Lombard Street: A Description of the Money Market/Appendix 2
By E. Johnstone
This pre-eminent position in regard to the relative magnitude of its resources the London Market has not fully maintained. The deposits of the metropolitan banks have indeed enormously increased. They amounted at the end of December, 1905, to £504,000,000; but in this total was comprised (as closely as can be estimated, since, owing to amalgamations, an exact comparison is impossible) about £230,000,000 held by banks which were not included in the statement for December 31, 1872, most of them banks with country branches, and which hold, therefore, a great deal of provincial as well as London money. Allowing for this, a greater relative increase is shown by the New York associated banks, whose deposits at the end of 1905 (including Government deposits) amounted to a little over £195,000,000 as compared with the £40,000,000 held by them in 1873. But, as in the case of the London banks, the deposits of the New York banks include a large amount consisting of the balances of other banks throughout the country. In Germany also there has been a great development of deposit banking. Unfortunately the German statistics are drawn up in a form which renders any comparison with those of the British banks exceedingly difficult, if not impossible. The German banks place under "deposits" only such amounts as are left with them upon call or for specific terms, usually three or six months. There is, however, another heading, "Creditors," under which is included amounts due to account holders on account current business, and apparently some other forms of liability. According to the Frankfurter Zeitung, the "deposits" of the eight largest Berlin banks (exclusive of the Reichsbank) amounted at the end of 1905 to £52,100,000, and their "creditors" to £98,463,000. And, in addition, the Reichsbank at that date owed its current account holders £24,105,000. The Frankfurter Zeitung also gives statistics of the forty leading banks of the Empire that is, banks having a capital of not less than £500,000 (but not including the Reichsbank). At the end of 1905 these held in "deposits" £73,736,000, and in "creditors" £144,223,000. Nor is it only that the resources of the German banks have greatly increased; these banks now play a much more important part in cosmopolitan finance. Berlin is now an important market for foreign loans, and through the instrumentality of the banks large amounts of German capital have been embarked in foreign industrial enterprises. The growth of these and other markets, however, has not operated to the relief of "Lombard Street." On the contrary, it has added to the delicacy of its position. It has increased the magnitude of the demands for gold that may be made upon us in times of pressure, and thus renders it more necessary than ever that the Bank of England should maintain an adequate reserve.
On December 31, 1891, the deposits of these four banks amounted to £70,000,000, but owing to amalgamations which have altered the identity of two out of the four, the further growth of the deposits since Mr. Bagehot wrote cannot be accurately traced. Some indication of it, however, may be gathered from the fact that five purely Metropolitan banks (including one of comparatively small magnitude) held on December 31, 1905, deposits to the amount of £78,000,000, and at the same date ten London banks with country branches held between them deposits aggregating over £374,000,000. The private deposits of the Bank of England on December 27, 1905, amounted to £44,000,000.