aMin» . . Cfjis UNIFORM EDITION, IN SIX VOLUMES, OF THE WORKS ^ OF T?IE LATE JAMES WILLIAM GILBAKT, ESQ. IS PRESENTED TO WILLIAM DENT ASPERNE, ESQ. 15Y THE EXECUTORS ACTING UNDER THE DIRECTIONS CONTAINED IN THE WILL OF THE V '©testator r % •I / W, t k • t jL-« THE WORKS OF JAMES WILLIAM GILBAET, F.K.S. IN SIX VOLUMES. VOL. I. PEACTICAL TEEATISE ON BANKING. 1 • X. rROil A PHOTOGRAPH RVX R. WIGLIAiCS . ZHCfflAVXD BT S HOTJL'YXB. PRACTICAL TREATISE ON BY THE LATE / JAMES WILLIAM GILBART, F.R.S., ONE OE THE DIBECTOKS OF THE LONDON AND WESTMINSTER BANK, AND FOBMKBLY GENEHAL MANAGER. “ The best banking system may be defeited 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 .”—of the Committee of the House of Lords on the Causes of Commercial Distress, 1848, IN TWO VOLUMES. VOL. I. LONDON: KELL & DALDY, 186, FLEET STKEET, AND G, YOKK STKEET, COVENT GARDEN. I G.'S.'II \ NOTICE. The executors of the late Mr. Gilbart, in placing before the pubhc a reprint of his works, deem it right to state, that no alterations have been made in the original text, beyond the correction of dates, and the omission of some obsolete matter; but that the works are issued in accordance with the provisions of his will, and remain as they were left by the Author. The Practical Treatise on Banking now published forms the first two volumes. Q.Hceavk tbv; [ORIGINAL DEDICATION.] O cJ TO THE RIGHT HONOURABLE LORD MONTEAGLE, F.R.S., COMPTROLLER-GENERAL OF HER MAJESTY’S EXCHEQUER, ETC. ETC. ETC., AVHO, AS A DIRECTOR OF THE PROVINCIAL BANK OF IRELAND, AS • ^ CHANCELLOR OF THE EXCHEQUER, AND AS FRAMER OF THE REPORT OF THE COMMITTEE OF THE HOTSE OF LORDS APPOINTED TO INQUIRE INTO THE CAUSES OP THE COMMERCIAL DISTRESS OP 1847, DISPLAYED A PROFOUND KNOWLEDGE OF THE PRINCIPLES OF irattial Ranking, THIS WORK IS, WITH PERMISSION, MOST RESPECTFULLY DEDICATED BY TITK AUTHOIL A 2 148 ‘ « 1 \ 1 * .* -I PREFACE. ♦o* The present work professes to treat of banking as an art. Art is the application 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 end 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 necessary to the party by whom these rules are administered—and describes those moral virtues which are as indispensable as professional knowledge to the attainment of success. 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. But these matters are viewed only in their practical results. The principles of banking are deductions from facts. The science of banking is a collection of these principles. It is of import¬ ance 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 * Sir John Herschel, VllI Preface. 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 tliink this book may be more particularly useful. Tlie first class includes those public men who have occasion to write or to speak upon our banking institutions. States¬ men, authors, and reviewers, however correct may be their knowledge of banking as a science, often fall into mistakes when they attempt to describe its practical operations. Al¬ though 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 establish¬ ments, 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 opera:tions. 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 subor¬ dinate stations in our banking establishments, may here acquire those enlarged views that will qualify them for higher appointments. One object of the 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 Preface. ix recollections 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 of the importance of a steady adherence to sound principles. And the more 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 administra¬ tion 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 satis¬ faction to their banker. And they will be able to judge how far he 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 advantage 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 sufficient 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 volume, omitting the third, fifth, twelfth, thirteenth, and X Preface, 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. J. W. G. BIOGKAPHICAL NOTICE OF THE AUTHOK, James William Gilbart, though of Cornish descent, was born in London, March 21, 1794. The name of Gilbart is said to be peculiar to Cornwall; Gilbert is common to several other counties. In the year 1813, when nineteen years of age, he entered, as junior clerk, a London bank, there remaining until the panic of December, 1825, when that establishment, and several others, were compelled to stop payment—the bank in which Mr. Gilbart had been engaged, paying all their creditors in full with interest a few months afterwards, though it did not resume business. He was for several years during this period a member of a debating society called the “ Athenian,” of which the Eight Hon. M. T. Baines, Edward Baines, Esq., M.P., Edwin Chadwick, Esq., C.B., Baron Channell, and several gentlemen now at the Bar, were also members. He was subsequently a member of the “ Union Society”—a debating club formed in 1825, by Mr. John Stuart Mill, and of which Lord Macaulay was a member. About this time Mr. Gilbart assisted in the formation of the City of London Literary and Scientific Institution, the first of the kind designed for the education of the middle classes, and in furtherance of the views entertained by him becoming a liberal contributor to the popular periodicals issued at a price within the reach of all. Consequent upon the stoppage of the bank alluded to, xii Biographical Notice of the Author, Mr. Gilbart accepted the place of cashier to a large firm in Birmingham; but the occupation being distasteful to him, he resigned it. In the beginning of 1827 he returned to London, and published his first book on Banking—‘ A Practical Treatise on Banking; containing an Account of the London and Country Banks, a view of the Joint-stock Banks of Scotland and Ireland, with a Summary of the Evidence delivered before the Parliamentary Committees, relative to the Suppression of Notes under Five Pounds in those Countries.’ A few months after the publication of this work, Mr. Gilbart was appointed Manager of the Provincial Bank of Ireland, and opened a branch at Kilkenny. In 1829 he was promoted to the managership of a larger branch at Waterford. As at Kilkenny, Mr. Gilbart there published in the local papers various articles on Banking, with the object of circu¬ lating a correct knowledge of the system introduced; and associating himself with several gentlemen of influence, he established the Waterford Literary and Scientific Institution, on the plan of the Institution in the City of London, already referred to; besides which he found time to give a series of lectures on subjects so varied and extensive, that those who knew how industriously and indefatigably he applied himself to his daily duties, were at a loss to imagine how he could find opportunities to acquire such knowledge. He delivered ten lectures during the first session of the society. Of these, five were upon ‘‘Ancient Commerce,” comprising the com¬ merce of Egypt, Greece, Kome, Tyre, and Carthage, and that of the ancients with the East Indies. The subjects of the remain¬ ing five were, “ The Philosophy of Language,” “ The Means of Preserving the Sight,” “ The Agriculture of the West of England,” “ Scientific Terms,” and “ The Commerce of Water¬ ford.” While he was thus engaged, his professional labours were signally successful, and his reputation for prudence, in¬ telligence, and ability becoming known in London, he received Biographical Notice of the Author. xiii an invitation which induced him to leave Ireland, and settle in the metropolis. It was in 1833 that a Committee was formed for the establishment of the first Joint-stock bank in London. Almok the first consideration of the Committee was to seek an efficient manager. Without having any personal knowledge whatever of Mr. Gilbart, and guided entirely by his reputation in Ireland, in union probably with that derived from his wiltings, they made him an offer to become their manager. Having received another invitation from a similar establishment then in the course of formation, Mr. Gilbart came to London, and, after an interview with both parties, engaged with the London and Westminster Bank, on the 10th of October, 1833—signing the first letters of allotment of shares on the following day. Mr. Gilbart’s antecedents were well calculated to qualify him for this appointment. He had been thirteen years in a London bank, by which he had acquired a perfect knowledge of banking, being, moreover, favourably known as an author on the subject; besides which he had for six years and a half fulfilled the onerous duties of manager in a Joint-stock bank—a young establishment which had to contend against popular ignorance and a chartered rival — which two opponents, a new bank in London, founded on similar principles, would probably have to encounter. The London and Westminster Bank was opened March 10, 1834. As the General Manager from the commencement of the bank, Mr. Gilbart had to withstand the violent opposition of interested and influential bodies, which met its rise and early progress. He had to conquer the apathy and distrust of the public, and to contend against law proceedings, injunc¬ tions, adverse bills in parliament, and other formidable dif¬ ficulties. All were successfully overcome, and at length he had the satisfaction of seeing the bank to a remarkable extent prosper. Year by year it increased in importance, until it became one of the largest and richest Joint-stock banks in the kingdom. An excellently-written history of the XIV Biographical Notice of the Author. undertaking was produced by Mr. Gilbart in 1847, wliich was printed for private circulation. About two years after the opening of the bank, a spirit of general speculation arose which, became directed towards the establishment of Joint-stock banks throughout the country. It being thought that some of these new banks might appoint the London and Westminster Bank to be their agent, Mr. Gilbart assisted in the formation of several. To secure the right to attend their meetings, he took shares, and urged upon all the shareholders and dhectors the advan¬ tage of connecting their business relations in London with London Joint-stock banks. The London and Westminster Bank thus obtained a large and valuable country connexion. In this year the directors, under the advice of Mr. Gilbart, opened several branches in London. In June, 1837, Mr. Gilbart was examined as a witness before the Committee of the House of Commons upon Joint- stock banks. This Committee was appointed “ to inquire into the opera¬ tion of the Acts permitting the establishment of Joint-stock banks in England and Heland, under certain restrictions, and the expediency of making any amendment in the pro¬ visions of those Acts.” The Committee had made a hostile report in 1836, but this session they resolved only to report evidence. In the course of the same year the Bank of England obtained an injunction against the London and Westminster, prohibiting their accepting any bills drawn at less than six months after date. It was supposed that this decision would be fatal to the connexion of the country banks, but it was not so. When in Ireland, ]\L'. Gilbart had seen bills drawn by the Bank of Ireland upon the Bank of England, without acceptance,” and it occurred to him that the country establishments might draw upon the London and Westminster Bank in the same manner. With the sanction of his directors, he visited all the country banks, and made the suggestion. It was universally adopted, and conse- Biographical Notice of the Author. xv quently the London and Westminster Bank lost none of its connexions. The “Association of Joint-stock Banks” was formed in the latter part of 1838, and all such establishments in England, Wales, and Ireland, were invited to attend a public meeting in London. This meeting appointed from their number a Committee “ to communicate with the Government, and to promote the passing of such laws as might be beneficial to Joint-stock banks.” This Committee was styled “ The Committee of Deputies,” and those members who resided in London were authorized to act, in ordinary matters, on behalf of the whole Committee. Mr. P. M. Stewart, M.P., a Director of the London and Westminster Bank, was Chairman; Mr. Oliver Vile, the Manager of the London and Westminster Bank, was the Honorary Secretary, and the circulars to the banks and the correspondence were written chiefly by Mr. Gilbart. The Chancellor of the Exchequer at that time was Mr. Spring Kice (now Lord Monteagle), who had been a Director of the Provincial Bank of Ireland during the time that Mr. Gilbart was Manager, and the Government being thus readily accessible on banking questions, several important improve¬ ments in the laws respecting Joint-stock banks were passed on the suggestion of the Chancellor of the Exchequer. In consequence of the pressure of 1839, a Select Committee of the House of Commons was appointed in 1840, “To inquire into the effects produced on the circulation of the country by the various Banking establishments issuing notes payable on demand.” Mr. Vincent Stuckey, of Bristol, and Mr. Gilbart, represented, by request, the English Joint-stock banks, and received the thanks of those companies for the manner in which they had given their evidence. In 1844, Sir Kobert Peel passed his Bill, renewing the Charter of the Bank of England, and regulating other banks; by this enactment, the London and Westminster, and other similar banks, acquired the power of suing and being sued XVI Biographical Notice of the Author. by tlieir public officer, and to accept bills at less than six months after date. Another pressure on the money market occurred in 1847, when both houses appointed a Committee of Inquiry, the chief question being—“ Whether the pressure of 1847 was pro¬ duced in whole or in part by the Act of 1844 ?” To this Mr. Gilbart gave an answer in the fifth edition of his ‘ Practical Treatise ’ published in 1849, a work dedicated to the then Chancellor of the Exchequer, a sixth edition following in 1859. A prize of lOOZ. was offered by Mr. Gilbart in January, 1851, for the best essay “On the Adaptation of Kecent Inventions collected at the Great Exhibition of 1851, to the purposes of Practical Banking.” The prize was gained by Mr. Granville Sharp, of Norwich. In 1854, the object for which Mr. Gilbart had frequently contended, viz., the admis¬ sion of the Joint-stock banks into the clearing-house, was attained. In 1859, he published his ^ Logic of Banking.’ In the course of the same year, the Directors of the Bank, in acknowledgment of his long and eminent services, passed a resolution to allow him to retire at the close of the year, with a pension of 1,500Z. per annum; and on their recom¬ mendation, he was appointed an extra director in anticipation of the next vacancy. Mr. Gilbart received further gratifying tokens of the esti¬ mation in which he was held. Prior to his departure from Waterford, the Members of the Literary and Scientific Institution requested him to sit for his portrait to be placed in the Lecture-room,—complimentary resolutions passed being accompanied by a letter from the President. In the year 1846, a service of plate was presented to him by the Joint-stock banks, in acknowledgment of his exertions in favour of Joint-stock banking. On the 10th of March, 1860, a testimonial of plate was pi’esented to him by the officers of the London and West- Biographical Notice of the Author. xvii minster Bank on his retirement from the office of General IManager, an address accompanying it. ]Mr. Gilbart was a Fellow of the Koyal Society, a life member of several literary and scientific associations, and a Member of the Statistical Society, to which he contributed various valuable papers. He died on the 8th day of August, 1863, in the 69th year of his age. SUMMARY OF CONTENTS OF VOLUME I. Part I.—OF PKACTICAL BANKING. SECTION PAGE Analytical Digest of Contents xxi I. TfeE Nature op Banking ....... 1 II. The Utility of Banking ...... ^. 3 III. Banking Terms ......... 12 IV. The General Administration of a Bank . . . .18 V. The Administration of a Bank with regard to Proceedings on Bills op Exchange ....... 43 VI. The Administration op a Bank with regard to the Employ¬ ment OP ITS Surplus Funds .. 65 VII. The Administration op a Bank during a Season of Pressure 79 VIII. The Administration op a Bank under the Act op 1844 . 93 IX. The Administration of the Banking Department op the Bank OP England ......... 124 X. The Administration of Joint-stock Banks, with an Inquiry INTO the Causes op their Failures .... 151 XL The Administration of the Office. 192 XII. Banking Book-keeping. 229 XIII. Banking Calculations. 279 XIV. Banking Documents. 311 i) VOL. I. \ V / ♦ « , f. r f I L 5 ^ N I. w > ♦ .s I ANALYTICAL DIGEST OF CONTENTS OF VOLUME 1 . *o*- PAKT I.—OF PEAOTICAL BANKING. SECTION I. THE NATURE OF BANKING. A BANKER in 1746. —Company or corporation called Goldsmiths.—Term “bank,’ whence derived. —Bankrupt.—Banker, a dealer in capital or money; an in¬ termediate party between borrower and lender.—Banks divided into private and public.—Business of banking.—Disposable means of a bank—how employed.—Expenses of a bank.—Profits of a bank . . Pages 1— 3. SECTION II. UTILITY OF BANKING. Banks useful as places of security for the deposit of money.—Allowance of interest for money.—Productive capital of the nation increased by banking. —“ The new-fashioned bankers,” formerly so called.—London bankers generally allow no interest—issue no notes.—Advances by bankers—advan¬ tages to community therefrom.—Branch banks in Scotland; principle and effect of their establishment.—Transmission of money by bankers.—Banks, convenience of public for obtaining denomination of currency required. —Saving of time, trouble, and expense by keeping a banker.—Bankers referees for respectability.—Credit increased by banks;—Credit defined by Dr. Franklin as money.—Annual expenditure recorded by means of banking.— Cheques, production of, in disputed payments, and receipts lost or mislaid. —Banks secure places of deposit for deeds, papers, plate, or jewellery— receptacle for solicitors, stock-brokers, and others, to consign valuable docu¬ ments for safe custody.—Banks as channels of information in matters of business,—for remittance of money to the Continent.—Powerful influence exercised by banking upon morals of society—Bankers conservators of the commercial virtues ........ 3—11. SECTION m. BANKING TERMS. The word “ bank,” whether a noun singular or plural—as a noun of multitude, rules observed with verbs and pronouns—application of the definite or in¬ definite article.—Gender.—Terms :—accepter and acceptor—indorser and h 2 XXll Contents. indorsor—indorsement and endorsement— presentment and presentation — draught and draft—check and cheque —correct employment thereof, and authorities quoted thereon ....... 12—18. SECTION IV. THE GENERAL ADMINISTRATION OF A BANK. Intellectual and moral requirements of a banker—need not be a man of talent; must be a man of wisdom.—Profession of a banker has a powerful bearing on the practical happiness of mankind.—Contempt of money, and false philosophy thereof.—Wisdom, definition of.—Qualifications necessary for a banker, and defects to be avoided.—Knowledge of himself—in knowing himself should have the capacity for knowing others.—Selection of suitable aids and instruments.—Taylor’s remarks cn statesmen, applicable to bankers. —Economising time.— Order.— Interviews with customers.—A banker’s room.—Books which should be ready for immediate reference enumerated— the most important of these.—Means and transactions of his customers.— Seeing customers—first impressions.—Country bankers’ facilities in ascer¬ taining character and circumstances of customers.—General principles or fixed rules for the government of a bank—importance of—refusals without reasons.—Bankers in large cities; banking in all its branches—not to be attempted by any one banker—different banks may pursue different courses with equal success.—New accounts.—Shabby accounts.—Parties with two bankers.—Drawing away connections from other banks.—Parties resident at a distance, bad policy to take their accounts—Small bankers and large accounts—imprudence of taking by.—Discounting bills—bills presented to a bank for discount may be divided into five classes: “ Kites,” or accommoda¬ tion bills, how to be detected—“ long-dated bills ”—“ short-dated bills ”— doubtful bills—forged bills—forged cheques, deeds, or bonds. — Alteration of cheques — detection.—Ke-discounting bills of exchange—the great in¬ fluence on the monetary operations of the country—gross abuses when giving a sort of vitality to dead loans.—London bankers avoid dead loans.—Loans divided into short loans and dead loans—illustrations afforded by Liverpool and Manchester—dead loans and rich men.—Shares in public companies.— Speculative customers.—Making loans; advice quoted for the guidance of in¬ dividuals, applicable to bankers.—Notes of hand better for bankers than grant¬ ing loans.—Dead loans and inconvertible secmlty—not desirable securities for London bankers.—Deeds to be taken as collateral secmlty only—the value of the property—the rule of a banker respecting deeds, or any other dead security—advances by country bankers upon deeds not so objectionable.— Bepeal of usury laws.—Bills of lading and dock warrants not prudent secu¬ rities—only to be justified by special circumstances —all the hills of the set requisite .—Life policies, bankers should never advance iqx)n — mode of valuing seldom understood.—Northamj^ton tables; short rule for ascertain¬ ing expectation of life.—Customers’ approaching failure, signs of.—“ Cross¬ firing.”—Fictitious bills.—Discounts and balances, rules for.—“ Nursing ” nn account ......... 18—42. Contents. xxiii SECTION V. THE ADMINISTRATION OF A BANK WITH REGARD TO PROCEEDINGS ON BILLS OF EXCHANGE. Duties of the accountant.—Bill case and arrangement of bills according to dates—by banker.—Questions put to persons applying for bills before they are due—bills are usually in charge of chief clerk.—Noting “ Past-due bills. ’ —Bill of exchange defined and described—form of—parties to.—Days of grace.—Holidays—Sundays—Bills dated on Sunday not vitiated.—Bills are divided into Inland and Foreign.—Bills drawn from Scotland or Ireland con¬ sidered foreign bills.—Protesting—Noting—Sets—Usance.—Accepting for the honour of the drawer, or one of the indorsers.—Bills accej^ted and made payable at a place with or without the word only.— Unaccepted bills. — Form of notice or direction in reference to bills not paid when presented—their further treatment.—Stamp duty on drafts.—Form of draft or cheque.— Word “ bearer.”—Tables of stamp duties upon bills of exchange, promissory notes, drafts.—Acceptance of bills by a woman, single or married—hus¬ band’s liabilities—acceptances by persons under age — “ Necessaries.”— Drawee refusing acceptance.—Bankruptcy and bills.—Bills lost—or stolen— cases and dicta.—Alterations of a bill of exchange.—-Presentment in reason¬ able time of bills, cheques, and notes—presentment of a bill at the clearing¬ house, a legal presentment.—Bills may be negotiated after they are due — parties receiving an over-due bill cannot acquire a claim which party hold¬ ing the bill did not possess.—Application of proceeds by banker to his own use of bills lodged for purpose of collection.—Notice of dishonour of bill or cheque—Mr. Justice Bay ley thereon.—List of some of tlie words in foreign languages expressing amount and time ; the two main points in a bill of ex¬ change.—“ At sight ”—“ At usance.”—Forms of bills in the same languages. —Bills of exchange formerly constituted a large proportion of the circulating medium of Lancashire—Mr. Gladstone’s account of such transactions.—Mr. Lewis Loyd on the cnculation of bills, gold, and notes, in Manchester ; Criteria of bills issued for speculation,—“Wind bills’' in Scotland synony¬ mous to “ kite bills ” in England.—Bill circulation in Lancashire diminished, and causes thereof ........ 43—65. SECTION VI. THE ADMINISTRATION OF A BANK WITH REGARD TO THE EMPI.OYMENT OF ITS SURPLUS FUNDS. The means of a London banker, of what they mainly consist.—Government se- • curities most permanent.—Discreditable for a bank to speculate in the funds —or to buy or sell stock frequently, with a view of making a profit by the diiference.—Investments of a banker—three grand points for consideration. Amount of money in till—City bankers—West-end bankers—bankers issuing notes—branches—clearing—fluctuation of amount in till—strengthening it— running it low—temperament of banker.—Bank of England’s reserve in notes and gold.—“ Cash in hancT” of London joint-stock banks—surplus cash.—Modes of investment.—Government securities—Mr. Stuckey and Mr. Marshall thereon.—Consols, best kind of government stock.—Bank stock. XXIV Contents. India stock, and long annuities not generally advisable investments for bankers.—Exchequer bills, advantages of — disadvantages of—West-end bankers prefer them—City bankers avoid them.—Bonds of corporation.— Good commercial bills.—Bankers of Lancashire.—Mr, Samuel Gurney’s opinion respecting bills of exchange and government stock as investments for a banker,—Bills discounted for customers not to be considered as part of a banker’s reserve.—Ke-discounting bills damages a London banker’s credit.— Money at call,—Clearing-house, advantages of, on sudden demands.—Banker should distribute his funds on investment.—Kequu-ements, of money, pre¬ cautionary regulations.—Government secmities considered — reasons for favouring—Bank of England’s government securities, and “ other securities ” —application of same principle to other banks—public impression thereon— Stock exchange operations.—“ Stocks.”—“ Funds. ’—Form of receipt from seller of stock.—Interest obtained on money invested in the funds and that employed with bill-brokers — average thereon manifested {note). — Stock¬ brokers—brokers and jobbers — buying and selling—settling days—selling “for money ”—buying “ for time”—“ account day”—“continuation”—en¬ gagement to “ deliver ”—“ backadation ” . . . . . 65—79. SECTION vn. THE ADMINISTRATION OF A BANK DURING A SEASON OF PRESSURE, A Pressure defined. — Indications.—Pressure of 1825, 1836, 1839, 1847. — Seasons of pressure always preceded by seasons of speculation.—Caution enjoined upon bankers when money is abundant and public funds high.— Kefusals of advances,—Ignorance or malignity displayed by customers refused. —Eumours about banks.—Transfer of new accoimts, and caution requii’ed.— Safe people. — Weak people. — New connections, best way of getting.— Wealthy customers.—Bill brokers and bankers.—“ Sharp-sighted ” people— curtailment of advances to — Exhortations to good behaviour in seasons of affliction — Eeproof to parties wandering. — Customers in difficulties.— Interest on deposits during a pressure.—Extravagant rates of interest not to be given by bankers during a panic—Imprudence tliereof.—Attention to be paid to the returns of the Bank of England during a pressm-e.—• Money abundant subsequent to panics or pressures.—The grand thing for a banker to know—following the course of events.—Investments on cessa¬ tion of pressure.—Health and discipline of mind peculiarly necessary to a banker during a pressure ....... 79 — 93. SECTION VIII. THE ADMINISTRATION OF A BANK UNDER THE ACT OF 1844. The Act founded on a theory, was a practical measure.—Objections to the plan of making the amount of the circulation fiuctuate in exact correspondence with the amount of gold in the Bank of England—Act formed upon the principle condemned—Efiects anticipated actually occurred.—“ Seeming the convertibility of the note,”— explanation of the phi-ase.—The sole advantage claimed for the Act.—Act as much in operation when it gives Contents. XXV out notes as when it gives out gold.—Kequlrement of the Act.—Funda¬ mental principle. — Reduction of rate of interest and promotion of spe¬ culation. — Seasons of abundance. — Seasons of scarcity. — Imperfections alleged against the Act.—Regulation of notes issued in Scotland and Ire¬ land, 1845.—Act of 1844 alleged to produce and aggravate pressure, and to deprive Bank of England of the power of granting adequate assistance.— Pressure of 1847, how produced.—Contraction of the circulation leads to a general apprehension of pressure.—Active and dead circulation of Bank of England notes.—Additional notes cannot be issued until the gold has returned.—Suspension of the Act in October, 1847.—Power to suspend the Act ought not to be vested in the government or the bank.—Uniform law preferable to unknown laws.—Consequence of the Act causing money to be alternately abundant and scarce.—“ Locks” of the Bank of England “shorn.” —Bank of England surrendered her power to the Act of 1844.—Bank of Liverpool, how treated by Bank of England.—Bank of England unable to meet public demand in 1847, and suspension of the Act.—Probable con¬ sequences to Bank of England in severe pressure.—Dependence on Bank of England or on bill-brokers by bankers, unadvisable.—Should not depend on other banks.—Banks in manufacturing districts discounting with banks in agricultural districts.—Countiy banks should not rely too much on their London agents.—Act of 1844 suspended upon the application of the London bankers.—Self-dependence—most effectual way of acquiring.— Fluctuations in the value of money, produced by attempting to regulate the cm-rency by the foreign exchanges, injurious to both London and country bankers.—Money abundant.—Money scarce.—Profits of bankers.—Fluctu¬ ations in trade, and knowing men,—Mr. Gurney’s dictum thereon.—Course of procedure recommended to bankers during the interim of pressures.— Speculative and non-speculative men.—Mr. Pease’s dictum respecting.— Bankers should avoid speculative inclinations. . . 93—124. SECTION IX. THE ADMINISTRATION OF THE BANKING DEPARTMENT OF THE BANK OF ENGLAND. Banking department separated from issue department by Act of 1844.—Govern¬ ment of Bank of England.—First return made under the Act of 1844, showing liabilities and assets of Bank of England for the week ending 7th September, 1844.—Observations and comments thereon.—Paid-up capital. —Rest.—Deposits, public and private.—Investments.—Reserve operations of the banking department, from the passing of the Act in 1844 to Sep¬ tember 5th, 1845.—Administration of the banking department, from Sep¬ tember 6th, 1845, to September 5th, 1846.—September 5th, 1846 to 1847. —September, 1847, to September, 1848.—Further progress subsequent to 1848.—Tables, showing gold and silver on hand, from 1849 to 1855 inclu¬ sive.—Dates of changes in rate of interest.—Official returns of issue and banking department. — Importance of this review in reference to future operations.124—151. xxvi Contents, 0 SECTION X. THE ADMINISTRATION OF JOINT-STOCK BANKS, WITH AN INQUIRY INTO THE CAUSES OF THEIR FAILURES. Chief points wherein joint-stock banks difier from private banks.—Paid-up capital—Amount of capital considered.—Nominal capital — Increasing capital—Small shares, general effect of and chief objection to—Joint- stock banks, how governed.—Requirements for an eligible director—for manager.—Distribution of administrative functions between directors and manager.—Management of banks by a few partners better than by many. —Branches of joint-stock banks—greater security to public therefrom— system provides facilities for the transmission of money.—Extends the benefits of banking to small places—provides means of a due distribution of capital—secures a better management.—Essential requisites demanded relative to branches.—Banks of Scotland and their numerous branches. —Provincial Bank of Ireland.—Joint-stock banks of issue and Act of 1826.—Country and district banking system. — Half-yearly meetings and balance-sheets.—Joint-stock banks in London exhibit balance-sheets, but not the practice generally in the country, nor in Scotland, nor in Ireland. Objections advanced against practice — tliat it is not a fair criterion by which you can form any judgment of the real condition of a bank—lays a bank open to attacks from its rivals or opponents—causes a great deal of speculation in the shares—Inefficient as a protection against fraud.— Profits, and mode of distribution.—Profits, dividends, surplus or guarantee fund.—Reserved or surplus fund does not take away the profits from . existing shareholders to benefit future.—Bonuses and market prices of shares.—Importance of ample surplus fund, and moral effect in strengthen¬ ing the reputation of the bank in public estimation.—Remarks educed respecting failures of banks and causes of failures.—Mal-administration of some joint-stock banks.—Causes of failure from taking unsound business of other banks.—Making advances on dead security—Banks in the East Indies, and indigo works —Banks governed by strictest rules sometimes drawn into transactions of kind objected to—Bank of England and the Mines royal.—Advances by way of loan or discounts to persons engaged in speculative undertakings—Corn merchants—AYool brokers—Builders— Speculators in railway and other shares.—Permanent advances of mag¬ nitude to any one customer generally bad policy. — Failures of banks usually to be ascribed to some one, two, or three large accounts.—Worst kind of illegitimate advances by banks, advances to own directors.— Independent small advances.—Want of system and discipline by a bank in conducting its affairs.—Laxity in book-keeping.—Numerous branches need peculiar governance and rigid discipline — Book-keeping — Efficiency of officers—Code of laws—Weekly returns—Special reports—Inspector, and his duties. — Branches should be kept in strict subordination to head- office.—Banks making no provision to meet contingencies, and consequences thereof.—Defects in the constitution of a bank.—Evils.—Joint-stock banks in England and in Scotland, origin and growth of.—Efficient manager.'!. ^ Contents. xxvii importance of.—Social position of a manager—manager virtually the banker. —Bare exception of a joint-stock bank stopping payment.—Kuin of a bank by manager—manager and managing dii-ectors conjointly, managing directors without manager—or by one, two, or three directors exercising undue influence over the board.—Danger to banks from the proceedings of the proprietors — their applause and censure.—Losses of a bank.— Admonitions and instructions'of shareholders.—Economy, real and false.— Mind, and men of business. — Kindness, liberality, generosity, produce corresponding feelings.—Neither creditable nor wise not to pay directors.— In matters of business men will apportion their services according to the return they receive for them.—Faults pointed out in the administration or constitution of joint-stock banks not inherent in the system . 151—192. SECTION XI. THE ADMINISTRATION OF THE OFFICE. Proper situation of a bank.—Should be a handsome building.—Separation of private house or dwelling apart from bank.— Arrangement of the office. —Space.— Light—Ventilation—Furniture—Position of counters, desks, and clerks — Selection and appointment of clerks. — Distribution of duties.—Amount of salaries.—Adam Smith on the wages of labour.— Stuart Mill on the principles of political economy and salaries of clerks. —Liberality of Mr. Samuel Jones Loyd, now Lord Overstone. — First appointments and low salaries, quotation from Taylor’s Statesman. — Securities. — Guarantee Societies. — System of promotion. — Cashier's department.—Accountant's department.—Eules of discipline.—Chief clerk, principal duties of, and qualification requisite for— Punctuality of attend¬ ance. — Health of clerks and advice thereon. — Holidays ; ought not to be optional. — Bank of England system of holidays.—Customers’ books. —Cashier’s deficiencies—“ Eisk money,” and allowance made in respect tliereof.—Lending sums to other clerks prohibited—Gambling in the funds, or in shares—Training of clerks for higher offices—Ascertaining relative merits of a clerk—Peculiar course to be adopted for training the cleverest clerks as managers.—Formation of libraries.—Literary Association of the Bank of England.—Education of a clerk after becoming a manager not yet completed.—Must be ready in the application of his knowledge.—Prompt in decision and judgment.—Government of office under control of chief clerk.—Discipline of subordinate clerks—Eeporting conduct to manager —Eules to be observed in cases of admonishment . . 192—228. SECTION XII. BANK BOOK-KEEPING. Preliminary operations with which a young book-keeper should become acquainted—Hand-writing—Counting gold and silver cnin—Entering cheques and bills—Casting—Calling over—Balancing.—System of bank- xxviii Contents iiig book-keeping.—Opening an account by customer—Keceipts to cus¬ tomers not usual.—Paying money on account of a country bank.—“ Shop receipt,” what, and form of—why name of party not inserted.—Payments of drafts on bills made in Bank of England notes, or sovereigns.—London bankers never re-issue country notes or bills of exchange.—Cancelling cheques—term “retiring” in Scx)tland. — Forms used in connexion with the banking system of book-keeping—Cash department and principal books—Bill department and principal books.—“ Walks.”—Country depart¬ ment, letters, and entries—Form of printed memorandum of payments to be made—Example of bankers’ letters to and from London—Corre¬ spondents or agents—Books kept by London bankers acting as agents for country bankers. — Note department of banks issuing notes. — Branch departments.—The general ledger— balances of and form thereof.—Titles of accounts—explanations thereof.—Periodical balances—daily—weekly— half-yearly. — Debtor and creditor balance-sheet — suggested—form of— Abstract of profit and loss account, form of— Shareholders’ register— Transfer register. — Brokers’ notice to dhectors of Bank on sale of shares, and form thereof—Stamp duties on transfer of shares in joint-stock banks. —Fees on transfers.— Proprietor’s ledger.— Improvements of which the system described and explained is capable, so as to render it more efficient in large establishments.— Large establishments can generally be conducted with a less proportionate number of hands than small.^—Adam Smith on the division of labour.—Dexterity in “casting up”—“calling over”—dex¬ terity in manipulation and counting acquired by practice, illustrated in a Bank of England clerk, by Mr. Babbage on “ concentration of attention.”— Improvement effected in Bank of England and National Debt Office.— Commercial book-keeping—main objects of improvements, or expedients.— Horizontal system of book-keejjing — forms—advantages.—Abolition and adoption of certain books—cheque ledger, and accuracy insured—time saved by use of—further suggestions as to books.—Comparison between the system of book-keeping practised by merchants and by bankers . . 229—278. SECTION xni. BANKING CALCULATIONS. Interest on bills—rules and examples.—Interest on any sums of money at different percentages and periods—rules and examples.—Eebate.—Com¬ pounding for stamp duty on notes—ascertaining what denomination of notes remains the longest in circulation—ascertaining how long a banker’s notes remain out—tabular statement of Bank of England notes in circula¬ tion.—Calculation of commissions.—Dividends on stock—purchase, or sale of stock—half-year’s dividend on any amount of stock in the 3 or the per cents, within one penny — rules and examples relating thereto—passing through the books a purchase of annuities—stockbroker’s charges—sale of stock, and executing a sale.—Power of attorney.—Periods for payment of dividends.—Money in United States of America, how reckoned.—French calculation of stock.—Operations connected with bills of exchange—Places Contents. XXIX to which England gives a certain amount of sterling for a variable amount of foreign money—an uncertain amount of sterling.—How to ascertain the amount of Enghsh money that ought to be received for a foreign bill of exchange—form of bill—all bills are drawn in the money of the country in which they are to be paid.— Complicated calculations—how they may be abridged.—“ Chain rule ”—“ Conjoined proportion ”— “ Compound arbi¬ tration”—rules and examples.—Calculations as to transmission of gold from one country to another.—Weighing precious metals in England.— Standard gold.—Pound weight of gold, coined.—Pound weight of silver, coined.—Specific gravity of gold—of silver.—Cubic foot of distilled water in ounces and pounds, avoirdupois, and ti’oy.—Avoirdupois and troy weights. —1 lb. avoirdupois of copper, coined—value in gold, of ton of.—Old pennies weight—new, and weight;—amount of, in circulation.—Silver.—Price of gold, and cause of exchange explained—real par of exchange between two countries.—Gold legal tender in England.—Silver—cm-rency in France— gold usually bears a premium or agio.—Commercial exchange, or price at which bills on London sell on Paris exchange—Exchange at Hamburgh.— Table of United States money—regulations in America respecting gold and foreign coins.—Dearness of gold—conveyance of—presumption of profit by conveyance thereof erroneous from charges and loss of interest attendant on transmission.—India, and exchanges with.—Table of East Indian money.— Bills on India.—Calculations of interest on large sums of money, at any rate per cent.—Mode of numbering persons entering a bank.—“ Calculating boys.”—Artificial memoiy.—Methods of calculation having reference to reasoning and statistics.—Anecdote of Quaker, proving by multiplication the importance of punctuality—observations on punctuality.—Questions, instructive and interesting, for calculation. . . . 279—310. SECTION XIV. BANKING DOCUMENTS. What they are—those used in the formation of a joint-stock bank—course pur¬ sued on proposing to form a joint-stock bank—provisional committee— solicitor—secretary—prospectus—Forms for application for shares—entry of shares—forms of letters on allotment of shares—of deposit certificates and receipts—of letter announcing first general meeting of shareholders—proxy for voting—proceedings at general meeting and actual formation of a joint- stock bank—Deed of settlement—Forms of bonds of security for officers—for clerks — of declaration of secrecy for directors and trustees — by the managers and clerks—of letters of guarantee, with reference to advances or to bills discounted—of letters to be signed by party lodging deeds, etc., as security for money advanced.—Forms of memorandum of agreement, with reference to the lodgement of deeds—of cash credit bond ;—and form of one used by a bank in Scotland—forms of letters of credit—of deposit receipts —of requisition notes, various kinds—of letter summoning a general meeting of shareholders — of letters of ordinary correspondence.—Country banks. XXX Contents. method of saving London agents trouble of copying advices.—Forms for special contracts—of notices of calls for further payment of shares—of certifi¬ cates of shareholders—of deed of transfer—of circular notes issued by the London and Westminster Bank—of letter of indication.—List of foreign and colonial banks on which the London and Westminster Bank issue letters of credit and circular notes.—Letters of credit, how addressed and signed— commission and charges. Table showing relative value of gold in London —Paris—Hamburgh, and Amsterdam — with method of use. — Table of English money reduced into Prussian, Frankfort, Dutch, and French coin — value of such coins — value of various denominations of foreign coin and English coin — pound money — coin — cash — guinea — angel— shilling—tester — groat — penny — half-penny—farthing—definitions and historical account of same.—Form of bond of the Guarantee Society.—Govern¬ ment annuities, table of.—Comparative view of expectation of life according to the difierent tables of mortality—Northampton—Carlisle—Government annuitants, male and female.—Table indicating the rate per cent, yielded by shares or stocks at their market prices.—Settlements at the clearing¬ house, and forms in use relative to transactions connected therewith. •311—352. APPENDIX. Act to facilitate the remedies on bills of exchange and promissory notes by the prevention of frivolous or fictitious defences to action thereon. — Act for limiting the liability of members of certain joint-stock companies; usually called “ The Limited Liability Act, 1855.”—Further Acts of Parliament enumerated relative to bankers, joint-stock companies, and fraudulent trustees ......... 353—364. A PRACTICAL TEEATISE ON BANKING. Part I.—of PRACTICAL BANKINa SECTION I. THE NATURE OF BANKING. ‘‘ What is it that we call a Banker ? There is in this city a company or corporation, called goldsmiths, and most of those called bankers are of that corporation ; but so far as I know, there is not a company or corporation in England called bankers, nor has the business any definition or descrip¬ tion either by common law or by statute. By custom we call a man a banker who has an open shop, with proper counters, servants, and books, for receiving other people’s money, in order to keep it safe, and return it upon demand; and when any man has opened such a sho]) we call him a banker, without inquiring whether any man has given him money to keep or no : for this is a trade where no apprenticeship is required, it having -never yet been supposed that a man who sets up the trade of banking, could be sued upon the statute of Queen Elizabeth, which enacts, that none shall use any art or mystery then used, but such as have served an apprentice¬ ship in the same.”* The term Bank is derived from banco, the Italian word for Bench, as the Lombard Jews in Italy kept benches in the * Speech, delivered in the House of Commons, in 1746.—See the ‘ London Magazine ’ for that year, page 120. VOL. I. B 2 A Practical Treatise market-place, where they exchanged money and bills. When a banker failed, his bench was broken by the populace ; and from this circumstance we have our term bankrupt. A banker is a dealer in capital, or more properly a dealer in money. He is an intermediate party between the bor¬ rower and the lender. He borrows of one party, and lends to another; and the difference between the terms at which he borrows and those at which he lends, forms the source of his profit. By this means he draws into active operation those small sums of money which were previously unproductive in the hands of private individuals; and at the same time furnishes accommodation to those who have need of additional capital to carry on their commercial transactions. Banks have been divided into private and public. A private bank is that in which there are but few partners, and these attend personally to its management. A public bank is that in which there are numerous partners, and they elect from their own body a certain number, who are entrusted with its management. The latter are usually called Joint-stock banks. The business of banking consists chiefly in receiving de¬ posits of money, upon which interest may or may not be allowed ;—in making advances of money, j)rincipally in the way of discounting bills;—and in effecting the transmission of money from one place to another. Private banks in metropolitan cities are usually the agents of the banks in the provinces, and charge a commission on their transactions. In making payments many country banks issue their own notes. The disposable means of a bank consist of—First, the capital paid down by the partners, or shareholders. Secondly, the amount of money lodged by their customers. Thirdly, the amount of notes they are able to keep out in circulation. Fomdhly, the amount of money in the course of transmission —that is, money they have received, and are to repay, in some distant place, at a future time. These disposable means are employed—First, in discounting bills. Secondly, in advances of money in the form of cash credits, loans, or overdrawn accounts. Thirdly, in the })ur- chase of government or other securities. Fourthly, a part is 3 on Banking, kept in the banker’s till, to meet the current demands. Of these four ways of employing the capital of a bank, three are productive, and one is unproductive. The discounting of bills yields interest—the loans, and the cash credits, and the overdrawn accounts, yield interest—the government securities yield interest—the money in the till yields no interest. The expenses of a bank may be classified thus: rent, taxes, and repairs of the house in which the business is carried on ; salaries of the officers ; stationer’s bill for books, paper, notes, stamps, &c. ; incidental expenses, as postages, coals, &c. The profits of a bank are that portion of its total receipts —including discount, interest, dividends, and commission— which exceeds the amount of the expenses. SECTION II. THE UTILITY OF BANKING. In the first place, banks are useful as places of security for the deposit of money. The circumstance which gave rise to the business of banking in this country, was a desire on the part of the merchants of London to obtain a place where they might lodge their money in security. Every one who has had the care of large sums of money knows the anxiety which attends their custody. A person in tliis case must either take care of his money himself, or trust it to his servants. If he take care of it himself, he will often be put to inconvenience, and will have to deny himself holidays and comforts, of which a man who is possessed of much money would not like to be deprived. If he entrust it to others, he must depend upon their honesty and their ability. And, although in many important cases a master is compelled to do this, yet he does not feel the same satisfaction as if the money was actually under his own care. Some instances of neglect or of dishonesty will necessarily occur, and these will occasion suspicion in refer- B 2 4 A Practical Treatise ence to other parties against whom no suspicion ought to be entertained. Besides, in both these cases, the money is lodged under the owner’s own roof, and is subject to thieves, to fire, and to other contingencies, against which it is not always easy to guard. All these evils are obviated by means of banking. The owner of money need neither take the charge of it himself, nor trust to his dependents. He can place it in the hands of his bankers. They are wealthy men, and are responsible to him for the amount. If they are robbed, it is no loss to him ; they are pledged to restore to him the amount of his deposit when he shall require it. Whenever he wants money he has only to write an order, or draft, upon his banker, and the person to whom he is indebted takes the draft to the bank, and without any hesitation or delay receives the money. 2. The bankers allow interest for money placed in their hands. By means of banking, the various small sums of money which would have remained unproductive in the hands of individuals, are collected into large amounts in the hands of the bankers, who employ it in granting facilities to trade and commerce. Thus banking increases the productive capital of the nation. At the origin of banking, the new- fashioned bankers,” as they were called, allowed a certain rate of interest for money placed in their hands* The banks of Scotland carry this practice to the greatest extent, as they receive upon interest so low an amount as ten pounds; and also allow interest on the balance of a running account. Many of the country bankers in England allow interest on the balance of a running account, and charge commission on the amount of the money withdrawn. The London bankers generally do not allow interest on deposit, but neither do they charge commission. All their profits are derived from the use of their customers’ money. The banks of Scotland do not charge commission, although they allow interest on deposits ; but then those banks have a profit by the issue of their notes. The London bankers do not issue notes. 3. Another advantage conferred upon society by bankers 5 on Banking. is, that they make advances to persons who want to borrow money. These advances are made—by discounting bills— upon personal security—upon the joint security of the bor¬ rower, and two or three of his friends—and sometimes upon mortgage. Persons engaged in trade and commerce are thus enabled to augment their capital, and consequently their wealth. The increase of money in circulation stimulates production. When bankers are compelled to withhold their usual accommodation, both the commercial and the agricul¬ tural interests are plunged in extreme distress. The great advantage arising to a neighbourhood from the establishment of a bank, is derived mainly from the additional supplies of money advanced in the form of loans, or discounts, to the inhabitants of the place. This principle is so well understood in Scotland, that branch banks are sometimes established in poor districts, with a view of obtaining a future profit from the prosperity which the bank will introduce.* 4. Another benefit derived from bankers is, that they transmit money from one part of the country to another. There 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 cannot send a messenger with it on purpose —that would be too expensive. He cannot send it by post— 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 on the transaction. If he live in London he may obtain a bank post bill, but he cannot obtain that in the country: and he may not be able to obtain 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 lives 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 bank will direct their agent in London to pay the money to * Evidence before the Select Committee of the House of Commons, upon the Abolition of Small Notes,, p. 43. Keport. 6 A Practical Treatise the London agent of the Aberdeen bank, who will be duly- advised of the payment. A small commission charged by the Penzance bank, and the postages, constitute all the ex¬ penses incurred, and there is not the least risk of loss. Commercial travellers, who go collecting money, derive great advantage 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 remitted with the greatest security, and at little expense; and they are thus delivered from an incumbrance which would have occasioned great care and anxiety. 5. Wherever a bank is established, the public are able to obtain that denomination of currency wLich is best adapted for carrying on tlie commercial 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. But where a bank is established there can be no difficulty of this kind. The banks issue that description of notes which the receivers may require, and are always ready to exchange them for others of a different denomi¬ nation. Banks, too, usually supply their customers and the neighbourhood with silver; and if, on the other hand, silver should be too 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 money transactions. How much longer time 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 inconveniences would arise from the necessity of -weighing 7 on Banking. sovereigns. What a loss of time from disputes as to the goodness or badness of particular pieces of money. Besides the loss of time that must necessarily occur on every transaction, 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 pay¬ ment of a debt, it is in the form of a draft upon his customer’s banker. lie pays it into his own banker’s, and no coin or bank notes pass through his hands. If he draws 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 over-due, and thus exonerating 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 wit¬ nesses ready to come forward to prove that the bill has been duly presented, and the notary’s ticket attached to the bill assigns the reason why it is not paid. But if any indorser of the bill has given a reference in case of need—that is, if any indorser 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 merchant has only two bills due each day. These bills may be payable in distant parts of the town, so 8 A Practical Treatise 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 oversights— from miscalculation as to the time a bill would become due —from errors in marking it up—from forgetfulness to present it—or from presenting it at the wrong house. In these cases the indorsers and the drawers are exonerated; and if the accepter do not pay the bill the amount is lost. 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 respectability 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 gi’ves his testimony as to the re¬ spectability of his customer. When a trader gives his bill, it circulates through the hands of many individuals to Avhom he 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 o^vn respectability, but it also enables him to ascertain the re¬ spectability 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 dra^\^l a bill upon a customer, and wishes to ascertain if this bill would be paid before he gave him any 9 on Banking, 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 keeps 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 practice is established of giving information to each other as to the respectability of their customers. For as the banl^ers 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 record of their annual expenditure.^ If a person pays in to his banker all the money he receives in the course of a year, and makes all his payments by cheques—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 varioiis items of his expenditure. This is very useful to persons who have not habits of business, and who may therefore be in danger of living beyond their means. It is useless to advise such persons to keep an account of their expenses—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 cheques were drawn for the purchase of unnecessary articles. A bank account is useful also in case of disputed payments. People do not always take receipts for money they pay to their tradesmen, and when they do the receipts may become * In the year 1849 a committee of investigation into the affairs of a railway company reported that the Company had kept no books for eighteen months, and knew their transactions only from their banker’s pass-book. 10 A Practical Treatise lost or mislaid. In case of deatli or of omission to enter the amount in the creditor’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 cheque on a banker, the cheque 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 docu¬ ments lie 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 overnight 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. Solicitors 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 ap- on Banhing, li pointed executors to a will, and have to settle some money matters—tlie banker will in these, and many other cases, be able to give them the necessary information. 13. Banking also exercises a powerful influence upon the morals of society. It tends to produce honesty and punctu¬ ality in pecuniary engagements. 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 moderate property and good morals, than to a man of large property but of inferior reputation. Thus the establishment of a bank in any place immediately advances the pecuniary value of a good moral character. There are numerous instances of persons having risen from obscurity to wealth only by means of their moral character, and the confidence which that character produced in the mind of their banker. It is not merely By way of loan or discount that a banker serves such a person. He also speaks well of him to those persons who may make inquiries respecting him: and the banker’s good opinion will be the means of procuring him a higher 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 bills will be taken by the bankers less readily than those of an honourable* 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 discountenance the spendthrift and the gambler, the liar and the knave. They hold out inducements to uprightness, which are not dis¬ regarded 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. 12 A Practical Treatise SECTION III. BANKING TEEMS. Query I.—Is the word Bank a singular or a plural noun ? The word Bank, being a noun of multitude, may have verbs and pronouns 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 observed :— 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 bank were anxious to meet the wislies 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 conceived themselves bound to pay in gold at their branches ?” “ The Bank of England petitioned against this bill, and were heard by their Counsel; but their representations produced no effect, and the bill having passed through both Houses, received the Royal assent.” The fol¬ lowing examples, wherein mental operations are ascribed to a neuter pronoun, are 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 conveni¬ ence, and reserves to itself the power of cancelling, whenever dt shall think fit, the credit granted.” ‘‘ It is usual for the bank when it gives a cash credit to keep a watchf ul eye over the person having that cash credit.” 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 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 indi¬ viduals named therein, for carrying on the business of banking, under the name of the Royal Bank; and subsequent charters were granted to this establishment, enlarging its capital, which now amounts to one million and a half.” “ The 13 on Banking. National Bank of Scotland has 1,238 partners.” ‘^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 establishment 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 belongs 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: “i)c the Provincial Bank issue post bills? They do not.” “ Have the Bank of Ireland at their branch at 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 he, it usually belongs to the singular—as, “ I am a director of the Bank of Scotland, which is established by Act of Parliament; it does not hold a charter from the Crown, but in common language it is called a chartered bank.” “ Suppose a bank was enabled to take 6 per cent, on a cash credit, instead of 4.” “ The Falkirk Union Banking Company has been returned to this liouse, 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 tlie demonstrative pronoun, this, that —or 14 A Practical Treatise 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 business than a bank that is only possessed of half a million?” “In a moment 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 cir¬ culation 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 mahes 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,” &c. “ I believe almost every bank in Scotland has an agent in Glasgow.” “ Suppose one bank in Scotland made its notes payable in Scotland, at the place where the notes were issued.” “ Is there any bank in Cork now that issues notes ?” 6. When the word bank is introduced in either the singular or the plural number, the same number should be preserved throughout the sentence. Hence, the following sentence of Smollett’s is inaccurate: ‘‘By the same acts the bank was required to advance a sum not exceeding 2,500,000^. towards discharging the national debt, if Avanted, on condition that they should have 5?. per cent, for as much as they might advance, redeemed by Parliament.” 7. When the Avord bank is used in the singular number, it is considered as a substantive of the neuter gender, and hence is associated with the relative pronoun, which; but Avhen used in the plural number, it implies the idea of persons, and has accordingly the personal relative, who ; as, “ The bank with which he kept his account has stopped paymentor, “ The bank Avith whom he kept his account have stopped pay¬ ment.” “ The bank, whose interests are affected by the pro¬ posed measure, have petitioned against it.” The bank upon whom the cheque Avas drawn have refused to honour it.” The following sentence is not in accordance aa ith this rule: “ In a moment of pressure, an emergency like the present, that on Banking, 15 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, considered a bank to be a lady; and this is only in the case of an Irish bank. Under the article “ Banking,” in his Commercial Dictionary, he 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 bl. per cent.” This mode of expression is, however, very common with American writers.^ II. Should we write accepter or acceptor of a bill of ex¬ change ? 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 holder, 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 lionour, is only liable if the original drawee do not pay; and to charge such acceptor, there must be a pre¬ sentment 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 unconnected with the instrument.”— Chitty. “Where the acceptor of a forged 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, write accepter. “An English in¬ land 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.”! * It lias now become more common with English writers, especially with reference to the Bank of England. 1849. t See Glen on the Law of Bills of Exchange in Scotland. 16 A Practical Treatise III. Should we write indorse or endorse ? Indorse is de¬ rived direct from the Latin, in dorsum, on the back. Endorse is derived from the Latin, through the French, endosser. In such cases, most waiters adopt the Latin mode of spelling, in preference to the French, as indorse, inquire, intire; not endorse, enquire, entire. All legal authors write indorse. A promise to indorse, though on sufficient consideration, cannot be treated as an actual indorsement'' — Bayley. “ The liability of the indorser is discharged by w'ant of notice, as in the case of the drawer.”— Boscoe. A j^erson who draws or indorses a bill, or indorses a note for the accommodation of the acceptor or maker, or payee, or prior indorsers, has, on paying the instrument, a remedy over thereon against the acceptor or maker, or prior party.”— Chitty. ‘‘A draw^er or indorser cannot, in the character of indorsee, maintain an action against the accepter, where the indorsement is after the refusal of payment.”— Glen. IV. Should w^e say indorsement or indorsation ? In England we ahvays use the word indorsement. “ No particular words are essential to an indorsement; the mere signature of the indorser is, in general, sufficient.”— Bayley. “ The indorse¬ ment may be upon the face, or at the back of the bill.”— Chitty. An attesting witness to an indorsement is necessary, wlien the bill is for a less sum than bl." — 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 after- w^ards marry, the right to transfer it by indorsation would vest in the husband.” After a bill has been paid no indor¬ sation can take place, so as to affect the accepter, or any of the parties wffio w^ould otherwise be discharged.”— Glen. The w'ord indorsement is also used in Scotland, though more rarely. Both w^ords 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, wliich 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, wdiich is termed a blank indorsation." 17 on Banking, — Glen. ‘‘A fictitious indorsement to a bill is a forgery ; such indorsation is clearly giving it a false credit.”— Glen. y. Should we say the presentment or the presentation of a bill of excliange ? All writers agree in using presentment. “ If upon the presentment of the bill for acceptance to tlie drawee, he refuse or neglect to accept it, the drawer is im¬ mediately responsible to the holder, although the bill has not become due according to its tenor.”— Cliitty. “If the bill be payable after sight, and the drawee detain it some days without declaring liis intention to accept, and afterwards incline to do so, the acceptance must be from the date of the first presentmenty — Glen. ^^Presentment for payment must be made by the holder of the bill, or by an agent competent to give a legal receipt for the money.”— Glen. “ Upon a presentment for acceptance, the bill should be left with the drawee twenty-four hours, unless in the interim he either accept, or declare a resolution not to accept. But a bill or note must not be left (unless it be paid) on a presentment for payment; if it be, the presentment is not considered as made, until the money is called for.”— Bayley. VI. Sliould we write draught or draft? This word is derived from the verb to draw, and probably was originally written and pronounced drawght. But custom, which is the law of language, has changed both the pronunciation and the spelling to draft. In the former editions of this work, I mentioned that Mr. Justice Bayley had always spelled this word draught; but 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 fword is derived from the French, echecs, chess. 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 an account; and the Government Office, where the public accounts were kept, was called the Exchequer. It probably obtained this name from the French exchiquier, a cliess- VOL. I. c 18 A Practical Treatise board, though Blackstone 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 here date: the banker was obliged to repay the money to the loser.” 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 qualifications. A banker need not be a man of talent, but he should be a man of wisdom. Talent, in the sense in which the word is ordinarily used, implies a strong develop¬ ment 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 remark¬ able quality by which he is 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 common 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 character, but rare only in their combination in the same person. It is a mistake to suppose that banking is such a routine employ- 19 on Banking, ment that it requires 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 ordinary 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 penetrate 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, frugality, forethought, self-sacri¬ fice,—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 manner in getting, saving, spending, giving, taking, lending, borrowing, and bequeathing, would almost argue a perfect man.’’* But though wisdom—or, in other words, a high degree of common sense —does not imply the possession of any remark¬ able talent (the undue development of any one faculty), it always implies the absence of any remarkable defect. One great defect in a banker is a want of decision. 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, cceteris paribus, most pernicious in affairs which require secrecy. 1st, Because the greatest aid to secrecy is celerity. 2nd, Because the undecided man, seeking after various counsel, necessarily multiplies confidences. The pretext for indecisive¬ ness is commonly matiLre deliberation; but, in reality, indecisive men occupy themselves less in dehberation than others; for to him who fears to decide, deliberation (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 * Taylor’s ‘ Notes on Life.’ c 2 20 A Practical Treatise itself to inventing reasons of postponement. And the man who has confirmed habits of indecisiveness, will come in time to look upon post- j)onement as the first object in all cases, and, wherever it seems to be j)racticable, 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 exalteth folly.” “ A wise man will hear, and will increase learning; and a man of understanding shall attain imto wise counsels.”! Another defect is that of being swayed by any personal or constitutional prepossession. Almost every man—not ex¬ cepting even the banker—has a sin by which he is most easily beset; a constitutional defect, against which it is necessary he should be upon his guard. It is a great advantage to a banker, and indeed to every one else, to know himself. He should know wherein he excels, and wherein he is deficient. He ought to know whether he is disposed from his temperament to be exces¬ sively cautious, or excessively liberal—whether his manners are courteous or abrupt—whether he is apt to view matters on their gloomy or on their bright side—whether social inter¬ course renders him more or less fit for his official engage¬ ments—whether the presents and civilities he receives from his customers do, or do not, affect his transactions with them in matters of business. When he has made a loss, he should examine 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 dis- * Taylor’s ‘ Statesman.’—I would advise all bankers, and all other persons at the head of large establishments, to read this little work. f Proverbs of Solomon. 21 on Banking. crimination, or of perseverance; and should guard in future against the exhibition of any similar defect: “Man, know thyself; all wisdom centres there.” But wliile a banker should make himself acquainted with his own defects, he ought not to let his customers become acquainted with .them. All wise men know their owm defects; none but fools publish them. Crafty men, who often have occasion to borrow money, are quick in perceiving the weak¬ nesses 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, perhaps, advisable that a banker should not have too much social intercourse with those of his cus¬ tomers who have occasion to ask him for any large amount of accommodation. ^Yisdom implies prudence and discretion, and these should regulate the whole conduct of a banker, not merely when engaged in banking transactions, but at all other times. We may apply to a banker the language we have elsewhere applied to a merchant: The amusements of a merchant should correspond with his cha¬ racter. He should never engage in those recreations which partake of the nature of gambling, and but seldom in those of a frivolous descrip¬ tion. A judge is not always on the bench, a clergyman is not always in the pulpit, nor is a merchant always on ’Change; but each is exiDected 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, but also uiDon the opinion generally entertained of his personal quahties; and he should cultivate a reputation for prudence and propriety of conduct, as part of his stock in trade.”* A banker should have a talent for selecting suitable instru¬ ments. He 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 cu’cumstances of commercial houses, or of individuals. He * ‘Lectures on the History and Principles of Ancient Commerce.’ By J, W. Gilbart. 22 A Practical Treatise should know how to choose his partners or coadjutors, and should endeavour to select those who possess qualifications in which he is himself deficient. In all 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 states¬ man 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.”* 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 wffiich are intellectual, 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 thi’ough 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 iDerform it thyself alone. Hearken now unto my voice, and I will give thee * Taylor’s ‘ Statesman.’ 23 on Banking. counsel. Thou shalt 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 sliall 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 said.”* “ Amd 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 shalt speak unto him, and put words into his mouth: and he shall be thy spokesman unto the people.”! A banker should know how to economize his own time. One mode of doing this wdll 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 confidential 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 will never learn to think for themselves,—never feel that wholesome anxiety which results from a sense of responsibility,—and never acquire that decision of mind which arises from the necessity of forming an independent judgment. Consequently, they will be less useful to him in their present position, and never become qualified for higher offices. Another mode of economizing time is to observe a principle of order. 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 bank at his usual time. By observing this routine, he will not only save much time, Wt he will avoid tumultuous feelings, and maintain a calmness of mind * Exodus xviii. 13—22. t Exodus iv. 10—16. 24 A Practical Treatise and of manner, that will be useful in all his affairs. He will also acquire from habit a coolness of investigation, and a promptness of decision ; and iie will get through a great deal of work without ever appearing to be in a hurry. Another mode of economizing time is, to make his inter¬ views with his customers, or with other parties, as short as he can. He should not encourage 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 arranged 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 fire-side. 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 ascertain the state of a customer’s account, or to consult with himself or another 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 banker’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 always to have in his room, ready for immediate reference, if necessary, ‘‘ the General Balance Book,” containing the weekly balances of the general ledger, which will show the weekly progress of his business for several years past,—“ the Daily Balance Book,” showdng the daily balance to the credit of each of his customers in the current-account ledger,—the ^Yeekly Discount Balance Book,” showing the amount of discounts, loans, or other advances which each customer has every Saturday night,— 25 on Banking. “ 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 occasion to make inquiries,— and, finally, “a Private Memorandum Book,” in which is entered any special agreements that he has made with his customers. It is also useful to a banker to have a list of his customers, classified according to their trades or professions— such as corn merchants, leather factors, grocers, solicitors, &c. &c. The banker would thus see at a glance among what classes of society his connexions lie. 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 transactions. Of these books, one of the most important is the Informa¬ tion 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 objection 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 requested by a customer to make inquiry about a house, he should record the informa¬ tion 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 bankers, as we have mentioned at page 8. This 26 A Practical Treatise 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, secondly, 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 in¬ formation respecting 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 liis customer may accept to other parties, and his payments, will show the class of people with whom he deals, or who are in the habit of giving him credit. But one main source of information is to see the man. This, like other means of information, will sometimes fail; but, generally speaking, the appearance and manners of a man will show his character. Some people always send their clerk to the banker with bills for discount, &c. This is all very well if they • want no extraordinary accommodation; but if they ask for anything 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 customer 27 on Banking, was tricky or honest—speculative or prudent—let him be guided by his first impression—we mean the impression pro¬ duced by the first interview. In nine cases out of ten, the first impression will be found to be correct. It is not neces¬ sary to study physiognomy or phrenology to be able to judge of the character of men with whom we converse upon matters of business. A country banker has greater facilities than a London banker of ascertaining the character and circumstances of other parties. In a country town everything is known about everybody.—A man’s parentage and connexions—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 last point, we will make a short extract from an excellent series of ‘‘ Letters to a Branch Manager,” published in the ‘‘ Banker’s Magazine,” under the signature of “ Thomas Bullion.” Next in importance to a study of his accounts, the habits and cha¬ racter of a client are deserving of your attentive consideration. If a man’s style of living, for example, becomes extravagant, and he gives himself over to excess, you cannot too promptly apply the curb, however regular the transactions upon his account may seem; because years may elapse before mere irregularity of hving 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.” A banker should always have general principles ; that is, he should have fixed rules for the government of his bank. He should know beforehand 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 un¬ commercial 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. 28 A Practical Treatise One advantage of this adoption of general principles is, that it saves time. If a banker can say, in reply to a cus¬ tomer, ‘‘It is contrary to the rules of our bank to advance money upon bills of lading,” the reply is conclusive. But if he had not previously adopted any rule upon the subject, the reply would have taken up much more time. Another ad¬ vantage 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 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 application been made in fewer words. But although a banker ought to have a large stock of general principles—and this stock will increase as his ex¬ perience 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 gene¬ rally are unable to appreciate its principles. Besides, a man Avho 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 acquire his know¬ ledge 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 reason¬ ing 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 j)ossible case should he depart from them. But he should not look for such cases; they are rare, and when they do occur they Avill force themselves upon his attention. If under shelter of the truism, “ All rules have their exceptions,” he departs from his general principles Avhenever he finds it convenient or profitable to do so, he may as well have no general principles at all. 29 on Banking, 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 dis¬ count a bill: a city banker will not lend money on mortgage. Different kinds of banking exist in different parts of the country, accordi^ig to the character and circumstances of the district. And in London the classes of people are numerous, and it may be both proper and advantageous for a banker to adapt his mode of business chiefly to the requirements of some one particular class. Different banks may thus pursue 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 respect¬ able the introducer, the higher opinion will the banker enter¬ tain of‘the party introduced. If a party apply 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 winch he is en¬ gaged, and the extent of accommodation, 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 occa¬ sionally require especial consideration. It is a great folly in a party opening an account 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 con¬ sidered to be not advisable to take the account of a party who has another banker, especially if he opens the account for the purpose of getting additional discount. The object of a party keeping two bankers is usually to get as much accommodation as he can from each. If an account is brought from another bank, the reason of the removal should be distinctly stated, and the banker will accept or reject it. 30 A Practical Treatise according to circumstances. It is bad policy in a banker to attempt to di-aw away the connexions 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 passing by the banks in their neighbourhood to go elsewhere, is one that should excite suspicion. It is not advisable for London bankers to take the accounts of private individuals who reside in the country. They should be referred to the bankers in their own districts. 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-dis¬ count, 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 command whenever required; and the additional amount he must keep in his till will be proportion- ably greater than Avould be kept by a large banker. Thus, if 100,000^. be placed in a bank that has 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 whose deposits are only 300,000?., the increase of notes to be kept in his till will be very consider¬ able. 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. In¬ stances have occm’red of small banks being greatly incon¬ venienced 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 discounting of bills. The bills presented to a bank on Banking, 31 for discount may generally be divided into the following classes:— •1st. Bills drawn by producers or manufacturers upon whole¬ sale dealers. 2ndly. Bills drawn by wholesale dealers upon retail dealers. 3rdly. Bills drawn by retail dealers upon consumers. 4thly. Bills not arising out of trade, but yet drawn against value, as rent, &c. 5thly. Kites, or accommodation bills. The first two classes of bills are the best, and are fair legitimate bills for bankers to discount. The third class ought not to be too much encouraged; they are for comparatively small amounts, and are drawn by shopkeepers and tradesmen upon their customers. To dis¬ count these bills freely would encourage extravagance in the accepters, and ultimately prove injurious to the drawers. When a man accepts bills to his butcher, baker, tailor, up¬ holsterer, &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 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 consideration 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.” 32 A Practical Treatise 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 accounts ? This will be answered by the Daily Balance Book. What amount has he now under dis¬ count? This will be answered from tlie Discount Ledger, and will suggest other inquiries. Is that amount greater or less than usual ? What proportion does that amount bear to the average 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 become 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 dis¬ count, 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 accepters 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 the genuineness of the signature. Of course in these, and many other cases in which a banker is liable to be cheated, much must depend upon personal discretion; no rules can be given for all cases. 33 on Banking, To facilitate the detection of forged cheques, it is advis¬ able that the banker should have a printed number placed on every cheque, in every cheque book, and keep a record of the name of the customer to whom each book is given. When a cheque with a forged signature appears, the banker 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 documents 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 favour it is given, but the Jetter 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 lOZ., 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 tliree, 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,” 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 importance, and has a great influence on the monetary you. I. D 34 A Practical Treatise 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 by circulation and 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 employ 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 return, bills of exchange. The bank that wants 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.” 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 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 discount 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 endorsement. 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 Manchester 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 on Banking, 35 credit which they possessed: 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 advance, 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 current 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 repayment. 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 tlie part of the banker, ^hort 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 renewed, 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 a while the customer fails, and the mill or manufactory, when sold, may not produce half the amount of the loan. D 2 36 A Practical Treatise Dead loans are sometimes produced by lending money to rich men. A man of moderate means will be anxious not to borrow of bis banker a loan which he will not be able punctually to repay, as the good opinion of his banker is necessary to his credit. But a man of property has no scruples of the kind : he has to build a house, to improve his estate, or to extend his manufactory ; and he is unreasonable enough to expect that his banker will supply him with the necessary funds. He believes it will be only a temporary advance, as he will shortly be in possession of ample means. The banker lends the sum at first desired; more money is wanted; the expected supplies do not arrive; and the advance becomes a dead 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 his own control. 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 security. 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 favourable opportunity occurred for realizing his security. In this, and in other ways, a banker has often much difficulty with customers of a speculative character. If he refuses what they ask, they remove their account, and give him a bad name; if he grants them their desires, they engage in speculations by which they are ruined, and pro¬ bably 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 37 on Banking. 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; but in regard to loans, a banker would do well to follow the advice which Mr. Taylor gives to individuals, and not to 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 lie does wisely and well in borrovfing it. Borrowing is one of the most ordinary ways in which weak men sacrifice the future to the present; and thence it is that the gratitude for 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. By conspiring with your friend to defraud his future self, you naturally incur his future displeasure. To withstand solicitations for loans is often a great trial of firmness; the more especially as the pleas and pretexts alleged are generally made plausible at the expense of truth; for nothing breaks down a man’s truthfulness more surely than pecuniary embarrassment— ‘ An unthrift was a liar from all time; Never was debtor tliat was not deceiver.’ The refusal which is at once the most safe from vacillation, and perhaps as httle apt to give offence as any, is the point-blank refusal, without reasons assigned—reasons—weak men, under the bias of self-love, will always imagine themselves competent to controvert.”* 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 recollection of the borrower. But care must be taken that the note, by repeated renewals, does not in fact become a dead loan. Hence, when a renewal cannot be avoided, attempts should be made to reduce the * ‘ Notes from Life,’ by Taylor. 38 A Practical Treatise 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 company 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 pro¬ perty. In London, however, this kind of security 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 transactions, 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 intended 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 having de¬ posited his deeds than that to which he is legitimately entitled. No banker takes deeds if there is the slightest probability of his being compelled to realize the property, as the legal difficulties are very great. In all cases in which deeds are taken, they are submitted to the inspection 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 indirectly, upon deeds, or any other dead security. But this rule, like all other general rules, must have ex¬ ceptions, and when it is proper to make an exception is a matter that must be left to the discretion of the banker. 39 on Banking. He should, however, exercise this discretion with caution and prudence, and not deviate from the rule without a special reason to justify such deviation. Among country bankers, in agricultural districts, advances upon deeds are not considered so objectionable as in London. A landed proprietor, who wants a temporary advance, places his deeds in the hands of his banker, and takes what he requires. The banker thinks he can have no better security ; but the loan is usually for only a moderate amount, and is paid off within a reasonable time. In the country the character and circumstances of every man is known. A landlord who wants an advance to' meet immediate demands, until his rents come in, seems fairly entitled to assistance from his banker. But should a landlord who is living beyond his income, ask for an advance almost equal to the value of his deeds, he would not be likely to obtain it. It is not now illegal to charge higher than five per cent, on discounts or loans made on the security of deeds, as by the Act 17 and 18 Vic. c. 90, passed in 1854, all laws against usury are repealed. Another kind of security is bills of lading, and dock warrants. Advances upon securities such as these must be considered as beyond the rules which prudent bankers lay down for their own government; they can only be justified by the special circumstances of each case. In advancing upon bills of lading, the banker must see that he has all the hills of the set; for if he has not all, the holder of the absent bill may get possession of the property. It is also necessary that he have the policy of assurance, that, in case the ship be lost, he may claim the value from the insurers. In advances upon dock warrants, the banker should know that the value of the goods is equal to his advances, and wall also give him a margin, as a security against any fall in the market price. But, in truth, no banker should readily make advances upon such securities. Now and then he may take them as col¬ lateral security, for an advance to a customer who is other¬ wise respectable. But if a customer requires such advances frequently, not to say constantly, it shows that he is con- 40 A Practical Treatise ducting his business in a way that will not ultimately be either for his own advantage, or that of his banker. A banker should never make any advances upon life policies. They may become void, should the party commit suicide, or die by the hand of justice, or in a duel; or if he go without permission to certain foreign countries. The pay¬ ment may be disputed, upon the ground that some deception or concealment was practised, when the policy was obtained. And, in all cases, they are dependent upon the continued payment of the premiums. The value of a policy, too, is also often overrated. The insured fancies that his policy increases in value in exact proportion, to the number of premiums he has paid; but if he offers it to the company, he will find that he gets much less than he expected. The policy is valued in a way that remunerates the ofSce for the risk they have run during the years that are past; and the valuation has a reference only to the future. Thus, if a man, at 20 years of age, insures his life, the expectation, or probability of life, as it is called, that is, the number of years he is likely to live upon the general average, is, according to the North¬ ampton tables, 33. If he wishes his representatives to receive 1,000Z. at his death, he will pay a proportionate annual premium. When 40 years of age, he will have paid twenty premiums, and he may fancy that his policy is worth the total amount of the premiums. But the policy is valued, not with reference to the past, but with reference to the future. At 40 years of age his expectation of life ” is not 13, but 23 years. It is then calculated, that 23 years hence the policy will be entitled to 1,000Z.; but that the annual premiums must be paid in the meantime. The value of the policy, therefore, is the present value of this 1,000^. less the present value of all these annual payments. Should he wish to sell his policy when he is 60 years of age, he will find that it is proportionably less valauable, for his expectation of life will still be 13 years. A short rule for ascertaining the expectation of life, according to the North¬ ampton Tables, is to take the age from the number 86, and then divide by 2. The value, of a policy is generally about on Banhing, 41 one-third of the amount of all the premiums that have been paid. There are certain signs of approaching failure, which a banker must observe with reference to his customers. Thus —if he keeps a worse account than heretofore, and yet wants larger discounts—if the bills offered for discount are drawn upon an inferior class of people—if, when his bills are un¬ paid, he does not take them up promptly—if he pays his money late in the day, just in time to prevent his bills or cheques being returned through the clearing ; but, above all, if he is found cross-firing: that is, drawing bills upon parties who at the same time draw bills upon him; as soon as a banker detects a customer in fair credit engaged in this practice, he should quietly give him reason for removing his account. Sometimes two parties, who keep different bankers, will adopt a practice of exchanging cheques. Their cheques are paid into the banks too late to be cleared on the same day; and hence the parties’ accounts appear better the next day than they otherwise would be. Some failing parties, too, have recourse to forged or fictitious bills, which they put into circulation to a large amount. The best way for a banker to guard against loss from this practice is, to inquire in all cases about the accepters of the bills that he discounts, not only when his customers are doubtful, but even when they are deemed respectable. Indeed, it is only people in good credit that can pass fictitious bills. The banker’s rule is, that they who have discounts must keep a proportionate balance: this is useful, as the amount of balance kept is an indication of the circumstances of the party. When a customer has heavy discounts, and keeps but a small balance, it may usually be inferred that he is eithe]* embarrassed in his affairs, or he is trading beyond his capital. The operation which is called nursing an account,” some¬ times requires considerable prudence, tact, and perseverance. A banker, having made considerable advances to a customer, suddenly discovers that the party is not worthy of the confi¬ dence he has placed in him. If these advances should be 42 A Practical Treatise • called up, or discontinued, the customer will break, and the banker sustain loss. The banker must be governed by the circumstances of each case. It is sometimes best to continue to discount the good bills, and refuse those of a different character; and thus gradually weed the account of all the inferior securities. Sometimes he may get the customer to stipulate that he will diminish his advances by certain fixed amounts, at certain periods; and thus, by alternately refusing and complying, the banker may at length place himself in a state of security. At other times, the banker may offer to make still further advances, on condition of receiving good security also for what has been already advanced. This plan is advisable when the additional advance is not propor- tionably large, and the security is not inconvertible, other¬ wise the plan is sometimes a hazardous one. It requires some courage to look a loss in the face. And it has occurred that a banker, rather than sustain a small loss, will consent to make a further large advance upon inconvertible security; and the locking up of this large advance for an indefinite period has proved the greater evil of the two. In fact, some of the largest losses of fallen banks have been made in this way. They have, in the first instance, made an imprudent advance; rather than sustain this loss at once, they have made a further advance, with a view to prevent it. The advance has at last become so large, that if the customer falls, the bank must fall too; for the sake of self-existence, further advances are then made; these too are found in¬ effectual, and ultimately the customer and the bank fall together. on Banking. 43 SECTION V. THE ADMINISTRATION OF A BANK WITH REGARD TO PRO¬ CEEDINGS 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 favour 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,* 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 * These books are described in the Section on Banking Book-keeping. 44 A Practical Treatise checking them against the books, distributes them 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 dishonour; 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 billand after a wdiile, 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 tliose 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, directing him to pay a sum of money either to the di'awer 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 favour the bill is di’awn 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 particular 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* 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 * If a bill be once indorsed in blank, thougli afterwards indorsed in full, it will still as against the drawer, the payee, the accepter, the blank indorser, and all indorsers before him, be payable to bearer, though as against the special indorser himself title must be made through his indorsee .—Serjeant Byles on Bills of Exchange, p. 115. on Banking. 45 be not indorsed by the party to whom it is thus specially assigned. In practice, 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 in¬ dorsement. The following is the form of a Bill of Exchange :— £1000. London, \st of May, 1827. Ttuo months after date, pay to the order of Messrs. Quick, Active, & Co. (or me or my order') the for value received. sum of One Thousand Founds, Hearty, Jjolly, & Co. Accepted, payable at To Messrs. John Caref ul & Co. Messrs. Steady & Co., Bankers. Southwark. John Careful & Co. A Promissory Note is as follows:— £1000. London, of May, 1827. Two months after date, we promise to pay Messrs. Hearty, Jolly, & Co., or their order, the sum of One Thousand Pounds, for value received. John Careful (& Co. At Messrs. Steady & Co., Bankers, Lombard Street. The acceptance is usually written across a bill, but should always be on the front, not on the back of the bill. An indorsement, as the name implies, 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. Tliese and similar terms may be illustrated by a 46 A Practical Treatise cii’cumstance said to have occurred on the cross-examination of a witness, on a trial respecting a mortgage.— Counsellor- ‘‘Now, sir, you are a witness in this case; pray do you know the difference between the mortgager and the mortgagee ?” — Witness. “ 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 dis¬ counted, is not used in England, but I observe in the par¬ liamentary evidence that it was employed by some of the witnesses 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 holiday,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. 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 honour of the indorsers. 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 endorsing 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 * To remove all doubts upon this subject, an Act of Parliament was passed (7tli & 8th Geo. lY. chap. 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 exchange and promis¬ sory notes, be treated and considered as the Lord's-day, commonly called Sun¬ day.” 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. on Banking, • 47 compelled to state also his address. This would prevent forged and fictitious indorsements, and give a banker who discounts a bill, a better opportunity of ascertaining the respectability of the parties. In case, too, the bill was un¬ paid, 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. 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 ac¬ ceptance or payment, it should be immediately protested and returned. An inland bill is only noted, and then only when refused payment. A foreign bill may be accepted verbally, or by letter; but no acceptance of an inland bill is valid, unless written upon the bill itself.* When a merchant in one country draws bills upon a mer¬ chant 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 conveyance, and his remittances will not be delayed by any accident that may happen to an individual ship. In drawing these bills, it is always expressly 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 merchant, 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 * See 1 & 2 Goo. IV. cap, 78. 48 A Practical Treatise only as it has the additional 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, Eotterdam, 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 always fifteen days. Bills drawn from Eussia 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 honour of the draw^er, 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 himself, for the honour 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 honour 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 honour 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. Bills accepted, and made payable at a banking-house, in the usual manner, without the addition of the word only, may be presented either at the banking-house, or at the residence of the accepter. In either case, it is a legal pre¬ sentment,^ as far as regards the accepter. In practice, how- * 1 & 2 Geo. IV. cap. 78. 49 on Banking, ever, 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 notice or direction, of which the following is a copy Bill for £ Drawn hy Mr. On Mr. Lies due at Messrs. Steady & Co., No. Lombard Street. Please call between Two and Four dclock. 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 to the customer. If it be a foreign bill, that is, drawn from any foreign land, it must be protested. 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. By the Act 16 and 17 Vic. c. 59, it is enacted that drafts or orders for the payment of any sum of money to the bearer on demand, shall be liable to a stamp duty of only one 'penny. By the same Act, bankers are allowed to state in their deposit receipts the rate of interest allowed for any sum of money placed in their hands, without being subject to stamp duty. VOL. I. E 50 A Practical Treatise The following is the form of a Draft or Cheque:— No. 457. London, May 1, 1827. Messrs, Hope, Bich, & Co. Lombard Street. Fay John Doe, Esq. or hearer, the sum of One Hundred Pounds. £100. Peter Thrifty & 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. 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 knowledge 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. But by the Act 17 and 18 Vic. c. 90, passed in the year 1854, the laws of usury are abolished. The following are the Tables of Stamp Duties upon Bills of Exchange, corrected down to, and including 27 and 28 Vic. cap. 56, 1864. Bill of Exchange {Inland), payable in any other way than to bearer on demand. Not exceeding £5 £0 0 1 Exceeding 5 and not exceeding £10 0 0 2 yy 10 yy yy 25 0 0 3 yy 25 yy yy 50 0 0 6 yy 50 yy yy 75 0 0 9 yy 75 yy yy 100 0 1 0 yy 100 yy • yy 200 0 2 0 yy 200 yy yy 300 0 3 0 yy 300 yy yy 400 0 4 0 yy 400 yy yy 500 0 5 0 yy 500 yy yy 750 0 7 6 yy 750 yy yy 1000 0 10 0 yy 1000 yy yy 1500 0 15 0 yy 1500 yy yy 2000 1 0 0 yy 2000 yy yy 3000 1 10 0 yy 3000 yy yy 4000 2 0 0 yy 5000, then for every £1,000 . . £1,000, or part of 0 10 0 51 on Banking, Bill of Exchange, Draft or Order {Foreign) —Drawn or endorsed, or negotiated out of the United Kingdom, for the payment of money, on demand or otherwise within the United Kingdom, same duty as on an Inland Bill up to £100, then for every £100 or fractional part of £100 . £0 10 The payers of Foreign Bills to cancel adhesive stamp by writing “ Paid ” thereon. Bills of Exchange {Foreign) —Drawn in, but payable out of the United Kingdom. If drawn singly, or otherwise than in a set of three. —Same duty as on an Irdand Bill. If drawn in sets of three, for every Bill of each set Not exceeding £25 £0 0 1 Exceeding 25 and not exceeding £50 0 0 2 50 yy yy 75 0 0 3 75 yy yy 100 0 0 4 100 yy yy 200 0 0 8 yy 200 yy yy 300 0 1 0 yy 300 yy yy 400 0 1 4 yy 400 yy yy 500 0 1 8 yy 500 yy yy 750 0 2 6 yy 750 yy yy 1000 0 3 4 yy 1000 yy yy 1500 0 5 0 yy 1500 yy yy 2000 0 6 8 yy 2000 yy yy 3000 0 10 0 yy 3000 yy yy 4000 0 13 4 yy 4000 then for every Bill of the set for every £1,000, or part of £1,000 0 3 4 Promissory Note. —Same Scale as Bills of Exchange payable in any other way than to bearer on demand. Bills of Exchange and Promissory Notes cannot be stamped after they are signed, unless impressed with stamps of wrong denomination but sufficient value. Draft or order (Inland), for payment of money to bearer or to order, on demand. All documents, termed letters of credit, whereby any person shall be entitled to draw upon any other for any sum of money therein mentioned. £0 0 1 Draft, or Order, for payment of money to bearer or to order drawn on any banker.£0 0 1 “ The holder of any bill of exchange drawn out of the United lUng- dom, and not having a proper adhesive stamp affixed thereon as herein directed, shall, before he shall present the same for payment, or indorse, transfer, or in any maimer negotiate such bill, affix thereon a proper E 2 52 A Practical Treatise adhesive stamp for denoting the duty by this Act charged on such bill; and the person who shall indorse, transfer, or negotiate such bill shall, before he shall deliver the same out of his hands, custody, or power, cancel the stamp so affixed by writing thereon his name or the name of his firm and the date of the day and year on which he shall so write the same, to the end that such stamp may not be again used for any other purpose; and if any person shall present for payment, or shall pay or indorse, transfer, or negotiate any such bill as aforesaid whereon there shall not be such adhesive stamp as aforesaid duly affixed, or if any person who ought as directed by this Act to cancel such stamp in man¬ ner aforesaid shall refuse or neglect so to do, such person so offending in any such case shall forfeit the sum of fifty pounds; and no person who shall take or receive from any other person any such bill as afore¬ said, either in payment or as a security, or by purchase or otherwise, shall be entitled to recover thereon, or to make the same available for any purpose whatever, unless at the time when he shall so take or re¬ ceive such bill there shall be such stamp as aforesaid affixed thereon and cancelled in the manner hereby directed.” If a woman accepts a bill, and is married before it becomes due, her husband may be sued for the amount, but she can¬ not. If a bill be indorsed to a woman, who afterwards marries, her husband must indorse the bill, unless she in¬ dorses 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 hus¬ band, or else in the joint names of the husband and the wife. If a woman who is actually married accepts a bill by and with the authority of her husband, the acceptance is binding on the husband; but if she accepts a bill without his au¬ thority, he cannot be legally compelled to pay it, unless it were given for articles necessary to her support. A person under twenty-one years 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 “ necessaries ” 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 neces¬ sary to the son of a nobleman which would not be necessary to a man of an inferior station in societv. 53 on Banking, • If the drawee refuse to accept a bill, the holder may im¬ mediately bring an action for the amount against all the other parties, without waiting until 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 practice 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-accept¬ ance. 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 protested 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 calcu¬ lated accordingly. If the accepter, drawer, and all the indorsers to a bill become bankrupts, 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 20s. 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 has not given value for it, they are accountable to the loser. But a person who has given value for a lost or stolen bill, to a thief, or to a finder, can recovei' the amount from all the parties in the same way as though he had received it in the course of business from the last indorser, provided the bill was not specially indorsed. But if it was specially indorsed, and the thief or finder 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. 54 A Practical Treatise 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 accepter. For it is possible that a finder may pass it for a valuable consider¬ ation to"another party, who would thus be a hona fide holder, and might compel the accepter to j)ay him the amount. In this case, therefore, 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 dishonour 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 immediately 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, Le., neglect on the part of the bankers in not making further inquiry, and under his direction the jury returned a verdict for the plaintiff. Keferring to the above decision. Sergeant Byles observes:— “ But it is now definitely settled that if a man takes honestly an instru¬ ment made or become payable to bearer, be has a good title to it, with whatever degree of negbgence be may have acted, unless bis gi*oss negbgence induce the jury to find fraud.”* Tlie following case was tried in the Court of Queen’s Bench:— The question involved was the right of money-changers to take Bank of England notes m disregard of notices that they bad been stolen. The action was brought by Messrs. Adam Spielmami and Co., of London, as * Bylcs ou Bilb of Exchange, page 12G. 55 on Banking, correspondents of Messrs. Meyer Spielmann and Co., of Paris, to recover the amount of two Bank of England notes for 500?. each, which had formed portions of notes, for the value in all of 3,000?., stolen from Messrs. Brown, Shipley and Co., of Liverpool. The notes were stolen in November, 1852, and it was proved that notices of the robbery were delivered at the places of business of both firms. One of the notes was alleged to have been received by Meyer Spielmann and Co., in Paris, from a person giving the name of O. F. Howard, and the other from A. Monteaux, a money-changer in Paris, which note also had the name of Gr. F. Howard upon it. Both notes were remitted by Messrs. Meyer Spielmann and Co. to Messrs. Adam Spielmann and Co., and received by them in London. On behalf of the plaintiff it was contended that, the notes having been taken in the ordinary course of business, he was entitled to recover upon them. Lord Campbell left to the jury the question whether Meyer Spielmann took the notes lond fide and for value; whether Adam Spielmann received them hond fide as a remit¬ tance ; and whether the notices were left at the places of business of both parties. The jury found that Meyer Spielmann and Co. did not take the notes hond fide for value; that Adam Spielmann and Co. did take them hond fide as a remittance; and that the notices were duly received. Upon this finding. Lord Campbell directed a verdict to be entered for the Bank of England.” The Editor observes:— “ It is hoped that this decision will have the effect of preventing the practice, which has become too common, of taking stolen notes, which cannot be passed in England, to the chief cities of Europe, and there obtaining the amount through money-changers, who afterwards claim the value from the Bank, on the ground that the notes have been taken in due course of business, although, in fact, no sufficient inquiry has been made as to the hona fides of the transaction, or the respectability of the parties presenting them.”* But in a similar action brought by Messrs. Eaphael and Co. on the part of Messrs. St. Paul and Co., of Paris, against the Bank of England, for the amount of another of these stolen notes, the verdict was for the plaintiff. The following were the points on which the jury were directed to decide :—• 1. Was the money paid? 2. Were the notices served on St. Paul and Co. ? 3. Did they know of, and had they the means of knowledge of the robbery at the time they discounted the note ? The jury, after retiring for three quarters of an hour, found, in answer to these ques¬ tions,—1. That Messrs. St. Paul gave full value for the note. 2. That the notices were served. 3. That the notices were not taken proper * Bankers’ Magazine, March 1855. 56 A Practical Treatise care of, and that St. Paul had the means of knowledge if he had taken proper care of the notice, but that he did not know of the loss at the tune; and, lastly, that the plaintiff took the note hond fide. Verdict for the plaintiff—534/. Execution to be stayed, but no points reserved.” 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 alteration does not affect the validity of the bill: but if the bill be left for acceptance 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 coiTecting a mistake does not vitiate a bill, provided it be made with the concurrence 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 time, 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 person on his behalf should be there to give an answer to the party presenting 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, lie 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 57 on Banking. 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 receives a bill or note by post, he is not re¬ quired 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 opportunity. It has long since been decided, in numerous cases, that, though the party by whom the bill or note is to be paid live in the same place, it is not necessary to present the instru¬ ment for payment till the morning next after the day on which it was received. And later cases have established, that the holder of a cheque has the whole of the banking hours of the next day witliin which to present it for payment.”* In the following case it was decided that the presentment of a bill of exchange at the clearing-house is a legal present¬ ment. “ On the 11th September, between one and two o’clock, the defendants gave the plaintiffs a cheque upon Bloxam and Co, then bankers, in payment for goods. The plaintiffs lodged the cheque with Messrs. Harrison, then bankers, a few minutes after four; and they presented it between five and six to Bloxam and Co., who marked it as good. It was proved to be the usage among London bankers not to pay any cheque presented by or on behalf of another banker after four o’clock, but merely to mark it if good, and pay it next day at the clearing-house On the 12th at noon Harrisons’ clerk took this check to the clearing¬ house, but no person attended for Bloxam and Co., who .stopped payment at nine on that morning, and the cheque was therefore treated as dis¬ honoured. The plaintiffs, in going with the cheque to Harrisons’, passed Bloxams’ house. On a case stating these facts, the court held that there had been no laches in the plaintiffs, in not presenting the cheque to Bloxam and Co. on the 11th for payment, or in his bankers, in not presenting it at the banking-house, but merely at the clearing¬ house, and therefore gave judgment for the plaintiff.”t Bills may be negotiated after they are clue, 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 * Byles’s Law of Bills of Exchange, page 123. t Baylcy on Bills of Exchange. 58 A Practical Treatise 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/cr value to a thu’d 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 lodge bills with a banker for the purpose of being collected, and the amount wdien 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 dishonour of a bill or cheque is of considerable 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 dishononr of a bill or note, it ought to import that the person to whom it is given is considered liable, and that j)ayment from him is expected. “ And the notice ought to import that the bill or note has been dis- honom*ed: a mere demand of payment and threat of law proceedings in case of non-pajunent is not sufficient. ‘‘Especially if such demand be made on the day the bill or note becomes due. “Notice must be given of a failure in the attempt to procme an acceptance, though the application for such acceptance might have been unnecessary; otherwise the person guilty of the neglect may lose his remedy upon the bill. “ The notice must come from the holder, or from some party entitled to call for payment or reimbm’sement. “A notice from the holder or any other party will iusiu’e to the benefit of every other party who stands between the person giving the notice, and the person to whom 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 hnmediate notice to those parties against whom he may have right ■ to claim; for the holder may have omitted notice to some of them, and on Banking. 5 9 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 Itresentment is a dishonour. “ 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 party 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 wliich he is to send it goes out within the day. And though there be no post the succeeding day for the place to wliich he is to send. Therefore, where the notice is to be sent by the post, it will be sufficient if it be 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 situa¬ tion as if it did not reach him till the Monday; he is not bound to pay it any attention till the Monday, 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 ap¬ pointed 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 dishonour of bills or notes due or payable the Saturday preceding need not be given until the Tuesday. “ And Good Friday, Cliristmas-day, and any day of fast or thanks¬ giving, 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 dishonour to his customer, in like manner as if the banker were himself the holder, and his customer were the party next entitled to notice. And the customer has the like time to communicate such notice, as if he had received 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 dishonour, is in time; and if the customer communicate that notice the day following, that will be in time also. 60 A Practical Treatise *‘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 that 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 are 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 interverung 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 houi’s of business, at a time when he or some of his people might reasonably be expected to be there, is sufficient; it is not neces¬ sary 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 pui’iDose, without delay. “ Notice to one of several partners is notice to all: and when a bill has been drawn by a firm upon one of the partners, and by him accepted and dishonoured, it is unnecessary to give notice of such dis¬ honour to the firm; for this must necessarily be known to one of them, and the knowledge of one is the knowledge of all. Upon an acceptance payable at a banker’s, notice of non-payment need not be given to the accepter, for he makes the bankers his agents; presentment to them is presentment to him. “ A person who has been once discharged by laches from his liability on a bill or note, is always discharged. And, therofore, where two or more parties to a bill or note have been so discharged, but one of them, not knowing of the laches, pays it; he pays it m liis own wi’ong, and cannot recover the money from another of such parties.” As many bills drawn in foreign languages pass through the hands of a London banker, it may be useful to give a list of some of those words which express the amount and the time, the two main points in a bill of exchange :— on Banking, English . . One Two Three Sixty Ninety. German . . Ein Zwei Drei Sechzig Neunzig. Dutch . Een Twee Drie Zestig Negentig. { Quatre-vingt-dix, or French . . Un Deux Trois Soixante 1 O' 1 Nonante. Italian . . Uno Due Tre Sessanta Nonanta, or Novanta. Spanish . . Uno Dos Tres Sesenta Noventa. Portuguese . Hum Dous Tres Secenta Noventa. Swedish . . En Twa Tre Sexti Nitti. Danish . . Een To Tre Tredsindstyve Hal vfemtesindsty ve. English . . German . . Dutch . . French . Italian . . J A dos meses de la fecha. Spanish . . 1A dos meses data. Portuguese . . . . . A dous mezes de data. ' Swedish , . . . . . Twa Manander ifran dato, Danish . . . . . . To maaneder efter dato. English . . German . . Dutch . . . French . . Italian . . j A tre giorni vista. (a tre giorni dopo vista. Spanish . . Portuguese . . . . A tres dias vista. Sivedish . . Danish . . In all the above languages, “at sight” is usually expressed by a vista, except the French, which expresses it by a vue. “ At usance ” is expressed by a uso or ad uso. The names of the months so nearly resemble the English, that a mistake can but rarely occur. * These phrases are taken from a small pamphlet, called ‘ The Interpreter,’ compiled and translated- by a Member of the Society of Public Notaries in London. 62 A Practical Treatise The following are forms of bills in each of the above-men¬ tioned languages:— French. Lille, le 28 Septembre, 18 . Bon pour £158 9 sterlings. Au vingt-cinq Decembre proclmin, payez par ce mandat a Vordre de nous-memes la scmme de cent cinquante-huit livres sterlings 9 schtllings valeur en nous-memes et que passerez suivant Vavis de A Messrs. _ a Londres. German. Niirnberg, den 28 October, 18 . Pro £100 Sterling. Zwei Monate nacTi dato zalilen Sie gegen diesen Prima Wechsel an die Ordre des Herrn _ Ein Hundert Pfund Sterling den Wertli erlialten. Sie bringen solche auf Reclinung laut Bericlit von der Herren _ London. Dutch. Orouw, den Isif November, 18 . Voor £59 17 6 Ttuee maanden na dato gelieve UEd te betalen voor dezen onzen prima Wisselbrief de secunda niet betaald zynde aan de ordre van de Ileeren _ negen & vyftig Ponden zeventien schelling en zespences sterling, de waarde in rehenmg UEd stelle liet op rehening met of zonder advys van de Ileer _ te London. Italian. Livorno, le 25 Settembre, 18 . Per £500 Sterlins. A Tre mesi data pagate per questa prima de Cambio (una sol volta) air or dine _ . la somma di Lire cinque cento sterline valuta cambiata, eponete in conto M. S. secondo Vavviso Addio Al __ Londra. on Banking. 63 , Spanish. Malaga, d 20 de Setlf^ de 18 . Son £300. A noventa dias fedia se serviran F» mandar x>(^gar por csta primera de cambio d la orden de loss _ Tres cientas libras Esterlinas en oro o plata valor recibido de dlios que anotaran valor en cuenta segun aviso de A los _ Londres. Portuguese. £600 Esterlinas. Lisbon, aos 8 de Dezembro de 18 . A Sessenfa dias de vista precizos pagard V _ por esta nossa unica via de Letra Segura, d nos ou d nossa Ordem a quantia acima de Seis Centas Livras Esterlinas valor de nos recebido em Fa¬ zendas, que passera em Comta segundo o aviso de Ao Sen' _ Londres. Swedish. Bjorneberg, den 23 September, 18 . For £ Sterl. 100. Nittio Dagar efter dato behagade H. II. emot denna prima Wexel (secundo obetald) betala till Herr _ elle ordres Ettliun- dra Bund Sterling som stalles i rakning enligt avis. Herrar _ London. Danish. Kjobenhavn, 9 December, 18 . Bbae 4,000. Tre maaneder efter dato behager de at betale denne Prima Vexel, secunda ikke, til Herr _ eller ordre med Fire Tusinde Rigsbank Daler, Valutta modtaget og stilles i Regning ifolge advis. Herrer _ London. Formerly bills of excliange constituted a large proportion of the circulating medium of Lancashire, and supplied the place of country notes. The following account is given 64 A Practical Treatise by J. Gladstone, Esq., M.P., before a Parliamentary Com¬ mittee :— We sell our 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 London 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 payments. The bank notes or gold we require for our ordinary purposes and charges of merchandise 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 to four; and the banker charges a commis¬ sion of a quarter per cent, on the amount of one side of the account; that charge is his remuneration, and that of his bankers in London, for paying our acceptance there, both inland and foreign. The account fluctuates, depending on the confidence the banker may have in his customers; if that confidence is entire, the customer is occasionally in his banker’s debt, but more frequently the balance is in his favour. Does that extend to the whole of Lancashhe ?—I believe the system at Manchester, Preston, and the other principal towns, is similar; I am not aware of any other. There are some small country bankers in the neighbom’hood of Manchester, who issue promissory notes, but I do not know anything of their practice: none of the more respectable banks in Lancashire do issue them.” * “ If I sell a thousand pounds’ worth of goods to a wholesale grocer, or any other person who again distributes them to his customers in the country, when he comes to pay me the 1,000Z. he will do so in bills, lim¬ ning from 10?. to any other sum; the 1,000?. may be paid in twenty or thii’ty bills of exchange, drawn on London, and generally at two and sometimes thi’ee months’ date.” f Mr. Lewis Loyd, of tbe firm of Messrs. Jones, Loyd & Co., estimated in 1826, that the circulation of Manchester con¬ sists 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.J Mr. Loyd stated he had seen bills of 10?. with 120 indorsements upon them; and when the stamp duties were lower, bills were drawn of a less amount. He gives the following criteria of accommodation bills. “ Bills that are issued for speculation * Lords, 21G, Gladstone. t Lords, 227, Gladstone. X See Evidence of Lewis Loyd, Esq., and of Mr. Henry Burgess, before the Committee of the House of Lords, pp. 294, 298, 65 on Banking, generally travel to London very rapidly, with very few in¬ dorsements upon them; they are wanted to be converted into bank notes 'immediately, and come quite clean, and witliout any marks of negotiation upon them; and besides that, we know the parties upon them pretty ' well.” In Scotland an accommodation bill is called a wind bill. In may be mentioned, that after the establishment of branches of the Bank of England at Manchester and Liver¬ pool, the bill circulation of Lancashire was considerably diminished. Most of the banks made agreements with the branch bank, stipulating that, in consideration of having a certain amount of discount, at a reduced rate of interest, they would not issue for local circulation any bills they had discounted for their customers. These agreements have been modified since the Act of 1844; but still the main circulation of Lancashire consists of Bank of England notes. It would not now be possible to find a bill with 120 indorse¬ ments. SECTION VI. 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 pro¬ bably be invested in Government securities; loans to bill brokers, payable on demand; in short loans on the Stock Exchange, or in first-rate 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 speculate in the funds, or to buy and sell stock frequently, with a view of making a profit by the difference VOL. I. F 66 A Practical Treatise of price ; hence a banker sells his Government 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 fluctuating investments. In seasons when money is abundant his deposits will increase, and perchance, at the same time, the demand of his customers for loans or discounts will diminish. His surplus funds will thus increase. But these temporary surplus funds he will on no account invest in Government securities, as his deposits will be certainly, and perhaps suddenly, reduced, and he might have to realize his Government securities at a loss. He will in this case increase his loans to brokers, and his brokers’ bills. And though he will get as much interest as he can, he will take a very low interest rather than keep the money unpro¬ ductive in his till, or invest it in a more permanent form. We will now take a short review of the different kinds of investment we have mentioned. The three grand points for consideration are, convertibility—exemption from loss—and a good rate of interest. But first we will notice those circum¬ stances which regulate the amount of cash 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 deposits are large, he will keep more money to meet them than when his deposits are small.— Secondly, the amount of his daily pay¬ ments. These will not at all times correspond with the amount of the deposits; for some accounts are more operative than others. On commercial accounts, for instance, the payments will be much heavier in proportion to the average balance than on accounts which are not commercial. The City bankers pay much larger sums every day, in proportion to the amount of their deposits, than the bankers at the West-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 more, as 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 67 on Banking. the cheques drawn on account of his deposits with his notes, and these notes often get into the hands of another banker, with 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 mthdrawn by a draft on London than in any other way.—^Fourthly, the number 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 business were collected into one place. In the case of a run the difference is considerable, as every point open to attack must be well fortified. The stoppage of one branch, even for a short time, would bring discredit upon the whole establish¬ ment.—Fifthly, in London the amount of notes to be kept in the till will be affected by the privilege of clearing. Those bankers that clear,” can pay bills and cheques upon them by the bills and cheques they have upon other bankers. Those banks that do not clear must pay all the bills and cheques upon them in bank notes before they receive payment of the bills and cheques they have upon other bankers. 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 average amount in his own mind, below or above which he does not swerve very widely, yet the cash¬ book will seldom be exactly this amount. Sometimes he vdll strengthen his till, in the prospect of large payments that may 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 necessary, it may be replenished. The temperament of a banker, too, has some effect in this case. Some bankers are F 2 68 A Practical Treatise 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 money market will also influence the tills of the bankers. When money is abundant, 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 emergency. 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 deposits. 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-eighth or one-tenth of their liabilities. Even this, we conjecture, is a higher proportion than that which is generally kept by London bankers, especially 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 customers with such loans and discounts as they may require, he has a surplus of cash. This surplus may be considered as being divided into two parts—though it is never actually so divided—the permanent surplus, which the banker is not likely to require, except in seasons of extreme pressure, and the temporary surplus, arising from fluctuations in the deposits. We shall now notice those modes of invest¬ ment 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 before the Joint-stock Bank Committee, in the year 1836, by the late Vincent Stuckey, Esq., the founder of Stuckey’s Banking Company, in Somer¬ setshire, and the late James Marshall, Esq., the Secretary of the Provincial 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 on Banking. 09 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 negotiable bills more 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 which you borrow money on exchequer bills and stock is notoriously lower than that at which you borrow on bills of exchange ? —Yes, it is lower, and for that reason we generally adopt it.” Mr. James Marshall:— "Will you inform the Committee whether it is the usage of the Provincial Bank to invest any portion of its funds in the public securities ?—It has been its uniforhi practice so to do. " By public securities, what do you understand ?—The Consols, for instance: there are various kinds of Government stock: exchequer bills, and Bank of England stock, are generally considered as a pubhc sort of security. "Do you hold stock in London only, or in Dublin as well as in London ?—In Dublin but to a limited amount, because it is not easily convertible there. " On what ground is it that it is not easily convertible in Dublin ?— From the limited nature of the market as compared with London; we could not sell even an immaterial sum without lowering considerably the price. " Have there not been at various times, from various causes, runs on the Provincial Bank, which rendered it necessary to supply large amounts of specie to that country ?—There have, repeatedly. " Do you consider, from your experience, that it would have been competent to the bank to have maintained its full security, with satisfaction to the directors, if they had not been possessed of very considerable funded property in this country ?—Certainly not; speaking of the last run that hajjpened especially, I must say that that dilfered ■from any former run in this respect. "You were conversant with the management of the Scotch banks prior to your connexion with the Provincial Bank ?—Yes. " Is it not the usage of all the Scotch banks in like manner to maintain a very considerable portion of their funds as invested in the Govern¬ ment securities ?—I believe the practice with all is generally so, but I can speak particularly to that of the three oldest banks—as they are commonly called, the three chartered banks,—the Bank of Scotland was TO A Practical Treatise erected by Act of Parliament, the Eoyal Bank of Scotland and the British Linen Company are erected by charter, but have been recognised in the same way, so that there are three public banks in distinction to any of the subsequently-formed banks; I can state from personal knowledge, that these banks have had always a very large sum indeed invested in the funded property of the kingdom. “ Do you consider it Avould be a safe system of banking, if the capital of the bank was altogether invested in commercial bills?—Certainly not.” Of tlie various kinds of Government stock, consols are the best, as there is a more ready market for this kind of stock, and money can usually be borrowed on them until the next account day ; so that, if a banker has only a temporary demand for money, he may thus obtain it at a moderate interest, when, by selling his stock at that time, he might sustain loss. The Bank of England has recourse, sometimes, to this mode of strengthening her reserve. Sometimes, too, a banker may make a profit by lending his consols. At the monthly settlings, among the brokers, stock is sometimes in demand, and money may be obtained upon consols, until the next settling, without paying any interest; and the banker may employ the money in the mean time. As, however, the rate of interest is usually low in such seasons, his profit will rarely be great. There are no time bargains in the reduced 3 per cents., or in the new 3 per cents.; but in ordinary times money can be borrowed upon them at the market rate of interest. In seasons of pressure these are not so saleable as consols. Bank stock, India stock, and long annuities, not being readily convertible, are not generally good investments for bankers. Some bankers avoid all Government stock, and give a preference to exchequer bills. They have some advantages. As the Government must pay the amount demanded in March or June, when they become due, there can be no loss- beyond the amount of the premium at which they were purchased. A banker, too, can borrow money upon them quietly and secretly. A transfer of stock is always known, and, if for a large amount, will, when money is scarce, excite notice, and give the impression that.the banker is compelled to realise some of his securities, to meet demands made upon 71 on Banking. him by his depositors. But a banker can hand his exchequer bills to a stock-broker, who will bring him the money, and the party who has granted the loan will know nothing about the party for whom it was required. On the other hand, there are some disadvantages. Almost every change in the market value of money affects the price of exchequer bills; and whenever money becomes abundant, the Government are very apt to reduce the rate of interest much below that which can be obtained from consols. But a greater objection is, that even in ordinary times, they are hardly saleable in large amounts. There are not now so many exchequer-bill jobbers as formerly, and hence these bills are not so readily saleable. On this account, the Bank of England, who were formerly large holders of exchequer bills, have changed their system, and are now holders of stock. The City bankers, too, prefer placing their money with the bill-brokers, to investing it in exchequer bills. But they are still a favourite mode of investment with bankers at the West-end. East India bonds yield a higher interest than exchequer bills, and the interest cannot be reduced until after twelve months’ notice from the Governor of India in Council. But they are by no means so saleable. Money, however, may generally be borrowed upon them; and the loans of the Bank of England are always announced to be granted on “ exchequer bills, India bonds, and other approved securities.” Bonds of corporations, or of public companies, are by no means proper investments for a banker, except to a very moderate amount, and when they have a short time to run. They may, however, be taken as security for temporary advances to respectable customers. Good commercial bills, of short dates, have this advantage over Government stock or exchequer bills, that a banker is sure to receive back the same amount of money which he ad¬ vanced. He can calculate, too, upon the time the money will be received, and make his arrangements accordingly. And if unexpectedly he should want the money sooner, the bills can, in ordinary times, be rediscounted in the money market. Another advantage is, that he is able to avail himself of any 72 A Practical Treatise advance in the current rate of interest. He will get no higher dividend from his investment in Government stock, should money afterwards become ever so valuable. But with regard to bills, as they fall due he will receive a higher rate of discount with the new bills he may take, and thus, as the market rate of interest advances, his profits will increase. The bankers of Lancashire usually keep the whole of their reserves in bills of exchange. If they have a “ good bill case,” that is, a large amount of good bills in their case, they think themselves prepared to meet any emergency. Their objection to Government securities is founded, first, upon the low rate of interest which they yield; and, secondly, the possibility of loss, from fluctuations in price. They contend, too, that good bills of exchange are more convertible than even exchequer bills; and, even if not convertible, the money comes back as the bills fall due, and thus the reserve is con¬ stantly replenished. The authority of Mr. Samuel Gurney, from his high standing in the City, is so constantly referred to upon this subject, that we copy his evidence. 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-con¬ ducted establishment, 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 emergency?—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 respects 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 iDrocm’cd 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 preferable investment for money, inasmuch as there is no risk of loss by variation of premium in the piu'chase and resale; but 73 on Banking. 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 ?—That is a difficult question to answer; 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 exchange only, which do you think would have the best means of procuring accommodation in the London market to pay his engagements ?—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 investment 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 in the panic of 1825, it is well known they discounted largely with that establishment. But since that period they have not done so, and their indorsements 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, liowever, 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 vdth a smaller amount of cash. In the morning the banker looks at his “ Cash-book,” and observes the amount with which he “ locked up ” the pre¬ ceding 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 remit¬ tances they contain, and the payments he is instructed to make. He will learn from these items whether he “ wants 74 A Practical Treatise 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 farther, and borrow money for a few days on stock or exchequer bills. Should he have money to spare, he Avill, peradventure, discount brokers’ bills, or lodge money on demand AAuth the bill-brokers, or lend it for fixed periods upon stock or exchequer bills. There are some bill-brokers Avho usually make their rounds every morning, first calling on the parties Avho supply them with bills, and then calling on the bankers who supply them Avith money. The stock¬ brokers, too, Avill call after the market is open,” to inform the banker how “ things are going ” on the Stock Exchange, Avhat operations are taking place, and whether money is abundant or scarce “ in the housealso what rumours are afloat that are likely to affect the price of the funds. It is thus that a banker regulates his investments, and finds em¬ ployment for his surplus funds. In our oj^inion, it is best for a banker not to adopt ex¬ clusively any one of the investments we have noticed, but to distribute his funds among them all. We have seen that practical bankers of high standing have been in faA^our of Government secmities, as being at all times convertible. The objection on the part of others has been, that the value of these securities very much fluctuates, and as their realisation Avill be required only in seasons of pressure when the funds are Ioav, it is sure to be attended with loss. On the other hand, it may be stated, AAith regard to ‘‘ loans on demand,” that the recent failures of bill-brokers have shown that the “ demand ” may not ahvays be readily met. And AAuth regard to “brokers’ bills,” 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 investment, Ave are strongly inclined to favour Govern¬ ment' securities, though fully conscious of the losses they may occasionally produce. There is one consideration that must be taken into account: a bank that has large surplus funds. 75 on Banking. if it makes no investments in Government securities, will be strongly tempted to invest tlieir funds elsewhere in other securities 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 perfect solvency, be compelled to stop payment from being unable to realise its investments. Another advantage of a large investment in Government securities is, that the haul?:, by the publication of its balance sheet, has always the means 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 “ Govern¬ ment securities ” distinct from the “ other securities.” It may so be that the “ other securities ” are as good as the Government securities, 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 circumstances 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 opera¬ tions of the 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 * At the Meeting of the London and Westminster Bank, July 1855, the Chair¬ man, J, L. Kicardo, Esq., M.P., made a comparison between the interest obtained on money invested in the funds and that employed with bill-brokers. Upon an average of twelve years the following is the result:—On the 2nd January, 1843, tlie price of Consols was 94|, which yields an interest per annum of 3Z. 3s. Qd. per cent. The interest allowed upon money at call by Messrs. Overend & Co. for twelve years, from January, 1843, to December, 1854, would average 2t. 10s. lOd per cent. Upon bills, the rate allowed is usually half per cent, more, that is, 3/. Os. lOd, per cent. 1,000,000Z. invested at 3?- 3s. GtZ. would produce annually the sum of 31,750Z. At 3Z. Os. lOcZ. per cent, it would produce only 30,416Z. 13s. dcZ. This shows, that upon an average of ijears the funds are more productive than brokers’ bills. 76 A Practical Treatise debts due from the nation to those persons whose names are entered on the bank books. The man who holds 1007 consols is a creditor to the nation for 1007, for which he receives 37 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 907 for this 1007 consols, they can go to the bank, and the seller being properly identified, will transfer this 1007 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: T uesday, W ednesday, Thursday, Friday. Holidays excepted. Eeceived this day of 18 of the sum of The Pro¬ prietors, to protect themselves from F KAUD, are re- being the Consideration for commended to AC - CEPT by them- Interest or Share in the Joint Stock of Three per Cent. Annuities, erected by an Act of Parhament of the 25th Year of the Eeign of King GEOEGEII. entitled. An Act for converting the several Annuities, therein mentioned, into several Joint Stochs of Annuities, transferable at the BAiSTK of ENG¬ LAND, to be charged on the Sinking Fund; and by several subsequent Acts, together with the Proportional An¬ nuity at £3 per Cent, per Annum, at¬ tending the same, by this Day transferred to the said selves or their Attorneys, all TRANSFERS made to them. >■ £ s. d. Witness Hand Witness on Banking. 77 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 600 persons, w^ho meet together in a building in Capel-court, Bartholomew-lane, close to the Bank. Each broker before admission must find three securities for 300Z. each, which sum is applied to meet any claims the other members of the “ House ” may have upon him during the first two years. The suretyship then ceases. The subscription paid by each member is ten guineas per annum. The House is governed by a Committee of thirty persons chosen from the members. But, although all the members of the House ” are called stock-brokers by the public, yet within the House they are divided into two classes, brokers and jobbers. A broker, as the name implies, is an agent who buys or sells for his customers out of the House, and he charges them a commis¬ sion upon the amount of the stock. A stock-jobber is a stock merchant; but he does not deal^ wdth the public: he deals only with the brokers ; and he is at all times ready either to buy or to sell. The price at which he sells is more than the price at which he buys. If one broker has an 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. Hefice the difference between the buying and the selling price of consols is always J, 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 ho 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 78 A Practical Treatise 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 the settling days, being the ’days on which the members of the House settle them accounts. They are fixed by the Committee of the Stock Exchange, and they now occur about once a month. Xow, 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 stockbroker 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 has money he wishes to employ for a short time, he will reverse the operation, and desire his broker to buy consols for money and sell them for time. He thus gets interest for his money, according to the difference of price between consols for time and consols for money. Gene¬ rally, the price for time is higher than the price for money; and the difference between these two prices is called the “ Continuation.” Supposing that the next settling day is a month distant, and the continuation is one-eighth per cent., that amounts to twelve-eighths, or one and a half per cent, per annum. The continuation will vary according to the near approach of the settling day—according to the abun¬ dance of money, and the market rate of interest—and accord¬ ing to the abundance or scarcity of stock. The last cause is not so readily understood by the public, and we will therefore explain it. The stock-jobbers', as we have said, are stock merchants. Of course they are large holders of stock; it is their capital, on wliich they trade. But however large may be the sum they hold, ^hey often agree to sell on the next settling day a much larger sum, expecting that in the mean time they shall buy a large sum, and thus be able to set off one against the other. But sometimes, as the settling day approaches, they find this is not the case, and they are con¬ sequently under an engagement to “ deliver ”—that is, sell —more stock than they hold. What can they do now? They will try to get stock from those who have it, by agreeing to buy it of them now, and selliug it at the ensuing account 79 on Banking, day, a month hence, at the same price; thus abolishing ‘‘ the continuation.” When that is the case, a banker’s broker will go to the banker and say, If you like to lend your consols, you can get money for nothing till the next account day.” The banker replies, Well, I don’t know that I can make much interest of the money just now; but as I can lose nothing, you may lend them.” Thus the jobbers get their stock, and complete their engagements. But sometimes the jobbers are obliged to go farther, and even to offer a premium to parties who will lend their consols. This premium is called “ Backadationit is just the reverse of “ continuation,” and implies that the time price of stock is less than the money price. We have thus described the legitimate operations of the Stock Exchange, so far as it may be necessary to explain the transactions of bankers in the employment of their surplus funds. Those operations, called ‘‘Gambling in the Funds,” and the mode in which the brokers and jobbers settle their accounts, we shall endeavour to describe when we come to speak of the Clearing-house. SECTION YII. THE ADMINISTRATIOjS OF A BANK DURING A SEASON OF PRESSURE. A PRESSURE 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 unfavourable course of exchange, a contraction of the circulation of the Bank of England, and a high rate of interest. These three circumstances have the relation to each other of cause and effect. The unfavomuble course of exchange induces the Bank of England to contract her circulation; and the con¬ traction of the circulation, by rendering money more scarce, increases its value, and leads to an advanced rate of interest. 80 A Practical Treatise The removal of the pressure is in the same order—the foreign exchanges become favourable—the Bank of England then extends her circulation—money becomes more abundant, and the rate of interest falls. The degree to which the exchanges are unfavourable is indicated by the stock of gold in the Bank of England ; and when this is at its lowest amount the pressure may be considered to have attained its extreme point; for as the amount of gold increases, the bank will extend her circulation, and the jDressure will subside. 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 circumstances:—First, by abundance of money ; secondly, by a low rate of interest; thirdly, by some species of speculative investments. The principal pressures that have occurred of late years, have been those of 1825, 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 Com- * mittee of 1832 :— Will you state to the committee what, in your opinion, was the nature and the march of the crisis in 1825 ?—I have always considered that the first step towards the 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, wliich prompted almost everybody to entertain any proposition for investment, however absurd, which wus 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 minin g operations, and loans to those govermnents, in which all classes of the community in England seem to have partaken almost simultaneously. With those speculations arose general speculation in commercial produce, wliich had an efiect of disturbing the relative values between this and other countries, and creating an unfavom-able foreign exchange, which continued from October 1824 to November 1825, causing a very considerable export of bullion from the bank— about seven millions and a half. Commercial speculations 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 on Banking. 81 connected with country bankers. I allude to the house of Messrs. Pole and 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, wliich were in correspondence with it, into difficulties. That discredit was followed by a general discredit throughout London and the interior.”—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 probable, 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 witnessed a mushroom growth of schemes not exceeded by the memorable year 1825. I hold in my hand a list of seventy con¬ templated companies, for every species of undertaking, which have appeared in the Liverpool and Manchester papers within the last three months. This list was made a fortnight or three weeks since, and might probably 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 manufactures. That increase has been enormous—not less than from twenty to fifty, and even one hundred per cent, m 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 adopted by the VOL. I. a 82 A Practical Treatise bank as a means of rendering the foreign exchanges more favourable. This being found ineffectual, the bank in Sep¬ tember 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 amount of American bills upon first-rate houses had been offered for discount and rejected. A high degree of alarm was imme¬ diately spread throughout the community. The dread of a panic similar to that of 1825,almost universally prevailed. Those who had money were unwilling to part with it—trade became suddenly stagnant—the prices of all commodities fell considerably, and numbers of commercial houses, chiefly of the second class, suspended payment. Many railway and other projects now fell into oblivion. The alarm that existed was kept up by the monthly accounts of the bullion in the Bank of England. The public returns showed a gradual decline from April, 1836, to Feb¬ ruary, 1837. It was therefore supposed, that the Bank of England would be under the necessity, for her own safety, of still further contracting her issues, and thus increasing the existing pressure. This apprehension caused all persons who had money to retain it in their possession, -and bankers and others withheld accommodation they would otherwise have been 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 com¬ mittee appeared to sustain all Mr. Clay’s accusations. Tliis report was highly creditable to the talents and industry of the 83 on Banking, committee, but marked by a decided hostility of tone. While it enumerated all the actual or possible imperfections of the joint-stock banks, it ascribed to them scarcely a single excel¬ lence. 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 stringent measures would be adopted with reference to joint-stock banlis, but what they would be none could conjecture. Had the report aj^peared at any other period it might possibly have done good; but as its appearance was contem¬ poraneous 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 of dispraising them, and believed, or pretended to believe, that the banks were unsound, and would certainly stop payment. Others, who were friendly, were apprehensive that the banks, being still in their infancy, vould be found too weak to withstand the storm now raised against 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 stop payment, the private banks in their neighbourhood would be put to a severe trial; and if the banks should even be compelled to withhold thoir usual advances to their customers, the credit of individuals must suffer. 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 farther appre¬ hensions. The alarm was augmented by the stoppage of the Agricul¬ tural 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 suspicion ; the accommoda¬ tion they had been accustomed to obtain by the re-discount of their bills in the London market was considerably re- G 2 84 A Practical Treatise stricted; 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 Liver¬ pool ; and afterwards farther assistance was granted, upon condition they should discontinue business after February, 1837. Soon afterwards, the old and respectable London banking-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, con¬ sisting chiefly of bonds of the respective States, had been remitted to the agency houses in England. This circum¬ stance, in connexion 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, several houses in the American trade, who were said to have given extensive credit to parties in America, applied for assistance to the Bank of England. 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 commenced from the month of May in tliat year. From that month the stock of gold in the bank gra¬ dually and uniformly declined until February, 1837, when it reached its lowest point of depression. From this point, it 85 on Banking, uniformly advanced: the lowest point of the circulation was in December, 1836, though even then it was not lower than it had been in the preceding January. The bank raised the rate of interest from 4 to 4^ per cent, in July, and to 5 per cent, in the following September. During the whole of the year 1837, the amount of gold in the Bank of England con¬ tinued to increase; the bank extended her circulation, and after the payment of the July dividends, money became very abundant, and the market rate of interest experienced a con¬ siderable fall. The foreign exchanges continued to be favour¬ able during the early part of 1838, and gold accumulated in the coffers of the Bank of England. In the spring of that year the directors of the Bank of England sent nearly a million of gold to America. Money became increasingly abundant, and the rate of interest fell. In February the bank reduced their rate of discount to 4 per cent., and the interest on the loans granted during the shutting of the funds was reduced in March to 3J- per cent. The low rate of interest caused large sums of money to be invested in American securities. Bonds of all kinds issued by the Bank of the United States, by the various states in the Union, and by numerous private undertakings, were poured upon the English market, and found eager purchasers. Several of the directors of the Bank of England, in their individual character as merchants, became agents for the distribution of these securities. About July the exchanges became un¬ favourable, 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 Bank of England was considerable, and the directors granted their usual loans in December at 3^ per cent., public confidence was not shaken. In the be¬ ginning of the year 1839 the exchanges became increasingly unfavourable, 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 foreign wheat at the lowest rate of duty. This occasioned a further demand for gold to be exported. The stock of gold in the Bank of England rapidly declined, until, in the month of October, it was no more than 86 A Practical Treatise 2,525,000?., while the liabilities of the bank upon notes amounted to 17,612,000?., and upon deposits to 6,734,000?. The bank directors were very anxious to stop this demand for gold. With this view, they raised the rate of interest on May 16th to 5 per cent., on June 20th to 5-^ per cent., and on Aug-ust 1st to 6 per cent.; and they charged the same rate upon their short loans. They are supposed to have sold large amounts of Government stock and exchequer bills, and on July 13th they announced that they were ready to receive proposals for the sale of the dead weight. None of the offers, however, met their approbation. Finding these measures not speedily effective, an arrangement was made vith the Bank of France for a loan of 2,500,000?. Messrs. Baring & Co. drew bills on account of the Bank of England upon houses in Paris for this amount, which the Bank of France undertook to discount. The directors also determined to refuse to discount any bills drawn or indorsed by any private or joint-stock bank of issue. Notwithstanding these mea¬ sures, the stock of gold in the baUk continued to decrease until the 18th October, when it reached the lowest point of depression. From this point it continued to advance, and the pressure began gradually, but slowly, to subside. It may be useful to notice the differences between the pressure of 1836 and that of 1839. If we measure the in¬ tensity of the pressure by the difference between the largest and the lowest stock of gold in the 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 pres¬ sure of 1836, one joint-stock bank, a London private bank, two country 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 feU considerably, and almost immediately. In the pressure 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 87 on Banking. interest above 5 per cent. In 1839, the rate of interest upon both discounts and loans was raised to 6 per cent. In 1839, the bank gave notice that they were willing to sell the dead weight, and they made arrangements for borrowing 2,500,0007 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 in¬ dorsed by private banks of issue. It would appear that a season of pressure is always pre¬ ceded by one of speculation; and hence it follows that a banker who wdshes 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 acts 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 charac¬ ter, 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 customers. He should also, under any circumstances, avoid making advances for any length of time, and invest¬ ments 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 com¬ mercial bills having a short time to run, or short loans on stock or other undeniable security, however low the interest received, seem to be the most safe and advantageous trans¬ actions. When the aspect of affairs seems to threaten that money will be in demand, and the failure of a number of merchants and traders may consequently be apprehended, it behoves 88 A Practical Treatise him to prepare for approaching events by avoiding all dis¬ counts 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 of his bank, avoid all overdrawn ac¬ counts, and reduce the amount of discounts of the inferior class of accounts. In performing these operations, he will exercise due judgment and discretion, making proper dis¬ tinctions between his customers, and reducing chiefly those bills which are of an unbusiness character, or which are drawn upon doubtful people, or upon parties that he knows nothing about; he will also mark particularly those accounts which require large discounts, but keep no corresponding balance to the credit of their current accounts. As the pressure advances, he will find that there are three demands upon his funds. First, his customers will reduce their balances, and keep less money in his hands. Money lodged at interest will be taken away, because the parties can make higher interest elsewhere, or they will be tempted by the low price of stock to invest it in Government securi¬ ties. Secondly, he will have a greater demand for loans and discounts, not merely from weak people whom he might not care about refusing, but from persons of known wealth, whom it is his interest and his inclination to oblige. Thirdly, he will think it prudent to guard against sudden demands by keeping a larger amount of bank notes in his till. To meet all these demands he will be compelled to realise some of his securities, and he will realise those fii'st on which he will sustain no loss. If a banker has money lying at demand with a bill-broker, he will now have occasion to call it in. If he has money lent at short periods at the Stock Exchange, he will, as he has occasion, take in the money as the loans fall due. If he has discounted brokers’ bills, he will receive the 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 89 on Banking, money market. A country banker who has kept his reserve in bills of exchange will be anxious to re-discount them, and will think himself lucky if he can do so readily and at a moderate rate of interest. It will be useless for a banker to attempt to call up dead loans, or to reduce his discounts, after the pressure has com¬ menced. He should have thought of these matters in the previous season of abundance. As he cannot get in any out¬ standing 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 may give rise to a surmise that he is short of funds. This season of pressure is, however, a good opportunity for calling up ad¬ vances, or getting rid of connexions that he would, on other grounds, like to be without. The “ scarcity of money,” the “pressure on the money market,” are capital reasons to assign for refusing applications which, even otherwise, he would refuse, and for calling up loans which, under any cir¬ cumstances, he would hke to see repaid. During a pressure, a banker will have to give a great many refusals, and some discretion will be necessary in the form of giving these refusals. Let him refuse in what way he may at such a season, he will be sure to give offence* And the party refused will possibly publish the refusal, and, from motives of ignorance or malignity, represent the refusal as having arisen from want of means, and possibly may cir¬ culate a report that the banker is about to stop payment. Hence rumours about banks are always 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 ac¬ counts 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 per¬ fectly 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 regulated by the value of the proposed account and 90 A Practical Treatise 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 accommodation. The best way of getting new connexions 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 incon¬ venience, 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 customers, wdio, when money was abundant, took their bills to be discounted by a bill-broker, because he w^ould 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 temporary purposes. In seasons of abundance the bill- brokers are glutted wdth money. \Yhen the pressure com¬ mences 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 w^hen money is scarce they discount at a higher rate, and in many cases will not discount at all. Sharp-sighted people, who are acquainted with the London money market, will, wUen money is abundant, take all their first-rate bills to a bill-broker, and send to their 91 on Banking. 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 pressure, 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 be¬ haviour 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 get into difficulties, and will apply to him for assistance. He will often be at a loss to decide whether he should or should not grant the assistance required. This hesitation will arise from his doubts as to the extent to which he can prudently rely upon the calculations and antici¬ pations of his customer. The party states that he must im¬ mediately stop payment unless he has assistance; but he has abundance of property, and his difficulties arise only from not being able to realise it. If he has a certain sum he can then go on comfortably. The banker grants him this sum. After a while, he comes again, and states he must now stop unless he has a farther sum. The banker hesitates, but ulti¬ mately gives him this farther sum. He comes a third time, and states he has not yet got enough; and not being able to get more, he then stops, leaving the banker at best with a large lock-up, and probably with an ultimate loss. During a pressure, those banks that allow interest on deposits will be asked for a higher rate of interest. It is quite right that those parties who have had deposits at the bank 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 receive farther lodgments, during a pressure, at a high rate of interest, un¬ less they are lodged for a fixed period. For, should the pressure increase, these sums are sure to be withdrawn, or else applications will be made for a higher rate of interest 92 A Practical Treatise than the banker can prudently give. Nor must it be for¬ gotten 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 withdrawn than he would obtain from his high rate of interest. During a pressure, a banker will pay considerable atten¬ tion to the published 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 banking department resembles any other bank. Its means are the paid-up capital—the real or surplus fund—the public deposits—the private deposits, and the seven-day bills. These means are employed in public securi¬ ties, 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 shows the increase of the pressure, and the banker will act accord- ingly. 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 speculate 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 will lower the rate of interest at which he takes deposits. At the same time, he will be cautious in the bills he dis¬ counts. For, though money may be abundant, yet trade 93 on Banking. may be depressed, and tbe effects of the previous 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 necessary 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 to 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 tlie mastery 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, realise securities unnecessarily at a heavy sacrifice, and keep in his till an amount of unemployed treasure excessively disproportionate 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 become 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 important a bearing on the administration of banking affairs, that our work would be regarded as incomplete were the subject altogether omitted. -The Act of 1844” is the 7 & 8 Yict. cap. 32, and is 94 A Practical Treatise entitled, An Act to regulate the Issue of Bank Notes, and for giving to the Governor and Company of the Bank of England certain pri^dleges for a limited period.” It enacts that from and after the 31st August, 1844, the Issue depart¬ ment of the Bank of England shall be separated from the Banking department—that the issuing department may issue notes to the extent of 14,000,000?. upon securities set apart for that purpose, of which the debt of 11,015,100?. due from the Government to the bank shall form a part—that no amount of notes above 14,000,000?. shall be issued, except against gold coin, or gold or silver bullion; and that the silver bullion shall not exceed one-fourth the amount of gold coin and bullion. Any person is entitled to demand notes from the issuing department, in exchange for gold bullion, at the rate of 3?. 17§. 9c?. per ounce. Should any banker discon¬ tinue his issue of notes, the Bank of England may, upon application, be empowered by an Order of Council to increase her issue upon securities to the extent of two-thirds of the issue thus withdrawn; but all the profit of this increased issue must go to the Government. The theory on which this Act was founded had, for several years previously, been brought before the public in pamphlets written by men of distinguished talent. Upon some of these pamphlets we wrote a critique, which aj^peared in the ‘‘ Westminster Keview ” of January 1841. That article was afterwards published separately, under the title of “ Currency and Banking: a Keview of some of the Principles and Plans that have 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 1844:— The plan of maldng the amount of the circulation fluctuate in exact cor¬ respondence with the amount of gold in the Bank of England. “ This plan is open to the following objections:— 1. Upon this plan there must be a perpetual increase and dimi¬ nution in the stock of gold; consequently a perpetual increase and diminution in the amount of the currency. The increase in the amount of the currency would raise prices and stimulate si^eculation. The 95 on Banking, diminution in the amount of the currency would reduce prices and produce distress. And thus there must be a constant alternation from high prices to low prices, and again from low prices to high prices— from speculation to distress, and from distress to speculation. 2. But depression of prices, and their attendant miseries, may not be experienced only when the foreign exchanges arc unfavourable. •Excessive caution, an apprehension of war, or political feehng, may cause a domestic demand for gold, and this would cause for a while a contraction of the currency as severe as that which would arise from an unfavourable exchange; and, as the bank directors would have no dis¬ cretionary power, but would be required ' to adhere to principle,’ by giving gold for notes, or notes for gold, they could do nothing to assuage these calamities. According to Mr. Loyd, a drain, from whatever cause it may arise, must be met by a contraction of the currency. Mr. Palmer, in laying down his rule, put in a saving clause—‘ except under special circumstances,’ but Mr. Loyd * makes no exceptions. “ 3. To carry this system into operation, would require a separation of the issuing department from the other departments of the business of the bank, and this would cause still farther inconveniences. The ma¬ nagement of the issuing department would be exceedingly simple. The office of the directors would be a complete sinecure, and, for anything they would have to do, their places might be as well supplied by 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 deiDartment 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 circumstances; and, as the amount of deposits varies, the amount of that in which those deposits are invested (viz., the securities) must vary also. It is, therefore, quite absurd to talk of the bank, in its character of a banking concern, keeping the amount of its securities in¬ variable.’ 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 bills, 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 * I wish I could have made this quotation without introducing the names. It would greatly assist our inquiries after truth, and lead to the formation of an independent judgment, if we could engage in discussions of this kind without any reference to those talented men who may have distinguished themselves as either the advocates or the opponents of the doctrines we investigate. OG A Practical Treatise 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 unsaleable even at a reduced price, how then could the bank pay off her deposits ? 4. If the currency were administered upon this principle, the bank would be unable to grant assistance to the commercial and manu¬ facturing classes in seasons of calamity. 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 legislature 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 securities with one hand, and lending out the money with the other ? Besides, is it certain that, under such a pressure as Mr. Loyd’s system must occasionally produce, these securities would be saleable 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 cui’rency, which prohibits the banking institutions of the country from granting relief to the commercial and manufacturing 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 national bank to exclaim, Sauve qui pent. They ought to co-operate with the Government in attempting to relieve the distress, and to preserve the tranquillity of the country.” These remarks, written in the year 1841, mig'ht, if put into the past tense, almost serve for a history of tlie year 1847. The Act of 1844 was formed upon the principle which is here condemned; and the effects described liave F on Banking, 97 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 specu¬ lations, followed by great distress. The Government funds have in large amounts been unsaleable ; and the bank has been unable to afford relief to the commercial classes. A severe pressure has taken pla(;e; 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? The Act was passed, and, as predicted, a pressure came : the Act was continued, and the pressm’e increased: the Act was suspended, and the pressure went away. These are not opinions—they are facts. At the meeting of Parliament in the latter end of 1847, committees were appointed by both the House of Lords and the House of Commons, to “ inquire into the causes of the distress which has for some time prevailed among the com¬ mercial classes; and how far it has been affected by the laws for regulating the issue of bank notes payable on demand.” The following is an extract from the Beport of the Lords’ Committee as to the causes of the pressure:— A sudden and unexampled demand for foreign corn, produced by a failure in many descriptions of agricultural produce throughout the United Kingdom, coincided with the unprecedented extent of siDecu- lation produced by increased facilities of credit and a low rate of interest, and had for some time occasioned over-trading in many branches of commerce. This was more especially felt in railroads, for which calls to a large amount were daily becoming payable, without corresponding funds to meet them, except by the withdrawal of capital from other pursuits and investments. These causes account for much of the pressure under which many of the weaker commercial firms were doomed to sink, and which was felt even by the strongest. To these causes may be added a contemporaneous rise of price in cotton; and, with respect to houses connected with the East and West India trade, a sudden and extensive fall in the price of sugar, by wliich the value of then’ most readily available assets underwent great depreciation. “ Some of these causes are obviously beyond the reach of legislative control. But upon those which are connected with the extension of commercial speculation, encouraged or checked by the facility or the difficulty of obtaining credit, by the advance of capital and the discount of bills, the powers and position of the Bank of England must at all VOL. I. H 98 A Practical Treatise times enable that corporation to exercise an important influence. The committee have consequently felt it to be their duty to inquire into the course pursued by the bapk acting under the provisions of the 7 and 8 Viet. c. 32, and they have come to the conclusion that the recent panic was materially aggravated by the operation of that statute, and by the proceedings of the bank itself. Tliis effect may be traced, directly, to the Act of 1844, in the legislative restriction imposed on the means of accommodation, whilst a large amount of bullion was held in the coffers of the bank, and during a time of favourable exchanges; and it may be traced to the same cause, indirectly, as a consequence of great fluctua¬ tions in the rate of discount, and of capital previously advanced at an unusually low rate of interest. This course the bank would hardly have felt itself justified in taking, had not an impression existed that, by the separation of the issue and the banking departments, one in¬ flexible rule for regulating the bank issues had been substituted by law - in place of the discretion formerly vested in the bank.” The nature and extent of the pressure is thus described by the Governor and Deputy-Governor of the Bank of Eugdand:— The panic began by the failures in the corn trade. The price |of wheat had risen to about 120s. Large arrivals of gi*ain from the continent of Europe and from America, coupled with the prospect of an early and abundant harvest, caused a sudden fall in price to about 60s., with a corresponding decline in Indian corn. The failure of most of the corn speculators followed this great reduction in price, and their failure caused the stoppage of an eminent discount broker having a large country connexion. This latter failure, by closing one of the principal channels of discount between the country and London, caused distrust to extend into the country. Credit became affected by these failures, and several London firms of high standing also failed. Then followed in rapid succession the failure of the Eoyal Bank of Liverpool, the Liverpool Banking Company, the North and South Wales Banking Company, some private country banks, and the Union Bank of New¬ castle, followed by a tremendous run upon the Northumberland and Durham District Bank. To these disasters succeeded alarm, and an almost total prostration of credit. The London bankers and discount brokers refused to grant the usual accommodation to theii’ customers, and necessarily obhged 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 ^vith 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 business through the means of credit, by a renewal of their acceptances as they became due, were no longer able to meet their 99 on Banking. engagements, and were forced to stop payment. This was the state of tilings previous to the issuing of the Government letter in October.”* The Committee of the House of Commons delivered a Report in favour of the continuance of the bill without alteration — in opposition to the opinions of by far the majority of the witnesses who were examined. Those witnesses who are friendly to the Act contend that it has secured the convertibility of the Bank of England note,—that this convertibility was endangered in 1825, in 1837, and in 1839, and would have been endangered in 1847 but for this Act.f 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 securities. By “ securing the convertibility of the note,” is meant, that the issue department of the Bank of England were 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 condition 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 purpose 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 pay¬ ment, a domestic run would have taken place upon the issuing department, and thus the payment of the notes would still have been endangered. * Lords, No. 12. t See the Evidence before the Committee of the House of Lords, Questions No. 1406 to 1409, and No. 3169. H 2 100 A Practical Treatise The following is the evidence of a director of tlie 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 remained 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 fact that the power of the bank had been reduced to such a point, that if there had been any apprehension of the failure of the country banks, it could not farther support them, and that very little might have occasioned (I might perhaps go farther, and say, would have occasioned) the failure of banks in large towns and in the country—believing that if one or two country banks of any magnitude had failed, alarm would have spread throughout the kingdom, or if one or two London banks had failed, consternation would have been general —seeing, also, the considerable amount of reserve in the hands of the country bankers and joint-stock banks, and the necessity that there would have been of having that reserve as early as possible converted into gold if the bank was obliged to stop—seeing that a reserve of 20,000/. for each of 300 country banks would have taken six or seven millions, or of 15,000/. each would have taken five millions—and that if the run for gold had once begun, it would probably have gone on till the treasury was drained—seeing all tliis, my firm opinion is, that the bill of 1844 has not secured convertibility, and I state the grounds on which that opinion is formed.’'* It seems useless at present to speculate u23on sucli a state of tilings, as we now know that before the pressure arrived to such a height as to cause the banking department to stop payment, the Act would be suspended. But. it seems fair to ask, whether the precautions of the Act are not dispropor¬ tionate to the danger? We ought to consider not merely the greatness 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 farther be asked, whether the stringent measures that were necessary last year to keep the * Commons, No. 94. 101 on Banking. banking department from stopping payment, would not have been equally effectual 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 1814, the bank had the power of rectifying the exchanges by means of foreign credits, as they did in the year 1839.* But 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 advan¬ tage NOW claimed for the Act is, that it has secured the convertibility of the note. Other advantages, however, were expected to result. Those expectations are thus disposed of in the Report of the Lords’ Committee :— “ It is true that to those who may have expected that the 7 & 8 Viet, c. 32 would effectually prevent a recurrence of cycles of commercial excitement and depression, the contrast between the years 1845 and 1847 must produce a grievous disappointment. To those who antici¬ pated that the Act would put a check on improvident speculation, the disappointment cannot be less, if reliance is to be placed (as the committee are confident it may) on the statement of the governor of the bank, and of other witnesses, that ‘ speculations were never carried to such an enormous extent as in 1846 and the beginning of 1847.’ If the Act were relied on as a security against violent fiuctuations in the value of money, the fallaciousness of such anticipation is conclusively proved by the fact, that whilst the difference between the liighest and lowest rate of discount was in the calamitous years 1837 and 1839 but 2| to 2| per cent., the difference in 1847 rose to 6|. If it was contemj)lated that the number and the extent of commercial failures would have been lessened, the deplorable narrative of the governor of the bank, recording the failure of thirty-three houses comparatively in large business, in London alone, to the amomit of 8,129,000?., is a conclusive reply. If the enormous extent to which railroad speculation has been carried be considered as an evil to which a soimd system of banking could have apphed a corrective, such a corrective has not been found in an Act, * Several of the witnesses made suggestions for rectifying this exchange by other means than the exportation of gold.—See Commons, 97, 2018, 2023, 2579, 2614, 2620. 102 A Practical Treatise since the passing of which, during a period of three years, an increased railway capital of upwards of 221,000,000?. has been authorized 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 important 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 Keport might have added, that if it was expected that the amount of notes in the hands of the pnblic would fluctuate in exact correspondence with the fluctuations in the amount of gold in the Bank of England, that expectation has not been fulfilled. From tlie censure cast on the Bank of England before the Act was passed for not producing this correspondence, it may be inferred that such an expectation was entertained.* 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 have stimulated to excessive speculation. We showed, in the last Section, that these are always the precursors 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 St. 17s. 9d. per ounce of standard gold. "WTien, therefore, the foreign exchanges are favourable 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 department, and instantly converted into Bank of England notes. The amount of notes is thus increased beyond what the transactions of the country require. Money becomes plentiful, the rate of interest falls, and the low rate of interest gives facilities to speculative undertakings. * See the Evidence taken before the Committee on Banks of Issue, No. 2677 —2713. 103 on Banking. It must be acknowledged that, previous to tlie passing of this Act, the bank directors had adopted the principle of purchasing all foreign gold that might be offered them at 3Z. i7s. 9(7. an ounce; and it formed a feature 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,* they can mean only that it is during such a season that the system established by the Act differs from the system previously 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 accumulated, not literally in consequence of the Act, but in consequence of the principle embodied in the Act. From the adoption of this principle, the gold in the vaults of the bank still farther increased after the passing of the Act. It must be farther acknowledged, that although the Act requires the issue department at all times to issue notes against gold, it does not require that the Bank of England shall at all times issue 14,000,000?. against securities. The Act merely requires that the amount shall not exceed 14,000,000?. And a London banker who was examined as a witness before the Lords’ Committee, said he expected that when the Act came into operation the bank would not issue at first more than 11,000,000?. against securities, and that the re¬ maining 3,000,000?. would not be issued until the rate of interest had advanced to 3|- or 4 per cent. But the Act did not require the Bank of England to adopt this course; and its adoption would probably have been considered by some parties as a departure from its principle. For it is a funda¬ mental principle of the Act, that the amount of circulation shall jerk up and down in exact conformity to the import¬ ations or exportations of gold. And hence during a favour- * Commons, 5121. 104 A Practical Treatise able course of exchange money must be abundant, and interest must be low. It is alleged that the Act still farther reduced the rate of interest, and promoted speculative undertakings, by placing the Bank of England in a position in which the directors were led to adopt a new system of management. ) In September, 1844, soon after the Act was passed, the directors, whose rate of interest had never previously been Bower than 4 per cent., reduced it to 2|- per cent. The object of this reduction was to invest a larger portion of their funds in the discount of bills. It is stated that, to effect this object, the directors not only reduced their rate of discount, but also canvassed for business, and thus gave a stimulus to new transactions. They had been told that the banking department of the Bank of England was to be managed '.“like any other banking concern using Bank of England notes.” And it is not an unusual thing for bankers, when they cannot employ their funds at so high a rate of interest as they wish to obtain, to employ them at a lower rate. Xor is it unusual for a banker to offer his surplus cash to bill- brokers and others, who are known to be in the habit of supplying bankers with bills. But however consistent the conduct of the directors may have been with banking prin¬ ciples, the reduction of the bank rate of discount immediately caused a reduction in the market rate, and in the rates charged by bankers throughout the country. For it must be observed, that wEen the bank lowers her rate of interest upon money in seasons of abundance, it has the necessary effect of reducing the market rate of interest still lower than the bank rate. Suppose, for instance, the bank discounts at 5 per cent, and the market rate of discount is 4 per cent., of course no bills are offered for discount to the bank. Then the bank, to get discounts, lowers her rate of interest to 4 per cent. A portion of bills that were previously discounted by private bankers and bill-brokers will then be taken to the bank; but the notes thus drawn from the bank make money still more plentiful, and the market rate falls to or 3 per cent. Now, should the bank reduce her rate to 3 per cent. 105 on Banking. the same effects would again follow. For the additional notes thus drawn out would make money so abundant, as to reduce the market rate of interest to 2^ or 2 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 5J- 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 dis¬ counted at the bank; and all bills of the second clas^ 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.* The directors of the bank seem to think that the spirit of the Act of 1844 required that the bank should employ 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 repre¬ sentative of gold, you entirely prevent its having any effect upon the circulation. The exchange will be kept up, and gold wiU continue to come in.”t Thus it appears that, although there is no positive enact¬ ment in the Act respecting the management of the banking department, the directors so understand its spirit as to believe * Cummons, 2275, 5189, 5347 to 5350. t Commons, 3009. 106 A Practical Treatise that wlien gold is going out of the country 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 importation 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 Parlia¬ ment required that all railway companies that intended to apply for an Act, should lodge 10 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 aU the notes in the hands of the public amounted to only about 20,000,000?. Ultimately the railway companies of Ireland and Scotland were allowed to make their payments in Dublin and Edin¬ burgh, respectively; and the payments in London did not amount to more than 14,000,000?.* This large sum was paid by means of the banking department of the Bank of England lending out the money as fast as it was received. Had the Act of 1844 not been in existence, 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 payment 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 sub¬ sided 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.t * Lords, 1209, 1214. t Lords, 1209. mi Banking, 107 It is farther alleged, that the Act of 1844 requires an immediate contraction in the amount of the notes whenever gold is exported for merely a temporary or specific purpose. Between March 13 and April 24, 1847, 2,237,2007 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 pubhc, or from the banking department of the Bank of England. About the same time, the Government had occasion to borrow of the banking department about 3,500,0007 to pay the April dividends. The banking department, consequently, for a while limited their discounts, and even refused to grant loans on exchequer 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 incon¬ venience. 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 certain fixed amounts, the banks in these countries are required to hold gold equal to the amount of notes in circulation. In both countries this circulation fluctuates. In Scotland, the highest amount is in November. In Ireland, the highest amount is in January or February. In these months they require more gold, and this gold they obtain from the issue department in exchange for Bank of England notes. Before the Act of 1844, the circulation of the country parts of England, ol‘ Scotland, and 108 A Practical Treatise of Ireland, expanded or contracted as required by tlie 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 banks, the banks of Scotland and of Ireland, are attended by a contraction of the circulation 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 farther stated, that the withdrawal or discon¬ tinuance 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 circumstance no provision is made by the Act.* Thirdly. It is alleged that the Act of 1844 tends to pro¬ duce and to aggravate pressure, and at the same time de¬ prives the Bank of England of the power of granting ade¬ quate assistance, even when the pressure is most urgent, and when assistance can be rendered without any danger of affecting the foreign exchanges. This objection assumes that a pressure is an evil. It as¬ sumes, 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 engagements—to cause a universal reduction of prices, and thus to baffle the calcula¬ tions 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 employment—to sell.to foreigners large amounts of goods and manufactures at less than the prime cost, thus causing a great national loss—to paralyse the national industry—to stop the progress of useful works— and to destroy confidence and credit—the objection assumes, that a pressure which produces effects like these is a national evil. And such must be the opinion of those who suspended * Lords, 232—235. 109 on Banking. the Act, and of those who approve of that suspension ; for it was to prevent or to remove evils like these, that the Acd 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 specula¬ tions), 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 farther alleged, that when a pressure occurs without being produced by the Act, then the Act tends to aggravate the pressure. An unfavourable course of the exchange may be produced by a large importation of corn. The Act re¬ quires that the exchange shall be rectified by an exportation 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 increased by the Act of 1844. We do not perceive the soundness of this reasoning, and it seems to show a forgetfulness of the peculiar operation of the Act. The Act requires that the amount of notes in circulation shall fluctuate in exact accordance with the amount of bullion. Eailway speculations, famine, foreign loans, or a hundred other things, may turn the foreign exchanges, and cause gold to be exported, but it is the xlct which causes our circulation of notes to be contracted in proportion as the gold is withdrawn. So a hundred different circumstances may cause gold to be imported, but it is the Act which causes the circulation to be inflated in correspondence with this in¬ creased amount of gold. Herein, we think, is the injurious operation of the Act. When the exchanges are favourable, gold is imported. The gold is in bars and foreign coin, and 110 A Practical Treatise 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, co-operating possibly with other causes, turn the exchanges. Notes are then taken to the bank, and gold demanded, for the purpose of being exported. This contrac¬ tion of the circulation of notes produces pressure, and the apprehension of farther pressure produces panic. They who contend that the Act of 1844 has not in the slightest degree tended either to create or to increase the pressure”* of 1847, seem to be inconsistent in contending, at the same time, that the Act has preserved the converti¬ bility 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 convertibility 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 farther alleged that the Act aggravates a pressure by the panic ” which it creates. It is stated that, during the pressure of 1847, notes to the amount of 4,000,0007 were hoarded under the influence of panic, and this hoarding was occasioned by the provisions of the Act. It must be acknow¬ ledged, however, that something of this kind has taken place in former pressures. We noticed this circumstance with reference to the pressure of 1836, and again with reference to the pressure of 1839. A contraction of the circulation leads to a general appre¬ hension 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 con¬ siderably increased. That portion of the notes of the Bank * Lords, 3106. on Baiiking. Ill 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 meet possible demands, may be called the dead circulation. Now, it is quite certain that the dead circulation, while it remains in that state, has no effect upon the prices of commodities—the spirit of circulation—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 contingencies. Hence we find the pressure is often more severe than the reduction 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. 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 assistance—it is natural to suppose that this disposition would be stronger in 1847, when the Bank of England had become divided into two departments—one of which could issue no notes except against gold, and the other had barely notes enough to meet its own obligations. For this alteration in the condition of the Bank of England, and the consequent feelings 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 difficult 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 112 A Practical Treatise these sums in case they should be demanded. And, from the* number of banking establishments that exist in London, and throughout the country, it is reasonable to suppose that the sums thus hoarded must have been considerable. Many private parties, too, from distrust of their bankers, probably kept their hoards in their own hands. No blame, however, can attach to the bankers; 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 farther alleged that the Act of 1844 has deprived the Bank of England of the power of granting assistance by the issue of notes during a pressure, even when the pressure is most urgent, and the foreign exchanges are favourable. Before the passing of the Act, when there was no separation of departments, the bank directors restricted their issues when the exchanges were unfavourable, but extended them when the exchanges were favourable. Hence, during the pressure of 1837, they granted assistance by a farther issue of notes to the Northern and Central Bank, because the exchanges had become favourable. Between the periods of an efflux and an influx of gold there is always an interval of time. This interval is usually the highest point of the pres¬ sure ; and heretofore the Bank 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 diminished, and the pressure removed. But the Act of 1844 does not allow this. No additional notes can be issued until the gold has returned. The same course must be fol¬ lowed, whether the exchanges are favourable or unfavour¬ able; and to anticipate the return of the gold, by a farther issue of notes, under any circumstances, however urgent, would be a departure from the principle of the Act. That such a departure, however, may be made with immense ad¬ vantage to the public, is obvious from the effects which imme¬ diately followed the suspension of the Act in October, 1847.* It is chiefly in this respect that the system established by * Commons, 5887—5389. 113 on Banking. the Act differs from the system previously in operation. And some of the witnesses, looking no fai’ther 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 unsoundness of its whole principle. Had a dispensing power been granted, we should merely have fallen back upon the previous system, with the additional disad¬ vantage 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 enact¬ ments, put this principle 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 Eobert 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 oi* that now proposed will best promote the interests of our establishments ? 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 unkno^\Ti laws, which are applied or suspended according to the impulse of caprice. “ The proposed measure is an experiment; and so ex¬ cellent is the machinery, that the experiment • interferes as little as possible with existing interests. And the old ma¬ chinery being retained by the continuance of the country issues, the return is easy to the former system, if necessary, before any serious injury can be inflicted on the country. VOL. I. I 114 A Practical Treatise “ As practical bankers, we contend that experience is tlie only test of the soundness of a theory. Let, then, ‘ the cur¬ rency principle ’ be tried by this test. If it succeeds, the joint-stock bankers, in common with every other class of the community, will sliare the advantage. If it fails, then other principles will, perhaps, be tried; and, notwithstanding all the denunciations 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 prin¬ ciple by which the currency throughout the United Kingdom can be managed.” 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. We have thus endeavoured to trace (impartially, as we believe) the practical operation of the Act of 1844. It is reasonable to suppose, that under similar circumstances it will produce similar effects. What will be its effects under other circumstances, we have yet to learn. We have yet to learn what will be the operation of the Act under a large importation of gold, ah initio, from a favourable state of the exchanges—what will be the effect of the Act during a pres¬ sure, when it shall not be suspended—and how its effects may be increased or mitigated by any different 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 loans; and how it will work during a war, in which we may have to maintain armies on the Continent, or to subsidize foreign powers. We have yet to learn whether the issuing department will be 115 on Banking. ultimately removed from the Bank of England to the Ex¬ chequer, and we shall have a paper currency issued by the Government under the authority of an Act the provisions of which may be suspended (as heretofore) by the same Govern¬ ment ; 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 Kussia or California. We may be reminded that, should the Act work unfavour¬ ably under any of the above circumstances, there is one remedy always at hand—the remedy Avhich has already been applied—to suspend it. And no doubt, under any Govern¬ ment, men will be found who will have the courage to apply this remedy. But this will not remove the previous evil. The suspension, too, may be long delayed, and in the mean time much mischief may arise. In the next pressure the nation will be like a cat in an air-pump.” The animal will not be allowed to die, but at what precise period of ex¬ haustion 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 confidence upon the suspension of the Act. They should make their arrangements on the supposition that it will not be suspended. And it behoves them to inquire what are the principles upon which, under such circumstances, their establishments ought to be administered. This we shall now proceed to do. We pointed out at the passing of the Act the course which we thought prudent bankers ought to pursue. In future, the amount of notes in circulation we observed, will be regulated by the foreign exchanges. When the,exchanges are favourable, money will be abundant; when they are un¬ favourable, it will be scarce. The evils arising from a scarcity of money can only be avoided by following a prudent line of i conduct when money is abundant. We, then, as prudent bankers, ought at present to check our desires of making large I 2 116 A Practical Treatise profits and declaring high dividends, and be content 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 overdrafts, and our dead loans, and, if necessary, increase our capital, so as to place ourselves in the position most favourable for meeting an adverse state of the foreign ex¬ changes. In cases of pressure on the money market, arising from an unfavourable course of exchange, the Bank of England will not be able, as heretofore, to relieve that pressure by a farther 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 shall have to limit our over¬ drawn accounts, to avoid all advances on inconvertible securi¬ ties, and to call up such an amount of capital as shall secure to us the means at all times of giving reasonable accommo¬ dation to our customers. On the recurrence of a pressure similar to that of 1839, the cry will be, Sauve qid pent — Every one must take care of himself.” The knowledge we have acquired of the working of the Act will tend to give additional force to these recommenda¬ tions. The attention of practical 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 I^ondon allow interest on the mini¬ mum 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 connexions. 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 deposits can be continued. on Banking, 117 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 withdraw ^ 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-J per cent, interest, and the railway companies issued debentures bearing interest at 5 per cent., large sums were withdrawn from all the banks, as well as from the savings banks, for the purpose of being invested in these securities. The bankers had no right to complain of this, as they were called upon only to fulfil their ' engagements ; but they will probably be unwilling in future to allow interest on deposits of this description. Another circumstance which the operations of the Act of 1844 will lead practical bankers to reconsider, will be the extent to which they should invest their surplus funds in Government securities. Many bankers have considered it as a sound principle to invest a certain portion of their funds in Government securities. We have laid before our readers extracts from evidence given before parliamentary commit¬ tees, in favour of this principle, and we expressed our own convictions respecting the same doctrine. But 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 is scarce, the funds are low. In seasons of abundance the banker 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 farther 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 to keep his money unemployed in his till, rather than 118 A Practical Treatise invest it in Government securities. His risk will be greater if the Act should be capriciously suspended. In October, 1847, 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 banks 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 dependence can be placed on the Bank of England. Several of the directors complained that everybody looked for assistance to the Bank of England. No expectation could be more complimentary to the bank, nor show 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 great strength lay in the power she possessed of expanding the circulation. That power she surrendered to the Act of 1844. She then became like ‘^any other banking concern issuing Bank of England notes.” Her locks are now shorn.* The Bank of Liverpool had been one of the oldest and most respectable of the connexions of the Bank of England. They had, from their commencement, 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 following:—“ The manager stated he had seen the agent of the branch bank this morning, and that he would not dis¬ count anything for us to-day.” Even in the comparative light Commons, 769, 3223-4, 39tl-2, 4566, 53S9. 119 Oil Banking. 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 occu¬ pation 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 bankers, will take their bills to the bill- brokers, who will discount them at a lower rate: and when the pressure arrives, and the brokers no longer discount, they think to return to their bankers. 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 Avheii 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 pro¬ vide i)aymeiits for its own indorsements, 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 120 A Practical Treatise other respects, yet the immediate cause of their stoppage was the inability to re-discount. We again refer to the pro¬ ceedings of the Bank of Liverpool. The manager stated that out of two small sums of 10,000Z. sent to London to the brokers, only one had been done.”—‘‘ We had then 100,000Z. at call with certain bill-brokers, who were unable, when applied to, to return us more than 25,000Z.” 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 connexion; 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 bill-brokers: they should also avoid de¬ pending on other banks. Some banks in manufacturing districts are in the habit of discounting with banks in agri¬ cultural districts. A very good practice, as we think. But the banks requiring the discount should always recollect that when a pressure 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 them.* If free from a run upon themselves, they will endeavour so to administer their funds as to afford reasonable assistance to all their connexions. And no one connexion should expect to receive more than this reasonable amount of assistance. But they may themselves be exjDosed to danger. The panic of 1847 was not a banking panic, but a commercial panic; and therefore the London bankers Avere comparatively free from molestation. The panic of 1825 commenced by the failure of a country bank. In such a case the London bankers could have rendered but little assistance to their country connexions. It must be recollected that the Act of 1844 was suspended upon the application of the London bankers. The governor of the bank stated to the Committee of the House of Lords—“The London bankers and discount-brokers refused to grant the usual accommo- * Commons, 2344—8. 121 on Banking. elation to their customers, and necessarily obliged every one requiring assistance to resort to the Bank of England.” 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 with¬ drawn. Secondly, many of his customers, and some pro¬ bably of the wealthiest, will require additional 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 spuits 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 expect 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 regulate 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 of their lodgments is reduced—the rate of interest allowed on the permanent 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 realising Government securities. Those country bankers who are in the habit of 122 A Practical Treatise re-discounting tlieir bills in London are induced, when money is abundant, to carry this system to a great extent, because they can obtain money at 2 or 3 per cent, in London, and lend it in the country at 4 or 5 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 unfavourable 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. While, however, the profits of a banker from the ordinary operations of his business may be diminished, it is possible he may have opportunities 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 abun¬ dant without speculation; in the second period, money is abundant and speculations abound; in the third period, specu¬ lation 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 tliese periods may last, as they wdll be infiuenced 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 bankers; 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 on Banking. 123 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.”^ 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.f And those vho have stock or any other kind of saleable property, are obliged to realise in order to fulfil their engagements. Bankers may during this period make advantageous investments ; and as they may calculate that another pressure will not arrive for two or three years, they may purchase a limited amount of securities that have six or twelve months to run. During the second period, money will be in demand, though there may be no great advance in the rate of interest. The securities purchased by the banker in the first period, will now be falling due or advancing in price. But this will be the period of his greatest danger, and he must have a care not to let his desire of getting higher interest lead him to make undue advances upon the com¬ modities or securities that may be the subject of speculation. The third period will be the most profitable for the banker in his direct business. Money will be 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 short bills or making short loans. He should weed his 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 * Lojcls, 1324. t Lords, 3845. 124 A Practical Treatise dealing more largely in securities. According to the evidence of Mr. Pease, the fluctuations in the currency have already produced similar effects in the departments of trade and commerce. I stated, as clearly as I was able to do, that the man who bought from hand to mouth, which is the common case, and did not watch those fluctuations of capital, so as to buy when things were unusually depressed, and to sell when things rose again, failed. The only man who succeeded in making money, succeeded in carrying on a speculative kind of business, that has arisen from the want of regularity in the values of money and produce. The man who did not so speculate— buying largely at one time and selling very freely at another—did not succeed. It is of great importance 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 being suddenly deprived by those fluctuations of that which they thought they had secured by their industry.”* Thougli we would not confound this kind of speculation with that which takes place by means of time bargains on the Stock Exchange, yet Ave do not think it desirable that banks should deal in the public securities merely wdth a view of making a profit from the fluctuations in price. Sometimes 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 speculative feeling which will lead him to disregard the steady pursuit of his trade. SECTION IX. THE ADMINISTRATION OF THE BANKING DEPARTMENT OF THE BANK OF ENGLAND. By the Act of 1844, the banking department of the Bank of England was separated from its issuing dej)artment; and was. to be managed like ‘‘any other banking concern issuing Bank of England notes.” Taking this view of the bankmg depart- * Commons, 4700, 4702. 125 on Banking. ment, we propose to inquire on wliat 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, peradventure, 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 depart¬ ment 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 re¬ commend 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 meantime, is in the hands of the governor and deputy-governor, who may be advised or assisted by the committee of treasury. This com¬ mittee is composed of those directors who have held the office of governor, of the existing governor and deputy- governor, and of the dkector who is intended to be the next deputy-governor. 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 treasiuy; 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-governor, for the time being, make all loans and advances, and some¬ times raise the rate of discount, without waiting for the opinion of the court. They conduct all negotiations with the Government, and, subject to the sanction of the court, have 126 A Practical Treatise the whole administration of the affairs of the bank. Each director must hold 2,000Z. bank stock ; the deputy-governor, 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 before 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, whether a permanent governor, either for life or for a number of years, would not be prefer¬ able to the present system. The Act for separating the two departments came into operation on the 31st of August, 1844, and the following was the first return made under the Act, showing the condition of the banking department on the 7th September, 1844:— Account of the Liabilities and Assets of the Bank of England, for the week ending 1th September, 1844. Br. ISSUE DEPARTMENT. Cr. Notes issued. £28,351,295 Government debt. Other secm’ities . 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 Rest. 3,564,729 Public deposits . . . 3,630,809 Other deposits . . . 8,644,348 Seven-day and other bills 1,030,354 Government securities . Other securities . Notes. Gold and silver coin . £31,423,240 £14,554,834 7,835,616 8,175,025 857,765 £31,423,240 The following table will give a more detailed account of some of the items in the above return:— Ith Septemher, 1844. m Banking. 127 41 6 o o O o o o o o O o o o o o o o o o »» p» •» p (M o <33 l> 03 CD o T—1 1—1 CO o d o 1-H 00 o d c3 K" ■TS o o o o o o o o o O fh' T—I I-H (M QO CO CX) C p a X H ft ® ® • ^ • pH d d d <1 ■Ti d 02 ® cr* c3 ^ -2 P OQ •73 ® -(-> d d o o M rO :3 P 0 O ® OQ -M o3 C> d b O 43 'd a 9 o O P o o • • ® 3 . . 02 « 1 —I d o f-( c3 (-22 o .2 'd d "d S ^ d o ® be ci M ® I—I W bo ® M ^ d c3 .d ^ H H O ^ 02 ® ® d ci > ■d <1 ® bo d o3 rH 'o P C 4 -I O 3 P 41 d o d M 41 O o o tp o (M (M O o o CO CO »s CO o o o p* rH CO CO 41 O O o o o o (M >0 o o CO Ti-l CO o o o o o o o o o o o o coioPt- 03 —( O rH —I CO lo CO c • ^ Q o o o o O O o o o o O CO CO CO CO CO 03 CO o o o o o o o o o lO 1—( 03 I>- CO o I-I CO (M lO r-T I d . d o C) '-XP d ^ ^ o d d o d o • pH o P o -t-3 I ^ • o N O "S C3 • pH pH d "2 !=' P Cd P 2 oT ® .■t3 03 H o " a. ® P ® a c3 p IH O P ® m P d c5 P 03 be d d d o o o ® • ^ pp( db d P d cj > 02 CO O N > C 3 > • pH ii! oT -4-s • pH GQ O Ph (D P 03 aj ;-( ® M d ca P * a ■ M •,—( • . ca ^ >> d o o a "c ‘ o d ca b i=i ca o d d o P O ca • ^ d d d c3 ® • pH ci p a ci P P o ® m e<-i O 03 O . d 02 oa d •|pq P ^ O O o p o o o (M GO d CO CO i 41 128 A Practical Treatise 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 Eest or surplus fund —3. The Public Deposits—4. The other Deposits—5. The seven-day and other Bills. These funds are invested 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 inde¬ pendent 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 de¬ posits 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 increased. All above this amount could only be invested in Government securities, never likely to be required for banking purposes ; and if required, could not be suddenly realised, 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 shareholders the imiformity of the dividend. If, in any one year, the profits fall below the amount required to pay the usual dividend, the deficiency 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 con- 129 on Banking. ducting 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 profits of the bank had become permanently diminished, then the course would be to reduce the dividend, until the surplus fund had recovered its former amount. Banks that have made large profits, have either 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 have adopted all these plans. Yet, after all these distributions of increased dividends, bonuses, and addi¬ tional capital, the bank had on the 7th of September, 1844, a rest, arising from surplus profits, of 3,564,729Z. No other banking concern carrying on business with Bank of England notes,” would think it necessary to keep such a rest. Neither the kind nor the extent of business carried on is ever likely to require anything like this amount to meet any occasional losses. The amount is altogether excessively disproportionate to the purposes for which a surplus fund is usually applied, and at the same time it tends to give an erroneous view of the profits of the bank. This rest is employed in the business, and yields profits, but it pays 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 made 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 Savings Banks, &c. 501,000 Other public accounts. 617,000 £3,631,000 VOL. I. K 130 ‘ A Practical Treatise The “ Exchequer account ” is the current account with the Government, and tliis 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 account “ 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 connected 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 bankrupts’ estates are required to be lodged in some one or other of the branches. These may form the “ other public accounts.” The Private Deposits are thus classified:— £ Railways. 30,000 London Bankers. 9G3,000 East India Company. 636,000 Bank of Ireland, Royal Bank of Scotland, &c. . 175,000 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 perma¬ nent; whether repayable at fixed periods, or liable to be suddenly withdrawn. He would thus ascertain what propor¬ tion 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 131 on Banking. 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. AVe may be asked what we mean by “ordinary times,” since now every year differs from its predecessor, and j the steadiness and uniformitv which heretofore characterised banking and commercial affairs are no longer known. We reply, that by “ ordinary times,” Ave mean those times that are the least affected by the foreign exchanges. For some years past it has been the practice to regulate 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 deposits 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, slie sustains no loss even when they are not employed ; but Avere they to be employed her profits would be gTeater. K 2 132 A Practical Treatise 4. With regard to the Investments, a banker .would in¬ quire first, Are they safe ? secondly. Are they convertible ? There seems no ground to question their safety—their convertibility is not so obvious. The Government stock. Exchequer bills, and East India bonds, must be considered in ordinary times, and to a reasonable amount, as strictly convertible. But this is not the case with the Government annuities. They could not be sold in the market; and even by private negotiation, few buyers would be found, except the insurance offices. Even with them the negotiations would probably occupy considerable time. As to the city bonds, railway bonds, and mortgages, they would in a season of pressure be altogether useless. It may be said, that the bank’s capital being so large, a portion may, without incon¬ venience, 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 3,671,700/. At first it was arranged that the bank should receive in payment of this sum, 4,000,000/. 3 per cent, reduced annuities; but it was afterwards changed to an annuity for twenty-six years, to 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 investments. 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 133 on Banking, 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 3rd of December, 1829, and the practice continued until after the passing of the Act of 1844. Advances on deficiency bills, are a kind of short loans made to the Government, 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 sometimes 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 inconvenience. But if a banker takes such accounts, he must make his arrangements accordingly. In the present case, the bank has the advantage of knowing, by the progress of the lodgments on the “Exchequer ac¬ count,” whether such advance is likely to be required. 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 unfortunate 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 similar 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 deposits it would not appear that so 134 A Practical Treatise large a reserve was necessary, and a portion might well be emjdoyecl in earning interest instead of lying unproductive in the till. But, before we condemn the bank directors, we must give this matter farther consideration. ^Ye have already stated that, even before the passing of the Act of 1844, the directors had been in the habit of issuing their notes against gold and silver bullion; and when a large amount of notes had been thus issued, the deposits in the bank were increased. Now, when this Act came into operation—August 31st, 1844—the bank had in tliis way acquired a large amount of gold and silver bullion; indeed, 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 13,810,080Z.; in 1836 the highest quotation 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 depart¬ ment 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 consequently 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 independently 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 invesk the temporary increase 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 discounting 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 135 m Banking, gold and silver bullion 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 discount bills and grant short loans at a lower rate of interest than the bank. The bank will, therefore, have no farther applications. When her bills and loans fall due, they will be paid, and the amount will go to increase her reserve. Thus it appears that the notes which, in a favourable course of the foreign exchanges, are issued against gold and silver bullion, will tend in two ways to increase the bank reserve; first, by increasing her deposits, and secondly, by diminishing her securities. This will account for the large amount of the reserve. The rule laid down by the j 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 August, 1844, and almost immediately some important changes were intro- ^ duced. Up to that date the bank had never discounted at a lower rate than 4 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 September, the rate of discount on bills was reduced from 4 to 2^ per cent., and on notes to 3 per cent. On the 18th March, 1845, the bank introduced the principle of a minimum rate of discount; fixing 2^ 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. v This lino of conduct was by no means unwarranted by the 136 A Practical Treatise practice of “ other bankinj^ concerns.” It is an established principle in practical banking, that a banker, when be cannot employ bis surplus funds at so high a rate of interest as be 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 different 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 circumstances. In adopting these regulations, therefore, the directors were only performing the work assigned to them, of conducting the banking department “ like any other banking concern issuing Bank of England notes.” These changes gave rise, in the parliamentary conimittees 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 governed 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 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 exliausted. But, though the bank cannot change the course of the current, she can give it increased 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 alteration in the bank-rate has always an immediate Influence on the market-rate. Such was the case in September, 1844. The large impor¬ tations of gold had reduced the market-rate of discount to 24 137 on Banking. 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;J per cent. To engage actively in \ discounting bills was a new feature in the bank management. In 1832 the then governor stated to the Committee of the House of Commons, that he thought the bank should be a bank of circulation and of deposit, and only occasionally a ban!?: 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 Govern¬ ment securities. But when she purchased, the price advanced; and when she sold, the price fell. This produced a fluctua¬ tion inconvenient to the public. Often, too, she purchased wlien th6 price was high, and sold when the price was low : and thus sustained loss. It was therefore 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 check¬ ing the discounts. 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 en¬ tertain considerable doubts), I think it very desirable that its rate of interest should conform to the real market value of money.”* The directors seemed to think it necessary that tliey should in some way employ their reserve, in order to prevent the too great accumulation of bank notes in the issue department.! We here give no opinion as to the best way of employing the bank’s reserve, but we are quite ready to admit, as the governor 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 * Lords, 1632. Commons, 3009. 138 A Practical Treatise whole of its resources at the greatest profit that it can with reference to prudence, looking to its reserve.”* 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 the interests of their proprietors. We shall not meddle with this question. We have here nothing to do with the PUBLIC duties of the bank directors. We are considering the banking dejiartment as any other banking concern.” Generally speaking. Providence has so constituted human society that all banking companies, and all individuals too, will most effectually promote the public interests when by honourable means they promote their own. If this is not the case with the Bank of England, it must have arisen from the acts of the Legislature ; and the fact—if it be a fact—is presumptive evidence against the wisdom and the justice of those laws by which she was placed in that position. At the close of this period we find that the London discounts had increased from 113,000?. to 2,365,000?., and the “ City Bonds, &c.” had 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?.,*f* and the minimum rate of interest charged by the bank was 2|- 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 16, 1845, it was raised from 2J to 3 per cent.; on November 6th to 3^ per cent.; and on August 17, 1846, it vvas again reduced 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 * Commons, 3722. t See the Returns at the end of this Section. 139 on Banking. the discounts. The amount of bullion virtually regulated tlie other two; and thus the interest was governed by tlie 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 autho¬ rize the construction of their lines, were required to pay into the Bank of England, within fourteen days after the meeting of Parliament, 10 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 rejected. Everybody 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 re¬ claimed by the railway companies, the operation could not have been effected. The bank could have performed it with greater facility previous to the passing of the Act of 1844. She could then have lent out her notes before the lodgments were required to be made; there would have been no previous apprehensions, nor any tightness during the opera¬ tion. III. The Administration of the Banking Department from September 5, 1846, to September 4, 1847. In September, 1846, the minimum rate of discount was 3 per cent. On January the 14th, 1847, it was raised to 34 140 A Practical Treatise 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 unfavourable, and the circulation of the issuing depart¬ ment declined from 29,760,870?. to 22,396,845?.* This was attended by a decline in the reserve of the banking depart¬ ment, 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 censured 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 importations of corn took place. These imports were paid for in gold, which was suddenly withdi’awn 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 importance, but the case was different under the Act of 1844. The banking department 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 lend 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 favourable 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 entrusted to the bank directors. They say that if the bank had advanced its rate * By deducting 14,000,000Z. from this sum, we see the amount of gold and silver bullion on hand in the issue department. 141 on Banking, of interest they might have prevented the unfavourable 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, as it would have checked the im¬ portation of corn which was then required in consequence of the deficiency in the harvest. There can be no doubt that, under the Act of 1844, a sudden exportation of gold must cause a sudden contraction of the amount of notes in circu¬ lation. This “ self-acting machine ” acts, by jerks, like a steam-engine without a fly-wheel; and its advocates look to the banking department to supply the fly-wheel, and to cause the machine to move smoothly and equably. It may be doubted whether the banking department has the power of doing this. But when this is not done, the advocates of the Act throw the blame upon that department. They resemble the court preceptor, who, when the royal pupil did anytliing wrong, inflicted the beating on his fellow-student. If on this occasion the bank did wrong, it may be feared that it was her court connexion which led her astray. The Government were then negotiating a loan of eight millions for the relief of Ireland. And “ there was a feeling in the court that, in the face of the Government negotiating a loan, it would be an act of want of courtesy to put up the rate of interest imme¬ diately.”* 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 con¬ siderations, she did not act “like any other banking con¬ cern.” The events of April, 1847, also lead us to remark that the London bankers never vary their rate of discount with a view * Commons, No. 8001. 142 A Practical Treatise to regulate the foreign 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 con¬ fidence. The frequent occurrence of such suspension of loans and discounts as occurred in April, 1847, would form an insuperable barrier to the banking department ever ac¬ quiring 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 believe, 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 attri¬ buted to the publication of the amount of the bank’s reserve. It was said, and said truly, that the bank might very 2 :)rudently 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 re¬ plenish her coffers. 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 pailies ques¬ tioned the policy of publishing the bank accounts in their present form. But the remedy for this is not to suppress the returns, but to circulate throughout the community such an amount of knowledge as shall enable them to judge accu¬ rately respecting banking affairs. Other parties, of a higher class than those we denominate the public, have fallen into erroneous opinions by a literal adhesion to tiiese retmms. Almost up to the time of the suspension of the Act of 1844, it was contended by some who sit in high places ” that there could be no pressure on the commercial classes, since there were then more notes in the hands of. the public than in former seasons when no pressure existed. And before the Parliamentary Committees of 1847 it was stated by the 143 on Banking, governor and deputy-governor, that it could make no dilfer- ence 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 com¬ mercial 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 certain criterion by which to judge of the amount of banking facilities enjoyed by the commercial classes. IV. The Administration of the Banking Department from September, 1847, to September, 1848. During this period the mimimum rate of interest was ad¬ vanced from to 6 per cent, on the 23rd 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 22nd of November; to 6 per cent, on the 2nd of December; to 5 per cent, on the 23rd of December; to 4 per cent, on the 27th of January, 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 fol¬ lowing 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, required in payment the export of a large amount of bullion, to the extent of about 7,500,000?., from the coffers of the banli, and pro¬ bably not less than 1,500,000?. from other sources,—together 9,000,000?. From this *great reduction in the available capital of the country, in addition to the still larger amount invested in railway expenditure, 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 conse¬ quently a diminution in the notes to that extent.”* During this period the bank acted with great liberality. * Lords, 12. 144 A Practical Treatise 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 apphed 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 IMiners in England, and thereby prevented them from stopping payment; it was distinctly 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 representations of several parties of the first import¬ ance in the City of London, the bank advanced 120,000/. to the Governor and Company of the Copper IMiners, on the guarantee of approved names, taking at the same time a mortgage on the Company’s property 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 10,000 people out of employment. 4. The bank advanced 300,000/. to the Eoyal 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 Eoyal Bank, having no more security to offer, stopped payment. 5. The bank assisted 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 another mercantile house on the guarantee of approved names. 8. The bank advanced 50,000/. to a joint-stock issuing bank on bills of exchange, and agreed to open a discount account with the said bank, on condition that it should with¬ draw its issues, but the joint-stock bank stopped payment before the arrangement could be completed. 9. The bank advanced 15,000/. on real property to a large establishment in London. 10. The bank assisted, and prevented from failing, a large establishment in Liverpool, by forbearing to enforce payment of upwards of 100,000/. of their accept¬ ances, and engaging to give further aid if required. 11. The bank as¬ sisted a very large joint-stock bank in the country with advances on loans on bills of exchange to the extent of about 800,000/., over and above usual discounts. 12. The bank advanced 100,000/. to a country banker on real property. 13. The bank advanced a joint-stock bank in the country 200,000/. on the security of local bills, besides discounting 60,000/. of London bills. 14. The bank assisted another joint-stock bank in the country with an advance of 100,000/. on local and London bills. 15. The bank advanced 100,000/. to a large mercantile house in London, on approved personal secui’ity. 16. The bank assisted 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 Banking. 145 on real property. 18. The bank assisted many other houses, both in toAvn 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 establishment any one bill offered for discount, except on the ground of insufficient security.” Some of these advances were not made till after the ap¬ pearance of the Government letter on the 25th of October. Up to that date the efforts of the bank were inadequate to allay the pressure, while they largely reduced the bank’s reserve. On Saturday, the 23rd of October, a deputation from the London bankers waited on the Government, who then determined 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 Bussell and the Chancellor of the Exchequer autho¬ rizing the directors of the Bank of England to enlarge their discounts 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 im¬ mediate. 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 Com¬ mittees. On Saturday, the 23rd of October, the notes on hand amounted to 1,547,270/., and the coin to 447,2467. 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 8,581,000/., 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, so far from being able to assist others, was not in a condition to VOL. r. * Commons, 2645. L 146 A Practical Treatise meet her own engagements. But the governor contended that the amount of the reserve should have been taken on the Friday night, before they were acquainted 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 2,500,000?. of stock which they could have sold, and a large amount of the bills they held fell due in the following week. From these sources 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’ deposits 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 x4ct, they borrowed money on the Stock Exchange at 7 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 2nd, 1848, the circulation of the currency department amounted to 26,883,505?., and the bank reserve to 9,410,952?. To show the further progi’ess of the bank since September, 1848, we have added the Returns for the week ending the 2nd of February, 1849, premising that since the year 1849 the Administration of the Bank of England has been in¬ fluenced by the importations of gold from Cahfornia and Australia, this subject being sufficiently important to demand a separate consideration. We shall here merely state the amounts of gold and silver on hand in the first week in September, in the years that have transpired since 1818, and 147 on Banking. the minimum rates of interest charged by the Bank of England at those respective periods. Date. Gold. Silver. Rate of Interest. 8 Sept. 1849 £ 13,631,153 £ 277,077 3 7 Sept. 1850 15,880,617 219,958 2i 6 Sept. 1851 13,674,190 33,375 3 4 Sept. 1852 21,334,921 19,154 2 10 Sept. 1853 15,866,770 nil. 9 Sept. 1854 12,630,110 nil. 5 Sept. 1855 14,368,010 nil. The following are the dates of the changes in the rate of interest:— Keduced, Nov. 1849, from 3 to 2^. Advanced in December, 1850, from 2^ to 3. Reduced, Jan. 1852, from 3 to 2^. Reduced in April 1852, from 2J to 2. Advanced, Jan. 1853, from 2 to 2^. Advanced again, in Jan. 1853, from 2^ to 3. Advanced, June 1853, from 3 to 3^. Advanced, Sept. 1853, from to 4. Advanced again, in Sept. 1853, from 4 to 4^. Advanced again, in Sept. 1853, from 4J to 5. Advanced, May 1854, from 5 to 5J. Reduced, August 1854, from 5^ to 5. Reduced, April, 1855, from 5 to IJ. Reduced, May 1855, from 4^ to 4. Reduced, June 1855, from 4 to 3J. Advanced, Sept. 1855, from 3J to 4. The following is a copy of the Official Returns for the four years that have passed under review :— BANK OF ENGLAND WEEKLY EETUENS. A Practical Treatise cc s r«o CO •i cc *+.c» •\ CO o .§ ■<5 to 00 g e to t- to O EH IZi w a <1 PH W P 02 02 O to to g e g CO g &4 to g g g 'O »o o o CO cq HO a tH I o o i" L" • CO [ rH 05 t- o CO 5? >> «+? o *» HO co" cq o" OO 2 CO r>« OO cq o CO i-H 2 CO o 05 CO HO CO OO rH cq CO 00 (M rH rH cq »o o o i> 00 HO C c^ o o o CD CO o lO rH 05 HO 05 o 00 a; Tfl ^ «+? CO o tr^ HO CO 22 s CO rH CO o CO CO o CO rH CO tM «v w\ 0S PH CD rH cq cq CD O CO (M rH rH cq m o o lO o HO tHH o o rH CO t±l 00 rH 05 CO o CO t^ 5r? •V tH ^ CD HO ■dH CO CO CD 22 a 05 rH CO cq 05 CO o 05 CO o CO »» •» »» PH C CO (N rH cq «+i rfl O o o t> CO o o o 05 CO rH 05 05 CO CO CD Sj c« #* «+? o HO l> cq o 22 a CD rH OO HO o CD o 05 o t-- PH crT r^ cq CO cq 05 O CO cq rH rH cq o o o rH 05 o •4^ o o o CD O o CO CO rH CO HO CO ]845 tember «\ #s W\ CO HO cq o CO iO rH CO CO HO 05 o 05 05 05 05 #v 0\ ** PH CO r^ cq cq rH CO a> CO cq rH rH cq HO o o CO HO 05 o o o CO 05 cq rH CO cq o cq tH E! lO t- rH 22 a HO rH CO lO o HO CO o 05 CD CD 1 CO PH 00 rH cq" cq rH 00 CO cq rH 1 rH cq • • • • • • • d • o • ^ • • • • d • 'Ti CD Q H-3 a 00 rH > o o •Hi o rH 5?; O O O m Banking Department. on Banking. 149 O uo rtH tH o Ttl o 05 o a o (M o (M O CO to CO rr o o CO CO to 00 CO (05 CO Ttn (35 CO d «k •% •s 0t •N 9s 9s 0s u CO CO 00 tH to (05 CO to 00 o (M (M 05 CO rr to (M S o o 05 CO rH to 00 CO to t> to 9s o CO CO -tH CO 05 (05 00 Tt< CO (35 00 'a o »o (M (M (M rH tH CO CO CO (35 rfH T-H »o 00 o 00 o 05 rfH CO l> CD (N &. Tfl CO lO 00 rH CO (05 00 CO a> (Z3 l-H CO rH CO «+^ =4 • .C o CO Tt^ CO rH O 05 o (35 rH o Ci o rH 00 Tfl rH CO (35 00 o lO CO t- CO CO rH 00 O CO •« •V «« •» *« 9s «« 0) CO CO (M (M CO CO 00 (35 (35 CO 00 a 0) lO 00 (M o (35 CO o 00 CO 05 tH lO 05 00 00 CO to rH 00 *» •% •« #» 0\ •« p. tH CO t> CO CO rH CO 02 r-4 CO rH rH CO ,a o 05 05 05 o t- to o to l> o rH o CO CO CO to 05 to CO o 05 rH 00 CO to o 05 CO CO t-t •s 0* #v «v 9s 0S #s #« CO 00 to (35 rH CO rH (35 (35 00 a »o CO r^ to CO (M CO (>5 CO rH (35 lO 00 CO to 05 (M (35 to (M to (35 •V *% 0>, 9s rv p. CO 1> 00 to 05 (^5 05 to CO rH CO rH rH CO «+! rC o o lO CO 05 o CO to 00 -«iJ o 00 o rH 00 oo 00 o to CO o rH CN CO t> CO o to to u r. »v •s «« 0% 0s CO 00 rH 00 to CO 00 'a lO o o 05 CO CO CO to l> CD rH o CO to o rH 05 (35 rH •* 0^ ♦» •V •s A p. CO CO 00 rH CO 00 TtH CO rH CO rH rH CO .d o 05 05 00 Tti o 'HH CO to to o o (M o to CO CO o 00 CO CO 05 00 CO o t> (35 ,o CO o' o co" 'rH to" to co" CO a »o CO CO CO (?5 to CO t> to (35 »o o CO CO o to 00 rH 00 •4^ »* •* #* •t •1^ P. Tf CO CO oo rH rH l> CO rH c« 1-H CO rH CO ■4? • • • • C3 ^ • r>H W 3 1 |m3 § a 'w ^ 2 • • • on • i-H w 1 1 (M .afc • • • • • • • • • • • • i::!. bot_ *4-9 •-H •pH (D d c3 * a o .r, > *=! ® ® • CO 05 -d o (O • • • CO o • • • ^ o o Pi <© o *^00 ;h o o ;h A 2 CO o o ^ s t> r|=« .jd o -M .2 « aS '^HOQ QO o o Q 05 xa fl o3 o3 ■73 1 d 05 > D overnment eluding Dei nuity ; • 4-9 • ^ t-i d C5 05 OQ ;-■ 2 M (D -4J o > fH • fH 02 ■70 d (d 2 'o Pm Ph O m C O 52( O 150 A Practical Treatise 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 be the future operations of that department, this portion of its history will always be inte¬ resting. This period is remarkable also as containing one of those monetary cycles to which we must always be liable as long as our currency is regulated by the Act of 1844. Each year has a peculiar character. 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 fluctuated also. During the whole of the third, the exchanges were unfavourable—gold was exported, and the rate of interest advanced. At the commencement of the fourth year came the pressure ; then a favourable 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 interest in September, 1844; but they expressed regret that the bank had not advanced the rate of interest in November, 1846, and that they suffered 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 the 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 exchequer bills,—that there was a pressure 151 on Banking, 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 ?” * We must, however, distinguish between “the system” as established by the Act of Parliament, and the administration of the banking department in consequence of the establish¬ ment of that system. We have given in the preceding section our opinion of the system. But the administration of the Banking Department of the Bank of England under the system has, in our sober judgment, been distinguished by a high degree of both wisdom and liberality. The administration of the banking department since September, 1848, does not call for any particular remark. We had the usual indications of the first stage after a panic. The bullion in the issue department increased from 12,883,505Z. to 14,330,845Z. The notes in reserve from 8,784,795?. to 9,553,460?. Money had been abundant, and the rate of interest low. On the 2nd 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 induced the directors to maintain the same interest to February, 1849, although this appears to be an abandon¬ ment of the principle adopted in the year 1844. SECTION X. THE ADMINISTRATION OF JOINT-STOCK BANKS, WITH AN INQUIRY INTO THE CAUSES OF THEIR FAILURES. The chief points in which a joint-stock bank differed from a private bank were,—the number of its partners—the per¬ manency of its capital—and the form of its government. A private bank formerly could not have more than six partners ; * Commons, 8450. 152 A Practical Treatise a joint-stock bank might have a thousand partners. If a part-^ ner 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 private 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 im¬ posed on new banks by the “Act to regulate Joint-stock Banks,”* 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 commencement 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 un¬ limited liability a certain amount appears to be necessary. The employment of capital judiciously is sometimes a means of acquiring business; and in case of loss there should always be a sufficient capital to fall back upon without recmu*ing to the shareholders. There is an evil in a bank 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 persons eligible to be chosen directors will be few; hence there will not be the same guarantee for good management. If a bank with a small capital have also a very small business, it had much * 7 and 8 Viet. cap. 113. 153 on Bankmg. better cease as an independent establishment, and become the branch of a larger bank. If, on the other hand, it has a large business, with a large circulation, large deposits, and large loans or discounts, its losses will sometimes be large, and hence the whole capital may be swept away. It is 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 those shares may induce many shareholders to sell out and form other, aud perhaps 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 em¬ ployed in the business, the directors are under the tempta¬ tion of investing it in dead or hazardous securities for the sake of obtaining a higher rate of interest; perliaps 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 15 to 20 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 3 per cent., then the capital raised by notes or deposit, produces, 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 ac- 154 A Practical Treatise quiring 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 in¬ fluential 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 l3e said, that the bank is liable also for its drafts upon its London agents, and for the payment of those bills which it has en¬ dorsed and re-issued : 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 busi¬ ness increases, the question is suggested, what is the best way of increasing the capital ? The English 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, * This is about the proportion in Scotland; but in England, or at least in London, the capitals of the Joint-stock Banks bear a much less proportion to their liabilities. 155 on Banking, then 50,000Z. mil 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 transferred. 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 misrepre¬ sentations that may attend 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 objec¬ tion 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 occur¬ rence 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 capital, such as two or three millions, a nominal capital may not be necessary, 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. 15G A Practical Treatise The second way of increasing the capital of a bank, is by the issue of new shares. The whole amount of shares to be issued is fixed in the first instance, and the bank commences as soon as a certain proportion has been issued. If the bank was not allowed to commence business until the whole of the shares were taken, a small amount would be fixed upon, and the bank would be proportionably weaker. But by beginning with a small number of shares you have capital enough for your business, and you acquire more as you proceed. Many persons will join a bank after it is established who would not take shares at the commencement. Some shares are there¬ fore reserved for persons of this description; and as the shares are more valuable when the success of the undertaking is no longer doubtful, they are often given out at a premium, and always a greater degree of caution is exercised as to the persons to whom they are distributed. Some members of the parliamentary committee of 1836, appear to have an objection to shares of a small amount; they apprehend that these shares are taken by an inferior class of persons; and hence the body of proprietors are less respectable. But it would appear from the returns, that the general effect of small shares is, that each shareholder takes a greater number. Thus in the banks of lOOZ. shares each proprietor has taken upon an average twenty-eight shares, on which he has paid the sum of 444Z. In the banks of 20/. shares, each proprietor has taken forty-three shares, and paid 359/. In the banks of 10/. shares, each proprietor has taken fifty-two shares, and paid 400/. While in the only bank of 5/. shares, each proprietor has taken 117 shares, and paid 585/. It appears to me that the chief objection to which small shares are liable is, that they do not admit of a large amount of nominal capital. The banks of 5/. and 10/. shares have usually the whole capital paid up, and hence in case of neces¬ sity the directors have no power to call for a further amount. II. Joint-stock banks are governed by a board of directors. The directors are chosen from among the shareholders at a general meeting—the pecuniary qualification being that they hold a stipulated number of shares in the company. on Banking, 157 “ There are several points of view in which a man becomes eligible as a director of a bank, independent of his qualifica¬ tion as the holder of the required number of shares. Indeed, his'qualification as a shareholder, merely, must not be taken into the account. 1. He ought, in the first place, to be a rhan enjoying public confidence. Unless he is a man whom the community contemplate as deserving of their confidence and esteem, it is not presumable he can be of much service to the bank, either by his influence or character. The public are not likely to deposit their money in an establishment where they cannot place the fullest reliance upon the directors; and, for the same reason, parties of respectability will not readily be .induced to open accounts with the bank. ‘“2. He ought to be a man possessing a knowledge of commercial business. It is a matter of great importance to the satisfactory and efficient management of a bank, that those to whom is entrusted the direction of its affairs, be in some measure conversant with the ordinary affairs of trade. Men who are retired from business are unquestionably the most eligible, not merely from their business knowledge, but because they are not apt to be contemplated with that suspicion, jealousy, and distrust, which tradesmen will some¬ times exercise towards such directors of a bank as are like¬ wise engaged in trade. But retired men of business are not readily to be had as directors of a bank, nor are they in most cases disposed to accept of such an office. Where such is the case, men of high standing and character, engaged in trade, should be sought for. 3. A bank director should be a man of strict integrity and uprightness. • This is a qualification perfectly indis¬ pensable to the welfare of the bank. He must be above all trafficking in the stock of the company, or taking any undue advantage over the other shareholders through his intimate knowledge of the state of their affairs as regards the bank. He must never for a moment forget, that while he is a partner in the concern, and as an honest man, is bound to conduct it in as faithful and diligent a manner as 158 A Practicql Treatise lie would his own private affairs, that he is at the same time appointed to a solemn trust, in having the interests of numerous others, equally interested with himself, under his management and control. In fact, unless the director of a bank is a man of strict integrity, he is placed in a position calculated to be productive of great mischief. He is invested with power to ruin the fortunes of others, and to inflict much commercial evil upon the community. Where there is a want of integrity, there is a want of principle, and the bank must necessarily be mismanaged. ‘‘4. A bank director should be a man of influence and respectability. He ought to be a man well knowm and respected in the district. Such a man is desirable in a variety of ways. He adds his own personal respectability, to the establishment, and he influences the favour and support of his friends and acquaintances. His standing in society gives the public confidence in the establishment with which he is connected—and they bring their money and business to its support; the paper of the bank becomes more readily current in the district, and the weight of his influence destroys any suspicion of its stability. ‘‘5. A bank director should be in good pecuniary circum¬ stances. It would be a most wholesome regulation, were it stipulated in all deeds of settlement, that no bank director should be privileged to overdraw his account. The great facilities which directors enjoyed of raising money from overdrawing their bank accounts, have, in some instances, resulted in extensive commercial disasters, and in the total wreck of large establishments. The temptation to specula¬ tions of all descriptions which such facilities hold out, necessarily increases the risk of the bank, and induces a less rigid inspection of the accommodation afforded to other customers. Where those who are entrusted with the manage¬ ment of the bank forget the extent and importance of the trust reposed in them, and begin to enter into unwarrantable speculations with the funds committed to their care, it is not supposable that they will be particularly scrupulous as to the general management of the affairs of others. 150 on Banking. “ 6. A bank director should be 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, appear 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 number of directors, than from any idea of their being expected, or of its being necessary for them to know anything regarding the management. The consequence of this has been, that the duties which de¬ volved upon the shareholders, perhaps six individuals, were confined to two, or possibly only one, and the others ap¬ proving, without suitable knowledge or proper inquiry, of all their acts, the mass of shareholders, as well as an extensive commercial circle, have been involved in the disastrous results of mismanagement. It is altogether an anomaly that any man, or body of men, should have the credit, honour, and distinction of being managers and directors of a bank, aud yet not exercise any of the active functions and import¬ ant duties that relate thereto. Upon what principle can they undertake, as by accepting the office they unquestion¬ ably 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.”* Mr. Taylor, in his “ Statesman,” makes the following observations upon the age of members of public boards :— ‘^Boards, or other co-operative bodies, should be so formed that youthfulness and elderliness may 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 invention of new courses, and intrepidity of purpose is required; and perhaps, also, unequal to * These observations are taken from the ‘ Philosophy of Joint-Stock Banking/ by G. M. Bell (Longman). I recommend the perusal of this little work to all directors and managers of joint-stock banks. 160 A Practical Treatise any unusual amount of spontaneous activity. If, on the other hand, it be composed wholly of young men, its operations will probably be wanting in circumspection; and the foresight by which it will be guided will be too keenly directed to the objects of a sanguine expecta¬ tion—too dully to prospects of evil and counteraction. The respective positions in life of the young and the old operate to these results not less than their temperaments; for the young have 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 re-election 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 social duties and reciprocal interchanges of confidence which ought to characterise 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 responsible situation, and ought to be rewarded not merely with an adequate pecuniary remuneration, but with the respect and friendship of the directors, by whom he should be considered in every respect, so far as regards 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 161 mi Banking. arduous employment in the profession ; and to speak well of him among their friends and acquaintances. 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 characterised by great circumspection and uprightness. He ought, un¬ questionably, in every instance, 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 qualifications, and not principally from his practical experience of banking, would be similar to appointing a man to the care and manage¬ ment 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 travelling; or it would be like placing a man at the helm to pilot a vessel over quicksands, and through a reef of rocks, who knew nothing of a seafaring life, but w^as fond of contemplating the grandeur of the elements. The manager of a joint-stock bank ought to be chosen exclusively for his experience 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 rewmd of a life of toil and drudgery; and thus merit is patronised and protected. In a well-regulated office no one will be promoted over the head of another, but a prudent selection 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 Ids attention to the affairs of the bank, courteous VOL. I. M 162 A Practical Treatise in his interviews with the public, affable and unreserved in his communications with the directors, and kind and con¬ ciliating towards the subordinates of the -bank, treating them as those who may be one day placed in a similar situation with himself. The days are now gone past when a man of business was considered in the light of a machine—a mere automaton for the purpose of forming figures and casting up accounts ; but it is still necessary, enlarged as our views of the powers and capabilities of the human mind are, in order to the proper management of any business, that it be carefully attended to. The manager of a joint-stock bank, being allowed a competent salary, cannot be justified in occuppng his time with any other employment which may occasion his absence from the duties of the bank. 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 unreason¬ able. Xor 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 partisan, he is certain of being more or less obnoxious to a portion of the inhabitants, 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 meetings, 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. 16H on Banking. The customers ought always to be treated with civility and kindness, their business transacted promptly and cheer¬ fully, and every inquiry regarding their accounts, or any matter of business, readily and satisfactorily 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 manager. The shareholders, being, in other words, the proprietors of the bank, are to be received with that freedom and con¬ fidence 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 bank. “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 circum¬ spection. It is, perhaps, a constitutional virtue which cannot be enjoyed by every one in the same degree, but it is never¬ theless a virtue which every one may acquire by proper attention. Nothing makes a manager look more silly and contemptible than a hesitating, dubious, and 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 disposed to alter an opinion when once formed.” * IV. In joint-stock banks the administrative functions are usually distributed between the directors and the manager. With reference to both private and joint-stock banks, the distribution of the administrative functions is a most im¬ portant 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 * Bell’s ‘ Philosophy of Joint-stock Banking.’ M 2 164 A Practical Treatise consists of two, three, four, five, six, or more 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 number of persons. A private bank may consist of as many as six or more partners, but it is rarely, we believe, that so many as six are actually engaged in the business. ^Yhen 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 labour, and each partner may preside over a distinct department of the business. But in all important cases there is usually one leading partner who practically guides the others. When a bank has risen speedily to eminence, it has generally 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 suggestions of his partners. It is the part of a wise man to avail liimself of the Imowledge and wisdom of others; and he will often gather much useful information from men far below himself in general talents. There is, perhaps, 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 tliis power is vested solely in the manager; sometimes in one or two managing directors ; sometimes in a permanent com¬ mittee 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 on Banking. 165 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 depart¬ ments, and all very important matters are reserved for their special consideration. V. Some joint-stock banks have many branches. When the law existed in England that no bank should have more than six partners, the branch system scarcely existed. 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 head office was placed in the county town, and branches were opened in the principal towns and villages around. The credit of the bank being firmly established, its notes circulated freely throughout the whole district. The chief advantages of this system are the following:— There is greater security to the public. The security of tlie whole bank is attached to the transactions of every branch; hence there is greater safety to the public than could be afforded by a number of separate private banks, or even so many independent joint-stock banks. These banks could have but a small number of partners—the paid-up capital and the private property of the partners must be comparatively small; hence the holder of a note issued by one of the independent joint-stock banks could have a claim only on that bank: but if that bank, instead of being inde¬ pendent, were a branch of a large establishment, the holder of a note would have the security of that large establishment; hence the branch system unites together a greater number of persons, and affords a more ample guarantee. The branch system provides greater facilities for the trans¬ mission of money. The sending of money from one town to another is greatly facilitated, if a branch of the same bank be established in each of those towns, for all the branches grant letters of credit upon each other. Otherwise you have to ask the banker in the town from which the money is sent, to give you a bill upon London, which is transmitted by post; or you 166 A Practical Treatise request liim to advise his London agent to pay the money to the London agent of the banker who resides in the town to which the money is remitted. This takes up more time, and is attended with more expense. A facility of transmitting money between two places usually facilitates the trade between those places. The branch system extends the benefits of banking to small places where independent banks could not be supported. An independent bank must have an independent board of directors who in most cases will be better paid—the manager must have a higher salary, because he has a heavier re¬ sponsibility, and a large amount of cash must be kept unem¬ ployed in the till, because there is no neighbouring resource in case of a run. There must be a paid-up capital, upon which good dividends are expected: a large proportion of the funds must be invested in exchequer bills, or other Govern¬ ment securities, at aTow interest, in order that the bank may be prepared to meet sudden calls; and the charge for agencies will also be more. On the other hand, a branch has seldom need of a board of directors, one or two being quite sufficient—the manager is not so well paid: there is no necessity for a large sum in the till, because in case of neces¬ sity the branch has recourse to the head office, or to the neighbouring branches; nor is a large portion of its fund invested in Government securities that yield but little in¬ terest, as the head office takes charge of this, and can manage it at a less proportional expense. Besides, at some branches, the manager attends only on market days, or once or twice a week. The business done on those days would not bear the expense of an independent establishment. The branch system provides the means of a due distribution of capital. Some banks raise more capital than they can employ, that is, their notes and deposits amount to more than their loans and discounts. Others employ more capital than they raise, that is, their loans and discounts amount to more than their notes and deposits. Banks that have a surplus capital usually send it to London to be employed by the bill- brokers. The banks that want capital must either restrict 167 on Banking. their business, or send their bills to London to be re’dis- counted. Now, if two banks, one having too much, and the other too little capital, be situated in the same county, they will have no direct intercourse, and will consequently be of no assistance to each other; but if a district bank be esta¬ blished, and these two banks become branches, then the surplus capital of one branch will be sent to be employed at the other—thus the whole wealth of the district is employed within the district, and the practice of re-discounting bills in London will be proportionably diminished. The branch system secures a better system of management. The only way to secure good management is to prevent the formation of small banks. When banks are large, the directors are men of more wealth and respectability—they can give large salaries to their officers, and hence can command first-rate talent—there will be a more numerous proprietary; and in a large number there will be always some active spirits who will be watchful of the conduct of the directors and the manager; besides, in a numerous proprietary there is a greater number of persons eligible to be directors, and consequently there is a wider choice. In populous cities, such as London or Manchester, a large bank may be formed without branches; but in smaller places there is no way of forming a large bank but by giving it branches throughout the district. A branch bank in a small town will probably be better managed than an independent bank in the same place. Tlie directors and manager of the branch will be appointed by the directors at the head office, assisted by the general manager, who are very competent to judge what qualifications are necessary for these offices, and who would not be biassed by local partialities. But the directors of the independent bank would most likely be self-appointed, or chosen by the proprietors, because no others could be obtained, and these du’ectors would appoint some friend of their own to be manager. The manager of the branch, besides the super¬ intendence of the directors, which he has in common with the manager of the independent bank, will be subject to visits from the general manager or the inspector; and he must 168 A Practical Treatise send weekly statements of liis accounts to the head office. The consciousness of responsibility will thus secure a more anxious attention to his duties ; and, besides, he will probably be looking forward for promotion to a higher branch as a reward for his successful management. These circumstances seem to insure a liigher degree of good management to the branch. At the same time, it must be admitted that banks with numerous branches require a proportionate paid-up capital, and that the capital be kept in a disposable foim; it also requires vigilant and constant inspection, and a rigid system of discipline. A proportionate paid-up capital is necessary, because, in case of a run, there are a greater number of points of attack : hence the funds must be divided to meet all these possible attacks ; for if one branch be overpowered, the whole bank is immediately exposed to suspicion. Another danger arises from the incompetency 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 establishment. 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 wdll 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 demand for money arises at head-quarters, and it is then found that all the capital of the bank has been absorbed by the branches. These advances cannot be suddenly recalled, and thus the «/ ^ bank is ruined. What number of branches a bank ought to have, and wffiat distance they ought to be from the head office, have been the subject of much discussion. No general rules can be given. The subject may very safely be left to the discretion of the 169 on Banhing, banks themselves. Several of the banks in Scotland have from thirty to forty branches. The Provincial Bank of Ireland, whose head office is in London, has branches spread all over Ireland. I am not aware that in these cases any danger or inconvenience has been experienced. When branches are found troublesome or unprofitable, they will very soon be discontinued. In some instances, even in Scot¬ land, the branches of the larger banks have been withdrawn, in consequence 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 established 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 advantages which are alleged to belong to the district system are the following :—That the bank will be better adapted to the wants and habits of the people—that a local feeling will be excited in its favour: hence the inhabitants 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 control—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, instead of a few large banks who may combine for objects injurious to the nation ; 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 accommoda¬ tion bills. On the other hand, it may be contended, that in Scotland the large metropolitan banks which have branches extended throughout the country, have generally been more successful than the provincial or district banks—that there is 170 A Practical Treatise a greater security to the public for the notes or deposits— 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 esta¬ blishment of the bank, being on a larger scale, you have a superior class of directors, and can demand 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 advantages, but they do not seem to super¬ sede banks on a larger scale. VI. Joint-stock banks have half-yearly meetings of share¬ holders, 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 secu¬ rities were available, or whether those loans could suddenly be called up, are points upon wliich the balance-sheet could give no information. The Agricultural and Commercial Bank of Ireland published 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 oppo¬ nents. 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 opponents 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. Sup¬ pose, for instance, the balance-sheet should show that the bank had advanced a few thousand pounds upon mortgage. * All the Joint-Stock Banks in London do so, but it is not the practice gene¬ rally in the country, nor in Scotland or Ireland. 171 on Banking. 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 directors 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 share¬ holders to judge of the ability and prudence of the directors- Bat 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 shareholders and the public would form their opinions of the bank from the statements in the balance-sheet; and accord¬ ing to these opinions the price of the shares would fluctuate in the market. Suppose it were seen that the bank had in¬ vested a large portion of its funds in Government securities, and it was known that during the year the price of those securities had experienced a considerable fall, would not the bank shares immediately fall too? Again, suppose at the end of a year like 1833, it should appear that the bank held a considerable amount of overdue bills, the apprehension of loss would cause the bank shares to fall; soon afterwards these bills might be paid, and then the shares would rise again.—Thus, the publication of balance-sheets would keep the prices of shares in perpetual fluctuation, and furnish a most fruitful source of speculation and gambling. 4. It is perfectly inefficient as a protection against fraud. The balance-sheet, it seems, is to be a check upon the 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 bank on one day in the year. Would it not be easy to put the bank on that day 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 share¬ holders a dividend on the capital. But all the profits are not 172 A Practical Treatise usually thus appropriated ; 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 deposi¬ tors for the amount of their deposits—these are guaranteed by the paid-up capital and the liability of the shareholders —but as a guarantee to the shareholders for the uniformity of their dividends. Should the profits in any one year fall below the sum necessary to pay the usual dividend, the defi¬ ciency may then be taken from the surplus or guarantee fund. The amount of this fund, tlierefore, 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 case a portion of the fund may be employed either in still farther increasing the dividend, or it may be distributed to the shareholders in the form of bonuses, or it may be adfled 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 sufficiently large, the best way will be to give an occasional bonus to the proprietors. This is usually better than in¬ creasing the dividend. For if the dividend be once increased, the same rate of dividend will always be expected. And it is better not to make any advance, unless there is good reason to believe that the same rate wdll always be maintained. When urging the establishment of a surplus fund, we are met with the remark, that we are not bound to do anything for posterity, inasmuch as posterity have done nothing for us. We recollect meeting with this joke many years ago, w'e think, in “Joe Miller.” As it is so frequently rejoeated, we presume it is thought to be witty. We profess not to be a judge of witticisms. As a piece of reasoning, it seems veiy 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. m Banking, 173 in the present case, that the provision is made. All bank proprietors should wish that it may be so ; but it is very pro¬ bable that within their own life-time 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 shareholders, 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 distri¬ buted, receives of course his portion of the fund. But an existing shareholder who sells out his shares before the fund is distributed, receives 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 ample 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 busi¬ ness, 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 strengthening the reputation of the bank in public estimation. It is regarded as an indication that its affairs are governed by a wise and prudent administration. It will assist us in forming a correct judgment as to the principles on which joint-stock banks ought to be adminis¬ tered, 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 174 A Practical Treatise 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 getting 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 honom’able 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 confined by their deeds of settlement to the business of bank¬ ing. Nor has it appeared—except, perhaps, in the Isle of Man Bank—that they have violated their deeds in this respect. To what, then, must we ascribe the failure of so many joint-stock banks? We reply. To mal-administration ; or, in other words, to bad management. And this leads us to inquire, In what way has this mal-administration been exemplified ? What are those erroneous principles that have led to these fatal results ? Without attempting to enume¬ rate them all, we will endeavour to specify a few of the most prominent. I. Taking the unsound business of other banks. One" cause of the rapid extension of joint-stock banks in 1836, was the “ merging ” of numerous private banks. It appears that 138 private banking establishments have merged in joint-stock banks. 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,” 175 oil Banking, were advantageous 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 had joined. On the other hand, the new joint-stock bank acquired a business abeady formed, and also obtained the advantage of the practical knowledge and superintendence of experienced bankers. 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 occa¬ sioned 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 con¬ sidered good at the time, but a few years afterwards the parties failed, and the joint-stock bank lost considerably. A joint-stock bank gave to the Northern and Central Bank the sum of 6,500?. for their business at Leeds, after they had stopped. The accounts they took over were afterwards the occasion of great loss. The Isle of Wight Joint-stock Bank was formed upon a private bank, 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. They 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 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 manu- 176 A Practical Treatise factories, 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 re¬ striction, 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 perpetually 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. Some¬ times, 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 Lancashire to pay for cotton with a three months’ banker’s bill. Banks in difficulties' avail themselves of this practice to make alKtheir advances by drafts on London, instead of cash. The Bank of Man¬ chester 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 farther ad¬ vances, 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 throwing good money after bad. The ultimate loss is usually in¬ creased. We may just observe in passing, that the banks in the East Indies get involved in the same way, through making advances on indigo works. These works are of no value except when kept in operation; and hence it has oc¬ curred that a bank which has made an advance, is compelled 177 on Banking. 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 an iron concern in Wales was said to have been carried on by the Bank of England. It be¬ longed to the Governor and Company of the Mines Koyal. The bank made an advance on mortgage to this corporation during the pressure of 1847, and took 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 anything like the cost price—the builders were ruined— and the loss fell upon the bank. The bank had recourse to the expedient of rediscounting the builders’ bills; but after a while it was compelled to stop payment. In agricultural ? districts, banks have sometimes made considerable advances to farmers and graziers. Indeed, it is almost a universal practice to do so at some seasons of the year. These advances are not individually of large amount, and are not usually attended with much loss—not with anything like the losses incurred by advances on collieries, mills, and houses. But it is a lock-up of capital until the year comes round. III. Some banks have lost large amounts, through ad¬ vances made by way of loan or discounts to men engaged in speculative undertakings. Two of the banks that stopped at Newcastle-upon-Tyne sustained great losses through advances to corn-merchants. Speculations in corn are usually carried on more by bills than by loan. A merchant buys a quantity of corn, and places it in the hands of a factor, and draws bills for some¬ thing 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. This second batch of bills he also gets discounted, and buys more corn; and thus he goes VOL. I. N 178 A Practical Treatise 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 dis- coimted, 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 banldng and monied interests. It was the stoppage of Messrs. Lesley, Alexander & 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. Builders are generally a speculative class. Banks that advance money to parties engaged in tliis 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. 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 ” is a relative term, and must be understood with reference to the extent of business that the customer is carrying on, and to the means of the bank. I It is not the business of bankers to supply their customers I with capital to carry on their trade. But it is their business to make temporary advances, and these advances may some¬ times be large. In such cases, the banker should have a kind of security, that shall not only secure 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. 179 on Banking. But the worst form of illegitimate advance is that which is made by a bank to one of its own directors. 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 transactions 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 manager 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 care¬ fully 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 conduct¬ ing its affairs. This laxity usually 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 share¬ holder 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 per¬ fect 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 adequate check upon the amount of notes in circulation; “ and from one N 2 180 A Practical Treatise 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 question about it from the head office.” We will not intimate that anything like this has ever existed in a joint-stock bank in England. We never heard that any one has had any difficulty in making out a state¬ ment of its affairs. With some banks, however, there has been a laxity in regard to the government of their branches. The system of inspection was not well understood—the returns from the branch were not so ample as they should have been—and the orders of the head office were not rigorously enforced. We could mention the names of several fallen banks that lost very considerably by their branches. In some cases the banks had opened branches in towns that required an amount of capital disproportionate to the means of the bank, and their administration had' been entrusted to parties who had neither banking nor local knowledge. A good system of book-keeping cannot be too highly valued. Its object is not merely to secure accuracy of ac¬ counts between the bank and its customers. A farther ob¬ ject is to classify and arrange all the transactions in such a way as easily to produce a weekly balance-sheet, showing the actual condition of the bank. Nor must it be supposed that such abstracts 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 individual 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 per¬ fectly 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 over¬ drawn accounts, or past-due bills, are unduly increased. If a good system of book-keeping does not prevent a manager on Banking, 181 I ! \ ( from going wrong, it will prevent his going wrong without knowing it. If he act unwisely, his balance-sheet will stare him in the face and remind him of his faults. It is a erreat 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 share¬ holders showing a respectable profit, which enabled the directors to declare a fair dividend, and to make an addition to the reserved fund. While the annual 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 showing 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 endorsements. If they fail to do this, it amounts to a stoppage of payment. In fact, the amount of such bills suddenly returned has in some cases been the immediate cause of a bank stopping payment. We have no horror of numerous branches. When we see that in Scotland the largest and most prosperous banks have each a large number of branches, we are led to believe that branches are not attended 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 administrative department of good govern¬ ment. 182 A Practical Treatise In the first place, each branch must have a good system of book-keeping, 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 returns 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 reference to a branch individually. Sixthly, An inspector should be appointed 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 observed—to maintain a uniform system of transacting business at all the branches— to instruct the officers of the branch in their duties when necessary, 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 promotion 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 in¬ spectors. Branches should always be kept in strict subordination to the head office. Prompt obedience to orders is a duty that must be rigidly enforced. 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 183 on Banking. exercise an independent authority. Upon this ground, some parties object altogether to the appointment of local directors at the branches. A local board, consisting of the branch directors and the manager, are more likely than the manager alone to assume independent authority—to postpone carrying out the directions they may receive 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 connexions 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 very seldom appointed. The branch is under the sole care of a manager. The general manager of the bank is not merely the manager of the head office, but has authority also over all the branches. When¬ ever necessary or expedient, he issues circular letters of instruction to the branch managers, and these instructions the branch managers are expected to obey. V. Some banks have been unfortunate in consequence of having made no provision to meet contingencies. This class of banks has not fallen into any of the practices that we have 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 reserve, either in Govern¬ ment stock, exchequer bills, or bills of exchange, to meet those contingencies to which all banks are liable. One bank of this class 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, conse¬ quently, unable to pay back the deposits to the railway companies. From this circumstance, and the knoAvn con¬ nection between the two banks having damaged its credit, it was compelled also to stop payment. 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 20s. in ]84 A Practical Ti^eatise the pound. But the directors concluded from this circum¬ stance, that a bank with a small capital 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— this will teach us the virtues we ought to cultivate. The lessons we here gather are, that we ought not only to avoid all mismanage¬ ment, 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 securities 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 still be in a condition to wind up our affairs without inconvenience to the public. - YI. 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 incom¬ petent persons—or of an unwise distribution of the adminis¬ trative functions. Joint-stock banking did not grow up gradually in England as in Scotland. On the introduction of this system into England, the directors were necessarily unacquainted with the pi’actical operations of banking.* For all the practice * 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 any of the directors of the joint-stock banks about you previous b:inking experience?—I do not recollect one.”— Committee on Joint-Stock Banks, 1837. 185 on Banking, 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 difficulties which would have tried the most experienced bankers. The want of experience in a board of directors did not, however, produce any dangerous consequences when they appointed an efficient manager. He prudently advised and instructed them. They gradually increased 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 acquired, 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 flve 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 gTeater portion of the banks formed dming that period have, at the present moment, the same managers they had at their commencement, i- But, after joint-stock banks were started as matters of specu¬ lation, 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 emigra¬ tion to England. In some cases, those Scotchmen who were appointed managers of English banks had never held office in a bank before, or else it was an office so inferior that all they knew about banking Avas merely the routine of the office. Wherever efficient managers were appointed, Avhether English or Scotch, the same effects Avere 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. 18G A Practical Treatise The manager was inefficient, and the directors inexperienced, and then the effects were disastrous. In some cases the manager laboured under an inconve¬ nience 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 days of Solomon to the present time, the degree of deference paid to even good advice has de¬ pended upon the social rank of the party who offered it: “ Wisdom is better than strength; nevertheless the poor man’s wisdom is despised, and his words are not heard.”* The public, too, had been so long accustomed to private banking, 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 analogous to that of chief clerk in a private bank. It may be feared, that in some banks the directors took the same view, and thought that the influence and the salaries of the two offices ought to corre¬ spond. These impressions have now passed away. In some cases the manager was superseded in his functions by the appointment of managing directors. The manager was a man of banking knowledge and experience, but he had placed over him a couple of managing 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 important of his functions—that of giving advice to the directors—and was required to confine his attention to the more easy duty of obedience. 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 report, that “ two of their * Eccles. viii. 16. 187 on Banking, body, who are out of business, alone have access to the accounts, and are authorized to advise with the manager, when requisite, on the current transactions of the bank. At the same time, each of the other directors engaged, indi¬ vidually, to refrain entirely from inspecting any of the customers’ bills or accounts ; thus combining all the secrecy of a private bank wdth the advantages of a public institution.” Tlie 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 tw^enty-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 transfer of its business. In some cases a bank has been ruined by its manager; in others, by the manager and the managing directors con¬ jointly ; 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. AVe may observe, that sometimes joint-stock banks have been led into erroneous principles of administration by the proceedings of the proprietors. 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 188 A Practical Treatise instruction 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 injurious ; and some joint-stock banks have fallen into danger through the operations being too much regulated by the proceedings of the proprietors. 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 directors who contrive to declare the highest dividends, to make the largest bonuses, 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 principles; but which shall produce the most glowing reports—which shall declare the largest dividends—and which shall keep up its shares at the highest 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 IManches- ter; and at that place several boards of directors were pre¬ sented with services of plate, by their respective shareholders, within a short time of the stoppage of their banks. Sometimes directors are induced to act unwisely from the censures of their shareholders. 189 on Bankino. Every one who knows anything 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 Avill be so gi’eat 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 main¬ tained. 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 dis¬ satisfied. This produces a bad effect on the minds of the directors. It is a great mistake to suppose that boards of directors are indifferent to the applauses or censures of their shareholders. As a general rule, the fact is lamentably the reverse. In some cases they have had so much dread of “ the general meeting ” that they could not muster courage enough to make honest reports. Had they done so in the first instance, their banks might have been saved from de¬ struction. Sometimes directors are in danger of being led astray by the admonitions 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 w^orthy of the rounds of applause with which it is usually attended. But it is liable to be misun¬ derstood. In banking, as in housewifery, the lowest priced article is not always the cheapest. The largest portion of the expenditure of a bank consists of salaries. Hence an exhortation to economy amounts to—“Keep down the salaries of your officersand as the manager has the largest salary, he will most likely be the heaviest sufferer. A more mischievous recommendation, when thus under¬ stood, 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 advice will have less weight in the board-room; the directors individually will treat him with less respect; his wealthy customers will not disclose to liim their private affairs; the needy class, when refused 190 A Practical Treatise discount, will insult him by threatening to complain to the directors, and his inferior officers will be less prompt in their obedience. But worse than all tliis will be the effect pro¬ duced 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 phenomena more strikingly exhibited. The amount of his salary is the only tangible means by which a manager can judge how far his character and his services 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 natoe, that the kindness, liberality, and generosity of others will produce corresponding feelings in ourselves. And it is another 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 salaries 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 excessive 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 connexions. Instead of paying the calls to the bank, the directors and their nominees on Banking, 191 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 to the account of securities, did not appear in the books as a debit against the dnectors. 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.” 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 wbo 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 honourable 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 honour¬ able 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 liis time for nothing, he will give only that portion of his time which he cannot more profitably or more agreeably employ elsewhere. In matters of business, men will ap¬ portion their services according 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 government of the bank has fallen into the hands of a few persons, whose punctuahty of attendance has been almost their only banking virtue. But the main advantage of liberal payment is its effect upon the minds of the directors. Every honourable man will attend to his duty with alacrity and energy, and will even make extra exertions for the benefit of the bank, when he finds that his services are handsomely and liberally appreciated. 192 A Practical Treatise We need hardly say, that the faults we have pointed out in the administration or constitution of joint-stock banks are by no means inherent in the system. They are acci¬ dental circumstances, arising from its establishment in a new country^ by parties who had no previous opportunity of understanding its principles. The system is no longer new —its principles are now well understood—and it may reason¬ ably be expected that the calamities of the past will never recur. SECTION XI. 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 Pules 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 im¬ portance. 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 narrow and disagree¬ able 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 ne- cessaiy 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 probably be set apart for the private residence 198 on Banking, 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 building should be so constructed that what is going on in the private house, whether in the kitclien, or the nursery, or the drawing-room, should not be heard in the bank. The office being thus isolated, must then be fitted 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 accountant 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 necessarily 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 mis¬ takes, 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 VOL. I. o 194 A Practical Treatise robberies in a light office than in a dark one. Faint or illegible handwriting can be more easily read, and hence mistakes are less likely to occm\ The clerks, too, perform their duties with more quickness and cheerfulness. 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 to 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 bv medical men upon the advantages of fresh air, and on the unwholesome atmosphere of crowded cities. If the air that cnculates in the streets of towns and cities is impure, what must be the state of those offices or rooms where twenty or thirty persons 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 complaint 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, through the number of people con¬ stantly walking in and out. It is almost impossible for persons 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 performing this in the most 195 on Banking. effectual manner, he must be content to be often put to inconvenience through the illness and consequent absence of his clerks. Having made due provision for space, light, and ventila¬ tion, it will 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 effi¬ ciency, and so- as best to promote the public convenience. It is not 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 business, 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 sufficiently 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 passes them to a clerk, who enters them in the Waste Book. In the same way, when a cheque is presented tor payment, he gives it to a clerk behind 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 super¬ numerary 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’ 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 establishment. 190 A Practical Treatise Another object is, to place near together those clerks whose duties will require them to have frequent communica¬ tion with each other. If this rule be not observ^ed, 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 tliat 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 show 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 tli^ office. “ A master’s eye will do more work than both his hands.” In this case, if the counter is crowded, 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 fre¬ quently to the counter, and from their transactions he will often draw conclusions respecting their circumstances which will be serviceable to the bank. It is generally best that many of the clerks should be so placed as to look towards the coimter. It has been said that this draws off their atten¬ tion from their work; but we do not think this is generally the case, although it may occasionally relieve the irksome¬ ness of their duties. A dishonest person standing at the counter, and watching an opportunity of committing a rob¬ bery 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 entrusted with the practical administration of an office. It is only by attention on Banking, 197 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 tlie 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 departments 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 shareholders, usually have the first claim. In some banks the nomination of the junior clerks is regarded as a portion of the patronage of the direc¬ tors, 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 pay¬ ment of bills, it is necessary they should have arrived at a sufficient degree of strength to be able to make some resist¬ ance 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 discharged by the same class in London. Another consideration is the class of societv 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. During the last war, bankers’ clerks were generally the sons of tradesmen, as the sons of gentlemen could usually find employment under 198 A Practical Treatise Govermnent. But now that places under the Government are not so easily obtained, members of what are called re¬ spectable families are found among the candidates for admis¬ sion into the service of banks. Each class has some advan¬ tages. The sons of gentlemen have generally a better literary education, and have usually a more courteous ad¬ dress. On the other hand, they have no notion of business, and no business habits. They have been accustomed to go a-hunting and a-fishing with the sons of men of large pro¬ perty, and they look upon banking business as a drudgery to which they submit from necessity, but which is much be¬ neath the destiny to which they think they are entitled. On tbe 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 inquuy 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 dis¬ covered before they are permanently appointed. Those who have been two or three years in a merchant’s counting-house are generally found to be the most efficient. But to have been in the office of a stock-broker or a solicitor, or to have studied for one of the learned professions, is no recommenda¬ tion. Clerks from country banks, and especially 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 candi¬ date. For although honesty and dishonesty do not run in the blood, yet it is probable that religious and vu’tuous parents have given their children a religious and virtuous education; and a youth who has been accustomed to see examples of excellence at home, will be the most likely to exhibit those excellences in his own conduct. A liigh degree 199 on Banking. of moral principle is in itself a necessary qualification in a post of trust and responsibility, and it is usually associated witli a cultivated and improved state of the intellectual facul¬ ties.—‘‘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 cor¬ respondencies 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 makes 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.” * 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 testimonials, which they expect will place them at the head of any list of candidates. 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 particu¬ larly what qualities are not, ascribed to the applicant. 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 handsome. 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 talent. It is true that these qualities are of more importance than talent. But Avhile they are more important, they are also more common. And if a young man possesses any kind of intellectual superiority, tlie lact will certainly not be omitted in his testimonial. III. The distribution of the duties of the various clerks is * Taylor’s ‘ Statesman.’ 200 A Practical Treatise a matter of no small impoiiance. Experience is the only efficient guide in making such arrangements. We may, nevertheless, lay down a few general principles. The great division of the business of a bank office is into the cashiers’ department and the accountants’ department. In London banks there is a third—the tellers’, or out-door department. In the distribution of duties, it is desirable that the account¬ ants’ department should be a check upon the other depart¬ ments. The cashiers must not have the control of the books, nor the accountants the care of the cash. The accountants’ books should show what amount of cash is in the hands of the cashiers; and it is the business of tlie cashiers to show that they have that amount of cash wliich corresponds with the accountants’ books. If the same • officer has the care of the cash and the command of the books, he may abstract a por¬ tion of the cash, and alter the books to make them cor- resjx)nd. It is further desirable, in large estabhshments, that two books wliich 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 distributed that the intromissions of any one clerk, either by file abstraction of ' cash or the falsification of the books, should be liable to immediate detection 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 'deposit 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 labour in a bank. Every clerk should have fixed duties to perform, and every duty, however unim¬ portant, should be assigned to some particular clerk. If anything 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 201 on Banking. dispute arises among the clerks as to the due division of their labours, a reference should be made to the chief clerk, who will give to each man his ^york, and hold him responsible for its proper performance. IV. The Amount of their Salaries. According to Adam Smith, the wages of labour are regu¬ lated by the following circumstances :—1. The agreeableness or disagreeableness of the employments themselves. 2. The easiness and cheapness, or the difficulty and expense of learn¬ ing them. 3. The constancy or inconstancy of employment in them. 4. The small or great trust which must be reposed in those who exercise them. 5. The probability or impro¬ bability of success in them. Mr. Mill makes the following observations with regard to the salaries of clerks:— A clerk from whom nothing is required but the mechanical labour of copying, gains more than an equivalent for his mere exertion if he receives the wages of a bricklayer’s labourer. His work is not a tenth part as hard, it is quite as easy to learn, and his condition is less pre¬ carious, a clerk’s place being generally a place for hfe. The higher rate of his remuneration, therefore, must be partly ascribed to monopoly, the small degree of education required being not even yet so generally diffused as to call forth the natural number of competitors, and partly to the remaining influences of an ancient custom, which requires that clerks should maintain the dress and appearance of a more highly paid class. It is usual to pay greatly beyond the market price of their labour all persons in whom the employer wishes to place peculiar trust, or from whom he requires something besides their mere services. For example, most persons who can afford it pay to their domestic servants higher wages than would purchase in the market the labour of persons fully as competent to the work required. They do this, not from mere ostentation, but from reasonable motives—because they desire that those they employ should serve them cheerfully, and be anxious to remain in their service—because they do not like to drive a hard bargain with people whom they are in constant intercourse 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 ojperate in the minds of men in business with respect to their clerks.”* * ‘ Principles of Political Economy,' by John Stuart Mill, vol. i. pp. 461—475. 202 A Practical Treatise There would be considerable difficulty in applying the rules laid down by political economists with regard to the wages of labour 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 interest to do this; for his work is of a peculiar kind. His 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 employment. They have to maintain a respectable appearance. They must be qualified not merely for the lowest post in the bank, but must be prepared to take higher posts should vacancies occur. And in every post they are entrusted with a large amount of property, and upon their integrity and prudence much reliance must at all times be placed. All these cu- cumstances serve to show that, in fixing the amount of their salaries, the banker should be anxious to err (if he eri’s at all) on the side of liberality. He ought also to take into consideration the effect which the amount of 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 effi¬ ciency—or if it enables him to move in a higher class of society, and gives hini a station and an influence which enable him to be useful to the bank—tlien is such advance of salary—though entered in the books under the item of expenditure—an outlay of capital wliich 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. Kirby, “ The enclosed draft for 1,000Z. I request you will place to the credit of the ‘ Clerks’ Chrisimas Fund.’ At the close of the first year since my accession 1 Now Lord Overstone. m Banking, 203 In all banks the junior clerks have lower salaries than the senior clerks. In Scotland, a clerk usually serves an ap¬ prenticeship of three years, during 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 60/. a-year, and a portion of the Christmas money. In the joint- stock banks, where no Christmas money is allowed, the com¬ mencing 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 in¬ crease 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 salary 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 be¬ comes entitled to the annual advances belonging to that post. We give no opinion as to the respective merit of these plans. But there is one principle we would enforce—that the salaries to tlie 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 sub¬ stantial 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 labour and trouble on the clerical department of the office. Of the readiness with wliich 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 acknowledgment, and that you and they will believe me to be the faithful friend of you all. (Signed) “ S. J. Loyd. “ Lothhury, Dec. 2Dh, 1845.” 204 A Practical Treatise of the clerks should be regulated by the prosperity of the bank. If tlie 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, upder any circumstances, a scale of salaries is desirable. It prevents caprice on the* part of the bank, and jealousy on the part of the clerks. The amount of salary in each case should be fixed by rule, and not by favour. With reference to this subject we quote from Mr. Taylor’s work, entitled ‘ The Statesman ’—a work which he states to have been the result of twelve years’ official experience :— It is often said, that in order to get efficient service good pay must be offered. But tlris is not true, as applied to first appointments of young men. On the contrary, it will often happen that the largeness of the temptation, by bringing into activity the most powerful mterests through which abuses of patronage are engendered, will lead to the appointment of a worse man than would have been obtained by a smaller offer. On the other hand, though men of promise are to be liad cheap, whilst they are young and their value is httle known to themselves or others, they cannot, when this is no longer their condition, be kept for a small consideration, or at least kept contented. But a reasonable degree of contentment is of essential importance where the understanding is the workman. There is no position so strong as that of a man who stands upon his head; and if he be not induced to the activity of just thinking and clear reasoning, he will hardly be coerced to it. Upon the whole, therefore, I would say, that what is most conducive to good appoint¬ ments in the first instance, and thenceforward to deriving benefit from them, is to offer small remuneration to the beginner, with successive expectancies proportioned to the merits which he shall manifest, and of such increasing amount as shall be calculated to keep easy, through the progressive wants of single and married life, the mind of a prudent man. Upon such a system, if unfit men belonging to influential fami¬ lies shall make good an entrance into the service, they will be more easily got rid of; since, finding that they have got but little in hand, and have but little more to look to, they will hardly be desirous to continue in a career in which they must expect to see their competitors shoot ahead of them.” Securities .—In all banks the clerks give sureties for their integrity—usually two, of 500^. each; and in some banks these amounts are increased on accession to higher offices. Of late years societies have been formed, both in England 205 on Banking. and Scotland, for the purpose of giving, on the part of clerks and others, the amount of security required. These societies allege that— “ Suretiship by private bondsmen is attended with various incon¬ veniences and objections; instances have constantly occurred in which persons of the highest respectability have been obliged to forego valu¬ able appointments, from either the great difficulty of obtaining security, or a repugnance to place their relatives or friends and themselves under the obligations involved therein. The society undertakes, on the annual payment of a small sum, to make good in case of default by fraud or dishonesty any losses which may be sustained to an amount specifically agreed upon, and by such means obviates the necessity for private sure¬ ties, as well as the obligations arising therefrom, which often 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 requi¬ site securities for personal integrity, which has often placed an insuper¬ able barrier in the way of many persons of the highest character.and ability; it affords facilities to those in pursuit 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 supervision lodged in the Board of Trade, renders the policy of the company much more valuable than that of any individual, inas¬ much as it is not hable either to doubt or depreciation. In large esta- bhshments, both public and private, where the securities are numerous, and the sui-eties often resident in many different parts of the country, and known only by repute, it becomes nearly impossible to watch over their continued existence and solvency; and cases of default have fre¬ quently occurred when, upon investigation, it has been found that all the sureties have been dead for many years.” “ The rates are from lOs. per centum per annum and upwards (accord¬ ing to the nature of the employment), on the amount of security required. “ No charge is made for stamp duty except in special cases; the usual legal expenses 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 annual payment.” The Lords of the Treasury, and a great many banking companies, have accepted the guarantee of these societies. In the year 1841 the Bank of England took measures for 206 A Practical Treatise discontinuing tlie system of requiring sureties from the clerks. Every clerk subscribed annually two shillings per cent, upon the amount of bis surety-bond. When be bad subscribed in the course of five years (or immediately if be chose), ten shillings per cent., the liabibty of bis sureties ceased. Every new clerk subscribes, 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. Eeduced, or Consols. This fund is fixed at 6,000/. stock. When at this amount, the interest is given to the Clerks’ Widows’ Fund,’’ a fund established by the clerks, with the assistance and support 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 shil¬ lings 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 have been required from the defaulter. The clerks still give their per¬ sonal bonds, which are for the full amount of their deficien¬ cies. This is an admirable plan for a large establishment. In adopting it the directors have shown a sound discretion, as it makes all the clerks interested in watching over one another. At the same time, they have manifested that kind¬ ness and goodwill which have, we believe, at all times dis¬ tinguished the Directors of the Bank of England in their conduct towards thefr clerks. Mr. Thomson Hankey, when Governor, delivered to the Banking Institute the following account of the working of this system:— “ Witk regard to the guarantee system, it appeared to him that the principle adopted in the Bank of England in 1841, by his predecessor, was capable of extension, with great benefit to the clerks, to many of the other banking institutions of the country. The principle of that plan was, that a compulsory payment of 1?. a-year for five years, or 57 in one sum, was required from each clerk, on entering the establishment. 207 on Banking. These payments accnmnlated until they amounted to a sum of C,000?., tlie interest of which was then to be applied to another purpose, for the benefit of the clerk; but in the meanwhile the fund was applicable to all losses at the bank, wliich, under ordinary circumstances, would fall upon the private sureties. Every clerk, on entering the establishment, was bound to give security to the amount of 1,000Z. Well, he believed the lowest premium the guarantee societies would take was 10s. per cent., or bl. for the 1,000/., and this 5/. premium had to be renewed every year. Now, the amount of this 5/. premium from each of the 700 clerks of the Bank of England would be 3,500/. a-year. Well, since the guarantee fund to wliich he had alluded had been established in 1841, the total defalcations in the Bank of England had only amounted to about 1,500/. Now, if the 700 clerks had paid the 5/. a-year each to the guarantee societies for the whole of that period, it would have raised nearly as much as 40,000/., the whole of which would have gone into the pockets of the gnarantee societies, with the exception of the 1,500/. which would have been necessary to make good the defalcations. Now, if 40,000/. had been paid in premiums, and 1,500/. had been the loss, it would require very little argument from him to show that the guarantee societies would have been very great gainers, at the expense of the clerks.” V. The System of Promotion. It need hardly be observed that some posts in a bank are more important 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 cashiers’ department—the accountants’ department —and the tellers’, 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 depart¬ ment, as vacancies occur, the clerks are promoted to higher posts in either the cashiers’ or the accountants’ depart¬ ment.* * It is of course in large banks, where there is necessarily a great subdivision of labour, 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. 208 ^4 Practical Treatise The Cashiers' Te'^arUnent .—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 superior 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 con¬ venience in any matter on which they may require informa¬ tion or advice. In fact, it may justly be said, that there is no class of clerks on which the reputation 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 handwriting, accuracy in figures, and method in the arrangement of their work. Slow¬ ness is no positive disqualification, provided it be associated, as it often is, with application and perseverance. An ac¬ countant 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 em¬ ployed 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 import- 209 on Banking. ance. But vve must distinguish between those qualities required in the clerks of the accountants’ department, and those required in the accountant himself. The chief accountant in a bank is not a mere book-keeper. It is one thing to keep a set of books previously prepared and arranged, and another to frame a set of books, or a new system of book-keeping, adapted for any operation that is proposed to be carried on. In the latter case, mental 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 consider the best way of passing certain transactions through the books—of framing abstracts of operations which the books may not immediately supply— of making difficult calculations, and of examining lengthy and complicated accounts, and exhibiting them with clearness and brevity. A good system of book-keeping, and a clear¬ headed accountant, would have prevented many a bank from stopping payment. From 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 it is desirable that each clerk should be placed in the department for which he is best adapted. Where there is no peculiar adaptation, and where there is no jnarked difference among the clerks, the promotion should go according to seniority—not seniority in regard to age, but seniority according to the time they have been in the bank. But it will often happen, not only in the first, but also in subsequent steps of advancement, that the clerk who is entitled to a vacant post by length of service, is not so well qualified for it as some of his juniors. But even in this case, 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 better adapted for the office. As, however, all such cases will give rise to some suspicion of favouritism, and as the party who is passed over is sure to think himself unfairly treated, it is VOL. I. p 210 A Practical Treatise 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 IMr. Taylor’s ‘ Statesman— The claims of promotion are twofold:—^First, merit; second, length of service. And the difficulties to he considered are those which arise when these claims clash: that is, when the most meritorious officer is not he who has served the longest. And, having regard to the large public interests and the deep individual concernments with which they deal, it may be stated broadly, as a general rule, that merit, or in other words, industrious ability, should be the one essential consideration to be regarded in them promotion. But the question then arises. Will the judge be always incorruptible and infallible? And if not, how are injustice, favouritism, and abusive promotion to be guarded against? The answer, as I conceive, is, that there can be no perfect protection ' against these evils; that the principle (like most other principles) resolves itself into a matter of degree; and that the protection will be adequate in the main, if the rule of preferment by merit, as against seniority, be applied only where there is a marked distinction of merit. For there are divers securities, each of which may be more or less leant upon, the aggvegate of which will afford in the main all but a certain reliance, where the distinction of merit is marked. If motives of favoiu’itism be at work, the most able and useful officer will at all events have a fair chance of being the favourite. But if he labour under some defect (as unsightliness, ill manners, &c.) which, without impaming his jDublic utihty, tends to throw him out of favorm, he will nevertheless have that hold upon the self-interest of his principal, which he wants upon his goodwill. Further, 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 pretend 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 vdll 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 favoru’itism to brave the reproach of disregarding it. In short, it is the natui’e of industrious ability, acting through various methods and upon various motives, to vindicate its own claims under any system in which those claims are recognised; and the system which shall conform to this natui’al tendency, and be so framed as to legitimate the rising of what is buoyant, will be found to work the best. There is, however, a certain moderating hand to be applied, even in 211 (r}i Banking, the preferment of merit. Except in urgent and peculiar cases, in cases of extreme necessity on the part of the service, or extraordinary endow¬ ments—and character also—on that of the individual, preferment should proceed, as Lord Bacon teaches, ‘per gradus, non per saltusj For, besides the ordinary evils 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 future, the patron sinks his capital and forestalls that revenue of reward which should furnish liim with resources of inducement through successive years. Moreover, if a man be advanced largely at once, th^e 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 Kules 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 qualifications, 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 demeanour, 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 inspection, 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 admoni¬ tions as the circumstances may require.—To see that during the day the counter is properly appointed, and that no delay takes place in attending to the wants of the public. For this p 2 212 A Practical Treatise purpose it is desirable that his desk should be so placed as to command a view of the counter.—To see, by occasional in¬ spection, that the customers’ books are written up in a proper manner, and in case of complaint he will personally investi¬ gate 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 proper means be employed to discover th» difference.—To count, at such times as may be deemed proper, the money of the several cashiers, and when necessary to report thereon to the Banker. —To see that all the officers of the bank conduct themselves towards each other and the public in a courteous and gentle¬ manly manner, and to maintain throughout the office a proper state of discipline and subordination.—To take charge of the stationery and other matters used in the office, and to prevent any loss or waste of any portion of the property of the bank. Besides the points of discipline hinted at in the above description, there are others that may require more particular notice, as Punctuality 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 expired, a line is drawn, which shows who has arrived in time and who has arrived late. Punctuality of attendance is an index of character. It may fairly be inferred 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 regular habits, and are, consequently, the most deserving of promotion. Those, too, who are the most punctual are the most deserving of occasional holidays. They who are habitually late must be regarded as having chosen to take their holidays by piece¬ meal each day, and they can, therefore, have no claim to other holidays besides. In all applications for promotion or leave of absence, it is deserving of inquiry, whether the party on Banking. 213 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 himself from the bank. An act of this kind would show such a want of personal honour as should be a disqualification for holding any office in a bank. “ Few things occasion more dissatisfaction and annoyance to the superiors 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 his superiors will be reluctant to advance him to any post where his absence would be more inconvenient than while he is engaged in an inferior situation. In addition to this, the superior in the office may attribute the attack of ‘ bile ’ or ‘ 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.”* A clerk should take care of his own health. We think it is better for him to stand 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 his chest against the edge of the desk, as that may produce serious complaints. The post most friendly to health is that of cashier. 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 operation^ which are connected with the office of a bank clerk are in themselves beneficial. It is the confinement, the impure ah’, and the keeping of the * ‘The Banker’s Clerk,’ j). 151, an excellent little work, published as one of the series in the ‘ Guide to Service,’ by Mr. Charles Knight. 214 A Practical Treatise 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 amuse¬ ment 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 moderation, 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 con¬ sumption. 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 consumption 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 examination. If absent from illness, he is visited by the bank surgeon, who reports 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 examined. In each of these cases a formal 215 on Banking, medical report is drawn up, and laid before the directors. The present surgeon is Mr. Alfred Smee, F.K.S. 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 by the bank. It is worthy of inquiry, whether this excellent arrangement might not be extended, and adopted by other banking institu¬ tions. Why should not 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 illness, or in checking its first approaches. It would thus preclude, in some cases, those inconveniences which are now felt through the absence of sick clerks ; while it would be a boon to the establishment, and save them what, in some instances, must be a heavy item of expense. Holidays .—It is desirable, on several accounts, that all the officers of a bank, and especially those who are entrusted with cash or other property, should once a year have leave of absence for at least a week or a fortnight. This should not even be optional—it ought to be a fixed rule with which they should be expected to comply. These absences should be arranged to take place at those seasons of the year when they will be of the least inconvenience to the business of the bank. These holidays ought to be readily granted on the ground of kindness and humanity ; but where these feelings do not exist, motives of self-interest alone would prompt a ready acquiescence in such applications. In the first place, a great inconvenience is often experienced in large establish¬ ments from the illness of the clerks when they are denied proper seasons of relaxation. In this case, the loss of time from ill-health is greater than that which would be occasioned by holidays. A sick clerk, even when he attends to his duties, 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 efficiency of an office. When a‘ clerk is absent, the next in seniority takes his place; and ^vhen all the clerks have been absent in turn, every duty in 216 A Practical Treatise the bank becomes perfectly familiar to at least two persons, so that in the case of those absences which arise from un¬ avoidable causes, little inconvenience comparatively is felt. But while the bank is thus rendered independent 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 fonned of his character; while the indulgence he has received will stimulate his energies and increase his desire to render 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 j)roperty 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 be thus necessarily exposed. The following is stated in a City Article of the Times to be the arrangement of the Bank of England on this subject:— It is not generally known that the Bank of England have recently entered into an arrangement by which all the persons on the establish¬ ment are allowed leave of absence once every year, the hohday varying in length according to the length of service. To carry out this plan, the whole number of persons is divided into four portions, and each of these four portions takes the vacation in one of the four periods of the year that follow the payment of the dividends, and precede the shutting, these being the periods in which the least business is done. So complete is the system, that the parties who take their holiday in the spring quarter one year, take it in the summer quarter in the year following^ and so on through all the four, that one may not have an unfair advan¬ tage over the other. The shortest holiday, we understand, is about nine days, and the longest about three weeks.” Customers' Books ,—It should be a great object with the chief clerk to see that the customers’ books are written up 217 on Banking, correctly and neatly, in a good handwriting, 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 handwriting. One of the best writers in the office should be appointed to this post, and his salary should be proportionate to its im¬ portance. 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’ boolv. 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 debited 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 receive and pay away money for a whole year, and yet never make any mistakes. Some deficiencies will be sure to arise. Each cashier is considered liable to make good his own loss. But, to meet these deficiencies, some banks allow to each cashier a certain sum—say 201. or 307 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 usually large. Superior accuracy in this respect is also considered as one test of superior merit, and therefore as forming one claim to pro¬ motion. When a cashier takes liis holidavs, he delivers up his cash to the chief clerk, wffio 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 218 A Practical Treatise 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 individually, at such times as may be most convenient to himself, giving the cashier no previous notice of his intention to do so. He immediately reports 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 considered 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. The evil effects of such practices are very great. Speculative engagements will necessarily distract their minds, and di’aw their attention from their official duties. If unfortunate, their personal comforts may be diminished : they may incur debts that will require years of saving to liquidate, or they may be tempted to actions which would ruin themselves and disgrace 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 he has been instructed. There is a good way and a bad way, a quick way and a slow way, of per¬ forming 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 another clerk, well qualified to instruct him with regard to all his immediate duties. It is also desirable that the chief clerk should not' have much manual labour, but should have leisure to walk round the office—stand for a while at the elbow of each clerk—observe his peculiar defects—and give such instructions as he may 219 on Banking. deem necessary or useful. The senior clerks, generally, should also be ready at all times cheerfully and courteously to give instruction to their juniors. There are many ways of ascertaining the relative merits of a clerk. There is one obvious way; that is, to inspect the books which he keeps. It 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 careless¬ ness or otherwise. Quickness is generally an evidence of cleverness. A clerk who can count 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 recommendation. Another test of tlie 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 lie may express will, in fact, be the opinion of the office, formed not only on his own experience, but also on the experience 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 senti¬ ments generally entertained by the chief clerk respecting the other clerks, and not ask his opinion merely when there is an opening for promotion. On these occasions feelings of kindness, or the reverse, may induce a chief clerk to speak of the party in a somewhat different tone from that which he would employ at ordinary times. With a view to the proper training of clerks, it is desirable 220 A Practical Treatise that tliere should not be too many in proportion to the work. If the clerks are unemployed for any considerable portion of the day, their habits of attention, of industry, and of quick¬ ness, 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 applica¬ tion 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 gambols 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 effective. The amount of Christmas money received by each will also be greater. For the purpose of training the clerks, it is desirable that their labours should be so subdivided as that the duties of one office should be a training 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 wdll advance step by step (each step requiring but a small addition to his previous knowledge) to the higher posts. When it is ascertained for which department—the cashier’s or the accountant’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 improvement. The juniors thus learn to perform the duties of their superiors. New arrangements are formed temporarily for a different division of labour, and, the hands being fewer, an additional stimulus is given to exertion. It is also useful, when it can be done, for the clerks to change occasionally, and do each other’s work. Every clerk should 221 on Banking, be encouraged to suggest any improvements for abridging or facilitating bis own labour. 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 another branch. A good inspector of branches will inspect the cashier 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 sometinies, 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 favouritism, or caprice, on the part of the banker—or from the influence of friends, customers, or shareholders—or even for qualities good in themselves, but not increasing his efficiency as a clerk—then will great evils arise from his appointment, even though he should be as well qualified as the man who was entitled to the post from seniority. Another effectual means of training clerks is the daily balance. The books are balanced every night, before the clerks leave the bank. But mistakes will necessarily occur during the day, and to discover these will occupy a little time. The total amount of error is called “ the difference and to endeavour to discover the error is called “ searching for the difference.” Those clerks who are thus employed in the evening are said to be “upon the balance.” In large esta¬ blishments it is usual to divide the whole body of clerks into classes, who take it in turn to be “upon the balance.” By this arrangement, all those who are not “upon 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 be sufficient to be on the balance. If a larger number—say twelve—were retained, the juniors would do nothing, or else 222 A Practical Treatise 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 acquire a thorough knowledge of the whole system of book-keeping, and be able to ascertain in what way errors in one book may counteract errors in another book, and how the errors discovered will bear upon ‘‘the difference.” In large establishments almost the only way in which a junior clerk can learn the whole system of book-keeping, is from being “ 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 consciousness of being a fool. We have here spoken of that kind of training which is adopted to the making of clever clerks. But as in the joint-stock banks a clerk may become a manager, it is desirable that those clerks who are deemed the most clever should be put under a course of training that will, with experience, 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 oj)erations. In a bank where there are only ten clerks, one clerk sees a tenth part, and may easily acquire a tolerable knowledge of the whole. A bank that has many branches has a great facility for training clerks to become managers. When a branch manager is absent from illness, or any other cause, one 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 and efficient in the discharge ' of all their official duties, and, moreover, possess a good m Banking. 223 temper, gentlemanly appearance and manners, a degree of literary information, with a desire of improving their know¬ ledge and their talents. They should not be young men who have entered 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 esta- bhshment. But beyond the qualities we have enumerated, 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 per¬ severance. 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 tliinldng of the merit of his actions, though they may be highly meri¬ torious. 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 estabhslnnent. The greater the intellectual talents of the individual, the more necessary are habits of business to keep him steady in liis 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; wliile, on the other hand, we could easily point out, in every science and in every path of fife, some yonng men who, though of towering genius, have become lost to themselves, and have disappointed the hopes of all their friends, through a w-ant of habits of business. They have burst upon the world with more than noon-tide splendour, they have attracted universal notice, they have excited big expectations, and suddenly they have darted into an obhque coui’se, and passed into obhvion.”* 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 * ‘ Lectures on Ancient Commerce,’ l)y J. W. Gilbart, 224 A Practical Treatise clerk) is generally, from the very length of his service, disqualified for being a manager. Seven to ten years’ ex¬ perience as a clerk is quite long enough, and after that period the sooner he becomes a manager the better, provided he has the necessary qualifications. Even during 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, df this be true, it is probably the result of an intellectual more than a moral deficiencv. 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 opposing 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 holding an equivalent post hext 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 criterion by which to judge of his qualifications for that or a similar situation. Among the means of training clerks for superior offices, we should give a high rank to the formation of a library of banking-books, to which the whole of the establishment should at all times have access. The remarks we made in a letter, addressed to the manager of a country bank, in the year 1846, and which was afterwards published in the sixth volume of the Bankers' Magazine, are, we think, not inappli¬ cable to this subject:— ‘‘ I wish you would advise your directors to celebrate their success by sending to each of their branches monthly, a copy of the Bankers' Magazine. I am sure this would be a profitable investment of some portion of your surplus funds, and would yield an ample return in the results arising from the increased knowledge and skill of your managers. Here 225 on Ba7iking, they will learn points of law and of 'practice^ with which they were previously unacquainted, and be better prepared to deal with such cases when they occur in their own ex¬ perience. It seems peculiarly necessary that managers 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 obtaining this kind of infor¬ mation. 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 present 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.” The manager of a joint-stock bank in the midland counties, on whom we called last summer, informed us that his direc¬ tors had recently voted lOOZ. 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 * In the year 1850 a Literary Association was formed by the clerks of the Bank of England. The directors assigned three rooms within the Bank for a Library, a Keading-room, and a Lecture-room, and gave £500 towards the funds- Several of the directors individually presented also handsome donations of both money and books. VOT>. I. Q 226 A Practical Treatise 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 perception, and that promptness of decision, and that firmness of purpose, which are essentially necessary to those who hold important and responsible offices. Young men who are backward in this respect should be entrusted at first with some inferior matters, with permission to act ac¬ cording to their discretion. If they act rightly, they should be commended; if otherwise, they should not be censured, but instructed. A fear of incurring 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 ex¬ tend 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 wi’ong, and never commending 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 physi¬ cal and mental powers by attending to matters which could be managed equally well by men of inferior talent. After a clerk has become a manager, his education has yet to be completed. 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 read¬ ing 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 independently, and, at the same time, wisely. This habit he will acquire by time. The exercise of autho¬ rity 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 customers will have a tendency to produce promptness of judgment. There is no profession in which experience is on Banking, 227 more useful tlian in banking. But it is useful, not so much in tlie amount of knowledge that is acquired (though that is important), as in the improvement it imparts to those intel¬ lectual faculties which are called into exercise. It is by con¬ stant practice 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 manager 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 con¬ sultation 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 delinquencies of the clerks, yet there are certain acts of misconduct that must always 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 tlie mode of reproof or punishment will be regulated by the kind of offence and the character of the party. Every act of dishonesty, however trifling the amount purloined, must be followed by instant dismissal. Acts of deliberate disobedi¬ ence to orders, gross disrespect to superior officers, or acts of immorality that would bring discredit on the bank, will Q 2 228 A Practical Treatise generally be visited with the same punishment. But ex¬ treme punishment should be inflicted only in extreme cases. Mere accidental errors, though they may sometimes occasion great loss, must not be treated in the same way as those faults which arise from gross neglect, or which imply a defi¬ ciency in personal honour. It is generally a good rule, that a banker should not reprove a clerk in the presence of the other clerks. By following this rule, he can adapt his re¬ proofs to the character and position of the party; for a valu¬ able 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 viewed differ¬ ently from those that arise from bad habits. Nor will it tend to impair the discipline of the office should it be known that a good character will sometimes get a young man out of a scrape, while he who had not that good character would be punished more severely for a less important offence. An¬ other rule to be observed in administering reproof is,—in re¬ minding 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, increases, instead of diminishing, the pungency of the reproof, while it removes from the mind of the party any impression that the banker is influenced by motives of personal dislike. on Banking. 229 SECTION XII. BANKING BOOK-KEEPING. “ Although tlie business of keeping books is extremely easy when once the accounts are properly arranged, yet the adapt¬ ation of the principle of double-entry to extensive and com¬ plicated transactions, so as to receive the full benefit of the system, is a process which requires the most complete know¬ ledge, not only of the practice, but also of the science, of book¬ keeping.” “ 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.” “The study of book-keeping affords an excellent means of intellectual discipline; that is, when its principles are exhibited as well as their application. When the reasoning powers are called into exercise as well as the memory, the student who has carefully attended to the instructions, and who is the master and not the slave of rules, will experience no difficulty in unravelling or adjusting any set of accounts, however complicated or diversified.”* 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 com¬ plicated, and by those who do understand 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 pui*- pose 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-booking as pub¬ lished in the former editions of this work. * ‘ Double-Entry Elucidated,’ by B. F. Foster. 230 A Practical Treatise III. To state those Improvements of which this system has been found to be susceptible. IV. To trace the Kesemblance between Bankinf? Book- keepmg 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 handwriting, 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 consequence 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 care¬ fulness at fii’st, are the causes why so few bankers’ clerks comparatively write a good hand. But they should re¬ member, that this is a most important qualification, 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 VTite a plain hand. You impose upon your correspondents a very unnecessary 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 correspondent no very high opinion of you as a man of business.” * * ‘Lectures on the History and Principles of Ancient Commerce,’ by J. W. Gilbart. 231 on Banking. The plan of writing-masters who advertise to teach good and expeditious 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 many times in succession, such as in signing bank-notes or in accepting bills, will find that on this plan they can get through their work in much less time than if they bend their fingers with every stroke of the pen. The young clerk should also be taught to make his figures clear and plain, so that a 2 cannot be mistaken for a 3, nor a 3 for a 5. He should also take care that the tail of his 7 or his 9 does not run into the line below, and thus turn a 0 into a 6, and also that the top of his 4 does not reach so high as to turn a 0 in the line above it into a 9. He should be careful, too, in putting his figures under one another, so that the units shall be under the units, the tens under the tens, the hundreds under the hundreds, and the thousands under the thousands. Otherwise, when he adds up the columns together, he will be in danger of making a ‘‘ wrong cast.” He will also learn to use both hands at the same time. In counting gold or silver 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 entered. 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 asso¬ ciation of figures will be the same; and if he has fallen 232 A Practical Treatise 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 with¬ out 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^. 10s. Qd. three hundred and fifteen pounds 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?. 13s. 4c?., instead of saying, four thousand seven hundred and eighty-five pounds seventeen shillings and four pence, he will call, forty-seven, eighty-five, thirteen, four. By proceeding in this way, and speaking quickly and yet distinctly, a column of figures may be called over and checked in a very short space of time. He will, however, take care to avoid ambiguity. Thus, if the sum be 40?. 5s. 6c?., he will not say forty, five, six, as that would mean forty-five pounds six shillings ; but he will say, in this case, iorij pounds, five, and six. In cases where the pounds consist of five figures, the two first denoting the thousands are expressed separately; thus 25,347?. 8s. 6c?. is called over twenty-five, three, forty-seven, eight, six; and six figures, say 468,379?. 8s. 6c?., is called over, four sixty-eight, three seventy-nine, eight, six. He will also be taught to balance; that is, to find the difference between two sums by addition, instead of subtrac¬ tion. Thus, if the two sums be 1,347?. 16s. 3c?. and 4,834?. 19s. 8c?. he will be apt at first to put one under the other and subtract, in this way— £4,834 19 8 1,347 16 3 Diftcrcuce . . . £3,487 3 5 233 (M Banking. But he must be taught to proceed by a mental process, and will add the difference to the smaller number, thus— £1,347 16 3 — £4,834 19 8 Diflference. . . 3,487 3 5 £4,834 19 8 He performs this operation by beginning with the pence, saying, or rather thinking, three and five make eight,” and so on. And thus the two sides of an account are made to balance ; that is, both sides are of the same amount. The principle of balancing pervades the whole system of book-keeping. For example, we know that if to the amount of cash in the bank last night we add the amount received to-day, and deduct the amount paid to-day, the renjainder will show the amount on hand to-night; and a novice would very naturally put it down in this form— £ Cash ou hand last night .... 100,000 Eeceived to-day. 60,000 160,000 Paid to-day . .. 80,000 Cash on hand to-night..... £80,000 But an accountant would arrange these four items in such a way h,s to form a balance, thus— Cash paid away to-day Cash on hand to-night. £ 80,000 80,000 £ Cash on hand last night . 100,000 Cash received to-day . . 60,000 £160,000 Balance . £160,000 In keeping the Progressive Ledger, the principle of ba¬ lancing is of constant occurrence. The ledger-keeper brings out a new balance every time he turns to an account. But he never deducts—always adds. And if he post several articles at the same time, the method is the same, thus— If the credit balance is.£1214 3 7 And he posts the following sums to the deWt of the account . . £141 2 4 8 7 6 49 3 11 305 4 2 - £710 5 8 234 A Practical Treatise lie ivill add up these items, and mentally add a sum that will make the whole equal to 1,214^. 3s. Id., bringing out this sum as a new balance, and placing it under the former one as he goes on. Thus he will say, or rather think,—4 and 6 are 10, and 11 are 21, and 2 are 23, and (here he must supply the figui'e) 8 are 31 = 7 and carry 2 and he puts down the 8 in the pence division of the balance column ; and goes on in the same way to the shillings, and afterwards to the pounds. When he has placed this sum, 710?. bs. 8d., he adds up the whole, including this sum, in order to check the operation, and to be sure that he is right. He will then acquire a knowdedge of the names and func¬ tions of the different books, and of the terms and phraseology used in book-keeping. The same book is sometimes called by different names in different banks, and different terms are employed to describe the same operations. But every clerk should use the language of the office in which he is placed. He should call every book by its proper name, and employ the phrases which are used by others. For instance, if the word “ money ” is used to denote coin, he must always use it in that sense; and not say “ money ” when he means bank-notes. It will be of great advantage to a sensible youngster, if one of the senior clerks should take the trouble to give him a general notion of the system of book-keeping, and show him the connexion that exists between the books that he keeps and the other books of the office. IT. We shall now describe the system of Banking Book¬ keeping, as published in the former editions of this work. Every person, on opening an account with a London banking-house, enters his name in a book called the Signa¬ ture-Book, and this book is referred to whenever a di'aft is presented having a doubtful signature. The person is supplied free of cost—stamps excepted—with *a book of printed drafts and a cash-book, called in some houses a Pass- Book, in which is entered an account of his debts and credits, as often as he thinks proper to leave it for that purpose. London bankers do not usually give receipts for money 235 on Banking. paid into their hands, but they enter the amount into the customer’s book. A person paying money on account of a country bank, will sometimes require a receipt, and he is then given what is called a shop-receipt, in the following form:— London, May 1, 18 . Received of [the country hanh'] the sum of one thousand pounds. To account for on demand. For Hope, Rich, and Co. £1000 A Cashier. The name of the party paying the money is not inserted in the receipt, as that would require a stamp. The payment of a draft, or a bill, is always made either in Bank of England notes, or sovereigns, as the party receiving it may desire. The London bankers never re-issue any country notes or bills of exchange, that may come into their hands. When a cheque is paid, it is cancelled by drawing the pen four times in different directions across the name of the drawer. In Scotland a paid note or cheque is said to be ‘‘ retired.'' It is retired or withdrawn from circulation. Before explaining the banking system of book-keeping, I will define a few terms which are often used in connexion with the subject. By the word bill, is always meant a bill of exchange not yet due. The word cash denotes the various' items included in a credit or cash entry, and may denote due biUs, cheques, bank notes, country notes, or coin. The terms cheque and draft are used synonymously, and denote an order on a banker, payable on demand. The word draft is never used in London to denote a bill of exchange, though this use of the term is very common in the country. Both bills and drafts are often called articles ; and if they are cash, they are styled cash articles. An addressed hill is a bill made payable at a banking-house. A discounted bill is usually called a discount. By money is always meant coin. To post an article is to place or enter it in the ledger. One book is said to mark against another when the same entry is made in both 236 A Practical Treatise books. One book is checked hy another, when any error in one book would be detected by some operation in another. To check a book, or an account, is to examine it, and prove it correct, or make it so. To cast, or cast up, means to add together. The balance of an account is the difference between the credit and the debit side. An account is said to balance when the credit and the debit side are of the same amount. To balance an account is to enter the balance, and to add up both sides, and then to bring down the balance as a new amount. The credit side of an account, or that on which the cash received is placed to the credit of a customer, is the right-hand side as you face tlie ledger ; the debit side is the left-hand side. In London, the establishments of bankers are usually called banking-houses, not banks. A person who has an account at a banking-house, is said to keep a banker. I shall now describe the various books in the order of the different departments to which they belong. I.— The Cash Department, The principal books in this department are the following:— 1. Two Waste-Books. —One is called the Keceived-Waste- Book, and the other the Paid-Waste-Book. In the former is entered an account of all the cash received, and in the latter is entered an account of all the cheques and bills paid. /The Keceived-Waste-Book is ruled with a double cash column on the right-hand side of the page. In making an entry into this book, you will proceed as follows:—First, enter the name of the party who lodges the money; then enter it in the first cash column the particulars of which the credit consists, specifying each particular in the space at the left- hand. In receiving Bank of England notes, the number and date of each note must be mentioned; but if the notes are numerous, make them up in a parcel, and write on the outside the total amount, and the name of the party of whom they were received. Call this parcel Sundries ” in your entry. These parcels of sundries will be marked, and sent to the Bank of England for other notes on the following day. 237 on Bankmg, Cheques on your own bank are to be entered by the name of the drawer and tlie amount. Country notes are to be entered by the name of the London banker at whose house they are made payable. These are distinguished from cheques upon bankers, by stating short the number and denomination of the notes—thus, ^ f. All gold and silver are to be called money. After entering all the particulars of a credit, add them together, and carry out the amount into the farther cash column. At the close of the day add up this outer column, and see that the total agrees with the amount in the Day-Book. If a customer brings his book with him when he lodges cash, the cashier enters the credit, and returns the book to him, unless it be left at the bank for the purpose of having the debit side also written up. In receiving money for a deposit receipt, the entry is made in the same way as when the money is placed to a current account; but the words Deposit Eeceipt, or the letters D. K., are written against the name of the depositor. In the Paid-Waste-Book is entered an account of all the bills and cheques paid by the bank. This book is ruled on each page with a cash column on the right hand, and another on the left hand, leaving a space between. When a cheque is paid, the amount is placed in the left-hand cash column— then the name *of the drawer in the open space—and in the right-hand cash column are entered the particulars of the payment. Bank of England notes are entered by their number. It is not necessary to enter the date, as that can be found if necessary either in the Cash-Book of the preceding evening, or in the Keceived-Waste-Book, or the Lists of the same day. When a deposit receipt is paid, the same order is observed, but the letters D. E. are added. All gold, silver, and copper are called money. At the close of the day, all the payments are added together, and should agree with the amount in the Day-Book. Each cashier has a Deceived-Waste-Book, a Paid-Waste- Book, and a IMoney-Book. 238 A Practical Treatise 2. Money-Book. —This is a small book ruled with a cash column on the right-hand side of each page, and it contains an account of all the coin, that is, the gold, silver, and copper in the bank. Each cashier will enter in his own Money- Book the money he receives and pays in the course of the day. On the left-hand page of the book he will copy from his Paid-Waste-Book the various sums of money he has paid, and on the right-hand page he will copy from his Beceived- Waste-Book the various sums of money he has received. In each case he will enter against the respective sums the totals in which they are included. Thus, if in paying a cheque of 175?. 2s. Qd., he pay 5-2-6 money, he will enter it thus — ‘‘£175 2. 6. £5-2-6.” The money is counted up at night, and must agree with the balance of the Money-Book; and this balance is then entered in the Cash-Book. 3. Cash-Book.— In this book is entered every night a specification of all the cash in the bank. The items will consist chiefly of Bank of England notes, parcels of sundries, country notes, cheques on other banks, and the balance of the money. The Bank of England notes are entered by their number, date, and amount. The parcels of Bank of England notes, called sundiies, are entered by the word “ Sundries,” then the name of the parties of whom they were received, and the amounts ; country notes by the name of the country bank, and the London agent at whose house they are made payable; cheques on other banks by the name of the drawer of the cheque—the name of the banker, and the amount. In this book generally the cash articles are more fully described than in the Keceived-Waste-Book. In some banking-houses the Cash-Book is called the Stock-Book, and in others the Make-up-Book. 4. Day-Book. —This book is ruled with a double cash column at the right-hand side of each page. The accountant enters in the Day-Book an account of all cash paid and received during the day, placing each transaction under the class of operations or accounts to which it belongs. On the left-hand page of the book he enters the cash which is paid, and, on tlie right-hand side, the cash wliich is received. He 289 on Banking. commences by writing the day of the week, and of the month: then on the left-hand side he writes a heading, “ Current Accounts.” Under this head he enters all the cheques paid, copying from the cheques the name of the drawer, and the amount, which is placed in the first cash column. The sum of all the cheques is brought forward into the second cash column. The second heading is “ Deposit Receipts under which head the individual receipts paid are entered, mentioning the number, the name of the de¬ positor, and the sum; and bringing out the total amount, as before, into the second cash column. The accountant may, if he please, make these headings in the morning, leaving such a space for the transactions under each head, as his experience may show him to be necessary. Thus, he may keep up his Day-Book throughout the day, and merely have to add it up and balance it -when the bank closes. The other headings may be, ‘‘ Bills Discounted this day,” “ Interest paid on Deposit Receipts,” Bank Premises,” Incidental Expenses,” ‘‘ Branch Accounts,” &c. &c., answer¬ ing to the accounts in the General-Ledger. On the right-hand page, or credit side of the Day-Book, the cash received is entered under corresponding headings, as “ Current Accounts,” “ Deposit Receipts,” “ Bills Dis¬ counted PAID THIS DAY,” &c. &c. The entries under the heads of Current Accounts, and Deposit Receipts, are copied from the Received-Waste-Books: the entry expresses only the name and the amount. After all the entries have been made, add up the debit and the credit sides. To the credit side add the amount of the Cash-Book on the preceding evening; to the debit side add the amount of the Cash-Book on the same evening; and, if tlie totals agree, the ‘‘ bank is right,” that is, the transactions of the day have been correctly entered; but if not, then the bank is wrong, and the error must be discovered by “ marking off ” the various books. In large establishments the Day-Book is divided into two books ; the debit side forming one book, and the credit side the other book. One is called the Paid-Day-Bookand 240 A Practical Treatise the other, the “ Keceivecl-Day-Book.” The advantage of this division is, that two persons can be employed at the Day- Book at the same time. In some banks the Day-Book has three cash columns, the third being used for transfer entries. These are entries in which no cash is actually paid or re¬ ceived by the bank; but an amount is transferred from one account to another. In other banks, all the transfers are passed through the Received-Waste-Book. By some London houses the Day-Book is called the Cash-Book, and its two divisions are called the “ Received-Cash-Book ” and the “ Paid-Cash-Book.” 5. Current-Account-Ledgek. —In this book every cus¬ tomer has a separate account. The suras 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 marked 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 “ Cash,” 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 accepter 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 is the debit column; the second is the credit column; and the third is the column on Banking. 241 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 account, 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 Ledger 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 stationary, 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 depositors are placed in alphabetical order, from the beginning of the first Ledger to the end of the last. 6. Deposit-Keceipt-Book. —Deposit Eeceipts are receipts granted for sums of money that are likely to remain a con¬ siderable time, and upon which interest is 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 withdrawn, the receipt itself must be produced at the bank, and delivered up. The Deposit-Keceipt-Book is not kept ledger-wise ; that is, each person 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, profes¬ sion, 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. • II .—The Bill Department. Bills are divided into two classes—bills deposited, and bills discounted. Bills deposited are bills lodged in the bank for collection, to be placed, when due, to the credit of the de¬ positors. Bills discounted are those for which the money has been advanced, and which are, therefore, the property of the VOL. I. n 242 A Practical Treatise bank. These two classes of bills are entered in separate sets of books; but, as the books are kept in nearly the same manner, I shall describe them together. 1. Bill-Register. | 'bhese books are kept, as the Discount-Register./ word register seems to impl}^, 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 discounted, 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 entered 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 ac- Discount-Ledger. fcount is opened 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 refer¬ ence 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 addition to this, some banks place in the Discount-Ledger an account of all bills they may have dis¬ counted, 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 oPthe 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 Accepterand the three on the right-hand will be headed, “ Where last Indorser.” on Banking. 243 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 of his engage¬ ments to the bank, whether arising from bills that have been discounted for himself, or bills to which he is only the accepter. 3. Bill-Journal. ) In these journals the bills are Discount-Journal, i entered under the respective days on which they fall due. For this purpose the day of the week, and of the month, is placed at the top of each page. This book may be made to last exactly a year, by having headings for every day, from the 1st of January to the 31st December, omitting Sundays. The entry includes the register- number, name of depositor, or for whom it was discounted, accepter, and amount. The Discount-Journal has three cash columns; one for the amount of each bill, another for 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 is 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’ accounts 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 tlie unpaid bills; and, in that case, the unpaid bills are returned on the following day to the depositor, without being passed through his cash account. This is sometimes called being “ entered short.” Some banks make 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 R 2 244 A Practical Treatise 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 Inst. Each List takes its name -from the walk to which it belongs; as the East List, the West 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 tlie 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 is, he places against it an account of the cash 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 Unpaid-List are entered all the bills not paid when presented for payment. In the course of that day or the following these bills are “answered,” either by being paid, or by being passed to the debit of a customer’s account, or by being transferred to the Past-Due-Bill-Book. In some banks the Unpaid-List is called the “ Take-up-Book.” Cheques upon other banks are entered in the Lists in the same way as bills,' unless the bank sends a clerk to the Clearing-house, and then they are entered in the “ 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 Deceived-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 account 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-Keceipt- 245 on Banking, Book, and afterwards in the Keceipt-W^aste-Book and Day- Book. When a deposit receipt is paid, it must be discharged in the Deposit-Keceipt-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 dis¬ counted each day are entered individually in the Discount- Kegister, and the total amount copied into the Day-Book. The bills are also entered individually in the respective accounts 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. When a bill is deposited, it is entered in the Bill-Kegister, 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 account is debited on the following day, and the bill is returned to the depositor. 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 accountant, or under his superin¬ tendence. 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 usually 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 Curreu t-Account-Ledger. 246 A Practical Treatise 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 delivered in the morning by the post¬ man, one clerk takes them and enters in the Waste-Book the cash enclosed in the letter to the credit of the respective parties. Another clerk takes the letters and enters the hills in the Country-Bill-Register, the Bill-Ledger, and the Bill- Journal. The letters are then handed to a third clerk, who copies off into a book all the payments, which are to be made immediately in cash. This book is usually called the Draft- Book, as the party receiving the money signs a draft for the amount, which is as good as signing a receipt. If the pay¬ ment is to be made to a banker, he receives notice in a printed form, called a memorandum; but if the payment is ordered to be made to a private individual, he must call for it, and claim the exact amount. The following is the form sent to a banking-liouse. The right-hand side is filled up by the house to whom it is sent, and the memorandum is paid through the clearing. London, December 1, 18 . Messrs. Steady & Co. Receive of [the country bank\ per Messrs. Hope, Rich & Co. the sum of £100. On account of [E. F. Esq.~\ A fourth clerk now takes the letters, and enters all the advices (that is, bills advised to be paid when due) in the Advice-Book and in the Advice-Journal. The corresponding clerk who answers the letters usually manages 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 anything is wrong he is informed of it. London, December 1, 18 . Messrs. Hope, Rich cfc Co. Pay E. F. Esq. or hearer, the sum of one hundred ptounds, on account of [the country hauF]. For Messrs. Steady & Co. £100. A Clerk. 247 on Banking. Bankers’ letters are usually short and plain, comprising only two or three lines. The following example includes all the ordinary topics. Messrs. Hope, Eich & Co. Bankers, London. Country Town, May 1, 18 . Gentlemen, —Enclosed we remit you sixteen bills, value 1,750?. and cash 250?. making together 2,000?. to our credit; and we subjoin a list of payments and advices, to be made to our debit. We will thank you to purchase 10,000?. new fours, in the name of James Wealthy, gentle¬ man, of Stately House, near Prince Town; and forward us a power of attorney for sale, and dividends of 200?. Consols, now standmg in the name of Susan Tluifty, spinster, of this place. Please inform us of the respectability of Messrs. John Careful & Co. of Southwark—they bank at Messrs. Steady & Co. Lombard Street. The bill you sent us to present here for payment has been paid, and we credit you 50?. the amount. We herewith send you the signature of our relative, Mr. John Keen, who is going to London, and whose drafts to the extent of 3,000?. we wish you to honour to our debit. On Mr. Keen’s return, which will be in about a week or ten days, he will bring with him our paid notes. We are. Gentlemen, Your obedient Servants, Keen, Busy & Co. [eeply.] Messrs. Keen, Busy, & Co. Bankers, Country Town. London, May 2, 18 . Gentlemen, —We have received your favour of yesterday’s date, enclosing sundries, value 2,000?., which we have passed to your credit, and note your lists of payments and advices. We also credit you 1,476?. 16s. 6'/. per Messrs. Good & Co. on account of John Green. We have inquired of Messrs. Steady & Co. as to the respectabihty of Messrs. John Careful & Co. and are informed they are highly respectable. We now enclose 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 1?. Is. 6d; also a dishonoured bill on Badluck, noted 100?. Is. 6c?. 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 enclose another on White, 120?. which we will thank you to get accepted and return. We have opened a credit in favour of Mr. John Keen, for 3,000?. and will forward your paid notes by him as requested. We are. Gentlemen, Yom* obedient Servants, Hope, Eich & Co. 248 A Practical Treatise Those London bankers who act as agents to banks, or to other parties in the country, will have occasion for the follow¬ ing 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 dehit side is posted from the vouchers themselves, and, like the debit side of the Town- Ledger, will maiL against the Paid-Day-Book and the Clearing-in-Book.” 1. A Country-Ledger. 2. Country-Bill-Iiegister. 3. Country-Discount-Begister. 4. Country-Bill-Ledger. 5. Country-Discount-Ledger. 6. Country-Bill-Journal, 7. Country-Discount-Journal. 8. Advice-Book.—-In tliis 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 granted by a country bank in favour 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 249 on Banking, who takes the bill for acceptance enters his initials when he brings it back; in the second column are entered the initials of another clerk to whom the bills when brought in from acceptance ” are delivered. Though this book is connected witii the country department, it is usually kept in the town office. 12. Stock-Book.—London bankers have usually powers of attorney from their correspondents in the country, authorizing them to receive dividends on the Government funds. All these are entered in a book called the Stock-Book. The book is divided into several parts for the different kinds of stock, as 3 per cent. Consols, 3 per cent. Beduced, &c. &c. In each division are entered the powers of attorney held by the bank. The entry includes date of the powers, names of the attorneys, names of the holders of the stock, and the amount. These entries should be made a 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 accounts, and a monthly account current. The cash account is a copy of the London banker’s ledger. But as the London banker does not consider as cash anything which may not be immediately turned into Bank of England notes, the cash account does not exhibit a statement of the undue bills which the country banker may have remitted, nor of the biUs 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 re¬ mittance, whether it consists of bills or cash. These are followed by entries of “ 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 ‘‘ advicesthat is, of bills advised to be paid, and also any “ extra ” payments of “ drafts ” to persons in London. Then the account is balanced. 250 A Practical Treatise and we have an easy check by which any error that may have crept into either the cash account 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 Departraeni, Those banks that issue notes wiU have occasion for A Note-Registek, in which the denomination, number, and date of the notes will be entered when prepared for circulation. The total amount 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 are 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 every morning, and debit it for the notes on hand every night: the balance will show the amount of notes in circula¬ tion. There should also be a book for the “ Register of Cancelled Notes,” in order to keep an account of those notes which, having become unfit for further use, have been can¬ celled 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 collec¬ tion to agents, where the branch does not remit all its bills 251 on Banking to tbe head-office, but direct to agents in other places in order to be collected. Every country banker has also similar Bill-Eegisters for Bills payable in London,” “ Bills payable at Bristol, Manchester, &c.,” as the case may be; and of course corresponding 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 paid, 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 Saturday night the totals and balances of these accounts should be taken off on a balance-sheet. When all the debits are added together, and all the credits are added together, the two sides will agree ; that is, they will be of the same amount. These balance-sheets may be printed and bound together in a book, to be called “ the General-Balance-Book.” I cannot better explain the General-Ledger than by giving the form of the weekly balance-sheet, with the names of those accounts which most banks have occasion to introduce. I have distributed these accounts into five classes:—I. Lodg¬ ments. 2. Investments. 3. Expenditure. 4. Cash Account, with Branches; and 5. Proprietors’ Accounts. Each bank, however, will open such accounts as are adapted to its transactions. Whatever books the business may render necessary will require to have corresponding acoounts. The General-Ledger contains tlie summaries of all the other books. Thus, the account called “ Current-Accounts,” con¬ tains the summary of the Current-Account-Ledger. The 252 A Practical Treatise account called ‘‘ Deposit-Keceipts,” is a summary of the Deposit-Keceipt-Book. The account called “ Bills discounted,” is a summary of the Discount-Kegister and the Discount- Journal. In tins way every book in the office has a corre¬ sponding summary in the General-Ledger. Hence, this book is a check upon all the other books; and by means of these summaries, the partners or directors of a bank can see at once the actual state of their affairs, and can trace the progress or decline of different branches of their business. Every branch of a Joint-Stock Bank has a General- Balance-Book,” and sends to the head-office every week a balance-sheet of its affairs as they stood on the previous Saturday night. At the head-office these various balance- sheets are consolidated, and form a general statement of the affairs of the whole bank. This statement comprises the balance of the General-Ledger at the head-office, and that of each branch. These statements are printed and bound toge¬ ther beforehand, so as to form a book—it is called the State¬ ment-Book, and is laid before the directors at their weekly meetings. The balances of the General-Ledger are given in the form on the opposite page (253), and those of the State¬ ment-Book in the form at page 261. It will be observed, that the accounts introduced into the balance-sheet on p. 253 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 introduced cash columns for the AMOUNTS as weU* 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 Lodg¬ ments, are all credit accounts; that is, the balance is on the credit side. on Banking 253 THE_BANKING COMPANY. Amounts and Balances of the Genekal-Ledger on Amounts. Dr. Balances. Dr. Titles of Accounts. Ledger Folio. Balances. Cr. Amounts. Cr. I. Lodgments. London Current Accounts. Country ditto. Deposit Receipts. Bills Deposited (in London). Ditto (from the Country). Notes in Circulation. Credits on Agents. 11. Investments. Bills Discounted (in London). Ditto (from the Country). Past-Due Bills. Government Stock. East India Bonds. Exchequer Bills. Loans to Customers. Ditto to Brokers. Interest Account. III. Expenditure. Bank Premises. Rent. Taxes. Salaries. Stationery. Incidental Expenses. Law Expenses. IV. Cash Account, with Branches. Branch A. Branch B. Branch C. Branch D. V. Proprietors’ Accounts. Paid-np Capital. Preliminary Expenses. Dividend Account. Unclaimed Dividends. Surplus Fund. Profit and Loss. Fund for Bad Debts. General Account of Cash. - 254 A Practical Treatise Current Accounts are those whicli are usually kept by the London bankers, and are called by the Bank of England, Drawing Accounts.” Deposit Receipts are more perma¬ nent lodgments, upon which the joint-stock banks allow interest. The account ‘‘Bills Deposited,” not being a cash account, might be omitted without deranging the balance of the General-Ledgei’. 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 General-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 de¬ posited ” . 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 deposited bills that are payable in the place where the bank is established, are usually distinguished from the dis¬ counted bills; one account being called “Local Bills Dis¬ counted,” and the other “ Local Bills Deposited.” Notes in Circulation.— When the notes are made pay¬ able 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 account. When the bill is due, or the credit paid, it is placed to the debit of this account, and to tlie credit of the agent’s cash account. The business of some banks requires a subdivision of their credits, as 255 on Banking, “ 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. 2. Investments. —The accounts belonging to this class are all debit accounts; that is, the balance (if any) is always on the debit side. In the foregoing balance-sheet it is presumed that all the bills are payable in London, as the London bankers do not discount bills payable elsewhere. The division into two accounts is merely to show the comparative extent of the town and the country business. The first account includes the bills discounted for parties resident in London, and the second includes the bills discounted for parties resident in the country. Where the bills are payable at different places, they are referred, as I have already intimated, to different accounts, as London Bills,” ‘‘ Bristol Bills,” “ Manchester Bills,” &c. It is not usual, in these cases, to distinguisli between the bills discounted and the bills deposited, but to place them together on the same account; for instance, the account ‘‘ London Bills ” would include all bills payable in London, whether discounted or deposited. If thought proper, however, they may be easily divided into separate accounts, as “ London Bills Discounted,” and “ London Bills Deposited.” Past-due-Bills. —When a discounted bill is not paid, it is transferred to the debit of this account. Bills deposited ” never pass into this account, but if unpaid, are returned to the parties by whom they were deposited. When the bank purchases ‘‘ Government Stock,” ‘‘ Exche¬ quer Bills,” India Bonds,” &c. the purchase money is passed to the debit of an account 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 25G A Practical Treatise loan granted to a customer, or to any other party, on secu¬ rity. When a customer wants a temporary advance, the usual way, in London banks, 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 charged upon the full amount of the loan. When the loan is repaid, this account is credited. 3. Expendituee.— The accounts under this head require little explanation. ‘‘ Bank Premises ” is debited for the expense of altering, painting, &c., the buildings and offices connected with the bank. 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 debit of profit and loss account. 4. Cash Account with Branches. —The title of this class of accounts is sufficiently explanatory. I will only observe, that in some banks 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. But, in other banks, each branch passes all its transactions through its cash account with the head^Dffice. It debits the head-office for whatever it 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 agent. . 5. Proprietors’ Accounts. —This class of accounts refers to the internal operations of the bank. Paid-up Capital.— If the capital has been paid up at different times, this account may be divided into ‘‘First Instalment,” “ Second Instalment,” “ 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 divided among the partners or proprietors, the surplus 257 on Banking, is transferred to an account, 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 akd 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 Account may be subdivided into several accounts, as Interest Keceived on Bills Discounted,” Commission Keceived,” “Interest Paid on Deposit Keceipts,” “Charge for Agency,” &c. &c. When it is not thus divided, a com¬ plete 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 account will be always on the debit side, and will be equal to the difference 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,* 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 then* business every night, with a view of correcting any errors that may have occuiTed during * See page 240. VOL. I. s 258 A Practical Treatise 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 trial, we find this is not the case, there must be some error. Suppose, for instance, the Cash-Book last night amounted to 100,000?., and we have received 40,000?. and paid 50,000?. to-day, then will the Cash-Book to-night amount to 90,000?. The trial stands thus :— Cash-Book last night. . £100,000 Received-Day-Book . . 40,000 £140,000 Paid-Day-Book . . . £50,000 Cash-Book to-night . . 90,000 £140,000 The daily balance, therefore, is nothing more than the balance of the Day-Book; and the only books employed are tlie Day-Book and the Cash-Book. But as these books, when finally closed, include the amount of several other books, the trial is usually made (for the purpose of avoiding alterations) on a half-sheet of paper, called the trial paper, previous to those entries being made, and then the amounts of these several books are stated separately, in the following manner:— BANKING HOUSE. Cr. Dr. Amount of Cash-Book last night. [This is usually called the Rest] Ditto of Received-Day- Book . Ditto of Bill-Journal . Ditto of Discoimt-Journal. Amount of Paid-Day-Book . Ditto of Clearing-in-Book * Ditto of Balance* of the Clearing .... Do. of Cash-Book to-night Ditto of Balance of Money- Book . Ditto of Discount-Register , The balance of the clearing f is always to the credit of the house ; for, if the clearing “ takes out,” then the bank notes * When a bank does not “ clear ” these items are of course omitted, f For an account of the books in the clearing department, see the section on London Bankers. 259 on Banking. 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 side. When the clearing is finally closed, the notes forming this balance are entered in continuation of the clearing-in, and subsequently in the Cash-Book. The notes entered in the clearing-out are, of course, not entered in the Cash-Book. Weekly Balances. —The daily balance checks the Waste-Books, the Discount-Kegister, the Journals, the Day- Books, the Lists, and the Money-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 book of all. The Ledger is therefore “marked off” every morning against the Day-Book, the Bill-Journal, and tlie Clearing-in- Book: but this is not a sufficient check. Hence the balances of all the accounts in the Current-Account-Ledger should be taken off weekly in a book called the Current-Account- Balance-Book, and added together, and the amount made to agree with the balance of current accounts ” in the General- Ledger. This is usually done by the London bankers quar¬ terly or half-yearly. When the Ledger is kept on the pro¬ gressive plan, it may be done weekly without much trouble. The “ Current-Account-Balance-Book ” should be ruled so that the names of the parties having accounts may be placed under one another at the left-hand, and all the rest of the left-hand page, and the whole of the right-hand page, divided into double cash columns: 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 s 2 260 A Practical Treatise balance. The usual days for balancing are the last days of June and December. Some banks, however, 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 following operations are passed through the books:— 1. The current accounts 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 calculated, 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 real¬ ized 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 shomng 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.—4. A list of all the balances of the current accounts.—5. A list of all the out¬ standing deposit receipts, and the interest due upon each.— 6. A list of all discounted bills current, i.e., bills not yet due. —7. A list of all deposited bills current.—8. A list of all other securities, distinguishing those that belong to the bank from those that are lodged by its customers. The debtor and creditor balance-sheet will contain the same amounts as the balance-sheet of the General-Ledger, (see page 253,) but differently arranged. They may be dis¬ posed according to the following form:— an Banking 2G1 Statement of the Affairs of the Bank, on Dr. THE_BANKING COMPANY. Cr. Due to the Public on Current Accounts. Head Office, Town . . Ditto, Country . . . Branch A. Branch B. Branch C. Total Current Accounts Deposit Receipts. Head Office. Branch A. Branch B. Branch C. Total Deposit Receipts Notes in Circulation . Credits on Agents . . Total Lodgments . . . Interest Account. Head Office. Branch A. Branch B. Bi-anch C. Total Amount of In-1 terest . » Fund for Bad Debts. Head Office. Branch A. Branch B. Branch C. ..... . Total Amount of) Fund for Bad Debts 5 Paid-up Capital . . Sundry Accounts. Forfeited Shares . . . Dividends. Unclaimed ditto . . . Surplus Fund. Profit and Loss . . . Total Sundry Accounts Total .... Due to the Bank ON Overdrawn Ac¬ counts. Head Office, Town . . Ditto, Country . . . Brandi A. Branch B. Branch C. Total Overdrawn Ac-) counts ...... j" Bills Discounted. Head Office, Town . . Ditto, Country . . . Branch A. Branch B. Branch C. Total Amount of Bills ) Discounted . . . . j Loans. Head Office. Branch A. Branch B. Branch C. Total Amount of Loans Investments. Government Stock . . Excliequer Bills . . . • India Bonds. Otlier Investments . . Total Investments . . Total available Assets . Expenditure. Head Office. Branch A. Branch B. Branch C. Total Expenditure . . 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. General Account OF Cash. Head Office. Branch A. Branch C. Branch C. Total Amount of Cash. Total 262 A Practical Treatise The abstract of the profit and loss account may be made out in the following form:— Abstract of Profit and Loss Account, from Jan. 1, to Dec. 31. Dr. Cr. To Bank Premises . . . Furniture. Rent. Salaries. Stationery. Incidental Expenses . Total Expenses .... Loss on bad Bills, &c. Balance in favour of the Bank. By Interest on Bills dis¬ counted . By Interest on Loans . . By Commission on Cur¬ rent Accounts. . . . By Profit on Exchequer Bills, &c. At the end of the year the final balance of the profit and loss account is transferred to other accounts according to the purposes to which it is to be applied. If intended to be held as a “ surplus fund,” it is transferred to that account. If intended to be divided among the proprietors, it is trans¬ ferred to a “dividend account,” which is raised for that purpose. If the balance of the profit and loss account should be .against the bank, then it must remain “ on the vn’ong side,” until further profits shall turn the balance the other way. Besides the books connected with the business of banking, every joint-stock bank mil require, 1. A Shaeeholders’-Kegistek. —In this book the names of the shareholders are entered chronologically in the order in which they become shareholders. The entry includes the date, the name, residence, number of shares, and sum paid. 2. Transfer-Begistee.— In this book are entered the transfer of shares from one proprietor to another. The entry includes date of transfer, from whom transferred, residence, ledger-folio, to whom transferred, residence, purchase-money, transfer stamp. 263 on Banking, 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. After the sale the broker gives notice to the directors of the bank in the following form:— London, the day of 18 To the Directors of Banking Company. Gentlemen, Please to prepare the necessary documents for transferring Shares, fi'om the name of of to of the consideration for which Shares is £ of Broker, The deed of transfer is then made out according to a printed form prepared by the bank. This agreement is liable to a stamp duty, varying according to the amount of the purchase-money. When shares are transferred for a nominal consideration, say five or ten shillings, the stamp duty is thirty shillings. The following is the scale of stamp duties upon the transfer of shares in joint-stock banks:— Consideration not exceeding £ s. d. £25 0 2 6 60 . 0 5 0 75 0 7 6 100.0 10 0 125.0 12 6 150.0 15 0 175.0 17 6 200 . 1 0 0 225 1 2 6 250 1 5 0 275 1 7 6 300 1 10 0 350 1 15 0 264 A Practical Treatise £ s. d. £400 . .2 0 0 450 . .2 5 0 500 . .2 10 0 550 . .2 15 0 600 . .3 0 0 Above £600: then for every £100 or fractional part .... 10s. Transfers for Nominal Consideration (55 Geo. III. cap. 184.). 30s. Most Joint-Stock Banks charge fees upon transfers. Some charge a fee of one shilling per share upon a transfer of five shares or above, and two shillings and sixpence per share for any number less than five shares. ^Yhere there is no pecu¬ niary consideration there is usually a fixed payment for each transfer. 3. Peopeietors’-Ledgee. —In this ledger each proprietor has an account open, in the same way as in a cash-ledger. He is credited for the number of shares ; and an entry is made of the different instalments he may pay. When he sells or transfers his shares, he is debited the shares, and they are placed to the credit of the party who may have purchased them. The entry includes the date, number of register, calls and transfers, number of shares, and amount. III. We shall now consider those Improvements of which the above system is capable, so as to render it more efficient in large establishments. As a bank increases its business, it becomes of importance to improve its system of book-keeping, and to adopt means of increasing the efficiency of its clerks. A large establishment can generally be conducted with a less 'pro]portionate number of hands than a small one. It admits of a more extensive application of the principle of a division of labour. In a small bank, one clerk may keep two or three books of various kinds, or perhaps act as both cashier and accountant. But in a large bank, each clerk is in general kept wholly to one employment. The effects of this separation of occupations is the same in banks as in manufactories; and the description of these effects given by Adam Smith will equally apply to both cases. 265 on Banking. The gi’eat increase in the qnantity of work which, in consequence of the division of labour, the same number of people are capable of per¬ forming, is owing to three different circumstances: first, to the increase of dexterity in every particular workman; secondly, to the saving of time which is commonly lost in passing from one species of work to another; and lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many.” The increase of dexterity by constant practice is very observable in 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. 232, a clerk in calling over will speak so rapidly that an unpractised ear Avill hardly be able to follow him. Mr. Babbage gives the following instance of great dexterity 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 stiff¬ ness 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 commencement as it becomes after some exercise.”! The invention of expedients for facilitating and abridging labour 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 * ‘ The Economy of Machinery and Manufactures,’ by Charles Babbage. t Ibid. 266 A Practical Treatise establishment by Mr. William Eae Smee, a son of the chief accountant. He proposed an alteration in the cheque ofiSce, 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 circulation 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 OfiSce 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 ofiSces to be made eight or nine days later than usual, the business which formerly occu¬ pied about thirty-two days being accomplished in about twenty-three.” * Similar improvements have been introduced into commer¬ cial book-keeping. The old method of journalizing and posting each transaction sepa¬ rately unnecessarily swells the accounts in the ledger with a multi¬ plicity of figures, which greatly increases the difficulty of balancing, and, to say nothing of extra labour and loss of time, the habihty to error is always in proportion to the number of entries, and vice versa. If a himdred 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 adjusting the accounts, a hundred entries must be called over and examined instead of one.”t The expedients introduced to improve any system of book¬ keeping have for their object either the saving of time directly by abbreviating the entries, or to save tiihe indirectly by new modes of preventing or detecting errors. And it may be observed, that a minute alteration, hardly worthy of being adopted in a small bank, where it would save but a few minutes a day, may be veiy properly adopted in a large establishment, where the time saved would be in proportion to the greater extent of business. Sometimes an entry may * ‘History of the Bank of England : its Times and Tmditions,’ by John Fiancis; vol. ii. p. 141. t ‘ Doubly Entry Elucidated,’ by B. F. Foster, p. 18. on Banking. 267 be shortened by omitting some of the particulars. Thus, where we have been accustomed to enter with every bill—the name of the last indorser—the drawer and his residence—the accepter and his residence—the date, term when due, and the amount—we may properly perhaps omit some of these items. Or where we have repeated the same entry in several books, we may enter it in fewer books—or perhaps make the individual entries in only one book, and enter the total amount in the others,—or, at other times, the whole form of a book may be changed, and we may by a new arrangement obtain the same results more clearly and in less time. Almost every bank will occasionally 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. We will notice a few of those amendments that have been adopted with the view of saving time and labour in some of our banking establishments. Some large banks have adopted the ‘‘ horizontal system of book-keeping,” which is in some respects an improvement on the system described in the former editions of this 'work. The chief difference is in the mode of ruling the Keceived and the Paid-Waste-Books. The Keceived-Waste-Book, instead of being ruled as de¬ scribed in p. 237, 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 the fourth. The different items of a credit entry, instead of being placed under one another, as in the former system, will be placed separately in the first three columns, and the total in the fourth column. Thus, if a sum of 543Z. 10s. Id. be received from Mr. Smith, and this sum consists of 3?. 10s. Id. in coin or money, lOOZ. in a Bank of England note, and 440/. in a cheque on Jones, Loyd, & Co., the entry will stand thus:— Money. i Bank Notes. Sundries. Name. Total. £ s. d. £ £ s. d. Smith. £ s. d. 3 10 7 100 440 0 0 Jones, Loyd & Co. 543 10 7 268 ^ A Practical Treatise Thus it is seen that the first column is for money, the second column for bank notes, and the third column for “ sundriesthat is, for all other articles ; and these three columns are added together “ liorizontally,” and the total brought out into the fourth cash column at the right hand. It will be observed, that the cashier has to add the items together, not longways, but crossways—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 column, 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, ^. e. 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 discovered forthwith. Thus the Horizontal- Eeceived-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 Keceived-Waste-Book would not be discovered till the Greneral 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, ^. e. coin. 2. Bank notes. 3. Parcels of bank notes, called sundries. 4. Country notes. 5. Cheques on clearing bankers. 6. Cheques on bankers who do not 2G9 on Banking. clear. 7. Cheques 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, e. 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 entty stands thus:— Amount of Cheque. Name and No. of Bank Note. Bank Notes. Money. £ s. d. £ £ s. d. 101 4 3 Wliite. 1473. * 100 1 4 3 The amount of the columns containing the bank notes and the money will of course be equal to the column containing the amount of the cheques. And thus this Paid-Waste-Book contains a cheque upon itself. The Horizontal-Paid-Waste-Book may have at the left hand two cash columns, one for the town and the other for the country departments, and also a separate column for the country notes; thus :— Town. Country. Countiy Notes. Name. Bank Notes Paid. Money. This prevents the necessity for having both a Town and a Country Paid-Waste-Book, while the two departments are still kept distinct. The country notes are also separated, and can be checked by themselves. When all are added together, the total of the three columns at the left must be equal in amount to the total of the two columns at the right hand. 270 A Practical Treatise The articles paid must be equal to the bank notes and money which were issued in payment. We shall now point out some of the advantages of the horizontal system of keeping the Waste-Books. First. As all the receipts and payments of money, i. e, coin, are entered individually in the Keceived and Paid- Waste-Books, and the amounts added together, it will not be necessary that these sums be copied individually into the Money-Book. The total amount only of each column is entered in the Money-Book at the close of the day’s business, and the Money-Book is balanced. Thus, all the time em¬ ployed in making the entries individually in the Money-Book is saved. Secondly. As all the credits to current accounts are added together in the Received-Waste-Book, it is not necessary they should be entered individually in the Day-Book. They can be individually posted dii’ect into the Ledger, and the total only be pntered in the Day-Book. The same remark will apply to the Paid-Waste-Book. This is another saving of time and labour. Thu'dly. Every Waste-Book, as we have already inti¬ mated, is a check upon itself. We have spoken of a Re¬ ceived-Waste-Book, and a Paid-Waste-Book, as though a bank had but one—and in small banks this is the case. But in large banks, there are seven or eight cashiers or more, each having a Received-Waste-Book and a Paid-Waste-Book for the town department, and another Received-Waste-Book and Paid-Waste-Book for the country department, with a Supple¬ mentary-Received-Waste-Book, and a Supplementary-Paid- Waste-Book, and a Money-Book besides. Now, it is a great advantage to have the means of keeping all these books free from errors during the day, and to know at night that they are all correct. If the “ Balance ” be vn'ong, the field of in¬ quiry is thus very much limited, and the time that would otherwise be employed in checking the Waste-Books is de¬ voted to the examination of the other books of the bank. Fourthly. This plan gives the means of checking sepa¬ rately those items that have a column appropriated to them. 271 on Banking. Take, for example, the column of bank notes. If we add to the amount of bank notes on hand last night the amount received to-day, and deduct the amount paid away, the re¬ mainder should be the amount on hand to-night. When this is the case the bank notes are right. In the same way we may check the money columns, the clearing columns, &c. Thus, when the trial balance is wrong, we can check these items separately, and thus more readily discover 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- Keceipt-Book, and a Supplementary-Paid-Book. These books are ruled in the same way as the other Waste-Books, and they embody entries in connexion with deposit receipts, received or paid, credits or debits to interest accounts, debits to salaries, taxes, incidental 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 account 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 hori¬ zontally—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 column 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 272 A Practical Treatise 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 hori¬ zontal 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 Best,” &c. &c Some of the Keturns pub¬ lished in the Appendix to the Parliamentary 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 dis¬ covering error^. These are— 1. The abolition of the Discount-Eegister. 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 contains 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 of the bill as is usually given in the Dis¬ count-Eegister. The Bill-Eegister is also abolished in the same way. 2. The adoption of a Chec^-Ledger facilitates the discovery of errors, and thus diminishes the time employed in searching for them. Though this book is called a Check-Ledger, it is not kept ledger-wise. It is ruled with a cash column on each side the page. In the column opposite yom’ left hand you enter, from the cheques themselves, all the cheques paid during the day. In the right-hand column you enter, from 273 on Banking. the Keceived-Waste-Books all the credits of the day. When you add up these two columns, they will of course agree with the amounts of the Paid-Waste-Book and the Keceived-Waste- Book. Thus the accuracy of the Check-Ledger is insured. Now, where the balances of the Current-Account-Ledger are checked every week, you employ the Check-Ledger to test their accuracy in this way. If to the amount of the balances of the Current-Account-Ledger last week, you add the total credits entered in the Check-Ledger during the week, and deduct the total debits entered in the Check-Ledger during the week, the remainder will show the total amount of the balances of the Current-Account-Ledger for the present week. Each Current-Account-Ledger will have a Check-Ledger, and thus each Ledger will be checked separately, so that when the total balance is wrong, it will at once be seen in which Ledger the error has occurred. Time is sometimes lost by a clerk taking up the wrong book—opening it, putting it down, and then taking up the right one. A cashier, for instance, will sometimes take up the Paid-Waste-Book instead of the Keceived-Waste-Book. To prevent this, the tw^o books may have covers of different colours—one white, the other green. Time may be lost by two clerks wanting the same book at the same time. The ledger-keeper may want to post from the Keceived-Waste- Book when the cashier is using it. To prevent this, there may be two sets of Waste-Books—one for Mondays, Wednes¬ days, and Fridays, and the other for Tuesdays, Thursdays, and Saturdays; and, to prevent mistakes, the names of the days should be written in large letters on the covers of the books. IV. We will now make a comparison between the system of Book-keeping practised by Merchants, and that practised by Bankers. The merchants have their Waste-Book, Journal, Ledger. Tlie bankers have their Waste-Book, Day-Book, Ledger. In both cases the Waste-Book is the book in which trans¬ actions are first entered. But this book is capable of sub¬ division : it contains a record of various transactions, some of VOL. I. T 274 A Practical Treatise which may be entered in separate books. Bankers have their Received, Paid, and Supplementary Waste-Books ; also their Deposit-Receipt-Book, Discount Registers, and other books- subsidiary to the Waste-Book. So merchants have their Waste-Books subdivided into various books, according to the nature cf the transactions. There is the Invoice-Book, con¬ taining 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 receive; another for bills payable, containing a list of all bills he has accepted, and which when due he will have to pay; a Cash-Book, con¬ taining 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 resemble those of the banker’s in two things :— first, they are all kept chronologically —they contain a record of the transactions in the order of time in which they occim-ed : and, secondly, all the transactions thus recorded must after¬ wards, upon the system of double entry, pass, either indi¬ vidually or in totals, through the boolv 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 js similar. But in the merchant’s Journal individual trans¬ actions may be entered, while in the banker’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— Groods Dr. to Cash; 275 on Banking. 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 :— Cnsh 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 ever}^ 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 personal accounts, and its accuracy is tested only by the periodical balancings. The banker’s Ledger, that corresponds in this respect with the merchant’s Ledger, is not the Current-Account Ledger, but the General-Ledger. This is kept by double entry. In a ledger kept by double entry, the sum of all the debit balances will be equal to the sum of all the credit balances; and the sum of all the debit amounts will be equal to the sum of all the credit amounts. When this is not the case there is an error in some of the accounts. This is the case T 2 27(i A Practical Treatise with the banker’s General-Ledger. But, as the transactions are not posted individually, but only in totals, tlie double entry does not appear on the face of the accounts. Thus, if a 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:— Bills Discounted Dr. to Current Accounts. But the bill discounted is placed to the debit of the account of Bills Discounted,” in a total of all the bills discounted on that day. And the amount 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 transactions were posted individually. So, again, if a country banker should discount a bill, and the customer ask for a draft on his agent in London, the Journal entry, on the commercial system, would stand thus:— Bills Discounted Dr. to Drafts 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,” in the total of all the drafts on London issued on that day. ft/ The accounts in a merchant’s Ledger are usually classified into Personal Accounts, Beal Accounts, and Profit and Loss Accounts. The Personal Accounts are the accounts of persons who may owe the merchant money, or to whom he may owe money. The Beal Accounts are accounts denoting property, such as cash, bills receivable, bills payable, mer¬ chandize, ship adventure, &c. The Profit and Loss Accounts are rent, commissions, expenses, and all other accounts which are ultimately transferred to the debit or the 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-Ledger. The 277 on Banking. usual accounts are those I have enumerated in page 253, and are all either Eeal Accounts or Profit and Loss Accounts. It would be quite possible (but not desirable) to introduce all tJie Personal Accounts into the banker’s General-Ledger, and thus to form the Current-Account-Ledger and the Gene¬ ral-Ledger 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 transaction individually. If John Brown drew a cheque on the bank, the Journal entry would stand thus:— John Brown Dr. to Cash. 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 272 (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 favour, or against them. 278 A Practical Treatise Tn thus comparing the commercial and tlie banking sys¬ tems 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. xVnd then their system more nearly resembles the system of those bankers 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 ex¬ ception of a column of reference 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 dh’ectly from the Daily-Books into the Ledger. In the Ledger, by single entry, strictly speaking, there ought to be only one kind of accounts; namely. Personal xlccounts, including all persons to whom a merchant becomes indebted, and all persons who become indebted to him.”* It will be seen from this account, that, in mercantile book¬ keeping by single entry, the merchant’s Ledger resembles the CiuTent-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 Cur¬ rent Accounts, 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 Deceived Waste-Books. * Wallace’s ‘ Pocket Guide to Commercial Book-Keeping.’ on Banking. 27D SECTION XIII. BANKING CALCULATIONS. When a bill is discounted, the party is credited for th^ full amount, and debited for the interest. The interest is calculated from the day on which the bill is discounted to the time it falls due. The shortest way is to make use of an interest book; but if it be done with the pen, the following rule may be useful. Multiply the amount of the bill by the number of days. To the product add one-third of itself, one- tenth of that third, and one-tenth of that tenth. From the total strike off four figures to the right for decimals. This will give the interest at 5 per cent, in pounds and decimal parts of a pound. The decimals are to be brought into shillings 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 way, if you multiply the principal by twice the rate of interest, and strike off five figures for decimals instead of four. Example .—It is required to find the interest of 500?. for ninety days at 5 and 3^ per cent. £ £ 500 principal. 500 principal. 90 number of days. 7 twice the rate of interest. l-3rd 45000 l-lOth 15000 l-lOth 1500 150 6-1650 20 3500 90 number of days. ]-3rd 315000 l-lOth 105000 MOtb 10500 1050 3-3000 12 4-31550 20 3-6000 6-31000 12 Answer — Ql. 3s. 3d. at 5 per cent. -- „ 4Z. 6s. 3d. at 3| per cent. 3-72000 It must be observed, however, that this method of calcula¬ tion is not exactly correct; it produces nearly a farthing too 280 A Practical Treatise much on every lOZ. of interest. In calculating large sums therefore, the amount of these farthings must be deducted. This mode of calculation is founded upon the rule, that whenever you have to divide by any number under 100, you may divide by 100 ; after having added to the dividend such proportion of itself as the difference between the divisor and 100 bears to the divisor, the result will be the same as though you had divided in the usual w^ay. .This rule is best explained by an example. Suppose you have to divide 2500 by 40. Now if 40 be subtracted from 100, there will remain 60. The proportion which 60 bears to 40 is 1^. If then you add to the dividend times itself, and divide by 100, you have the quotient required: thus— 2500 2500 1250 62’50 Answer, 62^. Now then, to find the interest upon any sum for one day, you may divide by 7,300, or, striking off the ciphers, by 73. The number required to make up 100 is 27. What is the proportion between 27 and 73? If you take the third of 73, a tenth of that third, and a tenth of that tenth, you have something more than 27. And if you add to 73 one-third of itself, one-tenth of that third, and one-tenth of that tenth, you will have lOO^-L, which divided by 100 will give li-o.iw As the proportion is not exact, the interest given by the above rule will always be -ro.^-o^th part too much, which is about a farthing in every lOZ. interest. In taking the interest for any number of months, it w ill be useful to remember that the interest of 11. for one month at 5 per cent, is Id. Thus the interest of 100?. for two months is twice a hundred pence, or 16s. ^d. The interest upon shillings and pence is never taken into the account. If the fraction is more than 10s. it is regarded as 1?.; and if it be less, it is not noticed. The interest for any number of months, at any rate per cent., may be found by multiplying the number of months by 281 on Banking. the rate of interest: with this sum divide 1,200. By this quotient divide the principal, and you have the interest required. Example. —What is the interest of 10,000?. at 4 per cent, for three months ? 4 multiplied by 3 gives 12—divide 1,200 by 12, and you have 100; then divide 10,000 by 100, and- you have 100?., the interest required. To find the interest of any sum of money at 6 per cent, for any number of months.* _ * Rule. —Multiply the number of pounds by the number of months, cut off the unit figure, and the remainder is the answer in shillings. The unit figure multiplied by 1^ will give the pence. Example. —What is the interest of 13,476?. 10s. 8c?. for 6 months at 6 per cent, per annum ? £ s. d. 13,476 10 8 6 20) 80,859 4 0 404 • 5 • 10 Having obtained the interest of any sum at 6 per cent., it is easy to find the interest at 1^, 2, 3, or 4 per cent, by taking 25 S interest, as the case may be. To find one year’s interest at any rate per cent. Rule. —Multiply the money lent by double the rate per cent., reject the unit figure, and you have the answer in shillings. Example. —What is the interest of 27?. 10s. for one year at 3 per cent. ? 27 10 6 double the interest. 16-5 0 12 6*0 Answer, 16s. 6d. * This and the subsequent rules may be found illustrated in Crossley’s ‘ Intel¬ lectual Calculator,’ in Fryer’s ‘ Mental Arithmetic,’ and in similar works. A Practical Treatise 282 To find the interest of any sum of money at 5 per cent, for any number of months. Rule .—Take the pounds as pence, and multiply by the months. Examf^le .—What is the interest of 1201. at 5 per cent, for 8 months ? s. 120 pence = 10 8 number of months. £4 0 0 Answer. To find the interest of any number of days at 5 per cent. Rule —^Multiply the days by one-third of the pounds, or the pounds by one-third of the days, reject the unit figure, and you have the answer in pence.—N.B. As this rule is founded on the assumption that the year consists of only 360 days, you must deduct one penny from every six shillings of interest. Exami^le .—What is the interest of 120Z. for 21 days at 5 per cent. ? £ 120 Or, 21 days 7 = 3 of 21 days. 40 = of the pounds. ] 2) 84,0 12)84,0 7 shillings. Answer. 7 shilhngs. Ansioer. There is often a difference in the amount of interest according to the method of calculation, either by months or by days. A month from the 10th of February to the 10th of March, is only 28 days ; but from the 10th of March to the 10th of April, a month is 31 days. The half year from the 1st of January to the 30th of June, is 181 days; but from the 1st of July to tiie 31st of December, the half year is 184 days. The interest of 10,000Z. for six months is 250Z.: for 181 days it is only 247Z. 18^. l\d.\ for 184 clays it is 252Z. !«. IcZ. ]Mr. Eeader has publidied a series of Time Tables, showing the number of davs from every dav in tlie vear to anv other dav in the vear. V 4 / Interest tables, calculated at anv rate of interest, mav " 4 / ' 283 on Banking, occasionally be employed to ascertain the interest on any sum at a different rate. This is done by taking that propor¬ tion of the principal, or of the time, which the given rate of interest bears to the rate of the interest tables. For example, if it be necessary to ascertain the discount on a bill of 100?. for 50 days at 4 per cent., and you have interest tables calculated at 5 per cent.; you may take either four-fifths of the time or four-fifths of the amount. For, the interest of 100?. for 40 days, or the interest of 80?. for 50 days, at 5 per cent., is equal to the interest of 100?. for 50 days at 4 per cent. When a bill is discounted, bankers charge interest on the full amount of the bill, and take it at the time. Thus, if a bill be discounted at 5 per cent., they will obtain more tlian 5 per cent, on the money actually advanced. This is allowed by law, and is not liable to be set aside on the ground of usury. Should it be necessary in other cases to allow dis¬ count or rebate, the mode of calculating it would be thus :— Example .—What is the rebate at 5 per cent, on a sum to be received a year hence ? Then, as 105 is to 100, so is 100 to the sum required. 105 : 100 : : 100 Answer, 951. 4s. 9^-^d. 100 105) 10,000 ( 95 945 550 525 25 20 105 ) 500 ( 4 420 80 12 105 ) 960 ( 9-2^ 915 15 When you have to find the interest of a large sum for one day, you may strike off two figures from the right hand, and 284 A Practical Treatise take the interest of the remainder for 100 days. Tims, if you have to find the interest of 4,786,347/. for one day, take the interest of 47,863/. for 100 days, then take the interest of 47/. for one day, and add the two sums together. The interest of 1/. for 100 days is the same as the interest of 100/.- for one day. It may be given as a general rule, that a different time and sum may be employed provided they yield the same product when multiplied together. Thus, the interest of 10,000/. for one day is the same as the interest of 1000/. for 10 days. Bankers differ in their mode of calculating the interest upon current accounts. Some have an Interest-Ledger, or cash columns ruled in the Current-Account-Ledger, in which they state the interest upon every individual item in the account. Thus, for instance, the general balance takes place the 30th of June, and the 31st of December. If a sum of money is paid in on the 1st of May, the interest is calculated on that amount from the 1st of May to the 30th of June, and is then carried to the credit of .the party’s interest account. On the other hand, if a cheque be drawn on the 1st of May, the interest is calculated and carried to the dehit of the interest account. On the 30th of June, the interest account is balanced, and the balance is carried to the debit or credit of the party’s current account. Other bankers take off the balance of the current account into a separate book (or Imve columns ruled in the ledger for bringing out the balances *) for every day, from the 1st of January to the 30th of June; add all these amounts together, and then take the interest of the total for one day. To take the interest for one day is a very easy operation. The interest of any sum for one year at 5 per cent, is one-twentieth part of the principal, and the interest for one day is the 365th part of the interest for a year. Now, 365 multiplied by 20 gives 7,300. You have then only to divide any sum by 7,300, and you have the interest of that sum for one day at 5 per cent, per annum. The interest of any sum for one day at any other rate than 5 per cent, may be found by multiplying the principal by twice * See page 240. 285 on Banking^ the rate of interest, and dividing the product by 73,000. But the best wav is to make use of Gilmer’s Interest Tables, published by Sims and MTntyre, of Belfast. Similar Tables have also been published by Mr. Coulthart, manager of the Ashton-under-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 night. The amounts for all the Saturdays in the half-year being added together, and divided by 26, the number of weeks, the quotient shows the average amount in circulation during that period, and the duty paid is at the rate of 3s. Qd. 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 circulation, let the total average circulation for any given period be represented by the number 1,000 ; ‘and let the amount of each particular denomination be represented by a proportionate part of 1,000. Then let the tot^ amount of notes paid during the same period be represented by 1,000, and the amount of each denomination of notes be proportion¬ ally ascertained; then place these two series of numbers in juxtaposition, and it will immediately be seen what deno¬ mination of notes remain out the longest. For instance, if the average 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 :— Total Circulation. £5. £10. £20. £50. 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; 12,000/. in 20/. notes ; and 8,000/. in • 50/. notes, the proportional numbers will stand thus:— Total Paid. £5. £10. £20. £50. 1,000 300 300 240 160 By placing these numbers.under the preceding ones, it 286 A Practical Treatise will be perceived that the amount of 51. notes paid is less than the proportional amount in circulation; and, conse¬ quently, notes of this denomination remain out the longest; the lOZ. notes remain out a less time ; the 201. 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. Tliese calculations are easily made by a table of logarithms. The following Account shows the Average Amount of Bank of England Notes in Circulation, distinguishing the Denominations, together with the Number of Days the Notes remained out, in the October Quarter 1843 , 1844 , 1845 , 1846 , and 1847 :— on Banking 287 10 0 0 0 0 0 0 0 0 0 0 I— ^ 01 CO rH »o 0 0 0 0 0 rH Cl CO 10 0 '-+1 0 CD CO CO CO 0 Cl Cl 0 CO CO CO Cl CO CD 0 0 0 CO (M rH CD CJ CO CO CO CO UO CO rH rH Cl d cfi CD »o cn CO 0 rH i-H CO CO 0 ■Cl U c 5 0 C 5 CO 0 10 0 d 0 d CO ■ 4 -» u ft CO 0 Cl rH rH d rH rH rH 5.0 - 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4 ^ 0 0 0 0 0 0 0 0 0 0 0 fO ^ ■ 0 3 CO CD 00 00 CO 0 CO CO rH -H rH a Tin tH 10 (M (Cl 0 'H CO Cl d 0 - tH 0 l> 10 0 rH CO d rH rH rH rH S 3 CO 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ^ 00 4^ 0 0 0 0 0 0 0 0 0 0 0 ^ r-l fl 0 P rH •s 10 CO rr rH d CO CQ 00 rH 0 0 (M »o rH rH -H CO CO >> c 3 CD rH CD CO t- CO 4 i 'in d CO <0 rH rH rH Cl Cl r^T d a 4 j 0 00 rH 0 (M >0 rH Cl Cl d CO 0 0 CD CO rH (M (M #> d CO CO CO 0 10 co" rH rH d" co" 0 CO rH d rH (M Cl CO d rH d • • • • • • cS CO CO CD rH rH d -H d u 0 4 ^ ft CO Cl CD (N rH rH CO rH rH rH rH . 0 CO 0 0 0 0 0 0 0 0 0 0 O'-H 0 0 0 0 0 0 0 0 0 0 0 4 -» 0 0 0 0 0 0 0 0 0 0 0 0 rH c p «+? a 0 Cl -H 00 rH d 0 0 rH 0 -H (M 0 CD 0 Cl d 0 p 00 rH (M CO (M »o 00 CO CO CO Cl 0 <1 tJh' co" f-H rH rH d uo 0 0 0 0 0 0 0 0 0 0 '-*1 f-H fM CO rH »o 0 0 0 0 0 rH d CO >0 0 '-+? - rH 288 A Practical Treatise 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 200 ^^^® principal. Hence, add to the principal one- half of itself, and divide by 100. If the stock be 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. Exam 2 ^les .—What is the half-yearly dividend on 13,476^. 10^. 3d. 3 per cents., 3^ per cents., 3^ per cents., and 4 per cents. ? 3 PER CENTS. SI PER CENTS. 3| PER CENTS. 4 PER CENTS. £ S. d. £ s. d. £ s. d. £ S. d. 13476 10 8 13476 10 8 13476 10 8 13476 10 8 6738 5 4 6738 5 1684 11 4 4 6738 5 3369 2 4 8 2 202 H 16 0 269-53 1 4 20 218-99 7 4 235-83 18 8 20 20 20 2-96 10-61 12 19-87 16-78 12 12 12 11-52 10-48 9.44 7-36 £ 8. d. Answer. —3 per cent. 202 2 11 1 ? *^4 per cent. 218 19 10 31 per cent. 235 16 9 » 4 per cent. 269 10 7 In making calculations respecting the purchase or sale of stock, multiply the amount of stock by the price, and divide by 100. Stockbrokers have seldom any occasion to make these calculations, as there are books published expressly for their use. 280 on Banking, To compute the half-year’s dividend on any amount of stock in the 3 or the 3^ per cents, within one penny. Rule .—Multiply the amount of stock by 3 or 3:^, re¬ spectively. Take the unit of the pounds produced by that multiplication for pence, and the remaining figures of the pounds for shillings. But when the unit of the pounds produced by this multiplication is more than 4, and also when there are shillings or pence in this product, then one penny must be added to the result for the unit, and one penny for the shillings and pence.* Example 1.—What is the half-yearly dividend on 13,476?. 10. 8d. in the 3 per cents. ? £ s. d. 13476 10 8 3 Multiply by 3. 20 ) 4042-9 12 0 £202 2 9 Add 2d. as above. 202Z. 2s. lid. Example 2.—What is the half-yearly dividend on 13,476/. 10«. 8d, in the 3J per cents. ? £ s. d. 18476 10 8 3 40429 12 0 3369 2 8 20 ) 4379-8 14 8 £218 19 8 Add 2d. as above. 218Z. 19s. lOd, In passing through the books a purchase of Annuities, debit the account of Annuities for the purchase money. Then calculate how much per annum the annuity will yield upon the capital invested, recollecting that the annuity will expire on the first quarter in the year 1860. Supposing this rate to be 4 per cent., you will, when the annuity is received in July or January, debit Annuity account 4 per cent, interest on the purchase money, and credit the same account the amount of the annuity received. The first entry will be * Tables founded on this rule have been printed by Mr. J. Sterland, of Margate. VOL. I. L 290 A Practical Treatise passed to the credit of Profit and Loss account. The second entry will be passed to the debit of Cash Account, as a return of capital. The balance of the Annuity account after each entry is made, will show the amount of capital that then remains invested in x\nnuities. The stock-brokers charge one-eighth commission on all purchases and sales of stock; one shilling per cent, on Exchequer Bills and India Bonds. The charges are made on the amount of stock, not on the amount of money in¬ vested. In the purchases or sales of shares in public com¬ panies the usual charge is 6s. per share. In continuation accounts; that is, where a party buys stock for money, and sells it for time, the charge is only one-sixteenth per cent. Upon terminable annuities the charge is one-eighth per cent, upon the money invested. “ One-eighth commission ” is a charge of 2^. Qd. (the one-eighth of a pound sterling) on every lOOZ.; a quarter commission is, of course, 5s. The stock-broker usually allows the London banker one-half the commission. If the stock stands in the name of several persons, any one may receive tlie dividends, but they must unite to execute a sale. If one or more of the parties die, the stock is trans¬ ferred by the survivors, without the concurrence of the exe¬ cutors or representatives of the deceased party. Hence, if a father wished to give his son a certain amount of stock at his death, he might place the stock in his oto and in his son’s name, and upon his death his son would become the actual possessor of the property. Powers of attorney made and executed for the sale or transfer of stock must be de¬ posited at the bank, for examination, before two o’clock, the day previous to being acted upon; if only for receiving dividends upon stock, it is sufficient to present the power of attorney at the time when the first dividend thereon becomes payable. A power of attorney for receiving dividends costs 6s. 6d .; and for sale of stock, 11. Is. 6d. Expense of a Transfer in £ £, s. d. £ £ s. d. Bank Stock, not exceeding 25 0 9 0 exceeding 25 0 12 6 India Stock .*10 1 10 0 „ 10 1 14 0 291 on Banking, Tlie dividends on the 3 per cent. Consols are paid in January and July. The dividends on the 3 per cent. Ke- duced, and on the new 3 per cent., are paid in April and October. This last stock bore interest at 3^ per cent until October, 1854; it was then reduced to 3 per cent.; but the interest cannot be farther reduced until October, 1874. The United States of America reckon their money in dollars. To turn dollars, at the exchange of 4s. Qd, per dollar, into pounds sterling, multiply the number of dollars by 9, and divide by 40. To turn pounds sterling into dollars, multiply by 40, and divide by 9. The French calculate their stock, not by the amount of the principal, but by the amount of the dividend. Thus, 1,000 francs in the French rentes, denote 1,000 francs per annum. To calculate the purchase money for any amount of French rentes, first ascertain the principal. For the 5 per cents, you multiply by 20, and for the 4^ per cents, by 22 —for the 4 per cents, by 25, and for the 3 per cents, by 33J. Having obtained the amount of stock, and the price, proceed in the same way as in calculating the purchase money for English stock. The following quotations from Waterston’s ‘Commercial Dictionary,’ * will serve to explain the operations connected with foreign bills of exchange :— A foreign bill of exchange is an order addressed to a person residing abroad, directing him to pay a determinate snm of foreign money to the person in whose favour it is drawn, or to his order. The amount of foreign money, therefore, to be paid is fixed by the bill; but the amount of British money (or money of the country in which the drawer resides), to be given for the purchase of the bill, is by no means fixed, but is con¬ tinually varying.” ‘‘ Of the two terms of comparison between the money of one place and that of another, one is fixed, the other is variable. The place whose money is reckoned at the fixed price is, in commercial language, said to receive the variable price; the other is said to give the variable price. Hence the higher the exchange between any two places, the more it is in favour of that which receives the variable price; the lower, the more in * *A Cyclopaedia of Commerce, Mercantile Laws, Finance, Commercial Geography, and Navigation,’ by William Waterston, Esq. u 2 292 A Practical Treatise fayour of that which gives the variable price;—the exchange being said to be favourable or unfavourable to any place, according as a smaller or larger amount of the currency of that place is required for discharging a given amount of foreign pajunents. Thus London receives from Paris a variable number of francs and centimes for 11. sterling; and taking the par at 25 francs 34 centimes for 11., exchange will be 5 per cent, in favour of London when it rises to 26 francs 62 centimes, and about 5 per cent, against London when it falls to 24 francs 7 centimes.” Bill merchants study the exchanges, not only between the place at which they reside and all other places, but also between all those other places themselves, by which means they are generally enabled to reahze a profit by buying bills in one place and selling them in another;—in this way preventing any great fall in the price of bills in those countries in which the supply exceeds the demand, and any great rise in those countries in which the supply happens to be deficient. Sometimes exchange oi)erations are conducted with little outlay of capital. Thus, if a bill merchant in London can sell a bill on Amsterdam at half per cent, premium, and buy one at Paris at half per cent, discount, and with the latter buy one at Paris on Amsterdam at par, he will have gained 1 per cent, by the transaction, vfithout the employment of any capital;—the bill remitted from Paris to Amsterdam arriving in time to meet the bill drawn there upon his correspondent. Again, a bill mer¬ chant, in order to take advantage of a premium on the exchange, may obtain a credit abroad upon which he may draw bills, under the calcu¬ lation that at some future and not very distant period he will be able to replace the funds at a lower rate of exchange, and thereby realize a profit by the operation. The central points for such transactions are Hamburgh, Amsterdam, Vienna, Paris, New York, and above all, Lon¬ don, the great money change of the world.” “ In this country the buying and selhng of bills on foreign countries is conducted by brokers, all such transactions centring in the metro¬ polis. In London the days for the negotiation of foreign bills are Tuesdays and Fridays, the foreign post days. The brokers go round to the principal merchants, and discover whether they are buyers or sellers; and a few of the more influential, after ascertaining the state of the market, suggest a price at which the greater part of the transactions are settled, with such deviations as particular bills may be subject to from their high or low credit. For the bills they buy on one post-day, houses of established credit pay on the following post-day, when they receive the second and third bills of the set; foreign bills being usually drawn in sets of three. The brokerage charged on bills is I per mille, or one-tenth per cent. “ On the evenings of Tuesdays and Fridays, the market rates for bills on all the principal foreign cities, with the current prices of bullion, are pubhshed in Wetenhairs ' Course of the Exchange.’ ” 293 on Banking. The following are the places to whicli England gives a certain amount money :— of sterling for a variable amount of foreig Variable according to £ the Exchanges. Amsterdam . . short 1 for 12 41 Florins and Stivers. Do. . . . . 3 months 1 12 71 do. Eotterdam. . . do. 1 12 8 do. Antwerp . . . do. 1 26 5 Francs and Cents. Brussels . . . do. 1 39 26 5 do. Hamburgh . . do. 1 33 13 141 Marcs and Schillings. Paris .... short 1 33 25 75 Francs and Cents. Do .... . 3 months 1 33 26 2 do. Marseilles. . . do. 1 33 26 5 do. Frankfort . . . do. 1 33 122 i Batzen. Vienna .... . do. 1 33 10 11 Florins and Kreusers. Trieste.... do. 1 33 10 12 do. Leghorn . . . do. 1 33 30 37 Lire Tosc. and Cent. Genoa .... . do. 1 33 26 5 Lire and Centesimi. The following are the places to which England gives an uncertain amount of sterling for a fixed amount of foreign money:— Variable according to the Exchanges. Madrid . . . 3 months 36 pence for 1 Dollar of Plate. Cadiz .... do. 36i 33 1 do. Naples . . . do. 40 33 1 Ducat. Palermo . . . do. 1191 33 1 Onza. Messina . . . do. 120 33 1 do. Lisbon . . . 60 days/d. 54 33 1 Milreis. Oporto . . . do. 531 33 1 do. Gibraltar. . . do. 48 33 1 Hard Dollar. Venice *. . . do. 47 33 6 Lire Austriachi. St. Petersburg . do. 38 33 1 Silver Eouble. Eio Janeiro . . do. 30 33 1 Milreis. New York . . do. 471 33 1 United States Dollar. Calcutta . . . do. 23 33 1 Company’s Eupee. 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 65 294 A Practical Treatise cents the pound sterling, then divide 300 by 25*65, and the result will be the arnount in English money. Londres, le 18 Janvier, 18 . B.P. 300. Au vingt Fevrier prochain veuillez payer contre ce Mandat a Vordre de Messieurs _ la somme de trois cents francs valeur en compde que vous passerez de rneme avec ou sans avis de A Messieurs _ Banquiers, Baris. 25-65 ) 300.00 ( 11 2565 •4350 2565 1785 20 25-65 ) 35700 ( 13 2565 10050 7695 2355 12 25-65 ) 28260 ( 11 2565 •2610 2565 - -45 Answer, IIZ. 13s. llcZ. We may observe that all bills are 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 advantageous 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 calcula¬ tions will be increased. But these calculations may be on Banking, 295 abridged by what is called “ the Chain Kule,” 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 the last number stand at the left hand. Then multiply the first row continually for a dividend, and the second for a divisor. Examj>Ie .—If 12 lbs. at London are equal to 10 lbs. at Amsterdam, and 100 lbs. at Amsterdam are equal to 120 lbs. at Paris, how many lbs. at London are equal to 40 lbs. at Paris ? Left. Right. 12 = 10 12 X 100 X 40 = 48000 100 = 120 10 X 120 = 1200 ) 48000 ( 40 40 48000 Answer, 40 lbs. This rule is capable of two modifications. The example we have given, is when it is required to find how many of the first sort of coin, weight or measure, mentioned in the question, are equal to the last. It may be required to find how many of the last sort of coin, weight or measure, men¬ tioned in the question, are equal to the quantity of the first. ' In this case, the following is the Buie .—Place the numbers alternately, beginning at the left hand, and let the last number stand on the right hand. Then multiply the first row for a divisor, and the second for a dividend. Examjple .—If 12 lbs. at London make 10 lbs. at Amster¬ dam, and iOO lbs. at Amsterdam make 120 lbs. at Paris, how many lbs. at Paris are equal to 40 lbs. at London ? Left. Right. 12 = 10 12 X 100 = 1200 100 = 120 10 X 120 X 40 = 48,000 40 . • J2000 ) 48,000 ( 40 48000 The above examples will explain the principle of the Chain Kule. The following example, taken from Mr. Waterston, will show its application with regard to the transmission of money. London and I’aris, through Hamburgh.—Find the arbi- 296 A Practical Treatise trated rate between London and Paris when the exchange of London on Hamburgh is 13 marcs 12 schillings banco for 11 .; 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 ascertain how many francs will be obtained for 11. 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, 1 x 16 x 100 x 100 = 160,000 divisor. 220 X 1 X 18450 X 1 X 1 = 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 : 16 =r 1, 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, aud remitting those bills to Paris—unless bills on Paris direct could be purchased on more favourable 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 chiefiy, we believe, of copper. Our silver coins have 18 pennyweights of alloy in the pound. on Banking, 297 A pound weight of gold is coined into 44J guineas, and in the same proportion for sovereigns. An ounce of standard gold is worth 3Z. 17s. lO^d .; being the twelfth part of 46?. 14s. 6c?., the value of a pound weight of gold. A pound weight of silver is coined into 66 shillings; and in the same proportion for crowns, half-crowns, and sixpenny pieces. The specific gravity of gold is 19*360; that is, it is 19,360 times heavier than distilled water. The specific gravity of silver is 10*474; that of copper is 8*878. A cubic foot of distilled water weighs 1,000 ounces, or 62*5 pounds avoirdupois, which is equal to 75*95 pounds troy. Avoirdupois weight is as follows :— 16 Drachms.make 1 Ounce. 16 Ounces.1 Pound. 28 Pounds.1 Quarter. . 4 Quarters.1 Hundred. 20 Hundreds.1 Ton. 1 lb. avoirdupois is equal to 1 lb. 2 oz. 11 dwts. 20 grs. troy. A pound avoirdupois is to a pound troy as 1750 to 1440. 1 lb. avoirdupois of copper is coined into 24 pence—equal to 240?. out of a ton. The old pennies weighed exactly an ounce avoirdupois; so that in buying an ounce of any commodity, a poor man might, if he thought he had short weight, use a penny piece for the weight. For some years past the penny has been only two-thirds of an ounce. The amount of gold in circulation, including that in the Bank of Eogland, is variously estimated at from 44,000,000 to 60,000,000. The silver is estimated at 11,000,000, but that includes the coin in the colonies.^ We often find in the City Article of the Times, the Bcono- mist, and other journals, paragraphs like the following :— The premium on gold at Paris is 7 per mille, which, at the English mint price of 3?. 17^. lO^c?. per ounce for standard gold, gives an exchange of 25*32^; and the exchange at * Commons, 3483—3488. 298 A Practical Treatise Paris on London, at short, being 25-25, it follows that gold is 0-30 per cent, dearer in Paris than in London. By advices from Hamburgh, the price of gold is 435^ per marc, which, at the English mint price of 17s. lO^d. per ounce for standard gold, gives an exchange of 13*10;^; and the exchange at Hamburgh on London, at short, being 13*10f, it follows that gold is 0*17 per cent, 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 follows 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 interest 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 fineness in the other country. In England gold is the legal tender, and its price is fixed at 3Z. 17s. 10\d. per ounce. In France, silver is the currency, and gold, like other commodities, fiuctuates in price according 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 purchase 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 commercial 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|- marcs banco, which gives an exchange of 13-10|- marcs and schillings against the pound sterling. But the commercial exchange is 13*1 Of, an Banking. 299 wliich 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 make 1 Cent. . 1 Dime. 10 Milles . 10 Cents . 10 Dimes . 10 Dollars . 1 Dollar. 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 Eepresentatives of the United States of America, in Congress assembled, that the gold coins of the United States shall contain 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 64J 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 respective actual weights.” “ Be it enacted, &c., that from and after the 31st day of July next, the following gold coins shall pass cm’rent 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 following; 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-lOths of a cent per pennyweight; the gold coins of France, 9-lOths fine, at the rate of 93 cents and 1-lOth of a cent per pennyweight; and the gold coins of Spain, Mexico, and Colombia, of the fineness of 20 carats, 3 grains, and 7-16ths of a grain, at the rate of 89 cents and 9-lOths of a cent per pennyweight.” Under tlie above Acts of Congress tbe English sovereign was made a legal tender at the rate of 94^ cents per penny¬ weight. 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, according to a rule * 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. 300 A Practical Treatise established in 1789, and ever since retained in exchange operations, the par of the dollar is paid at 4«. 6c?. sterling, which gives for 487 dollars 109?. 11s. 6c?. The nominal par thus exceeds the real par 9?. 11s. 6c?., or 9f|^ per cent. In this way, when the exchange is nominally 9|4 premium, it is really at par. The above calculations are subject to some slight modifications 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 109||^ per cent. ' When we read in the above calculations that gold is so much dearer in one country than the other, we must not infer that gold can therefore be sent thither at a profit. We must take into account the ex^Dense of conveyance. It is generally considered that the charges and loss of interest attendant on sending gold to America, do not amount to much less than 2-J per cent. Before closing this subject we will make some remarks on our exchanges with India. It has been seen, 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 exchange, that is, the fewer pence Ave give for the rupee, the more favourable is the exchange for England. For, the lower the rate, the more favourable is the exchange to that country in whose currency the rate is reckoned. The following is the Table for East India Money:— 12 Pice.make 1 Anna. 16 Annas.. . 1 Eupee. 100,000 Kupees.1 Lac. 100 Lacs.1 Crore. Taking the rupee at 2s., a crore of rupees is equal to 1,000,000?. sterling. 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 301 on Banking, 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 India Office issue in London 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 Council may have occasion to accumulate funds in London or in India.* In making farther observations upon the subject of this section, we may observe, that there is often a great facility acquired in performing arithmetical operations by varying the numbers, and especially if we can substitute ten or a hundred for some other number. And sometimes we may change the operation, and use multiplication for addition, or the reverse. Thus, if we have to multiply by 15, we can multiply by 10 by adding a cipher, and tlnm add half the sum. If we have to take three-fifths of a number, we may take the six-tenths. Instead of dividing by 25, we may multiply by 4, and divide by 100 ; or, instead of multiplying 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 usually 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 liours 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 * See the Evidence of W. P. Paton, Esq. and J. D. Dickenson, Esq.'before the Committee of the House of Commons, on Commercial Distress, 1848. 302 A Practical Treatise 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 to the counter. And if a clerk wants a day’s holiday he should fix on the day in which the fewest people enter the bank. It is in this way that a man stand¬ ing 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 whicli the questions 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 by application. A large multiplication table may be learned by perseverance. A facility of finding equivalent numbers may be acquired 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 darkness, 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 inferior to the endowments exhibited by these “ calculating boys.” It is remarkable that these boys are not found to retain this wonderful faculty after they are grown to be men. The various systems of artificial memory 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, suppose the floor of the room in which you are sitting were divided into on Banking, 303 nine compartments, and had a figure and letters in each compartment, thus:— 1. 2. 3. B. 0. D. F. G. H. 4, 5. 6. J.K. L. M. N. 7. 8. 9. P.Q. R. S. T. V. Now, if you wished to remember the number 29, you might form the word “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 53, it would be represented by the word “ log.” The word “ book ” would represent 14 ; the word “paper,” 778 ; and “ledger,” 5238. 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. Besides, 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 304 A Practical Treatise tlie 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 wish at any time to recollect any one of these numbers, your memory will be assisted by calling to mind its locality in this room. You may go farther 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 anything else. For in¬ stance :—In the compartments on the floor you may place trees, the name of each tree beginning with the letter belong¬ ing to the compartments. The compartments from 10 to 20 may each have a flower: from 20 to 30, a bird: from 30 to 40, a 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 represents the numerals by the following consonants and vowels:— 1234567890 bdtf 1 spknw a e i o u au oi ei on y Then, to recollect a date, you will alter the termination of the word, and place those letters that coiTespond with the figures. Thus, he calls Alexander the Great, Alex^^a, and the last three letters show that he died 331 years before the Christian era. Julius Csesar is called Julies, showing that he died 46 years before the same period; and ^omput shows that Home 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. Never¬ theless, they are occasionally useful in assisting the recollec¬ tion of figures. We shall now take a view of those Methods of Calculation that have a reference to Keasoning and Statistics. “We shall consider the relation between a whole and its parts, with reference to arithmetical numbers, physical objects, and moral ideas. 305 on Banking. “ With regard to arithmetical numbers. ‘‘ Any arithmetical number may be divided into as many parts as it contains units; and again, a unit may be divided into any number of fractional parts. It is obvious, that all the parts into which any number is divided must, when added together, be • equal to the whole number. A sovereign is equal to twenty shillings ; if, then, you receive in exchange for a sovereign only nineteen shillings, you will infer that you have not the w^hole. A pound weight is equal to sixteen ounces; if, then, in buying a pound of tea or of sugar, you get only fifteen ounces, you will infer that you have not the whole. “ Again, if two numbers that are equal to one another be multiplied respectively by any number, the products will be equal. If one Indian rupee be equal to one shilling and tenpence, you will infer-that twenty rupees will be equal to twenty times one shilling and tenpence. So also— “ If equal numbers be added to equal numbers, the totals will be equal. “ If equal numbers be subtracted from equal numbers, the remainders will be equal. “ If equal numbers be divided by equal numbers, the quotients will be equal. ‘‘ These maxims are too obvious to require any illustration. They form the foundation of much of our reasoning with regard to figures and quantities. Addition, subtraction, multiplication, and division are the four operations with regard to numbers, and these -operations are often called into exercise, not only with regard to our physical, but also with regard to our moral reasonings. In the Keport of the Board of Health upon the Supply of Water, it is stated that the Thames, Lea, and New Kiver waters contain sixteen grains of lime in every gallon. ‘ The importance of this mineral ingredient, however, is only to be correctly estimated when viewed in the aggregatefor the daily supply of water is forty-six millions of gallons, and this quantity will contain twenty-six tons of lime. “ If you are a clerk in a public office, and are behind your time a quarter of an hour every morning, in three hundred days that will amount to seventy-five hours; more than equal VOL. I. X 30G A Practical Treatise at six hours a-day to a holiday of t\yelve days in the course of tlie year. A large number of small parts will make a great whole. “The following anecdote proves, by multiplication, the importance of punctuality :— ^ A member of the Committee being a quarter of an hour behind the time, made an apology, saying, the time passed away without Ids being aware of it. A Quaker present said—“ Friend, I am not sure that we should adndt thy apology. It were matter of deep regret that thou shouldest have wasted thine oym quarter of an houi’; but there are seven besides thyself, whose time thou hast also consumed, amounting in the whole to two hours—and one-eighth of it only was thine ovti property.” ’ “ Parties who keep omnibuses or other public conveyances waiting for them, should recollect that they are sporting with the time of all the other passengers. “ While we multiply in order to prove the impoidance of an object, we use division when we wish to produce a contrary impression. Mr. Norman, the Bank Director, published a pamphlet a short time ago to show the lightness of our taxa¬ tion. He divided the total amount of the taxes by the total number of the population ; and he inferred that the taxation was light from the small average amount paid by each individual.” “ The facts with which this science (Statistics) is conversant are those which are susceptible of being represented and registered by figures. Its arithmetical operations are chiefly multiplication and division, the calculation of ratios, and the construction of tables. “ In treating of the relation of a whole and its parts, I have observed that w^e employ multiplication when we wish to magnify the importance of any matter, and division when we wish to produce a contrary effect. Thus if a party wdshed to show that the Established Church is in possession of enor¬ mous w'ealth, he would endeavour to obtain an account of all ecclesiastical property, and present it in one sum. But if another party wished to produce a different impression, he would divide this sum by the number of clergymen, and contend that upon an average they do not receive, indi- 307 on Banking, vidually, a higher income than an educated man should receive for the kind of duty he performs. It was by simple multiplication that Mr. G. R. Porter ascertained the amount spent annually in the purchase of Spirits, Beer, and Tobacco —sums which he happily styled ‘ self-imposed taxes.’ The following is the amount taken from the paper he read on the subject, at Edinburgh, before the Statistical Section of the British Association:— British and Colonial Spirits .... £20,810,208 Brandy . 3,281,250 Total of Spirits . . 24,091,458 Beer of all kinds, exclusive of that brewed in private families .... 25,383,165 Tobacco and snuff. 7,588,607 Total self-imposed taxes . . £57,063,230 “ When we wish to compare a number of things together in some one respect, we employ a ratio. The ratio usually employed is a per centage. For example, if we wish to show the number of crimes in each county or district, as compared with its population, we should place in one column the popu¬ lation of each county, and, in an adjoining column, the number of crimes in each county. We should then reduce these figures to a ratio, that is, we would, by the rule of three ascertain what per cent, in each county the crimes bore to the population. We might then, in making our comparisons, dispense with both the preceding oolumns ; and place against the name of each county its per centage of crime. “A series of figures may be placed either longitudinally or horizontally. In the former case they are called a column of figures ; and in the latter case a row of figures. A table of figures combines both. Several columns of figures are placed side by side, but at the same time there is a connexion between all these columns horizontally. Such a table admits of being added together in two ways. You may add longi¬ tudinally, and place at the bottom the amount of each column; and you may add horizontally, and place in a column at your right hand, the separate amount of each row. You will understand what I mean by the following table, which X 2 308 l 4 Practical Treatise I have taken from ‘ The Statistical Companion,’ published by T. C. Banfield and C. R. Weld, of the Royal Society:— Classified Abstracts of the numbers of Electerrs in the Counties, Cities, and Boroughs of Great Britain, for the year 1846. The total number of registered Electors in 1846 was as follows :— England . Wales Scotland . Totals . Counties, Cities and Boroughs. Total. 475,086 87,340 48,953 342,342 11,205 29,597 817,378 48,545 78,550 561,329 383,144 944,473 All tables are not drawn up in .this form. Some consist only of a series of columns placed side by side without any horizontal connexion, and sometimes the columns are not added up longitudinally.” ‘‘ The principle of classification—that is, of genus and species—is of very extensive use in statistics; and we can rarely apply it in any case without obtaining some important information. This remark is illustrated in the following table, from ‘ The Statistical Companion — National Debt.— and Classification of Fundholders. Persons entitled to receive dividends October 10, 1846. Persons entitled to receive dividends October 10 , 1847. Amount of Dividend each Person was entitled to receive. No. No. £ 50,008 51,609 Not exceeding ... 5 24,978 25,2^4 „ ... 10 53,829 54,145 „ ... 50 13,119 13,087 „ ... 100 6,893 6,889 „ ... 200 1,903 1,917 „ ... 300 1,225 1,203 „ ... 500 529 520 ... 1,000 164 163 „ ... 2,000 92 97 Exceeding .... 2,000 152,740 154,904 Showing that the number of persons thus entitled to Dividends on the 10th October, 1847, was 2,164 more than at the same period of last year, by far the largest portion of the increase being in the smallest amounts.* * ‘ Logic for the Million ’—Section on the Application of Logic to Statistics, by J. W. Gilbart, F.R.S. 309 on Banking, 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 obtain on the money actually advanced at these respective dates ? “ Suppose a banker should lend 100,000Z. 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 21 per cent., all of wliich bills should fall due, in equal prox)ortions, on the 10th 11th, 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 dividend 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 81 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 progres¬ sion ; 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 oimce of standard gold is worth 3/. 17s. lOat/. A sovereign is worth twenty shillings: What should be its weight ? “ 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-crovui ? “ A ton weight of copper avoirdupois is coined into 240/. in penny pieces: AVhat is the weight of a halfj)enny-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 sliillings may it be coined ?* “ What is the weight of a cubic foot of copi^cr, and into how many farthings can it be coined ?* * See p. 297. 310 A Practical Treatise “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 ? « The gold that came to Solomon in one year was six hundred three¬ score and six talents. Supposing this to be pm’e gold, how much alloy must be added to reduce it to standard gold, and what then would be the number 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. 9d. per ounce, what amount of bank notes would be received, taking the Hebrew talent as equal to 113 lbs. 10 oz. 1 dwt. 10 grs. troy?—Supposing pay¬ ment of these notes should afterwards be demanded in sovereigns, which are coined at the rate of 31. 17s. lO^d. per ounce, what would be the total weight of these sovereigns ? Find the arbitrated rate of exchange between London and Amsterdam when the exchange of London on Madrid is 37 pence for one dollar of plate, and that of Amsterdam on Madrid is 100 florins 75 cents, for 40 ducats of plate.* “ Bar gold in London is 77s. 9d. per ounce standard; required the arbitrated rate of exchange produced by its export to the United States for coinage, at the rate of 232g grains of fine gold for the eagle of 10 dollars.* “ Bar silver in London is 60 pence per ounce standard; in Amsterdam 04 J florins per pond fine; required the arbitrated rate of exchange, the Netherlands pond being equal to 1,000 wigties, and 31*1002 wigties equal to one ounce troy.* ‘‘ If the premium on gold at Paris is per mille, and the exchange at Paris on London is 25*275, bow much per cent, is gold dearer in Paris than in London ?* If the price of gold at Hamburgh is 435 per marc, and the exchange at Hamburgh on London is I3*10g, how much per cent, is gold dearer in Hamburgh than in London ?”t * These three questions are taken from Waterston’s Manual of Commerce, where the operations are performed. t See the Table, No. 18, in the next Section. on Banking, 311 SECTION XIV. BANKING DOCUMENTS. By banking documents, I mean such reports, bonds, deeds, letters, or other writings as are used in connexion with banking. I. I shall notice those Documents that are used in the formation of a Joint-stock Bank. AVhen any p’ersons 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 respecting 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 stamp-office a list of the shareholders, in order to observe the strength of their proprietary, and whether they reside chiefly in the district. 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 shareholders, 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 are requested to become members of a provisional committee for the formation of the bank, and they obtain the assistance of an influential solicitor, to whose office the appli¬ cations for shares are usually addressed. The committee then appoint a secretary, or sometimes the office of secretary is filled by the solicitor. 312 A Practical Treatise Attached to the prospectus is the form of an application for shares, similar to the following :— [No. 1.] _ BANKING COMPANY. HEAD BANK_. Capital, £_in_ Shares, of £_ each. Application for Shares. To the Provisional Committee of the _ Banhing 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 influence shall be exerted in support of this bank. I am. Yours respectfully. Name. Business or Profession Kesidence. [No. 2.] To the Directors of the _ Banhing Company. Gentlemen, I request you will allot me_shares of £100 each in the^_Banking Company. And I hereby under¬ take to accept the same, or any smaller number which you may allot to me, and to pay the Deposit of £10 per Share thereon, and execute the Deed of Settlement of the Company in respect thereof, at such times and in such manner as you may appoint. I am. Gentlemen, Your obedient servant. Name. Address. Profession or Business Date. 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 tlie applicant; then the number of shares 313 on Banking, applied for, and in a farther column the number of shares jrranted. 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 :— Sir, 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_shares in the_ Banking Comjiany has been laid before the Provisional Committee, who regret, that in consequence of the numerous applications, they are un¬ able 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. No. Deposit Certificate. _18 This is to certify, that the bearer hereof has paid the sum of .€_, being the allotment fee of_per share upon_^shares of £_each, allotted to him in the capital stock of the above Banking Company. For the Provisional Committee of the_ Banking Company. Other banks adopt the form of a receipt thus:— _BANKING CO]\IPANY. Eeceived of Mr._on account of the above bank, the sum of £__being the deposit of_per share on his being admitted a holder of_shares. 18 314 A Practical Treatise After the sums have been received, a general meeting of the shareholders is called in the following form:— _BANKING COOTANY. _ • 18 SiK, I am instructed by the Provisional Committee to inform you, that the first general meeting of the shareholders in the above Bank¬ ing Company will be held at the___on _next, for the purpose of submitting a report of their joroceedings, electmg a board of directors, and adopting resolutions for the immediate constitution of the Company. The chair will be taken at twelve o’clock. Lest you should be unable to attend, I annex a form of proxy for voting, the blanks of which you must fill up before it is placed in the hands of a shareholder. I am. Sir, Your obedient Servant, __ Secretary. Peoxy foe Voting. _BANKING COMPANY. I, the undersigned, a shareholder in the above Banking Com¬ pany for_shares, do hereby appoint_ also a shareholder therein, to vote for me, and on my behalf at the fii’st general meeting of shareholders, to be held in_on _instant. Witness my hand, this_day of_18 Name. Kesidence..•. No. of shares. At the general meeting tlie provisional committee make a report of their proceedings. Eesolutions are then passed —1. That the report be received and printed;—2. That certain shareholders then named be appointed directors;— 3. That the thanks of the meeting be given to the provi¬ sional committee. The bank is now formed, and the go¬ vernment is assumed by the directors. They appoint the manager and other officers ; they prepare the deed of settle¬ ment ; and they adopt the. measures necessary for the com¬ mencement of business. on Banking, 315 II.— The Deed of Settlement. This is the deed of partnership, which must be signed by all the shareholders. It fixes the name of the bank—the places where business is to be carried on—and the denomina¬ tion and number of the shares. It regulates the appointment of directors—the qualifications of shareholders—and the mode of holding meetings, transferring shares, and making divi¬ dends. 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, providing 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 hy 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. II., 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 be paid to the said W. X. and Y. Z. or their certain attorney, executors, administrators 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 \\Trereas the above-bounden A. B. has been appointed chief manager of a certain public joint-stock banking company, called the__ _, of wliich company, and for the general pur¬ poses thereof, the above-named W. X. and Y. Z. have been appointed trustees. And it was agreed, that on the appointment of the said A. B. 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. D., E. E., and G. II. has, at the request of the said A. B. agreed to 316 A Practical Treatise become surety for him as aforesaid to the extent of five thousand jminds: Now the condition of the above-written bond or obh’gation is, that if the said A. B. do and shall from time to time wliile 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 know¬ ledge respecting the said business, and do and shall keep all the cash accounts, ledgers, books, deeds, writings, and papers, belonging or re¬ lating to the said concern in a proper and business-hke manner, and regailarly answer the letters of their correspondents, and do and shall take due care of the moneys, securities for money, and proiDerty belong¬ ing to the said company, or placed in their custody, and do and shall from time to time account for, render, and make over to the directors for the time being of the said company, 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 embezzle, 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 entrusted to their care, and do and shall receive all the customers of the said banking-house with civility, and make up the notes or memorandums of their respective affairs when necessary, and do and shall as far as in him lies cause the clerk or clerks of the said company to give full and due attendance at their said banking-house, and there to conduct and demean himself or themselves dihgently and faithfully and in an orderly manner: and also if the said A. B. do and shall in all other respects diligently, skilfully, and faithfully demean and conduct himself as the chief manager of tha said company; and moreover, if they the said C. D., E. F., and O. H. their heirs, executors, or administrators, or some of them, shall and do well and sufficiently save harmless and keep indemnified the said comjDany and the direc¬ tors and all other members 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 whatsoever, wilfully and improperly done, or wilfully and improperly omitted to be done by the said A. B.m or during the said service, then the above-wi’itten obligation shall be void, but otherwise the same shall be in full force. Provided always, and it is hereby declared, that under the said obliga¬ tion, the said C. J). his heirs, executors, or administrators, shall not be liable to a greater sum in the whole than two thousand five hundred pounds, nor the said E. F. his heirs, executors, or administrators to a 317 on Banking. greater sum in the whole than owe thousand jive hundred pounds, nor the said G. II. his 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 bound to W. X. and Y. Z., in the penal sum of one thousand poimds of lawful money of Great Britain, to be 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 om-selves and each 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 fii-mly by these presents. Sealed with our seals. Dated this_ Whereas the above-bomiden A. B. has been appointed a clerk in a certain public company, called the_, of wliich 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 A. B. he should with sureties enter into a bond to guarantee his fidelity and honest conduct. And whereas the above- bounden C. D. and E. F. have at the request of the said A. B. agreed to become surety for him as aforesaid to the extent of jive hundred pounds each. Now the conditions of the above-written obligation is, that if the said A. B. do and shall, while he shall continue in the ser¬ vice of the’^ said company as such clerk, diligently and faithfully 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 time being all such cash, bills, notes, and other securi¬ ties as shall from time to time come or without his ■wilful default might have come to his hands, and shall not embezzle, 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 entrusted 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. I), 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 318 A Practical Treatise members 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 five hundred pounds; nor the said E. F. his heirs, executors, or administrators, to a greater sum in the whole than five 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 directors, and trustees of the public Joint-stock Company, called_do severally declare that we will re¬ spectively, 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 regTdations that may be made in pursuance thereof. And we do hereby pledge ourselves, and as in¬ violably 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 hy the Managers and Clerics. We, the undersigned persons, being respectively managers, account¬ ants, cashiers, tellers, and clerks of the_Banking Com¬ pany, do severally declare, that we will respectively, faithfully, honestly, and impartially discharge the several duties devolving on us as such managers, accountants, cashiers, tellers, and clerks as aforesaid, accord¬ ing to the directions of the directors of the company, and any laws and regulations that may be made by them. And we do hereby severally pledge ourselves, and as inviolably as if we had taken om* oaths thereto, that we will observe the strictest secrecy on the subject of all ti’ansac- tions of every description of the company with their customers for the 319 on Banking. time being, or with any other bodies or persons whatsoever, and on the subject of the state of the accounts of all bodies and individuals from time to time having accounts with the said company. Dated this _day of_18 V .—Letters of Guarantee^ With reference to Advances or to Bills Discounted. Bill-brokers usually give a letter of guarantee, instead of indorsing the bills they have discounted with the bankers. And sometimes one party will guarantee to the bank the bills discounted for another. ( 1 . ) To the Directors of the _ Banicing Company. Gentlemen, In consideration of your paying the cheques of Mr._ or otherwise advancing him sums of money, I hereby guarantee the re¬ payment thereof upon demand, to the extent of one thousand pounds. I am, &c. To the Directors of the ( 2 . ) Banking Company. Gentlemen, In consideration of your discounting a bill for £_^drawn by A. B. or C. D. dated_at_months, I hereby guarantee the due payment of the same at maturity. I am, &c. ( 3. ) Gentlemen, In consideration of your discounting the above bills, I hereby guarantee the punctual payment thereof as they respectively fall due. I am, &c. ( 4 . ) Gentlemen, Mr. John Slender may have occasion to offer you sundry bills for discount. In consideration of your discounting such of them as you approve of, which I request you to do, I hereby guarantee the punctual payment of such bills when due. I am, &c. * There are some excellent remarks on this, subject, as well as on other matters connected with practical banking, in ‘ Chapters on Country Banking,’ by J. K. Eogers. (E. Wilson.) 320 A Practical Treatise VI .—A Form of Letter^ To he sujned hy a Party lodging Deeds or other Documerds 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 hanking company, either upon hanking 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 premises, for the better securing the said sum or sums of money, intended to be hereby secui'ed, 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 sutn of £_shall not be repaid as aforesaid, to sell the said securities, or any part there¬ of, whenever you may think proper so to do, and repay youi’selves the sum of £ and interest, returning to me the surplus (if any) or holding 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 chai-ge all or any title deeds or other property belonging to me, which I may place or leave in your hands, with the repayment of aU 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. mi Banking '. ( 4 . ) 321 Gentlemen, In consideration of your discounting for_this day the above bills, amounting to £_, I hereby g-uarantee the due pay¬ ment of them as they respectively fall due. I am, &c. ( 5 . ) To the Trustees of the _ Banh. Gentlemen, We request that you will advance to us the sum of 1,000/. on the accompanying Securities, amounting to 2,000/., which advance we engage to repay on or before the 1st of January next, together with interest thereon, at the rate of hi. per cent, per annum, and in default thereof we hereby empower you to retain the said Securities, for your reimbursements, and to dispose of them in any way you may think fit. I am, &c. VII .—Memorandum of Agreement with reference to the Lodgment of Leeds. Memorandum, that on the_day of_ in the year of our Lord one thousand eight hundred and fifty_, _hath delivered to _at their office in _in the county of_the several title deeds and documents mentioned and comprised in the schedule hereunto annexed, for the purpose of securing to the proprietors in the said banking company for the time being, of whomsoever the same banking company may from time to time consist, all and every sum and sums of money which shall at any time hereafter be due or owing from _on the balance of his account current with the said banking company, either for money paid or advanced, or to be paid or advanced, by the said banking company unto the said_!_, or at his re¬ quest, or which shall be secured by any bond or bill of exchange drawn or endorsed by the said_or by any promissory note or other contract whatsoever, with interest for the same respectively, from the several times at which they respectively shall be advanced, or at which the said bonds, bills, notes, or other contracts respectively shall become due, and thenceforth until payment thereof respectively after the rate of_per centum per annum, with com¬ mission and other usual banker’s charges, so as the same do not exceed in the whole the sum of £_. And the said___doth hereby VOL. I. Y 322 A Practical Treatise promise and agree with and to the said banking company, that he the ^P-id___, whenever thereunto re¬ quired by the said banking company, shall and will effectually convey and assure all and singular the hereditaments and premises comprised in the said deeds and writings unto and to the use of the said banking company, in such manner as shall be lawfully required by them, free from incumbrances; subject nevertheless to redemption on payment by the said__of such sum of money as shall be therein expressed to be secured with interest in manner aforesaid. And in the said indenture of mortgage shall be contained all usual clauses and covenants, with power of sale in case default shall' be made in payment of the principal and interest to be thereby secured, or any part thereof. As witness the hand of the said._ __the day and year first above written. (^The schedule above referred to.) VIII.— Cash Credit Bond. Almost 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_, and E. F. of_, are jointly and severally held, and firmly bound to W. X. of_and Y. Z. of_two of the trustees of the society or co-partnership called the __, in the penal sum of_ pounds of lawful money of Great Britain and Ireland, to be paid to the said F. O. and H. /., or their certain attorneys, executors, administrators, and assigns, for which payment to be well and truly made, w'e bind ourselves, and each and every of us, and om*, and each and every of om* heirs, executors, and administrators, jointly, severally, and firmly by these presents. Sealed with our seals. Dated this _ of_. Whereas the above-bound A. B. has opened an account with the above- mentioned society or co-partnership, called the_, at their establishment at _, and is desh’ous of being accom¬ modated by the said society or co-partnership, from time to time, in some one or other of the various modes in which bankers are in the habit of affording accommodation; and to induce the said society or co-partnership to take the said account, and to accommodate him from time to time in some one or other of the modes aforesaid, the said A. B. and tlie said C. I), and E. F. as his sureties, have agreed to enter into the above-written bond or obligation with such conditions as hereinafter is expressed. 323 on Banking: Now the condition of the above-written bond or obligation is snch, that if the said A. B., C. D., and E. F., or some or one or them, or their, or some or one of their heirs, executors, of administrators, do and shall, on the demand in writing, under the 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-partner- sliip, all and every such sum and sums of money as upon the balance of any account current, wliich now is, or at any time or times hereafter shall be open between the said A. B. and the said society or co-partner¬ ship, 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 dis¬ count, interest, postage of letters, and commission, according to the usage and com-se of business, but nevertheless to the extent only of £_ principal 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 security to the said society or co-partnership to the amount of £_principal money, besides such interest and costs as aforesaid, notwithstanding any settlement of account, or other matter or thing whatsoever, then the above-v/ritten 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. D., and E. F., hereby bind and oblige ourselves conjointly and severally, and our heirs, executors, and successors whomsoever, to content and pay to the said_j or to_, the present manager of the said bank, or to his successors in office as manager, for behoof 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 _ pounds, or such part or> parts thereof as the said A. B. Y 2 324 A Practical Treatise 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 __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 advance, until the same be repaid, and a fifth part more of the said principal sum of penalty, in case of failure, or proportionally efifeiring to the sum due, and it is hereby declared, that a stated account, made out from the books of the said bank, and signed by the manager, secre¬ tary, or accountant thereof, for the time with reference to tliis present bond, shall be sufficient without any other voucher to constitute and ascertain a balance and change against us, and no suspension shall pass upon the change so constituted and ascertained, but on consignation only. And we consent to the registration hereof, in the books of coimcil and session, for others competent, that letters of horning, on six days’ change and all other necessary execution, may pass upon a decree, to be interposed hereto, in common form, and for that pm’pose we con¬ stitute our Procurators_. In witness whereof, the present written upon stamped paper by IX .—Letters of Credit. Granted hy the Bank upon its Agents or Branches. ( 1 . ) _BANKING COjMPANY. To _ SiE,—There has tliis day been lodged at this office by_ the sum of_for the credit of_whose drafts to that amoimt you will honour, and charge the same to the account of the_Banldng Company. I am. Sir, Your obedient Servant, £* _ Manager. Entered __ Accountant. on Banking, 325 ( 2 . ) _BANKING COMPANY. No. To _ (Not Transferable.) Sir, —You will be pleased to credit_ in the sum of___and charge the same to the account of the_Banking Comioany, with this branch. I am, Sir, Your obedient Servant, £ _ ^Manager. Entered_ Accountant, ( 3. ) BANKING COMPANY. Messrs. _ Paris. _ IS_ Gentlemen, This letter will be presented to you by_ to whom you will be pleased to pay to the extent of_ deducting your charges, and taking for your reimbursement his drafts on this bank, which will meet with due honour. I am, &c. ( 4 . ) Gentlemen, You will be pleased to hold at the disposal of_ on his being identified, the sum o f _pounds__ shillings and_pence sterhng, less your charges, taking in reimbursement his draft on this bank, which will meet due honour, such draft to be drawn on account of Credits on Agents. No._ I am, &c. ( 5 . ) Messrs. _ ■ • - New York. This letter will be presented to you by Mr._ _in whose favour we beg to establish a credit for__ pounds sterhng. You will please hold this sum, or any part thereof at his disposal, less your usual charges, and take in exchange his drafts upon 326 A Practical Treatise this bank, which will be duly honoured. It is understood 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 can¬ celled. 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. £_ Eeceived from_the sum of_ sterling to the credit of his deposit account with the__ Banking Company. By Order of the Board of Directors, _ Manager. Entered _ Accountant. BANKING COMPANY. 18 No. Eeceived 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 to specify the cash they pay into the bank. They are usually placed on the counter, to be ready when wanted. The following are the forms most in use :— on Banking. 327 ( 1 . ) Kequisition Note. To Refilled up hy Parties desiring Receipts for Money deposited, Letters of Credit, or Bills on_ _ dav of , 18 Specification of Money presented to the Cashier. Wanted from the Banking Company the Manager’s in favour of for the sum of Applicant. Entered £ ( 2 . ) Lettee op Ceedit. Specification of Money 18 Bank of England Notes . Gold Silver andXopper Local Notes. Wanted, the Bankiner Com- nanv’s Letter of Credit on in favour of for Annlica,nt. BiUs . £ £ Entered to Credit of ( 3. ) Payment to Ceedit of Cueeent Account. Specification of Money. Bank of England Notes. Gold. Silver and Copper Local Notes. Bills. £ 18 Paid to the_Bankmg Company, the snm of_ to be placed to the credit of_ in cnrrrent account with said bank. By_ Entered in the Bank’s Cash Book, £ Teller 328 A Rractical Treatise ( 4 . ) Application for Account. Fii’in. Business. Eesidence. Probable return.... Advance required. Security proposed. Order of the Board per IMinute, dated_18_ Names of Persons composing the Firm. £ £ ( 5 . ) Bills Discounted By the Banking Company at to on 18 No. When Payable. Days. Amount of Bill. Discount. Proceeds. ( 6 . ) THE^_BANK. Application for Letter of Credit. Date_18 Amount £_ On what place__ In whose name__ _ Signature and Address of Applicant on Banking. 329 ( 7. ) THE_BANK. Application foe Circular Notes. Name of Person to whom I Notes are to be payable ) Amount required £_ Signature and Address of Applicant_ Date_18_ XII.— A Letter Summoning a General Meeting of the Shareholders. _BANKING COMPANY. _18_ Sir, I beg leave to inform you that the Annual General Meeting of the Proprietors of this Company, pursuant to the deed of settlement, will be held at twelve o’clock on_instant, at the _ in tliis place, for the‘purpose of 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 amiexed. I am. Sir, Your obedient Servant, _ Manager. Most large banks have also a printed form for their letters of ordinary correspondence, as the following :— ( h ) Sir, I beg to acknowledge the receipt of your favour of the__ enclosing sundries £___and undue bills_£_ for the credit of your accoimt. Your advices* have due attention. You are credited for the following_sums received. I am. Sir, Your most obedient Servant, * Some country banks send their List of Advices in a printed form, on a sheet separate from the letter. These sheets can be pasted or gummed togetlier so as to form a book. The London bank is thus saved the trouble of copying the advices into a book, and avoids the chance of mistakes. 330 A Practical Treatise ( 2 . ) The Manager of the___Bank. SlE, I beg to acknowledge the receipt of your favour of the_ instant, vdth the following enclosures. Sundi’ies for the Credit of your Bank £_ Undue Bills for deposit_ _do._^for_ Bills for accei3tance, and return_ ^Ye take due note of your advices, and on the other side hand you particulars of credits received on account of your bank. At foot you have statement of remittances from your branches, and note of unpaid bills and sundries enclosed. I am, Sk, Your most obedient Servant, _ General Manager. Remittances from Brandies. Unpaid Bills, &c., returned. Sundries enclosed. Branches. Cash. Bills. Name Amount. Xotg. Credits received on account of the _ Banking Company. No. Branches. On whose Account. By whom paid. Amount. 1 on Banking. 331 ( 3. ) To_ I beg to inform you that I have tliis day issued a Letter of Credit, No._^on your House in favour of_ _for the sum of £_which be pleased to honour on presentation. I am, &c. ( 4 . ) We beg to hand you enclosed_ draft on__of_for £_which we shall feel obliged by your collecting, and by your remitting the proceeds to this bank, less your customary charges. I am, &c. XIII .—Special Contracts, Those joint-stock banks that are not formed under the Act 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 enter into a special con¬ tract. This may be done by a letter addressed to the trus¬ tees personally, in a form similar to the following:— To A. B., C. D., and E. F. _18_ Gentlemen, You engaging that the_Banking Company shall pay to me whatever sums may be due to me on my current or other accounts with it, I hereby agree, as a separate contract with you, to i^ay to you or the survivors of you, after demand, the balance, if any, which shall at any time hereafter be due by me to the said Banking Company on those accounts or otherwise. I am. Gentlemen, Your obedient Servant, * These banks obtained in 1844 the power of suing and being sued in the names of their registered public officers. 332 A Practical Treatise XIV.— Notices of Calls for further Payment on Shares. _BANKING COMPANY. _ 18 _ Sir, I beg to inform you that the Board of Directors of tliis Company? agreeably to the powers contained in clause No._of the deed of constitution of the Company, have made a third call of £_ per share on each of the shares in the Company, and that the same will become payable on the_of___next. The certificate for your share is at__, and will be delivered to you on payment of £_, and in exchange for that now in your possession. You will please to take notice, that all pajunents for calls must be made free of postage, and in cash, on or before the_of _, otherwise they will not be received except with in¬ terest at the rate of 5 per cent, per annum from that date. I am. Sir, Your most obedient Servant, _ Manager. XV .—Certificates of Shareholders. Some banks exchange the old certificates for new ones after every call. Others do not grant new certificates ; and some do not issue certificates at all, unless a party request to have some evidence that he is a shareholder. ( h ) _BANKING COl^lPANY. London, the _ day of __18_ This is to certify, that_ ha this day become Member of the_Bank, in respect of_Shares of 100?. each, on which twenty pounds per share have been paid. Examined_ Secretary. Eegistered_ Director. 333 on Banking. ( 2 . ) BANKING COMPANY. CENTRAL BANK. Tliis is to certify that Mr._of- a proprietor of_^shares in the capital stock of the. Banking Company, on which. IS _per share has been paid. And as the j^roprietor thereof, he is entitled to all benefits and emoluments arising from such shares, agreeably to the deed of settlement of the company, dated the_day of. 18- As witness onr hand this, sand eight hundred and No. .1 day of. one thou- Eegistered. Two of the Directors of the Company. XYI .—Deed of Transfer. This deed is executed by the buyer and seller of any shares in the bank, after the directors have given their consent to the transfer. The followins: is the form of this instrument: This Indenture, made the. between__ day of. 18 of of .of the City of. _of the first part; of the second part; and _, trustees (appointed _Banking Company) by the board of directors of the_ of the covenant hereinafter contained of the third part. Whereas the said_has become the purchaser, with the approbation of the said board of direction, of_shares in the capital of the said company: on each of which shares the sum of _pounds still remains unpaid. Now this indenture witnesseth, that in consideration of the sum of _at or before the sealing and delivery of these presents paid by the said_to the said_ the receipt of wliich said sum of. the said doth hereby acknowledge, and from the same and every part thereof, doth release and for ever discharge the said_^liis heirs, executors, administrators, and assigns: the said_ _hath bargained, sold, and assigned, and by these presents doth bargain, sell, and assign unto the said_:_his executors, administrators, and assigns, all those the said shares of his the said_^in the capital of the_^_ Banking Company, and all benefits, advantages, powers, and privileges attending the same; to have, hold, receive, and take, the said shares hereby assigned, and the said benefits, advantages, powers, and privi- 334 A Practical Treatise leges attending the same, unto the said_his execu¬ tors, administrators, and assigns, for his and their own use and benefit. And the said_doth hereby, for himself, his heirs, executors, and administrators, covenant, promise, and agree, with and to the said_and_their executors and administrators, that in respect of the share hereby assigned, and all and every other share and shares which the said_ may hereafter purchase in the capital of the said company, he, the said _^his heirs, executors, or administrators, shall and will, well and truly, in all respects, observe, perform, and keep, all and singular the covenants, agreements, and provisions, contained in the deed of settlement of the said company, bearing date the_ day of_18_, so far as the same ought on his or their parts to be observed, performed, and kept. In witness whereof, the said parties to these presents have hereunto set their hands and seals, the day and year first above-written. Witness to the identity and signature of Signed, sealed, and delivered by_ In the presence of_ Memoeandum. It is needful that this document should be completed and left at the office of the company without delay, when a certificate of the shares will be given to the purchaser, into whose name the shares cannot be placed until this regulation is complied with. Xyil. — Circular Notes issued hy the London and Westminster Bank. LONDON AND WESTIMINSTEE BANK. c No._ Lettre de Credit Cieculaiee pour £_Sterlg. Londres, ce _18_ a Messieurs les Banquiers, designes dans nos Lettres d’Indication. Messieurs, Cette lettre vous sera remise par M._dont vous trouverez la signature dans notre Lettre d’Indication susdite. Je vous prie de vouloir bien lui compter sans frais quelconques, la valeur de _Livres Sterling, an cours a usance sur Londres contre sa traite ci-jointe sur cette Banque. J’ai Thonneur d’etre. Messieurs, Votre tres-obeissant Serviteur, Gerant. Secretaire. on Banking. 335 On the other side :— LONDON AND WESTMINSTER BANK. Londres, _ A sept jours de vue prefix payez a Fordre de M. _Livres Sterling, valeur re9ue. a _ ce 18 These Circular Notes are accompanied by the following Letter of Indication :— Lettee dTndication. LONDON AND WESTMINSTER BANK. Londres, ce _ 18 _ IMessieues, Le Porteur de cette Lettre, M.__,pour lequel nous reclamons vos attentions, est muni de nos Billets de Change Cir- culakes pour son voyage. Nous vous prions de lui en fournir la valeur sur son double acquit au cours du Change a usance sur notre place, et sans deductions de frais. Si la ville oii il en touchera le montant n’a pas de Change direct sur Londres vous voudrez bien en combiner un avec la place cambiste la plus voisine. Vous observerez que tout agio sur especes d’or, ou d’argent, et tous frais extraordinaires dans le cas d’un remboursement indirect doivent etre supportes par le porteur, et ne peuvent etre a notre charge. Cette Lettre devant accompagner nos Billets Circulaires doit rester dans les mains de leur Porteur jusqu’a leur epuisement. Nous avons Fhonneur d’etre. Messieurs, ' Vos tres-humbles et tres-obeissants Serviteurs, _ Gerant. _ . Secretaire. Foreign and Colonial Hanks on wMch.the London and Westminster Bank issue Letters of Credit and Circular Notes. EUROPE. Abbeville . MM. Henri Gavelle. Aix la Chapelle. , Charlier & Scheibler. Aix en Provence . Guitton Talamel. Alicante.Dahlander & Co. j Hesse Newman & Co. Altona.Grosee Elbe Strasse, I No. 26. Amiens . . jMJI. Amsterdam Ancona .... Angers .... F. Dufetel Grimaux & Co. Hope & Co. G. Terni & Son, Contra- da del Porto, No. 31. Veuve, D. Kichou & Fils. 336 A Practical Treatise & J. R. Bi?chofisheim. Jean Louis Lemme Co. t C. L. VT. IMerlin, Rue . Cecrops, Iso. 551 — I Plaka. . P. de Stettin. . Gilbert Jeune Fils. (F. S. Merer. • I C. Muller & Co. BagneresdeBigorre| ^ & Antwerp . MM. Athens . Augsburg . Avranclies . Baden-Baden Creuznach . MM. & Co., Iloch nou. Basle Barcelona Bayonne. Bergen Berlin . . Berne . . Besan9on . Bilbao . . Blois . . Bologna (Italy Bolzano . . Bonn . . Bordeaux . Boulogne s/in Bremen . Breslau . Brest Bruges . Briinn . Brunswick Brussels . Buchar^t Cadiz Caen Calais . Cambrai Caiines . Carlsbad Carlsruhe Cassel (Hesse) Catania . Cephalonia Cette. . Chambery Chamounix CJiaux-de-F onds Cherbourg . Christiania . Christiansand Civita Yeccliia Coblenz . . Coburg . . Coire (Orisons) Cologne . Constance Constantinople Coijenhagen Cortu . . ('ourtrai. Cl-acow . . •{ •{ ■! •{ Mengi- Passavant & Co. (Gerona Brothers, Clave I & Co. Rodripues & Salzedo. A. Grieg & Son. Herman D. Janson, Jun. Schickler Brothers. Marcuard & Co., 87, Rue du Marche, Cot€ Gauche. Jacquard & Co. Alban T. Jones. A Blanchon. G. B. Renoli. F. Tschurtshenthaler. f Jonas Cahn, Weichser I Hof, Ko. 855. Barton & Guestier. / Adam & Co., Rue de < I’Ecu, No. 18. ' Haft'reingue & Co. H. Schroder, Jun. Eichborn & Co. Edmond Pesrou. J. E. & L. du Jardin. J. Herring. 5 Lobbecke Brothers & 1 Co. Brugmann Fils. Halfon & Son. John Duncan Shaw. F. Guilbert & Co. Bellart & Fils, Rue Royale. N. Boniface & Fils. F. Rigal. A. F. Seifert. G. Muller & Co. Goldschmidt Brothers. F. Matthey & Co. Ionian Bank. E. Blouquier Fils & IV estphal. Victor Python. A. Mackenzie, Hotel Eniou. Pury & Co. Mauger Freres. Carl Christensen. . Jacob Morch. Lowe Brothers. A Jordan. J. H. Kehrmapn. Schraidt & Co. Masner & Braun. J. D. Herstatt. Macaire & Co. Charles S. Hanson & Co. Frcilich & Co. Ionian Bank. B. Van Dorpe. A Hoelzel. • Cusset, near Vichy Dantzic . . . . Darmstadt , . . Deuia . . . . Dieppe . Dijon Dinan . Drammen Dresden. Dronthelm Dusseldorf Elberfeld Elseneur Emden . Ems . . Florence. Foix Frankfort o/m. Freiburg in Breis- gau, Bdden ) . Stras.se, No. 66. Augte. Butin & Co. . Gib^ne & Co.' . J. A. Zoeppritz. . J. Morand & Co. r George Chapman, Rue I des Tribunaux. .< Osmont Dufour & Co., j Place du Theatre, I No. 9. Maloir, Guiot & Co. Payoux. Jacob Borch. ( H. W. Bas.senge & Co., < Marche Neuf, No. 6. ^ M. Kaskel. Jenssen & Co. S Baum Boeddinghaus & ) Co. ( Von der Heydt Kersten I &Son. N. & C. Fenwick. Y. & B. Brons. Becker & Jung. French & Co., Piazza Sta. Trinita, No. 14. Maquay and Paken- ham,Via Tomabuoni, No. 5. Emanuelle Fenzi & Co. C. Capdeville & Co. Gogel Koch & Co., 41, Grosse Eschenheimer Gasse. M. A. de Rothschild & Son. I Joseph Sautier. Freiburg (Snitz.) . F. Goeldlin. Fiirth (near Nu- (Feuchtwanger Bro- Gotttngen ■I Granada (Spain) . |' remberg) . . } tliers, Galatz .... Ottoman Bank. Geneva .... Lombard, Odier & Co. Genoa .... Granet, Bro^vn & Co. Ghent .... La Banque de Flandre. Gibraltar . . . Archbold & Co. Gothenburg . . D. Carnegie & Co. H. & F. Klettwig & Reibstein. J. M. Rodriguez y Acosta. ( Boisnard, Grandmaison I & Co. . Honore Isnard. . Charles Greinitz. C Gaillard, Pere Fils & • I Co. . Scheurleer & Son. ( H. M. Conitz & Co. * ( Salomon Heine. . L. & A. H. Cohen. (Dubois & Co. ■ 1 Etienne Troteux. ( Kiister, Vom Rath & .< Co., 120, Westhche ' Haupfetrasse. Homhure- Baths of i Goldschmidt, Horn burg, Paths oi | Louj^en Strasse 314. Honfleur . . . G. Duval aine. Granville Grasse . Gratz Grenoble Hague, The Hamburg Hanover Havre . Heidelberg Innspruck Interlaken Ischl .Tena Kissingen F. J. Habtmann. Ebersold & Seiler. Carl Gottwald. j Julius Elkan. H. F. Kugelmann. on Banking. 837 Konigsberg. MjM Lausiinne . . Leghorn Leipsic . . Lifege . . Lille. . . Lindau ; - Lintz . . Lisbon . . Lode. . . •Lubeck . . Lucca . . Do. Baths of Lucerne Lugano . . Lyons . - Madeira Madrid . . Magdeburg Malaga . Malta . , Mannheim Marienbad Jlarseilles Mayence Meiningen Meniel . Mentone Messina . Metz Middleburg Milan Montpellier Moscow. . 3Iunich . . Munster. . Nancy . Nantes , . Naples . . Neuchatel . Nice . . . Nismes . . N uremberg Odes.sa . . OiX)rto . . Orleans . . Ostend . . Palermo. . Paris. C. L. Andersch. Charles Bugnion. Macbean & Co., Via Borra, No. 7. Maquay, Pakenham & Smyth, Via Borra, No. 7. Frege & Co. (De Sauvage, Vencour \ &Co. Rouze Mathon. E. & F. V. Pfister. (J. M. Scheibeniwgen \ Eidam. H. G. Scholtz. Pury & Co. Miiller Brothers. C Rafiaele D. Cosimo. \ Giorgetti Erede Petri, t Plowden & French. \ Maquay & Pakenham. F. Knoerr & Fils. J. de la Grange. Veuve Guerin & Fils. Robert Bayman. Tapia, Bayo & Co. ) Teetzmann, Roch & I Alenfeld. Hernandez Crooke& Co. Jas. Bell & Co. { H. L. Hohenemser & \ Son. ( W. Keister & Co. A Benedickt. Salavy Pere, Fils & Co. G. L. Kayser. B. M. Strupp. Henry Fowler & Co. L. Bioves & Co. Cailler & Co. ( The Nephew of F. G. } Simon. A. H. G. Fokker. Carli & Co. 5 E. Blouquier Fils & X Westphal. Wogau & Co. R. de Froelich & Co. A. Schmedding & Son. Jules Elie, Rue Drouot. Gouin Pere, Fils & Co. ( C. M. de Rothschild & Son. 1 W. J. Turner & Co. ^ Nicolas Du Pasquier & Co. E Carlone & Co., Quai St. Jean Baptiste, No. 51, Maison Carlone. A. Lacroix & Co. E. Bayle & Co. I^eonard Kalb. E. Mails & Co. D. M. Feuerheerd Jun. &Co. Ducrot Pere & Fils. Bach & Co. Thomas Brothers. f Callaghan & Co., Rue I Neuve des Mathurins, 1 No. 40. De Rothschild Freres. Chas. Latlitte & Co., Rue Bas.se du Rem- part. No. 48 bis. I Parma . Patras . Pau . . Perpignan Pesth I Pisa . . I ' Prague . Rastadt . Ratisbon Revel Rheims . Rome Rostock . I Rouen . I Rotterdam Salzburg I Santander ! Schafthausen i Schwalbach Seville . Sienna . Smyrna . St. GaU . St. Malo. St. Omer St. Petersburg St. Quentin St. ^bastia Spa . . Stettin . Stockholm Stuttgard Stralsund tetreVsburs Tarbes . Thun . Tciplitz . Toulon Toulouse Tours Trent . Treves . Trieste . Turin . Valencia Venice . Verona . Vevay . ■{ MM. G. B. Campolonghi. . Ionian Bank. r Merillon aine & Frere. . •! Masgrave Clay, Rue t Latapie, No. 19. F. Durand. C. J. Malvieux, Maria Dorothea Gasse, No. 6. ( Maquay Pakenham & Smyth. ( F. Peverada. . Leopold Liimel. . F. S. Meyer. . Haymann & Co. (Thomas Clayhills & ■ X Son. J Ruinart Pere & Fils, .J Place de I’Hotel de ( Ville. Plowden Cholmeley & Co., Corso, No. 234. Macb^n & Co., Corso, No. 378. Maquay, Pakenham & Hooker, Piazza di Spagna, No. 20. . Edward Burchard. . Pecuchet & Lain^. . D. & C. Blankenheym. i Spath, Jun. & Co., Nieu Waagplaz, No. 52, op¬ posite the Hotel Arch¬ duke Charles. . Francisco Alday. . Carl Gy. Hunter, jvr T^rlp ! Cahill, White & Co. . Maquay & Pakenham. . Hanson & Co. 5 J. J. Mayer, Jun., Frei- ■ X hoof, Miillerthor. . P. Fontcin. . A. Caffieri. '. . M. Anderson & Co. . Lecuyer & Co. . Jose y Franco Bnuiet. . Henri Hayemal. 4 Goltdammer & Schleich ' X Nachfolger. . Tottie & Arfwedson. . G. H. Keller’s Sons. . F. A. Spalding & Son. . Ed. Klose & Co. Liicay Pere & Fils, d. W. Knechtenhofer, ^ near Bellevue. ^ Emanuel Mayer, Lange t Gasse, No. 147. . Trabaud Frferes. f Courtois & Co., Rue des ■ X Coutellers. No. 6. . Gouin Freres. . Heer & Co. . Reverchon & Co. 4 J. Collioud & Co., Riva ■ X Pescatori, No. 1415. . Nigra Brothers. 4 White, Llano & Mo- ' X rand. 4 Schielin Brothers, Cam- po della Fava, No. ( 5525.* . Siuania Brothers. . Gen ton & Co. {• VOL. I. Z 888 A Practical Treatise Vienna . Vichy . Vigo. . Utrecht . Warsaw. MM.j ; M. L. Biedermann & Co. Fred Schey. ]\r. H. Weikersheim & Co. Augte. Butin & Co. ]\Ienendez, Barcena & Son. Vlaer and Kol. S. A. Fraenkel. Weimar . M3I. ^Viesbaden. . . Wildljad , . . Worms . . . . Wurzburg . . . Zante . . . . Zurich . . . . Aleppo . . Bagdad . Beyrout . . Canton . . Hong Kong . John Kennedy. . A. Hector & Co. . Henry Heald & Co. . Gilman & Co. 5 Agra and United Ser- ■ X vice Bank. ASIA. Jerusalem . . . Shanghai . . Trebizond . . . Alexandria. Algiers . . Cairo Cape Town AFEICA. Bank of Egypt. Briggs & Co. Franqueville & Co. Bank of Egypt. Briggs & Co. Cape of Good Hope Bank. H’Urban . . . Graham s Town . Oran . . . . Pietermaritzburg . Port Elizabeth Tenerifle . . . NOETH AJilEEICA. Barrie .... Belleville . . . Boston . . . . Brantford . . . Brockville . . . Charlotte Town . Chicago .... Cincinnati . . Coburg . . . . Detroit (Michigan) Goderich . . . Guelph . . . . Halifax .... Halifax, N.S. . . Hamilton . . . Kingston . . . Lindsay . . . . London . . . . Mexico . . . . Montreal . . . Bank of Upper Canada. ( Bank of Upper Canada. ( Bank of Montreal. James S. Amory. ( Badk of British North ( America. Bank of Upper Canada. I Bank of Prince Ed- X ward’s Island. Bank of Montreal. La Fayette Bank. Bank of Montreal. Peninsular Bank. Bank of Montreal. Bank of Montreal. ( Bank of British North X America. i Union Bank of Hali- X fax. ( Bank of British North America. ( Bank of Upi)er Canada. ( Bank of British North < America. ( Bank of Upper Canada. Bank of Upper Canada. ( Bank of British North America. ( Bank of Upper Canada. McCalmont Bros. & Co. ^ Bank of British North ( America. Montreal—conW. . New York , . . Ottawa .... Perth .... Peterboro . . . Philadelphia . . Pictou .... Port Hope . . . Quebec . . . . • San Francisco . . Sarnia .... Simcoe .... St. Catharines . . St. John (New Brunswick) . St. John (New- •I Victoria (Vane. Island) . . . Washington . . Whitby .... Windsor . . . foundland) . Three Rivers . Toronto. . . j Vera Cruz . . Bahia . . . Buenos Ayres . Monte Video : Pard. . . . Pelotas . . . Porto Alegre . SOUTH AMEEICA. Douglas, Latham & Co. Mau^ «fc Co. » Rio de Janeiro. . Rio Grande de Sul Rosario . , . . Santos . . . . St. Pauls Tampico . . . Julius Elkan. Charles Kalb, Jun. W m. Klumpp. P. J. Valckenberg. G. Ochninger. Ionian Bank. Gaspard Schulthess & Co. 31. P. Bergheim. Agra and United Ser- ( vice Bank. Fras. J. Stevens. Natal Bank. Eastern Province Bank. Giraud Brothers. J. R. ilanegat & Co. Natal Bank. Port Elizabeth Bank. Bruce, Hamilton & Co. Bank of Upi)er Canada. Bank of ilontreal. James G. King’s Sons. Bank of Upper Canada. Bank of ilontreal. Bank of Slontreal. S. 3Iorris, Waln & Co. Bank of 3Iontreal. Bank of Upper Canada. Bank of British North America. Bank of Upper Canada. Davidson & Berri. Bank of Upper Canada. Bank of ilontreal. Bank of 3Ionti‘eal. Bank of British North America. Commercial Bank of Newfoundland. Bank of Upper Canada. Bank of British North America. Bank of Upper Canada. C. 3Iarkoe. 3IcCalmont Bros. & Co. Bank of British North America. Riggs & Co. Bank of Jlontreal. Bank of Upper Canada. 3Iau(l, Slacgregor & Co. JIausi & Co. Stewart L. Jolly & Co; Agra. . . . Batavia (Java) Bombay, . . Calcutta. . . Colombo . . Delhi . . Kurrachee . . Barbados . . Trinidad . . Grenada . . St. Vincent. . St. Lucia . . Dominica . . Antigua. . . St. lutts . . Adelaide . . Adelong Agency Albury . . . Ararat . . . Auckland . . Avoca . . . Ballarat. . . Barkly . . . Biithurst . . Beechworth. . Belfast (Victoria) Brisbane. . . Burrangong Carcoar . . . Castlemaine. on Banking. 339 EAST { Agra and United Ser- t vice Bank. Maclaine, Watson & Co. C Agra and United Ser- \ vice Bank. G. Steuart & Co. ( Delhi Bank Corpora- \ tion. (Agra and United Ser- I vice Bank. INDIES. Lahore . . . Lucknow . , Madras . . , Mauritius . . Point de Galle Singapore . , Umritsir. . , (Agra and United Ser- ■ \ vice Bank. < Delhi Bank Corpora- • ( tion. (Agra and United Ser- ■ I vice Bank. . Ireland, Fraser & Co. . Wilson, Clark & Co. . Hamilton, Gray & Co. ( Agra and United Ser- ■ \ vice Bank. WEST INDIES. Colonial Bank. Demerara . . . Berbice .... Jamaica (Kings- ( ton) ^ Do. (Montego Bay) St. Thomas . . St Croix. . . . Colonial Bank. AUSTKALIA, Etc. i Union Bank of Aus- J tralia. ( Bank of Australasia. ] Bank of New South ' I Wales. Bank of New South Wales. Commercial Banking Company of Sydney. London Chart. Bank of Australia. Bank of New South Wales. Union Bank of Aus¬ tralia. Bank of New South Wales. Bank of Victoria. ' Bank of Victoria. Union Bank of Aus¬ tralia. London Chart. Bank of 1 Australia. Bank of New South Wales. . Bank of Australasia. 5 London Chart. Bank of ' ) Australia, t Bank of New South I Wales. I Bank of Victoria. I Bank of New South ’ j Wales. ( Bank of Australasia, i Bank of Victoria. ' X Bank of Australasia. Union Bank of Aus¬ tralia. Bank of New South Wales. Tank of Australasia, l Commercial Banking ’ \ Company of Sydney. r Bank of Victoria. I Union Bank of Aus- J li Q I Bank of N.S. Wales. V Bank of Australa.sia. ChUtern Agency Christchurch Creswick Cooma . . Deniliquin . Dunedin Dunolly Echuca . . Gawler . . Geelong. . . Goulburn . . Hamilton . . Hobart Town . Inglewood . . Invercargill Ipswich (Queens land) . . . . Kadina . . . . f Bank of New South i Wales. Union Bank of Aus¬ tralia. Bank of New South Wales. yy yy i Commercial Banking I Company of Sydney. (Bank of New South X Wales. Union Bank of Aus¬ tralia. Bank of New South Wales. (London Chart. Bank ( of Australia. { Bank of Victoria. } Bank of New South ( Wales. I South Australian ( Banking Company. ( Bank of Victoria. Union Bank of Aus- I tralia. j London Chart. Lank of Australia. Bank-of New South Wales. Bank of Australasia. i Bank of New South X Wales. Bank of Victoria, i Bank of Van Diemen’s ( Land. London Chart. Bank of Australia. Bank of New South Wales. Union Bank of Aus¬ tralia. Bank of New South Wales. ( Bank of New South '.J Wales. ( Bank of Australa.sia. ( South Australian ( Banking Company. z 2 340 A Practical l^reatise Kiama . . Kiapoi . . Kyiieton Launceston Linton . . Lyttleton . ^laitland IMaldon . jMaryborough Melbourne . lilorpeth Mudgee . Napier . . Nelson . . Newcastle . Orange . . Parramatta. Penrith Perth . . •1 •{ •{ •{ •1 ■I { { 1 I { { 1 Commercial Banking Company of Sydney. Bank of New South Wales. Bank of New South Wales. Bank of Van Diemen’s Land. Bank of New South Wales. Union Bank of Aus¬ tralia. Bank of New South Bank of New South W ales. Commercial Banking Company of Sydney. Bank of Australasia. Bank of Victoria. Bank of New South Wales. Bank of Victoria. London Chart. Bank of Australia. Commercial Banking Company of Sydney. Bank of Victoria. Union Bank of Aus¬ tralia. London Cliart. Bank of Australia. Bank of New South Wales. Bank of Australasia. Commercial Banking Company of Sydney. Bank of New South Wales. Union Bank of Aus¬ tralia. Union Bank of Aus¬ tralia. Bank of New South Wales. Bank of New South Wales. Bank of Australasia. Bank of New South Wales. Commercial Banking Company of Sydney. Bank of New South Wales. Western Australian Bank. Pleasant Creek Port Adelaide Port Albert Portland Queanbeyan Raglan . . Red Bank . Robe Rockhampton Sale Sandhurt f Bank of New South I Wales. I Union Bank of Aus- \ tralia. Bank of Victoria. Bank of Victoria. Union Bank of Aas- tralia. Bank of Australasia. 5 Commercial Banking ( Company of Sydney. Bank of Victoiaa. (London Chart. Bank ) of Australia. Ji South Australian i Banking Company. Union Bank of Avls- tralia. Bank of New South Wales. Bank of Victoria. Bank of Victoria. Union Bank of Aus¬ tralia. Bank of New South Wales. Bank of Australasia. Union Bank of Aas- tralia. London Chart. Bank of Australia. Sydney . . . •■er Sch. Pre- mium cts. marc in mium Per in the Per fine. the Per Per Cents'. Per niille. Fes. Cts. £ cent. Marcs. Mcs. Sch. £ cent. cent. Flor. cts, cent. 0 25 14f * •01 430 13 7* i •06 13 11 93* * •02 i 1 >9 99 15i 17 * i •02 •03 * * 99 99 6 5 f * f •11 •17 i 99 94* * •04 u 99 18* 1 •04 f 99 7 8 * •23 * 99 96 * •06 2 99 19* 2 •08 431 13 8 5 8 •29 3 97* 1 •08 2i 99 20* 3 •12 * 99 * . *34 8 99 3 99 22 4 •16 * 99 * i •40 * 99 00 2 •17 31 99 23* 5 •20 i 99 I 1 •46 5 12 3 •25 4 99 24* 6 •24 432 99 * 2 •92 8 99 25* 7 •28 * 99 6 8 3 1-38 f 99 01* 4 •33 5 •9 27 8 •32 * 99 * 4 1-84 i 02* 5 •42 5i 99 28* 9 •36 * 99 7 8 5 2-30 99 6 99 29* 10 •40 433 13 9 6 2-76 14 99 04 6 •50 61 1 99 99 30* 32* y 12 •44 •48 * * 99 99 i * * 99 05* 7 •58 n 99 33* 13 •52 f 99 1 * 99 06* 8 •67 8 99 34* 14 •56 434 99 * 3 08 9 •75 Si 99 36 15 •60 * 99 5 8 8 9 99 37* 16 •64 * 99 * i 99 09* 10 •83 H 10 99 38* 39* 17 18 •68 •72 * 435 99 13 i 10 6 8 99 10* 11 •92 10^ 99 41 19 •76 * 99 * * 99 12 12 1- 11 iH 99 99 42* 43* 20 21 ■80 •84 * * 99 99 * 3 8 i 99 13* 13 1-08 12 99 44* 22 •88 436 99 * 15 99 14* 14 1-17 \2i 99 46 23 •92 * 99 5 8 X 16 15 1-25 13 99 47* 24 •96 * 99 * 8 99 13i 48* 25 1- * 99 * 9 > 17* 16 1-33 14 99 49* 26 1-04 437 13 11 3 18* 17 1-42 Hi 99 51 27 1-08 * 99 i 8 9 > 15 99 52* 28 1-12 * 99 * * 9 » 20 18 1-50 15^ 99 53* 29 1-16 * 99 3 8 5 21* 19 1-58 •16 99 54* 30 1-20 438 99 * 8 9 > 16i 99 56 31 1-24 * 99 5 8 * 99 22* 20 1-67 17 171 99 99 57* 58* 32 33 1-28 1-32 * i 99 99 * 7 8 • 7 9 » CO 21 1-75 18 99 59* 34 1-36 439 13 12 16 25* 22 1-83 18i 99 61 35 1-40 * 99 * 23 1*92 19 99 62* 36 1-44 * 99 * 19i 99 63* 37 1-48 99 24 2- 20 99 64* 38 1-52 440 99 * 25 2-08 201 99 66 39 1-56 21 99 67* 40 1-60 26 2-17 2li 99 68* 27 2-25 22 99 69* 22i 99 71 28 2-33 23 23i 99 99 72* 73* • 29 2-42 24 99 74* - 30 2-50 24i 99 76 25 99 77* Method of Use — -(For example, take Parts.)— Ascertain the premium on gold at Pai*is - say 9 per mille ; in the left-hand column, against 9, will be found the rate of ex- change per pound sterling produced francs 25'37i. From that rate, deduct the exchange on London at short — say francs 25-27L leaving a remainder of 9i centimes per pound sterling. In the second column it will be found that 9| centimes in the pound sterling are equal to '39 per cent. ; consequently, gold is ‘39 per cent, dearer in Paris than in London. Note.- -If the rate of exchange produced by gold in Paris be lower than the exchange at short on Ix)ndon, gold \vill be dearer in London than in Paris. 342 A Practical Treatise XIX .—A Table of English Money reduced into PRUSSIAN COIN. At 6 th. 20 sg. FRANKFORT COIN. 11 gul. 64 kr. DUTCH COIN. 12 guild. FRENCH COIN. 25 fr. 10 cts. £ s. d. Tha. Sq. Pf Gul. Kr. Ha. Gld. Cts. Fr. Cts. • • 1 • • 10 o o 05 • • 10 • • 2 1 8 6 10 • • 20 • • 3 2 6 9 15 * , 31 • • 6 5 17 • • 30 • • 62 1 10 35 • • 60 1 25 2 20 1 11 1 20 2 51 3 1 • • 1 47 1 80 3 76 4 1 10 2 22 2 40 5 02 5 1 20 2 58 3 6 27 10 3 10 5 57 6 12 55 15 5 .. 8 55 9 18 82 1 6 20 11 54 12 25 10 2 13 10 23. 48 24 50 20 .3 20 35 42 36 75 30 4 26 20 47 36 48 100 40 5 33 10 59 30 60 125 50 6 40 * , 71 24 72 150 60 7 46 20 83 18 84 175 70 8 53 10 95 12 96 200 80 9 60 107 06 108 225 90 10 66 20 119 120 251 20 133 10 238 240 502 30 200 357 360 753 40 266 20 476 480 1004 50 333 10 595 600 1255 60. 400 714 720 1506 70 466 20 833 840 1757 80 533 10 , * 952 960 • • 2008 Pkussian Coin. —Thaler, Silbergrossch, and Pfenning. 1 thaler = 30 silbgr. 1 silb. = 12 pfennings. Franktort. —Gulders, Kreutzers, and Hellers. 1 gulder = 60 krentz. 1 kreutz. = 4 hell. Dutch. —Guilders and Cents. 1 guild. = 100 cents. Belgium and France. —Francs and Centimes. 1 franc = 100 centimes. on Banking. 343 Value at which the following Coins are generally current. PUTJSSIA. Frank¬ fort. Holland. Belgium AND France. Th. Sq. Gul. Kr. Guil. Cent. Fr. Cent Sovereign. 6 20 11 50 12 • • > 25 • . English Shilling .... • • 10 - • 35 • • 58 1 20 Dutch 10-guilder-piece . 5 20 9 54 10 • • 21 16 Ducat. 3 4 5 30 5 60 11 60 Guilder. 17 • • 58 1 2 11 Fred. d’Or. 5 20 9 44 9 80 21 • • Prussian Thaler .... 1 • • 1 45 1 70 3 70 French Crown Thaler. 1 16 2 44 Braband ditto .... 1 16 2 42 2 65 , * Convention ditto .... 1 10 2 24 Piece of 20 Kreutzers • • 6 • • 24 20-franc Piece. 5 12 9 30 9 54 20 5-franc ditto. 1 10 2 20 2 35 5 l-franc ditto. • • 8 • • 28 • • 48 1 • • The above table has been circulated by the General Steam Navigation Company. On this subject I would refer to Mr. Waterston’s ‘Manual of Commerce: being a Compen¬ dium of Mercantile Tables, British and Foreign Moneys, Weights, and Measures, and the Theory and Practice of Ex¬ change.’ (Simpkin, Marshall & Co.) We think also this is a proper place to introduce the following account of the origin of English Coins :— ‘‘ Pound. —Though a pound is one of the most common denominations for money, it never was a real coin, either in gold or silver, in any age or country. Such large and ponderous coins would have been in many respects inconvenient. But for many ages, both in Britain and in other countries, that number of small coins which was denominated a pound in computation, or a pound in sale, really contained a pound of silver, and they might have been and frequently were weighed, as well as numbered, to ascertain their value. If the number of coins that were denominated a pound in sale did not actually make a pound in weight, an additional number of coins were thrown in to make up the weight. "‘Money was coined in the Temple of Juno Moneta, whence our English word money. “Coin. — Com {cuna, pecunia) seems to come from the French i. e. angulus, " a cornerwhence it has been held that the most ancient sort of coin was square with corners, and not round as it now is. Cash. — Cash in a commercial style signifies the ready money which Practical Treatise 344 a merchant or other person has at his present disposal, and is so called from the French term caisse, i. e. * chest or coffer,’ for the keeping of money. Guinea. —Tliis coin took its denomination Guinea, because the gold whereof the first was struck was brought from that part of Africa so called; for which reason it likewise formerly bore the impression of an elephant. “ The value or rate of the guinea has varied. It was first struck on the footing of 20s.; but, by the scarcity of gold, was afterwards advanced to 21s. 6o?., and again sunk to 21s. “ Angel. —The angel, called in the French angelot, was a gold coin value 10s., struck in England, where some few are still to be seen in the cabinets of the curious. It had its name from the figure of an angel represented on it; which figure was adopted, according to Eapin and others, to commemorate a pun of Pope Gregory the Great, wliich seems to have greatly flattered the vanity of the nation. Struck vuth the fair complexions and blooming comitenances of some Anglo-Saxon captives who had been brought to Pome, he inquired of what nation they were, and what they were called, and being answered Angles — ‘ Justly be they so called,’ quoth he, ‘ for they have angel-liikQ faces, and seem meet to be made co-heirs with the angels in heaven.’ “ Shilling.* —The etymology of the word scylling would lead us to suppose it to have been a certain quantity of uncoined silver; for whether we derive it ixom pcylan, ‘to divide,’ oxpceale, ‘a scale,’ the idea presented to us by either word is the same; that is, so much silver cut off, as in China, and weighing so much. “ There were none coined till 1504. Fabian mentions them under their proper names, 34 Henry the Eighth. “ A Tester. — Tester is derived from the French word tete, ‘ a head;’ a piece of money stamped with a head, wliich in old French was called f un testion,’ and which was about the value of an old English sixpence. ‘ Tester ’ is used by Shakspeare. “ Tester, sixpence, from teston, French, an old silver coin, formerly worth 12(?., sinking by degrees to gilt brass, and sixpence. “ Groat. —Other nations, as the Hutch, Polanders, Saxons, Bohemians, French, &c. have likewise the groats, groots, groches, gros, &c. In the Saxon times no silver coin bigger than a penny was struck in England, nor after the Conquest until Edward the Third, who, about the year 1351, coined grosses, i. e. groo.ts, or great pieces, which went for 4c?.; and so the matter stood till the reign of Hemy the Eighth, who, in 1504, first coined shillings. “ Penny, Halfpenny, Farthing. —Camden derives the word ‘ ’ from the Latin pecunia, ‘ money.’ “ The ancient 'EngliAi penny, p)enig, ox pening, was the first silver coin * Tlie iluriii or 2s. piece was fiist issued iii August, 1819. on Banldny. 345 struck in England; nay, and the only one current among our Saxon ancestors; as is agreed by Camden, Spelman, Dr. Hicks, &c. ” The penny was equal in weight to our three-pence; five of them made one sliilling, or scilling, Saxon; thirty, a mark, or mancuse, equal to our Is. 6c/. “ Until the time of King Edward the First, the penny was struck with a cross so deeply indented in it, that it might be easily broke, and parted, on occasion, into two parts, thence called half-pennies ; or into four, thence called fourthings, or farthings. But that prince coined it without indenture; in lieu of which, he first struck round halfpence and fartliings. ‘‘ He also reduced the weight of a penny to a standard; ordering that it should weigh tliirty-two grains of wheat, taken out of the middle of the ear. Tliis penny was called the penny sterling. Twenty of these pence were to weigh an ounce; whence the penny became a weight, as well as a coin. “ The penny sterhng is now used less as a coin, and subsists cliiefly as a money of account, containing the 12th part of a shilling, or the 240th part of a pound.”* XX .—Form of Bond of the G-uarantee Society. Public Companies Form. Agreement, No. GUAEANTEE SOCIETY. Articles of Agreement made and entered into the __ day of _, in the year of our Lord one thousand eight hundred and _, between the three Directors of the Guarantee Society, whose names are hereunto subscribed, on the part and on behalf of the said Society of the first paH, and _ _ of the second part. Whereas the said parties hereto of the second paid have Preamble, applied to the said Guarantee Society for a guarantee to the extent of_pounds, against any loss to be sus¬ tained by the said _L_ by or tlu’ough any fraud or dishonesty of_of_ while employed by the said city of_ __ in the capa- And the said society have agreed to enter into such Guarantee accordingly, on the terms and subject to the provisions and conditions herein contained and hereimder written. Now these presents witness, that in Considera- consideration of the premises, and of the sum of_ paid on behalf of the said_as a iiremium for such guarantee from the_day of_ tion. * From ‘ Notes of a Bookworm.’ 34G A Practical Treatise Guarantee Notice of fraud to be given within ten days. Security now given to be the funds and property of the society after dis¬ charge of prior claims. until the _ day of _ , one thousand eight hundred and_, both inclusive, being one year and part of another year: It is hereby agreed and de¬ clared, that from the said_day of_ to the last day of_and thence for one year, videlicet to the last day of_, one thousand eight hundred and_inclusive, and for every succes¬ sive term of twelve calendar months for and in respect of which the premium 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) during 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 hereunder •written, wliich 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 expiration 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 & 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 receipt 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 said_shall witliin ten days after the discovery of any matter in respect of which any claim may be intended to be made, 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 for the time being remaining undisposed of, and inapplicable to prior claims and demands, according to the provisions of the said deed of settlement, shall alone be subject to any claim in respect hereof, and that neither any director executing these presents, nor any proprietor or holder of shares in the capital 347 have power to prosecute. on Banking, 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 demands, as shall not for the time being have been paid up. Provided also, and Society to it is hereby agreed and declared, that the said_ shall, in case of making any such claim in writing as aforesaid, forthwith, 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 wliich such claim shall have arisen, and personally appear upon any examination or examinations of the said_ and at his trial; and in that case the said society shall be at liberty, at their own costs and charges, to carry on any prose¬ cution 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 damages in respect thereof,_ . being 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 pay- any such loss shall have been satisfied by or on behalf of the account of said society, an indorsement in satisfaction of all claims shall fraud or dis- be made hereon, and signed by the person or persons to whom SoSed^^ the amount of such loss shall be paid or satisfied, and there- these^e”^ upon these presents shall be given ujd to and for the benefit of sents given the said society, to be of no further force or effect against s^ciety!^^ them. In witness whereof, the said parties hereto have here¬ unto subscribed their names the day and year first above written. Witness to the signatures of f -—- the three directors. < --- Witness to the signatures of above named. CONDITIONS OF ASSURANCE. In the event of any loss for wliich the society shall be Liable, such loss shall be borne by the society, rateably only, and in common with any other person or persons who have already, or shall hereafter during the continuance of this guarantee, become security for tlie said _ _ _in the service or employment above mentioned, according to the amount for ’ivhich eacli shall be guarantee. 348 A Practical Treatise The above agreement is subject to the condition that the answers which have been given and signed by the said __ arid by the said__to the questions lettered from A to 1, both inclusive, submitted by the society, and contained in 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. Examined and registered __ XXI.— Government Annuities. The following is the Government Table, and shows the sum requii’ed to be paid for an Immediate Annuity of Twenty pounds, and in propor¬ tion for any sum not less than 4?. nor exceeding 30?. per annum. AGE. If 15 and under 16 £ 377 s. 15 d. 6 If 48 AGE. and under 49 £ 271 s, 0 d. 4 16 >9 17 374 4 1 49 99 50 265 1 4 17 18 370 16 7 50 99 51 259 0 4 18 9? 19 367 14 6 51 99 52 252 18 11 19 99 20 364 19 11 52 99 53 247 1 8 20 99 21 362 12 2 53 99 54 241 5 11 21 99 22 360 10 5 54 99 55 235 12 7 22 99 23 359 0 4 55 99 56 230 1 5 23 99 24 357 12 6 56 99 57 224 11 8 24 99 25 356 4 7 57 99 58 219 3 8 25 99 26 354 15 3 58 99 59 213 15 9 26 99 27 353 3 0 59 60 208 6 2 27 99 28 351 1 8 60 99 61 202 14 4 28 99 29 348 17 1 61 99 62 196 17 5 29 99 30 346 9 5 62 99 63 190 14 11 30 99 31 343 18 10 63 99 64 184 8 0 31 99 32 341 5 5 64 99 65 178 1 0 32 99 33 338 9 5 65 99 66 171 14 2 33 99 34 335 9 11 66 99 67 165 7 5 34 99 35 332 6 9 67 99 68 159 9 1 35 99 36 328 19 11 68 99 69 153 12 0 36 37 325 9 11 69 99 70 147 16 2 37 38 321 17 7 70 99 71 142 2 6 38 39 318 2 11 71 99 72 136 11 9 39 •9 40 314 6 7 72 99 73 131 3 7 40 99 41 310 7 9 73 99 74 125 14 8 41 99 42 306 5 10 74 99 75 120 1 5 42 99 43 301 18 6 75 99 76 114 4 7 43 99 44 297 7 10 76 77 108 4 3 44 99 45 292 12 6 77 99 78 101 7 5 45 99 46 287 12 6 78 99 79 94 11 10 46 47 282 7 10 79 99 80 88 1 10 47 99 48 276 16 0 SO or any greater age 81 14 10 Annuities on the above terms are granted by the Saving's Banks. By the Act 10 Geo. IV. c. 24, the Commissioners for the Eeduction of 349 on Banking. the National Debt are empowered to grant life annuities and annuities for terms of years. The terms vary according to the price of Stocks Tables can be obtained on application at the National Debt Office, Old Jewry, London. XXII. —Comparative View of the Expectation of Life according to the different Tables of Mortality. Age. Northampton. Carlisle. Government Annuitants. Male. Female. 0 25*18 38*72 50*16 55*51 1 32-74 44*68 50*13 55-59 5 40-84 51*25 48-93 54*23 10 39*78 48-82 45*57 51-05 15 36-51 45-00 41*76 47*19 20 33-43 41-46 38*39 43*99 25 30*85 37-86 35*90 40-81 30 28*27 34*34 33*17 37-57 31 27*76 33*68 32*59 36*91 32 27*24 33*03 32 00 36*26 33 26*72 32*36 31*40 35-61 34 26-20 31*68 30-79 34*96 35 25-68 31*00 30-17 34-31 36 25*16 30-32 29*54 33*68 37 24*64 29-64 28-91 33-04 38 24*12 28-96 28*28 32*40 39 23*60 28*28 27-65 31-76 40 23*08 27*61 27*02 31*12 41 22-56 26*97 26*39 30*46 42 22*04 26*34 25*74 29*81 43 21*54 25*71 25*08 29*14 44 21-03 25*09 24*42 28*48 45 20*52 24*46 23*75 27*81 50 17*99 21*11 20*30 24*35 55 15*58 17*58 17*15 20-79 60 13*21 14-34 14*39 17*32 65 10-88 11.79 11*63 14*00 70 8*60 9*18 9*22 10*99 75 6*54 7*01 7*12 8*46 80 4*75 5*51 4-94 6*50 85 3*37 4*12 3*12 4*84 90 2*41 3*28 1.95 2*83 95 0*75 3-53 1*18 1 * 55 100 '■ 2-28 ■■ 0*50 .4 Practical Treatise ;ir)() XXIII .—A Table indicating the rate per cent., yielded by Shares or Stocks, at their Market Prices. o o 0) 2 • WHEN THE RATE OF DIVIDEND DECLARED UPON EACH SHARE IS OJ ^ o a o 2 iier 21 per 3 per 3i per 4 per 4l per 5 per 5i per 6 per Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent. £ £ S. d. £ s. d. £ s. d. £ S. d. £ s. d. £ S. d. £ s. d. £ S. d. £ S, d. 50 4 0 0 5 0 0 6 0 0 7 0 0 8 0 0 9 0 0 10 0 0 11 0 0 12 0 0 51 3 18 5 4 18 0 5 17 7 6 17 3 7 16 10 8 16 5 9 16 0 10 15 8 11 15 2 52 3 16 11 4 16 1 5 15 4 6 14 7 7 13 10 8 13 0 9 12 3 10 11 6 11 10 9 53 3 15 5 4 14 4 5 13 2 6 12 0 7 10 11 8 9 9 9 8 8 10 7 6 11 6 4 54 3 14 0 4 12 7 5 11 1 6 9 7 7 8 1 8 6 8 9 5 2 10 3 8 11 2 2 55 3 12 8 4 10 10 5 9 1 6 7 3 7 5 5 8 3 7 9 1 9 10 0 0 10 18 2 56 3 11 5 4 9 3 5 7 1 6 5 0 7 2 10 8 0 8 8 18 6 9 16 5 10 14 3 57 3 10 2 4 7 8 5 5 3 6 2 9 7 0 4 7 17 10 8 15 5 9 12 11 10 10 6 58 3 8 11 4 6 2 5 3 5 6 0 8 6 17 11 7 15 2 8 12 4 9 9 7 10 6 10 59 3 7 9 4 4 8 5 1 8 5 18 7 6 15 7 7 12 6 8 9 5 9 6 5 10 3 4 60 3 6 8 4 3 4 5 0 0 5 16 8 6 13 4 7 10 0 8 6 8 9 3 4 10 0 0 61 3 5 6 4 1 11 4 18 4 5 14 9 6 11 1 7 7 6 8 3 11 9 0 3 9 16 8 62 3 4 6 4 0 7 4 16 9 5 12 10 6 9 0 7 5 1 8 1 3 8 17 5 9 13 6 63 3 3 5 3 19 4 4 15 2 5 11 1 6 6 11 7 2 10 7 18 8 8 14 7 9 10 5 64 3 2 6 3 18 1 4 13 9 5 9 4 6 5 0 7 0 7 7 16 3 8 11 10 9 7 6 65 3 1 6 3 16 11 4 12 3 5 7 8 6 3 0 6 18 5 7 13 10 8 9 2 9 4 7 66 3 0 7 3 15 9 4 10 10 5 6 0 6 1 2 6 16 4 7 11 6 8 6 8 9 1 9 67 2 19 8 3 14 7 4 9 6 5 4 5 5 19 4 6 14 3 7 9 3 8 4 2 8 19 1 68 2 18 9 3 13 6 4 8 2 5 2 11 5 17 7 6 12 4 7 7 0 8 1 9 8 16 5 69 2 17 11 3 12 5 4 6 11 5 1 5 5 15 11 6 10 5 7 4 11 7 19 5 8 13 10 70 2 17 1 3 11 5 4 5 8 5 0 0 5 14 3 6 8 6 7 2 10 7 17 1 8 11 5 71 2 16 4 3 10 5 4 4 6 4 18 7 5 12 8 6 6 9 7 0 10 7 14 11 8 9 0 72 2 15 6 3 9 5 4 3 4 4 17 2 5 11 1 6 5 0 6 18 10 7 12 9 8 6 8 73 2 14 9 3 8 5 4 2 2 4 15 10 5 9 7 6 3 O K* 6 16 11 7 10 8 8 4 4 74 2 14 0 3 7 6 4 1 0 4 14 7 5 8 1 6 1 7 6 15 1 7 8 7 8 2 1 75 2 13 4 3 6 8 4 0 0 4 13 4 5 6 8 6 0 0 6 13 4 7 6 8 8 0 0 76 2 12 7 3 5 9 3 18- 11 4 12 1 5 5 3 5 18 5 6 11 6 7 4 8 7 17 10 77 2 11 11 3 4 11 3 17 11 4 10 10 5 3 10 5 16 10 6 9 10 7 2 10 7 15 10 78 2 11 3 3 4 1 3 16 11 4 9 8 5 2 6 5 15 4 6 8 2 7 1 0 7 13 10 79 2 10 7 3 3 3 3 15 11 4 8 7 5 1 3 5 13 11 6 6 6 6 19 2 7 11 10 80 2 10 0 3 2 6 3 15 0 4 7 6 5 0 0 5 12 6 6 5 0 6 17 6 7 10 0 81 2 9 4 3 1 8 3 14 0 4 6 5 4 18 9 5 11 1 6 3 5 6 15 9 7 8 1 82 2 8 9 3 0 11 3 13 2 4 5 4 4 17 6 5 9 9 6 1 11 6 14 1 7 6 4 83 2 8 2 3 0 2 3 12 3 4 4 4 4 16 4 5 8 5 6 0 5 6 12 6 7 4 6 84 2 7 7 2 19 6 3 11 5 4 3 4 4 15 2 5 7 1 5 19 0 6 10 11 7 2 10 85 2 7 0 2 18 9 3 10 7 4 2 4 4 14 1 5 5 10 5 17 7 6 9 4 7 1 2 86 2 6 6 2 18 1 3 9 9 4 1 4 4 13 0 5 4 7 5 16 3 6 7 10 6 19 6 87 2 5 11 2 17 5 3 8 11 4 0 5 4 11 11 5 3 5 5 14 11 6 6 5 6 17 11 88 2 5 5 2 16 9 3 8 2 3 19 6 4 10 10 5 2 3 5 13 7 6 5 0 6 16 4 89 2 4 11 2 16 2 3 7 4 3 18 7 4 9 10 5 1 1 5 12 4 6 3 7 6 14 9 90 2 4 5 2 15 6 3 6 8 3 17 9 4 8 10 5 0 0 5 11 1 6 2 2 6 13 4 *91 2 3 ]1 2 14 11 3 5 11 3 16 11 4 7 10 4 18 10 5 9 10 6 0 10 6 11 10 92 2 3 5 2 14 4 3 5 2 3 16 1 4 6 11 4 17 9 5 8 8 5 19 6 6 10 5 93 2 3 0 2 13 9 3 4 6 3 15 3 4 6 0 4 16 9 5 7 6 5 18 3 6 9 0 94 2 2 6 2 13 2 3 3 9 3 14 5 4 5 1 4 15 8 5 6 4 5 17 0 6 7 7 95 2 2 1 2 12 7 3 3 1 3 13 8 4 4 2 4 14 8 5 5 3 5 15 9 6 6 3 96 2 1 8 2 12 1 3 2 6 3 12 11 4 3 4 4 13 9 5 4 2 5 14 7 6 5 0 97 2 1 2 2 11 6 3 1 10 3 12 1 4 2 5 4 12 9 5 3 1 5 13 4 6 3 8 98 2 0 9 2 11 0 3 1 2 3 11 5 4 1 7 4 11 10 5 2 0 5 12 2 6 2 5 99 2 0 4 2 10 6 3 0 7| 3 10 8 4 0 9 4 10 10 5 1 0 5 11 1 6 1 2 100 2 0 0 2 10 0 3 0 0 3 10 0 4 0 0 4 10 0 5 0 0 5 10 0 6 0 0 Explanation.— If it be wished to ascertain how much income per annum will be obtained per £100, invested in Consols, purchased at'91, in a line with 91, under the heading 3 per Cent., will be seen, “£3 lid.,” which is the answer. on Banking. 851 XXIV .—Settlements at the Clearing-house. If a bank owes money to the Clearing-house, the settle¬ ment is made by a cheque in the following form on the Bank of England:— (No. 1.) • SETTLEMENT AT THE CLEAEING-HOUSE. London, _18 To the Cashiers of the Bank of England, Be pleased to teansfer from our Account the sum of_ and place it to the credit of the Account of the Clearing Bankers, and allow it to be drawn for, by any of them (with the knowledge of either of the Inspectors, signified by his countersigning the Drafts). £ _ • For which the bank signs the following certificate:— (No. 2.) SETTLEMENT AT THE CLEAEING-HOUSE. Bank of England, A Transfer for the sum of _ 18 has this evening been made at the Bank, from the account of Messrs. __^_ to the Account of the Clearing For the Bank of England, Bankers. £ This Certificate has been seen by me, _ Inspector. 352 A Practical Treatise If a bank has to receive money from the Clearing-house, the settlement is made in the following form addressed to the Bank of England:— (No. 3.) SETTLEMENT AT THE CLEAKING-HOUSE. I.ondon,i _18 To the Cashiers of the Bank of England, Be pleased to ceedit our Account the Sum of_ ^ _ out of the money at the credit of the account of the Clearing Bankers. £ Seen by me, Inspector at the Clearing-house. For which the Bank gives the following certificate:— (No. 4.) SETTLEMENT AT THE CLEAEING-HOUSE. Bank of England, The account of Messrs.___ has this evening been cbedited with the Sum of 18 out of the money at the credit of the account of the Clearing Bankers. For the Bank of England, £ To distinguish readily these forms from each other, Isos. 1 and 2 are on white paper. Nos. 3 and 4 on green. APPENDIX. ANNO DECIMO OCTAVO & DECIMO NONO VICTOKI^ REGIN^E. Cap. lxvii. An Act to facilitate the Kemedies on Bills of Exchange and Promissory Notes by the Prevention of frivolous or ficti¬ tious Defences to Actions thereon. • [23rc? July, 1855.] Whereas Iona fide holders of dishonoured Bills of Exchange and Pro¬ missory Notes are often unjustly delayed and put to unnecessary ex¬ pense in recovering the amount thereof by reason of frivolous or fictitious defences to actions thereon, and it is expedient that greater facilities than now exist should be given for the recovery of money due on such bills and notes; Be it enacted 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 Parhament assembled, and by authority of the same, as follows: From Oct. 24, 1855, all Actions upon Bills of Exchange, &c., may he hy Writ of Summons as Form in Schedule A. Plaintiff on filing Affidavit of personal Service, may at once sign final Judgment, as Form in '^Schedule B. I. From and after the Twenty-fourth day of October, One thousand eight hundred and fifty-five, all actions upon Bills of Exchange or Promissory Notes commenced within six months after the same shall have become due and payable, may be by writ of summons in the special form contained in Schedule A. to this Act annexed, and indorsed as therein mentioned; and it shall be lawful for the plaintiff, on filing an affidavit of personal service of such writ within the jurisdiction of the court, or an order for leave to proceed, as provided by the Common Law Procedure Act, 1852, and a copy of the writ of summons, and the indorsements thereon, in case the defendant shall not have obtained VOL. I. 2 A 354 Appendix. leave to appear and have appeared to such writ according to the exigency thereof, at once to sign final judgment in the form contained in Schedule B. to this Act annexed (on which judgment no proceeding in error shall lie) for any sum not exceeding the sum indorsed on the writ, together with interest, at the rate specified (if any), to the date of the judgment, and a sum for costs to be fixed by the masters of the superior courts or any three of them, subject to the approval of the judges thereof or any eight of them (of whom the Lord Chief Justices and the Lord Chief Baron shall be three), unless the plaintiff claim more than such fixed sum, in which case the costs shall be taxed in the ordinary way, and the plaintiff may upon such judgment issue execution forthwith. Defendant showing a Defence upon the Merits to have Leave to appear. n. A judge of any of the said courts shall, upon application within the period of twelve days from such service, give leave to appear to such writ, and to defend the action, on the defendant paying into court the sum indorsed on the writ, or upon affidavits satisfactory to the judge, which disclose a legal or equitable defence, or such facts as would make it incumbent on the holder to prove consideration, or such other facts as the judge may deem sufficient to support the application, and on such terms as to security or otherwise as to the judge may seem fit. Judge may, under special Circumstances, set aside Judgment. in. After judgment, the Court or a judge may, under special circum¬ stances, set aside the judgment, and, if necessary, stay or set aside execution, and may give leave to appear to the writ, and to defend the action, if it shall appear to be reasonable to the court or judge so to do and on such terms as to the Court or judge may seem just. Judge may order Bill to he deposited with Officer of Court in certain Cases. IV. In any proceedings under this Act it shall be competent to the Court or a judge to order the bill or note sought to be proceeded upon to be forthwith deposited with an officer of the court, and further to order that all proceedings shall be stayed until the plaintiff shall have given security for the costs thereof. Remedy for the Recovery of Expenses of noting Non-acceptance of dishonoured Bill. V. The holder of every dishonoui’ed bill of exchange or promissory note shall have the same remedies for the recovery of the expenses incurred in noting the same for non-acceptance or non-j^ayment, or otherwise, by reason of such dishonour, as he has under this Act for the recovery of the amount of such bill or note. Appendix. 355 Holder of Bill of Exchange may issue One Summons against all or any of the Parties to the Bill. VI. The holder of any bill of exchange or promissory note may^ if he tliink fit, issue one writ of summons, according to this Act, against all or any number of the parties to such bill or note, and such writ of summons shall be the commencement of an action or actions against the parties therein named respectively, and all subsequent proceedings against such respective parties shall be in like manner, so far as may be, as if separate writs of summons had been issued. Common Law Procedure Acts and Rules incorporated with this Act. VII. The provisions of the Common Law Procedure Act, 1852, and the Common Law Procedure Act, 1854, and all rules made under or by virtue of either of the said Acts, shall, so far as the same are or may be made applicable, extend and apply to all proceedings to be had or taken under this Act. Act to apply to Courts of Common Pleas, Lancaster and Durham. VIII. The provisions of this Act shall apply, as near as may be, to the Court of Common Pleas at Lancaster and the Court of Pleas at Durham, and the judges of such courts, being judges of one of the superior Courts of Common Law at Westminster, shall have power to frame all rules and process necessary thereto. Her Majesty may direct Act to apply to Courts of Record in England and Wales. IX. It shall be lawful for her Majesty from time to time, by an order in council, to direct that all or any part of the provisions of this Act shall apply to all or any court or courts of record in England and Wales, and within one month afPer such order shall have been made and pub¬ lished in the London Gazette such provisions shall extend and apply in manner directed by such order, and any such order may be, in Like manner, from time to time altered and annulled; and in and by any such order her Majesty may direct by whom any powers or duties inci¬ dent to the provisions applied under this Act shall and may be exercised with respect to matters in such court or courts, and may make any orders or regulations which may be deemed requisite for carrying into operation in such court or courts the provisions so applied. Extent of Act. X. Nothing in this Act shall extend to Ireland or Scotland. Short Title. XI. In citing this Act in any instrument, document, or proceeding, it shall be sufficient to use the expression, ‘‘ The Summary Procedure on Bills of Exchange Act, 1855.” 356 Appendix, Schedules referred to in the foregoing Act. A. ViCTOKiA, by the grace of God, &c. To (7. 1)., of , in the county of . We warn you, That unless within twelve days after the service of this writ on you, inclusive of the day of such service, you obtain leave from one of the judges of the Courts at Westminster to appear, and do within that time appear in our Court of in an action at the suit of A. B., the said A. B. may proceed to judgment and execution. Witness, &c. Memorandum to he subscribed on the Writ. N.B.—This writ is to be served within six calendar months from the date hereof, or if renewed, from the date of such renewal, including the day of such date, and not afterwards. Indorsement to be made on the Writ before Service thereof. This writ was issued by E. F.,oi , attorney for the plaintiff. Or, This writ was issued in person by A. B., who resides at [mention the city, town, or parish, and also the name of the hamlet, street, and number of the house of the plaintiff’s residence^ Indorsement. The plaintiff claims [ pounds principal and interest], or pounds balance of principal and interest due to him as the payee [or indorsee] of a bill of exchange or promissory note, of which the following is a copy:— [Here copy bill of exchange or promissory note, and all indorsements upon it]. And if the amount thereof be paid to the plaintiff or his attorney within days from the service hereof, further proceedings will be stayed. Notice. Take notice. That if the defendant do not obtain leave from one of the judges of the courts within twelve days after having been served with this writ, inclusive of the day of such service, to appear thereto, and do within such time cause an appearance to be entered for him in the court out of which this writ issues, the plaintiff will be at liberty at any time after the expiration of such twelve days to sign final judgment for any sum not exceeding the sum above claimed, and the sum of pounds for costs, and issue execution for the same. 357 Appendix. Leave to appear may be obtained on an application at the Judges’ Chambers, Serjeants’ Inn, London, supported by affidavit, showing that there is a defence to the action on the merits, or that it is reasonable that the defendant should be allowed to appear in the action. Indorsement to he made on the Writ after Service thereof. This writ was served by X. Y. on L. M. (the defendant or the de¬ fendants), on Monday the day of 18 , By X Y. B. In the Queen’s Bench. On the day of in the year of our Lord 18 [Day of signing Judgmenf]. England (to wit). A. B.m his own person [or by his attorney] sued out a writ against G. D., indorsed as follows:— [Here copy indorsement of Plaintiff’s Claim.'] and the said C. D. has not appeared: Therefore it is considered that the said A. B. recover against the said C. D. pounds, together with pounds for costs of suit ANNO DECIMO OCTAVO & DECIMO NONO VICTORI.E BEGINS. Cap. cxxxiii. An Act for Limiting the Liability of Members of certain Joint-stock Companies. [14^^ August, 1855.] Whereas it is expedient to enable members of joint-stock companies to limit the liability for the debts and engagements of such companies to which they are now subject: be it therefore enacted 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 Parhament assembled, and by the authority of the same, as follows: Mode of obtaining Limited Liability by future Companies. I. Any joint-stock company to be formed under the Act of the eighth year of her Majesty, chapter one hundred and ten (other than an 358 Ajppendix. assurance company), with a capital to be divided into shares of a nominal value of not less than ten pounds each, may obtain a certificate of complete registration with limited liability upon complying with the conditions following, in addition to doing all other matters and things now required in order to obtain a certificate of complete registration; that is to say, (1.) The promoters shall state on their returns to the office for provisional registration that such company is proposed to be formed with limited liability: (2.) The word limited ” shall be the last word of the name of the company: (3.) The deed of settlement shall contain a statement to the effect that the company is formed with limited liability: (4.) The deed of settlement shall be executed by shareholders, not less than twenty-five in number, holding shares to the amount in the aggregate of at least three-fourths of the nominal capital of the company, and there shall have been paid up by each of such shareholders on account of his shares not less than twenty pounds 'per centum ; (5.) The payment of the above per-centage shall be acknowledged in or indorsed on the deed of settlement, and the fact of the same having been bond fide so paid shall be verified by a declaration of the promoters, or any two of them, made in pursuance of the Act made in the sixth year of the reign of his late Majesty King William the Fourth, chapter sixty-two: And upon such conditions being complied with, and such other matters and things done, the Eegistrar of Joint-stock Companies shall grant a certificate of complete registration with limited liability to such company. Mode of obtaining Limited Liability by Companies now or hereafter registered. n. Any joint-stock company, except as aforesaid, now or hereafter completely registered under the said act of the eighth year of her Majesty, may obtain a certificate of complete registration with limited liability, in manner and subject to the condition following; that is to say. The directors of such company may, with the consent of at least three-fourths in number and value of its shareholders who may be present, personally or by proxy, at any general meeting sum- moned for that purpose, make such alteration in the name, nominal value of shares, and deed of settlement of the company as may be necessary for enabling it to comply with the conditions hereinbefore mentioned with respect to joint-stock companies 359 seeking to obtain certificates of complete registration with limited liability; and upon compliance with such conditions the registrar, after the affairs of the company shall at the expense of the company have been audited by some person appointed by the Board of Trade, and on certificate from the said Board that the complete solvency thereof has been established on such audit to its satisfaction, shall grant to such company, by its new name, a certificate of complete registration with limited liability, and thereupon all privileges and obligations hereby attached to com¬ panies with limited liability, their shareholders, directors, and officers, shall attach to the company named in such certificate, its shareholders, directors, and officers. Mode of obtaining Limited Liability by existing Comj}anies constituted under Private Acts of Parliament. III. Any joint-stock company, except as aforesaid, constituted under any private act of Parliament, whereof it shall be proved to the satis¬ faction of the Board of Trade, after the affairs of the company shall, at the expense of the company, have been audited by some person appointed by the Board of Trade, that the said company is perfectly solvent, and that not less than twenty jger centum of three-fourths of the nominal capital of such company has been paid up, may obtain a certificate of complete registration with limited liability, in manner and subject to the condition following; that is to say. The directors of such company may, with the consent of at least three-fourths in number and value of its shareholders who may be present, personally or by proxy, at any general meeting sum¬ moned for that purpose, make such alteration in the name and nominal value of shares- as may be necessary for enabling it to comply with the condition in that behalf hereinbefore mentioned with respect to joint-stock companies seeking to obtain certificates of complete registration with limited liability; and upon com¬ pliance with such condition the registrar, on receipt of a certi- • ficate of the solvency of the company, and of the payment of capital as before mentioned, shall grant to such company, by its new name, a certificate of complete registration with limited liability; and thereupon all privileges and obligations hereby attached to companies with limited liability, their shareholders, directors, and officers, shall attach to the company named in such certificate, its shareholders, directors, and officers. Regulations to be observed on Complete Registration with Limited Liability. IV. Every company that has obtained a certificate of complete regis¬ tration with limited liability shall paint or affix, and shall keep painted 360 Appendix, or affixed, its name on the outside of every office or place in which the business of the company is carried on, in a conspicuous position, in letters easily legible, and shall have its name engraven in legible characters on its seal, and shall have its name mentioned in legible characters in all notices, advertisements, and other official publications of such company, and in all bills of exchange, promissory notes, cheques, orders for money, bills of parcels, invoices, receipts, letters, and other writings used in the transaction of the business of the company. Penalties to he inflicted for non-observance of such Regulations. V. If such company do not paint or affix, and keep painted or affixed, its name, in the manner aforesaid, each of the directors thereof shall be liable to a penalty not exceeding five pounds for not so painting or affixing its name, and for every day during which such name is not so kept painted or affixed; and if any director or other officer of the company, or any person on its behalf, use any seal purporting to be a seal of the company whereon its name is not so engraven as aforesaid, or issue or authorise the issue of any notice, advertisement, or other official publication of such company, or of any bill of exchange, pro¬ missory note, cheque, order for money, bill of parcels, invoice, re¬ ceipt, letter, and other writing used in the transaction of the business of the company, wherein its name is not mentioned in the manner afore¬ said, he shall be liable to a penalty of fifty pounds, and shall further be personally liable to the holder of any such bill of exchange, promissory note, cheque, or order for money, for the amount thereof, unless the same shall be duly paid by the company. Every increase in the nominal Capital to be registered, under a Penalty, VI. No increase to be made in the nominal capital of any company that has obtained a certificate of complete registration with Limited liability shall be advertised or otherwise treated as part of the capital of such company, until it has been registered with the registrar of Joint-stock Companies; and no such registration shall be made unless a deed is produced to the registrar, executed by shareholders holding shares of the nominal value of not less than ten pounds to the amount in the aggregate of at least three-fourths of the proposed increased capital of the company, nor unless it is proved to the registrar, by such acknowledgment and declaration as hereinafter mentioned, that upon each of such shares there has been paid up by the holder thereof an amount of not less than twenty pounds per centum ; and if any such increase of capital as aforesaid be advertised or otherwise treated as part of the capital of the company before the same has been so regis¬ tered, every director of such company shall incur a penalty of fifty pounds; and the payment of the above per-centage shall be acknow¬ ledged in or endorsed on the deed so produced, and the fact of the same 361 having been bond fide so paid shall be verified by declaration of the directors, or any two of them, made in pursuance of the said act made in the sixth year of the reign of his late Majesty King William the Fourth, chapter sixty-two. Members of certificated Companies to be free from Personal Liability. VII. The members of a joint-stock company which has so obtained a certificate of complete registration with limited liability, after such certificate is granted, notwithstanding the provisions contained in the said Act of the eighth year of her present Majesty, shall not be liable, under any judgment, decree, or order which shall be obtained against such company, or for any debt or engagement of such company, further or otherwise than is hereinafter provided. Effect of Execution against Company. Vni. If any execution, sequestration, or other process in the nature of execution, either’ at law or in equity, shall have been issued against the property or effects of the company, and if there cannot be found sufficient whereon to levy or enforce such execution, sequestration, or other process, then such execution, sequestration, or other process may be issued against any of the shareholders to the extent of the portions of their shares respectively in the capital of the company not then paid up, but no shareholder shall be liable to pay in satisfaction of any one or more such execution, sequestration, or other process a greater sum than shall be equal to the portion of his shares not paid up: provided always, that no such execution shall issue against any shareholder except upon an order of the Court, or of a judge of the Court, in which the action, suit, or other proceeding shall have been brought or instituted; and such Court or judge may order execution to issue accordingly, with the reasonable costs of such application, and execution to be taxed by a master of the said Court; and for the purpose of ascertaining the names of the shareholders, and the amount of capital remaining to be paid upon their respective shares, it shall be lawful for any person entitled to any such execution, at all reasonable times, to inspect the register of shareholders without fee. If Dividends be made and Corporation insolvent, each Director consenting thereto liable. IX. If the dii-ectors of any such company shall declare and pay any dividend when the company is known by them to be insolvent, or any dividend the payment of wliich would to their knowledge render it insolvent, they shall be jointly and severally liable for all the debts of the company then existing, and for all that shall be thereafter contracted, so long as they shall respectively continue in office; provided that the amount for which they shall all be so liable shall not exceed the amount VOL. I. 2 B 362 Appendix, of such dividend, and that if any of the directors shall be absent at the time of making the dividend, or shall object thereto, and shall file their objection in writing with the clerk of the company^ they shall be exempted from the said liability. Notes of Shareholders not receivable in Payment of Calls; Liability of each Officer consenting to a Loan to Shareholders. X. No note or obligation given by any shareholder to the company whereof he is a shareholder, whether secui*ed by any pledge or other¬ wise, shall be considered as payment of any money due from him on any share held by him, and no loan of money shall be made by any such company to any shareholder therein; and if any such loan shall be made to a shareholder, the directors who shall make it, or who shall assent thereto, shall be jointly and severally liable to the extent of such loan, and interest for all the debts of the company contracted before the repayment of the siun so lent. Rights of Creditors of existing Companies preserved. XI. Where any company completely registered under the said Act of the eighth year of her present Majesty, or any company constituted under any Act of Parliament, shall obtain a certificate of complete registration with Limited liability, the grant of such certificate shaU not prejudice or affect any right which previously to the grant of such certificate has accrued to any creditor or other jDerson against the company in its corporate capacity, or against any person then being or having been a member of such company, but every such creditor or other person shall be entitled to all such remedies against the company in its corporate capacity, and against every person then being or having been a member of such company, as he would have been entitled to in case such certificate had not been obtained. Change in the Name of a Company under the Act not to affect the Rights of the Company or other Parties. XII. No alteration made by virtue of this Act in the name of any company shall prejudice or affect any right wliich previously to such alteration has accrued to such company as against any other company or person, or which has accrued to any other company or person as against such company, but every such company as against any other company or person, and every other company or person as against such company and the members thereof, shall be entitled to all such remedies as they or he would have been entitled to if no such alteration had been made; and no such alteration shall abate or render defective any legal proceeding pending at the time when such alteration is made. Appendix, 368 Companies to he dissolved and wound up when three-fourths of the Capital lost. XIII. In the case of any company wliich has obtained a certificate of limited liability, whenever, on taking. the yearly accounts of such company, or by any report of the auditors thereof, it appears that three- fonrths of the subscribed capital stock of the company has been lost, or has become unavailable in the course of trade, from the insolvency of shareholders, or from any other cause, the trading and business of such company shall forthwith cease, or shall be carried on for the sole purpose of winding up its affau-s; and the directors of such company shall forth¬ with take proper steps for the dissolution of such company, and for the winding up of its affairs, either by petition to the Court of Chancery, or by exercise of the powers of the deed of settlement, or by such other lawful course as they may think most fit. Auditors to he appointed subject to approval of Board of Trade. XIV. In cases where a certificate of registration with limited liability has been obtained, when one auditor only shall have been appointed under the thirty-eighth section of the Act of the eighth of Victoria, chapter one hundred and ten, that single auditor, and when two or more such auditors shall have been so appointed then one of such auditors shall be subject to the approval of the Board of Trade, and such Board in case the auditor submitted to them for approval shall for any reason appear unfit or objectionable shall appoint another in his place. : Recovery of Penalties. XV. Every pecuniary penalty imposed in pursuance of this Act shall be deemed a debt due to the Crown, and shall be recoverable accordingly. Act to he taken as Part of 1 & % Viet. c. 110. X^T. This Act shall, so far as is consistent with the contents and subject-matter thereof, be taken as part of and construed with the said Act of the eighth year of her present Majesty, chapter one hundred and ten, and the Act of the eleventh year of her Majesty, chapter seventy- eight, and all the provisions of the said Acts, save in so far as they are varied by this Act, shall apply to persons and companies applying for or obtaining a certificate of complete registration with limited liability. Provisions of 1 & ^ Viet. c. Ill, 11 & 12 Viet. c. 45, and 12 & 13 Viet c. 108, to apply to this Act. XVII. The provisions of the Act of the eighth year of her present Majesty, chapter one hundred and eleven, and of the Joint-stock Com¬ panies Winding-up Act, 1848, and of the Joint-stock Companies Winding- 364 Appendix. up Amendment Act, 1849, shall apply to persons and companies obtaining a certificate of complete registration with limited hability, subject only to such variations as may be occasioned by the provisions of this Act. Act not to apply to Scotland. / XM;II. This Act shall not apply to Scotland. ^liort Title. XIX. This Act may be cited for all purposes as “The Limited Liability Act, IBSS."” FUETHEE ACTS OF PAELLOIEXT. 1856. 19 ViCT. c. 22.—Bankers’ Compositions Act. 19 & 20 „ c. 25.—Drafts on Bankers Act. „ „ c. 47.—Joint-stock Companies Act. „ „ c. 100.—Joint-stock Banks Act. 1857. 20 & 21 Yict. c. 14.—Joint-stock Companies Act. „ „ c. 49.—Bailing Act. „ „ c. 54.—Fraudulent Trustees Act. 1858. 21 ViCT. c. 20.—Stamp Duty on Drafts Act. 21 & 22 „ c. 60.—Joint-stock Companies Amendment Act. „ „ c. 79.—Drafts on Bankers’ Law Amendment Act. „ „ c. 91.—Joint-stock Banking Companies Act. 1864. 21 & 22 ViCT. c. 32—Banking Copartnerships Act. END OF VOL. I. r,oxT)oy: prtntf.o by av. clowes axd sons, jTAMFORn street AND CHARINO CROSS. m i I q % V •* ■), •/: • % ' 9 « s