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BANKING

The difficulties of carrying on business on a large scale were augmented by certain legal technicalities which practically rendered large private banks impossible in ordinary circumstances. Hence banking business did not begin to assume its present form till almost half-way through the 19th century. The gradual change followed the passing of the Acts of 1826-33 and 1844-45. Incidentally the latter legislation had an unexpected influence in promoting the formation of large and powerful banks. The main features of the Act of 1844 are as follows :—By it the Bank of England was divided into two departments, one concerned with the issue and the other with the banking business; no new bank of issue whatever was allowed to be established; restrictions were placed on the English issuing banks. Private issuing banks with not more than six partners were allowed to remain, to amalgamate and retain their issues. The joint stock banks which possessed issues were also allowed to continue these, but when two joint stock banks amalgamated, the continuing bank only retained its issue. Also when a private issuing bank was formed into or joined a joint stock bank, the issue lapsed. All the larger provincial banks in England and Wales had practically been banks of issue up to 1844. The enactments of that year, besides separating the Issue Department from the Banking Department of the Bank, were arranged with the intention of concentrating the note issues on the Bank of England in order to secure the

[BRITISH

monopoly of that bank as the one issuer of notes in England and Wales. The result has been that nearly all the provincial banks in England had by 1901 lost the right of issue. Probably all will do so unless legislation is introduced to resuscitate the local issues in a form which will render them secure and enable them to be as useful to banking in England as the local issues have been to Scotland and Ireland. No security was ever provided for the local issues in the United Kingdom. The requirements of the Acts of 1844-45, which compel the Irish and Scottish banks to hold specie against the notes issued beyond the legal limit, do not appear to make the coin held a security for them. The legislation of 1879, which made them a first charge, with unlimited liability, on the total assets of the joint stock banks which accepted the principle of limited liability for the rest of their business, has been the only recognition of the duty to the note-holders of rendering them secure. It has been a real disadvantage to England that this duty has not been sufficiently recognized. A different policy was followed by Sir Robert Peel in Scotland and Ireland. By the Acts of 1844-45, the Scottish and Irish banks were allowed to exceed their authorized issue on holding specie to the amount of the excess and no restrictions were placed on amalgamations among banks in these countries. In Scotland, and also in Ireland, notes for less than £5 continued to be allowed. The result has been that the ten large banks in Scotland, and six of the nine banks in

BANK OF ENGLAND (New Form).

Notes issued

Week ending Saturday, 7th September 1844. Issue Department. . £28,351,295 Government Debt Other Securities Gold Coin and Bullion Silver Bullion .

. £11,015,100 2,984,900 . 12,657,208 1,694,087 £28,351,295

£28,351,295

Banking Department. Proprietors’ Capital ....... £14,553,000 Government Securities, including dead - weight an nuity ........ £14,554,834 Rest 3,564,729 Other Securities ....... 7,835,616 Public Deposits (including exchequer, savings banks, Notes ......... 8,175,025 commissioners of national debt and dividend ...... 857,765 accounts) ........ 3,630,809 Gold and Silver Coin Other Deposits ....... 8,644,348 Seven Day and other Bills ..... 1,030,354 M. Marshall, Chief Cashier. £31,423,240 Dated the 12th day of September 1844. £31,423,240 Weekly Statement of the Liabilities and Assets of the Bank of England, 7th September Public Securities— Circulation— Advances on Exchequer Bills— . £14,802,000 London Deficiency . . . . 6,405,0001 Country Other Exchequer Bills . £21,207,000 Exchequer Bills purchased Deposits, Public, viz.— Stock and Annuities . £2,198,000 Exchequer Account 315,000 For payment of Dividends Private Securities— 501,000 Savings Banks, &c. Bills discounted— 617,000 Other Public Accounts, London 3,631,000 Country Deposits, Private, viz.— £30,000 Railways 963,000 East India Bonds . London Bankers . 636,000 City Bonds . East India Company Mortgage Bank of Ireland, Royal Bank of Advances— 175,000 Scotland, &c. 5,631,000 Bills of Exchange Other Deposits Exchequer Bills, Stock, &c. 1,209,000 Deposits at Branches 8,644,000 Bullion £33,482,000 1

This includes seven day and other bills.

1844 (Old Form).

£870,000 311,000 12,821,000 £113,000 2,003,000 £198,000 3,357,000 620,000 883,000 661,000

£14,002,000

2,116,000

5,719,000 £21,837,000 15,209,000 £37,046,000