"Question.—What class of the community is it that makes the smallest deposits?
"Answer.—They are generally the labouring classes in towns like Glasgow ; iu country places like Perth and Aberdeen, it is from servants and fishermen, and that class of the community who save small sums from their earnings, till they come to be a bank deposit. There is now a facility for their placing money in the Provident Banks, which receive money till the deposit amounts to 10. When it comes to 10 it is equal to the minimum of a bank deposit. The system of banking in Scotland is an extension of the Provident Bank system. Half-yearly or yearly those depositors come to the I bank, and add the savings of their labour, with the interest that I has accrued upon the deposits from the previous half-year or year, to the principal ; and in this way it goes on, without being at all reduced, accumulating (at compound interest) till the depositor is able either to buy or build a house, when ifc cornea to be 100, or 200, or 300, or till he is able to commence 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 the most thriving of our farmers and manufacturers have arisen from such beginnings."
The following Table exhibits an account of the different Scotch Banks, their Partners, Branches, Authorized Circulation
Actual Circulation, Coin, &c., in 1874-5 (from Oliver & Boyd's Almanac and Banks of Issue Report).| A table should appear at this position in the text. See Help:Table for formatting instructions. |
Insti tuted. NAVE. Partners. Br. Paid tip Capital. Rest or Reserve Fund. Dividend per cent. Amount of Deposits. Price per 100 Stock (per share of those marked*). 1872. 1873. 1874. 1695 1727 1746 1810 1825 1830 1825 1836 1838 1839 1838 Bunk of Scotland 1409 1454 1209 1228 1660 1260 848 1423 1383 1273 804 86 105 70 101 91 116 41 43 79 125 21 1,000,000 2,000,000 1,000,000 1,000,000 1,000,000 1,000,000 252,000 320,000 1,000,000 1,000,000 125,000 385,000 500,000 350,000 407,114 400,000 380,000 115,000 85,000 500,000 423,000 62,531 13i 9* 13t 15t I6f 15 12*t 1H IGi 11 14t 10,632,000 10,063,000 7,703,000 9,503,000 10,874,000 9,608,000 1,829,000 2,465,000 6,519,000 8,162,000 1,043,000 287 192J 283 296 307 281 15i 94 255 208 7* 292 196 272 300 300 285 15| i 2634 219 n 303 2303 291 319 319 292 17* 11 284 240 8* Royal Bank British Linen Co Commercial Bank National Bank of Scotland Union Bank of Scotland Aberdeen Town and County Bank* North of Scotland Bank* Clydesdale Bank City of Glasgow Bank Caledonian Bank*
- The capital of banks marked with an asterisk is in shares: The Aberdeen Town and County Bank, 7 paid ; North of Scotland
Bank, 4 paid ; Caledonian Bank, 2, 10s. paid. † Dividend and bonus.
The loans or advances made by the Scotch banks are either in the shape of discounts, or upon cash-credits, or, as they are more commonly termed, cash accounts.
A cash-credit is a credit given to an individual by a banking company for a limited sum, seldom under 100 or 200, upon his own security, and that of two or three individuals approved by the bank, who become sureties for its payment. The individual who has obtained such a credit is enabled to draw the whole sum, or any part of it, when he pleases, replacing it, or portions of it, according as he finds it convenient, interest being charged upon such part only as he draws out. "If a man borrows 5000 from a private hand, besides that it is not always to be found when required, he pays interest for it whether he be using it or not. His bank credit costs him nothing, except during the moment it is of service to him, and this circumstance is of equal advantage as if he had borrowed money at a much lower rate of interest" (Hume s Essay on Balance of Trade}. This, then, is plainly one of the most commodious forms in which advances can be made. Cash-credits are not, however, intended to be dead loans ; and they are not granted except to persons in business, or to those who are frequently drawing out and paying in money.
The system of cash-credits has been very well described in the Report of the Lords Committee of 1826 on Scotch and Irish Banking. " There is also," say their lordships, "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 com petent sureties, 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 amount, or for such part as his daily tran sactions may require. To the credit of the account he pays in such sums as he may not have occasion to use, and interest is charged or credited upon the daily balance, as the case may be. From the facility whi h these cash- credits give to all the small transactions c f 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 minutest products of their industry, it cannot be doubted that the most impor tant advantages are derived to the whole community. The advantage to the banks that give these cash-credits arises from the call which they continually produce for the issue of their paper,[1] and from the opportunity which they afford for the profitable employment of part of their deposits. The banks are indeed so sensible that, in order to make this part of their business advantageous and secure, it is necessary that their cash-credits should (as they express it) be frequently operated upon, that they refuse to continue them unless this implied condition be fulfilled. The total amount of their cash-credits is stated by one witness to be 5,000,000, of which the average amount advanced by the banks may be one-third.
The expense of a bond for a cash-credit of 500 is 12s. 6d. stamp duty, and a charge of from 5s. to 10s. 6d. per cent, for preparing it.
There have been, on the whole, comparatively few failures among the Scotch banks. In 1793 and 1825, when so many of the English banks were swept off, there was not a single establishment in Scotland that gave way. This superior solidity appears to have been owing to various causes, partly to the banks having, for the most part, large bodies of partners, who, being conjointly and individually bound for the debts of the companies to which they belong, go far to render their ultimate security all but unquestion able, and partly to the facility afforded by the law of Scotland of attaching a debtor s property, whether it con sist of land or movables, and making it available for the payment of his debts. This last-mentioned circumstance was referred to as follows, in the Report already alluded to:—
- ↑ The advantage of an increased issue is, however, much reduced, when the authorized issues are exceeded, and cash reserves are kept ifi hand equal to the excess.
