first of the joint-stock banks in the public estimation and known to be very cautiously and carefully managed with the Bank of England, we shall see the difference at once. The London and Westminster has only 13 per cent. of its liabilities lying idle. The Banking Department of the Bank of England has over 40 per cent.[1] So great a difference in the management must cause, and does cause, a great difference in the profits. Inevitably the shareholders of the Bank of England will dislike this great difference; more or less, they will always urge their directors to diminish (as far as possible) the unproductive reserve, and to augment as far as possible their own dividend.
In most banks there would be a wholesome dread restraining the desire of the shareholders to reduce the reserve; they would fear to impair the credit of the bank. But, fortunately or unfortunately, no one has any fear about the Bank of England. The English world at least believes that it will not, almost that it cannot, fail. Three times since 1844 the Banking Department has
- ↑ The London joint-stock banks have considerably increased their cash reserves since then. On June 30, 1890, the proportion of reserve to liabilities to the public of the London and Westminster Bank was 12.6 per cent., on Dec. 31, 1905, it stood at 14 per cent. and on Dec. 31, 1913, it had risen to 15.6 per cent. The Bank of England Reserve on the latter date stood at 33⅜ per cent. of the liability, but being made up on the last day of the year the ratio was much below the average during the year, which was 49.7 per cent.
