed, aad to certify the average amount of the note* of the two or more banks so as dM MMQt which the united bank shall thereafter be autliorizcd to issue, * NfaUttfons of this Act. agreemen becaOM P^fliiaW fVtilfniBli Co llr fi -"-- -- - 1 - " "' Gazette to be Evidence. " XV. Aad be it enacted, That the Commissioners of Stamps and Taxes shall, at the time of eentrVlag to any banker such particulars as they are hereinbefore required to certify, sJso pnUiih a duplicate of their certificate thereof in the next succo Lm4m Gustst in which the same may be conveniently inserted; and the gazer wMdi each publication shall be made shall be exclusive evidence in all courts what- of the amount of bank notes which the banker named in such certificate or is by law authorized to issue and to have in circulation as aforesaid. / cam Bants HMDBM nutted!, Commissioners to certify On Amount of Bank Note* which each BtaJc was mmtkofitid to torn. XVI. And bo it enacted, That in case it shall be made to appear to the Commis- sioners of Stamps and Taxes, at any time hereafter, that any two or more banks. Mch bank consisting of not more than six persons, have, by written contract or agreement (which contract or agreement shall be produced to the said commissioners), become * ibseqnently to the passing of this Act, it shall he lawful to the said commis- afoBers, upon the application of such united bank, to certify, in manner hereinbefore Mtioaea, die aggregate of the amounts of bank notes which such separate banks were pnvfaxuly authorized to issue, and so from time to time ; mid every such cer- tificate shall be published in manner hercinU-fore directed ; and from and after such pablication the amount therein stated shall he and be deemed to be the limit of the amoant of hank notes which such united bank may have in circulation : Provided al- ways, that it shall mot be lawful for any inch united bank to iuue bank notes at any time after the nmmber of partner* therein shall exceed fix in the whole. Penalty on Bank* issuing in Excess. u XVII. And be it enacted, That if the monthly average circulation of bank notes of any banker, taken in the manner hereinafter directed, shall at any time exceed the which such banker is authorized to issue and to have in circulation under the ise forfeit a sum n/wil to the as aforesaid, shall have ex- > issue and to hare in circula- tion as aforesaid. Issuing Banks to render Accounts. " XVIII. And be it enacted, That every banker in England and Wales who, after the tenth day of October, one thousand ei^ht hundred and forty-four, shall issue bank notea, shall on some one day in every week after the nineteenth day of October, one dKMHud eight hundred and forty-four (such day to be fixed by the Commissioners of Sump* and Taxes) transmit to the said commissioners an account of the amount of the bink notes of such banker in circulation on every day during the week ending on Ike next preceding Saturday, and also an account of the average amount of the bank MMes of ch beaker in circulation during the same week ; and on completing the firrt period of Soar weeks, and so on completing each successive period of four weeks, my Men banker shall annex to such account the average amount of hank notes of banker in drealatfam during the said four weeks, and also the amount of Nank *^J5* f** D f a ^* r * othorized to issue under the provisions of this Act ; and MCtt aecowit shall be verified by the signature of such banker or his chief r, or, i the case of s^ company or partnership, by the signature of a director, or partner, or chief cashier of such company or purtnershij), nn- lic advantage that a private bank should become a joint-stock bank. In other district*, it mi-ilu be desirable that two small joint-stock banks of issue should unit and form a large one. The restrictions imposed by this Act will tend to prevent such unions. Perhaps in other respects its effects may be beneficial. It may lead a larger number of persons to k.-i-p cur- rent accounts with bankers, and to make their payments with cheques. A smaller amount of notes will then be necessary for the purposes of the country. The advantages of having a banker will be extended to tin- middle' and lower classes, and will not as much as heretofore be confined to the wealthy. The Act, too, may have the effect of exempting the banks of issue from those accusations to which they have always been subjected on the occurrence of any national calamity. The whole Act of 1844 is formed upon the notion that the country bankers can extend their issues as much as they please, " a vulgar error," that has over and over gain been abundantly refuted. Yet, had the Act not been passed, and had the country circulation increased a million or two, as possibly it might, from the increased transactions of the country, the railway speculations of 1815 and 1846 would doubtless have been ascribed to the excessive issues of the country banks. The following language, which I addressed in 1844 to the joint-stock banks, may not be considered inapplicable to all banks of issue : 44 Another advantage is, that the joint-stock banks of issue will be de- livered from those unjust accusations to which they have hitherto been ex- posed. Almost every evil that has befallen the country for the lust ten years has been ascribed by different writers to the reckless issues of the joint-stock banks ; and though the charge has been oft refuted, yet such has been the talent, zeal, and perseverance with which it has been re- vived, that it has doubtless in some degree prejudiced the public mind. But now this charge con be made no more. Our assailants arc compelled to observe at least a ten years 1 truce. During this period we shall have no bank directors publishing pamphlets to show that their efforts to regu- late the exchanges have been counteracted by the imprudent issues of the joint-stock banks. Our notes will not again be classed by the authors of 4 prize essays* among the causes of national distress, and philosophical writers will no longer declaim, in eloquent metaphor, against ' the wild democracy of rival issuers.' It is no small matter to be put into a position wherein we shall be sheltered from the peltings of unjust accusations." (Letlm of Nehemiah, p. 11.) Some banks had ceased to issue their notes before the passing of the Act, by virtue of agreements with the Bank of England. The twenty- ' section of the Act contains a special provision with reference to these to certain Banker* named in the Schedule. JLJUII. And where** the icreral banker* named in the schedule hereto annexed (C.) bare cawed to brae their own bank notes under certain agreements with ygreiuor ss4 company of the Bank of England ; and it is expedient that mch Country Private Banks. agreements should cease and determine on the thirty-first day of December next, and that such bankers should receive by way of compensation such composition as hereafter mentioned : and a list of such bankers, and a statement of the maximum sums in re- spect of which each such banker is to receive compensation, hath been delivered to the Commissioners of Stamps and Taxes, signed by the chief cashier of the Bank of Eng- land ; be it therefore enacted, That the several agreements subsisting between the said governor and company and the several bankers mentioned in the schedule hereto re- lating to the issue of Bank of England notes shall cease and determine on the thirty- first day of December next ; and from and after that day the said governor and com- pany shall pay and allow to the several bankers named in the schedule hereto marked (C.), so long as such bankers shall be willing to receive the same, a composition at and after the rate of one pound per centum per annum on the average amount of the Bank of England notes issued by such bankers respectively and actually remaining in circu- lation, to be ascertained as follows ; that is to say, on some day in the month of April, one thousand eight hundred and forty-five, to be determined by the said governor and company, an account shall be taken of the Bank of England notes delivered to such bankers respectively by the said governor and company within three months next pre- ceding, and of such of the said Bank of England notes as shall have been returned to the Bank'of England, and the balance shall be deemed to be the amount of the Bank of England- notes issued by such bankers respectively and kept in circulation ; and a similar account shall be taken at intervals of three calendar months ; and the average of the balances ascertained on taking four such accounts shall be deemed to be the average amount of Bank of England notes issued by such bankers respectively and kept in circulation during the year one thousand eight hundred and forty-five, and on which amount such bankers are respectively to receive the aforesaid composition of one per centum for the year one thousand eight hundred and forty-five ; and similar accounts shall be taken in each succeeding year ; but in each year such accounts shall be taken in different months from those in which the accounts of the last preceding year were taken, and on different days of the month, such months and days to be de- termined by the said governor and company ; and the amount of the composition pay- able as aforesaid shall be paid by the said governor and company out of their own funds ; and in case any difference shall arise between any of such bankers and the governor and company of the Bank of England in respect of the composition payable as aforesaid, the same shall be determined by the Chancellor of the Exchequer for the time being, or by some person to be named by him, and the decision of the Chancellor of the Exchequer, or his nominee, shall be final and conclusive : Provided always, that it shall be lawful for any banker named in the schedule hereto annexed marked (C.) to discontinue the receipt of such composition as aforesaid, but no such banker shall by such discontinuance as aforesaid thereby require any right or title to issue bank notes." The following are the Banks named in the schedule : Bank of Liverpool . Liverpool. J. Earned & Co . 1. ' ditto. Biddulph, Brothers, & Co. . . . *. . . . Pembroke. Birmingham Banking Company .... Birmingham Birmingham Town & District Bank .... ditto. Birmingham and Midland Banking Company . . ditto. Burgess & Son . ... . . . . . Eamsgate. Coopers & Purton . . * . . . . Bridgenorth. Cunliffes, Brookes, & Co Blackburn. Deane, Littlehales, & Deane Winchester. Dendy, Comper, & Co. . . . ' . . Chichcster. Devon and Cornwall Banking Company . . . Plymouth. Grants & Gillman Gosport. Hampshire Banking Company ... . . Southampton. James W. R Hall ....... Ross. J. M. Head & Co. Carlisle. Henty, Upperton, & Olliver Arundcl. Thomas Kinnersly & Sons Newcastle-undcr-Line. R. J. Lambton & Co Ncwcastle-on-Tync. Y 289 A TVeofiM OH Banking. Lhwpcol PommwUI BkiBf Company . . Lirerpool. 1 ' - ...... I-' 41 ''! ..... I- Lbnool Boron* Bank ...... . IfaMMMcr MM| Uwrpool District Bunking Company Manchester. Manrhc*utr and SaUbrd Banking Company . . . MoMMMlh and Glamorgan Banking Company . Newport. MOM 4 Company ....... l.iv.-rpool. Mangiea, DrodMn ....... (itiildfonl. TfiwcMlfa Ooamsfciil Banking Company . . . Newcastle-on-Tyne. NcwcMtle-oa-Tyn* Joint-Stork Banking "Company . i*irirt Hunk . . ditto. Itwlsmoath MM! South llanu Bauk Company . . Portsmouth. T. 4 R Raikes 4 Co. ...... Hull. Robtaaoa 4 Broadhurst . . Mansfield. Bhrfbld Umion Bank ... . Sheffield. JotwStovvld ........ IhailstUiJ luhi % Ihrtiiig Company . . Sundcrland. TmU4Co ......... l.uh. . Union Bank of Manchester ..... Manchester. Virun, Kit*on, 4 Co ........ Torquay. Wans, Whitcway, 4 Co. ...... Newton. J. 4 J. C. Wrifftit 4 Co ....... Nottingham. Wbb, llolbrook, 4 Spencer ..... Ledbury. The following account of the state of the fixed issue under this Act is taken from the " Banking Almanac " for 1849, page 37 : At Oct., 1S48. Fixed tone of the Private Bank* (England and Wales) by the Act of 1944, ............. 5,153,407 Deduct 21 Frirate Banks, since ceased to issue, ..... 330,919 Amount of Private Banks' issue, ...... 4,822,488 Fixed Issue of Joint-stock Banks, by same Act, . . 3,495,446 Deduct 6 Joint-stock Banks, since ceased to issue, . . 85,459 Amount of Joint-stock Banks' issue, ...... 3,409,987 Fixed issue of Private and Joint-stock Banks, . . . 8,232,475 PRESEWT STATE OF THE FIXED IBBUEB. 1. Fixed issue in England and Wales, ....... 8,232,475 S. Bank of England, ....... 14,000,000 8. Banks in Scotland, ....... 3,d 4. Banks in Ireland, ....... 6,354,494 Fixed issne in the United Kingdom, at 7th October, 1848, . .31,674,178 NUMBER OF BANKS OF ISSUE IN THE UNITED KINGDOM. At October 7, 1843. 1 Bank of England in England and Wales, having . . . .14 Banks. 1*4 Private Banking Firms in England and Wales, having 375 u M Joint-stock Banking Companies in England and Wales, having . 407 " 251 Firms and Companies id England and Wales, having . . 796 Banks. 1* Joint- Stock Banking Companies in Scotland, having . . .403 " in Ireland, having . . . 155 " 177 Finn* and Companies in the United Kingdom, having . . . 1354 Banks. Country Private Banks. REDUCTION IN THE FIXED ISSUES IN ENGLAND AND WALES. The Maximum Circulation of the Private.cmd Joint-Stock Banks was reduced at the under- mentioned dates, by t/te following Banks Iiaving ceased to issue their own Notes : Date of last Return. Prior to the 12th Oct., 1844, when the Act came into operation. NAMES. 1. Bristol Old Bank. Baillie, Ames, & Co. . . Bank of Eng. Notes. 2. Bishop Waltham, Hampshire. Gunrier & Co. Ditto. 3. Cambridge Bank. Fisher & Sons. . . Ditto. 4. Ditto. Humphrey & Son. . . Closed, 1845. 5. Margate Bank. Cobb & Co. . . . Bank of Eng. Notes. 6. Oxford Univ. and City Bank. Sir J.Locke & Co. Ditto. 7. Staines Bank. Thos. Ashley & Co. . . . Ditto. 8. Wrexham and N. Wales Bank. R. M. Loyd. Ditto. _ 1. Western District Joint-Stock Banking Company. Dissolved. April 12, 1845 9. Whitby Bank. Frankland & Wilkinson. . York City and C'nty. 1 2,076 Sept. 13, " 2. Suffolk Joint-Stock Banking Company. . . Dissolved. . . 6 7,449 April 11, 1846 10. Dover Union Bank. Latham & Co. . . Bankrupts.. 1 9,577 July 4, " 3. Stockton & Durham County Joint-Stock Bank. Dissolved. 2 8,290 Oct. 10, " 11. Romsey& Hamp. Bank. Wm. Footner & Sons.Bank of Eng. Notes. 1 3,875 Dec. 5, " 4. Leeds & West Riding Joint-Stock Banking Co. .Dissolved. . 2 18,937 May 29, 1847 5. Leeds Commercial Joint-Stock Bank. . . Ditto. . 1 13,914 Oct. 9, " 12. Abingdon & Wantage. Henry Knapp. . .Bankrupt. . 2 29,316 " 13. Penzance Union Bk. Ricketts, Enthoven & Co 4 31,461 Oct. 16, " 14. Leek & Congleton. Fowler, Gaunt, & Co. . Bank of Eng. Notes. ft 4,009 Oct. 23, ' 15. Salisbury & Fordingbridge Bk. Brodie & Co. Bankrupts. 8 23,335 " 16. Shaftesbury & Hendon Bank. Brodie & King. Closed. . g 9,813 Oct. 30, " 17. Shrewsb'y & Market Drayton. Adams & Warren. Bankrupts. . a 9,700 " " 18. Honiton Bank. Flood & Lott. . . . Ditto. . i 19,015 Nov. 6, " 19. Bridport Bank. Gundry & Co. . . . Ditto. 5 24,698 Nov. 27, " 20. St. Alban's & Herts Bank. Gibson & Sturt. . Closed. . 1 2,333 July 29, 1848 21. Grantham Bank. Kewney & King a 19,401 Oct. 7, " 22. Sheffield & Retford Bank Closed. . a 18,744 Total Reduction in the Circulation, under Act 7 and 8 Viet. c. 32, to Oct. 7, 1848, . 416,378 21 Private Banking Firms, having 34 Banks, . . . 330,919 6 Joint-Stock Banking Companies, having 18 Banks, . 85,459 416,378 All banks of issue are still excluded from receiving accommodation, by discount or otherwise, from the Bank of England. There seems, how- ever, to be a difference of opinion among the directors as to the propriety of continuing this exclusion. Mr. Morris thinks that under the Act of 1844, the rule may be relaxed : " Do yon not refuse discounts to all banks of issue ? We have always refused dis- count accounts to banks issuing their own notes. " Upon what ground 1 ? The ground upon which I understand it has been refused is, that, previous to the Act of 1844, the bank made arrangements with certain joint- stock banks, to induce them to adopt the Bank of England circulation ; and after the Act of 1844 had been passed, it was thought that it would be hard not to continue the same facilities to those banks which they had obtained from the bank befofe the pass- ing of the Act ; that arrangement having been made for our mutual convenience." " It is, however, a complaint, that you have a stringent rule, by which you refused discounts or accommodation to all banks of issue ? I have no objection to state, speaking individually, that now that the Act of 1844 has been passed, I do not see any reason why they should not be placed on the same footing as the others ; but the rea- son the court "has not acceded to that, is in consequence of those parties having 291 A TVeotiM on Banking. whh as at a period when it was useful to 01 that they should do so * (Owi- But Mr. Cotton entertains different sentiments : * Out TOO inform the committee of the rca.onn why the Rank of England refuses accommodation to paittaa who iine note* ! There arv, in my opinion, good reasons flbr thai i thow rcaaoni appear in the following paper, which 1 have di.iun up : Isso- - - - la hsk, wtw th right <>! ili^i'<'ii'>tini: <'"<' >!' 'I t<> tin-in, would krrp -,\\\ fMSrvaof their own note*, of Hank of England notes, or coin, pcrhnp> nmi<-. n-lyin- Ml discounting with the bank on every demand, and moat pi-easing on the bank when it was mUitUUi to tones- There are about 300 hanks of issue in hii-hmd and Wak, for all of which the bank would hare to provide gold. Tin- HHMMIIV would trad to frustrate one of the objects of Act 7 and 8 Viet. c. 32 (the ultimate rstuhli.( i--n.- a! tlm*.- pla.-i-^. Ii unuM (.< diatcult ia times of pressure or adverse exchanges to control the discounts ; and such contraction, if enforced, would be obnoxious to such issuing bunks as had h<-on in the habit of discounting. The banks would consider thcv Imd ac<|iiircd a right to dis- counts, and would probably ascribe to the capricious action of the Hank of England SUIT loascn consequent on a necessary contraction of accommodation.'" (Commons, The Law of the Currency with Reference to the Country Banks. These are thus stated in the article previously quoted, in the Foreign and Colonial Review : 44 It will readily occur to every reader, that the laws which regulate the circulation of these country banks must be different from those which reg- ulate the London circulation of the Bank of England. They do not pay the public dividends ; they cannot issue their notes in purchasing bullion, or Government stock, or Exchequer bills, as all these operations take place in London, where their notes do not circulate. They are also sub- ject to certain restrictive laws to which the notes of the Bank of England are not subject Their notes are not only legally payable on demand, but payment is constantly demanded ; while no one demands payment of a Bank of England note, unless he has occasion to export the gold. There is also a system of exchanges between country bankers, by which all notes that are paid into any of the banks are immediately brought back for payment to the banks that issued them. It is the practice, too, throughout the country, to allow interest on deposits ; and thus all notes not required for the actual wants of the community are promptly with- drawn from circulation, and lodged with a bank upon inter ** On inspecting the monthly returns of the country circulation for the but ten years, we find that the highest amount is in the month of April ; thence it descends, and arrives at the lowest point by the end of August, which is the lowest point in the year. It gradually increases to Novem- ber ; a slight reaction takes place in December ; but it then advances, until it reaches the highest point in April. The general law is, that the country circulation always makes one circuit in the year ; being at its lowest point in August, and advancing to December, and continuing to Ml Country Private Banks. advance to its highest point to the month of April, and then again de- scending to its lowest point in August. " The laws which regulate the circulation of the country banks are de- rived from the state of trade in the respective districts in which the banks are established. As these banks are chiefly located in agricultural dis- tricts, the operations of agriculture have a very considerable influence in their regulation. Hence the advance in the spring, and the advance again after August, in consequence of the harvest. It is clear that the laws must be uniform in their operation, because the fluctuations of circu- lation in each year are uniform, and constantly recur with the return of the season. The slight reaction in December is probably occasioned by the collection of the public revenues and of landlords' rents in the coun- try districts, and the general dulness of trade in that month. " It may also be observed, that the issues of the joint-stock banks, and of the private banks, are subject to the same laws. The issues of both classes of banks rise together and fall together, and they have maintained nearly the same relative amount during the last seven years. " The laws which regulate the annual fluctuations of the country circu- lation, that is, which determine the variations in the amounts of the coun- try circulation, not within the year, but taking corresponding periods of different years, are also dependent on the state of trade in those years. If there be an increase of trade without an increase of prices, more notes will be required to circulate the increased quantity of commodities. If there be an increase of commodities, and also an advance of prices, a still larger amount of notes would be required. There are also other cir- cumstances that may permanently affect the amount of the country circu- lation. " During the last five years there has been a gradual reduction in the annual amount of the country circulation, as appears from the following Table, which shows the average amount in each year, from 1839 to 1843, both inclusive : 1839, .... 11,715,527 1840, .... 10,457,057 1841, .... 9,671,643 1842, 1843, 8,249,052 7.667,916 " We attribute this extensive reduction in the country circulation to the following causes: First, The great dulness of trade which has taken place in every part of the country. Secondly, The fall in the price of corn in connection with bad harvests. Thirdly, The introduction of the penny postage, and the system of registered letters. The uniform penny post was commenced on the 10th of January, 1840, and the registry of letters on the 6th of January, 1841. In consequence of these arrange- ments, every banker sends off every night, either to London or elsewhere, for payment, all the notes of other banks he may have received during the day, excepting those issued in the same town. This must have occa- sioned a large reduction in the amounts returned as notes in circulation. The amount in the hands of the public is the same, but the amount in the hands of other bankers is considerably reduced. Fourthly, The practice of keeping banking accounts has extended very much of late years. In- Y* 293 A TrealUe on Banking. of carrying note* in their pockets as formerly, people now lodge the notes with their banker, and make thuir payment* by giving cheques OQ the bank. Tito facilities of travelling by mil ways and otliur means have abio tended to diminish the amount of notes in eireulution, and to cause them to be returned more rapidly for payment to the bankers. Fifthly, the circulation of the private bankers has been reduced by fail- ures, and by merges into joint-stock bunks ; and, on the other hand, sever- al joint-stock banks have withdrawn tlicir own notes, and made arrange- roonts for issuing the notes of the Bank of England." It will be seen by the following Table, that the country circulation is governed by the same laws since the passing of the Act of 1844 : of lit average Circulation of the Private and Joint-Stock Bant* of lime, dtnma (fa latt II Wt IN 0* Montht oj April, Auyutt, and December, for the Yean 1845, PKIVAT* BANK*. JOINT-STOCK BANK*. DM*. No.of Bmnk*. 145. April M A H Dec. 17 April 25 lam n \ M 1847. April 24 A 1 M Da 1848. April 29 A', :;-, Dec. 90 1 199 197 197 197 196 196 196 187 187 187 184 Authoriiod 1NM. 5,011,097 5,011,097 5,009,021 Actual Circulation. 4,655,636 4.369,458 4,481,038 5,009.021 5,009.021 4,999,444 4,700,170 4,384,136 4,528,208 4,999,444 4.999,444 4,880,389 4,700,169 4,150,688 3,525,157 4,880,389 4,880,389 4,822,488 8,919,739 3,473,839 3,492,340 No. of Bank.. 71 71 70 70 70 67 67 67 65 67 67 66 :t.477,:i-Jl 3,477,321 3.469,872 :i. Jf.'.i. -72 3,418,277 3,418,277 3,418,277 3,261,906 3,409,987 :un'.t.'.i-7 3,409,987 Actual Circulation. 34172,034 3,129,952 3,160,010 3,229,744 :t u.-,.:o-j 3,228,717 2,417,528 2,834,799 2,455,664 2,529,498 From the pressure in the year 1847, the country circulation in Decem- ber was less than in August. Will they who contend that country bank- ers can extend their issues as they please, have the kindness to inform us why those bankers did not increase their issues when money was so val- uable ? 1 cannot better state my own views of the principles of the country circulation, than by transcribing a portion of my evidence given before the Committee on Banks of Issue, in March, 1841, when examined by fir Robert Peel: u Sir Robert Peel. Would you recommend that the paper thus is- sued should be convertible into gold at the will of the holder ? Yes. ** You think that is an absolutely necessary check against excessive issues ? 1 think U is a necessary check. ** What reference is made in the issue of paper to the quantity of gold in the country, and to the ultimate ability of the parties to discharge their paper engagements in gold ? The bankers in issuing their notes do not make any reference to the quantity of gold in the country, but they make " Country Private Banks. reference to their ability to discharge those notes when returned to them for payment. " What is the nature of the reference which they make ? By keep- ing securities available for the purpose of being sold in order to discharge those notes whenever presented to them for payment. " They have no reference whatever to the state of the exchanges ? No ; when I say no, I mean not with the view of regulating the amount of notes by the exchanges ; but bankers, whether banks of issue or not, no- tice the exchanges as naturally as they would notice the prices of the funds, in order that they may be able to judge as to the future value of money, so as to exercise their discretion with reference to their investments. " They do not notice the state of the exchanges with a view to deter- mine the policy of contracting or increasing their issues ? No ; not with a view of making the amount of their issues correspond. If they see that the exchange is likely to become unfavorable, bankers will natu- rally be more cautious in making advances, and more cautious of com- ing under engagements, than they would be when they found that the ex- changes were favorable ; but there is no intention on the part of the coun- try banks to make their notes correspond with the amount of the bullion in the Bank of England. " A country banker would rely upon the sale of his securities, and that only in case of a demand for gold ? In case of a general run, he would depend upon the stock he had in hand, and the further stock he might realize by a sale of securities. " If all parties continued to issue, none of them having reference to the state of the exchanges, but relying upon the available resources which a sale of securities might supply, do not you think that there might be a danger of a sudden demand for gold, and of an inability on the part of those issuers to discharge their engagements in gold ? I do not think there would be any danger of that at all, because each bank would take care of itself; if you suppose that the whole circulation of the country comes in at once and demands gold, it is quite clear that gold cannot be found to pay it off, and that is equally the case with the Bank of England and any other bank, and it is equally the case with us who are banks of deposits ; if all the depositors were to come together at the same time and require their deposits, we should be unable to pay them, but we could realize our securities, and pay them off, if they were to come gradually. " Suppose there was one bank which had the charge of the paper cir- culation of the country, and had the means, therefore, by constant refer- ence to the state of the exchanges, of determining the amount of the pa- per circulation, do not you think that there would be a greater security against a sudden demand for gold, and an inability to pay that gold, than there is when there are a great many issuers, none of whom, according to your own statement, pay the slightest regard to the state of the exchan- ges ? No, I think not. " What then supplies the check ? The check upon the private bank- ers is, that their circulation cannot be issued to excess ; whereas, if you had a bank which should issue notes for so much gold, then every time 295 A Treat he on Banking. was a favorable coone of exchange, there would be a large issue of note*, which note* would necessarily n-duce the rate of interest, lead to speculation, and turn the exchange* again by causing investments to be MM in foreign countrica. Now, as issues are at present conducted, banker* are under several checks which would not apply to such a bunk ; for instance, the check of the interchange with each other of ih- ir ililli r- ent note* ooce or twice a week, and the check of having their notes pay- able on demand ; whereas the notes of such a bank as you suppose would not be diminished except when gold was wanted to be sent abroad. Another check is the practice of giving interest upon deposits, by which all the surplus circulation is called in and lodged with the banks; M<>\\, such a bank as you have supposed would not be under tin- control of those check*, and it would be under the necessity of increasing the cir- culation whenever the exchange became favorable ; and we know by ex- the mosl Bun w:iy \' ni.ikinu' til'' 'Ai-liiiiiu"^ uiil'iv.nii,!.- is a previous excessive issue ; that previous excessive issue would nec*essari- ly arise, on the principle you have supposed, every time the exchange was favorable. ** You think that there is some cause in operation which applies equally to all issuers of paper, and prevents any undue issue of paper, and dis- pense* with the necessity of any reference, on the part of each issuer, to the state of the exchanges ? That is the case with all country issuers of paper. With regard to the Bank of England, who have the power of is- suing their notes in exchange against bullion, in the purchase of Exch uer bills and Government stock, it is quite clear that notes put into ope tion in that way, being thrown in a mass upon the previously existing state of trade, will have the effect of raising prices and reducing interest, and turn the exchanges ; but if notes are issued merely to pay for trans- actions that have previously taken place, and are drawn out by the oper- ations of trade, those notes will have no such effect. " Supposing, at present, the Bank of England observed that the ex- changes continued unfavorable for a long period, -and that there was a progressive diminution in the amount of their bullion, and supposing that they saw that in the course of two years their bullion was reduced from ten millions to four millions ; do you think it would be desirable that the Dank of England should take any step whatever to guard against the ul- timate consequence* of that state of things, by restricting tlie paper cir- culation ? I think such a case may occur, but I think in ordinary times the Bank of England might hold foreign securities, by which they would bring back gold to this country, and thus prevent any necessity for a con- traction of the circulation ; at the same time, I do not at all question the possibility of such a case occurring as may render a contraction necessa- ry ; nor do I at all question the influence of a contraction to have some effect upon the exchanges ; but I contend that, as an ordinary principle of action, the bank ought not to expand their circulation, so as to cause the exchange* to be unfavorable, nor calculate upon a contraction of the ctrcalauon for the purpose of remedying the exchanges. 44 Then you do think that the expansion of the circulation of the Bonk of England may cause unfavorable exchanges ? Yes. M6 Country Private Banks. " Why should not the expansion of the circulation on the part of the country issuers produce the same effect ? Because the country circula- tion is under checks, whereas the Bank of England circulation is not ; the country circulation can be issued only in consequence of transactions which have taken place, and to the extent only required by the wants of the district ; whereas it is obvious that the Bank of England has the power of increasing the circulation by the purchase of exchequer bills or stock, or by purchasing bullion, and throwing a mass of notes on the market when the state of trade does not require them." Chairman. " Have you any further observations to make to the com- mittee ? When the first question was asked of me, at the commence- ment of my examination, I stated that I appeared before the committee as the representative of the joint-stock banks, and that, therefore, in ex- pressing any opinions consistently with the resolutions which they had passed, I wished to be considered as speaking the sentiments of the joint- stock banks, but, should the committee ask me any question not connect- ed with the circumstances of country issues, that I wished to be consid- ered as speaking my own individual opinions. The points upon which I wish to be considered as speaking the sentiments of the joint-stock banks are as follows : I speak the opinions of the joint-stock banks, in saying that their circulation cannot be made to fluctuate in exact conformity with the circulation of the Bank of England, or with the stock of gold in the Bank of England ; that the country issue is drawn out by the demands of trade, and is subject to checks to which the circulation of the Bank of England is not liable ; that the country bankers have not the power of is- suing their notes to excess ; that they cannot contract their circulation or expand it as they please ; and also, that the country circulation does not influence the prices of commodities, and that it cannot be regulated by the principles of the foreign exchange. I speak the opinions of the joint- stock banks when I say that the abolition of the country circulation would cause very considerable distress ; would limit the power of the country banks to grant the same accommodation to their customers ; would com- pel many of their customers to sell their property, thus lessening the val- ue of real property ; that country bankers would be compelled to increase their charges to their customers ; and, in some cases, that those banking establishments would be altogether abolished, in consequence of not be- ing able to supply sufficient profit for carrying them on ; that, in some other cases, however the country circulation would be substituted or super- seded by a bill circulation, nevertheless considerable distress would exist throughout the country, and that not only country banks themselves, but their customers and the public in general, would be subject to very con- siderable loss and inconvenience. In other opinions which I have ex- pressed with regard to the regulation of the currency, and the principles upon which the Bank of England ought to be managed, also, as regards the extracts which have been made from my own works, and other mat- ters I need not particularly specify, I wish to be understood as giving my own opinions, without saying whether those opinions do or do not meet the concurrence of the joint-stock bankers. I take the responsibility of these entirely upon myself." 297 A Treatbe o* Banking. The country bankers residing in the same neighbourhood usually make their exchange* onc a week, and pay the difference in I*>nil..ii on the following day. This arrangement is of eonsiderahle advantage to all par- lie*. Suppose I as a country banker receive in the course of n week the urn of 10,000 in the note* of a neighbouring bank, and that hank re- ceives the same amount of my notes ; if we exchange notes, there in an end of the trnn-wtion. I pay the notes that hank lias upon me by the notes I hare upon that bank, and each of us has 10,000 lew in circula- tion. But suppose we refuse to exchange notes with each other, thru 1 take his notes and demand Bank of England notes and sovereigns, and he does the tamo with in--. llenee each of us must keep a balance of 10,000 more in gold or Bank of England notes, and also an additional sum to aaiwer any sudden emergency that may arise at any time from that banker hating more than the usual amount of notes, and to meet any run that he nmfbe disposed to make upon me. Thus it is that country banks, by exchanging notes, and receiving payment of the difference in London, are enabled to carry on their business with a less amount of ready cash, and to prevent the danger that might arise from being run upon by each other. Those banks only exchange which are in the same neighbourhood. Were I to receive the notes of a bank at some distance off, I should send these notes to London, and that banker would send my notes to London, and they would be paid by our London agents. We should not exchange with each other, because it would cost more to send messenger with the notes to be exchanged, than it would cost postage ML London. Here I have to pay the postage of these notes to London, ansr I have also to pay the expense of having my notes which have been paid in London sent down to me. The exchange between any two banks established in the same place, will be regulated by the character and extent of the business they may respectively carry on. The balance may for a considerable length of time be uniformly in favor of one of these? Ifecks, and then for a consider- able period in favor of the other ; or it may fluctuate weekly, and at the year's end be found to be neither favorable nor unfavorable. I shall en- deavour to investigate the causes which govern these changes. In the first place, I shall presume that each bank is a bank of deposit, of discount, of remittance, of agency, and of circulation. The claims upon each bank will then consist of, 1. Cheques drawn against deposit accounts. 2. Its own notes. 3. Notes issued by its agents or other branches. 4. Letters of credit granted by agents or branches. These claims or obligations will get into the possession of the rival bank by some of the following ways : 1. As lodgments on deposit accounts. 2. In payment of local bills. 3. For bills or letters of credit on agents or branches. 4. Received for collection by post from some agents or branches. The exchanges will now be more or less favorable according to the following circum- 1 The discounting of bills not payable in the place where the banks are established, has a tendency to render the exchanges unfavorable. If, for example, a country banker discounts bills payable in London, he his own notes for the amount at the time the bill is discounted, and 9M Country Private Banks. some of these notes will get into the rival bank and render the exchanges unfavorable. When the bills are due, the London agent receives the amount from the accepters ; but this has no effect on the local exchange. Hence a bank that discounts a large amount of London bills must expect to have large sums to pay in the exchanges. There are some cases, however, in which the discounting of London bills will not affect the local exchange : these are, 1. When the amount of the bill is not taken in notes, but in a draft on the London or some other agents. 2. When the amount of the bill is placed to the party's current account, the exchanges will not be affected so long as it remains on that account. 3. The ex- changes will not be affected, if the notes issued for the London bill should be retired either by the bank that issued them, or by any of its agents. 2. If a bank has to pay a large amount, or letters of credit, issued upon it by its agents or branches, the exchanges may become unfavorable. The exchange between any two banks may be affected by other cir- cumstances than local connections. If one bank is drawn upon by agents or branches, or has to pay notes issued by agents or branches, and the other has no such connections, then the exchange will be unfavorable to the former bank and favorable to the latter. Some of these notes or let- ters of credit, and some of the notes issued for the letters of credit, will probably get into the possession of the rival bank, and appear in the ex- change. 3. If a bank issues a large amount of bills, or letters of credit upon its agents or branches, the tendency is to render the exchange favorable. * The bank receives the money for these bills or letters at the time it issues them. This money will often be composed of the notes chiefly in circulation, and a part of them will consist of the notes or obligations of the rival bank, and will be paid in the exchange : or if the bank receive from its agents or branches any claims upon the rival bank, or even any bills to be collected, the effect will be to render the exchange favorable in the same way as the granting letters of credit upon those agents or branches. 4. The increase of lodgments on current accounts has a tendency to render the exchanges favorable. On these accounts money is received and money is paid out daily. The receipts of money tend to throw the exchange in favor of a bank, be- cause some portion of these receipts will consist of the obligations of the rival bank. The payment of money tends to render the exchange unfa- vorable, because some of the notes issued in payment will find their way into the other bank. When therefore the receipts are more in amount than the payments, the exchanges are likely to be favorable. When the total deposits lodged in a bank continue to increase, the exchange will probably be favorable during the progress of such increase ; but after the deposits have ceased to increase, the exchange will not be more favorable than before the increase began. As long as the amounts of the deposits in the respective banks remain stationary, the operations on those ac- counts will not affect the exchanges, although the deposits in one bank may be twice the amount of those in the other. But if from a transfer of accounts or from other causes the deposits increase in one bank and di- 299 A Trealite on Banking. minish in the other, the exchange* during these operations will bo in favor >f the bank whose deposits are on 'the increase. But lot the progress of increase be over, and the amounts of the respective lodgments become permanently fixed, then as far as the operations on the current accounts an concerned the exchanges will again be equal. 5. An increase in the amount of local bills under discount has a ten- dency to render the exchanges unfavorable. Local bills are bills payable in the place where the bank is established. The operations on the local bill nmniu* are similar to those on the deposit account When these bills are discounted, note* are issued, when the bills are paid, totes are re- ceived. When the amount of local bills paid is greater than that dis- counted, the tendency is to render the exchanges favorable. Thus, to re- duce the amount of local bills under discount, is to render the exchanges . favorable ; and to increase the amount, is to render them the reverse. But though the pperations on the local bill account are similar in their nature to those On the current accounts, yet the effect is different s to their influence on the exchanges. For as the amount of the local bills under discount increases, the exchanges become unfavorable : but as the deposits increase, the exchanges become advantageous. In the increase of local bills, the issue of notes will be more than the receipts ; but in the increase of the deposits, the receipts will be more than the issues. As the laws of the country circulation are the same, whether the notes are issued by private or by joint-stock banks, I have introduced the subject into this section on the Private Country Hanks, and have altogether omit-. ted it in the following section on the Country Joint-Stock Bonks. SECTION V. COUNTRY JOINT-STOCK BANKS. BT a clause in the charter of the Rank of England, no partnership formed for carrying on the business of banking could consist of more than six persons, but by an Act passed in the year 1826, copartnerships of more than six in number are permitted to carry on business as bankers in England, sixty-fire miles from London, provided they have no house of business or establishment as bankers in London, and that every mem- ber of such copartnership shall be responsible for all the debts of the company. They must also deliver to the Stamp-office the names and laces of abode of all their members, and also a list of their officers. These lists are to be copied into a book, which any person is entitled to see on paying one shilling, and to obtain a copy for ten shillings. The banks may sue and be sued in the name of their public officer, and exe- n upon judgment may be issued against any member of the copart- nership. We take the following account of these banks from a Report of a Com- mittee of the House of Commons, appointed in the year 1830 to inquire into the operation of the Act 7 Geo. IV. c. 46, for permitting the estab- of Joint-Stock Bank.: no Country Joint-Stock Banks. "The evidence taken before your committee, and the returns from the Stamp-office, establish the fact that these banks are rapidly extending in all directions ; that new companies are daily forming, and that an increased number of branches and agencies are spreading throughout England, even in small towns and villages ; that a principle of competition exists, which leads to the extinction of all private banks, and to their conversion into banking companies. The mode in which this is effected, and the prin- ciple on which the issue of transferable shares acts at once on private banks, and gen- erally on commercial credit, is fully developed in the evidence. " Your committee have had before them the deeds of settlement of the greater num- ber of the existing joint-stock banks, and they proceed to submit to the House an analysis of some of their leading provisions. " Though the general objects of these establishments are much alike, yet there are some variations in their deeds of settlement which it may be material to point out. " First, as to the power of altering the regulations of the company. " The active duties are generally delegated to a small body called the directors, while the main body of proprietors reserve to themselves the power of selecting tbe di- rectors, and of altering from time to time the rules by which the directors are to be governed. Indeed, it might have been expected that the proprietors would always have reserved to themselves this power ; nor should this general rule have been no- ticed, had it not been necessary to point out a single exception to it, in the case of one particular company, in which all the powers of the company are vested in the directors of the central bank, till January, 1838, and even after that date this authority is only to be controlled by the ' general board of directors,' consisting of the central directors themselves, and of the local directors of branch banks, appointed by them. The deeds of all the other companies expressly give a power to the shareholders to make new laws and regulations. " Secondly, as to the mode of conducting the business of banking. "This is for the most part set out in general terms. Some banking companies con- tent themselves with defining the business to be 'banking in all its branches' ; in other cases, it is called ' the business of bankers.' " Ad vancing* money on real security is in no instance forbidden. The deeds of three companies are silent on the subject ; the rest expressly allow it. " The majority of the deeds are silent on the subject of the purchase of land. The . Banking Company expressly allows it. The Banking Company and the Union Banking Company expressly forbid it. " An advance of money on mining concerns is in no instance expressly allowed ; in many it is expressly forbidden ; in the majority, it is passed over in silence. " Advances of money upon any ' public foreign government stock, or the stock of any foreign chartered public company.' is directly sanctioned in the deeds of four banking companies. Investment in foreign government stock or funds is allowed by the deed of another bank. Such advances are expressly forbidden by many of the deeds, and are passed over in silence by many others. " In no instance is the company forbidden to become the purchaser of its own shares ; but, on the contrary, power is expressly given to do so by means of the deeds, and that to any amount. The only modifications of this power which your committee have found are in the case of one banking company, in which the directors are au- thorized to purchase shares in the case only of a refusal to admit as a proprietor the person proposing to buy ; and in the case of another bank, the number of shares to be bought in by the directors is restricted to forty. " Thirdly, as to the degree of publicity to be given to the proceedings. " No principle seems to be move attended to, or prominently put forward, than that of preserving secrecy as to the state of the accounts of the customers of the banks. To this principle there does not appear to be an exception. " The directors are in general required to sign a declaration pledging themselves to observe secrecy as to the transactions of the bank with their customers, and the state of the accounts of individuals. In some of the companies, this declaration is also to be signed by all the clerks and officers. One banking company goes so far as to re- quire an oath to this effect. If the proprietors are dissatisfied with the statement of accounts made by the directors, a power is generally reserved to appoint auditors or inspectors for the examination of the books ; but these auditors or inspectors are re- quired to sign a similar declaration of secrecy. z 301 A TrtattM on Banking. " No proprietor, not bdng a dim-tor, U entitled to inspect any of the book* of the - The" director! are in general hound to exhibit to the general meeting of the share- holders a unary or balance-sheet of thoir affairs, and to make such further state- MM or report as the > "> expedient and conducive to the interests of the company, la the rae of one of these banks, even this is not obligatory l>y the tams of til* dssd, which leave U to the discretion of the directors whether they do or to Ml exhibit *rtilflri*t *" In a Terr extensive bank, the proprietor* annually appoiat aaditon to examine the affairs of the company, and to report therm i " In SOOM of the companies the principle of secrecy U carried still further : two of the directors, selected from the rest, are the exclusive depositors of the power of in- specting the private accounts of customers. These persons are tome time* ru!l< it confidential directors. 1 This provision U stated to be made ' in order that the credit and private transactions of individuals may be preserved inviolate..' Sometimes tin y are called ' maaaewf directors '; sometimes ' special directors.' In other companies, though all the directors have the power uf inspection of the accounts of customers, two of the directors are selected to inspect bills and notes, ' in order to prevent the re of such bills of exchange and promissory notes as may pass through the These two directors are called ' the bill committee.' In two of the com- , a single person, called 'the manager,' has the exclusive power of inspecting panic*. !..:- 1 Fourthly, as to the terms on which the company is to be dissolved. The deeds of all these companies contain some provision for dissolution in certain contingencies. It is in general provided that a dissolution of the company shall take place by reason either of a certain amount of loss, or of a voluntary agreement. Dis- solution by reason of loss in the great majority of the deeds is provided for in die fol- lowing manner. " It is necessary to premise that the directors of each of these companies are bound 10 set aside a certain portion of the profits to form a fund to meet extraordinary de- mands, which fund is sometimes called the * surplus fund,' sometimes the ' reserve fund.' tmt more usually the 'guarantee fund.' The ordinary provision for dissolution is to this effect : That if the losses sustained shall at any time have absorbed the whole of this guarantee fund, and also one fourth of the capital paid up, then any one share- holder may require the dissolution of the company, which shall take place accordingly, less two thirds in number and value of the shareholders shall be desirous of con- tinuing the company, and shall purchase the shares of those proprietors who wi>h to withdraw. In one bank the dissolution of the company takes place upon a loss of one fifth instead of one fourth of the capital. In two other banks no mention is made of the guarantee fund. * The provision of the great majority of deeds, as above stated, is, that in the event of a given amount of loss, any one shareholder mav propose the dissolution. In some, three shareholders are required. In the Hanking Company A. the requisition for dis- solntion most be made by ten shareholders holding 200 shares ; in the Bank B. by one fourth of the company ; but if the loss amount to one half the capital, then by any single shareholder. " By the general provisions of the great majority of deeds, the dissolution of the company, thoagh duly proposed, may be averted by two thirds of the proprietors ; but ! some there exists no such restriction ; and on the occurrence of a given amount of loss, the dissolution, if proposed, must necessarily take place. In other instances, on the appearance of a given amount of loss, the dissolution is to take place immediately, even though no partner should propose it." LIST OF COUNTRY JOINT-STOCK BANKS. . The following Tables contain a complete exhibit of the Country Joint- Stock Banks, as in existence, July, 1849, arranged in alphabetical order, and showing, I. The location of the Head Office. II. When established. 111. Number of Branches. IV. Paid-up Capital. V. Reserved Fund. VI. Last Dividend. VII. Amount of Authorized Issue. VIII. Name of Manager. 302 Country Joint- Stocx Banks. art nt. 2* S-gJ>3 re -S = i-joir- Wdi-jai >-i-j w vids si? iqa ii r * * * * L; Id-i-^; _g EU^JS" 3 IS"' P 200^, J. Bowman. F. Hardcastle 5S c? I oJ' 9 - ~ - S, - - - o coo o .Q>. W-2 A * fti " C. . . 28 . . 10 I I us" op ; -* jOOOOOO OO OOOO O OO OOOOO i> tN. o ^j* o TH* fr~ ^C* 9S ~'^ > ?5 ^?* * ^ "3! * SSfiH o t^ 3 fl>0) Q)4)O o oo - g - - o g^u,^^ c \ a cccac" a a c " sf s"s" s" -"- a fs"gfafa" s'a's sfs" '' - o o^ flj .t-s n e rt . ? A TWo/ue on Banting. & &l* - *4tf is -c -23 -a 4S- P ^_ S^SS 06 ' ' 00 * ** ^S 10 * ** ^^S 1 * *5 *7 ** ^ eo e e oeoeoooooeo eo ooo o o oooe f P * ^ I *! 1 raft " -??* - -: *. 3 1 fll'dlJJB = === zu: ui u-J JSJ XZ 85 xx P. x>.i: 5; fc 2 Country Joint-Stock Banks. So Ob >-:: JHWOtfM >-^ GOOOCOl if* III Mill" I* il 5!! o? o to io GO co oTo o o cS"o OGOUJ , ./>. 1 . Ipswich Suffolk Banking Company . April, 1842 . . 1845 '. Leeds Yorkshire District Bank . . . Aug. 1834 . . .1843 3. Leeds Commercial Bank of Leeds . . July, 1836 . . 1846 4. Lmrpool Albion Bank .... May, 1836 . . . 1842 * 5. Limpool Fhnix Bank . . . Jan. 1837 . . 1838 6. Manchester Northern and Central Bank) ,, ,. lfl , A of England ...... ) Mar> 1834 * ] 7. Manchester South Lancashire Bank . . May, 1836 . . 1843 8. Manchester - Alliance Bank Oct. 1839 . . . 1841 . OUham Oldham Banking Company . . Sept 1836 . . 1847 No. 2 was discontinued, and the shareholders formed a new bank, called the Yorkshire Banking Company, taking all the premises and olli- cers of the old bank. No. 3 was formed on the private bank of Messrs By water dc Co. No. 4, The Tradesman's Bank of Liverpool merged in this bank. Afterwards it wound up, paying back to its proprietors all the ' " Country Joint-Stock Banks. capital and a bonus besides. No. 5 was formed out of the remnants of a branch of the Northern and Central Bank ; it existed only a short time. No. 8, The Northern and Central Bank, realized about 10s. in the pound of its capital. Some of the shareholders with that portion of their capital formed this bank. It never did much business, and after a while its capi- tal was lent to the Bank of Manchester, upon the promissory notes of that bank, at two or three years' date, bearing interest at 5 per cent. No. 9 ; a well-managed bank, but having only a small capital, the directors deter mined, after the pressure of 1847, to wind up its affairs. Banks which stopped, and soon afterwards resumed : Date of Establishment, 1. Liverpool Royal Bank of Liverpool . May, 1836 2. Liverpool North and South Wales Bank May, 1836 . S.Newcastle Union Bank of Newcastle July. 1836 4. Nottingham Nottingham and Nottingham- ) A ., ,. ,,,. shire Banking Company . . .$ A P n1 ' 18 ' Nos. 1 and 2 stopped during the pressure of 1847, but soon afterwards resumed. No. 3 stopped at the same period, but have resumed at three of their branches, and are about to resume at Newcastle. No. 4 was stop- ped in 1842 by their London agent. They changed their agent, and re- sumed. The following Joint-stock Banks have merged in other Joint-stock Banks : Banks into which Date of When Banks. they merged. Establishment, merged. I.Birmingham Bank of Binning- ? Birmingham Banking 7 . , QQO 1QQ - ham ..... 5 Company . .$ Au S' 1832 ' 1837 2. Lichfield Lichfield, Rugeley, and ) National Provincial > v 1QQ( . 10 , Q Tamworth Banking Company 5 Bank . . . $ * 3. Newport -Isle of Wight Banking? Di May, 1842 . 1844 Company . ) " 4 Norwich Norwich and Norfolk? ,, . . ,-, , , T> u AT 1QO , IQ OA j> u > .Last ot England Bank Mar. 1827 . 1836 5. Stockton Stockton and Durham ) National Provincial > T. ia Q , a .~ y^t.-ni f T> i t JJeC. looo . 184O County Bank . . . . ) Bank . . . $ " Return of the Joint-stock Banks which have been established under the provision of the Act 7 Geo. IV. c. 46, stating the period when, and the place where, established, and likewise the dates at which any such banks, once established, had ceased to exist." Besides those we have mentioned, this list contains the following : The Period when The Places where Name of the Bank. established. established. Date of ceasing. 1. Bank of South Wales . Feb. 26, 1835 Carmarthen Last license, Oct. 1836. 2. Bristol Old Bank . June 16, 1826 Bristol Last license, Oct. 1840. . 3- Bury andHeywoodBank- 7 Qo . , 7 , MR ( Bury and 5 ^' ast an( i on ty ing Company . . 5 bept 17 ' 18 6 [ Heywood \ Sept. 1836. 4. Central Bank of Liver- ) De(J 3 1836 Liverpool Last retuni) Aprfi, i 839 . 5. G1esount y and } Dec. 31, 1834 Gloucester Last return, June, 1836 307 A Treatitf on Banking. Tftt ftrferf M*m TM Ptocw irJUra /(** mtU*k* taMu**i. Da* if noting. Nortk } N "- ll - 1M4 { n iSS? 1 ^ } ^ <* ct - 18M - t 7. Lekfi*rhire and War* i trkuhirt! Joint-stock > Sept 14, 1840 Hincklcy . Lut license, Oct. 1 840. j t. Leith Hanking Comt*nv Nor. S3, 1837 Carlisle . Last license, Oct 1 836 *' Nw " wi< * 4 ~ ttth **" Jjaly 85, 1839 Nantwich. hire Liajik. . . ) No. 1 is the private bonk of Messrs. Watkins & Co. The number of partners exceeding six, the firm was registered as a joint-stock bank. The number has been reduced by death, and therefore the registry is no longer required. The head office is at Brecon. No. 2. This is the pri- Tate bank of Messrs. Elton, Baillie, & Co., who, having eight partners, registered as a joint-stock bank. Three of the partners nave since died, so that the number is reduced to five. Since the year 1844 they have discontinued the issue of their own notes. No. 3. This bank was in ex- istence only a few months. No. 4. This- was a small, ill-regulated bank, that brought itself to a close. No. 5. This bank was formed by Mr. Charles Cripps, who had been the agent of the Bank of England branch at Gloucester. It existed for a short time, and then became a branch of the County of Gloucester Bank. No. 6. This bank had seven partners. It is presumed to have been the private bank of Messrs. Douglas, Swalley, dc Co., who stopped payment in the year 1839. No. 7. This bunk was formed on the private bank of Messrs. Heming & Needham, at Hinckley. It continued only a very short time. No. 8. The Leith Banking Com* pan v had a branch at Carlisle, and consequently registered as an English bank. No. 9. This was a small, but respectable bank, that transferred its business, on the 1st of January, 1845, to the Manchester and Liverpool Dintrict Bank. Two joint-stock banks have failed in the Isle of Man. 1. The Isle of Man Joint-stock Bank. This bank was formed on the private bank of Messrs. Forbes & Co. They were largely in debt to their London agent, and their affairs have led to much litigation. 2. The Isle of Man Commercial Banking Company. The business of this bank has been taken up by the City of Glasgow Bank, who have Opened a branch in the island called the Bank of Mona under the management of Mr. John Stanway Jackson, who was formerly manager 4>f the Manchester and Liverpool District Bank. The following are the provisions of the Act 7 & 8 Viet c. 113, passed in 1844, to regulate Joint-stock Banks in England : jit Joint-Stork Bank ettallithed after 6tk May latt to carry on btaineu vnleu by virtue of LeOen Pattmt granted according to this Act ; but Cowjjaniet previoudy ettiibtiihed not minuted from carrying on &MMMM until Letten Patent have been granttd. " Wbm** the hwt in force for the regulation of copartnerships of banker* in Eng- laitd need to be amended : lie it enacted by the Queen's mo*t excellent Mxjesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, That it shall aot be lawful for anjr company of more than six persons to carry on the trail. or busi- MH of bankers in England, after the pasting of this Act, under "anv agreement or cov- Country Joint- Stock Banks. enant of copartnership made or entered into on or after the sixth day of May last passed, unless by virtue of letters patent to be granted by her Majesty according to the provisions of this Act ; but nothing herein contained shall be construed to restrain any such company established before the said sixth day of May, for the purpose of carrying on the said trade or business of bankers in England, from continuing to carry on the same trade and business as legally as they might have done before the passing of this Act. until letters patent shall have been granted to them severally on their application. as hereinafter provided, to be made subject to the provisions of this Act. Company to Petition for a Charter. " II- And be it enacted, That before beginning to exercise the said trade or business every such company shall present a petition to her Majesty in council, praying that her Majesty will be graciously pleased to grant to them letters patent under this Act ; and every such petition shall be signed by seven at least of the said company, and shall set forth the following particulars ; that is to say, " First, The names and additions of all the partners of the company, and the name of the street, square, or other place, where each of the said partners reside. " Second, The proposed name of the bank. " Third, The name of the street, square, or other local description of the place or places where the business of the bank is to be carried on. ' Fourth, The proposed amount -of -the capital stock, not being in any case less than one hundred thousand pounds, and the means by which it is to be raised. " Fifth, The amount of capital stock then paid up, and where and how invested. " Sixth, The proposed number of shares in the business. " Seventh, The amount of each share, not being less than one hundred pounds each. Charter to be granted on Report of Board of Trade. " III. And be it enacted, That every such petition shall be referred by her Majesty to the Committee of Privy Council for Trade and Plantations ; and so soon as the Lords of the said committee shall have reported to her Majesty that the provisions of this Act have been complied with on the part of the said company, it shall thereupon be lawful for her Majesty, if her Majesty shall so think fit, with the advice of her Privy Council, to grant the said letters patent. Deed of Settlement. " IV. And be it enacted, That the deed of partnership of every such hanking com- pany shall be prepared according to a form to he approved by the Lords of the said committee, and shall, in addition to any other provisions which may be contained therein, contain specific provisions for the following purposes; that is to say, " First, For holding ordinary general meetings of the company once at least in every year, at an appointed time and place. " Second, For holding extraordinary general meetings of the company, upon the requisition of nine shareholders or more, having in the whole at least twenty-one shares in the partnership business. " Third, For the management of the affairs of the company, and the election and qualification of the directors. " Fourth, For the retirement of at least one fourth of the directors yearly, and for preventing the reflection of the retiring directors for at least twelve calendar months. "Fifth, For preventing the company from purchasing any shares, or making ad- vances of money, or securities for money, to any person on the security of a share or shares in the partnership business. " Sixth, For the publication of the assets and liabilities of the company once at least in every calendar month. " Seventh, For the yearly audit of the accounts of the company, by two or more au- ditors, chosen at a general meeting of the shareholders, and not being directors at the time. " Eighth, For the yearly communication of the auditors' report, and of a balance- sheet, and profit and loss account, to every shareholder. "Ninth, For the appointment of a manager, or other officer to perform the duties of manager. "And such deed, executed by the holders of at least one half of the shares in the 309 IIOMIJI p. hull A Tftatite OH li.iniing. , on which not leas than ten pound* on each such share of one I, mi. in-. I . and in proportion for tvery share of larger amount, shall have been then t ;K shall h* annexed to the petition; and the j.r.-M , \uth MI, h others M 10 her Mijertj shall Mem fit, shall be set furili in the letter* patent. may IP nmmmet Bminm tiS D*d ttiatttd oarf all the Sham nbtenbedfor, ana at but Uafftkt Amount pai.i ,. " V. Provided always, and be it enacted. That it shall not be lawful for any inch .vtmpany to commence business until all the shares shall have been snb--ni.,-d tor, mi I the deed of partnership shall have been executed, personally or by some i Authorised by warrant of attorney to execute the same on behalf of sue h h-:- hoMtn, bv the holders of all the share* in the said business, and until a sum of not less than cue half of the amount of each share shall have been paid up in resp> m-h Hare; and it shall not be lawful for the company to repay any pan of i...- M>U. ><> paid np without leave of the Lords of the said committee. Company to be Incorporated. "VI And be it enacted, That it shall be lawful for her Majesty, in and by such let- to grant that the persons by whom the said deed of partnership shall h:ive and all other persons who shall thereafter become shareholders in the . their executors, administrators, successors, and assigns respcc- tirdy. shall be one body politic and corporate, by snch name as shall be given to them ia aad by toe aid letters patrtit. for the purpose of carrying on the said lmnkin<; l>usi- IMM, and by that name shall have perpetual succession and a common seal, and slmll have power to purchase and hold lands of such annual value as shall be expressed in och wtten patent; and snch letters patent slml! U- ^rMiitc-.l for a term of ycui- exceeding twenty Tears, and may be made subject to such other provisions and stipu- lation* a* to her'Majesty may seem fit. Incorporation not to limit tJie Liability of the Sharfholden. ' Provided always, and be it enacted. That notwithstanding such incorporation t!e several shareholders f.>r tin- time In-in^ in the said banking business, nnd tln.j who . have been shareholders therein, nnd their several executors, administrators, sue- < m.r;- gngrl. The following is the language of the Report of the ( 'ommitter of the House of Commons, appointed in 1826 to consider the expediency of abolishing all notes under 5 : "There fa no limitation upon the number of partners of which a hanking company mar rotiit ; and, excepting in the case of the Rank of Scotland ami ilu> two ehar- trred banks, which hare very considerable capitals, tin- II.U-IH.T-, of all hanking compn- BiH are bound jointly and severally, so that each partner is liable to the whole extent of Us fortune for the whole debts of the company. A '. : >r in Scotland is empowered to attach the real and portable, an well as the pmonal <*tate of his debtor, for payment of personal debts, ainn^ which may he classed debts doe by bills and promissory notes ; and recourse may !>< h.ul for the pro- raring payment to each description of property at the same time. K\c< ution is not confined to the real property of a debtor merely daring his life, but proceeds with equal effect upon that property after hi* decease. ~ The law relating to the establishment of records gives ready moans of procuring information with respect to the real and heritable estate of which any person in Scot- land may I >c possessed. No purchase of an estate in that country i> -< urc until the seisine (that is, the instrument certifying that actual delivery has Seen given) is put on record; nor is any mortgage effectual until the deed is in like manner recorded. " In the case of conflicting pecuniary claims upon real property, the preference is not regulated by the date of the transaction, but by the date of its record. These rec- ord* are accessible to all persons ; and thus the public can with cane ascertain the effective means which a banking company possesses of di-cliairin.- its obligations, and tttt partner* in that company are enabled to determine with tolerable aeeuraey the de- free of rik and responsibility to which the private property of each is exposed. "There are other provisions of the law of Scotland, which it is not necessary mi- nutely to detail, the general tendency of which is the same with those above men- The following Acts of Parliament have been passed in reference to banking in Scotland : " Toe flrat notice of hanking in Scotland which occurs in the statute-book, is an act of King William the Third, passed in the year 1695, under which the Bank of Scot- land was established. By this Act an exclusive privilege of banking was conferred upon that bank, it being provided 'that for the period of twenty years from the 17th July, 1695. it shovld not be lawful for any other person to set up a distinct company or bank within the kingdom of Scotland, 'besides those persons in whose favor this Act WM granted.' No renewal of the exclusive privilege took place after the expiration of ike twenty-one years. - The Bank of Scotland first issued notes of 20. in the year 1704 ; bat the amount of notes in circulation previous to the Union was very limited. " The Bank of Scotland continued the only bank from the date of its establishment in Ift95. to the veer 1717. - In ihat year a charter of incorporation was granted to certain individuals named therein, tbr cailjlag on the badness of banking under the name of the Royal Bank ; 312 Scotch Banking. and subsequent charters were granted to this establishment, enlarging the capital, which now amounts to one million and a half. "An Act passed in the year 1765 is the first and most important Act of the Legis- lature which regulates the issue of promissory notes in Scotland. " It appears from its preamble, that a practice had prevailed in Scotland of issuing notes which circulated as specie, and which were made payable to the bearer on de- mand, or payable at the option of the issuer at the end of six months, with a sum equal to the legal interest from the demand to that time. " The Act of 1765 prohibits the issue of notes in which such an option as that be- fore mentioned is reserved to the issuer. It requires that all notes of the nature of a bank-note, and circulating like specie, should be paid on demand ; and prohibits the issue of any promissory note of a sum less than 20s. " With respect to the issue of promissory notes in England, an Act was passed in 1775, prohibiting the issue of any such notes under the sum of 20s. And in the year 1777, restraints were imposed by law on the issues of notes between the sum of 20s. and 5, which were equivalent to the prohibition of such notes circulating as specie. "In the year 1797, when the restrictions as to payments in cash were imposed upon the Bank of England, the provisions of the Act of 1777, with regard to the issue of notes between 20s. and 5 were suspended. By an Act passed in the third year of his present Majesty, the suspension was continued until the 5th of January, 1833 ; but now stands limited by an Act of the present session to April 5, 1829." " The general result of the laws regulating the paper currency in the two countries in this : " That in Scotland, the issue of promissory notes payable to bearer on demand for a sum of not less than 20s. has been at all times permitted by law, nor has any Act been passed limiting the period for which such issue shall continue legal in that country. In England, the issue of promissory notes for a less sum than 5 was prohibited by law from the year 1772 to the period of the bank restriction in 1797. It has been permitted since 1797; and the permission will cease, as the law at present stands, in April, 1829." The Act which now regulates the issue of bank-notes in Scotland is 8 and 9 Viet. c. 38, passed in the year 1845. By this Act, the power of issuing notes is confined to those banks that issued notes in the year preceding the 1st day of May, 1845. And the amount to which each bank may issue is not to exceed the average amount of notes it had in circulation during the year ending the 1st of May, 1845, and the amount of gold or silver coin it may at the time have in possession at the head office or principal place of issue, in the propor- tion that the silver shall not be more than one fourth the amount of the gold. This Act was to come into operation on the 6th day of December, 1845. After which day each banker is to make weekly returns to the Stamp-office of his notes in circulation, and of the gold and silver coin on hand ; and the averages of four weeks are to be published in the London Gazette, with a certificate from the commissioner as to whether the bank has held the amount of coin required by this Act. All banks, except the Bank of Scotland, the Royal Bank of Scotland, and the British Linen Company, are required to send to the Stamp-office, between the 1st and 15th days of January inclusive, the names of all their partners, which shall be published by the 1st day of March follow- ing in some newspaper circulating within each town or county respec- tively in which the head office or principal place of issue of such bank is situated. Bank of England notes are not to be a legal tender in Scotland. In the Acts of Parliament passed in 1844 and 1845 for Regulating AA 313 A TreatiM on Banking. Banks of Issue in England and in Scotland, we may observe the follow- ing differences : 1 The maximum of the circulation in England is the average of the twelve week* ending the *,i7:h of April, 1841. The maximum in Scot- land is the average of the year ending the 1st day of M;i\ , 1 2. The Kni!ish hanks ure no', under any circumstances, allowed to ceed the fixed limit. Tlie Scotch k-inks arc allowed to i \cc.-d their limit, provided they hold in their cullers at the head office an amount of gu!d and silver equal to such excess. 3. In England, should two joint-stock banks of issue effect a junction, the .circulation of one of them would be forfeited, and the united Ixmk could issue only to the amount which the other bank had previous! . sued. In Scotland, the united bank is allowed to issue to the amount of the two circulations added together. There is no express provision in the English Act with reference to the junction of two joint-stock banks. We consider that only one of the banks would lose its issue, provided the continuing bank retained its original title, so as not to create a new bank. But if by the union a new bank should be formed, then both the banks would lose their issues. In the same way, we think that the union of an issuing and a non-issuing bank would cause no change in the issue. But then the new bank must retain the title of the old issuing bank. Its right of issue would not be affected by taking new directors or new share* holder-, 4. In Scotland, notes under . 5 are still permitted. In England, notes under 5 are still prohibited. II. The Existing Banks of Scotland. The following Table, which I constructed from the parliamentary evi- jJBBPB of 1826, contains an account of the number of the banks in Scot- land, the name of the firm or bank, date of its establishment, place of the head office, number of branches, number of partners, and the name of the London agents : Name* of Firm or Bank*. Date. Head Office. Bimnches. Partn! London A yenu. I. Bank of Scotland, ... 1696 ft. Rnyal Bank of Scotland, . 1727 I Briitek LteM Company, . . 1746 4. Aberdeen Banking Company, 1767 6. Ahanhaa Town and County Bank. . . ' . .1885 t A/trtwh Bankinc Company, 1825 7. Carrick AC*., or 9Mp Bank, . 1749 Bank** Company . . . 1810 9. CnaMKial Baaktef Company, 1778 10. DMteBankinf Company, . 1777 11. DMUaeNewBaa*. . . . 1808 It DowWCoMHteJalBank, . 16 111 DwdoeUatoBaak, . . 1800 14. Ik Falktrfc BaaMacC aipaoy, . 1787 11 rub BMktec Ciapny, . 1808 Edinburgh, 16 chart. Ditto, 1 ditto, Ditto, 27 ditto, Aberdeen, 6 80 Ditto, 4 4*8 Arbroath, 2 118 Glaagow, none, 3 Edlnbargh, 31 621 Aberdeen, none, 15 Dundee, i. . 61 Ditto, 1 6 Ditto, none, 202 Ditto, 4 86 \ :. . ' v i, 1 Falkirk, 1 I Cupnr. Fife, 89 314 Jones, Loyd, & Co. Glyn & Co. Smith, Payne, & Co. Jone, Loyd, tt Co. Kinloch k Son*. Rnom & Co. Glyn & Co. Glyn & Co The Banks of Scotland. 17. Greenock Banking Company, 18. Glasgow Banking Company, . 19. Hunters & Co., 20. Leith Banking Company, . 21. National Bank of Scotland, . 22. Montrose Bank, 23. Paisley Banking Company, . 24. Paisley Union Bank, 25. Perth Banking Company, 26. Perth Union Bank, . 27. Ramsay's, Bonar's, & Co., . 23. Renfrewshire Banking Company, 29. Shetland Bank, 30. Sir William Forbes & Co., . 31. Stirling Banking Company, 32. Thistle Bank, Date. Head Office. , Branches No. of i. Partn. London Agents. 1785 Greenock, 3 14 Kay & Co. 1809 Glasgow, 1 19 J Ransom & Co., and I Glyn & Co. 1773 Ayr, 3 8 Herries & Co. 1792 Leith, 4 15 Barnett & Co. 1825 Edinburgh, 8 1,238 Glyn & Co. 1814 Montrose, 2 97 Barclay & Co. 1783 Paisley, 4 6 Smith, Payne, & Co. 1788 Ditto, 3 4 Glyn & Co. 1766 Perth, 5 147 Barclay & Co. 1810 Ditto, 69 Remington & Co. 1738 Edinburgh, none, 8 Coutts & Co. 1802 Greenock, 5 6 Kay & Co. Lerwick, ' 4 Barclay & Co. Edinburgh, 7 (Barclay) (Coutts). 1777 Stirling, 2 7 Kinloch & Sous. 1761 Glasgow, none, 6 Smith, Payne, & Co. Private Banking Companies, who do not Issue Notes. Thomas Kinnear & Sons, Donald Smith & Co., . Robert Allen & Son, Alexander Allan & Co., 1748 Edinburgh, none, 1773 Ditto, none, Ditto, none, 1776 Ditto, none, Smith, Payne, & Co. Glyn & Co. Barclay & Co. Barclay & Co. Since the year 1826 the following banks have been formed in Scot- land : Formed. 1. The Glasgow Union Bank, April, 1830. 2. The Ayrshire Banking Company, at Ayr, . . y . Nov., 1831. 3. The Western Bank of Scotland, at Glasgow, .... Oct., 1832. 4. The Central Bank of Scotland, at Perth, .... April, 1834. 5. The North of Scotland Bank, at Aberdeen, .... Oct., 1836. 6. The Clydesdale Bank, at Glasgow, May, 1838. 7. The Southern Bank of Scotland, at Dumfries, .... Ane, 1838. 8. The Eastern Bank of Scotland, at Dundee, .... Dec., 1838. 9. The Edinburgh and Leith Bank, Dec., 1838. 10. The Caledonian Bank, at Inverness, Feb., 1839. 11. The City of Glasgow Bank, May, 1839. 12. Glasgow Joint-Stock Bank, Oct., 1840. 13. The North British Bank, at Glasgow, (not a bank of issue,) . . 1844. 14. The Exchange Bank of Scotland, at Edinburgh, (not a bank of issue), . ;' ; "' w . '"-. '. . . . . t ...... * t. . . 1845. At present, the following are the only banks of issue in Scotland : A TABLE exhibiting the CAPITAL and other particulars of the BANKS OF ISSUE IN SCOTLAND, with the PRICE of their SHAKES, as publicly quoted in December, 1848. (From the "Edinburgh Almanac") Insti- tuted. NAME. 1695. Bank of Scotland, 1727. Royal Bank, . 1746. British Linen Company, 233 1810. Commercial Bank, 1825. National Bank, 1829. Union Bank of Scot- land, ... 692 Part " Rnnrhes Paid '"P ners. Br hea ' Capital. Dividend. Rate. Payable. Share Paid. Price. t. (/. 645 31 1,000,000 7 April and Oct. 100 162 917 6 2,000,000 5 Jan. and July. 100 118 6 233 43 500,000 8 June and Dec. 100 196 o 565 47 600,000 7 Jan. and July. 100 151 fl 1,458 38 1,000,000 6 i Jan. and July. 10 13 ' c 1,000,000 315 8 June and Dec. 77 A Trtatiae on Banking. Prlc*. ITM. rank BaMaf company. ISM. OMU>! Btak of Scot- 405 66,275 11,912,130 Thus we find that, although there were thirty-two banks of issue exist- ing in Scotland in the year 1826, and twelve more banks of issue have since been formed, yet the present number of issuing bonks is only eigh- teen. It may also be observed, that out of the four non-issuing private honks in Edinburgh, only one remains. It will be interesting to trace the changes that have taken place in the Scottish banks since the yc.-ir l s vit!. In the following Table the figures refer to the numbers in the Table at pp. 314, 3J5. Change* in Scottuh Bank* since 1826. I 4. Arbroath Banking Company . 9. Commercial Bank of Aberdeen 10. Doadee Banking Company 11. Dmdee New Bank . . It. Dundee Commercial Bank . 13. Dundee Union Bank 14. Exchange and Deposit Bank 15. Falkirk Banking Company 1*. Fife Banking Company 17. fi -* .M*.g Company 19. SO. UrthBaak tS. MontroM Bank 53. Paialey Bank . . . 54. Paialey Union Baak ."-- iVrth Union Honk . *7. nitmrry*r. Bonar'a, 4 Company 316 ( Merged in Commercial Bank of rland. $ Merged in National Bank of Scot- ' ( land. Arc now Dundee Bank. M.-rgfd in Eastern Bank of Scot- ' \ land. I Mrrged in Western Bank of Scot- \ land. Failed. Wound up. . Failed ; paid in full. Merged in Western Bank. Afterwards joined Union Bank of Scotland. Ditto. . Failed. Wound up. . Merged in British Linen Company Merged in Union Bank of Scotland . Wound np. Ditto. Failures of Scotch Banks. 28 Renfrewshire Banking Company . . . Failed. 29. Shetland Bank Ditto. 30. Sir W. Forbes, J. Hunter, & Co. . . Joined with Union Bank. 31. Stirling Bank Suspended; paid in full. 32. Thistle Bank Merged in Union Bank. Non-Issuing Private Banks. Thomas Kinnear & Sons ? ( United under the firm of Kinnears, Donald Smith & Co. }' ' ' ' Smiths, & Co., and afterwards failed. R. Allan & Son Failed. Alexander Allan & Co Continue in business as formerly. Of the Banks formed since 1826 : The Glasgow Union Bank joined, in 1 844, the private bank, at Edinburgh, of Sir William Forbes & Co. ; and afterwards took the title of the Union Bank of Scot- land. The Edinburgh and Leith Bank, and The Glasgow Joint-stock Bank, united in 1844, and formed a new bank, called the Edinburgh and Glasgow Bank. The Ayrshire Banking Company merged in the Western Bank of Scotland. The Southern Bank of Scotland became, in 1842, the Dumfries Branch of the Edin- burgh and Leith Bank. From this statement it will appear that the Union Bank of Scotland em- braces the following banks : 1. The Glasgow Union Bank. Formed since 1826. 2. The Paisley Union Bank. No. 23 in the first table. 3. Glasgow Banking Company. No. 18. 4. Carrick & Company, or Ship Bank, Glasgow. No. 7. 5. Sir William Forbes & Co. No. 30. 6. Thistle Bank, Glasgow. No. 32. 7. Hunters & Co., Ayr. No. 19. The Western Bank of Scotland also embraces several original banks : 1. The Western Bank of Scotland. Formed since 1826. 2. The Dundee Union Bank. No. 13. 3. Greenock Banking Company. No. 17. 4. The Ayrshire Banking Company. Formed since 1826. The Edinburgh and Glasgow Bank is formed of three banks : The Edinburgh and Leith Bank. The Southern Bank of Scotland, at Dumfries. The Glasgow Joint-Stock Bank. The banks that have failed or wound up since 1826 are the follow- ing: 1. Exchange and Deposit Bank, Edinburgh. No. 14. 2. Fife Banking Company. In 1825, No. 16. 3. Leith Banking Company. No. 20. 4. Renfrewshire Banking Company, Greenock. No. 28. 5. Montrose Bank. No. 22. 6 Perth Union Bank. No 26 7 Ramsay's, Bonar's, & Co., Edinburgh. No. 27. 8. Shetland Bank. No. 29. 9. Stirling Bank. No. 31. AA* 317 A Trtaiite on Banking. From this account it will appear that out of the thirty-two banks con- in my list of 1826 only nine remain. These axe the following : I. Tb* Bank of Scotland. No. 1. r The Royal Bank at ScotUnd. No. 2. 3. The Bri'tuh Linen Company. No. 3. 4. The Aberdeen Banking Ciimpnny. No. 4. onleen Town ft County Bank. No. 5. 6. Coaunrrvial Bank of S<-otlund. No. 8. ..!. Hanking <\iii|nuiy. No. 10 and No. 11. .uonal Bank of BattWM. No. SI. . I'crth Banking Company. No. 25. Most of the hanks that have ceased to exist were banks having only a few partners, and their capital was unknown. The banks that have since been formed have many partners, and generally a large amount of capi- tal. It was probably in consequence of the greater strength of the new banks that the old ones found it expedient to discontinue business. The change has doubtless been for the advantage of the public, and it has taken place without being attended with any inconvenience or excitement. Indeed, we think that in all cases where the law leaves banking free, the Act is to reduce the number of banks. We are aware that the general impression is the reverse. ** The argument presumes, that in case of free banking the number of banks would be very great Are we justified in supposing that this would be the case ? Theory exclaims, * Yes ' ; experience whispers, ' No.' The numerous banks in America are not the result of free trade, hut arc the re- sult of the Acts of the Legislature. The State Legislatures have thought proper to give a large number of charters, and of course there is a large number of banks. Had the charters been fewer, and required higher paid- up capitals, the banks would have been larger and more respectable. The number of banks in England, too, have been the result of the interference of the Legislature. In the renewal of the charter of the Bank of England io 1708 it was .enacted, that no other bank having more than six partners should have the privilege of issuing notes. As the growing trade and wealth of the country required banks of some sort, and as banks having more than six partners could not be formed, a great number of banks, each not having more than six partners, rose into existence as they were required by the increasing trade and wealth of the country. Hence, in- stead of having a small number of large banks, we have had a large num- ber of small banks. 44 If we look to Scotland, where banking has been free, we find that the total number of private and joint-stock banks is only twenty-eight.* Bank- ing has been free beyond fifty miles from Dublin for the last fifteen years, yet throughout that district there are only five banks of issue, with the ex- ception of the Bank of Ireland. In England, where there has been, as we are told, a frenzy in their favor, the joint-stock banks of issue are only ninety-one,! and probably they would have been less numerous had Thii wa written in the year 1 840. The present reduced number of bank* trength. - - . i - . - t At prwent, tuctj-dx. 318 Failures of Scotch Banks. not the law excluded them from London. The capital which has been embarked in a number of small local banks would have been invested in large London establishments, and the place of the local banks would have been occupied by branches of the London banks. From these facts, it seems fair to infer that some of the small joint-stock banks, and many of the private banks, will in the course of the next twenty years be merged in larger establishments. The supposition that unlimited freedom of bank- ing would lead to the establishment of an inconvenient multitude of banks is wholly unsupported by the testimony of experience." (Currency and Banking, by J. W. Gilbart.) The existing banks in Scotland are thus distributed : Edinburgh is the head-quarters of the following banking institutions : 1. The Bank of Scotland. 4. The Commercial Bank of Scotland. 2. The Royal Bank of Scotland. 5. The National Bank of Scotland. 3. The British Linen Company. 6. The Edinburgh and Glasgow Bank. All these banks issue notes, and have branches. The first five have charters. The charters of No. 4 and No. 5 are comparatively of recent date, and do not limit the liability of the shareholders. The Exchange Bank of Scotland : This bank has a charter under the Act of 1844 (7 & 8 Viet. c. 32). It does not issue notes, and has no branches. Glasgow is the head-quarters of the following banks : 1. The Union Bank of Scotland. 3. The Clydesdale Bank. 2. The Western Bank of Scotland. 4. The City of Glasgow Bank. The North British Bank, at Glasgow, does not issue notes, and has no branches. Its capital has been reduced from .233,270 to 156,520 by the purchase of its own shares. These purchases have been carried to the " Reserved Fund Account." Dundee is the head-quarters of three banks, Aberdeen of three, Perth of two, and Inverness of one. All the other places in Scotland have only branches. Branches of other banks are also established in Edinburgh, Glasgow, Dundee, Aberdeen, Perth, and Inverness, besides the banks whose head offices are in those places. III. A Comparison between the Banks of Scotland and those of Eng- land. The differences between the English and the Scotch banks are the fol- lowing : 1. The Scotch banks are all joint-stock banks. In England there is a mixture of joint-stock and private banks. 2. The Scotch banks are nearly all banks of issue. In England there are many, both private and joint-stock banks, that are not banks of issue. 3. The Scotch banks generally have branches. In England most of the private banks, and some of the joint-stock banks, have no branches. 4. The Scotch banks universally grant interest on the balance of cur- rent accounts, a practice not universally adopted in England, especially in London. 319 A Treatise on Banking. ft. The mode of making advances by way of " cash credit " is general in Scotland, but very rare in England. \\ i nay also observe some other differences, chiefly of a business character, which have nn iinjortant bearing on the interest of the commu- nity. 1. The banks of Scotland have generally a large paid-up capital. * Two great error* appear to hare been committed in the formation of joint-stock tank* in England, and, until theM are remedied, such establishments can hanlly ex- jirrt to rrarh a higher degree of importanre or credit than is attainable by u wealthy private bank. Tbeee erOs are, in the first place, too small a capital relatively to the extevt of btttinew undertaken ; and, in tlic next place, the circ umsuincc of the is- aee of the joint-clock banks being left uncontrolled by any effective ystcm of ex- "Tilt advantage of a small capital in banking is. that it enables the establishment, if at all racreuful in busine**, to pay a large dividend. The profits of hanking dcj .]..! fa a great measure, on the amount of deposits and circulation, and according as than are great or email compared with the extent of the capital, ill the company be enabled to diride a larger or smaller dividend. It then-fun- heroines the !iviy the adoption of this plan, it is proposed to meet the additional expense by a small tax upon the tranwu-iion-. them- elves; and it is calculated that the trifling niiini-.ion of a halfpenny up.>u t . t . h .-in. neat and entry, or 4*. %/ npon the hundred, will uili-i.l Miilirient irtiitineruiuni crease of labor. Should this fee be found too small to n-mtiin T.U. CJSK M MM falcroaac of labor. Should thin fee be found too small to i-eninip-i.ite. m- to ard svftcimtly against the abuse of the privilege, it will, of mur-e. ! . n\ fur the aak to increae the charge, say to one penny, or more, on each trama< 8. TW system of numerous branches leads to uniformity all over Scot- land in the terms on which business is transacted in the banks. From the small number of banks that existed for many years in Scot- land, and from the circumstance that the liead offices of most of these banks were fixed at Edinburgh, it was easy for them to form arrange- * among themselves for the regulation of their business. Hence arode a uniformity of practice among all the banks, and throughout the whole of Scotland. Ttits uniformity of practice does not e*tet in England. The system of London banking is different from that in the country. And tin: kink- ing of one district differs from that of another district. It would be diffi- cult to produce any general union in England, even among the joint-stock banks. There is a difference in the character of their localities. Tli< ir head offices are too wide apart to admit of frequent personal communica- tion. And it may be feared that among the joint-stock banks of England there is not enough of that esprit du corps which is essential to the < ence of a general confederation. There is, however, considerable competition among the banks of Scot- land. This rivalry, however, does not lead to transacting business on lower terms. Indeed these terms are always very moderate. The dif- ference between the rate of interest allowed and charged is rarely more than one per cent No commission is charged on current accounts ; and it is only recently, we believe, that commission has been charged on the amount (not the operations) of cash credits. Sometimes the banks at Glasgow, when there is a great demand for capital, have been disposed to grant a higher rate of interest than the banks of Edinburgh. But this difference has soon been arranged. The provincial banks, too, have car- ried on a strong opposition against the branches of the Edinburgh banks. The late Thomas Kinnear, Esq., when asked what had led to the discon- tinuing of some branches of the Bank of Scotland, replied : With respect to those that are beyond ray memory, I cannot say what was the dtese; bat those that hare been given up within my rcran h hud originally been artahCslud baring accumulated wealth to such a degree, that it could afford a hank- tag capital of ita own, and that it had in point of fact established a local bank, then the connection of that local bank went so strongly against us l>y fair competition, that we (band we roald employ oar capital to better purpose el&cwherc, and gave up the braaeh." (ChnHM, 132, Kinnear.) 4. The system of numerous branches enables the banks of Scothm'l to transfer the surplus capital of the agricultural districts to the manufactur- ing and commercial districts, without going through the process of re- discounting their bills. Some Scotch writers have considered it a reproach to the English Comparative View. banks that they re-discount their bills, and have boasted that, with rare exceptions, the practice of re-discount is unknown in Scotland. The ac- cusation is made without due consideration. The system of branches makes a difference in all banking arangements. A bank in an agricul- tural district, say at Norwich, has a superabundance of money. A man- ufacturing town, say Manchester, has a demand for money. The bank at Norwich will send its money to a bill-broker in London. The bank at Manchester will send its bills to the same broker. A re-discount takes place. But let us suppose that the bill-brokering establishment should be- come the head office of a large bank, having one branch at Norwich, and another at Manchester. Then no re-discount will occur. The bills dis- counted at Manchester will never pass out of the possession of the bank. Nevertheless, the surplus funds at Norwich will be transferred to meet the wants of Manchester as effectually as before. This is an illustration of the branch system in Scotland. A bank at Edinburgh will have branches in both the agricultural and the manufacturing districts. Or a bank whose head office is in a manufacturing town, will have branches in the agricultural districts. Thus the surplus funds of Perth, Ayr, and Dumfries, are speedily transferred to be employed at Glasgow, Paisley, and Dundee. Were a bank to be established at Glasgow, without branch- es, it would probably have occasion for discount at certain times, as well as the banks at Manchester or Leeds. At the same time, we think this transfer of capital by means of branches is better than by means of re-discount. There is no occasion for the intermediate party, the bill-broker. The J>ills do not go out of the bank, so that men's transactions do not become known. The abuses connected with re-discount by fictitious bills are effectually prevented ; and the bank can more readily regulate its advances in accordance with its means. To recur to our illustration : The bank at Norwich may lose a large amount of its deposits ; the bank of Manchester, knowing nothing of this, may continue its advances in dependence upon receiving its usual re-discount. The check may at length come so suddenly that the Man- chester bank may be placed in difficulty. Under the branch system, should any large amount of deposits be withdrawn from one branch, the bank would immediately limit its advances at the others. The advantage of this system on the approach of a pressure is obvious. 5. The system of numerous branches leads to more regularity and uniformity in the mode of making their exchanges : " The system of exchanges centres in Edinburgh. In that city a general exchange of the bank notes of all the banks of issue in Scotland takes place twice a week. This exchange is made alternately within the office, and under the superintendence of the Bank of Scotland and of the Royal Bank. On these exchange days, clerks from all the banks having establishments in Edinburgh assemble, bringing with them the notes which each bank has collected, not only in Edinburgh, but, by means of their branch- es, all over the country ; and as the Edinburgh banks act as agents for the several provincial banks, and, as such, exchange or give value for their notes, the whole bank- ing interest of Scotland, so far as concerns the exchange of notes, is represented in the ' Cleariiig-roam.' " On these occasions a mutual exchange is made by the several clerks assembled, giving the notes of other banks which they hold, and taking their own in exchange. After this exchange of notes, a balance is struck, and each clerk hands over to the offi- 323 A Treatise on Banking. statement, showing the amount of the Iwlanr as between of the other eMiiMMuncnts. The aggregate balance on this shows the remit of the day 1 * exchange as it affects each Tiank ; ami (hat bid- will be for or against any given bank in the precise proportion in win. h n- i have oioeniied or fallen short of its emerging and available resources. - The ultimate balance against every bank was formerly paid by a draft on J/.mlon at ten days' daw. Bat this mode of settlement having Urn found Inconvenient, and having on one occasion led to considerable lo. in ...:,-, , |U ' i..,- of the i.niiu. of a pri- vate bank in Edinburgh, a different arrangement won then made, and is now acted upon. Acconimsr to that arrangement, every Scotch bank of issue having an estab- lishment m Edinburgh is bound to bold a certain cd by the com- bined banks, which in Scotland would be tantamount to a suppression of the non-ac- ceding bank as a bank of issue, tt In addition to these exchanges in Edinburgh, there are also exchanges made on the same days in Glasgow ; and the balances being advised by post to Kf exchanges is, the surveillance which, by this means, the lurgo banks at Edtobiugn are al.le to exercise over the smaller (Minks in the provinces. That iliis surveil- lance exists in Scotland, and that it hns been exercised beneficially, we entertain no doubt It is equally true that such a surveillance does not exist in England. Hut the system of exchanges is not the cause of this surveillance, it is m- r<-ly the instrument. In Scotland, the bunks being few, and all their hend olliccs l>eing at Edinburgh, they are aide t.. confer together, and to fix on rules for their general government. \\ iih any in- ferior hunk that refuses to comply with these rules they can refuse t. change note*, ami thus force it to compliance. In England, where tin- banks are numerous, and where their head otlices are distant from each other, such a system cannot well In- formed ; and hence each bunk is free from the control of other banks, and may pursue any course it pleases, however injurious to itself or to others, so long as it is able to make good its payments to the public. The banks at Edinburgh, too, by means of their numerous branches, have the earliest information of any irregular practice that may have beert adopted by a local bank in the provinces ; but the large banks in London have comparatively but a very imperfect knowledge of the operations of either the private or the joint-stock banks that nre scattered over the country. From a want of this surveillance, banks in England have curried on business for years after they have been supposed to be insolvent. Hence they have gone on until their losses have not only absorbed the whole of tlieir capital, but have required, to replace them, further demands to a large amount from their shareholders. In Scotland, these hunks, if they could not be kept in the right path, would probahly Iwive been compelled to stop before they had wandered so widely. Banks, as we have seen, do some- times fail in Scotland, but never under circumstances that shake the pub- lic confidence in the general banking institutions of the country. 6. The confidence placed in the banks of Scotland by the public ren- ders them IBM exposed to inconvenience during a season of pressure. When a pressure takes place in England, the first objects of suspicion are the banks. People that have money in their banker's hands draw it out and hoard it. The bankers, knowing that they are liable to these de- mands, draw in their funds, and make provision accordingly- Hence the capital of the country is rendered dormant at the time when it is most re- quired to be in a state of activity. Bunks that issue notes are more liable than others to these sudden demands. But no such feeling exists at ; ent in Scotland. And should the Act of 1845 have the effect of inoculat- ing the people with the love of gold, and by this means place the banks in the same position during a pressure as the banks of England, it must be regarded as a national calamity. On this subject, we again quote from the letter of Mr. Bell : " Nor are these benefit*, great as they arc, the only advantages which we hare de- rived from ear syttetn of banking. Our one-pound notes connect and familiarize every rtMn and laborer in the country with our banking establishment* ; and the implicit confidence ia oar paper currency, thu* created and perpetuated by the general expc- lirncc of the sufficiency of our bankx, has on many occasions torn remarkably illus- trated. It U no exaggeration to say, that at this moment nine tenths of the laboring 3)46 Currency in Scotland. classes of Scotland, if they had their choice, would prefer a one-pound note to a sov- ereign ; and, as a consequence of this feeling of security, combined with a sense of the other advantages of the system, no one in Scotland can have forgotten the truly na- tional stand on behalf of our currency, whicli was made by rich and poor in the year 1825, when your English economists proposed to visit us with an injury similar to that which was in that year inflicted on England. " With banking establishments thus preeminently possessed of national confidence, no mercantile convulsion has hitherto created any general run on our great joint-stock banks. It has been otherwise in England, where, in consequence of legislative enact- ments, the public have been taught to regard gold and silver as the only representatives of value. The bond of union between the banks and the mass of the people has thus "been severed ; and when a monetary crisis occurs, its consequences are incalculably more injurious. With us (though very rarely), runs have been occasionally made on particular banks ; but it has been merely to withdraw a deposit from one bank to place it in another ; or to exchange the notes of a suspected bank for the notes of one of our national joint-stock banks, the prevailing confidence in our paper currency remaining unshaken. In this way the disposable banking capital or resources remain in the ag- gregate unchanged ; whereas with you the run is for gold ; and the coin thus with- drawn from one bank is not re-deposited in another, but hoarded till the panic is over, by which means the entire banking resources of the country are involved in the conse- quences of the temporary disaster ; and this, too, at the very time when these resources are most needed." IV. Laws of the Currency in Scotland. In Scotland the lowest point of the circulation is in March, and the highest in November. The advance, however, between these two .points is not uniform, for the highest of the intervening months is May, after which there is a slight reaction ; but it increases again until November, and falls off in December. The reason of the great increase in May and November is, that these are the seasons for making payments. The in- terest due on mortgages is then settled, annuities are then paid, the coun- try people usually take the interest on their deposit receipts, and the ser- vants receive their wages. There are frequently large sums transferred by way of mortgage. It is the custom of Scotland to settle all transac- tions, large as well as small, by bank notes, not by cheques on bankers, as in London. It is remarkable that these monthly variations occur uni- formly every year, while the amount of the circulation in the correspond- ing months of different years undergoes comparatively very little change. A TABLE, showing the CIRCULATION OF ALL THE BANKS IN SCOTLAND on the last Saturday in March, My, and November, in the years 1834, 1835, 1836, 1837, 1838, and 1839. Number of Banks. March. July. November. 1834 21 2,834,627 3,094,468 3,497,795 1835 21 2,822,417 3,097,947 3,457,899 1836 21 2,934,292 3,222,142 3,657,431 1837 22 2,875,404 2,962,673 3,560,242 1838 23-24 2,811,377 3,060,199 3,688,410 1839 24-28 3,041,545 3,120,183 3,559,599 This table shows us, first, that the circulation of Scotland is at its lowest point in the month of March, is higher in July, and reaches its highest point in November. Secondly, in the corresponding months of different years there is but little difference in the amount of the circulation. We find that during a course of six years, the difference between the lowest 327 A Treatise on Banking. and the highest circulation in tl corresponding months is vrry triflinp. Thirdly, the increase in the numb* r of bunks docs nut produce a corn - ponding increase in the amount of notes in circulation. In November, 1834, the number of banks of issue was twenty-one; by No\. m'.. r, 1839, they had increased to twenty- : tin- circulation at tli.- I'.TIU.T pe- riod was 3,497,795, and in the Int'ter, ; 3,559,599. Fourthly, these facts prove that the circulation of Scotland does not produce any (diet upon prices, nor, consequently, upon the foreign exchanges. It is Imnlh cetsary to adduce evidence in proof of the fuct, that the prices oi ' ( ..uiinod- ibec do not goon increasing from March to November in every \<.n: and if they do not, they cannot be regulated by the currency. Fifthly, thw regularity in the circulation shows that it must be governed by some uniform laws, arising from the local circumstances or habits of the coun- try ; and this we think will always be the case where the banks are p.-.-- ire, and permit themselves to be operated upon by the wants of the trade and commerce carried on in their respective districts. (Currency and Banking, by J. W. Gilbart.) That the laws of the currency in Scotland are the same since the pass- ing of the Act of 1845 as before, is evident from the following Table : An Accorxr of At CIRCULATION or THE BANKS OF SCOTLAND during the four Mb ending at the voder-mentioned date*, in the year* 1846, 1847, and 1848, dutinguith- uty the note* of 5 and upward* from tJtote below that amount. Number 1846. 1847. 1848. Much 98 Aug. 15 Dec. 5 March 27 July 17 Dec. 4 March 25 .July 15 Dec. 2 18 Fixed toue. jt& and Under 5. Toul. 3,087,209 828,778 2,189,99.) 3,018,771 w 1,013.539 2,358,365 .'I,:}" 1,904 u 1,235,072 2,761.786 3,996,858 1,063,384 2,296,959 S,3< u 1.121,236 2,374,682 3,495,918 u 1,143,241 2,58'J.L'4 1 :i.::ii',t82 u 932,496 2,019,439 2,951,935 u MS.MI 2,123,680 3,106,643 u 1,158,981 2,411,141 3,570,122 The Act of 1845 does not appear to have much effect on the amount of notes in circulation. But it lias had an effect in other ways. It has required the Scotch banks to keep a larger amount of gold in their vaults. This is evident from the following Table : A RrrrE of tin Aggregate Amount of NOTES IN CIRCULATION IN SCOTLAND, and of U* Aggnyau Amomt of GOLD COIN AND BULLION HELD BY BANKS IN SCOT- LAND, on Ike last day of the ttctxtd week of Ftbruary and November, in the yean 1842, 1843, 1844, 1845, 1846, and 1847. 184S 1843 1844 1845 184 IM7 N :-, 2.710,515 Coin. 408,220 481,102 422,968 403,083 1,116,088 I..-M: :,..; MUM, .\i.-. am i.. 3,149,554 3,555,789 3,784,118 4.046,526 Coin. 411,070 Ml^O? 324,982 676,674 It hn* also had the eflect of inducing the banks to increase their charges* and to decline granting cosh credits. The banks are required to keep in Currency in Scotland. their coffers a large amount of gold. This increased amount yields no interest ; and hence to that extent the Act diminishes their profits. To make up the same amount of profit as heretofore, the charges for dis- counts and advances are increased. This illustrates a principle that we think will always be found correct, that restrictions upon banks are taxes upon the public. This principle is not sufficiently obvious to statesmen, nor even to the public, in England ; the mercantile classes have been pleased, rather than otherwise, when laws have been passed injurious to bankers. In Scotland such matters are better understood. The commer- cial classes have always rallied round the banks; they have had the saga- city to perceive the truth of the principle we have advanced ; they know that capital employed in banking must be made to produce an average profit : and if the Legislature causes one branch of business to be less productive, the bankers must make other branches more productive, in order to render capital employed in banking as profitable as it would be if employed in other occupations. But the Act of 1845 not only in- creased the charge, it led to a limitation of accommodation. There is no one point on which Scotchmen, of all classes, are more unanimous in opinion, than on the advantages that have arisen to their country from the system of cash credits. This system can exist only with a note circula- tion. One of its objects on the part of the banker is to increase his circu- lation. But he has no profit by increasing his circulation of notes, if he must keep in his coffers an additional amount of gold equal to that in- crease. But gold is the idol of our currency theory. The cash credit system, therefore, with all the virtues it produced, has been offered up in sacrifice to this " golden calf." The following Table shows the Circulation of all the banks in Scotland during the year 1848 : AMOUNT OF BANK NOTES authorized by law to be issued by the several BANKS OF ISSUE IN SCOTLAND and the AVERAGE AMOUNT OF BANK NOTES IN CIRCULATION and qfCoiN hdd during thirteen periods of four weeks, from December 4th, 1847, to November 4th, 1848, as published in the Gazette. N of Bante, Bank of Scotland .... lloyalBank . . . . .' British Linen Company ... Commercial Bank of Scotland . National Bank of Scotland ... Union Bank of Scotland . . . Edinburgh & Glasgow Bank . . Aberdeen Banking Company . . Aberdeen Town & County Bank . North of Scotland Banking Company Dundee Banking Company ... Eastern Bank of Scotland . . Western Bank of Scotland . . . Clydesdale Banking Company . .' City of Glasgow Bank . '. . Caledonian Banking Company . Perth Banking Company ... Central Bank of Scotland . . Authorized Average Circulation. Circulation. Coin. 300,485 326,276 160,042 183,000 182,293 80,866 . 438,024 408,300 142.052 374,880 430,415 146^449 . 297,024 , 292,681 70,415 327,223 304,923 91,163 . 136,657 124,048 36,716 88,467 103,776 33,652 70,133 83,767 18,950 154,319 141,919 18,772 . 33,451 27,821 5,281 33,636 31,806 6,518 . 337,938 374,959 111,694 104,028 100,621 28,001 . 72.921 104,366 52,657 53,434 55,296 15,762 . 38,656 43.738 13,738 42,933 43,743 10,880 Totals BB 329 3,087,209 3,180,748 1,043,608 A Trealitf on Banting. The following is the latest return, taken from the Bankers' Mngnrine for May, 1HI9, and shows the proportion between tin- n>i, - of b and above, and those below .5. One advantage arising from this puhl lent ion ts, that we can so readily refer to the records of the circulation. Those who have never waded through Parliamentary Returns in order to prepare tables for the publir little know tin* time and labor thus COUSUUH ; 79,001 Bnu.h Unen Company . . 438,094 HMBJ '.: ' '. .'.'.i 1 i M 135,357 CkMMMlcial Bank of Scotland . . 374,860 l^i H| m m I tflft i i m National Bvk of Scotland . . 997,024 85,453 \ ;:<-,! m m Untan Bank of Scotland . . . 327,223 107,477 1-." i:: m MM UK M Utabayfh ft (Baafow Bank . . . 136,857 45,208 njm 1 1 _ i > :;; ;j; Banktnf Company in Aberdeen . 88,467 31,213 r> - * 100,070 40,207 Aberdeen Town ft County Bank . . 70,133 21,834 MB 74,703 ; M North of Scotland Banking Company 154,319 ; m 80,512 127,386 19.844 Dvodee Banking Company . 33,451 8,208 18,998 27,206 4,698 Eastern Bank of Scotland . . 33,636 11,876 18,228 30,102 8,170 Weelecn Baa* of Scotland . . . 337,938 1 ' ! ' 'i-> HVBM m '."' -:, ,; ;^ M 1 i > -.-,-, 116,909 31 193 Oty of Otaajow Dank . . 72,921 39,572 i- -.--.'j .V.-M Caledonian Banking Company . 53,434 13,626 33,163 M m 16,642 Penh Banking Company . . 38,656 10,187 J.\ "'! 34.741 11,102 Central Bank of Scotland . . 42,933 10,603 26,861 37,464 11,242 Totab 3,087,209 968,278 1,978,846 2,935,120 1,009,173 Among the theories on the currency was a notion of establishing one bank of issue for the United Kingdom. The following evidence on this subject was given by Mr. Kennedy, the manager of the Ayrshire Bank, before the Committee on Banks of Issue in 1841 : "Do TOO think die establishment of a (tingle bank of iscuc for the United Kingdom would be adraatagcou or otherwise to Scotland ?"...." I conceive that it must be very dettrortive to Scotland " * In what way 1" . . . . u It l perfectly clear that it would overturn the present sys- tsai of banking in Scotland. Our system of banking IK based upon the power that oar (.rnatjf gives as to allow a high rate of deposit interest ; if you take from us the profit that or cBireory yield*, we mast make our profit from some other source ; we mu-t incrMkte the charges to tb community, and allow less interest, or probably no interest at all, sad ov system will be totally changed." Another favorite notion has been the abolition of all notes under 5. A Committee of the House of Lords and a Committee of the House of Commons made reports on this subject in the year 1626. The evidence 330 Currency in Scotland. produced by the Scotch banker was so overwhelming, that both the committees recommended the postponement of the measure. Robert Paul, Esq., secretary of the Commercial Bank of Scotland, stated to the Committee of the House of Lords that the following would be the effects of the abolition of the small notes. (Lords' 1 Report, p. 204.) : " "We should diminish the number of our branches, because we should be involved in an expense in the transmission of gold, which the profits arising out of our branches could never compensate ; they are not the most profitable part of our business ; they are attended with a great many hazards and disadvantages. '' We should withdraw our cash accounts, because they could no longer accomplish the end for which they were granted ; which was the maintaining our circulation, espe- cially of our small notes. " We should diminish the interest of our deposit accounts, because we should then be required to keep a very large amount of dead stock of gold in our coffers, to meet the constant variations that would arise, and to keep it wholly unproductive. I imagine that if a gold currency were substituted for a small-note currency, there would be a much greater amount of gold required than there is at present of notes. We have at present, in order to meet the constant variations, a large amount of notes constantly on hand, and in the same way we should require a stock of gold, and that would be pro- portionably larger as the general circulation would be greater." (Lords' Report, p. 132.) The following letter, written by an agent at Inverary, to Roger Aytoun, Esq., manager of the Renfrewshire Bank at Greenock, states the incon- veniences which the writer apprehends would result from the introduction of a metallic currency into that part of Scotland : " With regard to the proposed measure of suppressing bank notes in Scotland for less than 5, I think it would be ruinous to this country ; for I cannot see how, if it takes place, the business of the country can be carried on. Confining myself to some of the most prominent instances in which the Highlands will be affected, I shall state the difficulties that occur to me. Our produce chiefly consists of cattle and sheep, grain, wood, kelp, and the production of the fisheries. Cattle are brought to the coun- try markets by the breeders, chiefly small farmers, every man attending his own, and having generally from one to three young animals for sale. There they are met by the dealers and graziers, who purchase such of the beasts as suit them; and it is seldom that a single animal, at the age of one or two years, being the ages at which they sell them to the dealers and graziers, comes to the price of 5 ; the price is more frequently from 2 to 4. Of these a dealer often purchases two or three hundreds in single beasts, so that he has more than 1 and less than 5 to pay to each of as many sellers ; but he has no notes under , 5, and the sellers are not able to return balance in any coin. This will occur to many dealers at every market ; and how is the difficulty to be removed ? The dealers must all come loaded with gold and silver, and this they cannot carry to the necessary amount ; and besides, they will not be supplied by bank's with gold and silver for their bills by which there would be no profit. The means of paying being wanting, the seller will not deliver, and the object of the parties is frus- trated ; and thus a difficulty is cast in the way of disposing of this material article of Highland produce, which must discourage the sales, and occasion a reduction of price, and consequently of the rent and value of land. "It is the same in the case of grain, of which bear or barley is what is chiefly sold by small farmers to the distilleries. In settling for some bolls, bought in small quan- tities of two or three bolls, 5 notes will be found most inconvenient; and the pur- chasers and manufacturers of wood and bark, and of seaweed for kelp, who require many hands, and pay off their workers generally once in a month, none of whom will draw so small a sum as JEl, nor so large a sum as 5, will experience the same difficulty. " The herring fishery on our coasts employs several thousand men, and is of very great importance. Instances have occurred of herrings being taken in Lochfine alone to the value of 40,000 in one season ; and a thousand boats are generally employed 331 A Treatise on Banking. there la the fishing. The fishermen every morning sell their fih to the curer* on , and K-t out in quc.t of more. The value of each boat's nes exceed ft, but generally is under it . and tl,. tab fiahiag staBon alone, a thousand boats to U> paid . .it e\ cry morning, of whom most probably two thirds have 10 receive less than JC5 each. It will !* impo--iM. to provide iroU and silver rafldent for such a purpose ; and in the remote parts of the N,.rth Highlands, what* the fishery is much more extensive, and banks at a greater distance, iMcBlty U insuperable, ~ At prevent the bosineas of the Highland* i* transacted by means of tank notes of XI and I Is. with some larger notes on occa-i.ui>. and that with the -rcatc-t facility. 'attle dealers, and all others, wiving to pay away money to any amount in small sums *o a number of people, as in the iu-t.mcc- mentioned, prepare th< -m-.-U. - by a \u\\- tmre of none, some Urge and some small, accompanied by a few pound- .: every thing goes on * el I i are preferred by the country p. -.pi,- i. gold, both Mcaase they are unable to distinguish U-twcen the genuine and base metal. and becaase these coins are more liable to be lost from their pocket- than notes ; and they have no reason to repent their confidence in the stability of these banks, whose notes they have been accustomed to receive for so many years in their Iran-action-. Hut if small notes are superseded, and gold Mib-titutcd, It is not easy to see how the sapplv of gold is to be kept up to curry on the hu-incss and transactions of this conn- try. Ahould a quantity of it be received into the circulation, it would not remain long, bat lad its way into the banks, who will not again give it out in bills as they do their notea, and it will immediately become a scarce article in the country. A person, then, having to pay in small sums, will on every such occasion lie ob!L< .1 to -. ml ! notea to the bank that issued them, perhaps a hundred miles oil. to receive gold and silver in their place, to answer his purpo-e. The conveyance of it to him i- next to be provided for. The weight may \>c too much for the post. There arc no mail roaches; and he must cither employ a carrier, moving too slowly for his occasions, or be at the expense of sending a trusty person for (lie treasure. fc ln transmitting money from one part of the conntrv to another, the same difficulty will often present it-elf. S;ippoe a pervon in the \V. -tern I.-les has to pay . 19 to one on the Continent. At present this may ! conveniently done by three notes of 5 and four of I inclosed bv post ; but when thm- .-hall [*> no 1 not. s, tl.e odd 4 must be sent in gold or silver, not conveniently curried in a j.o-t letter, and re- quiring that a person be employed for the purpo-e, and at some expense. 14 Many other such difficulties and inconveniences will occur. These presented themselves to me, and I stated them hastily, without regard to order. If you Jind any thing in them useful for the purpose 1 shall be pleased. But it appears extremely hard that the Scotch system should be disturbed, and that we should be obliged to adopt one, not only unsuitable to our purposes, hut ruinous to the business of our coantry." V. Those Operations of the Scotch Banks that refer to Cash Credits, Deposits, Remittances to India, and the Settlement of the Exchanges. I. Cask Credits. A cash credit is an undertaking on the part of the bank to advance to a'n individual such sums of money as he may from time to time require, not exceeding in the whole a certain definite amount, the individual to whom the credit is given entering into a bond with secu- rities, generally two in number, for the repayment on demand of the gums actually advanced, with interest upon each issue from the day upon which it is made. Cash credits are rarely given for sums below 100 ; they generally range from .200 to .500, sometimes reaching 1,000, and occasional- ly a larger sum. A cash credit is, in fact, the same thing as an overdrawn current ac- count, except that in a current account the party overdraws on his own Cash Credit System. individual security, and in the cash credit he finds two sureties who are responsible for him. Another difference is, that a person cannot over- draw his current account, without requesting permission each time from the bank ; whereas the overdrawing of a cash credit is a regular matter of business, it is in fact the very thing for which the cash credit has been granted. The following advantages have been ascribed to the cash credit system. 1. Cash credits enable young men of good character to acquire wealth and respectability. (This, and the following quotations, are taken from the evidence given by the witnesses from Scotland, before the Committees of Lords and Commons, appointed to consider the expediency of abolish- ing the notes under " I have known many instances of young men who were starting in the world from low situations of servants, who have conducted themselves well during the time they were apprentices, or farm servants even, who were able to procure an account from a bank by means of some friends or acquaintances becoming their securities, that in the course of their business have raised themselves to situations by becoming farmers of considerable extent, or manufacturers in a way highly creditable to themselves and beneficial to the country. " Without cash credits, sober, attentive, and industrious people, would not have the means at all of following up what they very deservedly might be encouraged to follow up ; they begin the world, in all probability, with a mere trifle, which trifle they have been known to make by their own industry. Having made that, it recommends their character to persons of perhaps a little more fortune, who, to encourage them, become sureties for their cash accounts. " The classes of persons who have cash credits- are very various ; but they are gen- erally the industrious classes of persons, merchants, and traders, and farmers. " The accommodation is more readilv given to a small than to a large amount, the bank preferring to grant ten credits for 100 than one for 1.000, thereby demon- strating that their accounts are quite as much for the asistancc of the poor as for the accommodation of the rich." 2. Cash credits furnish great facility to tradesmen and others in carry- ing on their business, either in the way of raising money, in making pur- chases, or in employing at particular seasons their surplus capital. " Is the advantage to the party borrowing greater under the system of cash credit than under the system of lending in the ordinary mode ? Infinitely. " Why ? As to the question of actual pounds, shillings, or pence, paid in the shape of interest, there is, in the first place, this difference, that when he discounts a bill ho pays the interest on the sum for three months, if that be the currency of it ; should any accidental mercantile transactions throw into this individual's hands, on the next day, the same amount which he had thus received from the banker, he has lost the benefit of the transaction, because he must keep this ; if he has a deposit account with the banker he must keep it at banker's interest, while he is anticipated by having paid to the banker three months' discount interest on his bill ; if a trader were to take bis money systematically by discounts instead of by cash accounts, a disadvantage to him would arise. The same principle applied to small sums ; if half or a quarter, or any part of the advance which he may have received upon the cash account comes in to him, he immediately lessens the advance by paying it into the bank, and the interest being calculated at the close of the account, there is a progressive account of interest dimin- ishing with the principal sum till it is extinguished. So far as to actual benefit of interest; but the convenience of getting money when wanted, affords a very material advantage, independent of the actual benefit. " What are the facilities that exist in obtaining this sort of advantage, compared with those of obtaining an ordinary loan? When a person applies for a cash w- c-ount, which is not au immediate advance of money on the part of the bank, but a 333 A Trtatite on Banking. eosjfcniaf of the power or privilege of drawing upon the hank to the extent M,- the person proposes two or more personal sureties : a bond i- made out. nn.l ! draw* require*, la this way be ha* never more from the lumk than is absolutely for ate purposes of hi* business. The account is never rivalled, unless it to be beneficial to the bank, by having l- n hut little operated upon, and thoB not having promoted the circulation 'of the bank'.* notes. Whenever it be. dead advance, the bank ralU it op. In the case of a person obtaining A loan. I,.- would probably in die lint place, have to pay the inti -ret down at once ; he would bare to pav it uin the whole Mini, whether fie should reouitv it ultimately or not, and it would be liable 10 be recalled by the lender at his pleasure." " The person who procure* a each credit, docs no upon the security of two or three MbMamial individual*. He may be a mnn of little property, l.ut upon that security be gets a credit, perhaps of 000 j hi- hill to any thing like that amount, without those securities, would not he dicountl. :cr the permanent credit is given, rhe option of using it lies solely with the bor- vsjr, not with the bank, as does also the option of the period of rv|a\ mi-nt If a mall trader borrow of an individual (not a hanker) UMI, that indnidual would not be disposed to receive hack his money in 5, or 10, or 15, he would wait till the term expired, when he \vould receive the whole. When a credit is granted, the individual, perhaps, draws out 50 to-day, and pays in 40 to-morrow, and goes on in that way, always having credit with the hank to the extent originally Mipulati d. M The repayment as well as the overdraught is permitted l.y the hank to he made hi email sums piecemeal: so that by attention in his repayment, the borrower saves himself from paying interest on more than the precise advance for which he has occa- sion at the moment, and can constantly convert to a safe and profitable purpose the money which he may rvet i.e in the course of his trade, however small the amount. " Tnese advantage* are steadily and uniformly afforded at all times to the indiistri- i, or fanner, the merchant, the professional man, and the landlord.'' 3. Cash credits supply capital for carrying on extensive branches of trade, employing the population, and constructing public works. " Cash credits for small sums enable the poor to he as instrnmcntal, as far as their Man* go, in increasing the capital of the country as the rich arc. For the produce of that industry which cash account credits enable to operate, and of that capital which they leave at liberty to be employed in trade, goes to increase the real wealth and capital of the country ; and a great proportion of the transactions, carried on through the instrumentality of cah accounts, con-ists of those of the poorer classes. "I apprehend that those cash credits have enabled a large number of manufacturers to carry on business, and to employ the population of the country, who, if they hod not amen credits, could not have carried on such business, nor employed such popu- u Cash credits are granted to almost all descriptions of persons throughout the country. Every young man who has a prospect of success on entering lid-. :. for a c**h credit. A great manv gentlemen have cash credits, and a great many farm- en. There is hardly any public work undertaken in Scotland that the lir-t object is not to apply for a cash credit, to cam- it on to advantage. All the roads in Scotland are managed by Parliamentary trustees ; and I believe there is hardly any one of those sett of trustees which have not cash accounts for the purpose of carryiiiL' on their operations. I am sure many of the most important public works in Scotland woald not have been carried on, or certainly not with the same advantage, but for the credits they obtain from the banks." 4. Cash credits prevent large manufacturers setting up as bankers, and thu they exclude those evils which in other countries have resulted from the failure of private banks. "Wfcam jb e _*7" t * ai * applied to the case of large manufacturers, employing hnn- or thowanils of workmen, and possessing a cash credit to a proportional"; t, mpoB ronVient security, one obvious effect is, that the temptation is removed list aaa&etarer, of attempting to Usne notes, and becoming himself a hanker. Cash Credit System. an error or temptation which, if what is said is true, has been the main cause of the institution of many insufficient English bankers, whose partners, from being good traders, became bad bankers, and brought upon their own district the distress which bad banking sooner or later always produces." 5. Cash credits have a considerable moral influence upon the habits and character of the people. " The security afforded to a bank by its debtor, or rather its customer, on a cash cred- it, is by bond, with two sureties at the least, occasionally there are not two sureties, but frequently many more ; the practical effect of which is, that the sureties do, in a greater or less degree, keep an attentive eye upon the future transactions and charac ter of the person for whom they have thus pledged themselves. And it is, perhaps, difficult for those who are not intimately acquainted with it to conceive the moral check which is afforded upon the conduct of the members of a great trading com- munity, who are thus directly interested in the integrity, prudence, and success of each other. It rarely, indeed, if ever, happens that banks suffer loss by small cash credits. " This system has a great effect upon the moral habits of the people, because those who are securities feel an interest in watching over their conduct, and if they find they are misconducting themselves, they become apprehensive of being brought into risk and loss from having become their securities, and if they find they are so miscon- ducting themselves, they withdraw the security. " Sometimes cash credits are recalled from the interference of the securities. They have the power of knowing from the bank at any time the state of the account, and the operations upon it ; and if, from that, or from other circumstances, they have been led to think less favorably of the person for whom they gave the security, they can immediately cease to allow that account to be further operated upon." The Report of the Committee of the House of Lords contains the fol- lowing observations upon the effects of cash credits : " There is also one part of their system which is stated by all the witnesses, (and in the opinion of the committee very justly stated,) to have had the best effects upon the people of Scotland, and particularly upon the middling and poorer classes of society, in producing and encouraging habits of frugality and industry. The practice referred to is that of cash credits. Any person who applies to a bank for a cash credit, is called upon to produce two or more competent securities, who are jointly bound ; and after a full inquiry into the character of the applicant, the nature of his business, and the sufficiency of his securities, he is allowed to open a credit, and to draw upon the bank for the whole of its amonnt, or for such part as his daily transactions may re- quire. To the credit of this account he pays in such sums as he may not have ccca- sion to use, and interest is charged or credited upon the daily balance, as the case may be, From the facility which these cash credits give to all the small transactions of the country, and from the opportunities which they afford to persons who begin business with little or no capital but their character, to employ profitably the minuted products of their industry, it cannot be doubted that the most important advantages are derived from the whole community." As by cash credits the banks render themselves liable to be called upon at a moment's notice for the amount of the credit granted, it is natural to suppose that they contemplate some advantage in return. The ad- vantage contemplated is the circulation of their notes. It is not intended that the cash credit shall be a dead loan of capital. It is expected that there shall be a perpetual paying in and drawing out of money, and the smaller the denomination of the notes drawn out, the more advantageous is the account to the bank. Manufacturers, who pay away large sums every week in wages, linen buyers and cattle dealers, millers and pro- vision merchants, who make their purchases in small sums, and generally 335 A TVeoJwe on Banking. all those who have quick returns of money passing through tlirir hands, have the means of making a cash credit profitable to the bank. On this subject, I again quote the evidence : To secure to the bank the adrantages of circulation, which is to make it worth while to afford these facilities at so little c\pcn>c to their < u-tomcr-. he. on his part, is to lose no opportunity of brinpnjt to the bank, and thus withdrawing fiom lirmla- tioa, the notes of every rival bank which comes into his hands in the course of his transaction* ; or of paying away, and thus introducing into circulation. IH inan\ of the note* of the bank as Kis transactions admit of, always 1 notes if j dbla. '1 he p:.\ meats and receipts most be frequent, for in this consists the banker's profit, n..i'-- much as the payments are uniformly mode t.\ him in his o\\n notes, and the receipts are generally, in a very great degree, in the notes of other hank- 'I iippo-m^ a aopSJSSnor to have a credit for 50 or lOO, if his receipts and pnvinent- a. 5 per day, he may in six months, or 150 days, have placed 750 of his banker's I note* in circulation. - It is quite necessary, in order to render a cash account beneficial, that there odd be repeated and continued operations upon it ; that the transactions should he numerous; that there should be a continual drawing out and paying in of money; and that, by these means, a circulation of the hank-notes may be promoted ; n i.t of his s in the currency of the country. Previous to that system, lie M _ goods in the currency of the country. Previous to that system, lie MM to put his . m- reocy into his drawer, B or 10, or whatever it was. If people l.iou-ln him : money to pay for his goods, he returned tho>e people change ; or if he did not. he kept it until he w'anted to purchase for himself. But, after the hanker ha his till, and ha'ndcd it over to the hanker, and left his own till with only the change which he could not do without. Then, when he required sums to pay away, instead of taking them from his till, he sent to the bank, and took from it what he required, the hanker pirinR him his own notes. So much of the previous current y was t!. i. and the banker's notes taken in its place. That was the effect of the first operation, v\h< n the thinj; was only in so simple a state that there was only the notes of one hank and a metallic circulation. If you apply the same principle where there are thirty hanks, the result would be the same. The amount of the circulation of the country continues the same, but the proportion between its parts vary." II. DEPOSITS. A sum of money deposited or placed in a bank is called a deposit. Some banks grant interest on these deposits ; others do not. The Lon- don bankers allow no interest on deposits, but the English country bank- ers usually do. The Scotch banks have carru-d this practice to the great- est extent ; and the deposit system forms a very important branch of the bonking system in Scotland. Those regulations which the banks have established as the rule of tin h transactions between themselves and the depositors are the following : The depositor may place in the bonk any amount of money he pleases above 10. The whole or any part of the deposit may be withdrawn at the plea- sure of the depositor without previous notice. Interest is allowed on the deposit from the day it is lcxlr< d in the bonk until the day it is drawn out Scotch Deposit System. The balance of a current account is allowed interest at the same rate as though it were a permanent deposit. The following are the advantages ascribed to the deposit system : 1. The system of deposits is advantageous to the lower classes, in pro- viding a place of safety for their deposits, in granting them interest on their savings, in encouraging habits of frugality, and thus often enabling them to advance in society. " The deposit branch divides itself into two parts : There is, first, what is called a running account, where the party pays in from day to day the whole surplus funds in his hands, and on which he receives interest. These depositors are, in general, shop- keepers, and merchants, and traders, more particularly in large towns ; and in these deposit accounts there is found at their credit at the close of every day, the whole amount of the money for which they have not immediate employment in their trade. The second branch of deposits consists of small sums placed in the hands of the bank at interest, which have been in general the savings of their industry, and which are put into the hands of the bank to accumulate, and on which they may operate not in the way of a running account. They may receive a partial payment whenever they please ; and in general these deposits are very seldom removed, excepting when an in- dividual has occasion to build a house or begin business. This class of deposits is dis- tinguished from running accounts by the name of deposit receipts." (Lards' Report, p. 80.) " What class of the community is it that makes the smaller deposits ? They are generally the laboring classes in towns like Glasgow. In country places, like Perth and Aberdeen, it is from servants and fishermen, and just that class of the community who save from their earnings in mere trifles and small sums till they come to be a bank deposit. There is now a facility for their placing money in the provident banks, who re- ceive money till the deposit amounts to 10. When it amounts to 10, it is equal to the minimum of a bank deposit. The system of banking in Scotland is just an ex- tension of the provident bank system. Half-yearly or yearly these depositors come to the bank, and add the savings of their labor, with the interest that has accrued from ths previous half-year or year, to the principal. And in this way it goes on, without being at all reduced, accumulating, till the depositor is able either to buy or build a house, when it comes to be one, two, or three hundred pounds, or till he is able to com- mence business as a master in the line in which he has hitherto been a servant. A great part of the depositors of the bank are of that description ; and a great part of ic most thriving of our farmers and manufacturers have risen from such beginnings. And in regard to the deposit receipts, I may iust mention what is generally the way in which they are granted. To-day a person from the country appears at the bank, it may be with 20 or 30 or 50. We probably never see him again till that day twelvemonths, but we are sure of seeing him about that very day. If he has 20 in the bank, he may come and say, ' There are four guineas ; you will give a receipt for 25.' He knows well that the 20 has earned 16s. interest; and I do consider that the four guineas are just the savings of the year. He goes away with his new receipt, and returns on that day twelvemonths ; then again it is added to, and thus accumulated, and so on in many instances throughout the country." (Commons' Report, p. 159.) 2. The system of deposits is advantageous to capitalists in furnishing them with a secure mode of employment of capital, either for a longer or a shorter period, at their pleasure. " What class of persons form the large and steady depositors in the Scotch banks 1 The middling and the lower order of society, industrious poor people, who are sav- ing their money, and small capitalists who have raised a moderate sum of money, upon the interest of which they live. "Do many persons live upon the interest of their deposits, as far as you know? Yes, a great many. (Lords' Repori , p. 165.) "Do you know whether it is tha practice of persons who have small capitals in Scotland, to inveat them in the public securities in London, or to deposit them with the cc 337 A Trtatite on Banking. baaks la Edinburgh ? I believe, almost universally, to deposit them with a Scotch bank. " And they lip upon the interest of what they to deposit, in the manner a j" here lire ujx-n tin ir interest on Mock * Yes ; they often look to the |>cnutimcnt api- ml with view of leaving it at their death, taking the interest during their i. (Omill '//ryarf, p i 14 The deposit accounts are of two kind*, one kind from the rommcreial people who have large um tii.it tin \ ih to keep in a disposable form, waiting an o|.|.onu- nity of any investment which'may occur. Of the operating deposit*, there an . who keep "the money until a favorable turn in the St..<-k I-:\< lum.-.- enables them to in- Test it there. And there are others, respectable householders, who keep it for the pnr- poaoa of their family expenditure. I reckon that these and the sums due upon them average one half of the aggregate amount of a bank's deposits." (Lordt' A'r/x/rt, I- II H.ue you formed any estimate of the amount of deposits in all the banks in Scot- land? Tcertain I y have boon at very great pnins to gel information UJKHI the Millet: and I am satisfied that the amount is considerably al>ovc twenty millions, I should ay, twenty-fire millions. From what clans of persons are those deposits chiefly f Generally from indus- trious tradesmen, small shopkeepers, varying from 10 to 500. The greatest num- ber of deposit*, and the greatest in their aggregate amount, ore in small sums. - Are there not, however, deposits from richer classes, and each of them to a much tarter amount t Certainly, there are deposits from 1,000 to 20,000 and 4:30.000. (Ibid. p. 231.) " In the spring of 1 824, the hanks in Scotland began, in some instances, to decline ac- cepting deposits at all. In the autumn of 1824, the grat banks made an express rule that they would not accept more than 5,000 from any one depositor. They allowed 24 per cent, on the first 3,000, and 2 per cent. uj>on the remainder of the 5,000, and above that they would not allow any interest. That was the general rule with the great banks at that period. There were many people who preferred leaving their money, though they received little or no interest, to taking it away. That commenced in 1825." (Ibid. p. 158.) 3. The system of deposits is advantageous to the country, by augment- ing the amount of national capital, by increasing the demand for labor, by granting facilities to trade and commerce, and by removing the tempta- tions to engage in hazardous speculations and foreign investments. " Thi system was adopted before the middle of the last century. The rate of inter- est allowed since then has been regulated by the value of money, and has, of course fluctuated considerably ; bat it has ever been such as to afford as high a return to the depositor as has been consistent with the reasonable profit, and of course the security of the bank. The effect of this system has l-ecn to encourage and to afford the means of the accumulation of capital among the lower, as well as the higher, orders, by placing within the reach of all, a convenient, safe, and moderately profitable invc-t- mrnt of money, and to offer an inducement to capitalists to retain their accumulations to Scotland, notwithstanding the opportunities or temptations which foreign invest- ment* might hold oat" (Lord* 1 Report, p. 175.) "The system of deposit accounts. I think, is a very great stimulus to the habits oi tadastry. and economy, and frugality, in Scotland. The whole surplus capital of the individual i thus rendered productive. "Under the system on which you conduct your business, is not the money arising from those deposits {anted oat, to encourage the further consumption of labor in the country ? ^ Tea. " It would be a low, then, to the country, if it was to be removed from the channel in which it i* now placed, into this country, on government debentures ? It certainly would. " Under this system, does not the poor workman pain immediate interest for his sav- ing, whilst the saving is immediately employed, through the bank, in putting a further MxtMM of labor into motion 1 Precise! v so. It is in this way that the wealth of to Scotch Deposit System. those individuals is concentrated, and, through the agency of the bank, is brought to bear in carrying on the business of the country." (Ibid. p. 283.) " Is there not an advantage to the public from the gathering of those small capitals together, forming part of the deposits of the bank, and so being sent out again in large sums, like other capitals, for the purpose of being applied to increase the powers of productive industry? The Scotch banks form a sort of reservoir for receiving the small sums of capital scattered throughout the community, and then sending them forth into channels of trade, so as to promote the commerce, manufactures, and agriculture of the country. (Commons' Report, p. 203.) " Are you of opinion that if the deposits with the banks of Scotland were considerably lessened, the banks could afford the same accommodation by discounts which they do at present ? I should think that is impossible, because it forms part of their capital. It would diminish the capital which is at present employed in that business, of which discounting forms a great part. " Would not any such diminution of discount operate injuriously to the general trade of the country ? The want of those discounts must diminish the trade of the country, inasmuch as the manufacturer and merchant receives his money at least three months sooner by discounting their bills, than he could possibly get payment of his account." (Lords 1 Report, p. 266.) " The system of deposits forms a great part of the funds arising from our banking system. It is a great deposit of money, which is given out to the trade of the coun- try, for the profit of one per cent., for which the bank runs the risk of its business. If that great deposit were withdrawn, and could not be issued with the same degree of safety, I conceive the consequences would be a total derangement of the whole system, and ruin of our country." (Lords' Report, p. 235 ) " If the banks are under the necessity of reducing the interest on deposit accounts, the depositors must look about them and find out on what security they can lend their money so as to obtain a higher rate of interest. It would certainly diminish the capi- tal of the trading part of Scotland, inasmuch as the banks would not have it in their power to assist them, in trading by discounting, but it might be lent on Government securities or landed property, and the temptation of a higher interest from individuals would, undoubtedly, be a temptation to many, and a temptation that could scarcely be resisted by those whose income depends entirely upon the interest of that lent money, to lend it on personal and doubtful security. ' When the banks reduced their interest some time ago, a great part of the deposits was drawn out, to be invested in various different ways. And, as the depositors did not get from the banks the interest on which they were depending, and did not choose to make a less interest, many of them went into schemes, which have turned out very ruinous to them. It has been one great cause of over-speculation, that the people did not get the interest they had been accustomed to from the banks. They, therefore, drew it out to invest it in joint-stock companies, lent it to builders, or other inferior se- curities, or became builders themselves." (Ibid. p. 250.) 4. The system of deposits is advantageous to the banks, by inducing every person to deposit his money in a bank, by furnishing the banks with capital to carry on their business, and by putting in circulation a large amount of their notes. " The universal practice at Glasgow is to pay into the bank with which the individ- ual transacts his business, the whole of the notes he has in his possession, or nearly the whole, every day." (Commons' Report, p. 50.) " Unquestionably, the giving of interest upon deposits is an inducement to every person that has any surplus money in his hands, to place it in the hands of his banker. And in the same way in the case of cash accounts, every payment by the holder of a cash account into the bank, either diminishes the interest he has to pay to the bank, or if the account should turn in his favor, enables him to get interest from the bank, and that is a great inducement for every person to pay in daily into his banker's hands all the money which he does not require for the purposes of his business." ( Commons' Report, p. 201.) " The means of a bank I conceive to consist of three things : first, capital paid in 339 A TrttUite on Banking. its own stock; secondly, the aotta which th* bank i able to keep afloat in the circle ; thirdly, th* amount of to dpodu n (LonU / | 195.) "And if the amount of |I-|H.MW were Iwjwne.l. in that ut-c tlicir moan* of issuing money upon discount would be proportionately lessened I Yet. (Common*' L * Every bank constituted a* the banks of Scotland arc, mnkc advances in two wavs, they make tin m II|MUI cash credit*, and they nmkc them upon ihe disi-onnt i.f l.iils. They also borrow in two way*, thev borrow upon dcpo-it receipts ami they lx>m>w alto upon account* current That is, if a pentleman opens an account. Ami j u- 100 to bU credit, ami operates upon it, drawing out n part of it, leiivin:; a Ulan.c in tbe band* of the bank, tin n t> there n lx>rnwinn to the extent of the hulanee ili.n b M left TboM accounts we nt allow to be overdrawn, so that the advance i- in two wan, and the borrowing in two ways, that is, in two dillcivnt forms." (Ibid p.lv " In the cac of small depositors, a considerable pan of the profit arising from the deposit of that money if the eireulation of the notes. \\\\<\\ :i ile|K>sitor withdraws hit money from tbe bank, he r. . . i\.>s it in the notes of the bank, and, of course, they go into circulation. As long as they remain out they are a source of profit." (Com mo** Rfpori, p. 45.) ; . r notes two ways, they auto aiWHMM "!'"" c:1 ^' ;!' "iint-. and they make advance* upon discounts. They also issue tlnir notes in i.Mvment upon accounts current, and also in the re-payment of deposit receipts." (LurM lie- port, p. 836 ) u The deposit and cash accounts are the instruments for supporting our circulation. and without the continued operations upon the deposits and cash account* our circu- lation cannot be maintained." (Hid. p. 135.) III. REMITTANCES TO INDIA. Although this branch of banking business is not peculiar to Scotland yet I believe the banks of Glasgow have carried it on to a greater extent than any other banks. This has arisen partly from the more intimate connection that exists between Glasgow and India, and partly from tin- character of Scotch banking. We refer to the practice of granting bills of exchange to be sent out to India, accompanied by an undertaking to accept them when presented. To enable our readers to understand distinctly this branch of business, t*B must give a short description of the banking and commercial opera- lions of India. The business transacted at each of the Presidencies con Mte of importing British manufactured goods, and exporting the produce of the country, such as cotton, indigo, &c. Some of the merchants who are engaged in these operations act also as bankers. They receive de- posits, and allow interest on them, receive dividends on India stock, and make remittances to England. Their business in this way was formerly YCTV extensive, but has recently been much reduced by the establishment of banks all over the country. One part of the business of these mercan tile bankers is to advance money on shipments of goods either to England or to China, taking as security the bill of lading and the policy of insur- ance. Here they often find a powerful competitor in the East India Company ; and the mercantile interests, in both India and Glasgow, arc desirous of excluding the Company from this kind of business. (Sec tin; Evidence taken before the Committee of the House of Commons on Commercial Distress, 1848.) I cannot better describe the kind of business carried on in India, than MO Remittances to India. by the following extract of a letter I received about two years ago, in re- ply to some inquiries I made on the subject : " One part of business which the houses used to do largely was advancing on ship- ment of goods to England and China, and it is still done by Messrs. and . The system is : A. ships 10,000 worth of goods for Eng- land, and takes the bills of lading and policies of insurance to B., who agrees to ad- vance three fourths of the value ; the shipping documents are indorsed by A. to B., and A- draws bills on the consignee of the goods in London for the value, in favor of B., payable at six months' sight, and directs him to accept the bills when presented by B_?s London correspondent. As the goods will most probably arrive in London be- fore the bills fall due, the consignee will take then! up before the due date, and witli the bills receive the shipping documents from B.'s correspondent. Sometimes, how- ever, it may be that A. has no agent in London, and the goods are therefore consigned to B.'s correspondent, who is instructed to sell and remit the proceeds by bills, or with the purchase money of the Indian goods to buy British manufactured goods, and ship them consigned to B. You will easily perceive what large profits could be realized in this way, as commission is charged on the sale of the Indian goods, and purchase of British, and a high rate of interest on the advance until it is paid off. " The East India Company usually get a portion of the money required for the home expenditure, from India, in this manner. Last month, the government here gave notice, that, in pursuance of instructions from the Court of Directors, it was pro- posed to provide a sum of J 800,000 in India during the remainder of the official year 1846 -47, for the service of the East India Company in London, by the purchase of bills of exchange to be secured by the hypothecation of goods. Advances in cash are accordingly made for the purpose by the governments of Bengal, Madras, and Born- bay, at the rate of exchange of 2s. per company's rupee ; the operation is exactly the same as I have stated in the former case. A. ships goods, and, on the security of the bills of lading, policies of insurance, and his bills on consignees in London, at six months' sight, receives from the government an advance equal to three fourths of the value of the goods ; the bills, with the shipping documents attached, are sent to the India House ; and in due course accepted by the drawee ; on the arrival of the goods the bills are paid, and the goods given up. In the event of the ship arriving, and the bills not being taken up, the goods are then lodged in one of the Dock Company's bonded warehouses. If the bills are dishonored at the due date, the goods are sold to reimburse the East India Company for the advance; this, however, is an extreme case, and could only occur in the event of the bankruptcy of the acceptor. " With reference to the bills drawn from India, with an engagement on the part of the drawee to accept, in the margin, these bills are obtained from a respectable Lon- don house, and sent out to this country for negotiation; but I must have recourse again to my favorite plan of illustrating by an exainple. A. having credit with a London house, or, if not, lodges security, and obtains bills, with an engagement in the margin to accept, and remits them to A, his correspondent, in India, for the purchase of produce; the drawee being well known, the bills obtain a favorable rate in the mar- ket, and B. is enabled to purchase produce, which he ships, consigned to A. in London, who, before the bills fall due, pays them ; on paying the London house commission on the amount, the transaction is concluded. " There is another system, and you very probably may have seen some of the bills rn the London market. A , a merchant in New York, proposes to send a ship to China for goods, but unwilling to have his money locked up on board ship for so many months, with the additional risk of loss, he obtains, either on personal or other security, from say Messrs. 's agent in New York, a letter of credit on the house in London, to honor the bills of the captain or supercargo of the ship. On the arrival of the ship in China, the cargo is purchased and paid for hy the bills on Messrs. , London: the bills are negotiated in China, with the indorsement of _ 's agent there, and as soon as A., in New York, receives advice of the same, he remits the amount to London, to meet the bills when they fall due. I inclose you a form of one of these American bills. Sometimes money is sent to India by means of London bankers' bills, and I have seen Messrs. 's hills offered for sale, but being drawn at short dates, do not obtain such good rates of ex- change as mi"ht be expected; they are seldom used for commercial purposes, but are CC* 341 A Trcalue on Banking. adcn by officers of the civil and military norvtce*, iruhinR to make remittance* to their fiuiiUM M home. I understand that the Western Bank of Scotland issue* dill* ..... . ; Thi* operation, M far as an exchange operation, i>f tlu< Lanks i--u;n.- tlu> )>i!l-, woald Mramlbe a profit raficieBt to cover ihc n-k. >u|.|...-.- the I.<>n .,n.i \ minster Bank tent out to an agent here iu bilU at M -hi. for X-U.IMMI an. I (hat the hilU are told at to. per rupee ; the aecnt mi, hich he hat received, and even ttlmittiii); that be < .. ,.!,. .m i.ui lulls at 2 percent, under that rate, it would scarcely pay his commission on the tr.i; !. ' iv in which merchants M-ttlo their rxchonpe operations in Huinhny, i the tame all over the ! clruw for on Iji^liinil ; .-1. fr Co. arc calU d . r. mil Jt.'i' .1 lfl Imyrrs, ami citli r for lliat LJ). bil : ."> I'lin more, KII that tioo k completed ; ami unic-s a l>:ink i | r. -pared to buy up ull ilic lie, at the suine, or a more favoralile mte than a merchant can oiler, I iu c\ rations prolitahly. the merchants lniyin^ and ^ellin^ , aave all the bankers' i-i.m-i-N. 'J'his, I imagine, has l.< m the case in all coontriet bewre the tyitcm of imnki!i|.'o]>(>rat!. .n-ly understood ; and 1 have no doubt, but that in a short time we shall see all exchange business done by the : . *JW 1 mount o the whole .- :',n it POBMS Or LETTERS OP CREDIT. To explain further this system, we shall transcribe the form of the bill referred to in the above letter, and also the forms of the bills issued by two banks at Glasgow. .Vo. 130. York, 7th June, 1342. Exchange for Sler. 300 Six Months after light ofthi* Firtt of Exchange (Second and Third unpaid) pay to the order of Davit, Brook*, Co. Three Hundred Pound* Sterling, value received, aiadvittdby Your obedient tenant, OEO. D. CARTER.* Palmer*, UacJaUop, Dent, Co., London. Tata bffl " Pay George D. Carter, or order. - Davit, Brook*, f Co." Remittances to India. -Vo. FOR FIRST OF EXCHANGE. WESTERN BANK OF SCOTLAND. 13 To I hereby engage to accept and to pay at Ma- 'nnty, the first presented Bill of the set of Exchange, of which the annexed is the First, to be drawn by on the Western Bank of Scotland, on or before at Sixty days' sight, provided this Letter of Credit, as annexed to such Bill, be presented therewith and de- livered to me on acceptance thereof. For the Western Bank of Scotland, Glas- gow, \ Manager. THIRD OP EXCHANGE. CLYDESDALE BANK, GLASGOW. To We hereby engage to accept and to pay at maturity the first presented Bill of the set of Exchange of which the annexed is the Third, to be drawn by you on us, on or before the for say Sterling, payable in London at a date not less than and not exceeding days' sight, provided this Letter of Credit be delivered to us on acceptance of the an- nexed Bill. For the Clydesdale Banking Company. No. 13 Si.rty Days after Sight, pay this First of Exchange (Second and Third of same tenor and date unpaid), to the or- der of at Messrs. Jones, L'oyd, $ Co.'s, London, value received as advised. To the Western Bank of Scotland, Glasgow. No. 18 after sight pay this Third of Exchange (First and Second of the same tenor and date unpaid), to the Order of in London Value received as advised. To Sterling, The Bank of England had their attention called to this subject, and consequently issued expressly for remittance to India bank post bills drawn at sixty days' sight. The following account of this arrangement is taken from a city article of the Times : " Some inquiries having been made as to the origin of the bills at 60 days' sightt drawn by the Bank of England, alluded to the other day, and the mode in which the operation is conducted, the following information may he found acceptable : " About the year 1836, the bills of the East India firms had been brought into tem- porary discredit by some failures which happened at the time, so that these bills did not find ready purchasers in the Bombay market. It was conceived, therefore, that a new sort of paper of unquestionable credit might be introduced into India with advan- tage, and nothing seemed more fitted for this purpose than bills made by the Bank of England, and payable by themselves. A resolution, passed in April, 1836, authorized the issue of the required paper, and since that time it has been in use. " And now, with respect to the mode of operation. A party who wishes to remit money to India applies to the bank by filling up the following form, to which a list is attached, and pays (of course at par) for the bills which he takes : 1 ' To the Cashiers of the Bank of England. ' London, " ' request to be furnished with the undermentioned bills, at 60 days sight, in triplicate, amounting to , the firsts to be' accepted and held by the 343 A TVeo/tM on Banking. Bank of England, for the purpose of being delivered to the holders of the second* or third*, whichever may be Am presented.' M The MB* to obtained art remitted to India, nnd bare a peculiar ad\ uma^c, Inch : ...... hat the ' Ants ' are to be ai . ;:. .! ;m.i h.-M by the Bank oY England. The paper which i* drawn bra fknj in India on London . i- gvejerally made parable at CO day* hut the 60 days do not begin to run nil after tkor acceptance in London. The bank paper, on the < outran-. Ix-ing accepted m o^ and held for the pnrpoee of being to the holders of t) ' and 'thirds,' in* 10 dart bctrin to run from the date. :mf tin m at a pood premium in tin In- dia market in certain state* of the exchanges, and thus they become, as it were, an ui ;. :, ,.< , . mm r. < * Notwithstanding die adrantage* of this paper, it is not so commonly n-< .! might be imagined. This is attributed to tin- < ompetition of some of tin- S< otch ) who offer an Inducement fur the circulation of their own paper. The Hank of Knglnnd Kno ratrrest, treating the 60 darn' hill JUM a- they would treat an ordinn. hare the use of the money paid during all the time that the hill i- performing its voyage to India, U finding a customer in the Indian market, a slow process in Met* of the exchange*, and is returning home. The Scotch firm*, on the contrary, allow interest daring this time, or a portion of it. and thus the capital of the !,<>!. I<'T doe* not lie completely idle. Hence a preference is, in many in-tame-., pven to the S pi .. .: :..- IV. REGULATIONS FOR SETTLING THE BANK EXCHANGES AT EDIN- BURGH. 1 There shall be ererr Thursday morning an exchanpc of the note cullcctr.I on Monday, Tuesday, and Wednesday; and every Saturday an the i,.,;. - xBerfe'il on Thursday, Friday, and 'Saturday. The Imlanccs stnx k on Sntunby shnll. with the Gbwgow and country exchange receipts, he cettled on Monday. The ha! struck on Thursday shall be nettled on the same day; and this settlement shall inelmle the country exchange receipts of Wednesday, and the (llaspow exchange reeript-* of Thursday. The exchange on Saturday shall not be interrupted bv holidays ; hut uti theae occasions it shall commence at half past nine o'clock A. M. YVIu n Monday is a hoUdar, the settlement shall be made on Tuesday. I. When exchange* are established in provincial towns, the DOT.-; r.md at the exchaaging agencies there must wait for the return of the next h al -xehiinjrc da\ . and must, under no pretext, be forwarded to meet the exchanges in Edinburgh, or at the other agencies. S. All pannents of balances shall l>e made in exchequer bills of 1.000 each, the of the ba balance to indicate the number of exchequer hills ; it lx inp under- stood, that Bank of Scotland. Royal Bank, or Hriti-h Linen Company noK s of ion each, or Bank of England notes o'f 100 and upwards, or gold, .-hull' lit- employed to pay fractional parts of 1,000 only. 4. The amount of exchequer bills to be kept in the exchange circle is apportioned as follows: Bank of Scotland . . . 24,000 Western Bank . . 24,000 Roral Bank ..... 24.000 ' !ale Bank . . . 12,000 BrUsh Linen Company . 24,000 Edinburgh & Glasgow Bank IJIMHI Commercial Bank . . . 24,000 City of Glasgow Bank . . 12,000 KMnnal Bank .... - Union Bank .... 24,000 204,000 heqner hills put into the circle, to le filled up, payable to the banks which have originally contributed them, and to be blank indorsed when first paid away. Her shall be registered before they are nut intoth*- rirelc. in a hook kept in the Batik of Scotland for the purpose, and shall bear the distinguishing mark of " Edinburgh Bill," affixed by the Bank of Scotland, showing that they U-long to not to be used for any other purpose whatever. 844 Scotch Exchange System. 6. All the exchequer bills placed and retained in the exchange circle to bear a uni- form rate of interest, and shall be paid and received in the exchanges at their nominal par value, with the interest accrued ; and when they are withdrawn, in consequence of being called in, or from an alteration in the rate of interest, a voucher in the form an- nexed (Schedule A) shall be issued for each exchequer bill by the banks by whom they were provided to pass as such, till replaced by the new bills iu course of post af- ter they are issued from the exchequer. 7. As exchequer bills may be expected to accumulate occasionally with some of the banks, while the stock of others is exhausted or becomes low, the parties holding the greatest amount of bills shall be bound to sell to the parties in want of them, who shall, on the other hand, be obliged to buy ; but the holders shall not be required to reduce their stock of exchequer bills, by selling below an excess of two thirds over their original quota, unless necessary for the settlements ; and parties whose stock of bills is short shall not be required to purchase more than will make up their stock to one third of their original quota. 8. Purchasers of exchequer bills shall buy from parties holding the largest propor- tional amount, with reference to their original quota, and two thirds more ; and the party holding the largest proportion shall have a continued preference in selling to one or more purchasers, until the stock of the selling bank is reduced to two thirds above their original quota, when the next largest proportional holder at the time shall have the preference, and so on. 9. Exchequer bills bought shall be paid for by drafts on London bankers at five days' date ; and the purchasers of exchequer bills shall pay, in addition to the princi- pal sums in the bills, the growing interest, at the rate allowed by the exchequer, up to the date of the drafts falling due in London, and shall furnish stamps for the drafts. 10. Transactions in the purchase and sale of exchange bills may be made on either of the settling days in the week , but they shall be made only in the exchange-room, and solely for the settlement of the exchange ; and no private transactions of this kind between bank and bank shall be permitted, so that the number of exchequer bills in the hands of any one party after the exchanges are so settled shall be the number re- turned on the next exchange day. 11. In the event of any exchange draft being dishonored, without prompt nnd most satisfactory explanation of the cause, the bank issuing such draft shall be immediately excluded from the clearing-room, and their notes shall be refused in all future transac- tions with the public. 12. The exchanges shall be made alternately ; on Thursdays in the Bank of Scot- land, and on Saturdays (with the relative settlement on Mondays) in the Royal Bank ; and these banks will undertake to receive from the banks which are debtors, and to pay to the banks which are creditors in the exchanges, the exchequer bills, Bank of England and other notes, and gold, which are passed in payment of the balances; but the Bank of Scotland and the Royal Bank shall not, nor shall either of them, be in any way responsible for the exchange transactions, nor otherwise soever. 13. The clerks of the different banks shall appear in the clearing-room at ten o'clock A. M. on Thursdays and Saturdays, and, before the exchange operations commence, they shall write down, on the board allotted for the purpose, the amount of exchequer bills held by the banks they represent; and after the balances are struck and ascer- tained on the settling days, they shall mark on the same board the exchequer bills which will be in their hands after the balances are settled by tbe Bank of Scotland and Moral Bank ; and this is to be considered the number on which all transactions in the purchase and sale of exchequer bills for that day shall be founded. 14. After the balances are struck on Thursdays and Mondays, statements of the name shall be conveyed to the respective banks by their own clerks, who shall afterwards attend in the clearing-room, to pay and receive the balances due, at half-past eleven o'clock on Mondays, and at half-past three o'clock on Thursdays, after the vouchers of the balances of the Glasgow exchange of that day are received. These arc to be con- veyed, by a special messenger, from the Glasgow banks of issue alternately, and to be delivered by him personally at the banks to whom they are addressed in Edinburgh. 15. The British Linen Company having, from a desire to promote the general con- venience, consented to forego the advantage they have hitherto enjoyed of making their whole exchanges with banks junior to themselves within their own office, no cer- tified statements of their separate exchanges will henceforth be necessary. 16. The seventh and eighth regulations will tend, in a great degree, to equalize the 345 A Treatise on Banking. among the different bank* ; but as it may possibly Imp- -changes, tb. > i.ii;. mar ntffinMWt in the hands of one bank to a considemble amount beyond n-. ,JII.,M and two thirds more, withoot the- am other Lank. a. -, ,,idmc u above regulation*, then that bank, when (he amount on hand exceed- tb Ml :. ' holding the fewest innnU-r. Although not u: <>! ilu-ir quo- ta, 'to parr ham Up to tin ir ijimlu. an. I - on to tin- next lowest, until (lit- >l, , it, note> into circulation, by e\< haii-ini; them for Other notes in the circle, they resolve to check uml discourage any such irregular iaMes by every means in their poi r 50. It U further understood and agreed, in consideration of the circulation of each bank (other than what may he issued against ^old anil >ihcr coin) b. ii;^ tixed and lim- ited, by the Act 8& ' -. that the banks -.hall brin- to the exchange-room regularly, at their head office and agencies, all the exchangeable notes which il. oatve, and thatun.l. r :... i ircum-tanees shall any bank i--u.- the mites ol 'another bank of issac in Scotland without permission iii>t MBSd and obtained. 51. The parties to this agreement shall he entitled to withdraw from it, and to r. - oahre back their exchequer bills at their par value, with accruing interest, on giving aths* notice. FA. 16, 1846. ALEX. BLAIR, for the Bank of Scotland. K'Hii.KT SVM WILSON, for the linyal Hank of Scotland. THO. CORRIE, for the British Linen Company. KoitKRT PACL, for the Commercial Hank of Scotland. GEORGE CROSHIK. for the National Hank of Scotland. SAML HAT, Cashier, for the Union Bank of Scotland. i: HAMSAY, for the Western Hank of Scotland. WILLIAM FLKMMINO, Manager, Kdinlnir^h. for the ( 'lydesdaleBank. ARCH. BOSAR, for the Kilinbiiru'h i (ila.^ow Bank. BOBBRT BELL, for the City of Glasgow Bank. VL Exchange Banks, and Exchange Companies.* As these institutions exist only in Scotland, they may fairly be classed among the banks of Scotland. At the period they originated I \\mti- tin- following letter to the late Patrick MaxwHI S . <|., M. 1'. for Ren- frewshire, who had asked my opinion on the subject. This letter was af- terwards published in the Railway ll-rnll. In compliance with your request, I will now give you my notions re- specting the new Exchange Banks recently formed in Scotland. 1. A division of labor among banking institutions is by no means a new idea. There is scarcely any bank that carries on every branch of the bu- .Veto by America* PmUiiker Those who are canons as to the svstem of the Kx- ehsssj* Bank System of Scotland, aud the recent failure of the... butts, are referred to the Bankers' Magazine, published at Boston, pp. 249-251, and 2'.'* -.ml. in whi< able views of the London Atlas and the London Hunkers' Mu^u/inu are fully given M8 Scotch Exchange Banks. siness of banking. The dealing in foreign exchanges, which forms so largo a portion of the business of Continental bankers, is quite unknown to English bankers ; it is confined to merchants, or to large moneyed houses, like the Messrs. Rothschild. In London, the West-end bankers, as Messrs. Coutts and Messrs. Drummond, do not discount commercial bills, but confine their advances to mortgages, as their connections lie chiefly among the aristocracy ; while the city bankers look on mortgages with horror, and make their advances by the discount of bills and short loans on personal security. Loan Banks, or Monts de Piete, have been in existence for several centuries as a distinct branch of business, and loan societies are now sanctioned with us by Act of Parliament. Some London bankers do not take the agency of country banks, while the agency of colonial and foreign banks is often taken by mercantile houses, who carry on no other part of the business of bankers. I might add to these illustrations, but these are enough to show that division of la- bor among banking institutions is accordant with every-day practice, and therefore the new exchange banks, in marking out for themselves a par- ticular line of conduct, cannot be charged with any deviation from ac- knowledged principles. 2. But then comes the question, Is the particular department of bank- ing marked out for themselves by the new exchange banks sufficiently ex- tensive to justify the formation of banks for that particular department, and also sufficiently lucrative to justify the anticipation of profit to the share- holders ? With regard to the extent, there can be no doubt that, from the formation of railways, and the multiplication of companies of all sorts, those kinds of securities on which commercial banks do not like to make advances are largely on the increase. It is likely, too, that these ex- change banks would attract much business in the way of advances on goods, &c., which is now done by brokers or individual capitalists. With regard to profit, it is well known that loans on the kind of security taken by the exchange banks are always charged a higher rate of interest than commercial bills. 3. One reason for the formation of banks to take up this particular line of business is, that it requires a peculiar kind of knowledge in the mana- ger. He must make himself acquainted with certain points of law con- nected with shares, with the value of all shares in the market, the history and prospects of each company, the law and practice with regard to bond- ed goods, and other matters that do not usually come under the notice of the manager of a commercial bank, and the knowledge of which he could not readily acquire and maintain without neglecting other matters of, to him, greater importance. 4. Although the rate of interest obtained by the exchange banks will be higher than what is termed the market rate, yet it will be affected by the market rate, and hence I think an exchange bank cannot yield a high dividend to its shareholders, unless it transacts a large amount of busi- ness. The only deductions from the interest received must be the ex- pense of the establishment. Every commercial man knows that a large establishment can be conducted with a less proportional expense than a small one. To conduct even a small business with safety, an exchange :m A TreatUe on Banking. bank must have a first rate manager ; but us the business increases, the mow iBtiBMn transacts the incn-nnnd business, and the chief increased "iqtntt is in tho number of clerks. In a large- bank the exju n< ma\ form smalt proportion to tho profit* ; in u small bank the < \, DH may equal the profits, or even exceed them. To do u lar-i- husim s.-, of course an exchange bank must him* n large capital. 5. After a while, those exchange Uinks may obtain funds beyond their own capital. The commercial bunks <>l>tain such funds by tin: issue of notes, the balance of drawing accounts, lodgments on deposits, and the issue of drafts on London and elsewhere. None of these means are adapted for exchange bunks, except the lodgments on deposits. After they are better known to the public, perhaps they may be able to receive deposits for three, six, or twelxe months certain, on \\lnch they may alloni to allow higher interest than is allowed by the commercial banks. Possi- bly some persons may prefer lending to these hanks on liberal interest rather than lending on mortgage. Any large extent of this business would, of course, add proportionably to the profits of the bank. 6. 1 know of no better form of government for an exchange bank than a board of directors and a manager. Commercial banks find a I board useful, as the number of directors exalt the bank in public estima- tion, and extend its influence, but with an exchange bunk a small number of efficient directors would bo preferable. Hut all hanks should avoid what are called " managing directors." A manager is selected be< he has had a banking education, and has obtained banking experience. Orer him are placed two directors, who have had no banking experience. The manager is thus reduced to a clerk, and having neither power nor responsibility, he has no stimulus to exertion. The managing directors being members of the board, their brother directors do not scrutini/e their acts so closely as they would the acts of the manager. These other di- rectors thus become ciphers. A bank thus governed resembles a private bank with two partners, with this difference, that the private bankers un- derstand their business, and deal with their own money. The main ob- jects of managing directors are to direct the manager, and to manage the directors. Most of the English joint-stock lumks that have gone astray have been either constitutionally or practically governed by managing di- rectors. The great object of the exchange bunks should be to manage their affaire prudently ; though a large business is essential to good profit, yet they should not attempt a large business with a small capital. Let them get a large paid-up capital first, and the large business will come of course. The main danger to which they are exposed is, that they may attempt to get on too fast 7. An obstacle to the progress of these banks is the stamp duties on the transfers of shares. 1 trust these and all other banks and companies will use their influence to get these duties abolished. In political economy, there is no proposition capable of clearer demonstration than that dom- taxes on the transfer of property are pernicious. Our Government serm *o have recognized this principle last session in their spontaneous surren- der of the auction duties. There is no more reason in laying a tax upon the sale of railway shares than there would be in laying a tax upon the Scotch Exchange Banks. sale of iron and timber. It will be a happy thing if the formation of ex- change banks should have the effect of causing these taxes to be repealed. You will perceive from what I have written that my opinions are in favor of these exchange banks. Presuming they will be well managed (for without good management no bank can succeed), I think they will be found profitable channels for the employment of capital, and after a while may worthily take their place side by side with the other banking estab- lishments of Scotland." The following extracts, from a letter addressed in March, 1847, by George Kinnear, Esq., the manager of the Glasgow Commercial Ex- change Company, to Alexander Blair, Esq., the treasurer of the Bank of Scotland, point out the difference between the business of those compa- nies and that of the Commercial Banks : " The advances of exchange companies are all made, irrespective of commercial credit, on the security of shares in joint-stock companies. Although these shares pre- sent the most undeniable and complete security, they do not present what all prudent bankers understand by a legitimate banking security. Every banker knows that he might as well devote his funds to lending over land as over shares ; that when he does so, he in reality abstracts his funds from banking, and to that extent loses his banking power ; and that, just in proportion as he does so, he must be prepared to give up his commer- cial business. " It is this which has induced prudent bankers, not only in Scotland, but everywhere else, to repudiate such transactions as inconsistent with the prosperity of their commer- cial business. They do occasionally lend a, customer over his shares, as they also oc- casionally lend a customer over the security of his title deeds, but they regard both as equally foreign to their legitimate business, and are well aware that if they practised either for any length of time they would ruin their legitimate commercial trade." " The Commercial Exchange Company allows interest at 5 per cent, on deposits for six months certain, and repayable at three months' notice. The Bank of Scotland allows interest at 4 per cent, on deposits repayable at call. I may appeal to any re- spectable banker, bill broker, or money dealer of any kind, if a difference of one per cent, per annum is too much between money for nine months certain, and money at a moment's notice ? I maintain that it is not ; and that the extra one per cent, which we pay is justly due on account of the superior character of the article which we re- ceive." " The whole of the money lent by the Commercial Exchange Company is at the rate of 6i per cent, per annum, and is lent for six months at a time. On all six months' paper the Bank of Scotland charge 6 per cent., so that the Commercial Ex- change charge only one half per cent, more than the Bank of Scotland. Nor is this half per cent, charged for nothing ; as the bank has no trouble in taking hills at six months, while the Exchange Company has the trouble and risk of taking over securi- ties, .and of renewing and changing them for the parties as they may desire." " The Exchange Company allows 5 per cent, for money, and charge 64 per cent., making a fixed difFerence in favor of the company of 1 4 per cent. The Bank of Scot- land allows on current accounts 3 per cent., on deposit receipts 4 per cent, and charges on hills under four months 5 per cent., and above four months 6 per cent. ; making a difference in favor of the bank varying from one per cent, up to 2i per cent." " The directors of the Commercial Exchange Company have allowed to the public 5 per cent, on money deposited with them ; and they have done so, although the Bank of Scotland and the Royal Bank only allow 4 per cent." " If money, repayable on demand, be worth to these banks 4 per cent., it follows as a matter of course, that money for six months certain, and repayable at three months' notice, ought to be worth 5 per cent." " I beg of you to recollect what class of people it is who are the great majority of depositors. Mostly persons incapable of working, maiden ladies, widows, and or- phans, people incapable of making the most of their money for themselves, nay, DD 349 A Treati* on Banking. nrast of them, either from thir sex or their ignorance of business, hutllj capable of judging where their noney It tafr. "It a vnr great pleasure to me to know that the estal>li>limcnt of the . \ en of great serrico to thi class of prntons. Hundreds ,.i have Md ibeir comforts increased, ny the increased intere.it the dcrirv from the money, on the produce of which tlicy arc obliged tu live , m,,| 1 i to brlitve, that thousands will \.-t t n . \ .-iiuilar ben. i lie exchange companies no more coni|>cio with bank* than the river : :.,.; v com] I ! ' :M:-(S. .in. I nlli.T puMie nndc M.ikili;.--. who |..,r- :>oney for lengthens! period*. There is, in fnct. no possible room for jealot^ or competition between bank* and axchang* COBIpaaiaB, fee there is im business under- taken by the one which could bo accepted of i.\ ;ir otb. -r \\iih iiny .-.il'.-ty or |irojurM*lf arknouii .!_-. th.it tin- IJank nf ^(r nine im>ii;h> certain at .*> percent.; am! I (ussuro you the ('nni- merrial Exchange Com|mny ctmlil not uftonl to ^m- I per cent, lor nn'iicy at call." \'. : , the siniillot I'.e^n e. injuie or interfere with tin- prosperity of <-din- mdKial banking ; on the contrary, the establishment of exchange companies inu-t !m\e giren a very acceptable apology to pnulent bankers for ileclinin^ to mnke a-s. which (although i|iiitc p>oV(uU you call e\ i!s an- in f.ict ^-reat public U-nclits. l-'irt. by conferring' Mil'sfan- tial adrantagec on a certain class of depositors : inn! .-e( ondly. l-\ nablin^ the inteni:il improvements of the country to be carried out with an case and rapidity vliii -h cuuld not otherwise be attained." Tho ExchruiLT'' Hunks and Companies that have been formed in Scot- land arc the following : 1. The Exchange Bank of Scotland, at Edinburgh. 2. The Commercial E.vli:i!r_'-' ( 'mn]i;iny, ;it (llas^ow. 3. Tin: I'liion Exchange Company, at (;ias-_ r '\v. 4. The National Exchange Company, at Glasgow. 5. The Glasgow Exchange Company, at Glasgow. 6. Thfe West of Glasgow Exchange Company, ut Glasgow. 1. The Exchange Bank of Scotland. This bank has a charter under Sir Robert Peel's Act of 1845. Its paid up capital is .350,000, and it has about ^400,000 deposits. It cannot issue notes. In making pay- ments it issues the notes of the City of Glasgow Bank. It bus paid a dividend of 6 per cent. 2. The Commercial Exchange Company. This bank has no charter. s established before the passing of the Act of 1K15, but not i. i until after the passing of the Act. It has since registered, and hence the directors consider that they are entitled to carry on Im-.M-ss as a bank without a charter. The extracts we have mad.- from the pam- phlet of Mr. Kinnear, the manager of this bunk, will show the principles on which it is condu 3. The Union Exchange Company of Glasgow, does not profess to be a bank at all, and hence avoids the question of a charter. At a special general meeting of shareholders, held in November, 1846, it was resolved u that the word * banking 1 be omitted from the name or firm of the Com- pany, as prescribed by the first article of the contract of copartnery, and from the description of companies referred to in tin- third article of contract ; and that a special declaration be added to the said third clause of the said contract, that it has not l>een, and docs not form any part of 350 Scotch Exchange Batiks. the business of the company to make advances simply on personal secu- rity, unaccompanied by the collateral security of real or personal proper- ty." Its paid-up capital is about 250,000, on which it has paid a divi- dend of 7 1 per cent. 4. The National Exchange Company. This company has been very unsuccessful. It commenced in the year 1845, and got into difficulties at the end of 1847. Their first paid up capital was .210,790. They have since made a call of 2 a share more, on 57,000 shares, to enable them to meet their liabilities. 5. The Glasgow Exchange Company began business in 1847, and wound up creditably in 1848, returning to their shareholders 4s. per share more than they had paid up. 6. The West of Scotland Exchange Investment Company is winding up its affaire, and is expected to return to its shareholders nearly the whole of its paid-up capital, about 120,000. The losses that have fallen upon exchange companies seem to have arisen mainly from the great reduction that has taken place in the price of railway shares. The following observations of the directors of the Glasgow Exchange Company, with reference to the prosecution of their business, appear very just and impartial : " The directors will first state the negative view of the question. From the nature of the transactions which form the general business of exchange companies, their suc- cess depends chiefly upon a high state of the prosperity of the country, and particularly of railway enterprise. The main object of nearly all who enter into such transactions is to realize the benefits of an expected augmentation of the value of the stock ; the business, therefore, is necessarily attended with risk, and though that risk may be guarded by what appears an ample margin, recent experience has shown that this has not been a sufficient precaution. " The directors' short experience may not give much weight to their opinion ; but it appears to them to be essential to the profitable management of the company's business, that it should possess, in addition to its own capital, a considerable amount of money in loans from the public. The employment of such money is the chief source of the profit of banking companies, and this advantage is still more required by exchange companies. To command a share of such loans, this company must possess the confi- dence of the public : what might tend to infuse this confidence would be a large paid- up capital ; but although this would be quite requisite, if the business is to be carried on, yet it is doubtful how far it would remove the strong prejudice which has taken possession of the public mind against exchange companies, a prejudice which is a good deal mixed up with the injurious effects to individual fortunes which recent bank- ruptcies have disclosed, as arriving out of transactions with exchange companies. " The directors will now state what has occurred to them in favor of prosecuting the business. " The magnitude of railway stock in this country is so great, that it may be fairly concluded it will always form a subject of extensive dealings, ami that, therefore, there will always be a large field on which business may be cultivated. In ordinary times, the risks attending the business of the company would not be much ; and it is not to be expected that a period such as has just been passed, distinguished by extraordinary vicissitudes in the value of public securities, will often occur. " The prejudice which exists against such companies at present, time may remove, for it does not appear to the directors that the grounds of that prejudice rest on any principle that would not apply to any other joint-stock company ; but it is not to be concealed that the existence of this prejudice will be an obstacle, for a time, to the fa- cility of increasing the paid-up capital, and the increase of loans from the public, both essential to the profitable results of the business " 351 A Trcalut on Banking. SUCTION VII. THE HANKS OF IKI'.I.AM) I of Parliament f.r regulating banks in Inland is the 8 & 9 Viet. :<7, passed in the year 1 s ! Thi* ' ' by tin- Act 21 At 22 Geo. III. m passed _ a Iwink by the name t.f the ( Jovernor ami ( 'ompany of :h,- Bnnk of Ireland ; and which prohibited any other eomparu i^ of n>. >n- than six personate issue notes payable on . IV. ,;:; other companies consisting of more than six partners n i^ht i n- payable on demand, at a greater distance than fifty miles (Irish) fmm Lon- don. And that by 6 Geo. IV. cap. 42, and 1 \Vm. IV. -\\<-}\ co-partnerships of bankers might transact certain matters <.f business by agents in Dublin, including the payment though not the issue- of i The Act further recites that the Hank of Ireland h;.d nt various times advanced for the public service, the several sums of 600,000, f>< <>.- 000 and ,1,250,000 late Irish currency: ami that l.y ','ne is (I,.,,. HI. cap. 103, the charter of the Bank of Ireland was extended t<. the first day of January, 1837, upon twelve months' notice to bo pul.li.-hed in il.e Dublin Gazette, and after the repayment of the abore-inentioned sums. And that by the Act 1 & 2 Geo. IV.-cap. 72, the Bank of Ireland had agreed to advance a further sum of .500,000, and the hank \\ as em- powered to enlarge their capital to 3,000,000; n; total ad- vanccs ^2,850,000 late Irish c-irrency. e.pial t.. .i'-.MWO.TfJO 4*. Sd. sterling money of the United Kingdom of (Ireat Britain and Ireland; on which, by the Act 3 & 4 Viet. c. 7">. the bank n-eeived an annuity from the Government of 115,384 12*. 4d. sterling, payable on the f>th of January and 5th of July in each year, redeemable upon six ir.i.nths' no- tice, to be given after January 1st, 1841, and after payment of ;l;e above- mentioned sums. The Act further recites, that the above annuity of 1 1 .">.:;- \ Ms. 4d. has, with the consent of the said governor and com; n reduced to ; 92,076 18*. 5d., being at the rate of 3J percent, per annum n the capital sum of 2,(i;K),769 4*. 6W., which capital sum '-hall I:.T be re- paid until the expiration of six months' notice, to he givu af-'T .I.-nuary 1st, 1855 ; and that, during such term, the said governor and company nhall manage the public debt free of all charge. The company is to ecu- tinue a corporation, for the purpose of carrying on th< <>f bank- ing, but not to have any exclusive privileges. The charier t<. continue! until the expiration of twelve months' notice to be given, and publisl ed in the Dublin (tmrtte, after January 1st, 1855, and upon repayment of the sums due from nment to the bank. The Act removes, from the 6th day of December, 1S45, all restric- tions upon banks having more than six par* d carry- ing on business in Dublin, and within fifty miles thereof. Hut i shall issue any larger amount of notes than tin !md - the year ending the first day of ' liich amount shall be certified by the i.d the The Banks of Ireland. amount of gold and silver coin he may have in his hands, in the propor- tion of not more than one fourth of silver to that of gold. In case two banks should unite, the new bank to have the power of is- sue to the amount of both the united banks. Any bank may arrange with the Bank of Ireland to give up its issue ; and in that case the Bank of Ireland may increase its issue to that amount. But the bank that thus contracts shall not afterwards resume its issue. All notes for a fractional part of a pound are prohibited. Each bank issuing notes is required to send to the Stamp-office weekly returns, stating the amount of notes in circulation on each Saturday, distinguishing those below 5 ; and also the amount of gold and silver coin held at each of the head offices or prin- cipal places of issue in Ireland. And from these returns the Commis- sioners of Stamps and Taxes shall make a monthly return, which shall be published in the Dublin Gazette. This monthly average must not exceed the amount certified by the commissioners and the amount of gold and silver on hand. All banks are required to send a list of their shareholders to the Stamp-office, every year, between the 1st and the 15th of January, to be published in the Dublin Gazette before the first day of the succeeding March. All banks, whether they issue notes or not, are entitled to sue and be sued in the name of their public registered officer. Upon the Act of 1845, for the Regulation of Banks in Ireland, we may observe : 1. The authorized issue is like that of the banks of Scotland, the aver- age amount of the year ending on the 1st day of May, 1845. 2. If any two banks unite, the new bank may issue to the amount of the circulation of both the united banks. Here the law is the same as that of Scotland, but different from that of England. 3. If any bank gives up its issue, and agrees to issue Bank of Ireland notes, the Bank of Ireland may increase her authorized issue to the full amount of the issue of the bank whose notes are withdrawn. In Eng- land, the Bank of England can, in a similar case, issue only to the extent of two thirds of the issue of the bank whose notes are withdrawn. There is no similar provision in the Act referring to Scotland. 4. Another difference may be noticed between Ireland and Scotland. All the notes issued at the branch banks in Scotland are payable only at the head office of the bank that issued them. In Ireland all the notes are legally demandable in gold at the branches where they have been issued. Hence the banks in Ireland must keep some gold at every branch, while the banks in Scotland need not have any gold except at the head office. In both countries, the banks must hold a stock of gold equal to the amount of notes in circulation beyond the authorized issue : and, according to the Act, this gold must be at the head office, or chief place of issue. The gold held at the branches, however necessary for business purposes, is not taken into account in the returns to the Stamp-office. The banks, indeed, return the whole amount of the gold in their possession ; and it is this which is published in the newspapers. But the amount held against the excess of authorized issue must be held at the chief office, or other chief places of issue. In the Provincial Bank of Ireland these places are DD* 353 A Trtatute on Banking. Cork, Limerick, Dublin, and Belfast. They are desirous of having .11 nd- '/ . . " Eridm&, i ".;>.; The hanking institutions of huli'm nrr the Bank of Ireland. \\ln chartered kink, like the Hank of Unhand. It is tin- ( ImrriimrMt hank. ] . -. nnd has branches in tin- |.nnci|.al towns through.-!' In- land. It IMIS i vhisive privilegea. The I'mxincial Hank of Ireland, and the N;ition;il Bank of In-lnnd These arc joint-stock hanks that N BOIMfOtM btuche*. i . . . rned bj boards !' direetors, \\ I ieei in l.on- don. The ! .k, and the Royal Bank of In-hind. Tin-si- arc- 'stock banks, that rot rtion of the Government of the state in which they wen- esiaMished. Such was tin- case with the banks of Venice, Genoa, and Amsterdam : and such, too, was the case with the banks of England, of Scotland, and of Ireland. The former were closely connected with the state, and may properly be called "State Banks"; the latter had peculiar privileges bestowed by charter, and are usually called "Chartered Banks." These privileges may be divided into two classes, those which refer to the proprietors them- selves, and those which refer to other parties. The privileges of the first class relate to the amount of capital, the form of government, the number of the directors, and the mode of their nomination, the meeting of the proprietors, and the specification of the branches of business the bank are allowed to carry on. The privileges of the second class refer to the restricted liability of the shareholders, and the prohibition of other parties carrying on die same business. If the charters granted to banking companies referred only to the first class of privileges, they would be liable to but little objection. In the infancy of commerce and of banking, the assistance of the government may with propriety be granted to encourage the formation of institutions, Jo eminently calculated to promote the public advantage. But of what avail are prohibitory clauses? If no other persons are disposed to form similar institutions, then those prohibitions are a nullity But if other parties are disposed to form similar companies, without the assistance of the Government, then why should the Government interfere at all ? \Vhy should they grant a charter to effect an object which can be effected with- out their assistance ? :<:> i TJie Bank of Ireland. In the charter first granted to the Bank of England in 1694, there was no prohibitory clause. But when the charter was renewed in 1708, it was enacted that no other company formed of more than six persons should carry on the business of banking in England. The charter grant- ed to the Bank of Scotland, in 1695, contained the following prohibition, "That for the period of twenty-one years from the 17th of July 1695, it should not be lawful for any other persons to set up a distinct company or bank within the kingdom of Scotland." This privilege was not re- newed after the expiration of the twenty-one years ; and in the year 1727, a charter, without any prohibitions, was also granted to the Royal Bank of Scotland. In the year 1746, the British Linen Company was formed, and carried on the business of banking as a joint-stock company. Subsequently this bank also obtained a charter, but without any exclusive privilege. Hence Scotland has had the advantage of chartered banks, and joint-stock banks, and private banks, all working well together with- out producing those effects which in this country have followed the prohib- itory clauses of the charter of the Bank of England. Both in its constitution and government the Bank of Ireland closely im- itated the Bank- of England ; and it has produced in Ireland most of the advantages and evils which that establishment has produced in this coun- try. It has supplied the country with a currency of undoubted solidity ; it has supported public credit, it has granted facilities to trade, and it has assisted the financial operations of the Government. On the other hand, its prohibitory clause necessarily led to the formation of many private banks, whose failure was the cause of immense wretchedness to all classes of the population. The charter of the Bank of Ireland contained a clause, which prevented more than six persons forming themselves into a company to carry on the business of banking in Ireland. In the year 1824, they surrendered this exclusive privilege, as far as regard those places which are situated at a greater distance than fifty Irish miles from Dublin ; and in 1826, the Bank of England made a similar surrender, with regard to places at a greater distance than sixty- five miles from London. As eleven Irish miles are equal to fourteen English miles, fifty Irish miles are equal to about sixty-five English miles. But it must be observed, that Dublin is situated on the sea-coast, therefore, the Bank of Ireland had only the monopoly of a semicircle, whose radius is fifty Irish miles. But London, being situated inland, the Bank of England had the monopoly of a whole cir- cle of 130 English miles in diameter. The Bank of Ireland was established by an Act of Parliament passed in 1782, 21 & 22 Geo. III. cap. 16. The following are the provisions of this Act : The capital was 600,000, which was lent to Government at 4 per cent. No one person was permitted to subscribe more than 10,000. If the bank incurred debts to a greater amount than their capital, the sub- scribers were answerable in their private capacity to the creditors in pro- portion to their subscriptions. The bank were not either to borrow or to lend money at a higher interest than 5 per cent., nor to engage in any business but banking. The stock to be transferable, and deemed 355 A Trtatue on Banting. p*fftnt>** estate, and a* such to go to the executors of the holders, and not to their heir*. No trans : '"k stock tu be valid, unless r< land in the bank books, in seven days from the contract, and actually transferred in fourteen days ; the charter to expire at twelve months' 110- tice after the 1st day of January, 17!) I, and repayment of all sums due by the Government to the bonk. " The charter is dated May 15, 1783, anil contains as follows : Such persons as should subscribe before Januan, 1, I"*- 1. the sum of 600 were to be formed into a corporation, to be styled the Governor anoration. n directors shall be chosen annually, between March 'J5 and April 25 in each year, and not above two thirds of the directors of the preceding year to be reflected. The notice for the meeting of general courts of proprietors to be affixed upon the Royal Exchange in Dublin at least two days before the time of meeting. The qualification for a voter at a general court shall be 500 stock, to be held for six months preceding, unless it come by will, mar riage, Arc. The qualification for Governor shall be 4,000 stock, and for deputy-governor 3,000, and for director 2,000. No dividend shall at any time be made by the said governor and com- pany, save only out of the interest, profit, or produce, arising by or out of the said capital, stock or fund, or by such dealing, buying, or selling, as is allowed by the said Act of Parliament ; nor without the consent of the members of the said corporation, in a general court qualified to vote as aforesaid. The governor or deputy-governor shall summon four general courts at least in every year. One in the month of September, one in Decem- ber, one in April, and another in July. The governor or deputy-governor shall also summon a general court, whenever requested to do so by nine members, each holding 500 stock. If governor and deputy-governor be absent one hour after the usual time of proceeding, at any general court or court of directors, a chairman shall be chosen for that time only, who shall have like privileges as the governor or deputy-governor. Governor, deputy-governor, or chairman, not to vote in general co< or court of directors, save when there shall happen to be an equal number of votes on each side. The Bank of Ireland commenced business at St. Mary's Abbey, June 25, 1783. After the Union, its office was removed to the Parliament House. In the year 1821, the capital of the Bank of Irrland was increaverl from 2,500,000 to 3,000,000 Irish currency. The additional .: 500,000 was taken from the bank's surplus fund, and lent to the Government at 4 per cent, to be repaid by the 1st of January, 1838. The increased capital was divided among the proprietors, at the rate of 20 for every 100 they possessed. In consideration of this increase of capital, the bank 356 The Bank of Ireland. consented to a clause in this Act, whereby persons in partnership, resid- ing fifty miles from Dublin, might carry on the business of banking, al- ihough such partnership might consist of more than six partners ; but that such partnership should possess no other privilege than being allowed to sue and be sued in the name of a public officer, should Parliament here- after think fit to grant such a power. This privilege was of little prac- tical use, for, according to the construction put upon the Act, it required that all the partners in these banks should reside in Ireland. In this year an Act was passed (5 Geo. IV. cap. 73) " to relieve bank- ers in Ireland from certain restraints imposed by the provisions of the 29 Geo. II., and to render all and each of the members of certain co- partnerships of bankers, which may be established, liable to the engage- ments of such copartnerships, and to enable such copartnerships to sue and be sued in the name of their public officer." Those clauses in the former Act that required the names of all the partners to be subscribed to the notes, and which prohibited bankers being traders, are by this Act repealed. Banking partnerships exceeding six persons, and carrying on business at any place beyond fifty miles from Dublin, shall be registered at the Stamp-office, Dublin ; and also the names of the public officers, in whose name such partnerships sue and are sued. The names of those public officers were also required to be sub- scribed to all notes and receipts issued by the company. Judgments against the public officers to operate as judgment against the partnership, and execution upon judgment may be issued against any member of the society, and the public officer to be saved harmless. In the year 1825 was passed the " Act for the better regulation of co- partnerships of certain bankers in Ireland." It \vas obtained by the di- rectors of the Provincial Bank of Ireland, as the Acts previously granted did not furnish the facilities which the Provincial Bank required for the beneficial exercise of its operations. It confirmed the permission granted by former Acts to establish joint-stock banks at a greater distance than fifty miles from Dublin, and permitted persons resident in Great Britain to become shareholders in such banks. The banks were required to re- gister at the Stamp-office in Dublin an account of the names of the firms, the several partners therein, and the public officers thereof. The partner- ships shall sue and be sued in the name of their public officers. Parties obtaining judgments in Ireland may authorize the acknowledgment of like judgment in Great Britain ; and, in like manner, parties obtaining judg- ment ,in Great Britain may proceed thereon in Ireland. Judgments against public officers shall operate against the society, and execution upon judgment may be issued against any member of the co-partnership. All transfer of shares must be registered at the Stamp-office. In this year, too, an Act of Parliament was passed to assimilate the currency of Ireland to that of England. It is entitled, " An Act to pro- vide for the assimilation of the currency and moneys of account through- out the United Kingdom of Great Britain and Ireland." (6 Geo. IV. cap. 79.) The Act recites, that the pound sterling in Great Britain and Ireland respectively is divided into twenty shillings, and the shilling into twelve pence ; but the silver coin which represents a shilling in Great 357 A Treatise on Banking. Britain b paid and accepted in Ireland fur thirteen pence, and ihr pound sterling orGreat Bn'a-.n i, at the par of exchange, paid and Moeptod >ne pound one shilling and right pence of the currency of Ireland : and that great complexity of accounts, and other inconveniences, arise from the said difference of currencies. It i! . that the cum n<-\ of Great Britain shall be the currency of the I'nited Kingdom, and all re- oeipts, payments, contracts, nnd dealings, shall be made in such currency. And all contracts, debts, &c., made or contracted previous to the com- mencement of this Act shall be carried into effect, and satisfied by pa\- : in British currency of 1'J-iyths of the amount according to Irish irrrncy. All duties and public revenues, and all funds and public < shall be estimated in British currency, and the accounts thereof kept ac- cordingly. After a day to be named by proclamation, British silver and gold coins shall be current in Ireland at the same rate of pence as in Great Britain. On the like proclamation, Irish copper coin shall be brought into the Bank of Ireland, and exchanged there for British copper coin, at the rate of twelve pence British for thirteen pence Irish, and the Irish copper coin shall cease to circulate. Bankers 1 notes shall be mnde pay- able in British currency. No notes payable in Irish currency shall be re- issued after the commencement of this Act, under a penalty of 50 for each offence. Bankers may deliver into the Stamp-office re-issuable notes, payable in Irish currency, and receive in lieu thereof new stamps to the whole amount of the stamps delivered up, if dated within one year previous, or three fourths if within two years, and one hulf if within three *. This Act came into operation on the 5th day of January, iN'Ji;. Very ample returns of the state of the Bank of Ireland are published in the Appendix attached to the Reports of the Parliamentary Commit- tee*. The following is that of the latest date : 12rn FEBRUARY, 1848. ('imiUtion: Securities : 5 and above, .1,867,300 Public, . . . .3,735,800 Under, . . 1,232,900 Private, viz. - 3,100,200 Notes and Bills Pspoiill ;
  • counted, . 2,605,400 Public, . . 1,336,600 . All other Private Private and Son- Securities, . 536,900 dry Balances, . 2,160,500 - 3,142,300 - 3,497,100 Specie, .... 808,500 6,597,300 7,686,600 This account includes the bank and the branches. The circulation of the branches was : 5 and above, 769,800 ; under 5, 855,500 ; making a total of 1,625,300. The deposits at the branches amounted to .564,800, and the bills under discount to 1,852,000. The Bank of Ireland has branches at the following places : Armagh, Bailinaaloe, Drogheda, Longford, Tullamore, Dundalk, Maryborough, ford, Cnlway, New ROM, Westnort, , , Cariow, Kilkenny, vry, Wexford, ' mm, EJsMrfei, ' < '"fk Londonderry, Tralec, 358 The Provincial. Bank. The Provincial Bank of Ireland. Public banks may be divided into three classes : first, Chartered Banks, those which have received a charter from the crown ; secondly, Joint- stock Banks, formed under the common law ; and, thirdly, Joint-stock Banks, formed under the statute law. The common law of England allowed any number of persons to form themselves into a partnership to carry on banking. At the same time, it presented this inconvenience in the formation of such partnerships, .in all actions at law, it was necessary to state the names of all the individ- uals who composed the company. Another inconvenience of partnerships formed under the common law was, that all the partners were answerable for the debts of the company, to the full extent of their property, not only while they were partners, but after they had ceased to be partners, as far as regards any transactions that took place during the continuance of their partnership. The banks avoided these inconveniences, in the first place, by conducting their business in the names of trustees, in the same way as some of the insurance companies ; and in the second place, by inserting a clause in the deed of settlement, that in case the bank should lose one third or one fourth the amount of its paid-up capital, it should immediate- ly be dissolved. The statutes 6 Geo. IV. c. 42, with reference to Ireland, and 7 Geo. IV. c. 46, with reference to England, not only repealed those Acts of Parliament which prohibited the formation of banking companies having more than six partners, but they also removed the inconveniences of the common law. It was enacted, that it should no longer be necessary, in legal actions, that the names of all the partners should be placed upon the record ; but that the company should register at the Stamp-office the name of some one person in whose name they wished to sue and be sued. Any party who had a disputed claim upon the company must sue this public officer, and when he had obtained a verdict in his favor, he might issue judgment against all the partners, in the same way as though he had obtained a verdict against them all. And, that he might have no difficulty in ascertaining who were or were not partners, it was required that the names of all the partners should be annually registered at the Stamp-office. The statute law also obviated the second inconvenience of the common law, by enacting that every partner, as soon as he had trans- ferred his share, should be released from all liability as to the subsequent act of the company, and at the end of three years he was no longer liable for any acts that took place even at the time he was a partner. The Provincial Bank of Ireland was formed under the statute of 6 Geo. IV. c. 42. Few banks have in so short a time advanced to so high a de- gree of prosperity. The circumstances of Ireland at that period were friendly to the growth of such an establishment. The recent abolition of the union duties, and the introduction of steamboats, had given a stim- ulus to the trade between the two countries, while nearly all the banks in the south of Ireland had been swept as by a whirlwind from the face of the land. The operations of the bank were also facilitated by the assimi- lation of the currency, and the measures taken by the Government and 3*9 A Trratitt on Banking. the Bank or Ireland to prevent these fluctuations in the e\ehanges which had previously existed. But the prosperity of this bank must IK- attrihui- ed chiefly to the wisdom nnd prudence manifested in its constitution and in its subsequent government. Tin- capital was raised chiefh in Kn^land, and London was, consequently, made the scat of government. The hoard of directors was composed of merchants and statesmen, and the latter were taken from the leading men of the two parlies into \\hieh In- land was then divided. The local government of the n in Ireland was composed of directors possessing local know It -d-M- and in- fluence, and of managers selected tor their experience in hanking, and the manager had a veto upon the decision of die board. An m-; was appointed to visit the branches, and to report to the London ollice. At the same time, the bank had considerable difficulties to contend against. Property in Ireland was considered insecure ; political and re- ligious feelings often interfered with matters of business; the habits of the people were not commercial ; and the country had suffered so severe- ly from private banking, that confidence was not easily acquired for a new company, the members and constitution of which were |>ut imper- fectly known. Before these difficulties had been completely overcome, the bank became involved in a competition with branches of the Hank of Ireland, and exposed to sudden demands for gold arising out of political The object of the bank is thus stated in the original prosj>ectus : "The hank to have a capital of . 2,000,000, if necessary, suhsrrilml in sli.iros of . 100 each. To have a board of directors in I/ondon, and establishments for business in the principal towns of Ireland which arc distant above fifty miles In mi Dublin. At earh of these places, a part of its stock to be subscribed, and from the stockholders a local board of directors to be chosen. The establishments to be manured l>y .sternly, experienced persons sent from England, with the advice and under the inspection of the local directors, but subject to the entire control of the London board, to whom accounts shall be regularly transmitted." The first report, delivered by the directors to the shareholders in May, 1826, stated that the bank had the following nine branches : Opened. Opened. Cork, .... Sept. 1, 1825 Wexford, .... Feb. 27, 1826 Limerick, . . . Nov. 1, 1825 Belfast, . . . Mur. 1, 182G Clonmel, . . . .Nov. 15, 1825 Watcrford, . . .May 1,1826 Londonderry, . . Dec. 12, 1825 Gal way, . . . May 1, lni'6 Sligo, .... Feb. 20, 1826 The state of banking in Ireland at the time the Provincial Bank was formed is thus described in their Eleventh Annual Report, delivered in May, 1836: u To show the progress of that competition, it may be sufficient to i>tatc, that prior to 1825, when the Act 6 Oeo. IV. o. 42 was passed, "under which th.- l'n.\ iii.-iul Bank WM established, the Bank of Ireland had no establishment out of Dublin. "That in Dublin iwelf there were only four more, and t!, banks; and that in all Ireland betides there were no other than i.rivut.: bunks, and these onlv in Belfast, Cork, Wexford. and Mallow. -oin 1825 to 1834, banking offices in the chief cities and towns of Ireland had NO The Provincial Bank. been gradually established by the Provincial Bank, the Bank of Ireland, the Northern and the Belfast Banks, to the number of about' fifty ; while, within the short space of the last two years, the offices of joint-stock banks having resident managers or agents beyond fifty miles from Dublin, added to the branches of the Bank of Ireland, have increased to upwards of 120, and appear to be daily augmenting in number; besides which, there are a great variety of stations attended on market-days by non-resident agents, on behalf of one or other of such banks ; and, in addition to all these, several establishments, on a large scale, have been lately announced in Dublin as in con- nection with some of the joint-stock banks most recently formed in the provinces. li The directors cannot, however, regard this unexampled rapidity of increase in the number of banks as a certain indication of prosperity. Amidst the excitement arising out of this state of things, they have considered it to be their duty to impress upon all their local directors and managers the necessity of increased caution and vigilance, and to warn them of the extreme danger of entering upon a race of competition, in which those who engage in it are too apt to overlook what is essential to their own safety." There is no joint-stock bank of whose rise and progress we have a more detailed account than the Provincial Bank of Ireland. This account is furnished to us in the evidence given to a Committee of the House of Commons, by the late secretary, Mr. James Marshall. We recommend the following quotations to the especial consideration of students in prac- tical banking, as showing most minutely the various steps by which pros- perity is obtained by banking institutions : 1. Ttie Constitution oftlie Provincial IBank of Ireland. " Can you explain to the committee the constitution of the Provincial Bank ? I can. I may make reference to the annual reports of the institution, of which, I un- derstand, copies were furnished to this committee ; a report is made to the proprie- tors on the third Thursday of May in each year. " By whom is that report prepared ? By a special committee. " A committee of the board of directors ? A committee of the board of directors, whom it is my duty to attend on such occasions, and to be their organ in acting as the clerk of that committee. " When that sub-committee has prepared the report, what further step is then taken * It is submitted then to the general court of directors. " Is it examined by them ? By the general court ; it is laid before them, and every part of it is explained to them ; and they have it in their power to examine any part, to refer instantly to the books, or the source from which A is drawn. The committee in making it up go very minutely to work, and examine very particularly. " Then are the committee to understand, that before the report is laid before the proprietors, that report is first submitted to a select committee, reported by them to the general court, and approved of by the general court ? It is ; it is, in the first instance, signed by the chairman of the committee, when presented to the general court. " When laid before the proprietors, is it laid before the proprietors on the responsi- bility of the court of directors'? Completely so." " Just confine yourself at present to the constitution of the bank. ' It may be here proper to state, for the information of the proprietors, the regulations which have been adopted, in the first place, for conducting business in a proper manner at the branches : and, secondly, for the control and superintendence which are exercised over them by the directors" in London. First, as to the branches ; fpr the due management of the business at each a suitable house has been obtained, and the following officers have been provided ; viz. manager, accountant, teller, clerk, porter ; all of whom find secu- rity for their fidelity. Where the scale of business requires it, the number of the in- ferior officers is increased, but there are only two principal officers at any branch, viz. manager and accountant ; and for securing more effectually the proper discharge of the duties of all, and assisting the manager with advice and information, there has been appointed at each station a board of local directors, consisting, according to cir- cumstances, of three, four, or five gentlemen of the first respectability in the place, EE 361 A Trtahte on Banking. who, in order to be eligible, most themselves have an inter, -t in ii..- i .tab'.M.m.-m. i % holdtef tea shares each of its stock. The duty of these . ;.. meet duily m a ffiTM boor at the bank's office, and, along with the mm rated for discount, and of all applicnti < > business of thu ature it U necessary that t> !>< al .lire, tors and tin- IIIUIIL< r I . |,i. M -nt , mid i: is piwMed, that where application^ IT Bed, in ii.dr. i.lnal .lin fixed amount, or when tl.e manager ditVcr- in opinion lYom the majoi. the local board, the matter mu-t !< submitted to the de< i-ion ot' tin- < <>m i < - further the duty nt' tin- local din-dors to compare daily the row with the entries in the each-book* to count, at .-tat. d int< mil.-. the la-h in the manager, and to certify the returns made periodically from the IU-..IH Ii to 1.. : Aro th committee tlicn to understand distinctly tli.it the local diic.-tui-. in the cae in which the manager, who is the head officer of the .society, diil'ers \\i;h them. although he may v. are bound to refer those cases to the London bu.;i iy decision is come to 1 In every case. i another contingency it would ap|>car, that where the pecuniary transaction* in giv qimtiul vwnofaA a given amount, that too, although the In. .ml mi :ht l>e the o :-.'. ration i-r tin- I.i.ndun ! .. ; .i,i ,,i' ,!.n etonf II i- \\ i:.it ti,.e- that -mn iri'iuTiilly amount to? Is it a fixed sum, or does it vary a. cording to the circumstances of the different branches 1 It has varied according to dffCMilMUCH . but. generally sjx-aking, from 300 to 500 is coii-idi n d the extent .: h nny tiling in tlie shape of a credit, other than the discount of a mercantile bill, would go." 2. The Selection of Officers. "Be so good as to explain to the committee what steps were taken by the Provincial Bank of Ireland in the selection of their various paid officers at the branches 1 I be- lieve that is detailed in this said report. ' The. selection of officers in particular v.a- a matter of paramount importance, both on arc-mint of the great Dumber required to fill the intended situations in Ireland, and the m-cc^ity there \va to M -rutiniw their ((ualificntioM as to character and ability. Communications were made on :!:i- Mil.jci -t with various gentlemen in diflerent parta of the country, from whom it was expected UK; best information could be obtained. The prospectus of the society havitiL' set out with the resolution that the business should be conducted on the principles which had been so long and so successfully acted upon in Scotland, it seemed desirable to obtain from that country persons trained up in banks there, provided their c|ualinYatioii* in other respects were such as to recommend them. With this view, the secretary ' (th:u was not myself at that time) 'was sent down to Edinburgh in February for the purpo-e of making inquiries; and notice having leen given in the public papers that persons were wanted to fill situations in the projected establishment.- in Ireland, a gentleman in the above city was employed to receive applications and to institute the m-i-i minuto and scrupulous inquiries regarding the character and ijualilication of tho-e who should apply. Another gentlemen from the same city %\., proceed to I,on- don. to assist the directors in the formation and prosecution of a plan for conducting the business, when they should be ready to commence it in Ireland' (that a!!u myself). 4 The extensive correspondence which the applications and inquiries, pro- diiced bv the measures above mentioned, necessarily occasioned, occupied the atten- tion of tile directors very closely, and for a considerable length of time, and the rc-u!t has been that the services of a number of most valuable officers have been secured to the society.' " But at that period was there a greater facility in procuring the sen-ice? of gentle- men more particularly who had experience in the Scotch banking than there would be subsequently, when there was a more active competition in the establishment of banks ? No doubt of it. * What description of security were these officers required to pive ? Unexception- able personal security ; two persons, at least, generally were joined in a bond for the fidelity of the officer. " Wat there any fixed proportion between the amount of the security required and of the salary paid, or the duties to be performed ? The amount hod respect to the duties to be performed rather than to the salary. ' The Provincial Bank. " What was the general security that was taken by bond for the fidelity of these officers ? The lowest clerk was 1,000 ; the highest 10,000 for a manager at the largest branch. " And that has been enforced by the Provincial Bank with respect to its officers ? The amount of 10,000 has not been required, as we have practically found 5,000 to be a more commandable sum ; I would say, within the reach of the description of parties who are aspirants to these offices. " Now with respect to the local directors, how were they selected ? It is mentioned here, that there should be selected three, four, or five gentleman of the first respecta- bility in the place, of commercial knowledge, whenever those could be obtained ; if having had that commercial knowledge, and being disengaged from business, thev were considered as so much the more eligible. "But in the selection of local directors, so far from excluding persons by reason of their having commercial or banking knowledge, are the committee to understand that such parties were preferred ? Where they had it, and were not understood to be in a situation to require banking accommodation for themselves. " You have stated that the local directors were required to take ten shares each, at the least ? Yes. " Will you have the goodness to state what the reason was that they were required to take those shares 1 In order that they might have a greater interest in the estab- lishment ; feel a personal interest. I must say we have not, in every instance, been able to get gentlemen of that description. We have, in some instances, appointed gentlemen who, from various causes, declined to become shareholders ; at least, we have elected gentlemen to be local directors without requiring the fulfilment of that condition : there are some instances at present of gentlemen who are so ; but no doubts regarding the solvency of the bank ever deterred any of them." 3. The C/u>ice of Directors. " Now tell us how they are appointed ? The directors in London were, of coursei originally appointed by the gentlemen who associated together for the purpose of forming this establishment ; and they continued, with the approbation of the meeting, until a certain time, when by the deed of settlement, which was afterwards prepared, four were to go out every year. " In the vacancy of the four, who appoints their successors 1 The proprietors gen- erally ; the general meeting of proprietors. " Are they refiligible ? They are declared by the deed of settlement to be re- eligible. " Are they recommended to the court of proprietors by the court of directors ? They are ; they have been virtually so : and I beg to refer to one of the annual re- ports, which gives an explanation upon that point. It is in the report made the 17th of May, 1827, in which it is stated : The directors have now to advert to a cir- cumstunce of some importance as connected with the constitution of the society. By the deed of settlement, the number of directors was limited to twenty. Since the completion of the deed, that number has been reduced by death or resignations to sixteen ; and the directors having found by experience that the latter number is quite sufficient to insure a due attendance for the efficient management of the busi- ness of the establishment, have not thought it necessary to enforce the terms of the deed by proposing the election of new members ; and they think themselves now justi- fied, by past experience, in unanimously recommending to the rourt of proprietors to limit the number of directors for the ensuing year to sixteen. The directors may add, that this arrangement will be attended with a considerable saving of expense ; and iu conclusion, they beg to state to the proprietors an opinion in which they also unani- mously concur; viz. that in future elections, it will greatly conduce to the harmony and cordiality which it is so desirable should prevail amongst the directors themselven, as well as to the good management of the bank's affairs, if a recommendation shall be made by them to the proprietors in favor of those candidates whom, after due inquiry, they shall find to be the best qualified to fill the situation.' " Have those recommendations been generally complied with by the proprietors ? Always. " Uniformly, without exception ? Uniformly ; it has uniformly been acquiesced in. Two or three candidates had upon more thnn one occasion started, but when the mat- 363 A TVtufu* on Banking. __ ......... 10 them, they hurt uniformly acquiesce.! in it. It is necessary to 'MM, to pomplite tbia, that the recommendation to limit the numl>cr of (!,,,.. WM afterwards the Mhject of a pedal provision by an additional ,i,-i .1 ..i proprietor*, therefore the BMnbtr cannot be extended beyond M\U, H without a!: - Are the sUraejjori paid for their attendance 1 They are. What U the emoun: <>f payment hi. h they receive t It U so regulated that no firmer on receive above i50 year, the director in London I mean, were tending at every po*rible meeting that he could. - Is the payment an annual payment, or pn.|>ortionate to the attendances ? Pro- portionate to the attendances, ascertained every quart, r. ~ According to the number of attendances so the parties are paid ? Tes, accord- - Waa that sanctioned by the proprietors and by the society ? The deed of settle- jiiem contain* a provision allowing the directors to take the sum of 5,000 as re- muneration ; they have never taken more than 3,000; the proportion is red-. thi was wbien th*e number of directors was twenty. ^r Tlioma* t'miionilr. What do they take" now, the sixteen? They cannot Bteeed XS,000." (At a recent meeting of the shareholders of the bank, the chairman the amount to be 4,000.) 4. The Daify Committee. " Will yon state how they transact their business ? By meeting daily in committee, (sj general committee,) which i open to all to attend ; but in order to be a quorum, there roust be three present; and by a weekly court, held each Friday, at which all ouch! to be present. - Is there a record in writing of all the directions and the acts of that special com- mittee There is "Are each of those acts brought under the examination and review of the general court on Friday? At the weekly court they HIV, the minutes are read over. 1- the question put upon the eoutinnuiion of those minutes, or is it open to the general court to vary or ulter tin in '>. The ::, mitti-e. Having now explained to the committee the formation of your local administra- tion at the branches, and your general dmini-t union in London, will yon state what the course of proceedin- U. to in-ure to the court in London a knowledge of that which takes place at the different branch'-- ' I ."I tVom the report already referred to: ' Renlar advices of the proceedings at the branches are transmitted by the mana- ftn to London by post every second or third day, according to circumstances ; and at the end of each week a complete statement of the whole transactions is made up, and forwarded by the mail-coach. These returns are fiiM examined by the officers of the London establishment, and then submitted to the directors. For giving the necessary orders arising oat of these communications, for judging of all matters n -fern awliton, hot there is a provision in the deed of wtilniu-nt \>\ \\hVh H certain number of peopriXon may call for a further investigation of the accounts, if .: . ,: . 7. Tie Oman of it Prosperity. - Do you think there is any thing peculiar in the construction of this hank which has {Mired its being correctly and well managed up to the present time, or that it Li, rather arisen from the ' happy accident ' u[ tin- directors who were selected having (.<. n honorable and correct men of business t I conceive the von- first and indispensable thing was an exceedingly respectable board of directors fornu ank nteo an office in hnl-hn, where, since the Act of 1845, it has issued its own notes. 1846 slates that the National Bank of Ireland had token the business of the London and Dublin Bunk : 'uring the Utter part of the year, it having t>ccn intimated t<> tin- directors that the London and Dublin Hank were desirous of dissolving tlmt compiiny. n. -ntiatiniiN were entered into with the directors, which terminated in thi- r-t:i!>lixhnu-ni MKVCI -dm- to to connection* in the towns of Dundalk, Curricknmcross, Wicklow, Ke!l>. Atliv, Mullingar, and Parsonstown, with every prospect of advantage to the hunk. whole of these local ilk* are, with the r\< rp:i..n f l';n -..M-IOUH. within tin- < irdc fumi which all banks of Urae, except the Hank uf Ireland, had U-.-n <-\< Indcd. until t . tfarriffffl of the monopoly by the Banking Act of 1845." Several of the savings 1 banks in Ireland having failed, and occasioned to the de|>ositors, through the dishonesty of the officers, and the in- ability of the trustees to make good the losses, the. National Bank ot land have recently determined to discharge some of the functions of a savings 1 bank. They receive deposits for 10s., .1, ,1 10a., II. 10*., or for any multiple of 10*., but not for any fractional part of JO.v. When the sums thus received amount to ^f>, the party ir- is a regular de- posit receipt for the amount. In the mean time he receives interest at the same rate which is allowed on other deposit re<-ei|is (at present 2 [>< i cent) and can withdraw it at a short notice. The following is the form of receipt given to the savings 1 bank depositor : NATIOXAL HANK. OF IKEIASD. A5>. Received from f TEX SHILLINGS. dayof 18 _ Manager. The following is a copy of the Balance-sheet attached to the last An- nual Report, delivered May 23d, 1849 : 4 Net profits for the year ending December, 1848 . . . MAW 12 10 87,595 17 2 Deduct half year's dividend to Midsummer, 1848, at 5 percent. ....... 11.250 Ditto, to Christmas, 1848 .... 11250 Boes of 10*. per share on 30,000 shares . . 10,000 Amount paid T. Laroie Murray, Esq., according to the provision* of th Deed of Settlement . 1,000 Balance of profit and loss carried to tlmt account far 1849, ........ 3,990 12 10 - -- 37,490 12 10 of undivided profits to the credit of reserve fund, ai Drrrmber, 1848 ......... 50,105 4 4 MS The Hibernian Bank. The National Bank of Ireland has branches at the following places : Athlone Cork. Limerick. Roscommon. Athy. Dundalk. Longford. Roscrea. Ballina. Dungarvan. Loughrea. Skibbereen. Ballinasloe. Ennis. Mallow. Tallow. Boyle. Enniscorthy. Midleton. Thurles. Carrickmacross. Fermoy. " Mitchelstown. Tippcrary. Carrick-on-Suir. Galway. Moate. Tralee. Cashei. Kanturk. Mullingar. Tuara. Castlerea. Kells. Nenagh. Waterford. Charleville. Kilkenny. New Ross. Westport. Clonakilty. Killarney. Parsonstown. Wexford. Clonmel. Kilrush. Rathkeale. Wicklow. Tlie Hibernian Bank. The Hibernian Joint-stock Bank was formed in the year 1824. The following account of the origin of this bank is given by John Robinson Pirn, Esq., of Dublin : " A number of Roman Catholic gentlemen, finding they were continued to be ex- cluded from the direction of the Bank of Ireland, met together, and obtained the sig- natures, not only of Roman Catholics, but of a number of others, amongst the rest myself, to the establishment of this bank ; many merchants signed it, as considering that by having an opposition bank in such a city as Dublin, advantages would fre- quently be derived from it, and not altogether looking to the emolument which they should receive as subscribers to the bank, but looking at it as citizens generally; I myself never calculated on a very great deal of profit from it, except at a very remote period. Some of the individuals who undertook it came over to London, and they had expected to obtain the power of issuing notes, but they met with so much opposi- tion from the Bank of Ireland, there were some of the directors of the Bank of Ire- land came over here in order to oppose it, and the clauses which they intended to enable them to issue notes were expunged in the committee ; but I state this only from hearsay." Its nominal capital is 1,000,000, divided into 10,000 shares of .100 each. 25 per cent, has been paid upon each share, so that the money actually advanced amounts to 250,000. In the same year this company obtained an Act, entitled " An Act to enable the Hibernian Joint-stock Company, for the purpose of purchas- ing and selling annuities, and all public and other securities, real and per- sonal, in Ireland, and to advance money and make loans thereof, on the cecurity of such real and personal security, at legal interest, and on the security of merchandise and manufactured goods, to sue and be sued in the name of the governor or secretary for the time being." * The preamble slates, that, " Whereas the commerce, and manufactures, and agriculture of Ireland has long la- bored under great disadvantage, arising from the want of due command of capital ; and that merchants and manufacturers have no means of procuring temporary advan- ces of money on a deposit of their goods, when a slackness of demand arises ; and whereas several persons have agreed to form themselves into a company, or partner- ship, under the name of the ' Hibernian Joint-Stock Company,' and have subscribed or raised considerable sums of money in order to purchase and sell annuities and all public and other securities, real and personal, in Ireland ; or to make loans and ad- vances of money on the security thereof, and on the security of merchandise and * Anno quinto Georgii IV. Regis, cap. 159 369 A Treatise on Banking. good*, at lecal intercut, an.l t<> r. , . i\ o lodgments of money or dcponit rof: and prat i>uWic KrncrU is expected to ! hi|>; and where** dimlti may arise Iron time to time," Ac. It is enacted, that this coropany may sue nn million i memorial shall have been enrolled. Kxecution upon aii\ judgment against the governor or secretary may be issued against any of the members, who are to be reimbursed their expenses by tin- company. At the last half-yearly meeting of the slum-holders, held on the, 4lh of December, 1848, the following statement was exhibited, and a dividend declared at the rate of 5 per cent : Abttroet of At Affair* of the Company to 1* of November, 1848, purwant to the Deed of Settlement. i. d. Aneti of the company 550,575 1 6 1>M to the public 218,623 7 8 331,951 13 10 Capital of the company, 1,000,000, 25 percent, paid . . . 250,000 Balance to credit of profit and loss in favor of the company . . 81,951 13 10 Net profits of the company for the year ending the 1st of November last, after deducting all charges fo'r management .... 16,05515 7 The Royal Bank of Ireland. The Royal Bank of Ireland was formed in the year 1836, and before opening made arrangements for taking the business of the private bank of Sir James Shaw & Co. At that time the law did not pormit joint-stock banks, in Dublin, to accept bills drawn at less than six months after date, or to sue and be sued in the name of their public officers. These restrictions were removed by the Act of 1845. The Royal Bank attempt- ed also at that time to obtain the power of issuing notes, but were not successful. The manager of the bank from its commencement has been Mr. Charles Copland, who had previously been a manager in the Provin- cial Bank of Ireland. At the last annual meeting, held on the 7th November, 1848, the following statement was laid before the shareholders : .. $. d. The paid-up capital of the bank is 209,175 The amount of reserve fund 45,475 8 TTie net profits of the year, which terminated on the 31st of August last, after deducting all expenses of management, amount to . . 19,87716 4 Ot of which have been paid to the proprietors two half-yearly divi- dends, at the rate of 5 per cent, per annum, amounting to . 10,458 15 Leaving a Mrptw on the year of 9,419 1 4 WWrfc has been added to the bad and doubtful debt fund. 370 The Banks of Belfast. THE BANKS OF BELFAST. There are three joint-stock banks at Belfast. The Northern Banking Company was formed in 1825, on a private bank which was called the Northern Bank. This was the first joint-stock bank in actual operation in Ireland. The Belfast Banking Company was formed on a private bank, which was called the Belfast Bank. The "senior partner in this bank, John Holmes Houston, Esq., was examined as a witness before the Par- liamentary Committee of 1826, on the abolition of small notes in Ireland. His evidence contains some interesting particulars respecting the state of banking in Belfast during the time he had been a partner in that bank.* The Ulster Banking Company is a new bank, formed in 1837. All these banks have branches extending throughout the north of Ireland. The prudence with which banking institutions have at all times been managed at Belfast, has no doubt greatly contributed, with other causes, to the prosperity of the north of Ireland. The following is the condition of the three banks at Belfast : Belfast Date of Number Banks. Bank, of Shares. J= - c . 3 5 Paid up on Share. Paid-up .E 8 Capital. S Northern 1825 5,000 Belfast Ulster 1827 1837 s. r First 25 ] 193 100 I BonusjH) I iwfm 1Q 30 OJ 5,000 656 100 75,000 440 10 25 125,000 8 2 10 187,500 5 e s 3 9 fcw 11 18 15 Fixed Circu- lation. 243,440 281,611 311,079 The Northern Banking Company has branches in the following places : Armagh. Ballymena. Carrickfergus. Clones. Coleraine. Downpatrick. Lisburn. Londonderry. Lnrgan. Magherafelt. Newtownlimavady. The Belfast Banking Company has branches at the following plu ces : Armagh. Ballymena. Ballymoney. Castleblayney Coleraine. Cooks town. Dungannon. Larne. Letterkenny. Londonderry. Magherafelt. Monaghan. Newry. Newtownards. Newtownlimavady. Portadown. Strabane. Tenderagee. * See the History of Banking in Ireland, by J. W. Gilbart 371 A Treatise on Banking. The Ulster Banking Company has branches at the following pla> Antrim. Cookstown. I.urgun. Armagh. Coolelnl! M-nia-hnn. l; i. t > Downpatrick. < Mnagh. Battrmooey. Knni-kilien. r<.n.ido\ui. I;.V,'I,L. I/ii.dondcrry. The Tipprrary Joint-stock Bank. In the Art of 1845 there is an express provision with rrfen.-nco .- m.: Tippcrary Bank. COM of Detrrminaliim of existing Ayrrrmrni Ivtvrrn the Dat>k of 7r JfrW inpany.ca 'The Tipperanr Joint-^to.-k 15:ink,' n t'raincd tVom \\\\ bank i.otrs. und-T a certain agreement with the Governor and Company of the Bank of Ireland for the MM of the bank notes of the said governor and company, which agreement is deter- minahle by either partv upon certain notice to the oiher party, and it is just that in case neh ajrreement should at any time hereafter during the continuance of this Act be determined and put an end to by the Governor and Company of the Bank of Ireland, the said Tippcrary Joint-stock Bunk should receive "by way of compensation composition as hereafter mentioned; be it therefore enacted, That if the raid giceuicnt shall be at any time hereafter during the continuance 1.1 r!,i- Ae ascertained by the Bank of Ireland in the manner provided for rejrulatintf the compensation to l>c made to certain hankers by the Bank of England in and by the Act parsed in the seventh and eighth years of the reign of her present Majesty, entitled ' An Act to regulate the Issue of Bank Notes, and for giving to the Governor and Company of the Bank of England certain Privileges for a limited Period:' Provided always, that the total sum payable to the Tipperary Joint-stock Bank by way of composition as aforesaid in any one year shall not exceed 1 per cent, on an amount that hath been agreed on by and between the Bank of Ireland and the Tipperary Joint-stock Bank, and certified by both banks to the Commissioners of Stamps and Taxes ; and such composition shall cease to be payable from and after the 1st day of January, one thousand eight hundred and fifty- six." The Tipperary Bank has branches at the following places : Athr. Nenagh. Thurles. Carfow. Koscrea. Tippcrary. Carrick-on-Suir. Thomastown. At the last general meeting the directors declared a dividend at the rate of 6 per cent., and added .2,513 8s. 5d. to the " doubtful debt fund," which then amounted to .5,013 8*. 5J. The amount of the capital was not stated. The following joint-stock banks have ceased to exist in Ireland : 1. The Agricultural and Commercial Bank of Ireland, fonn<-lin docs not vary much it show* that the circulation of tin- l>nui. lies of the Hunk of In l.iinl \ more; and that the circulation of the joint-stock and private bunks in In- land varies considerably more. A TABLC Aowwy fJU CIUCDLATIOM ,'.. /ViMfc ffadb; on 0* la* Saturday of .I/W, Adjust, and December, of the yeart 1834 ISM. 7. Bank of Irftand and Branclitt. 1894. 1835. ISM. 1838. 1839. April. . .3,923^00 3,798,500 3,614,100 3.332.300 3.398,400 3,536,400 August, . 3.453,800 3,198,700 3,133,300 2.921.600 3,059,800 2,9.-' December, . 3,926,800 3,574,200 3,481,100 3,265,700 3,474,500 3,192,200 If. /tranches of the Sank of Ireland. April,. .1 C Angmt, > No separate account kept at thu time. < 1 .056.200 i). mbm, ) (i, ///. Joint-Stock and Private Bank*. April,. . .1,186.165 1,517,648 2.08.1.4.11 1' Anmwt, . 1,140,654 l.L>f,-|.r,7:i l.'J^8.900 1,4>" JIM Deeerobcr, . 1,666,269 1,959,542 1,787,586 2,204,286 1.357,600 1.572.000 l.L'.-.T.r.nii 1.-' 1 1,900 1,695,600 1,464,000 2.366,774 2..')^ 1.881,906 l.'.^.'.li'.' 2,972,034 2,629,205 ** It will be observed, that in the year 1836, with regard to the joint- stock banks, there was a departure from the law, which usually increases the Irish circulation very rapidly between the months of August and De- cember; for in 1836 the Agricultural and Commercial Bank of Ireland stopped payment ; that brought on a run for gold upon the other banks, and thus the circulation of those banks became reduced. This is the only year in which there is not a very considerable increase in the circu- lation of the joint-stock banks of Ireland between August and December. " To what do you attribute this uniform increase of the Irish circula- tion towards December? I attribute it to the trade in corn, and bacon, and cattle, which commences in the months of September and October in every year; the produce of the harvest commences to be brought to market in September ; but the bacon is made in the beginning of Octo- ber. The bacon must be made in cold weather, and therefore pigs are reared so as to be fit for killing by the 1st of October ; and in the begin- ning of October the provision merchants send out their men to pure: pip at the different markets, and they get notes from the hank. The cattle trade is conducted in the same way ; men go to the market to buy pig and cattle, and take them over to Bristol and Liverpool, but chiefly to Bristol, from the part where I was. Those notes are chiefly issued in three ways. During the summer, the merchants, having their capital un- mployed, lodged it as deposits in the bank ; then, when the season for trade commenced, they drew out their deposits, in the form of n- 'wards, they brought us bills upon their factors in London, and our notes were issued in discounting those bills which thev hud drawn against Currency in Ireland. the exportation of bacon and cattle. The dealers took their pigs and cattle over to Bristol, and sold them in the various markets and fairs in the west of England, and received the notes which were circulating in that district, and took them to Mr. Stuckey, and got a letter of credit upon me, payable on demand, for the amount. So that our notes were issued, in the first place, by the withdrawal of deposits; secondly, for the dis- counting of bills on London, drawn against the exports which were made ; and thirdly, for the payment of letters of credit which had been obtained by the parties who had sold Irish cattle in the English markets. The notes were, therefore, drawn out by the trade of the country, and of course it was not in our power to withhold issuing those notes, unless we wished to cramp the trade of the country." Robert Murray, Esq., the chief officer of the Provincial Bank of Ire- land, was examined as to the establishment of one Bank of Issue through- out Ireland. The following is his reply : " It would produce an entire revolution in the monetary affairs of Ireland. The committee will already have gathered from the questions I have previously answered, that the produce is brought to market in very small quantities, and by a very large num- ber, I had almost said an innumerable class, of farmers ; each man brings 'his sack of oats and two or three pigs to market. It would be almost impossible, in such a state of things, to regulate by one bank of issue the monetary affairs of Ireland, or to adapt it to its purposes as it is now situated." The following is the report of the Select Committee of the House of Commons, made in 1826, respecting the abolition in Ireland of notea under 5 : " With respect to the circulation of Ireland, the inquiries of your committee have been less extensive than those which they have instituted with respect to Scotland. " The first law in Ireland which restrained the negotiation of promissory notes, was an Act passed in the Irish Parliament in the year 1799. " The preamble recites, that various notes, bills of exchange, and drafts for money, have been for some time past circulated in lieu of cash, to the great prejudice of trade and public credit ; and that many of such notes are made payable under certain terms, with which the poorer classes of manufacturers and others cannot comply, unless by submitting to great extortion and abuse. It adds, that the issue of such notes has very much tended to increase the pernicious crime of forgery; and the Act proceeds to apply to notes between the value of . 5 and 20s. similar restrictions to those which had been applied to such notes issued in England by the Act which passed in the vear 1777. It permits, however, during the suspension of cash payments by the Bank of Ireland, the issue of bank-post bills, bills of exchange, and drafts under certain regu- lations, for any sums not less than three guineas. This Act did not extend to the Bank of Ireland. " In 1805, this and some other Acts which had passed in the interim, relating to the issue of small notes, were repealed ; and notes under 20s., which had been previously admitted under certain regulations by the Act of 1799, were declared void. " There is at present no law in force imposing any limitation to the period for which notes for a sum not less than 20s. may be issued in Ireland. " A tolerably correct estimate of the amount of promissory notes, above and below 5, circulating in Ireland, may be formed from the subjoined returns made by the Bank of Ireland, and by other banks at present established in that country. " Bank of Ireland notes. An account of the average amount of the Bank of Ire- land notes of 5 and upwards (including bank-post bills) for the years 1820, 1821, 1822, 1823, 1824, and 1825: 375 A TVeoftM on Banking. IrUh Currwner. . d. Notoi aad port bills of 5 and upward., . . . 3,646,660 19 6 " An account of the average amount of the Hank of Ireland note* under the value of ft (udading bank-post bill*) i.-r the yean 1820, 18-M, 18-J2, 1823, 1824, and IMS: IrUh Currency. L a. " ltelt.Mdpot bills nnder the value of 5, . . . 1,643,828 5 u It appear* from the evidence that a practice prevails in Ireland of i--uin_- note- l"..r the payment of snnit between one and two pound.*, for throe guineas, und other I'i .'.<- tiooal MUM> u Toor committee M6 BO public advantage arising out of this practice : and they arc it tends to disj>e.n.se with the silver coin, of opinion that it ought to be discontinued, as and practically to exclude it from circulation. " loor committee hesitate, in the present i imperfect state of their information, to pronounce a decisive opinion upon the general measures which it may be fitting to adopt with respect to the paper currency of In-hind. * Although they are inclined to think that it would not be advisable to take any im- MditjM Mep for the purpose of preventing the issue of small notes in Ireland, their impression undoubtedly i, that a metallic currency ought ultimately to be the basis of illation in that "country. " It will probably be deemed advisable to fix a definite, though not an early period, at which the circulation in Ireland of all notes below 5 shall cease ; and ir is deserv- ing of consideration, whether measures might not be adopted in tin- interim, for the porpos* of insuring such a final result by gradual though cautious advances to- wards it." The following is a summary of the evidence given before the Commit- tees of the two Houses of Parliament as to the effect of abolishing the small note circulation in Ireland : 1. Small currency is necessary to carry on the commercial transac- tions of the country. JOHH ACHSSON SMYTH, Esq., Agent for Uie Belfast Bank at Londonderry. " In Lancashire, I believe all the raw materials are bought in large parrels, and by bills. In Ireland, the raw material is all bought in small parcels, and all in small In Lancashire, there is only cash wanted to pay the workmen ; hut we wnnt it both to par the workmen and to buy the raw material. The provision and grain that we send to England are also bought in small notes, and we ore reimbursed by drawing billi for oar shipments." (Common* 1 Report, p. 77 .) PIERCE MAHOXT, Esq , Solicitor to the Provincial Bank of Ireland. * If the banks were prevented issuing notes under the amount of 5, would any in- conveniences arise in conducting the trade of the South of Ireland ? The trade of Ireland generally, and especially in the South of Ireland, would be greatly inconvc- nenced, aad the growth of manufactures would be decidedly checked, if not destroyed, by Men a measure. From the great subdivision of Innd in Ireland, and particularly in the Sooth and West (where the population is almost exclusively agricultural), the produce m disposed of in small portions, scarcely ever representing , 5, and almost aivertelly under that amount. I am of opinion, that the withdrawal of all notes under that amount would have the effect of curtailing the accommodation the Imnks now af- ford to the public, to a ruinous extent ; and that the trade of the country under such cir- eusMMMM would not afford profitable employment for banking capital to any extent ; and, therefore, I should anticipate the withdrawal of such establishments, except per- haps at Cork and Belfiut In the South and West of Ireland, from the nature of the 376 Currency in Ireland. provision and corn trade, the chief demand for notes or for gold commences in Octo- ber, and continues until March, when that trade is nearly over for the season. From March until October the butter trade is almost the only one in the South and West of Ireland ; and as that trade would not employ all the capital that is required in the win- ter season, the effect would be, if sovereigns were substituted for small notes, that the extra supply required for the corn, beef, and pork trade, must remain idle in the bank- er's chest, or be remitted at great risk and expense for employment elsewhere during the summer and autumn. " Do you think if a metallic circulation were adopted that there would be a difficulty in maintaining that metallic circulation? I do ; because the trade in the South and West of Ireland is periodical ; the remittances from those districts of Ireland would force the gold away at certain periods, and it must be returned at others with consider- able expense to meet the trade of the country." (Commons' Report, pp. 250, 251.) 2. A gold currency would be more inconvenient than notes, and would not be so well liked by the people. LEONARD DOBBIN, Esq.,* Agent for the Northern Banking Company of Belfast, at Ar- magh. " Do the people of the North of Ireland manifest any wish for gold in preference to notes, or for notes in preference to gold ? They decidedly prefer notes, and the weavers have refused to carry gold out of the market lately. " Can you assign any reason for this preference ? There are many reasons that I could assign. The bank notes are now the established currency ; the people are per- fectly acquainted with them. If a man should lose notes, or a house be robbed, or if there is a forgery, it would be much better for them to trace notes than it would gold. I have often assisted poor people in tracing notes that were robbed, and forged notes, whereas the gold could not be traced so readily. Another reason I would give is this; guineas became light, and were troublesome to the people. When standing beam there was Is. charged, and when lighter than standing beam, 2s. Gd. ; and when gold was scarce, and bank notes not a legal tender, the land agents refusing to take any thing but gold, the tenants were obliged to pay from Is. to 4s. on a guinea discount. Some agents would only take gold." (Commons' Report, p. 243.) J. A. SMYTH, Esq., Linen Merchant, and Agent for the Belfast Bank at Londonderry. " I am in the habit of employing my linen buyers to go to the country markets, and I must supply them with the week's money before they start, perhaps five hundred or a thousand pounds ; they have to go through the interior of the country, and do not return for a week. They make their purchases all in small quantities, and it is more convenient for them to carry notes than gold." (Lords' Report, p. 7.) ARTHUR GTJINESS, Esq., Director of the Bank of Ireland. " I conceive that with the persons who handle the circulation of the country, there is a decided preference in favor of small notes over cash in every respect. I speak from mine own experience ; for I remember perfectly well, before the restrictions upon cash payments, when gold was a great inconvenience in trade. I speak of those who handle the currency of the country, among whom I think the preference is in favor of the small notes, as more convenient, more portable, and less liable to counterfeit. I con- ceive these to form the general ground of preference." (Commons' Report, p. 237.) 3. The profits of the banking establishments would be so much dimin- ished, that they could not extend the same accommodation to the agricul- tural and commercial classes. W. P. LUNNEL, Esq., Director of the Bank of Ireland. "If the notes under 5 were prohibited, would the profits of the Bank of Ireland * This gentleman was afterwards agent for the Bank of Ireland at Armagh, and M. P. for that place. FF * 377 A Trtatite on Banking. W mawrfalhr affected bjr rach prohibition t I should expect that they would suffer towr BBBjBi MOUC9 A certain profit. " Hntr you conddCNd towhnt extent the profits of other hankers would he affected ' I should expert that the principal circulation of tin- mini:: - in small tberabrv in tlmi |)ni|M>nin ihcy would tufTer." (Aon/ . 108.) JOHS 11. i vi I!.. i -TON. Esq., Banker at Btifuit. nil the note* umlcr 5 were prohibited to l>e i^ued. would it l>e worth while, in your opinion, lo keep the establishment of a Imnk at Bel fa* t ? I do nf.t think it woold. except by carrying it on in tin- same niiinncr ni it formerly WHS, in keep n discount olHce, charging commi-i n <>n discounting bills. U-cansc 5 notes ..'.. I not circulate ; then oar circulation would be so trilling it would not answer." (Il>id. P.M. II. A. DOUOLAB, Esq., Director of the Provincial Dank of Ireland. consider the cash account system, and the one pound circulation so conn that if the note* arc withdrawn, it i* understood that our e.stahli-lmn -nt will not gnrnt any farther cash credits. The business hii-h wp carry on, even if we charged a hi^licr rate of interest, or a commis,ihmcnt. independent of our notes. If the i--uc of -mar be withdrawn, then we cannot afford to allow interest on deposits." (Lord* 1 /.V;/r/, pp. 24, 26, 27.) 4. The abolition of small notes would prevent the investment of British capital in the present banking establishments. T. S. RICK, Esq., M. P., and Director of the Provincial Bank of Ireland* " In it your opinion, that if all notes under 5 were abolished, a con-sideniMe incon Tenience would arise in the ordinary traffic in Ireland? I conceive that it wonld. I conceive that the first effect of the cxtinc tion of all notes below 5 wonld he a much more considerable diminution of the general mass of the circulating medium in Ireland than in Kngland. "I fear extremely that if any thing were to occur which materially diminished the profits of oar establishment, it would have ih.- etV.-et of depriving n- of one of the chief benefits of the establishment, namely, the support and control of British capitalist*, and conducting the bank by British merchants, and upon British commercial princi- ples. I conceiTe a rate of profit, rather higher than the average rate of profits, is es- tential to induce persons so circumstanced to enframe in such a lui'-ine--. more particu- larly when it is considered that there is no limitation of responsibility by the grant of charters." (LoraV Report, pp. 47, 51.) 5. The gold currency would be sent out of the country, whenever it bore a premium in England. H:MIT H. Hi NT. K*'|., Ijocal Dirrctar of the Provincial Dank of Ireland, at Watrrf-ml. "What do yon think wonld be the consequence of a law which prohibited the N-n-- of notes below 5, both by the Bank of Ireland and by any other banking establish- ment in Ireland 1 I should think it would be very hazardou- in. iced : I should very much apprehend that the gold circulation wonld at times be irithilrnmt in a ver\ degree from tke country, whenever gold was wanted in London ; for instance, A SMALL ntEMtm crow A OTKKEIOH WOULD INDUCE A VAST QUANTITY OF THEM TO BB aiorcHT OI-T or IBELAWD. Have TOO ever known instances of quantities of gold being brought over from Ire- land to this coantryi and persons making a regular traffic of it? I have." (Com- rnout, Report, pp. 73, 74.) 6. The proposed measure would cause general distress, and prevent the progress of enterprise. Now Lord Monteagle. 378 Currency in Ireland. JOHN ROBINSON PIM, Esq., General Merchant in Dublin. " The very idea of curtailing the currency under 5 would have a tendency to dis- courage all adventure in Ireland at present. I should not, for one, be careful of plac- ing money in any kind of machinery till the effect was tried. I fancy it would reduce property very much in that country, and sometimes fancies are almost as bad as reality." (Lords' Report, p. 19.) The following table was given in by Mr. Murray to the Committee of the House of Lords, showing the circulation of Ireland since the passing of the Act of 1845 : ABSTRACT of the RETURNS by the several BANKS OP ISSUE IN IRELAND under the Pro- visions of the Act 8th Sf 9th Victoria, cap. 37. From 3d January, 1846, to 20th May, 1848. For the Certified Notes of 5 XT.. Total Issue Total Specie Four Weeks Issue of all and ilUltKJ of all the Gold held. Silver held. held by all ended the Banks. upwards. under 5. Banks. the Banks. 1*46. 3d Jan. . . 6,354,194 3,039,855 4.364,509 7,404,366 2,221,944 267,308 2,489,254 31st Jan. . 6,354,494 3,052,163 4,353,533 7,410,751 2;252.RS7 298,145 2,531,032 23th Feb. . 6,354,494 3,066,529 4,403,198 7,469,729 2,262,714 304,582 2,567,300 23th March, 6,354,494 3,071,589 4,373,371 7,444,960 2,246,022 322,131 2,568,158 25th April, . 6,354,494 3,170,291 4,366,031 7,536,323 2,204,748 321,861 2,526,613 23d May, . 6,354,494 3,223,469 4,193,610 7,422,030 2,177,633 321,310 2,493,945 20th June, . 6,354,494 3,072,053 3,899,973 6,972,026 2,082,018 332,981 2,415,002 18th July, . 6,354,494 3,003.914 3632,577 6,636,491 1,903,216 353,567 2,266,786 15th Aug. . 6,354.494 2,959,671 3,520,844 6,480,517 1,887,457 376,335 2,263,795 12th Sept. . 6.354,494 3,013,054 3,575,118 6,538,175 1,832,938 349,980 2,182,922 10th Oct. . 6,354,494 3,183,979 4,067,575 7,251,555 1,894,453 345,812 2,240,267 7th No/. . 6,354,494 3,335,209 4,501,616 7,836,825 2,131,587 353,447 2,485,034 5th Dec. 6,354,494 3,273,326 4,566,204 7,839,530 2,253,124 316,467 2,569,595 1847. 2d Jan. 6.354,494 3,151,117 . 4,364,295 7,515,414 2,264,266 343,740 2,608,012 30th Jan. . 6,354,404 3,161,701 4,097,724 7,259,426 1,999,140 384,091 2,383,236 27th Feb. . 6,354,494 3,158,358 3,871,694 7,030,053 1,795,792 333,389 2,179.184 27th March, 6,3.-)4,49i 3,123,516 3,581,218 6,704,736 1,710,405 403,693 2,114,100 24th April, . 6,354,494 3,163,465 3,357,768 6,521,234 1,547,530 445,010 1,992,515 22d May, . 6,354,494 3,036,115 2,932,305 6,018,420 1,162.163 520,506 1,632,6S2 19th June, . 6,354,494 2,835,513 2,629,436 5,464,951 1,028,579 520,299 1,548,832 17th July, 6,354,494 2,740,914 2,516,464 5,257,378 993,810 663,524 1,557,337 14th Aug. . 6,354,494 2,670,376 2,426,869 5,097,245 969,590 697,627 1,567,221 1 1th Sept. 6,354,494 2,581,063 2,467,246 5,048,310 966,818 565,399 1,532,222 9th Oct. 6,354,494 2,636,692 2,718,920 6,355,613 1,006,066 611,643 1,517,712 6th Nov. . 6,354,494 2,714,939 2,804,374 5,519,314 1,045,805 490,718 1,536,526 4th Dec. 6,354,494 2,597,237 2,725,002 6,322,741 1,087,074 503,692 1,590,770 1848. 1 at Jan. . 6,354,494 2,502,756 2,693,357 5,196,116 1,112,955 505,800 1,618,760 29th Jan. . 6,354,494 2,528,633 2,705,281 5,233,916 1,132,937 631,806 1,664,746 26th Feb. . 6,354,494 2,510,595 2.709,483 5,220,030 1,111,032 562,846 1,706,882 2oth March, 6.354,494 2,505,565 9,601,829 5,107,395 1,095,722 584,711 1,680,437 22d April, . 6,354,494 2,540,489 2,463,542 5,009,033 1,071,297 651,568 1,622,86.3 20th May, 6,354,494 2,561,459 2,279,211 4,840,672 1,087,162 601,318 1,588,485 93,235,610 109,829,727 203,065,375 61,656,884 13,740,306 eo,*97,3lO AVERAGES of the preceding Returns. Average for whole Period Average for the year 1846 . Average for the year 1847 Average for the first Five Monthi of!846 Average for the first Five Months of 1847 . Average for the first Five Months ofl348 . . . . Notes 'of 5 and upwards. Notes un- der 5. Total. Gold. Silver. Total Specie. 2,913,612 3,432,178 6,345,791 1,611,152 429,384 2,040,640 3,121,259 4,144,461 7,265,721 2,106,004 334,253 2,410,266 2,844,049 2,986,375 6,830,425 1,263,517 491,953 1,766,476 3,116,809 4,339,953 7,456,768 2,224,800 313,605 2,538,409 3,138,631 3,568,141 6,706,773 1,643,006 427,337 2,070,349 2,529,348 2,552.869 5,082,219 1,106,230 546,449 1,652,633 379 A Trtalise on Banking. The last Return of the Circulation of Ireland is as follows : Aruuoi CICTOATIOH ottd Coiif Md by fA IRISH BANKS during ike four imdb ndtmy Saturday, the 24/A day of March, 1849. Arerm| NaM of Bttka, (Unk of Inland Authorial Circulation. .3,739,488 Areran Circulation durlii(Fur AiiM>uni of WMK* nding a* abova. Gold It Hivw held 5 and Under -,,. dwtagfbw upwank. JC6. " Wekendlnf M abora. Ji \'-\ ,in m :"" -' M M -.. 89,997 186,486 216,423 \IQ,S 83,887 148,251 171,638 94,066 19,085 181,371 900,396 67,847 197,173 3113,340 600,614 257,072 3,888 6,073 9,968 3,738 : 20,274 37,775 17,731 piartaeial Rank . 927,667 . 861,611 N.nhrn Bank 843,440 UbMrBaok , - . : ' . 4,(H4 Ttmritri '"- " Touli . 6,364,494 8^*4,610 2,167,238 4,401,750 1,708,867 We have noticed the different meanings given to the word " circula- tion " in England, since the passing of the Act of 1844. By the Act of 1845, it is enacted that this word shall have the following meaning in Scotland and Ireland : "Section 17. And b it enacted, That all bank notes shall be deemed to be in cir- rnUtion from the time the same .-hall huvf l>< < n i-tu-il from tiny luinki-r, or any scr- rant or agent of such banker, until ilic snmc shall have been actually returned to such banker, or some servant or agent of such Imnkcr." It may be useful to trace the effects of this Act (the Act of 1845, 8 & 9 Viet c. 37) upon the state of banking in Ireland, as compared with the effects of similar enactments in Scotland and England. 1. The limitation of issue in Ireland, as in Scotland, is not absolute. The banks may issue beyond this limit, if they retain an amount of l Scotland and Ireland, With to Mission of the clause that rendered the bnnks subject to the laws of hanknij By a clause in these Acts, any bank for the formation of which proceed- ings had been taken 1* !.>n- the (>th May, and which was actually in busi- ness on the 4th of July, must at the end of a year after the passing of the Act< ;ro from business or take a charter. The 1'reston Banking Company was in this case, and accordingly became a chartered bank. This is the only bank that lias a charter under the Act in England. The tange Bank of Scotland was in a similar cose, and on the 31st of De- er, 1846, became a chartered bunk. There is no bank of this kind in Ireland. From the extracts we have made from the Act at p. 308, it will be seen that no new joint-stock bank can be fonncd of a less nominal cap- ital than 100,000, and half the capital must be paid up before the com- mencement of business ; that the assets and liabilities of the company must be published once at least in every month ; and that at least one fourth of the directors shall retire yearly, and shall not be eligible, for reelection for at least twelve calendar months. As a specimen of the monthly returns required, we copy from the London Ga-.ctte the last re- turn of the Preston Banking Company : Account of the ASSETS and LIABILITIES of the PRESTON BANKING COMPANY, at Proton, on Saturday the 7th day of April, 1849. AftftETS. LIABILITIES. Bills of Exchange, Bank Premises, Prelim- Capital stock . 100,000 inarr Expenses, Loans, &c., Cash in Deposits, and other Lia- Bun'k, ana Deposits in other Banking l>ilitics . . . 206,899 4 3 Establishments . . 309,65821 Undivided Profits . . 2,7581710 309,658 2 1 309,658 2 1 That provision of the act which requires one fourth of the directors to retire annually, and which declares them ineligible for election for one year, has been the subject of much discussion. The object of the Legisla- ture appears to have been to prevent those evils which, in public compa- nies of every kind, occasionally arise from the undue ascendency of indi- vidual directors. Practically, it may be injurious oradvantageous to a bank, according to circumstances. On the one hand, it may deprive a bunk of the services of its most useful directors for one year. And on their return, they may be less useful than heretofore, from being less acquainted with the transactions that have taken place during their absence. In small country banks it might not be easy to find other parties to take the places of the directors who had thus retired. On the other hand, it has been con- tended that the number of the directors, and consequently their influence, would thus be virtually increased, that, while on some occasions the most clever directors would be compelled to retire, ut other times the least clever would retire, and their places might be better supplied, that the retirement of even the most clever might call forth the energies of the Ireland Bank Circulation. others, and thus the talents of the whole might be improved, that the plan tends to prevent the undue ascendency of any individual director, or of any knots or parties of directors, for any length of time, and that it is a convenient means of getting rid of an inefficient, injurious, or disagree- able director : for, as when he is once out, it would be easy for the board, if so disposed, to prevent his reelection. By the charter of the Bank of Ireland, fifteen directors are chosen annually, and not above two thirds of the directors of the preceding year can be reflected. 6. There is another difference between Scotland and Ireland with ref- erence to banking operations, though it does not arise from the above- mentioned Act. At the time of the union between England and Ireland, Ireland had her debts as well as England. And although England be- came liable for these debts, the dividends continued to be paid, and the transfers made in Dublin. Hence Government stock is bought and sold there in the same way as in London. Besides this, any party may pur- chase stock in Irelandj and have it transferred to England, or the reverse. The plan is this : Any person holding stock may go to the Bank of England, either personally or by power of attorney, and get a ticket that will authorize him to have the same amount of stock put in to his name in Ireland. The stock in England is then transferred to the com- missioners for the reduction of the National T)ebt. He may go to the Bank of Ireland in Dublin and reverse the operation. Several Acts of Parliament have been passed with reference to this subject. The last is the 5th Geo. IV. c. 53, passed in the year 1824. When there is a great difference in the price of stocks in the two countries, operations of this kind may be very profitable. This power of transferring government stock from one country to the other has a tendency to equalize the price in both countries. It also serves the purpose of a medium of exchange. A transmission of stock has the same effect in rectifying the exchanges as a transmission of gold. And, doubtless, the exchanges between England and foreign countries might, to a great degree, be adjusted in the same manner. There is a Stock Exchange in Dublin similar to that of London, estab- lished for the purchase and sale of Government stock, bank stock, railway shares, &c. No person can transact business there unless he has ob- tained a license from the Lord Lieutenant. The number of these persons is at present about twenty-five. There are no time-bargains as in London. The borrowing and lending of money on stock are matters of daily occur- rence. This is not always done through brokers. Individuals often effect these transactions directly with the banks. The general rule is, that the lender shall have a margin of 5 per cent, on the value of the stock, and shall be entitled to call for additional security whenever the market price falls below that difference. The Exchanges between the Banks Since the Act of 1845 when other banks besides the Bank of Ireland acquired the power of issuing notes in Dublin a system of clearing, or, as it is called, of exchanges, has been established, similar to that estab- lished in Edinburgh. 383 A Trtaiitt on Banking. The following is a copy of a clearing balance-sheet : 10 rr. wrra DOB BY 1T. Bank of Ireland. Provincial Bank. National Bank. Northern Bank. Belfast Bank. Ulster Bank. , 1849. Here we may observe that nil the banks that clear are hanks <>( and the clearing in Dublin includes all the banks of issue in Ireland, al- though three of these banks have their head quarters in Belfast. The FJclfast banks clear by their agents. The Bank of Ireland is the agent for the Northern Bank and the Belfast Hank, and the Royal Hank (if Ire- land is the Dublin agent for the Bank of Ulster. It will also be observed that the Bank of Ireland the chartered hank is a member of the clearing ; and, in fact, the clearing is held daily, at two o'clock in one of the rooms of that establishment. The differences are paid daily, like those at Edinburgh, in exchequer bills. The following arc the amounts required to be held by each bank : The Bank of Ireland, The Provincial Hunk, The National Bank, . The Northern Bank, The Belfast Bank, . The Ulster Bank, 134.000 48.000 80,000 80,000 30,000 330,000 Those banks in Dublin that are not banks of issue are not nu ml the clearing. Although the Royal Bank of Ireland attends the clearing as the agent of the Ulster Bank, it does not clear on its own account. All the non-issuing banks, however, have accounts with the Bank of Ireland, and pay into that establishment the cheques they may have on the other hanks. The National Bank, though an issuing bank, and a member of the clearing, has no account with the Bank of Ireland. This system of clearing appears to work very satisfactorily- The fol- lowing is an extract from a letter I received a few days ago from an Irish banker, on the subject : The SStdsBMiit of our ' exchange balances' in Dublin, through the use of excheq- Irish Bank Exchanges. oer bills, works very well. The great evil, previously, was, that when these balances were ot magnitude, Dublin was such a limited money market there was difficulty and expense m raising the needful quantity of Irish money for the purpose. If you antici- pated the balance to be heavy against you, it was requisite to prepare some time before and to have your funds lying idle and unproductive until the crisis arose. Now we have exchequer bill interest for our surplus, and the power of replenishing our stock ac- count whenever required by drawing on London, thus possessing the unbounded advan- tages of the greatest money market in the world. In point of fact, the arrangement has virtually changed the venue, and made London the actual and final place of settlement through machinery worked in Dublin." The following are the " Regulations for making exchanges between the several banks in Ireland, at Dublin, and for settling the balances of such exchanges, at Dublin ; to take effect from and after the 8th day of December, 1845." " 1. The exchange shall be made daily at two o'clock, P.M. "2. The payments of the balances shall be made in exchequer bills, except for the fractional parts of 500 which may be paid in the notes of the particular bank debtor. "3. The exchequer bills shall be filled up in favor of the bank who may be the orig- inal holders, and shall bear the distinguishing mark of ' Dublin Exchange Bills,' show- ing that they belong to the Dublin exchanges, and are not intended to be used for any other purpose, and shall be received at par, with the interest that may be due when the transfer takes place. "4. The amount of exchequer bills to be kept in the circle is fixed at 330,000, to be apportioned amongst the following banks in fixed sums, calculated in their respec- tive amounts of circulation : NAMES OF BANKS. Bank of Ireland. Northern Bank. Ulster Bank. Provincial Bank. Belfast Bank. National Bank. The sums being once fixed, each bank is to maintain its quota at all times, as herein- after provided. " 5. Nine tenths of the exchequer bills to be of 1,000, and one tenth of 500. " 6. The amount of exchequer bills held by each bank shall be stated every day in the Clearing-room. "7. It is expedient that no bank shall be obliged permanently to hold more exche- quer bills than a surplus of one third above the fixed amount, nor shall be allowed to reduce the amount held more than one third below the fixed amount ; but as the ex- chequer bills will accumulate with some of the banks, and be required by others, it shall be imperative on the parties so situated to sell or buy exchequer bills ; that is to say, the bank holding the greatest amount of exchequer bills shall be bound to sell to the bank in want of them, what may be required for the legitimate purposes of the ex- changes ; but it shall not be imperative on that party to sell a greater amount than what will reduce their stock to the original quota, and the purchaser shall be bound to take bills from those parties having die greatest proportionate amount of them beyond their respective original quota. " 8. The preceding regulations will tend in a great degree to equalize the amount of exchequer bills ; but if exchequer bills shall nevertheless accumulate in the hands of a bank, so as to exceed their original quota by more than one third, that party shall have the power to call upon the party or parties holding the smallest amount in proportion to their quota to purchase the excess that is to say, the excess above their quota plus one third ; but it shall not be imperative on any party to take more than is re- quired to bring up their stock to two thirds of the original amount. "In this way the fluctuation in the amount of exchequer bills amongst the different banks, which is an essential part of this arrangement, need never permanently exceed one third more or one third less than the original quota of each bank. " The terms of purchase to be governed by the next regulation. " 9. The bank seeking to buy, or being called upon to buy, exchequer bills, from the bank or banks holding in excess of their quota, shall pay for the purchase by a Letter of Credit oa their London correspondent, demandable on the fifth day after the date GG 385 A Treatise on Banking. thereof, the pwreha*r paring I*. ."W. per << m on the amount of tho Letter of Crt>>1it ; ]>*T the amount in gold in Dublin, ut the option of the holders of the lulls qucr bull to be uwd for the 1 )iililin exchanges arc to he a nearly a* poatible divided into the two data* of March hills MM JN hdk whit h nro to be ex- changed at the 1'nymaater-GeneraT* Oth. here I., ton- due. ami n. \v ..... - to I..- |,i,.- Yided, *o a* to keep up the itock in the circle ; and no exchequer hilU advcrtisi d to be paid are to be own in the exchanges. 1 1 1 .. ti bank U to be alway* liable to the income-tax on tin- interest f its ori/i- nal qaola of exchequer hills, mid no more ; and the exchequer dills :id\.n I i.. I,.- renewed are, within a week after tin- tiovernmcnt noiico appears in the i;>iz-n,, tc. !.. the original holders. ii|K)ii receiving other hills not advertised, failing which, Ifa on Ixmdon. dcmnndahlc on the liAh day from its date. Mil-ject to the rhnr^r a Mated in No. 9, ii to be riven, or the amount to be paid in gold, at the <>; ..f tlie holder* of advertised hills. \-l. The exchange* are to be mode at the Hank of In-hind, who undertake to pny thoM bank* who are creditors in the exchange the exchequer hills or \-\\\- of . \ vcd from thote bank* who are debtors in the exehaii^e ; l.nt the Hunk of In land hall not be in any way re*ponsible for the exchange transiu-tions, or otherwise soever. .1 The statement of the balances after they are stniek to be sent to their re>pee- tire bank* from the Clearing-room, by their clerks ; and the clerks of hunks creditor* to be in waiting to receive the amount due to them at two o'clock. 4 Any bank a party to this agreement to h:ive the |>owcr of withdrawing from it, and n-ceiving back their exchequer bills at par, upon payment of them if needful, upon ginnn three months' notice. .. Xo bank a party to this arrangement shall, after the 8th of December, 1 84.1, di- rectly or through any agent, demand gold from or pay gold to any other hank or bank's parties to this arrangement, except M hereinbefore provided, unless under spe- cial agreement between any two of the banks they mutually arrange to pay and re- ceive a sum of gold. " It U assumed that each bank always has its statutory amount of gold, and if any bank tx either in excess or deficiency in that amount, the export or import of gold uiu-t be liorne by the bank seeking to diminish or increase its stork. y violation of this regulation after the 8th of December, 1845, to be considered a virtual 'withdrawal of the bank who departs from this rule. 1'. The foregoing arrangements are to be subject to such alterations and amend- ment* a* may be required and agreed on by the several banks parties thereto, after the plan shall be in operation, and its working effect ascertained." THE IRISH BANKS. - ADDENDUM (.From, the London BanJrtrt' mm E I. BuikoflrcVtnd, .... Almanac, Diary, and Year Book, for 1861.) Paid-up Rfttrred Fixed No. of 'ttaUiihtd. Capital. Fund. Inut. BrancM. 1783 3,000.000 1,093,300 3,7:in.428 24 M0 126.0(0 .... r,n 20 !-.-. 2VHNK) 68,000 Nnlaxue 3 450,000 60,106 761,767 48 1838 .... .... I',.; 1V5H v J I i-vl IM 180,000 4iM:9 ai ;: < l-i'. 640,000 110,182 927,667 38 309,176 45,746 No IMUO Nona 8 1838 200,000 .... 311,070 14 X. BtUut Blinking Compuijr, . a Hibcnttn Bank, Dublin. . 4 Na'.looal Bulk of IraUod, . ft. IK do. GaomA, & Do. do. &rrick-e grateful, and this duly is the more obligatory n pr. .portion to the greatness and MQjMOMMkNl i 'i.' r ivl.-iiinn to the Deity is aluo a relation of responsibility. I possess wrallh, inf! -T. Providence never bestows th->-- fell ir . without holding the parties on whom they are l>< o\srd rwpootiblfl their proper use. Those who duly improve tin- talents with which Provi- dence has intrusted them, \\.ii have those talents increased, and he n - warded by the Divine approbation. Those who neglect to use these tal- responsible lor their neglect, and wiil he punished for their activity. (Luke \ .''>.) \Ve liave no reason to suppose that public companies are excluded from the general rules of the Divii:- ministration. As far, then, as they art- endowed with the same !,-. as individuals, so far must they he considered as subject to the same raaponsih i'rom these considerations we infer, that public com- panies, like individuals, are moral agents. I. 1' u blic companies are analogous to other collective bodies who are acknowledged to be moral ag< It will not be denied that n notion may declare an unjust war, may y it on in u mid manner, may treat a corupiered nation with njtpres- treaty of peace with diijilirih/ and fniml. Nor will it be denied, that a nation may become immoral by the extinction of moral fueling in its rulers, and throughout the population. If, then, nations are capable of performing virtuous or vicious actions, (hen are tby moral agents; to be rewarded or punished according to their actions. The doctrine of national responsibility is thus stated by Moses : - If ye will walk in my statute*, and keep my commandments, and do them ; then I will give yon rain in due season, and the land shall yield her increase, and the tree* of the field shall yield their fruits, and your threshing .-hall reach unto tli> vintage, and the vintage shall reach unto the sowing time : and y .-hall eat your bread to the full. and dwell in your land safely. And I will pve peace in the land, and ye .-hull lie down, and none shall make you afraid; and I will rid evil beasts out of the Innd, neither shall the sword po through your land. And ye shall chase your enemies, and ther hall fall before you hv the sword. And I will set my talienuicle among you, and will be your God, and ye snallU my jiroj.le. ' Ix-v xxvi. 3-12. "But if ye will not hearken unto me, and will not do all these commandments, I also will do this unto you; I will appoint over you terror, consumption, and the hurn- inn ague, that shall consume the eyes, and cause sorrow of heart : and ye slut!! your seed in Tain, for your enemies shall cat it; and 1 will set my face acaiuM you, ind ye shall be slain ool ! your nuinir*; they that hate you shall rei^n and ye shall flee when none p lirM1 ' ''' V" And if ye will not \.-t for nil this )>< i . ->::[ p-inMi you seven times more for your sins." Lev. xxvi. U- 18; xxviii. 1-15; Neh. ix.; Jer. r. 23-28: yii. 5-7; xviii. 7-10; xxii. i; xxii. ; Mao. xxiii. 34 - 38. The Jewish history presents the most remarkable instance on record of a nation being rewarded for their righteousness and punished for their dis- M00. '! i.ations they con'j-H red were subjected to the same dis- cipline, and it w expressly stated that those nations were punished for 'their sins. And those who have s'udi'.-d the philosophy of history will Moral and Religious Duties. have observed, that nations have risen and fallen in political greatness as they have risen and fallen in their observance of the principles of mo- rality and religion. On this subject we might quote the language of historians, of moralists, of philosophers, and of theologians ; but we prefer citing the language of a monarch, especially as that monarch is our own. Surrounded by her nobles, her senators, her councillors, her judges, her generals, and her admirals, Queen Victoria has declared from the throne, " RELIGIOUS AND MORAL PRINCIPLES ARE THE SUREST FOUNDATION OF OUR SECURITY AND HAPPINESS." As, then, large bodies of men, like nations, are rewarded or punished in their collective capacity, for their virtuous or vicious actions, it would seem to follow, that smaller bodies of men, like public companies, may be subjected to the same moral discipline. A public company, like a nation, is composed of a number of individ- uals who have a government for the regulation of their affairs, and whose acts are considered as the acts of the whole body. It is true that a pub- lic company is composed of a smaller number of persons than a nation," but that cannot affect the moral character of its actions. It is also true, that while a nation must always act through its government, a public company may, and often does, at the general meeting of its shareholders, act independently of its government ; but neither can this alter its moral agency ; for whether the form of government be aristocratical or democrat- ical, the duties of a nation, or of a public company, remain the same.* In opposition to this doctrine, it may be contended that, to render public bodies of men responsible in their collective capacity, would be destruc- tive of personal or individual responsibility. But this is not the case. A nation may be punished for its national crimes, and yet the individual who may have caused these crimes may sustain an individual punishment. Thus Jeroboam, Ahab, and other kings of Israel, were individually pun- ished, while, at the same time, the nation was also punished in its collec- tive capacity. So a public company may be punished or rewarded for its actions, while, at the same time, any individual who caused these actions may also be personally rewarded or punished. It may, too, be objected, that if a public company is to be punished as such for its acts, Ujen all the partners would share in the punishment, though many of them may have been quite innocent of the crime. To this we answer, that the same ob- jection would apply to the doctrine of national responsibility.! It is not * In this discussion we consider public companies as corporations, and inquire \vhat duties they, as corporations, owe to other parties. The several duties of directors, officers, and shareholders, do not lie within the range of our inquiries. t The logical reader need not be reminded, that in arguments from analogy it is a sufficient answer to an objection to show that the objection applies with equal force to the doctrine from which the analogy is drawn. Thus, in the text, the monil responsi- bility of nations is assumed as admitted by all parties, and therefore requiring no fur- ther proof. From the resemblance or analogy between the two cases, we infer the moral responsibility of public companies. It is therefore a suliicicnt answer to any objection iigaiii-it the latter doctrine, to show that it will equally :i;>ply to the former. Indeed, the more numerous the objections, if they will apply cqu.illy in b;>th cases, tho more the argument is strengthened ; as they are confirmatory of the soundness of the analogy. 391 A Trtatite on Banking. ponible in fhe^caae of a largo body of men fr MTV in-lividual to take part in its actions. The act of tho authori/ed L">\' rnmcnt, or of tho majority of the members, must be regarded a> tin act .it tin- whole com- munity, nml every individual must share in the prosjKjrity or advt IMU n - suiting from such acts. It may further be observed, that it is not inconsistent with the principles of the Divine government for persons to suffer for the wicki dm-ss, ,r i. bo rewarded for the righteousness, of those with whom they arc social 1\ connected: the Lord thy God am a jealous God, visiting the iniquity of the father* upon the children unto the third and fourth generation of them that hate me ; ami s).< merry onto thousand* of them that lore me, and keep my commandments." 1 xx. 5, 6. In our own day, we witness numerous instances of children possessing wealth, mental cultivation, and influence in society through the virtu- their parents. And also, not a few cases of children being reduced to poverty and degradation through the vices of their parents. Children suffer through the conduct of tin ir parents, and parents through the con- duct of their children; masters by their servants, and sen-ants by their masters. In fact, it is not possible for any individual, however obscure, to be either virtuous or vicious without in some way promoting the happiness or misery of some person besides himself. It Is, therefore, no valid ob- jection to the doctrine of the moral responsibility of public comp;uii< s that it renders all the partners answerable for the conduct of the majority. In fact, .human governments act upon this principle. If any company were tC incur penalties to the state, those penalties would be enforced agaiast the whole property of the company, though many individual part- ners might be quite unconscious of the offence by which those penalties were incurred. We might further confirm our doctrine by tracing the analogy between public companies and families. " Ponr oat Thy fnrr upon the familifs that call not on Thy name." .7- r x. L'.'>. "In that day I wilf perform against Eli all tilings I have spoken cowerning hit ; for I hare told him that I will judge his house for ever, for the iniquity \vhi< h he knoweUt; because his sons made themselves vile and i. i them not. And therefore I Bare sworn unto the house of Kli. that the iniquity of Kli's house shall not be purged with sacrifice nor offering for ever.' 1 1 Ham. iii la- 14. "And the ark of the Lord continued in the house of Obcd-edom the Giitit. month* : and the Lord blessed Olx-d-edom. and all his household; and it was told King David, saying, The Lord hath blessed the house of Obed-edom and all th;i: taineth onto him. because of the ark of God." 2 Sam. \ i 11, 12 " And Jeremiah said unto the house of the Kcrlmhites, Thus saith the Lord of Hosts, die God of Israel; Because ye h:i the commandment of .lona-iiih \our fa- ther, and kept all hit jin-i-q"t. and done according to all that he hath commanded TOO: therefore thus saith the I-'.ri ' -od of Israel; .Jon.idal.. the son >t bechab, shall not want a man to stand before me for ever." Jer. xxxr. 18, 19. We might adduce other declarations respecting the families of I Jeroboam, Ahab, and others. It may be objected, that in \\v-w cases tin- families were rewarded or punished for the acts of the head of the fami- ly, and not for their own. It appears, however, that tho families con- curred in the actions of their head. When this was not the case, the HI Moral and Religious Duties. exception is mentioned (1 Kings xiv. 13), and in others it is expressly stated that the reward or punishment of the family would in some degree depend upon their own conduct (Ps. Ixxxix. 30-33). The doctrine of collective responsibility in the present world might be still further confirmed by references to the punishments inflicted on partic- ular cities. We will refer only to Nineveh and Jerusalem. In the former case an act of general humiliation obtained a remission, or at least a postponement, of the punishment due to their wickedness ; and in the latter, their sin in rejecting the Gospel was visited with a signal punish- ment. " The word of the Lord came unto Jonah, saying, Arise, go to Nineveh, that great city, and cry against it ; for their wickedness is come up before me And he cried and said, Yet forty days, and Nineveh shall be overthrown. So the people of Nine- veh believed God, and proclaimed a fast, and put on sackcloth, from the greatest of them even to the least of them. For word came unto the king of Nineveh, and he arose from his throne, and he laid his robe from him, and covered him with sackcloth, and sat in ashes. And he caused it to be proclaimed and published through Nineveh by the decree of the king and his nobles, saying, Let neither man nor beast, herd nor flock, taste any thing: let them not feed, nor drink water : but let man and beast be covered with sackcloth, and cry mightly unto God: yea, let them turn every one from his evil way, and from the violence that is in their hands. Who can tell if God will turn and repent, and turn away from his fierce anger, that we perish not ? And God saw their works, that they turned from their evil way ; and God repented of the evil that he had said that he would do unto them ; and he did it not." Jonah i. 2 ; iii. 4 - 10. " And when he was come near, he beheld the city, and wept over it, saying, If thou hadst known, even thou, at least in this thy day, the things which belong unto thy peace ! but now they are hid from thine eyes. For the days shall come upon thee that thine enemies shall cut a trench about thee, and compass thee round, and keep thee in on every side, and shall lay thee even with the ground, and thy children within thee ; and they shall not leave in thee one stone upon another ; because thou knewest not the time of thy visitation." Luke xix. 41 -44 ; Matt, xxiii. 37, 38. Before quitting this branch of our inquiry, we may notice one practical application of the doctrine of collective responsibility. It is, that every individual member of a public body, whether a nation, a family, or a com- pany, should induce that body to walk in the path of uprightness. For should they not do so, he will have to bear a portion of the collective punishment, though he may not personally have taken any active part in the crime (Matt. xxiv. 19). SECONDLY. Having shown that public companies are moral agents, and consequently bound to the performances of certain duties, we shall now inquire what are those duties which, as moral agents, public compa- nies are bound to perform. We shall not attempt to enumerate all these duties, but merely make a selection of the most important, and these we shall classify as, I. The duties of patriotism ; II. The duties of social relationship ; III. The du- ties of religion ; IV. The duties of benevolence. I. The duties of patriotism. By the duties of patriotism we mean those duties which a public com- pany owes to the state. Patriotism is the love of one's country, or, more properly, the love of one's nation. Public spirit is a willingness to sacri- fice a portion of one's time, property, or comfort, to promote the happiness 393 A Treatise on Banking. of one's fellow-citizen*. These are duties obligatory on every citizen (Ps. cxxxvii. ; Neh. i. 4 ; ii. .'I ; Km. i.\. :i), and consequently binding on . body of citizens. \\ ' repudiate the doctrine that a piih- lic company has only to attend to the interest of its proprietors, regardless of the effect its measures may have on tbe public weal. This would he a violation of duty on the port of an individual, and still mop- so on tl.-- part of a public company. For thry have received fro in tin- Legislature special privileges to enable them to carry on their operations. '!!... ges have been granted with a view to the promotion of the public interest. If, then, these privileges are employed to the injury of the public, then is there not merely a violation of the duty of citizenship, but n further violation of duty by the misapplication of privileges con- ferred by the Legislature. I'nto whomsoever much i< jjivm. of him shall much t>c required; nnd to whom men have committed much, of him they will ask the more.' 1 Luke xii. 48. In proportion as the Legislature has conferred privileges, in such pro- portion it may be expected that they who have received these priv: will be active in promoting the public interest. The possession of privi- leges implies an increased obligation to perform certain duties. Tlii- first of these duties is to obey the laws. A public company should abstain from smuggling and all other illicit proceedings, should make cor- rect returns to government, and pay its fuir proportion of the property- tax and of all other duties, unto Csssar the thing* which are OJEHJU-'S. I\<-n. Another duty is to conduct the affairs of the company on such a liberal, yet prudent scale of expense, as shall afford encouragement to the indus- try, trade, and fine arts of the country. Solomon says, " Prepare thy work without, and make it fit for thyself in the field, and afterwards build thy bouse," I'rov. xxiv. 27. Moral and Religious Duties. Which means, if we understand it rightly, " Get your money before you spend it ; but having got it, live in a scale of expense corresponding to your means ; afterwards build thy house." Individuals may be justified in living much within their means, in order to provide for old age, or for the proper settlement of their children ; but public companies cannot have such motives for conducting their establishments with an unsuitable econ- omy. But, above all, it is the duty of a public company to maintain, in all its transactions, a high-toned morality. " Righteousness exalteth a nation." Prov. xiv. 34. A departure from moral rectitude is altogether inexcusable in a public company. As all their actions are presumed to be the result of previous deliberations, they cannot plead in excuse, as individuals do, the power of passion, the impulse of the moment, or the force of habit. In proportion to the weakness or the absence of temptation, in such proportion would their conduct be the more criminal (Prov. vi. 30) ; while their wealth and influence would render their example more extensively injurious to the public morality. If parties of high station in society depart from the strict rule of duty, those of inferior station will deviate still more widely " If a ruler hearken to lies, all his servants are wicked." Prov. xxix. 12. II. The duties of social relationship. The social duties of public companies are the same as those of individ- uals who maintain the same relations. These duties are clearly stated in the Holy Scriptures. The Bible is a code of laws, not a book of ad- judged cases. It lays down the principles of human actions, but leaves the application of these principles to the dictates of reason and of con- science. We might read through the Bible, and not find a chapter headed " The Duties of Public Companies." In this case we endeavour to ascer- tain, in the fust place, what are the duties of individuals. Then we take the principles of these duties and apply them to the acts of public com- panies. The principles of moral duty undergo no change ; but the cir- cumstances of human society are perpetually changing, and hence the correct application of these principles is sometimes a matter of difficulty. We shall here, in the first place, state in the language of Scripture the principles of some of our social relationships, and then make a practical application of them. There are, doubtless, other principles we have not mentioned, and those we have mentioned may be applied, and are applied, in practice, to many other cases besides those specified. 1. These are the things that ye shall do : " SPEAK YE EVERY MAN THE TRUTH to his neighbour, execute the judgment of peace and TRUTH in your gates, and let none of you imagine evil in your hearts against his neighbour, and love 'no false oath; for all these are things that I hate, saith the Lord." Zech. viii. 16, 17. Insert no erroneous statements in your prospectus ; make no incorrect calculations in order to deceive a parliamentary committee ; circulate no unfounded rumors for the purpose of affecting the market value of your shares ; and let your annual reports contain nothing but the truth. 395 A Treatise on Banking. ' Thou halt not raise * false report; put not thy hand with the wicked, to be an anriehtewu witmM." Exod \\m l " The felting of treason* by a lying tongue U a vanity towed to and fro of them that Mek death." Pror. xxi. 6. 2. YK SHALL NOT STEAL, neither DEAL FALSELY, neither lie OIU5 tO an- other." i 11. Be honest and upright in all your dealings, let your ehnrges IK- fair and just, and be sincere and straightforward in all your pecuniary transae- . M, I'hon shalt not harr in thy tag divers weight*, a great and a small. Thou shall not have in thine li.ni-- ilivi-r* nn-.i-un-., a ^reat and a small. But tlmu shalt have a perfect and just weight, n perfect and just measure shall thou li:n- : that thy days may be lengthened in the land whieh the Lord thy God givitli thrc." Deal. xx'v. What man in he that dcsircth life, niul loveth many days, that he may see good ? Keep thy tongue from evil, and thv lips from tpe*king gOIM. Depart from oil and do good ; e*k peace, and pursue it'" Ps. xxxi\. I:!- 14 ; l IVt. iii. 10, 11. All promises or engagein.-nts must be faithfully kept, even when the performance is injurious to the interests of the company. ' hat which is gone out of thy lips thou shalt keep and perform." Dcut. xxiii. 23. " He sweareth to his own hurt and i -han^eih not." Ps. xv. 4. The Israelites were punished with three years of famine, because one >f their kings attempted to violate a treaty into which they had been drawn byfefec representations. Josh. iv. ;!,"; *i Sam. xxi. 1. 3. " If iniquity be in thv hand, put it far away, and let not wickednea dwell in thy tal- rmtdet." Job. xi. 14. If any of the servants of a public company are found wanting in integ- rity, they should immediately be dismissed, and on no account be rein- stated. And if any of their professional agents act dishonestly, even to benefit the company, they should not be employed again. " He that walketh in a perfect way, he srmll fcrvc me. He that worketh deceit shall not dwell within my hourprt from me, ye evil doers, for I will keep the commandments of my God." Ps. cxix. 115. In making advances, banking companies should consider the moral character of the party with whom they deal, as an element of their s< <-u- rity ; and should more readily afford accommodation to parties having nich a character than to those who are without it. " The \u<-k-d borrow- eth and payeth not again." Ps. xxxvii. 21. Public companies should do nothing that would be considered dishonor- able and disreputable in an individual member of the company. The 3i>6 Moral and Religious Duties. moral character of an action cannot be changed by the number of persons who may commit it. " Though hand join in hand, the wicked shall not go unpunished." Prov. xi. 21. " Fire shall consume the tabernacles of bribery." Job xv. 34. " Abstain from every appearance of evil." 1 Thess. v. 22. Public companies should not listen to plans and schemes proposed for their adoption by parties known to be deficient in moral principle ; nor should they hire agents to do what they would not do themselves. "Evil communications corrupt good manners. 1 Cor. xv. 33. Lord, who shall abide in thy tabernacle ? who shall dwell in thy holy hill ? He that walketh uprightly, and worketh righteousness, and speaketh the truth in his heart. He that backbiteth not with his tongue, nor doeth evil to his neighbour, nor taketh up a reproach against his neighbour. In whose eyes a vile person is contemned ; but who honoreth them that fear the Lord." Ps. xv. 1 -4. 4. " SPEAK NOT EVIL ONE OF ANOTHER." James iv. 11. Public companies should not speak unjustly or unkind of each othei. " Love as brethren." 1 Pet. iii. 8. But this does not prohibit their speak- ing the TRUTH of each other on proper occasions, even when the truth may be unpleasant or injurious to the party about whom it is spoken. It may sometimes become the duty of a respectable and honorable compa- ny to expose the fraudulent and deceitful practices of other companies : we are not forbidden to bear witness but only false witness against our neighbour. " By mercy and truth iniquity is purged." Prov. xvi. 6. 5. " Fear thou the Lord and the King, and meddle not with them that are given to change" Prov. xxiv. 21. A public company should not meddle with politics : nor let the influ- ence of the company be employed to produce any political change. It should not too frequently change the principles and maxims of its own gov- ernment. Fixed rules and regulations are to a public company what habits are to an individual : they insure a uniformity of conduct, and are equally essential to success. A steady adherence to fixed principles is the surest road to prosperity. A restless discontent with moderate profits, and an attempt to get suddenly rich, by reckless speculation, has been the ruin of many companies as well as individuals. Prov. xxviii. 20 -22. Nor should they change too often the terms on which they transact busi- ness with the public, as that occasions much inconvenience. Nor change too frequently the rate of their dividend, as that may lead to gambling in their shares. Better pay always the same rate of dividend, and let the surplus profit of one year be placed to a reserved fund to supply the defi- ciences of future years. " A double-minded man is unstable in all his ways." James i. 8. " Unstable as water, thou shall not excel." Gen. xlix. 4. " Trust in the Lord with all thine heart, and lean not unto thine own understand- ing. Be not wise in thine own eyes. Fear the Lord, and depart from evil." Prov iii. 5-7. 6. " Thou shalt NOT AVENGE, nor bear any grudge against the children of thy people, but thou shalt love thy neighbour as thyself." Lev. xix. 18. HH 397 A Treatise on Banking. In OMM of dispute or litigation, do not let your judgment In- blinded by elf-i impartially, and do unto others as, in a similar owe, you would wish to be done unto yourself. I'se no means of hostil- r annoyanee, >r r rds oilier eompanies whieh you would nn - un .-' Of unfair \\> M 'h-A n-.-d a^am^t yourself. K.-e..m- mend to others no schemes, or speeulations, or investments, m \\hich you would not be willing to take any slum- yourself. ort. AH hostile companies should render:: ance to each other on the occurrence of calamities, to which all are liable. " Rejoice not when thine enemv falleth, and let not thine heart be glad when ho stumlikth. lest the Lord see it. and it di>|>lriic him. ami hi- turn away his wrath from him." I'rov. xxiv. 17, 1H It is iniite ri-ht t<> rontriid ai:aint our rnt-mii-. ami to rejoice when we are successful "I will extol thee, () Lord, for thou hast lifted mo uj>, and hast not made my foes to rejoice over me." Pa. xxx. 1 . But it is not right to rejoice when the wrath of Providence permits them to fall into calamity, or to stumble into acts of vice or folly. A railway company should not rejoice when accidents occur on a rival line ; nor a banking company when a rival hank has made a large amount of bad debts ; nor an insurance society when extensive fires or numerous deaths have absorbed the funds of a rival society ; nor a mining associa- tion when accidents have damaged the mines belonging to a rival asso- ciation. ' He that i* (rlad at calamities shall not he unpunished. 1 ' Prov. xvii. 5. If lour enemies treat yon in a different manner, you should not imitate their exam- ple, nut forgive them. ' Recompense no man evil for evil.'' Kom. xii. 17. -I/.-t all bitterness, and wrath, and anger, and clamor, and evil speaking, he put away from you. with all malice ; and lie ve kind one to another, t-mi.T-ln -arti-d, for- giving one another, even as God for Christ's sake hath forgiven you." K]>h. iv. ;n, 32. 8. " If any man will sue thff at the 7a, and take away thy coat, let him hare thy cloak also." Matt. v. 40. (1.) If he have an equal claim to the coat and the cloak, and the law decides that he is justly entitled to the coat, give him the cloak though he do not claim it. Do what is just, though the law may not require it, and never have recourse to a legal quibble in order to ha flic a just demand. Moral and Religious Duties. " The thoughts of the righteous are right, but the counsels of the wicked are de- ceit." Prov. xii. 5. (2.) Do not go to law without mature deliberation. " Go not forth hastily to strive, lest thou know not what to do in the end thereof, when thy neighbour hath put thee to shame." Prov. xxv. 8. (3.) Nor yet about matters of trifling importance which are no practi- cal injury. " Strive not with a man without cause, if he have done thee no harm." Prov. iii. 30. (4.) Nor yet from vindictive motives. " Say not thou, I will recompense evil, but wait on the Lord, and he shall save thee." Prov. xx. 22. (5.) Never go to law about matters in which you have no direct in- terest. " He that passeth by, and meddleth with strife belonging not to him, is like one that taketh a dog by the ears." Prov. xxvi. 17. (6.) Do not go to law with a man merely because he is poor, and therefore unable to contend against your large capital ; nor trespass on any man's rights because he cannot afford the expense of obtaining legal redress. " Bob not the poor because he is poor, neither oppress the afflicted in the gate, for the Lord will plead their cause, and spoil the soul of those that spoiled them." Prov. xxii. 22, 23. (7.) It will be wise and honorable to bring the suit to a close as soon as you can. " It is an honor for a man to cease from strife, but every fool will be meddling." Prov. xx. 3. (8.) If you reject a just and honorable compromise, you may lose the action, and you will then not only have to pay the expense of the suit, but you will have put yourself in a disreputable position. "Agree with thine adversary quickly, while thou art in the way with him, lest at any time the adversary deliver thee to the judge, and the judge deliver thee to the offi- cer, and thou be cast into prison. Thou shall by no means come out thence till thou hast paid the uttermost farthing." Matt. vi. 25, 26. (9.) Do not indulge a fondness for litigation. " He loveth transgression that loveth strife, and he that exaltcth his gate seeketh destruction." Prov. xvii. 19. (10.) If you have to sue any party criminally, enforce the law with kindness and forbearance. " Execute true judgment, and show mercy and compassion, every one to his broth- er." Zech. vii. 9. Tt is quite possible to execute judgment and show mercy at the same time. (11.) If called upon to arbitrate between contending parties, act justly and impartially. " Thou shall not respect the person of the poor, nor honor the person of the mighty? but in righteousness shult thou judge thy neighbour." Lev. xix. 15. " Thou shall not 399 A Treatise on Banking. I: thon ahalt not iwpoet persons : neither take a cift ; for a gift doth blind OM eyw of the wiae, and ponrert the word* of the righteous." Dcut x (12.) Public companies should employ none but honorable men to plctui any cause in which tin y may be engaged. Advocates \\1> noted for legal quibbling, attacking private character, nr bn>\\ healing \\it- nesjse*, should nut be engaged ; and, more especially, tin- stumling coun- sel oC a public company should be a man of high moral and religious |ili-. \Vlini hat thoo to do to declare my statute* T Thou givest thy mouth to < vil, ami Mguo franu-th il- >( it IV 1 K/-19. They speak TSJrity ren i\<- with liis MtghlMiur : with flattering lip* and with a double heart do tlicy speak, i In I.onl nhall I all flattering lip*, and the tongue that cpcnkcih pnm>ut tin- :.m-u<- t the wise U health. The lip of truth shall be established for ever : l>ut a :_ is but for a moment Deceit is in the hcurt of them Unit inia-inu evil : but to the counsellors of peace is joy." Prov. xii. 18 - 20. 9. w Be ye all of one mt'nd, having compassion one of another ; love, as brethren ; be pitiful, be courteous" 1 Pet iii. 8. Be of one mind. Public companies should entertain a pood feeling towards each other, and nnlravour to promote each other's proper occasions, thi-y ought to unite their influence for tin- protection of their mutual rights. Be courteous. All the servants of the company who come into com- munication with the public should be instructed to h-liave with the utmost courtesy ; and if they do so, they ore entitled to courtesy in return. No shareholder should address a servant of the company as if In: \M own individual servant; nor should he, in his transactions with the com- pany, expect any undue attention or preference on account of his being a shareholder. Whan a company has occasion, in its annual report or pub- lic documents, to refer to the proceedings of other companies, it should always be done in the language of court Be pitiful (full of pity). In some cases, life policies become forfeit- ed through the inability of the parties to pay the premiums, and sometimes by the party meeting his death in a way that deprives hi.s . ,f all claim on the company. In cases like these, insurance companies should take all the circumstances into consideration, and be pitifuL \Vln-n an honest tradesman fails, and his creditors agree to take a composition, the banking company should not refuse to accept the terms proposes. should be pitiful. When the servant of a company has inadvertently committed an error, not involving any moral delinquency. N t him not )>' too hastily dismissed, and thus placed for life in a lower condition, but f>e pitiful. When servants of the company, from sickness or old uge, have become leas effective than formerly, let arnuiL-'-men's be ma. 1 .- f.,r render- ing their duties proportionate to their diminished s:ieiu::li. Recollect were ow id healthy, and you Lad then the benefit of their ser- vices, do not treat them harshly i.\v. J!r /////////. 10. ** Use hospitality one to another, without grudging.' 1 1 Pet. iv. 9. 400 Moral and Religious Duties. It is proper that public companies, on particular occasions, such, for ex- ample, as the opening of a new line by a railway company, should enter- tain their friends and others connected with the company. Also, that the companies should use hospitality " one towards another." Social inter- course tends to promote friendly feelings ; and a friendly feeling between the principal officers and members of different companies tends to pro- mote a friendly feeling between the companies themselves. It is also a good practice to give an annual dinner to all the servants of the company. The words " without grudging " may suggest that when the company can afford it, these entertainments should be given in a rather handsome style, without a too strict regard to economy. On these festive occasions, the humbler servants and others connected with the company should not be forgotten. " When thou makest a feast, call the poor, the maimed, the lame, the blind. And thou shall be blessed : for they cannot recompense thee ; for thou shalt be recom- pensed at the resurrection of the just." Luke xiv. 13, 14. 11. "Thou shalt not oppress a stranger, for ye know the heart of a stranger, seeing ye were strangers in the land of Egypt." Exod. xxiii. 9. The principle of this suggestion is, that we ought to have compassion for all those who are in the same difficulties in which we formerly were ourselves. Those whom Providence has raised to a higher station than they or their fathers occupied, should entertain kindly feelings towards those who belong to the class from whence they have sprung. The same rule applies to public companies. Those which have overcome the diffi- culties of their formation, and become prosperous, should not employ any vexatious or oppressive means of preventing the growth of similar compa- nies. Knowing the anxieties they experienced from the difficulties they had to encounter, they should not inflict similar anxieties upon others. Moses often enforces the duty of kindness towards servants and strangers, by reminding the Israelites that they had been strangers and bondsmen in the land of Egypt In questions of morals, it is generally a safe guide to a correct judgment, to put ourselves in the position of others, and to inquire what then would be our own feelings, and what kind of conduct we should wish, under such circumstances, to be adopted towards our- selves. In the decision of such cases, it usually appears that the cultiva- tion of the moral feelings has improved the intellectual faculties. A sound heart is less likely to go astray than a clever head. " The entrance of thy words giveth light : it giveth understanding unto the simple." Ps cxix. 130. 12. " Masters, give unto your servants that which is just and equal, knowing that ye also have a Master in heaven." Col. iv. 1. Be just in your appointments, and select those who are the most wor- thy and the best qualified for the duties they will have to discharge. Be just in the amount of your remuneration ; recollect that many of the ser- rants of public companies have greater trusts and heavier responsibilities than the servants of individuals ; and in this case, it is just and equal that they be rewarded accordingly. Be just in your promotions, and let not merit be supplanted by patronage or favoritism. Be just in the HH* 401 A TVeoltM on Banking. quantity of labor ftt exact. Appoint a sull'icn-nt number <>f servants to do the wo IK> not Comprl them to keep late hour- ; nor P reawnable holidays, for the purges of health and recreation. Be /;/ IHTUU. of thy riche*." Eick \ \ will nut lay it to li-:irt, f.> pv> ^l..ry unto my name, MUth the Lord of Host*, I will even tend a riirsc upon you, and I \sill curse your ing*." Ma! They who honor inferior agents, but forget the Cause of nil their pros- perity, arc compared to the heathen fishermen who "sacrifice unto their net, and hum incense unto their drag, because by them tin 'ir portion is fat, and their meat plenteous.'" Ilab. i. 16. In ancient Rome the merchants and bankers had a public procession every year to the temple of Mercury, who, by a strange association, was regarded as the god of merchants and of hankers, of thieves and of eloquence, to offer sacrifices for the blessings they hai\ine direction, and to render to < Jod the honor of their success, as any of the associations of former days. The way to obtain this di- rection, and to have occasion for rendering this honor, is to acknowledge the superintendence and kindness of God. " In all thy ways acknowledge him, and he shall direct thy paths." Prov. iii 6. " Call upon me in the day of trouble; I will deliver tlu-e, und thou slujilt ylorify mt. n Pi, 1. 15. We are not friendly to the introduction of religious matters, either by individuals or public bodies, into secular intercourse. We have no wish that our business meetings should commence with prayer, and conclude with the doxology. But surely there must be some way in which a public company may, consistently with our national character and the mrmn< n of the age, express its reliance on Divine Providence, and its gratitude for the favors that Providence has conferred. Is there no way in which a public company may virtually utter the sentiments so beautifully ex- pressed by David : 1 irid bleated the Lord before all the congregation : nml said, Blessed be thon, Lord God of Israel, our Father, for ever and ever. Thine, O Lord, is the ^maneta, and the power, and the glory, and the victory, and the majesty ; for :i!l that is in the heaven and the earth is thine: thine is the kingdom, O Lord, and thou art exalted as head above all. Both riches and honor come of th<-e, and thon rei^ne-t over all ; and in thine hand is power and mi^ht; and in thine hund it i.s to make ^n >:. und t< strength unto all. Now. then-fore, our God, wo thank thee, und prai-<- thy ^lurioiin name. But who am I. and what is my people, that we should be ahh- to offer so wil- lingly after this sort; for all things come of thee, and of thine own have we piv< u the*. % 1 Chron. xxix. 10-14. 404 Moral and Religious Duties. Another religious duty is, to support the public worship of God. Hu- man legislation can enforce a small portion only of the moral and relig- ious duties of mankind, and can never interfere until vice has grown into crime. Some writers on moral philosophy have divided the social rights of man into perfect and imperfect. The perfect rights can be enforced > by human laws. The enactments referring to these rights are generally expressed in a negative form : " Thou shalt not kill " ; " Thou shalt not. steal." The imperfect righjs cannot be enforced perfectly by human laws. These enactments are generally positive : " Honor thy father and thy mother" ; " Thou shalt love thy neighbour as thyself." The fourth commandment has one of each kind : " Thou shalt do no manner of work " ; " Remember the Sabbath day to keep it holy." Religion ex- tends her sway, not only over all the actions of man, but over the mo- tives and springs of action (Exod. xx. 17 ; Matt. xv. 19). Religious and moral principles implanted in the mind of the community are the only se- curity for the performance of religious and moral duties, and the only means of acquiring the happiness which the performance of these duties tends to produce. While we maintain, in the words of our motto, that " property has its duties as well as its rights," we maintain, with equal firmness, that prop- erty has its rights as well as its duties ; and they who disregard its rights have no claim on the performance of its duties. But though the rights of property are as sacred as any other rights (Mark x. 19), yet they are the first to be disregarded among an immoral or an irreligious population. As a portion of the property class, therefore, public companies should support the extension of moral and religious principles, as a means of se- curing the safe and quiet enjoyment of their possessions. The mainte- nance of the public worship of God is one means of extending the knowl- edge and influence of these principles. But apart from motives of interest, it is no less the duty of public com- panies, than of individuals, to promote the honor of their Creator and Benefactor ; and to diffuse among others those blessings that attend the discharge of religious obligations. Public companies should not only give to all their servants the means of attending public worship, but they should also contribute towards its support in the district in which their operations are carried on. The houses and the lands they occupy, if not held by them, would probably be occupied by others who would thus contribute. It is, therefore, as much their duty as it is the duty of the other parishioners to provide the means of religious instruction for their neighbours. Contributions tow- ards this object, may not only be a suitable way of performing the duty to which we have referred, that of acknowledging their obligations to the Divine Being, and of extending those principles by which their own prop- erty is rendered more secure, but also of promoting the piety, and, con- sequently, the happiness of all the members of the community, and of discharging a duty to which is distinctly attached the promise of temporal prosperity. " Bring ye all the tithes into the storehouse, that there, may he meat in mine house, and prove me now herewith, said the Lord of Hosts, if I will not ojxm you the win- 405 A Trcatitf on Banking. Jowv of Heart n, and poor yon oat a blessing, that there shall not bo room enough to rewire it" Mai. in. 10. Another religious duty is to reverence the Sabbath-day. d only with reference to the present lit'f, tin- institution of the Sabbath-day is one of the greatest blessings that religion has conferred upon man : " Homember the Sabbath-day to keep it holy : in it thou shall not do any work." Kxod. xx. 8 - 10. It may be observed, that this is the only one of the ten commandments that we are expressly enjoined to enforce upon our households, and some of the most awful denunciations and threatrnings in the Holy Scriptures are directed against the violation of the Sabbath-day. AlVr tin- return from the Babylonish captivity, Nehemiah was the most anxious to enforce th due observance of the Sabbath : " In those day* saw I in Judah some treading wine-presses on the Sabbath, and bringing in sheaves, and lading asses ; as also wine, grapes, and figs, and all man- ner of burdens, which they lirou-lit into Jerusalem on the Sabbath-day : and I testi- 8ed against them in the tiny wherein they sold victuals. There dwelt men of Tyre also therein, which brought fish, and all manner of ware, and sold on the SuMiuih onto the children of Judah, and in Jerusalem. Then I contended with the nobles of Judah, and said unto them, What evil thing is this that ye do, and profane tl: bath-day! Did not your fathers thus, and did not our <;<><1 bring all this evil nj.i.n os and upon this city " Yet ye bring more wrath upon Israel by profaning the Sab- bath." Xeh.xiii. 15-18. The design of the Sabbath is to insure an interval of bodily r more especially for the humbler classes of society (Deut. v. 14) ; to change the current of thought, and thus to preserve the mental powers in a state of vigor and freshness ; to give leisure for reflection, and thus enable man to look above him, and around him, and within him, and consider his own character and destiny ; and to furnish opportunity for the discharge of those duties of piety, of kindness, and of benevo- lence, which devolve upon him as a moral and religious being. To ex- press thankfulness for past mercies is specially named as one of the duties to be performed (Deut. v. 15) ; and these feelings are beautifully ex- pressed in the 100th Psalm : * O be joyful in the Lord, all yc lands. Serve the Lord with gladness : and come before his presence with a sontr. He ye sure that the Ix>rd he is God : it is he that hath made us, and not we ourselves; we are his people, and the sheep of his pasture. O go your way into his gates with thank-giving, and into his courts with praise : be thankful unto him, and speak good of his name. For the Lord he is gracious : his merry is everlasting ; and his truth cndureth from generation to generation." Prayer- book* translation. The institution of the Sabbath-day must not be regarded as diminishing the produce of annual labor. By improving the habits and invigorating the mental powers, it increases the annual produce of labor, both in re- gard to nations and individuals. The labor of the Sunday tends not to wealth. It is not the man who Is Sunday to the week" of toil, who employs that holy day in at- t<-nrling to his ordinary business or in making up his books, no, it is not he who is in the surest road to riches. It is the man who, when the Sun- 406 Moral and Religious Duties. day dawns, feels his mind expand with new and exhilarating and en- nobling associations ; who, accompanied by his family, appropriately at- tired, pays his morning homage in the temple of religion, and passes the remainder of the day in works of charity or piety, or in innocent re- laxations corresponding with the sanctity of the day; that is the man who, by improving the intellectual, the moral, and the social faculties of his mind, is adopting the surest means of acquiring wealth and respecta- bility in the world. They greatly err who imagine they are pleading the cause of the poor when they endeavour to remove the religious sanctions of the Sabbath- day. Should the mass of the population once entertain the impression that the observance of the Sunday is not required by religion, but is merely a matter of convenience or expediency, the poor will then have no security for cessation from toil. Reasons will soon be found, based apparently upon a regard for the poor, for increasing their labor. Let the Sunday be regarded no longer as a day of devotion, but merely as a day of pleasure, and it will soon become a day of toil. Were the Sunday abolished, the poor man would receive no more wages for his seven days' labor than he now does for his six. His scale of comforts would be reduced, as he would have no occasion for a Sun- day's attire. His opportunities of social intercourse and of moral im- provement would be abolished. In this and in other cases it is shown that Religion, while she is the guide and solace of the wealthy, is pre- eminently the friend and guardian of the poor. (See a work just pub- lished, on The Temporal Benefits of Christianity, by Robert Blakey, Longman.) If it be the duty of nations and of individuals to observe the Sabbath- day, it must equally be the duty of public companies. We read of no dispensation in their favor. The prohibition of any manner of work does not except the work of public companies. It is not said that all men-servants and maid-servants shall have rest except the servants of public companies. Nor are we taught that the violation of the Sabbath- day will bring down judgments upon nations, but none upon public com- panies. But, as in domestic, so in social life, there are certain works of ne- cessity, and many duties that must be performed, even on the Sabbath- day. (Isa. xlix. 15; Luke xiii. 15; xiv. 5.) In these cases a public company will act like the head of a religious family. All the secular duties that can be postponed will be postponed to the following day. Other duties will be performed in such portions of the day as will permit as many servants as possible to attend Divine service ; and those servants who cannot be thus favored will be allowed other seasons for the perform- ance of this duty. (We omit here the discussion of the question respect- ing Sunday travelling by railways, as inappropriate to the present work.) We will not attempt to specify in detail all the works that may lawfully be performed by public companies, or by individuals, on the Sabbath-day. We will merely observe that, though " the Sabbath was made for man, and not man for the Sabbath " (Mark ii. 27), yet, at the same time, they who most religiously keep holy the Sabbath-day, may expect to share 407 A Tr tat isc on Banking. largely of those spiritual and tcmpoml benefits its institution was designed to bestow. "If tboa torn awav thy foot from the Sabbath, from doing thy pleasure on my holy day ; and rail the Sabbath a delight, the holy of the Lord, honorable ; and shall honor him, not doing thine own way*, nor tiiuling thine own pleasure, nor speaking thino own word*: then shall thou di-li^ht thyself in ihe Lord; and I will can-- tl IDE UPON TUB HIGH FLACKS or THE KAKTii, ami feed ihce with tlic heritage of Jacob thy Father : for the mouth of the Lord hath Hpokcn it" Isa. Iviii. 13, U. IV. The last class of duties are the duties of benevolence. By the duties of benevolence, we mean the duties we owe to the poor. Throughout both the Old and the New Testament there is no duty more frequently enforced than this, nor one, to the performance of which there is attached so many promises of temporal prosperity. Mom, besides enacting many laws that had an especial bearing upon the welfare of the poor, enjoined, moreover, the duty of voluntary be- nevolence. * And if thy brother be waxen poor, and fallen in decay with thee ; then thou shall relieve him : though he be a stranger, and a sojourner." Lev. xxv. 35. 14 For the poor shall never cease out of the land : therefore I command thee, saying, Thou shall open thy hand wide unto thy brother, to thy poor, and to thy needy, in thy land." Dent XT. 11. The devotional exercises of the Israelites abound with benedictions on those who pitied the poor. " Blessed is he that considereth the poor : the Lord will deliver him in time of trouble. The Lord will preserve him, and keep him alive ; and he shall be blessed upon the earth : and thou wilt not deliver him unto the will of his enemies. The Lord will strengthen him upon the bed of languishing : thou wilt make all his bed in his sickness." Ps. xli. 1, 2, 3. Job said : * When the ear heard me, it blessed me ; and when the eve saw me, it gave witness to me: because I relieved the poor that cried, and the fatherless, and him that had none to help him. The blessing of him that was ready to perish came upon me ; and I caused the widow's bean to sing for joy." Job. xxix. 11-13. In the Proverbs of Solomon, we read : " He that hath pity upon the poor lendeth unto the Lord ; and that which he hath given will he pay him again." Prov. xix. 17. " He that hath a bountiful eye shall be blessed ; for he givcth of his bread to the poor." Prov. xxil 9. 14 He that bath mercy on the poor, happy is he." Prov. xiv. 21 . Seasons of festivity were celebrated by granting relief to the poor. "The days wherein the Jews rested from their enemies, and the month which was turned unto them from sorrow to joy, and from mourning into a good day : that they should make them days of feasting and joy, and of sending portions one to another, and gifts to the poor." Esther ix. 22. u This day U holv unto the Lord your God ; mourn not, nor weep. Go jour way, eat the fat and drink the sweet, and send portions unto them for whom nothing is pre- pared." Neh. viii. 9, 10. In the New Testament, we read : * Give, and it shall be given unto you ; good measure, pressed down, and shaken to- 408 Moral and Religious Duties. gethcr, and running over, shall men give into your bosom. For with the same meas- ure that ye mete withal, it shall be measured to you again." Luke vi. 38. " Charge them that are rich in this world, that they be not high-minded, nor trust in uncemin riches, but in the living God, who giveth us richly all things to enjoy ; that they do good, that they be rich in good works, ready to distribute, willing to commu- nicate ; laying up in store for themselves a good foundation against the time to come, that they may lay hold on eternal life." 1 Tim. vi. 17 - 19. " Whoso hath this world's goods, and seeth his brother have need, and shutteth up his bowels of compassion from him ; how dwelleth the love of God in him ? " 1 John hi. 17. On the other hand, the most awful denunciations are directed against those who are unfeeling towards the poor : " He that oppresseth the poor reproacheth his Maker : but he that honoreth him hath mercy on the poor." Prov. xiv. 31. " Whoso stoppeth his ears at the cry of the poor, he also shall cry himself, but shall not be heard." Prov. xxi. 13. " He that oppresseth the poor, to increase his riches ; and he that giveth to the rich, shall surely come to want." Prov. xxii. 1 6. " He that giveth unto the poor shall not lack ; but he that hideth his eyes shall have many a curse." Prov. xxviii. 27. The rule by which public companies, as well as individuals, should regulate the amount of their contributions to religious and charitable pur- poses, is distinctly laid down in the Holy Scriptures, it is their ability. " Every man shall give as he is able, according to the blessing of the Lord thy God which he hath given thee." Deut. xvi. 17. " Thou shall truly tithe all the increase of thy seed, that the field bringeth forth year by year." Deut. xiv. 22. " Upon the first day of the week let every one of you lay by him in store, as God hath prospered him." 1 Cor. xvi. 2. The spirit of these instructions appears to be, that public companies should devote to religious and charitable purposes a certain proportion of their annual profits. What that proportion should be, must be determined by each individual company. All public companies have the advantage of knowing the exact amount of their annual gains. " Be thou diligent to know the state of thy flocks, and look well to thy herds." The principle of this injunction is, balance your books every half-year, in order to ascertain the state of your affairs, and the amount of your profits. In all cases we think it better that a fixed sum should be set apart at the commencement of the year, rather than the amount should be regulated by the caprice of the moment. We think it a good practice, even for individuals, and especially for young men commencing life, to determine, like Jacob (Gen. xxviii. 22), that a certain 'part of their future gains should be devoted to the cause of piety and benevolence. We are not friendly to religious vows ; but we think every prudent man, (and public companies are presumed to be assemblies of prudent men,) should have fixed principles of action, and not let his discharge of pious and charitable duties depend on the impulse of the moment. " Every man according as he purposeth in his heart, so let him give, not grudgingly or of necessity, for God loveth a cheerful giver." 2 Cor. ix. 7. This language seems to imply, that the amount devoted to acts of II 409 A Trtatise on Banking. charity should be the result of previous deliberation, and that those who have fixed the amount by a previous purpose, give with more cheerful- ness than those whose miixls |.n > -m n every occasion a conflict l-:\. the suggestions of liberality and those of selfishness, and who grudgingly comply with the solicitations of others, or give as a necessity imposed on ihrni by their social position. We are no advocates for indiscriminate charity. We think that nun of business (and of such our public companies are usually composed) should show the same prudence in the exercise of their charity as thi-y would on other occasions ; they should endeavour to ascertain tin- way of doing the most good with equal means, and should look to the remote as well as to the immediate effects of their Ix-nevolencc. The first claim on their liberality, is that of the parish or district in which the company conducts its operations. As the locality, if not occu- pied by a company, would probably be occupied by individuals, the com- pany is morally bound to subscribe to the local charities as liberally as would be done by individuals of equal wealth. Another claim is, that of charities whose object has some connection with the object of the com- pany, or which would relieve the distress of parties employed by the company. There are also extraordinary cases, wherein, by a sudden visitation of Providence, there is general distress ; such as when, by a revulsion of trade, large masses of men are thrown out of employment ; or the occur- rence of famine, pestilence, or fire. In these coses the appeal is nut made to us in our local or professional character, but to our national feeling, or to our common humanity ; and then public companies have the same du- ties to perform as would fall upon individuals of equal wealth. On the other hand, there are occasions wherein private charity is more useful than public charity ; and it may become the duty of public bodies, as well as of individuals, to exercise their benevolence in secret.* But it is not necessary that kindness to the poor should always take the form of almsgiving. It is often better to prevent poverty than to relieve it, to give employment rather than money, to grant -a loan, than to bestow alms. And sometimes public companies can so construct their business arrangements, as, without any pecuniary sacrifice, greatly to promote the interest and the comfort of the humbler classes of the com- munity. Public companies should also cooperate in endeavouring to raise the social condition of the poor, by diminishing the hours of labor, by re* lieving women and children from unsuitable or oppressive toil, and by ex- tending among the rising population the benefits of religious education. Matt vi. 1 -4. It appears to as, that one of the least useful modes of benefiting the poor U that of permanent endowments. It seems much better that 1,000 were distributed immediately to the poor, than that this sum were iim-tnl in the funds, and the interest doled oat to the poor of distant generations. Let tin- U -m-x oli -nee of the precni age relieve the distress of the present age ; and let as hope that the benevo- lence of future ages will be equal to our own, and equally commensurate with the dis- tress which mar then exist. This immediate and broadcast charity seems to answer best to the scriptural description : " He hath dispersed abroad ; In ////. v their as- sistance and influence, the formation of literary and scientific institutions. This would fiord an outlet for any surplus energy of character that mi^ht remain after the hours of boaine**, and enable them to promote the public good, without taking part in politi- cal or religions discussions. They would acquire for themselves much pleasurable and profitable amusement, would add to the usefulness and respectability of their char- acter in public estimation, and thus be enabled to increase the influence of their respec- tive estaoUshmenU." A farther Extract from the Letter auoted at page 148. t Rom. u. 14, 15. Some writer* on moral philosophy have denied that man DOS- es** jbose moral powers which are usually, hut perhaps not very properly, calico the moral MM*; and, to support their sentiments, they have adduced the immoral practices of various nations in ancient and modern times ; such as infanticide, the burning of widow*, Ac. They might as well have collected together all the erroneous opinions in the art* and science* that have prevailed in different ages of the world, and then have mferral, that man is Dot endowed with reason. 412 Moral and Religious Duties. that the Creator and Governor of the world is a God of truth, and without iniquity, just and right is he (Deut. xxxii. 4). And as he also possesses omnipotent power, he will assuredly carry his dispositions and purposes into effect, But on comparing these attributes of the Supreme Governor of the universe with the actual destiny of the righteous and the wicked in the present world, we do not perceive that perfect union of virtue with happiness, and of vice with misery, which our contemplation of the Divine character would lead us to expect, and inquiring minds have often been puzzled for a solution of this difficulty. " Righteous art thou. Lord, when I plead with thee : yet let me talk with thee of thy judgments : wherefore doth the way of the wicked prosper ? wherefore are all they happy that deal very treacherously?" "jer. xii. ]. " Thou art of purer eyes than to behold evil, and canst not look on iniquity : where- fore (then) lookest thou upon them that deal treacherously, and holdest thy tongue when the wicked devoureth the man that is more righteous than he 1 " Hab. i. 13. " As for me, my feet were almost gone ; my steps had well nigh slipped. For I was envious at the foolish, when I saw the prosperity of the wicked." Ps. Ixxiii. 2, 3. The book of Job is a controversy upon this question. The friends of Job maintained the proposition, that the destiny of men in the present life corresponded with their moral character. " Eemember, I pray thee, who ever perished, being innocent ? or where were the righteous cut oft'? Even as I have seen, they that plough iniquity, and sow wicked- ness, reap the same." Job iv. 7, 8. " Behold, God will not cast away a perfect man, neither will he help the evil doers." Job viii. 20. " If thou wert pure and upright ; surely now he would awake for thee, and make the habitation of thy righteousness prosperous." Job viii. 6. Job does not admit this proposition, but declares that sometimes u the tabernacles of robbers prosper, and they that provoke God are secure, into whose hand God bringeth abundantly." Job xii. 6. In attempting the solution of this difficulty, it may be observed that, though not universally, yet generally, virtue and happiness, vice and mis- ery, are associated in the dispensations of Providence in the present world. And, indeed, in all the moral sciences, the general propositions are subject to exceptions, the moral sciences differing, in this respect, from the ab- stract and the physical sciences ; or, to use the language of logicians, there is a metaphysical, a physical, and a moral universality (Watts's Logic). Thus, though it be a general rule in political economy, that the diligent hand maketh rich, yet there are some diligent hands that do not become rich. And though it be a general rule in the science of education, that if you train up a child in the way he should go, when he is old he will not depart from it, yet there are some melancholy exceptions. And thus it is a general rule, that the righteous are prosperous and the wicked miser- able, in the present world, subject only to those "exceptions to which all general rules, in the science of morals, are liable. It may also be observed, that, when those exceptions do occur, the prosperity of the wicked, and the afflictions of the righteous, are only of a short duration (Ps. xxxiv. 19 ; Job xx. 5), and often even rectify themselves ; the afflictions of the righteous leading to prosperity, and the prosperity of the wicked leading to destruc- tion. Gen. xlv. 7, 8 ; Prov. i. 32. II* 413 A Treatise on Banking. It may, moreover, be contended, thnt outward circumstances are i tain index of happiness; that tin- wicked man, :m>l as an adder (Pn>v. xxiii. IW) ; or have some particular circumstance that shall give him so much an- noyance as to nullity all the pleasures of his success. Esther v. 1 1 - III. \\ hi'.f, on the other Jiaiul, the righteous man may possess such inward sources of happiness, OR shall enable him to rejoice even in tribulation. lick x. Ml; Hub. iii. 17, 18. But though these considerations may lighten, they do not remove the difficulty. It is not consistent with the teachings of our intellectual facul- ties, nor with the impulses of our moral feelings, that a Being of immacu- late holiness and inflexible justice, and possessed, moreover, of omniscience and omnipotence, should permit, in even a single instance, that virtue should go unrewarded, and vice should remain unpunished. If the Crea- tor of the world were not a righteous Being, he would not have implanted a love of righteousness in the minds of his creatures ; and if he be a righteous Being, it is reasonable to expect that his righteousness should appear in all the operations of his moral government. And as we find this is not universally the case (Ecclcs. vii. 15 ; ix. 2), we are driven to the conclusion, that the present state is not a state of final retribution ; that the enjoyments and the atllictions of the present life are intended chiefly as instruments of moral discipline ; and that there is a future state of ex- istence, in which the final distribution of rewards and punishments will take place. Thus reason concurs with revelation in teaching us that " it is appointed unto men once to die, and after that the judgment." 1 l.-b. ix. 27. The inequalities of the present world will thus he rectified in the . and " every man will be rewarded according to his works." Prov. xxiv. 12. But, however satisfactory this solution of the difficulty may be with re- gard to individuals, it does not apply to the cose of public companies. Their existence commences and terminates in the present world, and they must be rewarded or punished in the present world, or they will not be punished or rewarded at all. In the latter ease they are ex- empted from the moral government of God. \Vith them virtue has no reward and vice no punishment. In reply to any exhortations to perform their moral and religious duties, they may exclaim, " What is the Al- mighty, that we should serve him, and what profit should we have if we pray unto him ?" Job xxi. 15. " We know not. the Lord, neither will we obey his voice." Exod. v. 2. As, however, we cannot suppose that God has exempted public companies from his moral government, s\e must infer that they are punished or rewarded in the present state. This conclusion rests upon the same evidence as the argument we have'just stated. In the former case the argument stands thus : The Righteous Governor of the world must reword the good and punish the wicked Bat this it not done in the present world. Therefore there But be a future world, in which this retribution will take place. Our present argument stands thus : The Righteous Governor of the world must reward the pood ami punish tin- wick- ed, whether those actions arc jx-rt'iirmctl by public bodies, or private individuals. 414 Moral and Religious Duties. But the public companies who now perform good or evil actions will not exist in a future world. Therefore public companies must be rewarded or punished in the present world. The only way of resisting this argument is either to maintain that pub- lic companies are not moral agents, and therefore not responsible for their good or evil actions, or that they will exist in a future world. The for- mer part of the alternative we think we have sufficiently refuted, the lat- ter is too wild to need refutation. Luke xx. 34 - 36. If the marriage contract shall then be dissolved, d fortiori, other contracts will also be dissolved. All the promises and threatenings of Scripture made to nations or other bodies of men have a reference to the present world, as it is only in the present world that such collective bodies can, in their corporate capa- city, be either punished or rewarded. II. What is the nature of these rewards or punishments ? The object of a public company is to get wealth, a few patriotic shareholders may have taken shares to benefit the country or the district that may be the field of its operations ; but by far the greater number have no other object than to obtain a profitable employment for their capital. A public company, therefore, cannot be considered as prosper- ous, unless this object be obtained. If then a public company be reward- ed, it must be by an increase of its wealth ; if it be punished, it must be by a diminution of its wealth. It may be observed, that wealth, riches, and similar terms, have usually a relative meaning. Generally they de- note the amount of property possessed by each individual in the highest classes of society. In this sense, wealthy people are comparatively few. But when it is said that " the diligent hand maketh rich," it is not meant that every diligent man is placed at the top of society, that would be impossible. It means only, that he possesses more property, and a larg- er portion of the comforts of life, than he would possess were he not diligent. He is rich, not, perchance, as compared with Others, but as compared with his former self, That wealth is an evil, is not the doctrine of Scripture nor of common sense. In Scripture, wealth is distinctly called a blessing : " The Lord hath blessed my master greatly ; and he is become great : and he hath given him floclcs, and herds, and silver, and gold, and man-servants, and maid-servants, and camels." Gen. xxiv. 35. " Thou knowest how I have served thee, and how thy cattle was with me. For it was little which thou hadst before I came, and it is now increased unto a multitude, and the Lord hath blessed thee since my coming." Gen. xxx. 29, 30 " The Lord blessed the latter end of Job more than his beginning : for he had four- teen thousand sheep, and six thousand camels, and a thousand yoke of oxen, and a thousand she-asses." Job. xlii. 12. The exhortation given in Scripture to the rich, to relieve the distress of the poor, must be founded on the principle that wealth is a blessing, and that poverty is an evil ; for if the poor are more happy, more wise, and more virtuous than the rich, upon what ground can the rich be ex- horted to relieve the poor ? 415 A Trtatitt on Banking. the cautions and admonitions given to the rich, assume the prin- ciple that wealth is a blessing, " Better is the poor that walketh in his uprightness, than he that is perverse in his ways, though he be rich." I'rov. xxviii. 6. This asserts that wealth is not so great a blessing as moral rectitude ; but still it assumes that wealth is a blessing. This will appear if we reverse tho sentence ; for though it will thru be equally true, yet for want of this assumption it will appear ridiculous; 1.< is die rich that walketh in his uprightness, titan he that is perverse in his ways, though he be poor. * Let not the rich man glory in his riches." Jcr. ix. 23. " Riches make themselves wings and fly away a* an eagle towards heaven." Prov. xxiii. 5. " Charge them that are rich in this* world, that they trust not in uncertain riches." 1 Tim. \ i IT. All these expressions imply that riches are blessings, and though they partake of the uncertainty of all earthly blessings, as health, friends, or reputation, yet still they are blessings to be received with thanksgiving ; 1 Tim. iv. 3 ; and to be employed in promoting the honor of God ; 2 Cor. viii. 7 ; and the good of mankind. The Scriptures do not intimate that the personal enjoyment of wealth is necessarily sinful. Wealth, like any other blessing,may be desired from inij>n'|>cr motives, James iv. 3; and sought by improper means, I'rov. xxviii i?i! ; 1 Tim. vi. 9 ; and such on ill regulated desire may become the root of all evil, 1 Tim. vi. 10. It is also true, that when wealth is obtained it has its temptations, and so have intellectual superiority, literary excellence, and even religious attainments. 2 Cor. xii. 7. But, it is not the honorable pursuit of wealth, nor the innocent enjoyment of its advantages, that constitutes a crime. " The ground of a certain rich man brought forth plentifully, and he said, I will pull down my burns and build greater, and there will I bestow my fruits, and will say to my soul, Take thine ease, eat, drink, and be merry." Luke xii. 16-iJO. There was nothing wrong in this. His folly consisted in forgetfulness of the approach of death, and his neglect of preparation for a future state. And in regard to the other rich man, Luke xvi. 19, it was not his clothing himself in purple and fine linen, and faring sumptuously every day ; it was his omitting to relieve the poor man who was laid at his gate, and his neg- lecting to hear Moses and the prophets, that brought him to the place of torment Not only is wealth represented in Scripture as a blessing, but it is a bleating promised as a reward to the practice of virtue and piety. 14 AH these blessings shall come on thec, and overtake thee, if thon shall hearken unto the voice of the Lord thy God. Blessed shalt thou be in the city, and l.li->nl Rhaltthou be in the field. Blessed shall lie thy l>a>kcl and thyMi.ii-. The Lord shall command the blessing npon thee in thy storehouses, and in ull that thou scttest thine hand unto. And the Lord shall make thee plenteous in good*, in the fruit of thy cattle, and in the fruit of thy ground. The Lord >hall open unto tln-e his pood treasure*, the heaven to give the rain onto thy land in his season, and to bless all the work of thine hand." Dent xxviii. ness is profitable unto all things, having promise of the life that now is and at that which is to come. 1 Tim iv. 8. By humility nnd the f< ar of the Lord, arc Ate, honor, and life. Prov. xxiL 4. The' hles.-ing'of the Lord it mukeili rich, and 416 Moral and Religious Duties. he addeth no sorrow therewith. Prov. x. 22. That I may cause them that lore m to inherit substance, and I will fill their treasures." Prov. viii. 21. The virtues, upon the exercise of which wealth is most frequently promised, are diligence, righteousness, prudence, liberality in the cause of religion, and kindness to the poor. 1. Diligence in business : "The hand of the diligent maketh rich. Prov. x. 4. The hand of the diligent shall bear rule, but the slothful shall be under tribute. Prov. xii. 24. The soul of the diligent shall be made fat. Prov. xiii. 4. The thoughts of the diligent tend only to plenteousness. Prov. xxi. 5. Seest thon a man diligent in his business, he shall stand before kings, he shall not stand before mean men." Prov. xxii. 29. " Wealth gotten by vanity shall be diminished, but he that gathereth by labor shall increase. Prov. xiii. 11. Be thou diligent to know the state of thy flocks, and look well to thy herds." Prov. xxvii. 23. , 2. Righteousness in social transactions : " The curse of the Lord is in the house of the wicked, but he blesseth the habitation of the just." Prov. iii. 33. " He that walketh righteously, and speaketh uprightly ; he that despiseth the gain of oppressions, that shaketh his hands from holding of bribes, that stoppeth his ears from hearing of blood, and shntteth his eyes from seeing evil ; he shall dwell on high: his place of defence shall be the munitions of rocks : bread shall be given him ; his water shall be sure." Isa. xxxiii. 15, 16. " And if thy brother be sold unto thee, and serve thee six years ; then, in the seventh year, thou shalt let him go free from thee. And when thou sendest him out free from thee, thou shalt not let him go away empty : thou shalt furnish him liberally out of thy flock, and out of thy floor, and out of thy wine-press : of that wherewith the Lord thy God hath blessed thee thou shall give unto him. It shall not seem hard unto thee when thou sendest him away free from thee ; for he hath been ivorth a double hired ser- vant unto thee, in serving thee six years : and the Lord thy God shall bless thee in all that thou doest." Dent. xv. 12, 13, 14, 18. 3. Prudent habits : " He that loveth pleasure shall be a poor man ; he that loveth wine and oil shall not be rich. Prov. xxi. 17. The drunkard and the glutton shall come to poverty, and drowsiness shall clothe a man with rags. Prov. xxiii. 21. He that tilleth his land shall be satisfied with bread, but he that followeth after vain persons shall have poverty enough." Prov. xxviii. 19. "He that is slothful in his work is brother to him that is a great waster. Prov. xviii. 9. A prudent man foreseeth the evil, and hideth himself; but the simple pass on and are punished. Prov. xxii. 3. The sluggard will not plough by reason of the cold ; therefore shall he beg in harvest, and have nothing. Prov. xx. 4. Love not sleep, lest thou come to poverty. Open thine eyes and thou shalt be satisfied with bread. Prov. xx. 13. In all labor there is profit : but the talk of the lips tendeth only to penury." Prov. xiv. 23. 4. Liberality in the cause of religion : u Honor the Lord with thy substance and with the first fruits of all thine increase; go shall thy barns be filled with plenty, and thy presses shall burst out with new wine. Prov. iii. 9, 10. " Thou shalt truly tithe all the increase of thy seed, that the field bringeth forth year by year. And thou shalt eat before the Lord thy God, in the place in which he shall choose to place his name there, the tithe of thy corn, of thy wine, and of thine oil, and the firstlings of thy herds and of thy flocks ; tliat thou mayst learn to fear the Lord thy God always. And the Levite, (because he hath nor part or inheritance with thee,) and the stranger, and the fatherless, and the widow, which were within thy gates, shall A Treatise on Banking. com*. anI hanlm i!m,i- IK art. nor -hut thine hand from thy poof hmthrr. Thou slnilt min-ly give him, and tliinc In-art hall not be grieved when ihoii cmvt unto him : because that for thi thin;; tin l...i.l l h.ill bleat thcc in all thy works and in all that thou puttcst tliinc hand unto." De*t xv. 7, 10. These are the mnximsthat form the Scriptural art of getting rich. \\ - often hear of other maxims, such as, " Mind number one" ; " A penny saved is u penny ir people shnll poil the.- ll.il- ii. H The children al*o of Jinliih and the ehildrvn of Jerusalem have ye sold nnio the Grecians ; and I will noil your ion* and your daughter* into the hand of the children of Judah, and they shall itcll them to the Sabcani." Joel iii. 6, 8. Many of the facts recorded in Scripture illustrate the application of this principle. M But Adonibesek fled, and they pursued after him, and caught him, and cnt off hi thumb*, and bi great toes; and Adonibezek said, Threescore and ten kings having their thumb* and their great toe* cut off, gathered their meat under my table : as I hare done, to God hath requited me." Judges i. 6, 7 M Samuel said unto Agag, As thy (word hath made women childless, so shall thy mother he childless among women. 1 8am. XT. 33. Klijah said to A huh, Thus saitn the Lord, In the place where dogs licked the blood of Naboth, shall dopi lick thy blood, even thine. 1 Kings xxi. 19. They hanged llamun on the gallows that he hail prepared for Mordecai." Esther vii. 10. Providence seems to have implanted in the mind of man a desire of witnessing the application of this principle. An honorable feeling of grat- ification arises in virtuous minds, when the man of violence, of fraud, or oppression, has been punished in a way corresponding to his crime, and by means brought on by his own actions. Hence the Psalmist preys, " Let the wicked full into their own nets, whilst that I withal es- cape." Ps. cxli. 10. " Let his net that he hath hid catch himself: into that very destruction let him fall." Ps. x.xxv. 8. And In- n-jnin-s in wit- ncssing the accomplishment of his desires. " The wicked is snared in the work of his own hands. The heathen are sunk down in the pit that they made : in the net which they hid is their own foot taken." Ps. ix. 15, 16. " They have digged a pit before me, into the midst whereof they are fallen themselves." Ps. Ivii. 6. We should infer from these principles, that, in the ordinary course of Providence, it will be natural to expect that public companies will receive their rewards or punishments as the result of their own actions. And this will more obviously be the case when prosperity is bestowed as the re- ward of diligence, righteousness, or prudence. But when success is be- stowed as the reward of the duties of religion or benevolence, it may arise from sudden or unexpected causes. At the same time, we cannot lay down any rules for the Divine procedure. ** He giveth not account of any of his matters." Job xxxiii. 13. " Hf will destroy the wisdom of the wise, and will bring to nothing the understanding of the prudent." 1 Cor. i. 19. He can unlock fresh sources of prosperity, or open new fountains of affliction whenever be thinks meet to do so for the moral discipline of his intelligent creation. " The Lord maketh poor and mak- eth rich : He bringeth low, and lifteth up." 1 Sam. ii. 7. " When he giveth quietness, who then can moke trouble ? and when he hidcth his face, who then can behold him, whether it be done against a nation or apWMt a man only ? " Job Ixxxiv. 29. With regard to public com- oanies, as well as individuals, " He putteth down one, and setteth up Another, and none can stay his hand, or say unto him, What doest 420 Moral and Religious Duties. thou ? " Ps. Ixxv. 7 ; Dan. iv. 35. But though " clouds and darkness are round about him, yet righteousness and judgment are the habitation of his throne." Ps. xcvii. 2. And he will so arrange the dispensations of his providence, " that men shall say, Verily, there is a reward for the righteous ; verily, there is a God that judgeth IN THE EARTH." Ps. Iviii. 11. IV. The effects which a liability to these rewards and punishments should produce on the conduct of public companies. The doctrine we have endeavoured to establish is, that public compa- nies are moral agents, capable of performing good and evil actions. That those which perform good actions will be rewarded, and those which per- form evil actions will be punished ; and that those rewards and punish- ments will consist generally in an increase or diminution of their wealth. We shall now notice the practical application which public companies may make of this doctrine. A liability to be rewarded or punished according to their works should naturally induce public companies to act in such a way as to obtain the reward and to avoid the punishment. This is to be done by performing the duties we have described. Let them perform the duties they owe to their country, and to those with whom they are socially related ; their du- ties to God and to the poor ; and they may hope with confidence for those blessings which are promised to follow the performance of those duties. 1. Public companies should not use this doctrine uncharitably in the opinion they form of other companies which are not so prosperous as themselves. Our doctrine does not teach us that success will immediately, in all cases, follow the performance of the duties we have described : nor that success will be unchecked or unalloyed. A few years is a short period in the history of a public company, and we can form no judgment from so short a period of its ultimate success. Nay, it may be that these few years of struggle and difficulty may be the foundation of its future great- ness. We should, therefore, judge illogically and uncharitably, were we, from the temporary distress of a public company, to infer that it was de- ficient in the performance of its moral and religious duties. We know enough of the principles of the Divine government to be able to regulate our own conduct, but not enough to enable us to pass sentence on the conduct of others. Luke xiii. 1 - 5 ; Acts xxviii. 3-6. 2. Public companies should not envy other public companies, who may have neglected their moral and religious duties, and yet, for a time, may enjoy a high degree of apparent prosperity. When large fortunes are suddenly acquired by comparatively slight deviations from the path of rectitude, even virtuous minds arc almost tempted to regret their own purity, and to exclaim, " Verily, I have cleansed my heart in vain, and washed my hands in innocency. Behold the ungodly, who prosper in the world ; they increase in riches." Ps. Ixxiii. 12, 13. But we are cautioned against the indulgence of this dis- * position. " Fret not thvself because of evil doers, neither be thou envious against the workers JJ 421 A Treat isf on Hanking. of iniquity. For they ihall soon be cut down liko the ^ms-i, ami wither ns tln barb. Rwt in the Lord, and wait patiently for him : IV. t not th\-elf because ot who prtMpercth in hi* war, because of the mitn \\h l.rii.. paM. not thrself in any wi*e t<> cut . i..r ,-\il !... -is >hall In- <-ui oil": luu those that wait poo the Loni, they shall inherit tin- earth I < r \ct u lutlc while, ami i!.. hallnotbe: yea, thou 'shah dili^.-sitly >n-i r ln> plaaa,sad it -luill not bo." IV ;t. 1-10. I hare Men the wicked in great power, and spreading himself like a green bay- tree. Yet be paated away. and. lo, he was not : yea, I sought him, hut he could not bsftwnd." PsTiMTii. 35, 36. 3. Let those public companies which nre not successful e\amh,e the duties WO have described. one \>\ one, Mini ascertain if they have per- formcd them all. If they find they may justly be charged with omissions, " put away the evil of your doings ; cease to do evil ; learn to ii. well; seek judgment, relieve the oppressed, judge the fatherless, plead for the poor. If ye be willing and obedient, ye shall eat of the fruit of the land." Isaiah i. 16, 18, 19. If they find they have performed all their duties, and yet are not successful, let them not " be wenry in well- doing, for in due season they shall reap, if they faint not." Gal. vi. 9. 4. Let those public companies which are prosperous also examine how far they arc chargeable with a neglect of any of their moral or religions duties. "If weighed in the balance, and found wanting" (Dan. v. ~7), let them reflect on the transient nature of unmodified prosperity. " Behold, these are the unpodly, who prosper in the world ; they increase in riches. Surely thou didst set them in slippery places: thou castctlst them down into destrnc- tioo. How are they brought into desolation as in a moment!" IV Ixxiii. 12, 18, \d to denote the partnership or company who carry on the business of banking. Thus we say, the Bank of Scotland, the London and West- minster Hank, the Bank of Messrs. Coutts & Co. M. \Vlieu a company of this kind docs not consist of more than six partners, it is called a " Private Bank" ; but when the company coi of several hundred partners, it is called in Scotland a " Public Bunk," and in England a " Joint-stock Bank." 4. A private bank is usually managed by one or more of the partners, and all the partners are styled hankers. A public hank is managed by a principal officer, who is usually styled a manager. In England a hank manager is not commonly called a banker ; but in Scotland all managers of banks, and managers of branch banks, are called bankers. So mind, when I use the word " banker," you may apply it to either a private banker, or to a bank manager, whichever you please, as my observations will be as applicable to one as to the other. A banker is a man who car- ries on the business of banking ; and whether he carries it on upon his own account, or as the agent of a public company, it appears to me to make no difference as to his claims to be called a banker. 5. It is the business of all these banks to receive other people's money, and to return it upon demand. And when any person puts money into one of these banks he is said to open an account with the bank ; and when he has thus opened an account, and continues to put in and draw out money, he is said to have a current account, or, in London phrus gy, " to keep a banker." 6. In Scotland almost every man has an account of some sort with a bank. The rich man in trade has an account because of the facility of :'icting his operations; the rich man out of trade has an account be- cause he gets interest upon his lodgments, and he keeps his money in the bank until he has an opportunity of investing it elsewhere at a better rate I puMiihed this Section eparatclr, in the year 18.19, nmlt-r the tide of Minute*' Advice to the Middle Claw of "Pco. le aliout Kci-pin^ a Udukcr. liy a Prac- tical Banker.* I'Ji Ten Minutes' 1 Advice. of interest. The middle class of people have an account because of the convenience of it, and because they obtain the discount of their bills, and perhaps loans, on giving two sureties, which are called cash credits. The poorer classes lodge their small savings in the bank, because of the secu- rity, and because they get interest on the sums which are lodged. 7. But in London the practice of keeping an account with a bank is by no means so common as in Scotland. The London banks are banks only for the rich. The bankers require that every person opening an account shall always have a sum to his credit ; and if the sum thus kept is not what they deem sufficient, they will close the account. Hence the mid- dle class of people in London have no banker at all, and the poorer class lodge their money in the savings banks, where they get interest, which they would not get from the London banker. It should also be stated, that besides keeping a sufficient balance, a party opening an account with a London banker is expected to give a certain sum every year to the clerks. This is called Christmas money, and the object is merely to en- able the banker to pay a less salary to his clerks, at the expense of his customers. 8. But, within a few years, public or joint-stock banks have been es- tablished in London. These banks, or at least some of them, will allow you to open an account without promising to keep a large balance, or even any balance at all, provided you pay a small sum annually as a com- mission. This sum is fixed when you open the account, and it is about the same that you would be expected to give as Christmas-money to the clerks of a private bank. Hence people of moderate incomes, and those who can employ the whole of their capital in their business, are now able to keep a banker. These banks, too, give interest on deposits, whether the sums be large or small, as I shall hereafter explain. 9. The first public or joint-stock bank established in London was the London and Westminster Bank. This bank is in Lothbury, and it has branch establishments at No. 1 St. James's Square ; No. 214 High Hoi- horn ; No. 3 Wellington Street, Borough ; No. 87 High Street, White- chapel ; and No. 4 Stratford Place, Oxford Street. The success of this bank has led to the formation of several others. You will observe, that all banks which have branches conduct their business on the same terms at the branches as they do at the central office. 10. Since, then, the Scotch system of banking is established in Lon- don, why should not the keeping of a banker be as general in London as in Scotland ? I have stated, that, under the old system, those chiefly who were denied banking facilities were the middle class of people. Now, these people may be subdivided into two classes, those who are en- gaged in trade, and those who are not. I shall address myself, in the first place, to the former class. 11. Now, I ask you, why don't you keep a banker? You say you have been in business several years, and have never kept one. Of course, if no banker would take your account, you could not do otherwise ; but now there are bankers willing to take your account. But you say, you can do without a banker. Of course you can. The question is, not whether by possibility you can do without a banker, but whether you cannot do J J * 425 7Vvtt better with one. But you reply, it would not be worth nny bank< rN while to take your account That U fur his consideration, not for yours. The question fur you to divide is not whether your keeping a bunker would be of use to him, but whether it would be of use to yourself. I shall point out to you some of the advantages. PJ. In tin- first place, by keeping a banker your money will be lodged in a place of security. You have now 50 or 100, or perhaps some. time* jf'JOO, that you keep in your own house ; you take it up into your bedroom at night, and when you go out on Sunday you carry it in your pocket Now, you may lose this money out of your pocket, the till may be robbed by your servants, or your house may be broken open by thieves, or your premises may take fire and the money may be burnt. Hut even should you escape LOSS, you cannot escape ANXIETY. When you have a little more inon- y than usual, you have fears and apprehensions lest some accident should occur. Now, you will avoid all this trouble by keeping a banker. \'<\ The banker will not only take care of your money, but also of any thing else you commit to his charge. You can get a small tin box with your name painted on it, and into this box you can put your will, the lease of your house, policies of insurances, arid any deeds or other docu- s that require particular care. You can send this box to your banker, who will take care of it for you ; and you can have it hack whenever you like, and as often as you like. If your premises are in- sured, it is clearly improper to keep the policy on the premises : for if the house be burnt, the policy will be burnt too; and where then is your evi- dence of claim upon the insurance office ? 14. Another advantage is the saving of time. When you rrreivr money you will send it in a lump to the bank ; and when you pay away money you will draw cheques upon the bank. Now to draw a cheque takes up much less time than counting out the money that you have to pay, and perhaps sending out for change because you have not the exact sum. Besides, you sometimes hold bills which, when due, you have to send for payment ; now you can lodge these with your banker, who will present them for you. And when you accept bills, you will make them payable at your banker's, instead of making them payable at your own house. Now in all these coses there is a great saving of time ; an< . idea, your bills, from being made payable at a bank, will be convden >i more respectable. 15. Another advantage of keeping a hanker, is, that it will be a check upon your accounts. I need not speak to you, as a trader, of the impor- tance of correct accounts. Your banker's book will be an authentic P - ord of your cash transactions. If you make a mistake in your trade books, the banker's book will often lead to a detection of the error. If you have paid a sum of money, and the party denies having received it, you can refer to your banker's account, and produce your cheque, \\ hieh is as good as a receipt By means of a banker's account, you could i your receipts and payments, even after a number of years had elir, and hence disputed accounts could be readily adjusted, and error, from forgctfulness or oversight, be speedily rectified. f Ten Minutes' Advice. 16. I could mention several other reasons why you should keep a banker.* But what I have said will be enough to induce you to make a trial ; and when you have once opened an account, you will find so much convenience from it, that you will require no further reasons to induce you to continue it. If it should not answer your expectations, you can, whenever you please, close it again. 17. Now, then, as you have made up your mind to keep a banker, the next thing is to determine at what bank you will open your account. On this point I must leave you to make your own choice. All the PUBLIC BANKS issue prospectuses, containing a list of their directors, the amount of their paid-up capital, the names of the bankers who superintend their respective establishments, and their rules for transacting business. You can get a prospectus from each bank, compare them together, and please your own fancy. But if you have no other grounds for preference, I ad- vise you to open your account with the BANK or BRANCH BANK that is NEAREST TO YOUR OWN PLACE OF BUSINESS. You will often have to go or send to the bank, and if it be a great way off, much time will be lost, and you will at times be induced to forego some of the advantages of keep- ing a banker rather than send to so great a distance. On this account, let your banker be your neighbour. Recollect, time is money. 18. There is no difficulty in opening an account. You will enter the bank, and ask for the manager. Explain to him what you want to do. He will give you every information you may require, and you will re- ceive, without charge, a small account book called a Pass-book, and a book of cheques. I advise you to keep these two books, when not in use, under your own lock and key. 19. You now require no further advice from me, as your banker will give you the most ample information respecting the way of conducting your account. Nevertheless, I may mention a point or two for your own government: Do not depend entirely upon your banker's Pass-book, but keep also- an account in a book of your own. Debit your banker with all cash you may pay into the bank, and credit him for all the cheques you may draw at the time you draw them. Send your Pass- book frequently to be made up at the bank ; and when it returns, always compare it with your account-book. This will correct any mistake in the Pass-book. Besides some of your cheques may not be presented for pay- ment until several days after tfiey are drawn; and if, in the mean time, you take the balance of the banker's Pass-book, you will seem to have more ready cash than you actually possess, and this may lead you into unpleasant mistakes. 20. When you lodge any money at the bank, always place the total amount of the cash and your name, at full length, upon the outside of the parcel, or on a slip of paper. The cashier will then see at once if he agrees with your amount. This will save time, and prevent mistakes. 21. Be always open and straightforward with your banker. Do not * The reasons assigned here have a reference chiefly to London banking The ope- rations of country hanking are familiarly described in " The Anatomy and Philosophy of Banking; or, the True Character and Value of Banks briefly explained to the Middle Classes of Society. By James Stradian." (Groombridge, publisher.) 427 .' represent yourself to be a richer man than you :> r banker any bills that are not likely t.> be ri-.vn:.\i.i.Y paiii uli.-n dm ; and should tiny !< uii|>aid :i:..i returned to \uu. pa\ l*y. ' .nt ; ilia! draw cheques ii(iank- -:!a!e l : .stS yOU 8J.'. 23. Should you bo dissatisfied with any tiling connected with yon: >.-nr complaint to the BA-. ill your communications be made in rr.Kso.v, rather than l.\ u But do not stay long at one inters u. Make ni observations atM>ut the weather or the news of the day. Proceed at once t<> tin- hi. are come about, ami when it is settled, retire. This will save your Lmk- . and give him a favorable impression of your character as a man of business. If you are in partnership, besides opening an account with your banker in the names of the firm, you should open a private account fur self, that your personal a flairs may be kept separate from tlm the partnership. Or if you are. in an r\ i business, and have a large family, it is advisable that you open a n with your banker in the nam- of your \sife, that your trade payments am: house ho! . may not be mixed up together in the >ame aeeoiin'. I is a good way of ascertaining the exact amount of your fam penditure. v!l. If you are appointed executor or aii_ r n< '" an e>tate, or Ix'c.ome treasurer to a public institution i^r e!:aritah!e si.eii-t\. ;-arate ac- count with your banker for this oilier, and do rot mix other people's moneys with your own. This will prevent m <1 confusion in your accounts. These separate a my ! I:"pt still more y tlie bank will at present be at the rate of 2 per cent ; that is to say, after the rate of 2 upon every 100 for a year. 84. Upon sums above 1,000 the interest allowed is sometimes more times leas than 2 per cent., according to the value of money, that is, according to the rate at which the hankers can employ it agtui ; and a few days 1 notice is usually required before the money is withdravn ; but upon sums under 1,000 the rate of interest varies less frequently, and they are always repayable upon demand. :t.~i ^ -a \\ill be surprised to find how the desire of lodging money in a bank will grow upon you. When you had the money in your pocket, you were anxious to find reasons for spending it. When you have placed it in the bank, you will be anxious to find reason? for not spending it All habits are formed or strengthened by repeated acts. The more money you lodge in the bank, the more you will desire to lodge. You will go >n making additions, until, at last, you will probably have acquired a sum that shall lay the foundation of your advance to a higher station in society. 430 Indf.x Reading. SECTION X. INDEX READING. THIS book is now brought to a close. Our aim has been to put into It such matters as shall be practically useful. We have endeavoured to render it more useful by making an Index. We shall now point out the uses of this index. By means of an index we can refer to any thing that we remember to have read. This facility of reference is a great advantage. Without it we may have to make a long search, and to read over a good many pages, before we find the page we want. An index is also useful in ena- bling us to call to mind those parts of a book that we have forgotten. After having read through a book, if we read through the index we shall be reminded of parts that would otherwise have escaped our recollection. And if we continue an occasional perusal of the index, we shall impress the whole substance of the book on our memory. An index will often bring together those parts of a book in which the same subject is discussed, and thus we shall obtain a fuller knowledge of the subject in all its bear- ings and relations than we should obtain by our reading without the index. An index may be employed as a means of self-examination. If the index does not suggest to the mind of a party the main ideas to which it refers, he must have read the book very inattentively, and he has yet more to learn respecting the subject discussed. The index will thus be a test of his attainments. To render the index more useful in this respect, I have made some of the references in an interrogative form. The index may thus be made to serve the purpose of a catechism. I advise the young student in practical banking to endeavour to answer these questions without referring to the book, and to answer them aloud. By this means he will impress the matter more deeply on his mind, and at the same time acquire a facility of expression. An index may be rendered useful, not to those only who have read the book, but to those who have not read it, and who never will read it. The index contains a syllabus of the work. Under a single word is sometimes placed a summary of the facts and principles of a whole section. We may thus become acquainted with the substance of a book in a short space of time. It is true that in this railway mode of obtaining knowledge we must forego any gratification that might arise from the style or the illus- trations. But the exercise would be profitable. In this way reviewers and others are able to acquire a good knowledge of a book, and to form a fair opinion of its merits, without reading many pages consecutively. But without an index this cannot be done, either so well or so rapidly. Intelligent men do not wish to read through a large book on a subject with which they are pretty well acquainted. They desire to refer to those ooints only on which their own information may be deficient, or on which 431 A TVeotiM on Banking. they would desire to know the sentiments of the author. This they can easily do by means of on index. Men in business, too, must husK-md their time, and they can afford to read only those parts of a book \\hi.-h tl .. > deem the moat interesting. They may he guided to those parts by means of an index. Tin-re are certain states of body and of mind in which u man is not disposed for continuous reading. At such a time it is r Tn -sh- ing to saunter over an index. Some word may catch the eye, or s<>m< new idea be excited in the mind, ami the faculties may be at once enliv- ened and invigorated. In this kind of intellectual loitering we may chance pick up in our path a (lower or a pebbh-th.it shall awakm tin- spirit of inquiry, set in motion our powers of investigation, and lead the mind into a course of agreeable and profitable meditation. 432 Appendix. APPENDIX. THE following paragraphs were omitted : To the statement of the affairs of the bank at page 173, add the follow- ing note : Those joint-stock banks that have branches make out a similar statement every week. It comprises the balances of the General Ledger at the head-office, and of that of each branch. The balance-sheets are printed, and are bound together beforehand, so as to form a book ; it is called the Statement Book, and is laid before the directors at their weekly meetings. Add the following to the end of the section at page 183 : A balance-sheet of the affairs of a commercial house is made out in much the same way as that ef a bank. The liabilities are placed on one side of the account, and the assets on the other. The items of which each side is composed will vary according to the nature and extent of the business. Many commercial balance sheets have unfortunately been recently brought under the notice of the public ; most of them, as well as the annual balance-sheets of some of the joint-stock banks may be found in the pages of the Bankers' 1 Magazine. THE BANK OF FRANCE. The following evidence was given by the late Lord Ashburton, before the Committee of the 1 House of Lords on Commercial Distress in 1848 : " Have you any statement which you are desirous of making to the committee of information received by you relative to the proceedings of the Bank of France ? " Having observed that the committee were desirous of knowing some- thing about the construction of the direction of the Bank of France, and of the conduct of that bank with respect to the several circumstances which have been matters of inquiry here connected with the Bank of Eng- land, I took the opportunity of making inquiry of a gentleman who was in London about ten days ago, who was a director of the Bank of France, and who would readily have come and given evidence himself if he had no tbeen under the necessity of immediately returning to his own country. The inquiry I made of that gentleman related, first of all, to the constructipn of the direction of the Bank of France, and to what extent that direction was considered to work well. Then I made inquiry upon some of the points more immediately connected with the subject of our inquiries, namely, the conduct of the Bank of France with respect to its discounts, K K 433 A Treatise on Banking. with respect to the charge ut and with respect to any limitation or regulation that may !>< put upon tin* o|>enitions of tin- hank analogous In those wliirh an- imposed upon tin- transactions of our own lunik. I will first of all state to the committee the facts with revp.-.-t to the. con- struction of the bank direction. Thr Mank of France, as prohahly most of your lordships know, has ;nco. 1803; it was estahlished quite at the beginning of the power of Napoleon, and is constituted to this day under the same administration ; and I think it may he stated, that under nil the different variations of government, and the difficulties through which that country hat passed, the management of the kink has been singularly successful and fortunate. There has been at no time any suspension of its payments or any material difficulties of any kind ; and it seems to have answered perfectly well the object for which that hank, like our own, was instituted, namely, as a bank to give proper facilities to the circulation and commerce of the country, and at the same time to be the bankers of the Government, and to give every proper and legiti- mate facility to the operations of the Government. The direction is formed in this manner : There is, first of all, a governor, who has a house and 60,000 franca a year. There are then two sub-governors, each with 30,000 francs a year. The governor and sub-governors arc both named by the Government, and, it is understood, removable by the Government, but in point of fact they never are removed. The present governor, Monsieur D'Argout, is the third governor of the Bank of France in forty- five years; so that it has been generally considered that, though legally removable by the Government, practically they have not been removed Then, besides this governor and two sub-governors, there are three re- ceivers-general. Your lordships are probably aware what the position of receivers-general is in the financial economy of France. Those three receivers-general are selected by the proprietors out of the class of the receivers-general ; but the receivers-general are naturally more or less connected with the Government and finance department of the country. There are then three censors, who are to be elected from the * Etnt In- dustrie! ' of Paris, what we should call the manufacturers of Paris. It is so regulated by the charter that they must be taken from that class of persons ; but although they are called censors, I do not find that they have to perform any duty in the direction but the same which is performed by the other directors. Then in addition to those there are twelve ordi- nary directors, elected in the way in which our bank directors are elected. 44 Arc the directors generally paid ? " None of them are paid but the governor and the two sub-governors, except that there is, I think, ten francs paid upon each attendance, mere- ly for the purpose of marking the attendance of persons to their duty, but no amount of payment that can be of any importance. The twelve di- rectors are taken from the body of merchants, bankers, and leading per- sons at Paris, at the discretion of the stockholders. That is the constitu- tion of the Bank of France. Upon making inquiry of the gentleman I have mentioned as to the system of management, he told me that the real detail of the management of the bank is mainly with the two sub-govern. 434 The Bank of France. ors. They are stated to be very able men, thoroughly acquainted with all the circumstances of Paris, and all the persons likely to come to the bank for business. And, in short, upon them seems to devolve mainly the duty of attending to the details of the management of the bank ; and the directors themselves seem to be more checks upon those sub-govern- ors, than to be themselves the managers of the bank. At the same time the directors have the power, which the directors of our bank have, to vote and to decide upon any measures that are before them. This gen- tleman stated to me that he considers the system to work well ; that there is no complaint of it. He does not find that the governor and sub-gover- nors pursue any interests of the Government as against those of the bank and of trade, and the power which they have with the directors is a suffi- cient check ; in short, that they have nothing material to complain of in the administration. So much for the direction of the bank. Then I pro- ceeded to inquire upon several points relating to the management of the affairs of the bank ; and first as to the charge of interest. The legal in- terest in France is 6 per cent, for moneyed securities, and 5 per cent, for land. It is limited, as the interest of this country is limited, to 5 per cent, for mortgages upon land, and 6 per cent, as the maximum of legal interest for any purpose. The transactions of the Bank of France may be said to have varied very little indeed from the limits of 4 to 5 percent.; they never exceed 5, and they have hardly ever been under 4. Un- der all circumstances, they have kept that equable rate of interest for their discounts and for their general transactions. I should state that the discounts of commercial paper by the Bank of France, so far from being insignificant, as has been intimated, are in reality very large. I take it that upon the average of years the discount of commercial paper by the Bank of France, is larger than the discount of commercial paper by the Bank of England. They make no distinction between any qualities of paper ; all paper is done at the same rate ; but they rather favor what they call the paper connected with the common trade of the place. Therefore a much larger portion of their discounts is in small bills in the regular trade of the place, upon which this gentleman says the loss was very insignificant indeed ; that paper usually having three signatures upon it, and being founded upon real business, is very seldom attended witli any loss. What I have stated with respect to the interest that the Bank of France charge is in answer to a further question which I put, whether they regulated the amount of their discounts at all by demanding a high- er rate of interest, as our bank has done of late years. He' says they have not done that on any occasion ; that the rate has remained, as I have stated, uniform, between 4 and 5 per cent., and they never attempt to lessen the applications by asking a larger rate of interest. " Have they any legal minimum of interest ? " No ; they have no legal minimum of interest ; but when the inter- est comes down very low they consider that a symptom that bank ac- commodation is not required. " Though they do not alter the rate of interest, do not they vary from time to time the rules with respect to the echeance of bills ? 435 A Trtalise on Banking. i'hnt I cannot state. Then IK- <-at.'d further that I..- 1, ,,v ,\: any time of their refinum tin- common trade bills nf tin- conn- to regulate the state of their a Hairs they do it by in- creasing or diminish m;.' what tin y may hold nf public securities, hut never reduce or materially vary their transactions with the merdmi, the I'hen in what sense rim they be said to favor one particular des- cription of pm . -I that they rutlier favored one sort <: per. In what way do they favor it ? They favor the paper of what I should call legitimate business, pnper connected with the real ordinary trade of the country, in pref- erence to the bills of stock-johliers or large speculators. i'iien in order to give effect to that distinction they must reject paper " Undoubtedly ; but it is the paper of ordinary trade that they never Have they any rule as to the length of bills ? " I cannot State what their rules an- in this re-peet. Then I have only lastly to state that there is no limitation as to their issues by Inw, nor is thi rulated limitation among then ,<-r than what :. fmm their own discretion from day to day as they come to manage their JUn, In th- of their discretion has not the fact been that the amount of bullion kept by the Hank of I IK -en very lai v king, I believe it has. This gentleman stated to me that they had never at any time been under any apprehension as to their ability to pay their notes, though undoubtedly we, looking at the returns, should think that their condition was rather (]uestional>le. You cannot state what proportion the amount of bullion in their hands has generally borne to the numlx-r of notes they have, issued? I am not able to answer that myself; but a return is regularly made; it is very easy to know that. 44 Do you know in point of fact that though it is called the Hank of France, their notes were not current throughout the whole of France ? "Yes; their circulation is very much confined to Paris; but at the same time, nine tenths of the business of F; ;he business in our own country, is done by bills upon Paris, and Paris really is the heart of the whole circulation. I have only further to state, that of ;\.< y have had branch banks, as our bank has had; hut : the directory did not think favorably of the working of those branch banks; he thought that they had not \x en profitable to tin in, and that had mther disturbed their circulation. g the grr:i of the time to which your ob*< :iv applied has not the. law confined them to a minimum note of f)(;0 francs? is only lately that they have corn- f 100 fau i at amount of securities they have generally held ; what we should call Government securii ' That is stated in the returns which are periodically pub! 44 Supposing that the natural value of money in France w;:s (\ per cent. The Bank of France. and that the ordinary market rate of interest was 6 per cent., does your information enable you to state to the committee what the Bank of France would do in order to answer the demands which must be made upon it if it maintained its own rate of discount at between 4 and 5 per cent. ? " I should think that if the Bank of France limited their interest to 5 per cent, they would, except under very extraordinary circumstances, guide and regulate the general interest of the place, and that under those circumstances they would do the whole of the real commercial paper that is presented. What is more singular, the banks in America never go be- beyond the legal interest. None of the banks in America discount at a higher interest than 6 per. cent., although the market rate of interest in that country is very often 10, 15, and 18 per cent. " What check do they apply ? If they do not impose a restriction by raising the rate of interest, must not they impose some other restriction, either in the date of the bills or in the securities ? " No, it does not necessarily follow ; because those variations in the interest do not materially alter the real business connected with drafts from Lyons and Havre and other places, and the paper connected with the real business of the country. If Mr. Rothschild or any great person were to send them in a mass of paper, for the purpose of taking advantage of the rate of interest, they would not do it for him. When I say they do all the paper sent in, I should explain that they distinctly make that condi- tion, that it shall be paper resulting from the real trade of the country, and that seldom materially varies. " What is the nature of their relation with the Government ? Do they receive the Government deposits and securities ? " It is as nearly as possible the same as that of our Bank of England. " Do they pay the dividends on the French rentes ? " No ; they have nothing to do with the dividends. " They are not liable to be called upon by the Government to advance money for that particular purpose ? " Yes ; if the Government want assistance they stand exactly in that respect in the same relation that our bank do to our Government. " Does their charter require them to make advances of that kind when demanded, or is it optional ? " It is optional. " They may act just as they do with the general trade of the country ? " Yes. They stand in exactly the same relation to the Government as the Bank of England does, except that they have nothing to do with the payment of the dividends ; but they hold the deposits of the Government, and in fact are the bankers of the Government. " Is it optional with them to pay their notes in gold or in silver ad libitum 1 " It is optional to pay either in gold or in silver, but of course they pay only in silver at present ; there is a premium at present upon gold of about 8 per cent., which has not been known for a long time. " What has been the lowest denomination of note that they issue ? " I think it is now 100 francs. K K * 437 A Treatise on Banking. 44 What is it in ordinary circumstances ? ** Until lately thm- were no notes under 500 francs. ^ ill YOU explain a little more fully the statement you made as to the amount of discounts afforded by the Hunk of France being larger than that afforded by the Rank of England, because the transactions of the two institutions certainly are not equal ? If we look back to the returns we see for a long time about the same amount of discounts of bills by the Bonk of England, 2,800,000, 2,700.000, 2,800,000, .2,900,000, and so on. If you take the av- erage of the last ten years, I think you will find the discounted bills larger in amount in Paris than here. " Have the Government any power, not merely of supervising the acts of the bank, but of compelling them to adopt any steps that they may think fit? 44 No ; they have not. The bank are perfectly independent, and that independence has been respected even under Napoleon's government. \V;th respect to those persons called censors, whajt are their functions in the bank ? Are they chosen by the bank proprietors ? 44 They are chosen from among the manufacturers of Paris. It was in- tended to provide that there should be three at least of the class of manu- facturers of Paris in the direction, and three of the receivers-general. 44 Are the receivers-general official members ? 44 1 am not quite sure whether the receivers-general were named by the crown, or whether they were elected by the stockholders from the general .!\. 44 They are the receivers-general of taxes ? 44 They are ; there is a receiver in each department." Ntr*. On the night of UM 15th March (1848), the Provisional Government consented to the twoe of an edict erompthig the Bank of France from the payment of iu notes in ipecie, rendering the pre- natal ton of theae note* In payment throughout the territory of France a legal tender; fixing 350 mil- lidp* of franc* a* the maximum of the outstanding circulation of the bank at one time ; authorizing the M*oe of note* for 100 franca (4) each; and finally directing the publication every week, in r, of a (nil abetract of the bank'* balance aheet. &j*trftmt decree* of the Z7th April, 1848, and 3d May, 1848, authorized the Incorporation with the Bank of France, of the nine "departmental bank*" (that I*, local joint-ttock bank*), at Bourdeauz, 9mm, Mian*, Lyona, ManeiUei, Havre, Lille, Toulouae, and Orlean* ; and extended the privilege of the BaalrtploB* to UM MMM of theee bank*, by augmenting the mar/mum limit of the total circulation of :he Bank of France, and all it* branches, from 380 million* to 402 million* of franc*, of from 14,000,000 Marling to 11,000,000 terling. OB UMflUi AugoK, 1800, the .National Aaaembly of France gave the aanction of a definite law to a pro- poaal Mtahud by M. Oonin to the name of a Committee, In favor of the immediate resumption of pay- ment* m epecie by the Bank of Franc*. Few men in France have dktinguUhed ihemaelvea more than M. Ooata to UM aifinri of all the be* Inauiuuooa of hta-country ; and it will be univenally fell that the liHiaAprttnn of a meaavre of eo much delicacy and Importance could not have been undertaken by any r of UM AM*mfaly having a bttler title than M. Oouln to connect hi* name with the reeattblUh- L of UM cndk clrf**lln*J of Franc* upon a aound bui*. London BanAeri> Mugazine, Sept., I860 The Bank of France. THE CONDITION OF THE BANK OF FRANCE ON THE TTH OF JUNE, 1849. DEBTOR. Fes. C Capital of the Bank, . . . * ; , . . . 67,900,000 Ditto of the ex-Departmental Banks, 23,350-,000 Reserve of the Bank, . 10,000,000 Ditto of the ex-Departmental Banks, 2,980,750 Reserve of the Bank in Landed Property, 4,000,000 Bank Notes in Circulation, 362,574,900 Ditto of the Branch Banks 29,221,600 Bank Notes to Order, 920,941 75 Treasury Account Current Creditor, 23,591,14245 Sundry Accounts Current, 109,762,12454 Ditto in the Branch Banks, . . 29,467,205 Receipts payable at Sight, 3,955,300 Ditto in the Branch Banks, 1,212,782 Draughts of the Branch Banks payable by the Bank, .... 6,745,395 61 Ditto of the Bank payable by the Branch Banks, .... 4,697,068 Dividends payable, 203,369 25 Liquidation of the Algiers Branch Bank, 180,952 44 Sundry Discounts anticipated, 3,574,784 09 Ditto of the Branch Banks, . . ' '.. 1,991,956 Re-discounted during the last half-year, . . . . . . 246,109 85 Ditto in the Branch Banks, 460,661 Sundries, , 412,355 86 Total Francs, . . . ' . . . . 687,449,397 84 CREDITOR. Fes. C. Cash in hand, 204,432,108 15 Ditto in the Branch Banks, . . 129,579,652 Commercial Bills Overdue, 172,390 6 Commercial Bills Discounted, but not yet due, of which 14,556,742f. were received from the Branch Banks, 47,680,034 90 Ditto in the Branch Banks , . . . 78,395,013 56 Advanced on a deposit of Bullion, 10,770,400 Ditto by the Branch Banks, 1,304,193 Advanced on French Public Securities, < 25,064,517 40 Ditto by the Branch Banks, . . . 1, 438,405 ' Advanced by the State on Treasury Bonds of the Republic, . . 50,000,000 Advanced by the State on the Loan of 150,000,000f., . . . 50,000,000 Loan of 10,000,000f., to the city of Paris, 1,000,000 Loan of 3,000,000f., to the city of Marseilles, 1,000,000 Loan to the Department of the Seine, . ... . . 3,000,000 Government Stock reserved, . . .. . r ' A . . . . 10,000,000 Ditto disposable, 42,581,488 13 Vested in Public Securities by the New Branch Banks, . . 12,770,541 30 Hotel and Furniture of the Bank, 4,000,000 Landed Property of the Branch Banks, 2,284,653 Interest in the National Discount Office, ...... 200,000 Ditto of the Branch Banks, . 230,000 Commercial Bills protested, and not yet honored, .... 5,997,353 39 Ditto in the Branch Banks, 3,557,217 Expenses of the management of the Bank, 571,020 86 Ditto of the Branch Banks, 486,871 Sundries, 924,538 95 Total Francs, 687,449,397 84 439 A Treatise on Banking. No. IV. A Law relating to Banking in New York. The following " Act, to amend an Act entitled ' An Act to abolish tho Office of Bank Commissioner, nml for other Purposes, passed April iNh, 1K43,'" passed the Legislature of New York, December -Itli, 1847: The people of the State of New York, represented in Senate and As- sembly, do enact as follows : 1. The third section of tho Act entitled " An Act to Abolish the Office of Bank Commissioner, and for other Purposes," passed April 18th, 1843, is hereby amended, so as to read as follows : It shall be the duty of the comptroller, secretary of state, and treasurer, on or before the first Tuesday of January, April, July, and October in each year, to fix upon and determine some Saturday in the quarter of the year then ended, in respect to which every incorporated bank, bunk- ing association, and individual banker in the State, shall make a report of the character hereinafter specified. Immediately after each determi- nation of such Saturday, the officers hereinbefore named shall cause no- tice thereof to be published daily, for six successive days, in such news- paper published in the city of Albany as shall for the time being have the publication of legal notices, under the Act entitled " An Act to Pro- vide for the Public Printing," passed March 5th, 1846, or shall serve a copy of such notice upon each incorporated bank, banking association, or individual banker in the State, by delivering the same to some officer or clerk thereof, at their respective places of business, or by depositing the same in the post-office, directed to each of such banks, banking associa- tions, and individual bankers, or some officer thereof, at their places of business respectively. It shall be the duty of every incorporated bank, banking association, or individual banker in the State, on or before the first day of February, May, August, and November, of each year, to make and transmit to the comptroller a quarterly report, which report shall be made on the oath of the president and cashier, and shall contain a true statement of the con- dition of the bank, banking association, or individual banker making such report, before the transaction of any business, on the morning of the day specified in the notice of the comptroller, secretary of state, and trea- surer, next preceding the date of such report, in respect to the following items and particulars ; to wit : Loans and discounts, overdrafts, due from banks, due from directors of the banks or banking associations making the report ; due from brokers, real estate, specie, cash items, stocks and promissory notes, bills of sol- vent banks, bills of suspended banks, loss and suspense account, capital, circulation, (distinguishing that received from the comptroller from the old outstanding bills,) profits, amount due to banks, amount due to indi- viduals and corporations other than banks, amount due to the treasurer of the State, amount due to the commissioners of canal fund, amount due to depositors on demand, amount due, not included under either of the 440 Banking in New York. above heads. And it shall be the duty of the comptroller to publish such reports together in the newspapers printed in the city of Albany, in this section before named, accompanied with a summary of the items of cap- ital, circulation and deposits, specie and cash items, public securities and private securities ; and the separate report of each bank, banking asso- ciation, and individual banker, shall be published in a newspaper pub- lished in the county ; if a newspaper is published in the city or town in which any bank is situated, such publication shall be had in such papers in which such bank, or banking association, or banking-house of such in- dividual banker shall be situated, at the expense of such bank or bank- ing association, or individual banker. 2. Section four of the Act in the first section of this Act referred to, is hereby amended so as to read as follows ; to wit : The comptroller shall publish the reports and summary required by the third section of this Act, together in one paper, on or before the 25th day of August, November, February, and May, in each year ; and the expense of such publication shall be defrayed by a percentage assessed upon the capital stock of all the banks, and banking associations, and in- dividual bankers doing business under the " Act to Authorize the Busi- ness of Banking," passed April 18th, 1838, or of any Act* amending the same in the said State ; and if any such bank, banking association, or indi- vidual banker shall fail to furnish to the comptroller its quarterly report in time for such publication, it shall forfeit and pay to the comptroller the sum of one hundred dollars, to be applied by him to the expense of publish- ing the quarterly reports. And if any bank, banking association, or in- dividual banker, shall neglect or refuse to make the quarterly report re- quired by the third section of this Act, for two successive quarters, it shall forfeit its charter (if an incorporated bank), and its privileges as a bank- ing association or individual banker, if organized or doing business under the Act of April 18th, 1838, in this section before referred to ; and every such bank, banking association, and individual banker may be proceeded against, and its affairs closed, in any manner now required by law in case of an insolvent bank or banking association. 3. Whenever, in the opinion of the comptroller, there shall be good cause to report that any bank, banking association, or individual banker, has made an incorrect or imperfect quarterly return, or is in an unsound or unsafe condition to do banking business, it shall be his duty to have the books, papers, and affairs of such banks, banking associations, or in- dividual banker, examined by some competent person, to be designated by him, who shall examine fully into his books, papers, and affairs, forth- with, and report to the comptroller, on oath, the result of such examina- tion ; a copy of which report shall be forthwith published, in the manner prescribed in the first and second sections of this Act, in respect to the publication of quarterly returns. The reasonable costs and expenses of every examination shall be defrayed in the manner prescribed in the second section of this Act for paying the expenses of publishing quarterly returns. $ 4. All individual bankers, and all banking associations, which are now or shall be hereafter engaged in the business of banking, under the 441 A Trtatitt on Banking. provision* of the Act entitled " An Act to Authorize the Business of Banking," shall be subject to taxation on the full amount of capital ac- tually paid in, or secured to be paid in, as such capital, by them severally, at the actual market value of auch securities, to be estimated by tin- comptroller, without any reduction for the debts of such individual banker, or banking association ; but in no cose shall the capital of any such bank- ing association, or individual banker, be estimated at a less sum than the amount of circulating notes deli\<-red to such banking association, or indi- vidual bunker, and not returned to the comptroller ; and, in cose the cap- ital of such banking association has been reduced by the surrender of anv securities to the stockholders thereof, and tho certificates of stock held on account of such securities being surrendered to such banking as- sociation and cancelled, such banking association shall not be subject to taxation upon such part of its capital. $ 5. Nothing in this Act contained shall apply to any bank or banking association which has reduced its capital stock in violation of the twenty- eight section of an Act entitled " An Act to Authorize the Business of Banking," passed April 18th, 1838. The following is a summary of all the Banks in the United States : * BANK CAPITAL OF THE SEVERAL STATES. \.- New York, New Jenej, PenaerlTania, . Delaware. . . Maryland. . . Iiuict of Columbia, Virginia, North CaraUna, . South CuuUna; . -- M '- . I Touk, 7 './'<< '"'".! No. of Bankt. Bank Capital. Hunk Circulation. Bank Coin. .-.-.'1 u :i:.!~ mi 2,600,000 475,000 918,000 29 1,78 314,300 27 'i >.">o,000 187,000 966,000 130 17,00 3,00 147,800 63 11,189,000 909,000 878,000 49 In i<~ ( mi 6.410,000 638,000 Um,800 1 "> ;,| niM.ii 20.HII'.,, l^niiii.i 180,300 26 8,754 '."> 3,(HO,000 888,000 'J. ^.V ii i 1 63 1^ >;::, mi 11,980,000 7,au '.i Mil 9 1,440,000 800,000 200,000 675.KJO 84 '.l.nr-i nil t3,3,000 12,812,000 .M'MI 4 1,188,800 1 300,000 f 940,000 1,498.800 35 9,718.000 2,627,000 0,000 19 1,660,000 3,600,000 L.Viinn 639,100 14 1 7,700,000 f -^ '4 1 1 1 1 1 1 960,000 17 r>.:ci 'in 1 4,600,000 1 1,500,000 2 190 000 67 ? |>i mi 0,000 8,7; .--.in 26 10,180,000 -.,.!,.., 8,800,000 1,850,000 13 3..-" 807,600 6 789,000 1^1 lll 1,060,000 81 - \l\~, '!) t 6 600000 1 1,5(0,000 800,000 I 8,000,000 f 1,500,000 696,000 6 13,600,000 6,500,000 880,008 1 (00,000 t nn.OOO 1 80,000 r.-i .vn 6 1,904,0(0 2,400,000 1,600 1**) 175,000 1 900,000 t /* 000 1 60,000 305,000 1 896,000 t 10,000 II '0,000 ir.-.nu 1 800,000 1 300,000 1 100,000 86,000 , , . . . . . . . 860,080 . . . . . . . . . 866 899,061,200 8143,630,000 66,460,000 * In UM of Uw ubte poblUhed In the En-lih edition we Iwert a Utemmt brought down to the year *8II, from ncnl docmMOU, for which we an indebted to the Banker* 1 Magaiint, puUuhod at Bo* Um.-Am.PmA. t Kulmeied to part. 442 ALPHABETICAL INDEX TO THE SUBJECTS CONTAINED IN A PRACTICAL TREATISE ON BANKING, BY J. W. GILBART. The reader is reminded that he is advised to answer all references in this form without looking into the book, and aloud. See the Section on Index Reading. A book is described by stating its uses, how it is ruled, how the entries are made, and against what books it will mark. See page 155. ABOLITION of notes under 5. In Scotland, 330 ; in Ireland, 375. Abundance of money. Usually precedes a season of pressure, 62, 57 ; and follows it, 60. Acceptance-book. Describe it, 163. of a bill of exchange should not be written on the back of the bill, 30. Accepter or Acceptor of a bill of exchange. Which should we write? 10. Accommodation bills. In what cases a party can enforce payment, 36; how are they known? 21,40. Account current. What is the difference between an account current and a current account ? 164. , mode of opening one, 154. Accountant. His books should be a check upon the cash department, 131 ; his department, 137. Acts of Parliament quoted. Bank Charter Act of 1832, 233 ; Bank Charter Act of 1844, 233, 284, 288 ; Act of 1844 to regulate Joint-Stock Banks in England, 308 ; Joint-stock Companies Wind- ing-up Act, 1848,311 ; Hibernian Bank Act, 369; Act of 1845 for Regulating Banks in Ireland, 372. Addresses. Desirable to indorsements of bills of exchange, 30. Administration of the office, 126. Administrative functions in a bank. Their distri- bution, 107; by whom ought they to be exer- cised? ib. Advances. Different ways in which advances are made by bankers, 2. - on its own shares, no banking company allowed to do so that is formed under the new Act, 309. Advice book. Describe it, 163. journal. Describe it, 163. Age. Expectations of life at different ages, 27; of directors, 104; different tables of, 231; at which clerks are admitted into a bank, 129. Agreements with the Bank of England. Provi sions in the Act of 1344 respecting banks that had formed them, 288 ; a list of those banks, 289. Agricultural and Commercial Bank of Ireland, 372; their stoppage, 55; their mode of book- keeping, 117. Allotment of shares in a new bank, 203. Almsgiving. Kindness to the poor need not al- ways take this form, 410. Alteration. Material, in a bill of exchange, viti- ates the bill. 35 ; what is a material alteration < ib. Alterations. In deeds of settlement, how made, 301. America. Money table of the United States, 197 ; the par of exchange between, and London, 196; laws respecting the circulation of gold coins, 197 ; value of sovereigns in, 198; the expenses of sending gold to, ib. ; trade with India, 342 ; a summary of all the banks in, 442; pressure in, in 1836, 55. American dollars. How turned into pounds ster- ling, 191. securities. Large sums invested in, in 443 1838, 56. Amsterdam. Mode of ascertaining the relative value of gold at, 221. Amusements of a banker, 14. Analogy. Arguments from, the nature of, 391. Anderson, J. A., general manager of the Union Bank of Scotland. His opinion as to bankers holding their reserves in bills of exchange, 46. Angel. The name of an old English coin ; the origin of the application, 223. Annual dinner to clerks. A good practice, 401. Annuities grantel by the Provident Clerks' Asso- ciation, 229 ; on what terms they can be pur- chased at the savings banks, 230 ; Long Annui- ties, how a purchase of is entered in the banker's books, 191. Application for shares in a new bank. Form of one, 203. Apprenticeship. None required to carry on busi- ness as a banker, 1. Approaching failure. Symplons of, which a bank- er should observe, 27. April. The highest calculation of the country banks is in this month, 293, 294. Arbitration of exchanges. What is it? 194; ex- amples, 195, 201. Arrangement of counters and desks in a bank, 128. Art, Scriptural, of getting rich, 418. Artificial memory. Applied to figures, 199. Ashburton, Lord. His evidence respecting the Bank of France, 433. Assets and liabilities of a bank must, under the new Act, be published every month, 309. Assimilation of the currency in England and Ire- land, 337. Assistance in times of pressure. Great prudence necessary in granting, 59. Attendance, punctual, of bank clerks in the morn- ing, 140. Auditors. Under the new Act, two or more not being directors, must be chosen at a general meeting of shareholders, 309. August. The lowest circulation of the country banks is in this month, 293, 294. A Treaiite on Banking. A,-.-..', Or all UM bank* In the United e*< h bank In Ireland, WX Scotch, write "accepter," UMtead of -iceiMir.'* oTtblB of exchange. 10; todor- aUon'' nors frequently than ' indorsement," II ; UMJT iMk k*(Wy of their *yte of ax- vSSa . . . r t k. . UM English \h*4rbUle,a; and for on current aeeniite, HS; itiiin*ion. iA. ; aad for kftv capital, 390. fUss ioa Charte*. HI* otoamtloM on UN d tortty oT dark*. ITS. Bseo*, Lori HI* obMrrMtoM, applid to took- . MI The cmiiM of UM uilure of ,1111 i of, an MtaUoB of ttw clrcum- ounwi of UM party, ST. , ID. What I* it, and how performed, 153. .dally. How made, 169; tMtdi to the lnyrev**nnjt of UM clerk*, 146; weekly, 170; Btyovty. in. okoM. Exhibited at the grntnl meeting oT ehareholder* of joinl-atock bank*, 110; objec- tion toll, io. " f ' ' f IlllaMI reepsctiac. XM. sheet*. Form of one, 166; form of an- other, 1 7X Bank. The word derived frwn "banco," the Iu Itaa word for ' bench," I ; le It singular or plu- ral. 8; *uw the ease* In which It I* wed In the singular, and In which It is need In the plural. 6. , toe building. Should be In a reepecuble pan oTthe town, 196; should to a handsome .- ,'. Bv ;.,.,. :. ,- , . ... . lage* Of nomlftai c*(>ill, IUI ; provisions of UM MW Act with reference 10 capiu! : the capital of all the joiat-evock bank* la tin - of each of the >>int stock hank* In Lon- Am. *W; of each In the counter. 3l; of each In of UM bank* In Ireland, fie* Ire- Advantage* they derive from bank*, Case of need. What t* It 30. Cash. Origin of the word, 923. account with branch** How U It kept, 169. book. Describe It J 167. cro.hu. What are they ? 332 ; wherein do tbeydinV from overdrawn accounts ? 333 ; utility of, 333- 335 ; wherein they differ from diecounu, not adopted by the London and Westminster Bank, 965; form of bond. 210; ill- Biniehed in Scotland by the Act of 1835,328; their advantage*, 333; diminished in Ireland by the run* for gold, 3*X credit bond, forme of, 210. department, book* need in the. 155. Cashier'* department. 137 ; hi* qualification*, i* ; hi* deficiencies, 143 ; check* on their accuracy, 131. Cast, U>. or ea*t up. What I* it? 166; bow to do it well, lit, 175. Catechism. An Index may be ued as one, 431. Cause*. Of the (allure of joint-stock bank*, 113: taking over the naeound businee* of private banks, i*. ; making advance* on dead eecurity. 114; granting accommodation to parties engaged In speculative undertaking*, 1 16 ; a want of sys- tem and discipline in conducting it* affairs, 117; ' ; no provision a?inst contingencies, 1 19 ; defect* in the constitution of the bank, the ap- pointment of incompetent person*, or an unwise distribution of the administrative function*, 120; injudiciooa proceedings of meeting* of proprie- tor*, 199. Csuses of the prosperity of the Provincial Bank of ! . : H Certificate* of shares, form* of, 203-216. Chain rule. What U It? 194. fheege, small, obtained from bank*. 4. Character, personal, of parties. An element in a banker'* calculation a* to the credit they are en- titled to. ia Chartered bank*, 354 ; charter of the Bank of En* land. 232; of the Bank of Ireland, 356 ; ofbanJu In Scotland, 312-319; of the new joint-stock banks in g^ghn^. 309, 389. Check-ledger. Describe it, 180; advantage* of, . J of country bank*, 296. Lee* trouble to write one than to count out the money, ; oeefel In prorin* payment*. ; Boet net be drawn on a bank more than fif Uen mUe* dietaat, 3; ahtrald we write " cheque " or "cheek," 12, Che^oee. Are multiplied by the bneinee* of the oek Eacbaaxe, 6Vr*illty of croeeing, 258. - , .(!,-. .... M - clerk. Hie deefc, where to be placed, 138 ; hie qualification.. 198 ; hie dotlee, <*. Vehould not have nMKhmemMl labor. 144 : hi* office a good ' - ' ! (nr a r, 148; hie dotie* often per- by the banker, 149. MM. Fora of Ihoee ieened by the Lon- and Weatmineur Bank, 218. Cirenlailon. Wflkrent m**nln|r* of the word, 242 ; the Parliamentary meanlnt,37. Cltle*. Analogy between clUee and public eompa- ntee, 391. Claee of enclely from which bank clerk* are usually Aej lift ' Cl**e*i of MUe offered to a hanker for discount. 20. Claeslncalioa of account* according to the prlee- eton of the pantee, l. Uilhsm. Hie motion respertlnf joint- dock bank*, K) ; hi* queetlon* to th Uoventur of the Dank respecting the clearing, 983. Clearing. Between the London banker*. 909; In- craaae of, by the btwlneee of the Si i clearing belance-ihcet, XA; MM transaction* by each banker, iA. ; amount -i m each month, 867; book* connected with, 263; joint stock hank* excluded from, 981. between the Bank of England and the London banker*, 267. between the bank* at Newcastle upon- Tyne,90a hoties: The preeentment of a bill (Sir pay- ment there I* a legal preeenUnent, 36 ; operation* of the, described, m Clerk*. Their (election and appointment, 129 ; dis- tribution of their duties, lot ; amount of their ealarie*. i:; their securities, 135; the *y*tem of promotion, 136 ; the rule* of discipline, 139 ; their holiday*, Ml ; training of clerk* for higher office*, \44 ; chief clerk, where he should he placed, 128; hlsndon. It* formation, capi- tal, proflta, dividend*, and surplus funds, V!75 ; r.s prospectu*. 277. - Exchange Company at Glasgow, 350. Commission account* taken by tha London and WMtn.in.ner Rank, 266, 424. Commissions. How to calculate. 189. Committees. Of the Lord* and Common*, upon the abolition of small note* In Scotland and Ire- land, in 1826, extract* from their report*, 312, 335, 375. Committee of the Houee of Common*, on the Bank of England Charter, In 1832, 67; extract fn.in the evidence of Mr. Horaley Palmer, 63; ditu/, Mr. George Glyn, x'5l. of the House of Common*, on joint- lock hank*, in 1836, M ; extract* from their re- port, 3)1. of the House of Common*, on hanks of 446 Usue, In 1840, extract* from the author'* evidence before them, 240, 243, lft. of the Lord* and Common*, appointwl to inquire into the cause* of the dlstrees 64 ; of the Houee of Common*, reported in favor of the continuance of the Aa of 1A14, 65; of the HOUIM of Lord*, extract* from their report a* to the oauM of the distress of 1347, 64. Compensation. By the Aa of 1844, to bank* that issued Bank of England note*, 968. Composition for (tamp-duly on note*. How calcu- BE 1-- Consol*. The belt kind of Government securities for banker* to bold, 44 ; (houkl hold other stock IN ML Constitutional (ailing*, A banker should guard against. i:i. Convertibility of the bank note. What it mean*, 64 ; the Act of 1844 said to have *ecured it '/- Copland, Charles, manager of the Royal Bank of Ireland, formerly a manager In the Provincial Bank of Ireland, 370. Copper. It* specific gravity, bow coined, 196. Alphabetical Index. Corn merchants. Banka hare made great losses through advances to, 116. Correlative terms. Drawer drawee, payer payee, mortgager mortgagee, indorser indorsee, discount- er discountee, noder nodee, 30. Cotton, William, governor of the Bank of England iu 1844. His evidence as to discounting for country banks of issue, 291. Coulthart's Interest Tables, 188. Counterfeit coin. Less through banking, 5. Counters. Arrangement of, in a bank, 128 ; should at all times be properly appointed, 128. Country banker. How affected in seasons of pres- sure, 53 ; has greater facilities in obtaining in- formation than London bankers, 18. Country bankers. Advance money on a deposit of deeds. 26 ; make advances by way of overdraft. 23. banks. Circulation of, restricted by the Act of 1344, 236 ; opinions of the joint-stock banks respecting the country circulation, 357. department in a bank, 162 ; what books are kept in the, 163. private banks, 234 ; the principles of their administration, ib. ; the provisions of the Act of 1844, ib. ; the regulations imposed on such as are banks of issue by the Act of 1844, ib. ; the laws of the currency with reference to the coun- try banks, 292 ; examination of the author on the subject by Sir Robert Peel, 294 ; the clearing be- tween country banks, 297. Courtesy. Of managers, 106 ; of clerks, 400 ; of shareholders, ib. ; of directors, 402 ; of annual reports, 400. Credit-book. Describe it, 163. Credits on agents. How entered in the books, 167. Cross firing. What is it ? .27. Crossing of cheques. The uses of, 258. Currency and banking. " A Review of some of the Principles and Plans that have recently en- gaged public attention with reference to the Ad- ministration of the Currency," a quotation from, in reference to the principle of the Act of 1844, 62. Customers. A banker should get a knowledge of his, 17. books. Should be correctly and neatly written up, 143; are checked against the ledger, ib. Cutbill, Alfred R., manager of the Commercial Bank of London, previously sub- manager of the London and County Bank, 275. DAILY balance. Describe it, 146, 169. Danish bill of exchange. The form of one, 39. Dates. Bank of England commenced 1694, present charter to expire at the expiration of twelve months' notice to be given after the 1st day of August, 1855, 237. The London and Westminster Bank, opened on the Wth March, 1834, 259 ; the London Joint- stock Bank on t/te 21st November, 1836, 270 ; the Union Bank of London, on the 4th February, 1839, 274 ; the Commercial Bank of London in 1840, 275; the London and County Bank, in September, 1836, 277. of the establishment of all the joint-stock banks in England, 302; of those that have ceased 305,306. of the origin of the banks in Scotland, 315 ; of the provisions of the Act of 1845 in Scotland, 313; in Ireland, 352. . The Bank of Ireland commenced the 25th June, 1733; Provincial Bank in 1825; National Bank in 1331; Hibernian Bank in 1824; Royal Bank in 1836; Northern Bank in 1825; Belfast Banking Company in 1827 ; Ulster Bank in 1837. See these banks. . Act of HI 1 was suspended on the 2~}th Oc- tober, 1847, 247; suspension removed on the 23d November, 1847, 243. David. His gratitude and humility, 404. Day-book. Describe it, 157. Days. The number of, that Bank of England notes, of various denominations, remain in circulation, 189. Dead loans. How they arise, 20 ; cannot be called up in seasons of pressure, 58. security. Some banks have lost money by making advances on, 23, 114. Debt, National. The amount of, 51. Decision. Very necessary in a banker, 13, 107. Declarations of secrecy. Form of, signed by direc- tors and officers of joint-stock banks, 207. Deed of settlement, 205 ; provisions of, with re- gard to altering the regulations of the company, 301 ; as to the mode of conducting the business of banking, t'6. ; as to the degree of publicity to be given to the proceedings, t'6. ; as to the terms on which the company is to be dissolved, 3U2 ; provisions of, under the new Act, 309. of transfer. Form of, 216. Deeds lodged as security for loans. Rules to be ob- served respecting, 25. Defects of character in a banker, 13. Deficiencies of cashiers. How provided for, 143. Department of tellers, 136; of cashiers, 137; of ac- countants, ib. Deposit receipts. Form of, 213 ; use of, 429. Deposit-receipt-book. Describe it, 158. Deposits in a bank. Are reduced in seasons of pressure, 58 ; the system of, in Scotland. 336. Amount of, in each of the joint-stock banks of London, 230. Desks. Arrangement of, in a bank, 123. Difference between the pressures of IS'36 and 1839, 56. Diligence in business, a source of wealth, 417. Direction, or notice, left by a bank clerk when a bill is not paid on presentation, 32. Director. Should be a man enjoying public confi- dence, 102 ; should possess a knowledge of com- mercial business, 103; should be a man of strict integrity, ib. ; a man of influence and respecta- bility, ib. ; in good pecuniary circumstances, 104 ; should have time to give attention to the bank, ib. Directors. At first they had no banking experience, 121 ; were chosen because out of business, ib. ; evil of managing directors, 122, 348 ; and secret committees, f22 ; provisions of the new Act re- specting, 309, 382. of the Bank of England. Their number and qualifications, 83; have always been liberal towards the clerks of the establishment, 136. Ireland, 356, 382. Discipline. Rules of, in a bank/118, 139. Discount of bills. Mode of calculating, 184. Discount balance book. Describe it, 16. 179. -journal. Describe it, 159. - ledger. Describe it, 159. register. Describe it, 159 ; abolition of, Discounting bills. Lar?e part of a banker's busi- ness, 20 ; classes of bills offered for discount, ib. ; rules of, 21 ; points of examination with refer- ence to bills discounted, ib., 28. Discrimination of character. A necessary qualifi- cation in a banker, 15. Dissolution of a banking company. How made, 302. Dividends, high. Bankers should not expect them under the Act of 1844, 80. - rate of, paid by the joint-stock banks of London, 230; by the country joint-stock banks, 302 ; paid by each bank in Scotland, 315. to calculate, 189. 447 Division of labor. Necejjary in a bank, 131, 174. A TVeotfM on Banking. Divtee Chancier. A toreJy exhibition of UM, In UM word*. He hath pleasure IB the prosperity of hM servant*," 4Ut A banker BhomU not make ad van the accoin- *TW* ed with the IbreWpMi of B expectation of life, 831 PnsjUi Dlrtf* No*. Tbe motto of the City I ! *V; iheawdof eMUement, 806; bond* of escu- for the offlcer*. 16 ; declarationa of secrecy, : letters of guarantee, 80S ; letters on lodging deeds or other **cunt tea, 809 ; memorandum of aftMOMnt with reference to deeds. 16. : cash credit bond, 810: letters of credit. 818; deposit rscMpu. 813: requiiltton notes, it. ; letter call- Inf B general meeUBf, 816; special contracts, 8lt; BMlce* of calls, it ; certlncat** of shares. . ; deed of transfer. 818 ; circular note* Issued by UM Liae'ln aad Westminster bank, 16. ; a ta- bis showing ths relative value of gold In London and Pans, Hamburgh Bad Amsterdam, 221 : a i . . : band of the OearBBte* Society, 884; Provident " Bt Fund, 886; term* of emving* 830; companUve view of the of Doable *try, book keeping by. Daecrib* It, 181. Draught, or draft, which hould w. write 1 1 1. Dmdia Bank. Extract from their proepactut, 321. PaiCfc bill at MClMiifa. Tbe form of one, 39. total. EoIMi OKMM7 raducwl Into, 2O. : i . : i - of public eomnanlaa, MS. 1. Dutiee of pat- riotUin, 3B. i butt* of foclal ntUttoMhip, aa&. a DMMB or raUfVm, 401 4. Dutiee of beoemUoce, 407. EAT lodift bond*. Banker*' Inve^menta In. 45. Economy, domartte. PromoKJ by banking, 6. ebould not be too Mrictly regarded by public eompanlaa. In their expenditure, 394 ; In their ImlldiW 19S; In their nlariea, 1M; in their bnepiuJily, 400; In their peii*loae, 401. B*nailnn. The doty of educating the poor bind lAf OB public eompaniee, 406; way. in which the duty .hould be discharged, 407. i. . .- -..:...'! tion in a candidate far the office of bauk clerk, 130. aflbctontiM population, 410; adrantam to bank* of having educated aerranu, 412; many public companim owe their exialwice to. 41 1 . EoclMBajinnay. Baducad into Pruaian, Frank fort, DMCB, and French coin, 222. ployment pnTiooa. To be inquired Into before IB* a bank clerk. !.' Envy. The prosperity of the wicked should not be . . : . Equivalent number*. Great facUitle* to calculation bv eabrtiiutmr 199. Evil spsakmx shnold not b* practlead between pub- , toB*jtaatoa of the author by fSr Rnbert Peel, on the clreolaiton of country bank*, 894. : i hanks and eompanle*, 34C ; letter of the her respecting. 16 ; extract from Mr. Kin- rt Baejphlit respecting, 349; those estab- I IB Scotland, 3SO Between banker* m London, 858; be- iksrs la th* cowury, 897; between m aeaUaad, an. 344 : to Ireland, 363; m Newcastleoa-Tyas. 868. Om " Clearing." - Bue'fB, aafaroribls. nnally precede* ft MftMMI of pC*WMiW* . It kept by double entry 1 I -I. principle*. A banker should always have then. Alphabetical Index. e ea o er cers, . Hewat, Thomas. The secretary of the Provincial , nto the Causes of the Pressure on the Money Market during the year 1839, 52, 72, 81 ; extracts , , , from his Currency and Banking, reprinted from , the Westminster Revieto, 62, 318, 323 ; extracts from his letters of Nehemiah, 74, 76, 288 ; extracts from his Laws of the Currency, published in the Foreign and Colonial Review, 241, 292, 327, 372 extracts from his History of Banking in America, 22, 55, 72, 99, 197; extracts from his History of Banking in Ireland, 354, 333 ; extracts from his Lectures on Ancient Commerce, 14, 147, 151 ; extracts from his Evidence before a Com- mittee of the House of Commois, respecting one bank of issue, 243 ; ditto, ditto, respecting the circulation of country banks, 294 ; ditto, ditto, respecting the circulation of Ireland, 373. Gladstone, J., M. p. His evidence upon the bill cir- culation in Lancashire, 40. Glasgow Exchange Company, 351. GlyrT, George Carr, M. P. His evidence respecting the London bankers in 1832, 251 ; his questions , respecting the clearing, 258; his anticipations respecting the issues of the Bank of England, 67. Gold. How weighed, 195 ; how coined, 196 ; its specific gravity, ib. ; the amount in circula- tion, ib. Goldsmiths, Company of. Formerly most bankers belonged to that company, 1. Goodness. Always associated with some degree of wisdom, 131. Government securities. The Bank of England pre- fer holding stock to exchequer bills, 45; amount held by them in September, 1844, 84; and at oth- er times. 97; bankers will probably hold a less amount from their experience of the Act of 1844, 77 ; proper for bankers to hold their reserves in, 44, 48. Grace. Three days of, allowed on bills of exchange, 30. Grammar. Is the word bank a singular or a plural noun ? 8 ; should we write accepter, or acceptor 1 10; indorse, or endorse) 11; indorsement, or in- dorsation t ib. ; presentment, or presentation ? 12; draught, or draft? ib. ; check, or cheque? ib. Gratitude, debt of. Due from public companies to the cause of mental cultivation, 411. Grey, Dr. Hia system of artificial memory, 200. Groat. Origin of the word, 223. Grudzing. Hospitality should be exercised with- out". 403; and also benevolence, 410; Guarantee Societies, 135 ; form of their bond, 224. - Fund. See Surplus Fund. Guinea. Why a gold coin was so called, 223. Giimey, Samuel. His opinion as to bankers hold- ing their reserves in bills of exchange, 47. HABITS. How formed, 430; imprudent, voluptu- ousness, drunkenness, gluttony, idleness, sloth, gay company, improvidence, gossiping, tend to poverty, 417. of business. What are they ? 146. -- . . Half-yearly balance. What is then done 1 171 171. book. What does it contain t sheet. Describe it, 173. Hamburg. Way of estimating the relative value of gold in, 196. Happiness. Outward circumstances no certain in- dex of, 413. Head-office. List of all the joint-stock banks in England, arranged alphabetically according to the bead-office, 302. LL* OdllK. Ul licialiu, ouu. Hibernian Bank, 369 ; its origin, t'6. ; obtained an Act to sue and be sued by its registered officer, t'6. ; the last statement of its affairs, 370. High salaries to clerks. Not advisable at first, 134. History and Principles of Banking. Quoted with reference to bills offered for discount, 20. - of banking in America. Quoted with ref- erence to the re-discounting of bills, 22; with reference to pressures, 55, 72 ; with reference to joint-stock banks, 99 ; with reference to the coins of the United States, 197. Hoardins. The effect of panic, 72 ; the extent of in 1847, 73. Holidays. All clerks should have, 141 ; promote their health and mental energy, 142; a means of improving the clerks, t'6., 145; a security for their honesty, 142; rules of the Bank of England with regard to, 143. Honiton Bank. Neglectful in book-keeping, 117. Honor Deo. The motto of the Mercers' Company. 405. Honor. Acceptance for honor; what is it? 31. Horizontal system of book-keeping. Describe it, 176 ; what are its advantages ? 178. Hospitality. Cases in which public companies should exercise it, 401. IGNORANCE. To remove the ignorance of the poor is as much a duty as to relieve their distress, 410. Illegal considerations for a bill of exchange. Such bills cannot be enforced by the drawers, but may by third parties who had no knowledge of the illegal consideration, 33. Illness of Clerks. Inconveniences of, 140; means of preventing, t'6. ; conduct of the Bank of Eng- land with respect to, 141 ; why should not banks ' engage medical men to attend to? 141. Impartial system of promotion. Tends to the im- provement of the clerks, 145. Improvements in book-keeping, 174 ; what is their object? 176. Inconvertible security. A banker should not make advances on, 23. Independence of mind essential to the development of the intellectual character, 149. Index. Uses of, is a reference to what we have read, will remind us of what we have forgot- ten, frequent perusal of, will impress the book on our memory, will present in one view all that is said on the same subject, a means of self examination, a catechism, a syllabus, points out those topics on which we may de- sire information, enlivens the attention, 430,431. India. Money table for, 198; exchange with, ib.; how regulated by the East India Company, ib. ; how exchange operations are conducted there, 341 ; form of bills remitted thither by the Scot- tish banks, 343 ; the Bank of England issue bank post bills in sets, at 60 days' sight, for remittance thither, 344. Indorsement of a bill of exchange. May be either general or special, 29 ; where it should lie placed, 30; should we write indorsement or indorsation* 1 1 ; indorse or endorse, id. Industrious classes. System of deposits useful to. 337, 339. Information. Kind of, given by bankers to each other, 6; given by a hanker to his customer, 7; means of obtaining and recording, 16; country bankers have great facilities in obtaining, 18. 449 A Treat isr on Banking. iv>*rrlh* lu Important MAr for KM laud* f thoa* with . th OSMII af th> Jtfarkat Atrhaj UM raaf Ms*. Qoatttion* Daacrtb* It, 16. ibte. A bajiker should know how tarhoos*. 15. eapanUa. Their Incraaa* owtnf to the attention paid to vital statlstk*. 410; . i. - . ,. . . . . ': M .- MttelM Mt food eerunlv for bankers' advance*. ; the Uahed GwrantM And Lift Aawmnca Oampacr?, 135; UM Provident Inwreai A low rate of, usually pracada* a eaaaon -- < -i - bow to calculate, HI - man than 5 per cent cannot be charged where the rarity i* real property, 96. MMrally by on deposit*. Allowed ly by London banker* I br banker*. 3 ; not i. ib. ; advantages of, win advance In aeaaoni of -taNee. Reader's, 186; Oilman 1 *, 188; Obulthar.rs.iA. what le th* practice of the London private .... .-.;..,.. i .'. atock bantotjBVr-MB, , 971, 979, 278; the cmmtrv bank* 75 343 : the bank* of Scotland 1 3. the bankaef Intend) 368,381; the Baak of England 1237.238; what ratwhaaihe ,..,..,... .... ... . -., , . :- ...... ..- ... , . apon the market rate of intereet, 68, 93; what connection hi there between rate* of internet and aaawm* of anaeutetinn or pressure, 53, 60, 66, 69; hnw It elteck* the exce**l ve issue of note* 996, 3*5; what aflheu are produced on, by the Act of 49, 77, 91 ; what are the rarion* mode* of calculating 194- 18S; what rate* are charged by the Bank of France? 436; and the Bank* in . : - lourvMws between ft banker and his curtomen * thoold be short, 16. larasunent*. Eoatnerale the account* that are placad under thi* head in the general ledger, 166; how entered hi the hooka, 167 ; In foreign stocks, - speculative. Uauallr precede a eea- am of . Ireland. Bills drawn from, regarded a* foreign. 31 bank* of, 358; provision* of the Art ,,f IMS, ib. : the Bank of Ireland, 354 ; the Provin- cial Bank of Intend. 3S8; the National Bank of Intend. 367; the Hibernian Bank. 369 ; the Roy- al Bvik of Ireland. 370 ; the private bank* in 354 : the Northern, Belfan, and Ulster at Bella*. 371 ; the Tvperary Joint awck Bank, 379 : the laws of the Currency In Ireland. i: the abolition of note* tinder 6. 75: reapectlve bearing* of the Act* of 1844 and IMC (7 and 8 Viet, cap 32 ; 7 and 8 Viet. cap. . .d 9 and 10 Viet., cap. 85) upon the bank* of Eedand. Scotland, and Ireland. 3; settle- ment of the xchanre. in Dublin, 383. Isle of Mao. Two joint stock bank* hare failed than VII. We of Wight. A joint stork bank then took the tiueinsae of a private bank, 114; after- ward* merged to the National Provincial Bank, ' - b*M rvpaninant of the Bnk of Bnfland. Is re- Mirerf to gir* not** for fold, at the rat* of 3 17. 9*t. peroMca, ; not t* kme tnor* than 1 1 nnn.nno acalMt aciiritlee from Jknt day ofAufutl. l44. M. , In any pan of the / ., , , , . . , . . iirtA da, o/ Afav, IHM, ih.ll hare the power o( lawlM noua,SM; the aroount of note* a country ' L ' ' , , , ' arerace amount In circulation during the twelve week* endlnc the fMMy-MMii/A day , ; 1944, M5 ; upon an avenue of four weak*, DO banker mu*t have more than the above amount In circulation from the tenth day of Ottobtr, . No bank can leroe notee In Scotland or Ireland, who did not l*eue on the fnl day of May, 1845. 313; the fixed lueue of each bank I* the average amount It had In circulation during the year ending the Jirtt day of M upon the average of four wmk*. no bank to have In circulation a larger amount than thi* fixed iwoe. after the riztH day of December, 1846, ib, Italian bill of exchange. The form of one, 39. jACKaoir, John Sunway. Manager of the Bank of M M,T '-. Jamee, Paul Moon. His opinion a* to banker* holding their reserve* in bill* of excnaoga, 46. Job. HI* controversy with hti frieixU, 412; hi* reflection*, when In diilreaa, on hi* previous coiulurt towanl* hi* wrraul*, VU; hi* kinrtneee to the poor, 413. Junii ni.K-k bank*. Committee of the Houae of :i* reepectlng, 53 ; their report, 64 ; point* in which they differ frmn prival* hank*, 99; their paid-up capital, 100; are governed by a board of director*, 102 ; have a chief officer, called a manager, KM ; distribution of their ad- - iiirn fuiirtion*, 107 ; advantage* of their branrhe*, 1H6; their annual meeting* of share- holilrn, 114; their balance aheet*, to.; their profits, and the mode* of dlttribulion, 112; CMiieea of their (allure* 114; their advantage*, 278. fiteCauae*. ' In London. Point* on which they iliflrr from the private bankers, 263; num- ber of partner*, io. ; a known amount of capital, 264; grant interact on lodgment*, 265; no Chri*tmas boxes to clerk*, ib. ; have branches, 966. Point* In which they differ from each other: three give interest on the minimum balance of a current account, 270. 272. 274, 279; two take commission account*, 264, 279; one has branch** in the country. 278. in the country. Origin of, 300; provisions of their deed* of aettlrment. .'i| ; a list of those now In existence. 3Oi; of thorn that have stopped payment, <'.. ( thixe that have wound up. 16. ; of those that have (topped and resumed, 307; of those that have merged in other ioint-rtock hanks, i*. : *ft. also, 431. Journal. Merchant*', describe it, 160 ; bill journal and discount journal, 169. KKBPINO' a banker. What I* it f 424 ; more gener- al in Scotland than in Enelan Lewis. His evidence upon the bill-circula- tion of Lancashire, 40. Samuel Jones. Reply to his observations 451 in favor of the currency principle, 62 ; his liber- ality to his clerks, 33. McCtTLLDCH, Mr. His observations on the clear- ing, and his description of the advantages of the clearing-house, 253. Mammon, temples of. Buildings of public compa- nies should not be so, 423. Manager. Should be selected solely on account of his banking talents, 105 : should be characterized by circumspection and uprightness, t'6. ; his va- rious duties, 106; must not be engaged in any other employment, t'6. ; his conduct towards the customers, t'6. , should be prompt and decided, 107; in some banks the administrative power is vested solely in the manager, 108, 302; large banks can command the services of the most tal- ented manasers, 114; should study his weekly balance-sheet, 118; in 1836 joint-stock hanks were formed faster than good managers could be obtained, 121 ; his efficiency will depend on his social position, t'6. ; the most important of a manager's functions is to give advice to the di- rectors, 122; evils of amanager beinghadly paid, 124 ; an instance o.f liberal feeling in the share- holders of a joint-stock bank towards their man- ager, t'6. : how clerks are trained to become man- agers, 146 ; names of the managers of all the joint-stock banks. .102 ; under the now Act a bank must have one, 310 ; of branches, 1 10. A Treatise on Hanking. wMMthMM. Sfcwld b wholly eeparau ftmn thataok ofloa, W. aarheeiar. Ba*Ju at, advMcad BMner on mitt*, Sa.114; a*>) adraae** to *om of their own director*. I IT; aarvteeaof plau were preaeatad to jjijCtor* *aorilj befcr* UMtr bank* Mopped pay ta* Bank oC extract from lu nr*t r port, l ;*tde of ludtr<-u>rs before llH.rr -y OoeaeaHli*. from UM Bank of Borland. 114. v -.. the mind* of manaren are influenced by the ir aabmrtee, it. and thoa* of direct Minors, aaaer twenty-one years of age. In what case* they may accept bill* of exchange. 34. E lank at A branch of tb* City of Glaagnw In the We of Man. ha* a charter from t lie iwnaunt under this title, H. A banker le a dealer In. I ; bank a safe alaee of deposit for, ft; enVt of iu increase, 62, orlfin of the word, S22; applied only to cola la banking book -keep***, 186. book, beecrib* It, 169; how eopmeded, 177. Moral acenu. What coast i tote* moral agency, 347, 413; ate hanking eompanie* moral agent* J 387; what datte* have they to perform.) 393; wht rtvBra of p*j**ttHv0M*tt *wBowf ihe piHbrnv i of thew dutie* 7 413. Moral character of a party. AD element of tot hanker 1 * urliy. 7. fcellnf*. Tlko eultlratton ot, iuiproTt* the .:r.V : i ! MM*. What I* It, 413; abrardity of deny ln| lu eiteunce. ift. mfluence. Of Nanking, 7 ; of ca*h credit*, ., ,,:.;.. . .:. Honi j, , Uovemor of the Bank of England In Id48. Hi* *vldenc* aa to the cau*e of the prrMiire In 1*47, (M ; hn ilatenieiit a to the liberality of the Rink of Kugland, 9C ; hi* opin- jmi w to the Bank of Engtend dlKounllag for Country bank* of tavue, 'fJ\ ; lita evidence u lo the incraaa* of note* rn|uirrd for circulation through the exclusion of the Joint-Mock bank* from the claring-hou*e, VO. Moeae. Antxample to banker*, 15; wa* inxtrurl- ed to make o*e of other men. 10. ; taught the doctrine of national recponaibillty, 390 ; hi* law agatrurt muscling the mouth of it- j ox that tread- eth out the corn, 4IU ; caution* the Israelite* agalnM forgetftUnee* of God In the time of their prosperity, 4O4 ; hi* laws framed on a principle of rtghteou* rruliation, 430; mad* law* In favor of the poor. 404 ; and, moreover, exhorted the paonii u %..iiu.!.iri baMfi IHM '. Murray. Bobert, chief officer of the Provincial Bank of Ireland, ;V1 ; his evidence a* to one bank of lame, 37-1 ; the table* be presented lo '.he Lord* Committee, 379. NAJTM of Ulented men should not bias u* In our Inquirte* after truth, 64. National Bank of Ireland, 3ff7 ; extracts from lu prospectus, i*. ; adopted the local (liareholder principle, to. ; Its chief connections at Ant among th* Repealer*, to. ; look tlie businee* of the Lon don and Dublin Bank, 36* ; act* in *ome case* a* a saving* bank, ib. ; the last statement of iu affairs, ib ; lu branches, ib. Exchange Company at Glasgow. 351. Nation*. Are moral agenU, 390 ; can only be pun- ished in their collective capacity in the presen world, 412 ; in what way are they thus punished or rewarded 7 390 ; the analogy between nation* and public companies, 391. Nehemiah. The letters of, quoted with reference to the Act of 1*44, 74, 76. New account*. Precaution* In taking, 19. connections. The beet way of getting them, joint-stork bank* In England. Provision* of the Act for regulating, 303. Newcastle. Bank* at, advanced money on collier lee, 114: and U> corn merchants, lie. New York. Par of Exchange between, and Eng land, 1 : could not have been aselst- e>l t,y th- Hank of EnrUn.l in 1-36 had the Act of i-ll l.-.-n ih-n in operation, 63; sold their branch at Leeds for 1 > ' III: debts due to the bank by their >'. wound up, un- der the superintendence of the Bank of England, - * Northern Banking Company at Belfast. Iu origin, 371 ; iu rapital, etc.. tb. : lu branches, it. Note department. What book* are kept in the, 164. register. Dencribe it, 164. Noted. Inland bill* are noted, foreign bill* pr UMe.1 Nou* of hand. Advance* on, better than loan* Alphabetical Index. Notes in circulation. How entered in the books 167 ; how to calculate the time they remain ii circulation, 183. on life, by J. Taylor, quoted with reference to money, 13 ; with reference to loans, 25. Notice of the dishonor of a bill of exchange. Wha it should import, 36 ; who should give it, '&. when it should be given, 37; to whom it shoulc be given, ib. ; must it be in writing? ib. Notices of calls on shares. Form of, 216. Number of clerks. Should not be too dispropor tionate to the work, 145. of persons who enter a bank. How to as- certain, 199. of banks of issue in the United Kingdom 291. Numerous banks. Not the result of competition, but of legislation, 318. Nursing an account. What is it ? 27. OATH of secrecy. Required in a bank deed of set- tlement, 301. Obedience to the laws. The duty of a public com- pany, 394, 397. Office. The arrangement of the, 126 ; administra. lion of the, 127; the arrangement of, with re- gard to space, light, and ventilation, ib. ; selec- tion and appointment of the clerks, 129 ; the dis- tribution of their duties, 131 ; the amount of their salaries, 132 ; the system of promotion, 136 ; rules of discipline, 139; training of clerks for higher offices, 144. One bank of issue. A summary of the author's evidence respecting its probable effects, 243. Opinion, good, of their banker, has been the means of raising people from obscurity to wealth, 7. Opinion of clerks as to each other's qualifications are generally correct, 144. Order. A banker should always observe a princi pie of order, 16, 117. PAID-UP capital. How ia this account kept in the books, 169. Palmer, John Horsley, Governor of the Bank of England in 1832. His evidence of the causes of the pressure of 1825, 53. Panic. Wherein panic differs from pressure, 52, 72, 73 ; produces hoarding, 73. Par of exchange. What is it? 196. Parentage. Of a candidate for a clerkship, to be inquired into, 130. Paris. The way of estimating the relative value of gold in Paris and London, 196. Partners. Number of, in the joint-stock banks in England, 306 ; in each of the Scotch banks, 315 ; in each of the London private banks, 250; in each of the joint-stock banks in London, 280. Pass-book. Describe it, 154, 427. Past-due bills. How entered in the books, 163. Patriotism. The duties of, 393 ; obedience to the laws, 394 ; to enforce the laws upon others, i&. ; to support the civil power, to. ; to encourage the industry, trade, and fine arts of the country, ib. ; to maintain a high-toned morality, 395, Paul, St. Has twice quoted the enactment of Mo- ses against muzzling the ox that treadeth out the corn, and applied it to the case of servants, 402. Payment to the Bank of England for conducting the public business, 235. Peel's, Sir Robert, Act of 1844. The practical ad- ministration of a bank under, 61 ; objections to the principle, 62; the amount of currency must fluctuate with the foreign exchanges, t'6. ; and also from a domestic demand for gold, ib. ; a separation must take place between the banking and issuing departments of the Bank of England, ib ; great fluctuations would take place in the orices of the Government securities, 63; the 453 bank would be unable to afford assistance to the commercial classes in seasons of pressure, ib. Peel, Sir Robert, his examination of the author in the Committee on Banks of Issue, 294. Penalty. On drawing cheques on a bank beyond fifteen miles distant, 32 ; on banks that issue notes beyond the authorized amount, 286. Penny. Origin of the word, 224 ; history of the penny, ib. Periods in a cycle of the currency, 81. Philosophy of joint-stock banking, by Mr. Bell. Quotations from, 102-104. Phrenology. Not necessary to enable a banker to know the character of his customers, 18. Pocket-money. How passed through the bank ac- count, 427. Political economy of the Bible, 418. Pollard, George, manager of the London Joint-stock Bank, previously chief clerk in the private bank of Messrs. Williams, Deacon, & Co., 270. Population of the United States, and the number of banks, 442. Portuguese bill. The form of one, 39. Poverty. It is better to prevent than to relieve, 410; produced by want of diligence, injustice, imprudent habits, neglect of religion, unkind- ness to the poor, 417. Pound. What is a pound ? 196, 222. Prayer. It is the duty of the servants of public companies to pray for the prosperity of the com- pany whom they serve, 403. Preliminary expenses. How is this account kept in the hooks ? 169. Presentment of a bill. For acceptance, 32; for payment, t'6. ; when in reasonable time, 35; for payment, is legal at the clearing-house, 36 ; should . we write presentment or presentation? 1 1. Pressure on the money market. Definition of, 52, 71 ; preceded by a low rate of interest, specula- tive investments, and an unfavorable course of the foreign exchanges, 52; the pressure of 1825 was preceded by a reduction of interest on the public funds, acknowledgment of the South American Republic, speculation in commercial produce and foreign loans, failure of the banking- house of Sir Peter Pole & Co., 53; pressure of 1836 was preceded by speculations of all kinds, high prices, rejection of American bills by the Bank of England, reports on the joint-stock banks, failure of the Agricultural Bank of Ireland and the Northern and Central Bank of England, 53-55 ; pressure of 18:39 preceded by abundance of money, Bank of England sent gold to Amer- ica, importation of American securities, un- favorable harvest, 55 ; the Bank of England ob- tained assistance from the Bank of France, 56; comparison between the pressures of 1836 and of 1839, ib. ; pressure of 1847 preceded by a low rale of interest, speculations in railways, bad harvests and a high price of corn, failure of houses in the East and West India trade, facili- ties given to credit by the Bank of England and subsequent restrictions, failures of banks and discount brokers, 63, 64 ; administration of a bank in a season of pressure, 57 ; a banker who wishes to be easy in a time of pressure must act wisely in the previous season of speculation, ib. ; steps to be adopted on the approach of pressure, 58 ; in the pressure a banker has three demands on his funds, ib. ; means to be taken to meet them, ib. ; no use to call up dead loans, or at- tempt to reduce discounts, ib. ; a banker will have to give many refusals. 59; should bs cau- tious in taking accounts from other bankers, ib. ; should not attempt to get away the customers of other banks, ib. ; how he should treat wealthy, but wandering customers, ib. ; how he should treat customers in difficulties who apply, for as- sistance, 60; whether he should increase his al- A Treatise on Banking. -,... .... "it" p ^^ll m * ro * nh * pri.wn'dsclmos, * ; darLfUM ' U pay gnat atuotion to and UM dieclpUm of We i year I9BS. ; of UM Tear 1938,18; .<* UM year ISM, A. ; of the year *M7, lu effect cm tha circulation of country banks, 894 i baakat0Mia in aaUclpaUsjo of OM, M; tow durfnf toe, t*. Pnetoa Ba*jktaf Company. The only bank In tagtaad afcvtag a charter under the Act 3fe ; a return of their MeeU and liabilities, 16. PrlvaU amok*. Th* administrative fun. u MM. of the several partner*, 107 ; how prevented in Scotland, 3M; private accounu, who inspecu - Takinf the unsound buslneas of, the cause of the failun of some joint stock banks, 1 131 Proceeding* of a general meeting of shanhoidan, Prodi. Th* source of a banker's, 2 ; how appro- priated, 118; amount of the London and West- mlaeter Bank. 889; of the London Joint-stock Bank, 873; of UM Union Bank of Lm>don, 275; of the Commercial Bank of U>odon,.i&. and loss account balance sheet. Describe Preota, larps. Baakan mat not expect, under th* Pnr*l*n%*r Describe it, 168 ; how an the balances brought oui I 153. PTC mil** Muet be kept, even when the keeping wtwid be injuriou* to the parties who made them, Promotion. Shook) go by seniority, unles* there is great superiority of merit. 13d ; ibould not be tjo rapid, 16. Property Ha* lu duties a* well a* iu rlghu, and Its rirhu a* well a* lu duties. 406; lu righu are the rirst that an disregarded by an irreligious population, 16. Proprtetor*. ' Procaeds&g* of, have sometime* been Injuriou* to their bank*, 122- 124. account*. Enumerate those accounu which are placed under this hevl In the general ledger, 168; how are they kepi 1 169. Proprietors' ledrer. Describe it, 174. PraeacuUon. The Guarantee Society have power to pressxejty all parties whose fraud* they make I. of a new bank. What It contains, Acquired by unrighteous mean* is \'i ; and i* not to be envied, 16. ; ob- tained by virtue and piety should excite joy and thanWvlng.423; It aflbrds pleasure to God and ild examine If they have papperiy ducbargwl their moral and religiou* du- ProvortML Not found among thooi of Solomon, 417. Pmrtdoal.Gbrlu' Praridont Fund. The role* of, Pamela! bank of Ireland, 363; Act under which it WM farriMd, 830; it* object*, 380; *uie of Unkmf In Jrelaod al the time of It* formation, cawaiUUion. 361 ; UM ejection of o- con. to ^ the chfjce of director*, 16 ; tho dally OMMriUev, 384; UM Inepectioo of branJbe*, 38$; UM declantion of a diridend, i4. ; the OMUM of lu pro*prrhy. 388; la* eu iu aiEun, i*. ; lu btmnchoi, 16. I'rorl.ioo. of UM Act of 1644, which rofulatw UM . . , , i- .v ....,! . - for refuUtinf th* i* ue of bank-notee In Inland, 33U. 1'r.uy, n.iii.c l.j. Konn <* letter. 900. I'ruileut habiu. A wurce of wealth. -117. PruMtan coin. E(ll*b DXMM* redn Public companies. Thi* U the ae of, il*7 ; are they moral agent*. 16. ; what are their ilutle* to- ward* the eUU. 303; what are the tlulle* aritlnf fr. .1.1 tltetr metal relation, 3M ; what are their re- lirii'u* dulie*, 404 ; what are their dulte* to- watd* the poor, 40S ; will they be re*.. the performance of moral and religiou* dutle* 7 412; when) 16. ; howl 416; In what manner, .x luil are the deduction* from tin* doctrine J work* in Scotland. Promoted by mean* of ca*h cretin*, :CM. Puniihment*. How ihould they be adminUtered ? 160; of bank*, 415; future, 414. QtnmnNi. With reference to the discounting of bill*, ai. , a aerie* of, on banking calculation*, am. Quotation*. From Taylor's Note* on Life, 13. 86: Taylor** Stateeman, 13, 104, 134; Banker*' Magazine, IS; Eridence given before Parliamen- tary Coramituea, 40, 888. 8M ; Sir W. Clay 63; Report* of Lord*' Committee, 63, 66 ; Provident of America, 76, 77; Bell 1 * Philowphy of Joint tk Banking, 102, KH; Mill'* I'.^i.V.il Econo- my, 132; Adam Smith'* Wealth of Nation*, KU, Guanniee Society'* Pruepeclu*. 136; Time* newapaper, 143. 344 ; FoeuP* Dcmble En- try Elucidated, 120, 176; Babbage'* EC Machinery and Manufacture*, 175; Kranrl* 1 * Hintory of the Bank of England, 16. ; Wallace 1 * Picket Guide to Commercial Book keepi Waterdon'* O>mmercial Dictionary, 1 tenton'* Manual of Commerce, 201, 'U\ Notee of a Book Worm, 222; Rule* of the Provident Clerk*' Benevolent Fund. 226 ; the Cambrian, a Wel*h newspaper, 238 ; M'CuUoch'* Commercial Dictionary. 258 ; Dr. Franklin. 6 ; Bailey on the Law* of Bill* of Exchange, 10, 4c. ; Chitty, on ditto, itt. ; By lea, on ditto, 36 ; Glen, on ditto, in Scotland, 10, &C. ; the Fifth Report of the Lon- don and Wertmiiwter Bank, 2til ; Foreign and Colonial Review, 241, 292; Report* of Parlia- mentary Commhteee, 301, 312; Bell'* Letter* to J. W. Gilban, 320, 323, 326; Kinnear on Ex- change Companies, 318. RAILWAY depoalu. How managed through the hanking department of the Bank of England, Railway* have diminUbed the amount of country note* in circulation, 293; railway speculator* are dangerou* customer* to a bank, 1 16 ; compa- nies should not rek'ice when accidenu occur HI, .\ rival line, 396: have very property prohibited mokiiur in their carriage*, 403. Reader'* Time Table*, 188. Baaionable time for presenting a bill or cheque. What i* it ; 35. Receipu. Not uraally given by London banker*, l.M ; what i* the form of a (hop receipt Re-discounting of bill*. Advantages and atiuae* of the practice, 22 ; not don* by London banker*, 47 ; why not by the Scotch bank*, 3iO. Reduction in the amount of, fixed issue* of bank* since the paaiing of the Act of 1M4. -jfj\. Refusals. A banker will have to give many In eea- on* of presure. 59 ; should always be given with courussy , 106, 402. Another ha* bee*) recently formed. In London, called the British Bunk. l.)l Alphabetical Index. Regulations for settling the bank exchanges at Ed- inburgh, 314 ; at Dublin, 335. Relief granted to distressed clerks, 223. Religion, pure. What is it? 403; is the friend and guardian of the poor, 407. Religious duties. The foundation of, 390; public companies are bound to. perform, 337; what are the chief that devolve upon public companies, 403 ; in what way will their performance be re- warded, 418. Remittance. Banks of, 4. Reports. Required from the banks of New York, 440; made quarterly to the Government, 441 ; what it must contain, id. ; to be published in the local newspaper, ib. ; penalty for non-compliance, 441 ; the comptroller may appoint a competent person to examine into the affairs of any bank, ib. ; the capital of banks subject to taxation, ib. ; table of all the banks in the States, 412. Reproofs. How should they be administered, 150. Requisition Notes. Forms of, 213. Reserves of bankers. In what should they be held, 44 ? of the Bank of England, 89. Respectability. A banker is a referee as to the re- spectability of his customers, 6. Responsibility, national. The doctrine of, taught by Moses, 390; proved by history, 391; is not destructive of personal responsibility, ib. ; of in- dividuals connected with public companies, 393. Restrictions. On the issue of the country banks, 70 ; on the banks of Scotland, ib. ; and of Ire- land, id. Retaliation. A principle of righteous retaliation is tha prevailing principle of the Divine govern- ment, 410; is the principle of the Mosaic law, id. ; recognized in the denunciations of the pnphftU, ib. ; illustrated by historical facts, 420 ; is agreeiMe to the feelings of human nature, ib. Retired. When is a cheque or note said to be so? 154. Returns. All banks to mike a return to the stamp office of the names of their partners, on the first day of January in each year, or within fifteen days afterwards ; the commissioners shall publish their names in some local news- paper before the first day of March following, 249; monthly returns of the assets and liabilities required under the new Act, 309. Rewards and punishments. Essential to moral agency, 412; wJv.n bestowed on public compa- nies, ib. ; what is their nature, 415 ; in what manner are they bestowed? 418; what effects should they produce ? 424. Rich men. Advances to, sometimes become dead loans, 23. Righteousness in dealing. A source of wealth, 417. Rights of property. Are as sacred as any other rights, 405. . gocial. Divided into perfect and imperfect, 406. Rivalry between bankers. Injurious, 123; not ad- visible in seasons of pressure. 59. Rogera's Chapters on Country Banking. A useful work, 203. Rome. In ancient, the merchants and bankers had an annual procession to the temple of Mercury . 404. Royal Bank of Ireland. Its formation, 371 ; the last statement of its affairs, ib. -Exchange. Exhibits the religious mottoes of the City of London and the Mercers' Com- pany, 401. Rules of discipline In a bank, 139. Rumors are rif.j in seasons of pressure, 59 ; a bank- er should not occasion, (i! . SABBATH-DAT. The duty of public companies to reverence, 406 ; its design, ib. ; its abolition would be injurious to the poor, 407. Salaries. Of clerks, rules respecting, 132 ; of managers, 124; of directors, 125. Sanderson & Co., bill-brokers. Stopped payment through the failure of Lesley, Alexander, & Co., corn merchants. 116. Savings banks. In what cases money should be placed there, 430. St. Clement Danes. Terms for granting annuities, 230; the National Bank of Ireland acts as one, 363. Scale of salaries. Desirable, 133. Scrimgeour, William Wilson. General manager of the Union Bank of London, previously a chief officer in the discount department of the Bank uf England, 274. Scotch banks. Their investments in Government securities, 44, 46. Scotland. Principles of banking in, 3 ; bills drawn from, regarded as foreign, 31. the laws of, with reference to banking. 311; the existing banks of, 314; comparison be- tween the banks of Scotland and those of Eng- land, 319 ; the laws of the currency in Scotland, 327; its cash credit system, 332; its deposit system, 336 ; remittances to India, 340 ; regula- tions for settling the exchanges, 344 ; exchange banks and exchange companies, 346 ; different effects of the Bank Acts of 1845 in Ireland ami in Scotland, 353, 379 ; keeping a banker more general in Scotland than in England, 325, 426. banks in List of those in existence in 1326,314; of those formed since, ib.; of those now in existence, 315 ; of the changes that have taken place, 316 ; of those that have failed or wound up, 313 ; of the nine that remain, ib. of those in Edinburgh, 319; of those in Glas- f)w, ib. ; difference between Scotch banks and nglish banks, ib. ; capital of all the banks in Scotland, 321. branch banks in. Number of, 291 ; more general in Scotland than in England, 319; aver- age amount of capital and of circulation to each branch, 321 ; branch system leads to uniformity in charges all over Scotland, 322; branches of the Edinburgh banks have been opposed and sometimes defeated by the local banks, 323; branches enable the bank to avoid re-discount. ib. ; produce uniformity in the mode of making the exchanges, ib. ; enable the large banks to exercise a surveillance over the small ones, 326 : the number of would be diminished if the notes under .5 were abolished. 331. Scripture. Proves that relations imply correspond- in? duties, 333; proves national responsibility. 390 ; family responsibility, 331 ; collective re- sponsibility of cities, 392; status the principles of social duties, 395; denounces tho-<; who vio- late the Sabbath-day, 406 ; enforces the duty of benevolence to the poor, 403; gives this rule for exercising it, 409; concurs with reason in reganl to a future judgment, 414; all its threalenirigs against public bodies of men have reference to the present world, 415 ; do not teach that wealth H an evil, ib. ; nor that its enjoyments are sin- ful, 416; promises wealth as a reward to the pious and the virtuous, t&. ; specifies the vir- tues which are followed by wealth, 417; de- clares the doctrine of a righteous retribution in the present world, 419. Seasons of pressure. Characteristics of, 53. of speculation, in them, 57. How a banker should act Securities. A banker will probably have to realize some in seasons of pressure, 58. for clerks, 135 ; Guarantee Societies, ib. Secrecy. -.On llie part of directors and clerks en- 455 A Treat tie on Banking. to doade Of MUltfMnl. 301 ; fcra Of a " . Bankers ehmild conduct their *** oo a riacipl* o& 78 : afcmtd not depart OQ itiT ftitnlr -Mh^ferilfT r - ' h ---- ' pr**up. T9. * on bUl-brukera, *.;* on oth - knowledge. Necoaearytoa banker, II Senwnty. Should be observed la the promotion of clerk*. nl*ea there u special reason* for the contrary, 138. Sarraau. He who ke* a banker need not trait bts money to hi* MmnU. 3; dulie* of bank* to- ward*. 401 ; duty of earvanu lowanl* the lank. *M: MlvaaUff** of religious one*, 41 1 ; ailvan Ufo to a tank of educated onea, 41*. - of bank* and other public companle*. Wlul are their dutioaf 404 SharebuMer'* regieter. Daaerth* It, 171. - liT Joint-Mock banks. Art liable to th* full extent of their property for all the debt* of UM bank. 963, 300; ib* cam* under the now charter*, 310; the earoe in Scotland. 311, 310; asjd In Inland. 367; they chiioM the director... 301 ; can diianire the company, id ; hare mime* acud unwisely, 123; thir conduct toward* the servants of the bank, 400. i in bank. Under the new Act cannot be lee* than 100, 308; amount of In (he joint -stock hack* of London, 890: of the bank* or Scotland i the bank* at Beltut. 371 ; bank* f-nn-,1 r the new Act nut mltowed to purcbaee or i advance* oo their own *hare*. 306 ; exist- ing bank* not thue restricted, 301 ; pricee of aftMra* in UM baoka of Scotland. 315. - in public companies. Advance* on by banker*, become dead loan*. 94. Tba origin of the word, 283. signature book. Describe n Silver. It* specific gravity. 196; bow coined, '&. Sin. Tba baeeuing. 13. 124. Singing. In moderation, nod for the health of bank clerks, 111. Single entry. Wherein doe* it differ from double entry, Ira. Singular. I* th* word "bank" aingular or plu- ral > - Situation-book for clerk*. Where I* one kept ? 229. Small bank*. The evil of, 103; the result of legis- lation. 31 S, 379. SokM, Alfred. The surgeon of the Bank of Eng- land. 141. William Raa. Hi* Improvement* In the book-keeping of the Bank of England. I" Smith, Adam. Hi* observation* on wage*, 132; on the dirieion of labor. 1 7.Y fl*aofctog. In UM atraat and in place* of public re- eon, la Improper. 404. Smuggling. In what case* a *muggling considera- tion Titbit** a bill of exchange, 33. Social duties 396; apeak ye every man the truth, to ; ye shall not Meal, nor deal falsely, ib. : let not wickedness) dwell in thy tabernacle*. 396; apeak not evil one of another, 397 ; meddle not with them which are given to change, ib. ; lore thy neighbour a* thyself, 393; if thine enemy be wanfry. feed him, ib. ; do what la just though tb* law ipay not require it. ib. ; be all of one mind, phiful, courteous, 400; use hospitality. 401 ; nppre** not a stranger, i*. ; give to your *er- real* what i* Jvst and eotial, to ; earvanu, be obaiBaa* to your neater*. 408; visit the fathertea* and widow* to their affliction, 403; do good unto , pnehton. Tha eflWancy of a manager will ad pan. 121 : those who ' have risen In tha I entertain kind feeling* toward* the claw from whence they bar* *pnuig, 401 ; social in* aaMOf tie* Hebsawa, 403 456 Social relation* Are tba fbondatloa of eoelal Ue*. t* : public companie* are capable of aua- Ulnlng. 10. 8otarai|nty of th* Dirlne proceodinga, 4!B. Space. Au iiii|Nirtan( i "iiMileriiiw In tba eon- traction of a l>u>k, I'Z7. SpanMh MIL Th* form of one, 39. Special contract*. Form* of, need prongm to 1844, when a tmnklng company could not ra* by It* PUUIC officer, are. Speculation, reck lew. Ha* been the ruin of compa- ny a* wall a* of Individual*, 397. Speculation*. Are produced by a low rate of inlet art, 53 ; are the precuraor* of pmeure, 57. Speculative cuitonter*. Troubleaoni* to banker*, InreetmonU. Uiually precede a aea- on of preaMire, 53. sini|nltii on note*. How to calculate the compo- sition .1 !< Sni|x. On bill* of exchange, 33 ; on recelpta on tratwfer of hare*. 172; on bank note*, 2S4. Slate. Dutieeof public companlee toward* the, 80S. Statement- hk. A prlntrd collection of the week- ly talemenl* of the affair* of a bank bound to- gether, I* *o called. 173, 433. Statesman, the, by Mr. Taylor. Quotation* from, on decleion, 13 ; on making u*e of other men, IS ; on the age of member* of public board*, 104 ; on the union of wiwlom and goodne**, 131 ; on the aalario* of clerk*, 134; on the rule* of promotion, 13S. Stationery. In a bank, U under the care of the chief Clerk, 140. St. Marvlebone Bank. Wound up, and It* burinee* lran*fciT*dtothe London and Westminster Kink, H Stewart. P. M., M r. Letter from the author to, on the exchange bank*, 346. Stock book. Describe It, 183. broker*' chnrce*, 191. Kxchange. Explanation of It* operation*. 49 ; bankers' loan* there. 60 ; the Dublin, 333. jobber*. Wherein different from Block- broker purchase of. How to calculate, 191. receipt. Form of one, 49. Stolen note, or bill of exchange. The law respect- ii.e.31. .Slrataii. Jame*. Has familiarly described the op- < of country hanking. 426. Stuckey, Vincent, the late. His opinion on invest- Supplpineiiiirv-waate-boote. Describe them. 179. >i.r|i : u fund. a. The nature of, 112; how appro- priated, ib : the advantage* of, 113; how kept In the book*, 109 ; amount of among the joinl-btock banks. 3U3-306. fund*. Adminictratlon of a bank with re- tard to th* employment of, 41. noftheActof 1M4. Waa it* condemna- tion. TO; may be suspended again, 76. Swedish bill. The form of one. '39. System. A want of. has canwd the ruin of *ome banka, 117 ; a banker should observe, 16. TABLB. Showing the number of day* the different denomination of note* remain inciroBlailo*7189; showing the relative value of gold in London, Part*, Hamburgh, and Amsterdam, 221 ; table of Kiiirlish money reduced Into loreiipi. 222; table of the term* on which government annuities are granted for 33 and under. 230; comparative view of the expectation of tile according to dif- ferent table* at mortality. 231.; of the rirrulalion of note*, by the branches of the Bank of England, 239: ditto, of draft*, ib. : amount oftfWMKllOM In the clearing. 86*, 257; rjipit.il profit dei uis, and mirpliM fund of the London and West- Alphabetical Index. minster Bank, 269; ditto, of the London Joint- stock Bank, 273 ; ditto of the Union Bank of Lon- don, 275 ; ditto of the Commercial Bank of London, ib. ; of the affairs of all the London joint-stock banks. 280 ; of stamp-duties on country notes, 281 ; reduction of the fixed issue of notes in Eng- land, 291 ; circulation of the private and joint- stock banks from 1845 to 1843, 294; of all the country joint-stock banks in England, 302 ; the joint-stock banks that have stopped, 305 ; those that have wound up, 306 ; those that have stopped and resumed, 307; those that have merged in other banks, ib. ; banks of Scotland in 1826, 314; banks since formed, ib. ; existing banks in Scotland, 315 ; changes in Scotch banks, ib. ; circulation of notes in Scotland, 1834 to 1839, 327 ; ditto in 1846 to 1848, ib. ; notes and gold, 1842 to 184?, 323 ; circulation of each bank during 1848, 329 ; ditto in March 1849, 330 ; of the banks of Belfast, 371 ; circulation of notes in Ireland, 373 ; returns from the banks of issue in Ireland, 379 ; circulation and coin in Ireland, t'6. Taking accounts from other banks, 19, 59. Talents, banking. As rare and as important as those necessary to obtain eminence in any other pursuit, 13. Taxes. On the transfer of property, are pernicious, 348 ; restrictions on banks are taxes on the pub- lic, 328. Taylor's Notes on Life. Quotation from, on mon- ey, 13 ; respecting loans, 25. Statesman, quoted. On decisiveness, 13; on the choice of instruments, 14 ; the correspond- ence between goodness and wisdom, 131 ; on the salaries of clerks, 134; on the promotion of clerks, 138. Teller's department in a bank, 136. Temper, hasty. A defect in a banker, 13 ; is tried by being kept waiting a long time at a banker's counter, 128. Terms. Used in book-keeping, 154. Tester, an old coin. Why so called, 223. Testimonials. To be received with caution, 131 ; may be negatively useful, ib. Till. The amount of cash a banker keeps in his till, how regulated, 42. Time. A banker should know how to economize, 15 ; modes of doing this, 16 ; time saved in keep- ing a banker, 426. bargains on the stock exchange explained, is saved. By the employment of assistants, 15 ; by methodical habits, 16 ; by the shortening of interviews, ib. ; by a banker having general principles, 18. Tipperary Joint-stock bank, 372; its arrangement with the Bank of Ireland, ib. ; its branches, 373. Tradesman. Saves trouble in keeping a banker, 5. Training. Of clerks for higher offices, 144; their number should be proportionate to their work, 145 ; their labor should be so apportioned as that each office should be a training for the one above it, ib. ; they should have reasonable holidays, when the junior should do the work of his sen- ior, 145 ; they should all be exercised at the daily balance, 146; those in training for managers should be assigned those duties which are the most intellectual, 146 ; should not receive too many minute instructions, 148. Transfer of stock, 191 ; in Ireland, 383. register. Describe it, 172; deed of trans- fer, form of, 154. Transmission of money. Effected by banks, 4, 284. 50. Travellers, commercial. Derive advantages from bank*, 6. Trial paper. What is it? 170. Troy weisht. Gold and silver weighed by, 195. Truth. Cases in which public companies should here to, 3'JV MM tion, 371 ; statement of its affairs, ib. ; and branches, ib. Uncharitable. Public companies should not be so in their judgment of each other, 421. Union Bank of London. Its formation, 274; its capital, profits, dividends, and surplus fund, 275: its prospectus, 6. Union Guarantee and Life Assurance Company, 135. Exchange Company, Glasgow, 351. United States of America. Their population, anJ the number, capital, and circulation of all ttieir banks, 450. See America. Universality, a moral. Differs from one that ia metaphysical or physical, 413. Unjust charges against banks of issue. Prevented by the act of 1844,288. Unpaid-list. Describe the book so called, 160. Unsanctified property. la transient, and is not to be envied, 422, 423. Unsuccessful companies. Should inquire if they have properly discharged their moral and religious duties, 423. Usury. In what cases a usurious consideration viti- ates a bill of exchange, 33 ; present laws of usury, ib, Utility of banking. Banks are places of security for money, 3 ; interest allowed on deposits, ib. ; make advances to people who want to borrow, 4 ; transmit money from one part of the country to another, ib. ; supply the kind of currency that is required, 4 ; there is a great saving of time in money transactions, 5; saves expense to mer- chants and others who keep bankers, ib. ; are ref- erees as to respectability, 6; are a means of ob- taining information about parties, ib. ; supply a record of annual expenditures, 6; are a secure place of deposit for deeds, papers, or other prop- erty, 7; means of obtaining useful information as to monetary transactions, ib. ; have a powerful in- fluence on the nvirals of society, 7. VENTILATION. An important consideration in the construction of a bank, 127. Virtue. Always associated with wisdom, 131. Virtues, commercial. Bankers are the public con- servators of, 7 ; virtues that produce wealth, 41. WAOES. Those who pay, derive advantages from ciunks, 5 ; laws by which they are governed, 132. Waste-books. Received-Waste-Book, describe it, 155 ; who keeps this book ? 156 ; how do you en- ter Bank of England notes ? cheques 1 country notes and coins? 155; how is it ruled in the hori- zontal system, and how does it check itself? 176. Paid- Waste-Book. How is it ruled ? 156 ; when a cheque is paid, how do you make the entry ? ib. ; how is this book ruled in the horizontal system? 177; how will it check itself? 178. Merchants' Waste-Book, 180. Waterston's Commercial Dictionary quoted, 192; his Compendium of Commerce referred to, 201, 222. Wealth. Is a blessing, 415 : its enjoyments not sin- ful, 416; the means of obtaining, ib.; ill-gotten, is soon lost, 422. Weekly-balance, describe it, 170. returns, under the Act of 1844, 97. Weighing sovereigns. Troublesome, 5. West of Scotland Exchange Investment Company, 331. Westminster Review of January, 1841. An article written by the author published in, 62. See Cur- rency and Banking. Widows. Public companies should have funds for relieving, 403; mining and railway companies should relieve those whose husbands have tweu killed in their works, Hi. ' 457 A Tnatitf on &inkiny. \v -' .'. r' M the bwteadaalM UM kd hi* thoHty to art a. hU ar-.. Win lins-up Art, 1 VM. An Art lor wln.lln* up th* affair* or trailing coeipattU*, ~^~|ng Joint- MMk Uaka, MO. WVdiNa. MonMMMkrr than UlrnU In a bank*. IJ. lmplh pndn.^ an.) .U-rri,n. 14; U. b*rk*A unto coonwl. a proof of, 434. WUrlr to art. Mondlfflrult to a lnk>r In w*on an In a mtfon of prt^ura, 67 Public coaptnUt hould rop- W right A OB, priU hanker*. In B OoovtaHtwrwn* Their pmnlMi now . I v !!.. i MMR fi) r u.K Ml... ... Rt; B< of the partner* rn*ac*J M manM'ntr the Wwt- M l; r ,,M!,.l il,, -I, .,.,., .1 ,n: -:, I ]::,,,k..:! Writer. A rntl on* nbuuU b* appoint^ to rlto up the etwtOBMV^i book*, 143. Writing wall. Importone* at, 161. Their motto of tMohlnf, 161. How bencflU-J Ij Yotwo mm of good character. eMh endite, 88S. BND. * ' "*v ' 1 ' > , V ;'A t* * . w" * ,. ** * INI I \l\ 1 RSI M 01 (.VI NORM \ S.inl.1 H. nl>. 11. i Mils HOOK is Dl I ON Mil I. VST DATE *1 \\I1MI) HI LOU.