"LI B RARY OF THE U N I VLR5ITY or ILLINOIS ^^^ -£875 V.33 y ■'* '^ y^ y^ / y 4^ ^. y^x yj/'^'j^u^'. ■I.<*^*«. THE PRACTICE OF BANKING IN SCOTLAND AND IN ENGLAND; WITH OBSERVATIONS AND SUGGESTIONS ON THE REKEWAL OF THE BANK OF ENGLAND CHARTER, OV THE PRINCIPLES AND REGULATION OF JOINT STOCK BANKS, AXD ON THE ONE POUND NOTE CIRCULATION. BY HUGH WATT, MAKAGEB. AXD SECEETARY OF THE HUDDERSFIELD BANKIXO COMPAXr, AND FORMERLY OF THE PERTH AND ARBROATH BANKS. LONDON: SIMPKIN AND MARSHALL ; ANDERSON, EDINBURGH ; BAINES AND NEWSOME, LEEDS : KEMP, AND MOORE, HUDDERSFIELD. 1833. EDWAKD BAINES AND SOK, PRIKTEES, LEEDS. i PREFACE. Having found since my coming to reside in England, that the business of Banking is much more varied than in Scotland, and that in many particulars it is quite different; and on the other hand, that the nature of Banking business in Scotland, and the method of transacting it, are but very partially known in England; it occurred to me that a small publication, explanatory of the respective systems, might not be unacceptable or useless, particularly at a period when the question of Banking is likely to excite consider- able interest both in and out of Parliament. Each system has its peculiar excellencies and defects ; but by taking the best parts of both, (so far as they are applicable to the circumstances of the country,) a system might be formed much more perfect than either. I am not so presumptuous as to attempt to construct such a system ; but I have thought that my experience justified me in pointing out facts and considerations which might be useful to others. The questions of the renewal of the Bank of England's Charter, the One Pound Note circulation, and the nature and degree of encouragement which ought to be given to Joint Stock Banks, have engaged my attention. On the latter subject, I have expressed opinions long since formed, and communicated to others. Believing that Banking Companies, under proper regulations, are calcu- lated to give the most efficient support to trade, and to establish the monetary, svsteni of the countrv on the most 359364 solid basisj I have endeavoured to point out the essential requisites to their becoming thus useful. In the establish- ment of such Companies, there are dangers to be avoided, as well as benefits to be secured. It is essential to the safety both of the proprietors and of the public that these banks should possess available resources, adequate not merely to ordinary but to extraordinary occasions, and that they should be conducted not in the pushing spirit of competition, or with an eager desire for large dividends, but with a prudent liberality, so as to consult the per- manent interests of the community. The existing law affords every facility for the establish- ment of Joint Stock Banks. It depends, therefore, entirely on the prudence of the shareholders, whether a safe or an unsafe system shall be acted upon : and this renders it of the highest importance that the public mind should be well informed on the subject. The general opinion has now also a greater weight with the legislature than at any former period : and as the Banking system of the country is about to be brought under the revision of Parliament, it is desirable that the great manufacturing and commercial districts should exert their influence in favour of a sound and wholesome system. SCOTLAND. The Bank of Scotland was established in 1695, by an act of King William the Third. By this act the exclusive privilege of banking in Scotland was conferred for twenty-one years ; but no renewal of the exclusive privilege took place after the expiration of that period. The head bank is at Edinburgh, and it has sixteen branch banks in different towns in the country. Its paid up capital is £1,500,000 ; the dividend is six per cent, on £100 shares, which sell at present at £150. The Bank of Scotland con- tinued to be the only bank in that country until 1727, when a charter was granted to a conijjany called the Royal Bank of Scotland, which has its head bank at Edinburgh, and a branch bank at Glasgow. The paid up capital of this company is £1,500,000, and the present selling price of its £100 shares is £154*; the dividend is 5j per cent. The British Linen Company's Bank was estab- lished in 1746, and has its head bank in Edinburgh, and 31 branches in towns throughout the coiuitry. Its paid up capital is £500,000, and it pays a divi- dend of eight per cent on its £100 shares ; the present selling price is £^35 per share. 6 These three banks are chartered companies, and the holders of their stock are not responsible beyond the amount or value of the shares which they may hold respectively. The Commercial Banking Company of Scotland was established in 1810, and has its head office in Edinburgh, and thirty-one branch banks in various towns in the country. Its paid up capital is £600,000 ; the dividend paid on its £100 shares is 6 per cent., and the present selling price £160. The National Bank of Scotland was established in 1825. Its head office is in Edinburgh, and it has 24 branches in the country. These two modern companies are composed of several hundreds of shareholders ; they have lately obtained from the Crown charters of incorporation, but those charters do not limit the responsibility of the shareholders. In Edinburgh there are six private banking houses, and two of these issue notes, viz.. Sir W. Forbes and Co., and Ramsays, Bonars, and Co. : the others do not issue notes of their own ; their firms are Kin- nears. Smiths, and Co. ; Alexander Allan and Co. ; Robert Allan and Son ; James Inglis and Co. In the principal towns of Scotland, (exclusive of Edin- burgh,) there are 21 banking companies, with nu- merous partners, and these companies have in all 50 branch banks in various towns and places in the country. It appears, then, from the above statements, that there are 183 establishments in Scotland for the transacting of what is called banking business. The distinguishing principle of the Scotch banks is their entire freedom from monopoly. They are all found- ed on the same principles and possess the same privi- leges, with tlie excej)tion already stated in favour of the three chartered banks, whose privilege of limited responsibility is not considered of much value. The chartered banks and other banking companies issue promissory notes for various sums from twenty shil- lings and upwards, payable on demand. The Bank of Scotland first issued notes of twenty shillings in the year lyOi, and the law of Scotland has ever since permitted thom to circulate. The notes of the different banks form almost the whole currency of the country, and, although only legally payable where dated, the}- pass current in every town and district of Scotland, and are paid or received by bankers, merchants, and shopkeepers, without any charge whatever. This is entirely owing to the exchange of all bankers' notes, which takes place at Edinburgh twice a week, with as much regularity as the oi)erations of the clearing house in London; so that, in flict, all bankers' notes sent from the country to Edinburgh answer the same purpose as cash remittances from English country bankers to their agents in London. The private bankers in Edinburgh are the agents of the banking companies in the country ; the notes issued at the branches of the Edinburgh banks are all dated at Edinburgh, and the notes issued at the branches of the country banks are dated at their head office. B Q. 8 The business of a Scotcli bank may be said to consist in receiving deposits from the public, on wliich interest is allowed, and in the issuing' of pro- missory notes upon the discount of bills and upon cash credits, &c. Banking in Scotland, previous to the Union with England, consisted principally in the discounting of bills of exchange ; but after the Union, an increased demand for money for commer- cial purposes took place, and the banks began to make advances on cash credits or accounts. A cash account in Scotland may be described as a credit established in favour of a party by other par- ties giving, along with him, a bond to the bank, by which they become Uable to pay whatever balance may be due at the final close of the account, or when the bank may demand it ; only the balance must not exceed the sum mentioned in the bond. A copy of one of these bonds is given in the Appen- dix. Wlien an explanation of a cash account in Scotland was given to the Committee of the House of Commons in 1826, some of the Members had an idea that interest was charged on the full amount stated in the bond, and from the date thereof; whereas a cash account only means a credit to the extent mentioned in the bond ; the party in such transactions pays money into the bank, and receives money from the bank, and he is allowed or charged interest according to his being debtor or creditor, as the annexed account, made out according to the form used in the Scotch Banks, will explain. g SO W Si C^ CO ill! CO 5 CI — Q c « s M(NK:rt-»— t>ir>. t M o.-^ t>. CO » -^ r-ro « -^ CO co^ e^ — — 1 3; ■a -* { )ff<«»«SCD {coco cocoes sscoco-^00 M -9 s t =i ■^oosS'-<-- t — CO «>» (r» ■* ?» (N QUO t t t ! < »: ! » 1 t i: J J J tf u •W J"* { { J » »"* » J J"* « J tw J { » to o =9 J ■«).}« J t t J «» J 1 t 50 1 t i«» J » » tw - =4 tS !^ t* t t CO ^ -t o j -T ! O t CO ?< C^ 0^ ■^ c ■« -*»«»»»»} «»«{() t t t t 1 t fCOSO } o s« ;2; ! I !— * t < -* t » t t 1 t ( t t t j«2 ' n» 1 «* '- '11 O O » » -T ( (^--o to 5^ t t 55 h^Th^.^^Th.^ -* ^'* i^'* *J 4) :S:Cr-irHS;r-«rHr-E-i:5 C9 owacci" — — X 2 'li''^^ i^^5i'"~''.-?irt a. c - ! ( « ! 3 ( < ! J ! £ ! ■r. !•§ ! 1 » g t t U 9 V ^; e { 10 The bank charges four per cent, for money drawn out, and allows two per cent, for money lodged in the bank, — the difference between the rates charged and allowed being the banker's profit ; only it is to be ob- served that all sums paid into the account are deducted from the amount advanced before interest is calculated, and the rate of interest at four per cent, charged only on the balance ; so that it is when the account becomes creditor, or in favour of the party keeping the account, that the difference in the rate of in- terest charged and allowed operates against him ; then he becomes a depositor, and is allowed only the rate of interest which the bank gives on deposits. In some instances five per cent, is charged on ad- vances : a few banks allow three per cent, on deposits, but the general rate at present is only two per cent. In 1826 the rate of interest was five per cent, charged, and four per cent, allowed. In English banks the same rate of interest is allowed and charged on accounts, and the banker is remunerated by a commission of one fourth per cent, on the sums drawn out. Where the banks in Scotland grant a cash account, they expect frequent transactions to be made on it, so that they may receive other bankers' notes from the person keeping the account, and get their own notes put into circulation by means of his payments in business. This is greatly facilitated by the circumstance of all bankers' notes in Scotland circulating as cash. The law of Scotland allows a very summary mode 11 of recovering" payment from the parties signing- cash account bonds, which will be afterwards explained. The most important part of the banking business in Scotland consists in the discounting of bills, — not negociable bills, as in England, but bills payable in the towns where the acceptors reside, and which may properly be called local bills. The banks never expect to raise any money upon these bills, but hold them until due, and then demand payment from the acceptors. The banks do not hesitate to discount a large amount of such bills when they consider the security undoubted, because they are never under any apprehension, as in England, of sudden demands for money, or of any thing like a panic, to cause a nm to be made upon them. It is the general practice for traders and others in Scotland to grant acceptances in payment of their purchases ; these acceptances (if approved) are readily discounted at the banks in the towns where the acceptors reside, and notes or bills, at from 20 to 30 days, on a London banker, given for them. This gives the seller a speedier connnand of his funds, and enables him to go again into market with ready money to make his purchases. Most of the Banks in Scotland have a large paid up capital, and large amoiuits of deposit money, from individuals, and from Savings Banks, &c. besides the capital created by their notes in circula- tion. These enable them to make advances on local bills, cash credits, and other securities not nego- 12 ciable, to an extent that would surprise many English bankers. The inducements to advance money on the security of such bills are, the obtaining four, and sometimes five per cent, as discount, the circulation obtained for the banker's notes, and the summary mode prescribed by the law of Scotland of recovering payment from the parties to such bills if dishonoured. When a bill falls due in Scotland, and is unpaid, it is protested. The bill and protest may be produced to the clerks in the Register Office, Edinburgh, any time within six months from the day on which it became due, when the same will be registered in the court books. An extract of the protest, containing a warrant for a writ of homing, to be followed by caption, (within six days, if necessary,) is delivered to the applicant on the very day it is applied for. By virtue of the caption the debtor is committed to jail, and his goods poinded or distrained. Thus registration of the bill and protest, in Scotland, is held equivalent to a judgment in England, and ren- ders execution on bills in Scotland a matter of the utmost dispatch, whilst the whole expense does not exceed from thirty to forty shillings. A creditor in Scotland can attach the real and heritable as well as the personal estate of his debtor for payment of per- sonal debts, among which may be classed debts due on bills, promissory notes, &c., and proceedings may take place against each description of property at the same time. The Court of Session (the supreme court in Scot- IS land) may suspend law proceedings on bills of ex- change ; but this rarely happens except on the con- dition of paying the money into court. Bail may be offered, but will not be accepted on any other terms than on the surety binding himself to pay the debt. In P^ngland, if the bail produce the debtor, the former is discharged ; a trial before a jury has to take place before judgment can be obtained, and a considerable time nmst afterwards elapse before exe- cution follows. It will readily be supposed that the celerity in recovering debts on bills of exchange in Scotland, has tended greatly to facilitate the banking operations of that country, and to increase its com- mercial importance. The process of obtaining judg- ment by only registering the bill and protest, was established in Scotland by successive statutes soon after the Reformation. It will surprise some to find the origin of this excellent system in the Church of Rome, the supposed enemy to all civil improve- ments. The Roman Catholic Church in Scotland, previous to the Reformation, had jurisdiction in ecclesiastical matters, and its clergy were also fre- quently occupied in the determining of civil pleas. They obtained the Royal authority for the imprison- ment of the persons who resisted their decrees, which was effected by letters of caption from the Cr()\Mi. AMien the Reformation extinguished all the powers of the Church of Rome in that country, creditors were left in a great measure without effectual means of enforcing payment ; and with a view to give relief, 14 the Commissary Court obtained the privileges of execution formerly belonging to the Ecclesiastical Court, and latterly the Court of Session has been invested with the same power. The warrant of poinding authorises execution in the King's name against \he property — the warrant of horning, against the person ; rebellion against the King being substi- tuted in the warrant as the ground of imprisonment, for that of rebellion against God and the church, as it stood under the Roman Catholic supremacy. In the cash account bonds a clause is introduced, whereby the parties consent to the registration of the bond in the books of the Court of Session. This consent of parties places the bank, as regards the balance of account, in the precise situation of having a judgment in their favour. It is true the Court may suspend the summary process of recovering payment, but the amount in dispute is generally ordered first to be consigned into Court. To show the superiority of the law of Scotland to that of England in recovering debts upon bills of exchange, I would here mention that the Hudders- field Banking Company had occasion to sue a person on a bill of exchange for £500 ; the proceedings commenced in the Court of King's Bench in August, 1830, and it was June, 1832, before they termi- nated ; the defendant's object being delay, he had recourse to all the trickery of law, and there were trials, and motions for new trials, and hearings, and re-hearings before Judges at Chambers, and a variety 15 of law proceedings, during" two years, which cost upwards of three hundred pounds ! Every person of common sense will ask with surprise, how could all this happen ? and his surprise will be increased when he is informed, that at the commencement of the first trial the bank produced the bill duly noted, proved the defendant's signature, proved the payment of the money to him, and produced a letter from him when the bill fell due, requesting delay ; and yet he was able to j)rotract proceedings for two years, until the judgment as against him was not worth the having and the bank had to look to another party on the bill for payment. In England, the law admits of specialty creditors : for instance, if a man die leaving £1000, and debts as follows — To a person on a bond £1000 To several persons on Promissory notes or bills 1000 Several shop debts 500 The person having the bond would be paid in full, and the others would receive nothhig. In Scotland the £1000 the man left would be equally divided among all his creditors; bond, bills, and shop ac- counts, would all rank alike ; and in England, in case of bankruptcy, they would do the same, but not in case of death, as already mentioned. It is well known that banking- has been the most profitable of all commercial undertakings in Scotland, and one of the principal means of increasing the pros- 16 perity of the country ; but any explanation of the banking system of Scotland would fail in pointing" out its leading characteristics, were it not distinctly stated that its one pound note circulation is the very foundation of the system. The law gave the power to issue one pound notes from the first institution of banking in Scotland, and it has never been altered. An attempt was made in 1826 to pass a restriction act, but it is a matter of rejoicing that the attempt failed ; and Scotland owes a debt of gratitude to Sir Robert Peel for averting that national calamity. The late Mr. Huskisson never yielded to the repre- sentations from Scotland, but insisted that one pound notes should disappear from the three kingdoms at the same time. Sir Robert Peel thought the peculiar circumstances of Scotland, and the case made out by the Scotch bankers, called for delay, and his influence induced the Cabinet and the Committee to acquiesce in this wise decision. The small notes (£1 and £1 Is.) in circulation in Scotland are reckoned to amount to about two mil- lions (£2,000,000) ; and the notes above these sums to £1,500,000; making the whole amount of the cur- rency of Scotland (for there is no bill circulation) to amount to about three million five hundred thousand pounds (£3,500,000.) There is no gold circulation in Scotland. A con- siderable quantity of silver is kept by the banks, to meet demands for payments of small notes, and for wages, &c. 17 This system of currency and of banking has had the effect of causing' a great and progressive increase in the manufactures, the agriculture, the commerce, and general wealth of Scotland ; and therefore the influential classes used all the means in their power to prevent the threatened withdrawal of the one poimd notes in 182(j. At that period Parliament and the Government were urged to delay their in- tended proceedings from the following considera- tions : — That even during the rebellions of 1715 and 1745, the confidence in the paper currency of Scot- land was not shaken, and that the banks maintained their stability diu'ing the shocks to which mercantile credit was exposed in the years 1793, 1797» and 1825 ; therefore it could not be assumed that a cir- culation of specie was necessary in Scotland, for the purpose of guarding against the effects of panic ; — that while Scotland had a paper currency of one poinid notes, England had, for twenty years before the Restriction Act (in 1797) a currency of gold and silver, to the exclusion of notes below £5 ; — that these different systems co-existed, and that the paper circidation in Scotland did not interfere in any mate- rial degree with the metallic currency of England ; — that, considering the amount of notes current in Scotland below the value of £5, and comparing it with the total amount of the paper currency of that country, no person could foretell the consequences of a law which should prohibit the issue of notes con- stituting so large a proportion of the whole circulation. .18 These and similar considerations had the intended effect in 1826, and Parliament did not interfere, but allowed Scotland to issue its £1 notes as had always been done since the origin of its banking establish- ments ; and I trust Parliament will not now inter- fere to restrict a small note circulation in Scot- land, although plausible arguments could be used why England and Scotland should be assimilated in this respect ; because the consequences of such pro- hibition would be a degree of difficulty and embar- rassment conceivable only by those who are fully acquainted with Scotland, its commercial and other transactions, and the ramifications of the one pound note system. No bill circulation exists, nor could exist, with the present laws as to bills of exchange in that country, and with the established habits of the people. There is no gold circulation, and the people uni- formly prefer the notes of their banks, which they know to be undoubtedly safe, to any other currency whatever. I recollect stating this to Sir Robert Peel, when, as chairman of the Committee in 1826, he asked me if the people did not come and demand gold when the guinea was worth 25 and 26 shillings. I answered that neither at that time, nor at any other, did I observe any demand or any liking by the people for gold in preference to notes, in the towns where I had acted as a banker ; and he ap- peared rather surprised at the statement. But the withdrawal of the one pound notes from 19 Scotland would affect other parties than those in that country. The manufacturers and merchants in England woidd soon find out that the advantage is not altogether confined to Scotland ; they would perceive a great diminution in the amount of their sales in Scotland, and a difficulty in obtaining pay- ments, of which they have now no adequate idea. English manufacturers, who understand this view of the subject, have stated that in case a one pound note restriction act for Scotland passed the legislature, they would decline doing business in that country. I do not wish to be considered as defending the practice of banking in Scotland in all its parts. It is, like all other things, susceptible of improvement. The branch bank system has been carried too far, and the competition for business which has taken place, by the increase of agents of banks, has been productive of injurious consequences, especially to the trade of the district where such competition has taken j)lace. They have in some instances been liberal in their discounts until instructions arrived from the head office to stop, and then a sudden con- traction of their issues has caused embarrassment and fluctuations in trade. When there are more banks or branch banks in a town than the legitimate business of the place re- quires, it is natural for the bank agents to increase their transactions by being liberal, (as it is called,) because in many cases their salaries rise or fall with the extent of business done. It will appear strange 20 to some persons that men of property in Scotland will eagerly accept the office of bank agent, and give security for considerable sums, and also guarantee all the bills they may discount, for a salary of £300 or £400 per annum. I know two merchants who were joint agents for a bank in Scotland, who gave undoubted and unlimited security to the bank, and were under a constant guarantee for bills discounted by them, (local bills,) the amount of which bills was never less than fifty thousand pounds, and yet their joint salaries did not exceed four hundred pounds a year. As the agent is not restricted from engaging in other pursuits, the office is accepted not altogether for the salary, but because it gives influence to the agent in the town : it promotes his own business, if in trade ; and, if a writer or attorney, he makes it pay him as a notary and solicitor, when it may not do so as a bank agent. Several of the banks have lost large sums by agents becoming bankrupts, notwith- standing the security they may have given. In England it is never once thought of that an agent or his sureties should be responsible farther than for an honest, faithful, and conscientious discharge of the duties of his office. The Scotch banks would exercise a sound discre- tion if they refrained from pushing their branches into places where they are not wanted ; and when a necessity arises for contracting their issues, they should not withdraw them suddenly, but in 21 a gradual manner, so that the effect on trade may be the least sensibly felt. It has been stated that the Bank of England, previous to February last year, reduced its issues very considerably, but it did it in so gradual a manner, and with so much care, that any bad effects on the country were prevented ; wliile it is alleged that representations were made to the Chancellor of the Exchequer, that about the same time the Scotch banks restricted their issues, but in so sudden a manner that the effects were felt both in Scotland and England. It must be admitted that it is more easy to state the fact (if it be so) than to suggest a remedy, because what the Bank of England can and may do is no criterion for other banks. The Bank of England has supreme power, and can do many tilings which it is impossible for the banks in Scotland to do, where it may be said the free trade principles as to banking are in fidl operation. Men of influence have represented to the Chancellor of the Exchequer that the one pound note circulation, and the present method of banking in Scotland, have a tendency to cause great fluctua- tion in trade, and that some restrictive measure should be applied by government to correct the evil. Although it were conceded that some banks have been to blame in not looking sufficiently to the general interests of trade, it does not follow that government is called u})oii to interfere. The attempted cure may be worse than the disease. A representation of the circumstances to the directors c 22 of the banks in Scotland would have a greater ten- dency to prevent the recurrence of the evil, than any g-overnment measure whatever. But it may be well for the Scotch banks to bear in mind that there are persons ready to make such representations to g-overnment, and that those who are opposed to a small note currency, or think Scotland unfairly privi- leged in this respect, will not fail to exaggerate its effects in producing fluctuations in trade. The money deposited in the Savings Banks in Scotland is not lodged in government securities, as is the case in England, but in the regular banks, and this may in part account for the deposits of money in the Scotch banks having been reckoned at so great an amount as twenty millions. The Scotch banks used to give a higher rate of interest to depositors in Savings Banks than to other depositors, to induce them to cultivate habits of saving ; and this was one of the reasons given in 1826 why the one pound notes should not be taken away, because their circulation enabled the Scotch banks to give a higher rate of interest to depositors. I recollect making use of this argument in answer to a question put to me in the Lords' Committee by the late Duke of Athol. After I had made use of it, the Earl of Liverpool, who was at that period of the investigation opposed to us, immediately asked me if I knew how the English Savings Banks were conducted, and whether, if the Scotch Savings Banks were put on the same footing as the English, my objection would not be 23 removed. To this I replied that I understood the money of the Eng-lish Savings Banks was lodg-ed in government securities ; but that, so litthi did the people of Scotland residing in country parishes know of government funds, that they would pref(!r the security of gentlemen of property in their own neighbourhood (who were directors of their banks) to any government security whatever. His Lord- ship laughed heartily, and did not repeat the ques- tion. Tlie Earl of Lauderdale, who was friendly to the Scotch banks, then put a question, evidently in- tended to draw from me the answer which I gave, namely, that the withdrawal of the Savings Banks money from Scotland to London would take away from the Scotch bankers a great part of those funds which enable them to assist trade, commerce, and agriculture, and promote the internal improve- ment of the country. In Scotland ten pounds is the maximum received by a Savings Bank from one indi- vidual, and when the deposit amounts to this sum, it is withdrawn and placed in a regidar bank ; but if the Scotch banks are now allowing only two per cent, to those who may be termed Savings Bank depositors, it is more than probable they may think of sharin"- in the rate of interest, viz. £3 fis. 8d. per cent., allowed by Parliament to the depositors in English Savings Banks. For several years the high rate oi four per cent, interest was allowed by govern- ment on the money de})osited in Savings Banks ; but this abuse of the public money was checked hi the 24 session of 1828, and since November in that year the interest has been £3 6s. 8d. per cent., which is still abundantly high. It is a fact which cannot be dis- puted, that very many sums were deposited in the English Savings Banks, under the former system, by persons whom the legislature never intended to lodge money there ; and indeed the abuse is not altogether put an end to, for we cannot suppose that the large sums lodged in the different Savings Banks can belong to that class of the community which the liberality of Parliament intended to benefit by the high rate of interest ; and Parliament will not do its duty unless it cause such an investigation as will lead to a reduction of interest on all such sums as do not belong to the working class of the community. Since I came to reside in Huddersfield, I have frequently expressed my surprise to gentlemen who take an interest in the condition of the labouring classes, how it happens that so few of them save any part of their wages for times of distress, and that so very few have money in the Savings Banks. I have contrasted this with the habits of saving which ob- tain amongst many operatives in Scotland, and with the sums of money they have deposited both in the Savings and regular banks. The answer which I have generally received to these remarks is, that wages were reduced so low that it was impossible for the working man to lay aside any thing for a future day. I am no advocate for low wages ; I consider the workman entitled to 25 a fair remuneration for his labom*, that he may be abk^ to obtain not only the necessaries, but the com- forts of life ; but at the same time I must state, that were the working population of this district less in the ale-house, and did our streets witness less of the effects of intoxication, a part even of the present wages might be laid aside, which would have a very powerful influence on the moral habits and comforts of the people. I think I cannot conclude this part of my statement more appropriately than by insert- ing an extract from an Address to the Labouring Classes, written by Mr. William Johnston, the able accountant of the Arbroath Banking Company, on drawing up the report of the Arbroath Savings Bank ; and I would preface it with a remark, that during the two years I resided in Arbroath, I never witnessed one half the scenes of intoxication I have seen in the streets of Huddersfield within the same period of time ; and I may assert it as a melancholy fact, that Mr. Johnston's striking observations will apply with too much truth to almost every manufac- turing to\vn in the kingdom : Mr. Johnston writes : — *' The present population of Arbroath may be computed at about 12,000 individuals, seven-eighths of whom earn their subsist- ence by labour. Taking five individuals as the average number in each family, there are thus 2100 families of tradesmen altogether. Now, supposing that, one with another, each family could lay by one shilling a week, which is no very great sum, con- 26 sidering the number of cliildren employed at mills, and thus earning wages at an early age, this would amount to £5,460 per annum, or £81,900 in 15 years ; being more than four times the sum that has actually been paid into the Savings Bank during that period. And to show what individual benefit might have been derived from such a procedure, it may be mentioned, that had any young person commenced and continued depositing one shilling weekly, adding the interest every year since the bank commenced, (15 years,) he would have been by this time possessed of above fifty pounds. Now, of what importance would this sum have been in the way of beginning him in the world, or of assisting him in the decline of life ? *' But many, no doubt, will be ready to conceive, that the idea of such an amount of saving is quite chimerical, and therefore altogether impracticable, — that it is impossible the labouring classes could spare so much as would enable them to save to this extent. " But if it can be shown, that they not only can, but actually do, spare as much to waste, or spend unnecessarily and perniciously : then it surely will not require much logic to prove, that what they can thus spare to waste, they could as easily spare to save. " It was ascertained, some short time ago, that there were in this town no fewer than 104 public- houses and spirit shops; being one for every 115 individuals of the whole population, men, women. 27 and chiltlren, or one for every Q3 families. What a (lej)l()rable state of society does this simple fact indicate ! Now it is evident that all these establish- ments could not exist unless they were supported, and that they cannot be supported unless the public purchase what they have got to sell. Let us, there- fore, see to what extent the public must necessarily purchase, before these houses can be thus supported, and then we will have some idea what could be saved. " At a very moderate calculation it will require £50 a year to pay house-rent and licenses, and maintain each publican and his family. If we nuilti- ply 101 by 50, we will therefore see what is required to maintain all the publicans and their families in the town. Accordingly, by this calculation, we find that it requires £5,200. This, it will readily be admitted, is certainly a very larg-e sum to be ex- ])ended yearly on liquor alone. But this is not all. This is only the profit on the amount so expended — the mere (/ain on the value consumed. Now, in order to ascertain what this total value is, it is necessary to fix upon some rate of profit, some data taken from other trades, that our notions on the subject may be more distinct. Conceive, then, their profit to be so great as 40 per cent £40 on every £100 worth sold. * That is quite preposter- ous ; the public never would submit to such extor- tion.' Well, we shall see whether it does so or not. It has been stated, that at the least it takes £5,200 yearly to maintain all the publicans and spirit shops 28 in this town, and that is their annual gross profits on what they sell, and that we are to suppose the rate of these profits to be forty per cent. Now, it necessarily follows that these publicans, &c. must sell as many hundred pounds worth of liquors as there are £40 in £5,200. On dividing 5,200, therefore, by 40, we find that the one is contained in the other 130 times : consequently, that 130 times £100, or £13,000, must necessarily be expended annually on liquors ; that is to say, each publican on an average must sell £125 worth every year, before he can realise £50, on a trade that yields 40 per cent, of profit. " But great and enormous as this sum may appear, we must either admit that this estimate is correct, so very stubborn things are facts and figures, or we must admit, what is equally astounding, that the publicans actually derive a greater profit than 40 per cent. " Were some wealthy philanthropist to make a present every year of this sum to the labouring classes, what a munificent gift it would be con- sidered ! Yet, the labouring classes actually have it in their power to bestow this gift upon themselves, by merely abstaining from one detestable vice. Let them, therefore, consider the fatal consequences of intemperance and dissipation, and let every one be anxious to remedy the evil. Communities never begin either to demoralize or to reform in the mass. Both processes originate in the actions of single 29 and separate individuals. Men must therefore resolve upon stepping one by one out of the current of intemperance, before any reformation can be effected. And every individual who does this may rest assured, that he will produce a two-fold effect in promoting the improvement of society ; because he will thus not only withdraw one from the ranks of vice and profligacy, but he will, at the same time, add one to the number of the sober and virtuous." D ENGLAND The Bank of Eng-land was established in 1694. It was projected by Mr. William Paterson, a native of Scotland, who had become an extensive Eng-lish and foreign merchant. He had great difficulty in persuading the government of that day to give its sanction to the measure, and it was oj)posed by monied men on the supposition that the establish- ment of the bank would bring down the high rate of interest they were then receiving on loans to govern- ment, which was greatly in want of money. The interest they were receiving was 10 and 12 per cent., and occasionally increased by other charges to 20 per cent., and even higher. The establishment of the bank had the effect anticipated. It lent its capital to government, viz. £1,200,000, and the rate of interest fell consi- derably. " The erection of this famous bank," says its pro- jector, Mr. Paterson, who was chosen one of its first Directors, " not only relieved the Ministerial man- agers from their frequent processions (as he terms 31 them,) into the city for borrowing- money on the best and nearest pnblic secnrities, at an interest of 10 and 1*2 per cent, per annnm, but likewise gave life and currency to donble or triple the value of its capital in other branches of public credit." The hig-h rate of interest existing- before the estab- lishment of the bank operated greatly against com- merce, by causing persons to withdraw their money from trade, and invest it in loans. Tlie charter was granted in 1691^, to continue until 170.5 : it was again renewed by successive acts of Parliament till 1710, 1732, 1742, I764, I786, 1812, and until the expiration of 12 months' notice to be given after the 1st August, 1833. Before a person can do business with the Bank of England, he must apply to the directors for leave to open an account ; if this be granted, the bank will then discount approved bills, receive and pay cash, &c. The party keeping the account must always have a sum at his credit, for which he receives no interest : the bank charges 4 per cent, on the bills discounted, but will allow no account to be over- dra\\ni. The branches of the Bank of England conduct their business in a similar manner. There are sixty-one banking houses in London and Westminster, besides the Bank of England. Some of these transact an immense amount of busi- ness ; their mode of doing it is similar to that of the Bank of England ; they allow no interest on balances of accounts kept with them, nor do they charge any commission for paying- the drafts of those who keep accounts, the balance at their credit being considered by the banker a sufficient remuneration for keeping the account ; and this balance is expected to be large or small according to the number and amount of the transactions, and the trouble which the banker has with the account. This mode of remunerating bankers is peculiar to London, and I am not aware that it is followed in any one instance in the country, except in the branches of the Bank of England. The balances in the hands of the London bank- ers must amount to large sums. Rowland Stephen- son's bank had balances in 1817, which exceeded the sum of £900,000 ; not long before he ran off, the amount was £700,000 ; and when he did go off, it was about £400,000. The profits of this bank, by the use of these balances, amounted to a very large sum on an average of six years before it stopped payment ; and had it not been for his extravagance and villany, the bank ought to have been safe to its customers and lucrative to the partners. There are 636 private country banking firms in England,* and the partners in all amount to from 12 to 1,300. Some of these firms are very wealthy. Before the year 1826, no banking * This was the number of Licenses granted to Country Bankers, on the 26th June, 1832. 33 house in England could consist of more than six partners. The country bankers in England discount bills, grant advances or credits on accounts, and allow interest on money lodged with them. Accounts kept with a banker in England are made cash on 30th June and 31st December, and not at the time the transactions take place, as is the practice in Scotland. A copy of an account, as kept in an English Bank is here given, and the })rinciple on which it is kept may require to be explained to those who have not done business with an English bank : — 34 CO ^ 9"^ o o 5 a ooooooooooo°oooooooooo o wg tog »^ tdo Wi: g tog too tJj" n> o g; »:' — o : : >« . CK : . n> . . • CO . ^tS • l-j OtO-<|h-.cn-MOConH-*»';ffO'^C;-- O O H- to O 10 O 0> i OS" 4^ ® H-co ! J } C5i ! } } ! S i sn! i i J *-i i ! ? os! •^ ^ O5 03 lO — i S t i t ! } i ! ^i k-i-i } .K-h-K-i tol^**^ ! Oit i -^i JCCnl— 'H-C0tO*i.5CCOCOCOi— tOttOOOT. i OS i t-1 ! i i— I i 0301— ! I— '»!— 1030* ^t Mt«t005' :^ o tototototototototototototototo tdg to- P !:^ "^ L^ <^ "" il^ to»= tc|5=.. to j^ to 5C Co" H-"!^"' "^ ^>— lOkOk-lO ^kO lO i cc ! i •^C;itOi } o> ! ! to! =D}ii!!ti„!j^!ii! PS -4 >t^ 1—1 to S5 HJ o i i i i i i ! ! ^} ^ *!. 1-1 h- OS ?*^ t Oii COSSi H- i 030ih-i! *i- *>. *^ ' o S3 >- t H-i .j5--, ! h-t Oh- no} li! a:=i. 35 The banker allows, and charges 4 per cent, on the account ; he receives a quarter per cent, commission on all the sums at debit side, which are the sums the party keeping the account may have drawn out, or that the banker has paid for him. Should the party have had a credit with the banker, (with or without security,) the banker expects that he shall make returns on the account corresponding to perhaps eight or ten times the average advance he may have had. Thus, if a party has had an advance of £1,000, for twelve months, his returns are expected to amount to £8,000 or £10,000, on which returns of £8,000 or £10,000 a commission is charged; also the interest on the £1,000 advanced. So that it is evident the greater the returns, the more is the banker's profit. This is a very profitable part of the banker's business, when he is certain he is advancing money to parties of undoubted credit ; but he is sometimes induced, by the large returns made, to increase his advances to an unwarrantable amount. An instance of this kind occurred not many years ago, when a banker proved on a bankrupt's estate for sums advanced exceeding £50,000. Parties keeping an accoimt expect that a banker should make an advance, or, in other words, allow over-drafts on the account equivalent to one-tenth of the returns made ; — for instance, if the returns on the account amount to £.50,000 a year, he considers himself entitled to an advance or credit for £.5,000, and so on for larger returns. But, of course, this 36 understanding is subject to regulation and alteration, according to the banker's opinion of the party keep- ing the account. These credits are often granted by the English banks, as before hinted, without any security at all ; and the bankers are therefore much in the habit of inquiring whether the persons keeping accounts with them are doing well or ill in their business. In Scotland the banks require security for all advances, and therefore trouble themselves less with such inquiries into their customers* business. If the securities be undoubted, they are perfectly satis- fied. Credits in English banks are granted upon the security of promissory notes, signed by the party, and his surety or sureties ; and upon bonds* which differ in their form from those in Scotland, and also upon deposits of deeds of property. The latter kind of security is not taken at all in Scotland, without a heritable security, equivalent to a mort- gage in England. The law of Scotland does not admit of a deposit of deeds being a good security ; but in England the holder of deeds of property for money advanced to the owner of these deeds is con- sidered to have an equitable mortgage created thereby, and the Court of Chancery would give the holder relief in any attempt to dispose of the property without first paying off his lien upon the deeds. * See form of Bond in Appendix. 37 Bills are discounted to parties not keeping- accounts, in the same manner as in Scotland ; but where parties do keep accounts, the bills are passed to their credit in the accounts as on the 30th June and 31st December. Bills in Eng-land are all made payable at a London baidier's, or at the Bank of England. Two reasons appear to render this necessary ; the first and principal of which is that bills in England form a part of the currency, and circulate from hand to hand, the same as the large notes of the banks in Scotland ; and they could not thus circulate all over the three kingdoms, without being made payable in London, where all money transactions are adjusted. The second reason for the English practice is, that the English bankers are more subject to sudden demands upon them than the Scotch banks. Their bills, by being made payable in London, can be turned into cash, whenever required to meet any exigency in the course of their business. A great number of payments in England are made in two months bills, and the parties who keep accounts will often not take cjisli from a banker, but will request two months bills, because in the account they are allowed interest by the banker, whilst they can in many cases pay the bills as equivalent to cash. Merchants, in many instances, would not allow any interest or discount for cash in settling accounts ; all bills, therefore, being made payable in London, the banker is enabled to pay these away to his E 38 customers by indorsation, without being- at the expense of drawing new bills. In some instances bankers prefer drawing- bills, and giving- these to their customers, trusting that the customer will pay in cash to his account to meet the bill before it falls due : in this case, which is far from being rare, bankers may be said to give their credit on secu- rity to their customer, instead of advancing cash. Bills drawn by English Bankers on London are generally at two and three months. In Scotland similar bills are generally drawn at the par date, which is 20 days in Edinburgh, and from 20 to 30 days in other towns. To draw many bills at a longer date would be looked upon in Scotland as a sign of weakness. One great peculiarity in the English system of banking is, that England has a most extensive bill circulation, composed principally of bills at two and three months date ; whereas Scotland has no bill circulation whatever. In Lancashire, where few or no local notes circulate, it has been stated that nine parts out of ten of the circulation consists of bills of exchange, and the tenth part of gold and Bank of England notes. Some reckon the bill circulation to bear even a greater proportion than is here stated. Bankers and Banking Companies issue £5 notes, payable at their own banks, and some of them issue such notes payable in London. These notes do not circulate all over England free of charge, in the manner in which the notes of all the Scotch 39 banks do ; when paid by another bank, thoy are subject to a charge of 7) 10, 21, and 30 days, according- to the distance the notes may have travelled from the place where they were issued. There being no general exchange of bankers* notes in London, similar to that described in Edinburgh, a charge becomes necessary ; and it must be quite obvious that this charge operates against the notes circulating at a great distance from home. I am of opinion that if the circula- tion in England had been wholly in local notes, as in Scotland, and not partly in Bank of England notes, a general exchange of the former would have been long ago in operation in England. The one pound note circulation ceased in Eng- land in the year 1829, in consequence of the act of Parliament passed (after the panic,) in 1826. It is now generally admitted that government would have acted wisely, had they only regulated the small note circulation of England, instead of prohibiting it altogether. The government charged the English country bankers with causing the panic, but it is now evident the bankers had only their share in bringing to a crisis that period of false prosperity. Almost all persons in business, merchants as well as bankers, overtraded at that time ; and it is unjust to charge upon one class of the conununity exclusively what really belongs in part to every class, not excepting the then government of the country themselves. Still it nnist be admitted that many persons without 40 sufficient capital carried on the business of banking", by means of one pound notes, .to a most unwarrant- able extent : one bank in Yorkshire, composed of only two partners, which failed in the panic, had as many £1 notes in circulation when they stopped, as the Perth Banking- Company in Scotland, including notes of £1, £% £10, and £20, at their head bank and five branch banks : though the latter company was composed of nearly 200 partners, and had a paid up capital of £66,000, whilst the property of the two partners in the English bank did not amount to more than £20,000. Government, no doubt, heard of similar cases to this, and thought it right to abolish a system that allowed of such over issues of paper. Had they regulated the issues of £1 notes, by requiring secu- rity in stock or Exchequer bills for the amount of such notes, they would have prevented some of the injurious effects which have been the consequence of the withdrawing altogether of the £1 note circula- tion. Besides the over issue of £1 notes by some weak banks, (thus creating capital,) these banks, in many instances, gave a considerable premium to persons who took their notes. This was carried to a great extent. I heard a gentleman say, who wanted £1000 from a country bank which had stopped, that although he received no more than the dividend then paid, (7s. per £,)lie would be no loser, reckon- ing the amount of premiums the bank had paid him for taking their notes ! 41 Bankers and Banking Companies in England receive money on interest, (called deposits,) as the banks in Scotland do, and allow at present, with few exceptions, a higher rate of interest than is allowed in Scotland, where the g-eneral rate of interest is only 2 per cent. It was 4 per cent, in 18'2(3. In Yorkshire, several banks allow 3 per cent., and others Qj, which rate is also allowed by the Lan- cashire banks on deposits. Notice of a week or ten days is reqnired before any considerable sum can be withdrawn by a deposi- tor from an Eng-lish bank : in Scotland no notice is reqnired. In Scotland payments are all made in the bankers' own notes ; but in England, when deposits are withdrawn. Bank of England notes are generally required, and this may in part account for the banker in England requiring notice of the intention to with- draw. Mr. Stuckey, in his evidence before the Bank Charter Committee, states, that he has 14 banking establishments in Somersetshire, and 12 partners, imder the firm of Stuckey's Banking Company, and that they require 60 days* notice on withdrawing deposits above £1000; but if under that sum, 30 days is required, and that they deduct the interest for the days of notice when they pay the money before the expiration of the notice. Their rate of interest is 3 and 21 })er cent. These banks allow no interest on sums that can be drawn out without notice on accounts. 42 In Manchester and Liverpool, bankers allow and charge 3 per cent, on operating* accounts, charg-ing" also a quarter per cent, commission on the amount paid by the bank. This rate of charge on a three months bill is equal to 4 per cent. ; if the bill be of a shorter date, it exceeds 4 per cent. The Bank of England's Branches there charge 4 per cent, and no commission. The terms of business vary in several of the English counties. In Sheffield, the general charge by the banks is 5 per cent., and i per cent, commission, on advances, and this is the charge made by the banks in Bir- mingham ; and yet Mr. Thomas Attwood, M.P. expresses his surprise how business should leave his bank, and go to other establishments where the charge is only 4 per cent. He gives a very remark- able answer to a question put to him by the Bank Charter Committee, viz. : — whether the Branch Bank, discounting at 4 per cent., has not brought down the rate of discount ? He answers — " I never " heard a merchant complain of the rate of discount, " because banking accommodation is too valuable " and too important to make it of any consequence " whatever, whether he pays 5 per cent, or 10 per " cent." If this be true, I can only say that it may do for Birmingham, but it would not do for Yorkshire. It will surprise some bankers in Scotland, where the charge is so uniform, to hear that advances on accounts are charged 5 per cent, interest and a i I 43 j)er cent, commission in Birmingham, and 3 per cent, interest and a i per cent, commission in Man- chester ; making- a difference of 2 per cent, in towns not 80 miles distant. The termination of the Bank of England Charter being near at hand, it is of great importance that the affairs and government of that establishment be well considered before a renewal of the charter take place. Previous to the passing of the act 7 Geo. IV., the bank charter prevented companies composed of more than six partners carrying on the banking business in any town in England. The act 7 Geo. IV. allowed companies containing any number of partners, to be established in any town \dthin a greater distance than sixty-five miles from Lon- don. The obtaining of this act was matter of negotia- tion and arrangement with Lord Liverpool's govern- ment ; and as an equivalent to the Bank of England for conceding the right to establish Joint Stock Banks, they obtained by the same act power to establish Branch Banks in any town in England ; and they have established them in the following places, viz. : — Gloucester, Leeds, Manchester, Exeter, Swansea, Newcastle, Birmingham, Hull, Liverpool, Norwich. Bristol, 44 It is understood that some of these Branch Banks have realised a profit to the Bank of England, but that others of them have not. It is rather a matter of surprise that all the branch banks have not rea- lised a very considerable profit to the bank, when it is considered that they have such facilities for doing- business in London and at all the branches, and that their notes form the principal circulation throughout the kingdom. The want of success may in part be attributed to their carrying on business at the branches by fixed rules and regulations devised in London, and which are different from the rules and regulations of the banks in the towns where their branches have been established. It is fortunate for the country banks that the Bank of England has adhered so strictly to its rules and forms ; for if the branch banks were to do business on the same plan as the country banks, viz., make advances on accounts with or without security, and allow interest, the Bank of England must, in course of time, monopolise almost the whole banking business of the country, on ac- count of its great influence, power, and facilities for doing the business of the funds, and commercial transactions, in diff'erent parts of the country. The chartered banks of Scotland at Edinburgh, in establishing branches in the country towns, make it a point to do business on the same terms and in the same mode as the local banks in the same towns. They know that this is their only chance of compet- ing successfully with the local establishments; and 45 the Bank of Eng-laiid will soon understand, that, if it is to do the country business, it must conform to the country practice, and then the country banking busi- ness must be g-radually acquired by the branches of that overgrown establishment. It therefore becomes matter of grave inquiry by the legislature, before the charter be renewed, whether the branch banks al- ready established should not be recalled, or, if the articles of the charter coidd have no retrospective effect, whether any farther extension of them should be prevented. Were the Bank of England constituted like other banking establishments, no ground of objection could be made to the existence of branch banks in country towns ; but if such wide extension of their business in the country towns in England be permitted by the legislature to go on under the exclusive privileges of their monopoly, no private concern will be able to cope as bankers with such fearful odds ; and whether the commercial and agricultural interests of England will be as secure and as well accommodated under such a change, is exceedingly doubtfid. Although the extension of the Bank of England influence and business throughout the country is to be deprecated, it does appear desirable that the char- ter should be renewed, so far as regards the money transactions of the metropolis, and the management of the public funds of the kingdom. The banking business in London is immense. A long series of years has accustomed the community F 46 to the mode of transacting business in the metropolis of the emj3ire, and it might be a dangerous experi- ment to change the system. Besides, it is not clear that the establishment of several large banks of issue in London would preserve an equality of prices, pre- vent changes in the value of property, accommodate the public more, or keep the foreign exchanges in favour of this country. Intimately connected with the question of the re- newal of the Bank of England Charter, is the pro- priety of continuing gold as the standard of value ; and the fact deserves to be remembered that the guinea, which by law was worth no more than 21s., was saleable on the Continent, at one period during the late war, for 29 shillings ; the effect of which on the course of exchange may be instanced as follows : — a parcel of goods, bought in London for £500, might have been sold on the Continent for 400 guineas ; yet for the 400 guineas the merchant might have obtained from his banker a bill in London for £580, or 559, guineas and 8s. Li such a state of things as this, gold is sent out of the country by foreign merchants in such quanti- ties that the Bank of England takes alarm, and re- stricts its issues of notes ; which has an immediate effect on all the banks in the country, and in many instances compels the manufacturer and merchant to sacrifice their property. It is not only when the foreign exchanges are against England that gold is sent out of the country. In January and February 47 last year, when the exchang-es were very favoiirahle for England, trroat quantitios of cold wore sent from London, and it was ascertained that it was sent for investment in the Dntch funds. It would therefore appear that a variety of circumstances may cause gold to be sent from Eng-land ; and if it be taken into consideration that political alarm, or commercial panic, may have all the consequences of an unfavour- able exchange, by causing the gold to disappear as if by magic, by its being hoarded, it is in my humble opinion worthy of serious inquir}- whether silver would not be a ])referable standard of value. Silver could not be transmitted from country to country yAi\\ as nuich facility as gold, nor could it be so easily hoarded ; and its fluctuation as a standard would be greatly prevented by gold being made an article of merchandise, to rise and fall according to the demand. It will no doubt have some weight with the legislature, in considering the question of a standard, that silver is the standard on the Continent ; and in realily it is so in Scotland also ; there gold is seldom seen, but many of the Scotch banks have always in their coffers as large an amount in silver as English bankers of corresponding respectability have of gold in theirs. Should one pound notes be again allowed to be issued in England ? This is a difficult question to decide, and those who lunc been accustomed to London business and London banking alone are not competent to decide it. Wliat may be quite right 48 and proper for London, may be quite the reverse for the ag-ricultural and manufacturing districts of the country. Men of considerable property may find no difficulty in being accommodated by bankers without an issue of £1 notes, but it is not so clear that small traders in country towns, and small farm- ers, have the same facilities afforded them as when small notes were allowed to circulate. Those who wish a one pound note circulation consider it should only be allowed on the condition of the bankers giving security to the amount of their issues in Stock or Exchequer bills, and therefore contend that no harm, but much benefit, would be the result of a circulation of one pound notes, where undoubted security was given for the same. The strongest reason in favour of a one pound note circulation is, the extreme inconvenience that must be suffered by the manufacturing districts, at times when gold could not be procured to pay wages ; this is a difficulty I have not been able to overcome, and it is with me a very powerful argument why silver should be made the standard, instead of gold. Many commercial gentlemen of great ability think, that as the country has now undergone the change consequent on the withdrawal of the £1 notes, it would be unwise to disturb the present arrangement ; — that although many advantages might arise from a circulation of £1 notes, yet the dis- advantages are many also ; — that bankers have a desire to push £1 notes into circulation beyond the 49 legitimate wants of trade, which has a tendency to raise prices, and to produce great fluctuations. My own opinion is, that, situated as England now is, with agitation of various kinds in operation, if Bank of England notes were not made a legal tender for country hankers^ notes, it would be in- judicious to issue £1 notes at all. The greatest danger and inconvenience would arise to banks, in the manufacturing districts particularly, from sudden demands for gold by the working classes, who are now so nuich accustomed to unite firmly, and to act on one system, that, whenever they wished to carry a point connected with trade or politics, and were thwarted in the attempt, they might take an easy and effectual revenge by directing (through their leaders,) simultaneous runs on all the banks for payment in gold. The merchants and manufacturers of Manchester oppose the circulation of all notes except those of the Bank of England, from a fear that the banks would be unable, at a period of alarm, to meet the demands for payment of their notes, and at the same time give the usual facilities to that immense trading district. Many reasons in favour of a one pound note cir- culation in Scotland will not apply to England, on account of the immense amount of transactions in England, and the different manner of carrying on the business of banking. I have considered the matter with all the attention of which I am capable, 50 and, althoug-h the issue of one pound notes would be favourable to Banking Companies, with one of which I am connected, yet my opinion is rather in favour of not disturbing the present arrangement. I think the evils to be now dreaded by a continuance of a prohibition of £1 notes, are not so great as those attendant on a change of system. I had the honour of receiving, some time ago, a communication from an eminent statesman on the subject of a small note circulation with security, and I beg leave to subjoin an extract from one of his letters, from which it would appear that his opinion is unfavourable to a circulation of small notes, even with security : " December 26, 1829. " Supposing bankers in the country were allowed to issue " small notes, on the deposit of public securities, would not the " consequences be — a very general issue of such notes ; the " displacement of nearly the whole of the circulating gold coin, " as being an unnecessary and expensive currency ; a temporary " stimulus to trade, arising from the progressive increase of " prices ; and an undue encouragement to speculation in every " branch of manufacture. The notes issued remain payable on " demand in gold, but the public are at first satisfied with the " security of the paper issued — with the new guarantee of the " solvency of the respective bankers, and the gold is not de- " manded, and in fact has left the country. A reaction in trade " takes place — the natural consequence of undue speculation i " or there is a threatening aspect of affairs abroad. Gold be- " comes suddenly more valuable than paper, and every holder *' of paper desires to have that which he is entitled to demand " in exchange for his paper. Then comes a simultaneous con- " traction of paper, aggravating the effect of re-action in trade ; — " a suspension of payments in many cases, not from the ulti- " mate insolvency of the bank, but from tlie actual impossibility 51 " of suddenly procuring gold ; — a general desire to effect the " sale of stock, and a rapid fall in the funds in consequence ; — ■ '' in short, a general panic, and the ruinous effects of it. The " question is — A^hat guarantee does an issue of paper, founded " on the deposit of public securities, afford against the recur- " rence of the evils abovementioned?" Banking- Companies, with any number of partners, were allowed to be established at any place situated more than 6.5 miles from London, by the act 7 Geo. IV., passed in the year lH'2i), and they have been established in the following- towns : Huddersfield, Darlington, Bradford, Plymouth, Manchester, Whitehaven, Norwich, Gloucester, Halifax, Knaresbro', Leicester, Leeds, Birmingham, Sheffield, Liverpool, Newcastle-on-Tyne, Barnsley, Bristol, Stamford, York, Wakefield, Wolverhampton. Lancaster, In some of these towns two Banking Companies are established, and several of them have* a number of branch banks. The Huddersfield Banking Company consists of 310 shareholders, with a paid up capital of £100,000. It was almost the first established under the act of Parlia- 52 ment ; I was appointed its manag-er ; and as I was in- strumental in introducing- what is called the Scotch sys- tem of banking into England, I had the honour to receive communications from the originators of most of the banks subsequently established, requesting in- formation reg-arding the formation, progress, and man- agement of that bank, which the Directors have always allowed to be freely given. Huddersfield had suffered severely by the failure of several private banks, and the trade of the district had not sufficient accommo- dation afforded it. This awakened the attention of several public-spirited gentlemen to attempt forming the Banking Company, which was eventually accom- plished. The proprietary consisted of men of property retired from business, as well as of those extensively engaged as merchants and manufacturers. The object of the framers of the bank was to inspire confidence, by the respectability of the shareholders, as well as by the paid up capital of the bank. As some banks are now attempted to be estab- lished on a rather different foundation, I would venture to observe that Banking Companies are not formed upon a correct principle, are not safe as regards the public, and are not sound as being the furnishers of a paper circulation in notes and bills, if they carry on the banking business with a small paid up capital, with the view merely of realizing a high per centage as a dividend. A bank ought to possess money of its own, or it is not entitled to the name of a bank, even although many respectable merchants 53 may be shareholders ; because, when a time of pressure comes on a bank, it comes at the same time on the mercantile part of the community, and to a call on the shareholders to pay up additional capital at such a time, the answer would be " that it was not a convenient season." The legislature had in view, by the Act of 7 Geo. IV., to establish in Eng-land a secure and sound sys- tem of banking- ; but if the principle is admitted, and allowed to operate throughout the country, that Banking- Companies can be established on credit, with small paid uj) capitals, or with no paid up capital at all, for the purpose of realizing- a high j)er centage as a dividend, and thus encouraging- speculation in shares, then banks of this description vAW spring up in every district in England, (which they are partly doing at present,) and in their consequences will be productive of far greater evil than ever attended private banks. They will be set agoing by specula- tors ; a great per centage as a dividend will be announced, partly arising from profits in business, and partly from premiums on shares ; and when the concern is thus puffed up, the framers of it will sell out at a large profit. One individual sold out of a Banking Compau}' not four years in existence, with the direction of which he was concerfted, and cleared ten thousand pounds ; and soon after he sold out, the bank found itself in possession of had debts to as great an amount as its paid up capital ! Tlie principal evil to the trade of the country \^ill G 54 be in tlie system of competition — of over trad- ing-, and all its injurious consequences, wliicli will inevitably be engendered by credit hanks being- established, and carrying on business with small paid up capitals, and re-discounting their bills. The governor and deputy-governor of the Bank of England gave their opinion of such banks to a deputation who waited on them, regarding a new Banking Company opening an account with the Bank of England. They stated " that it nuist be perfectly and distinctly understood that the Bank of England by no means would, or indeed could, engage always to go on discounting to the same extent as might be at first named on entering on the account ; and they reserved always the right, to be exercised at their discretion as circumstances might occur to render it necessary, to curtail to any extent, or even to dis- continue their discounts altogether. They therefore most strongly urged the propriety, indeed absolute necessity, of every Joint Stock Bank calling for such a capital from their shareholders, to he really paid np, as would enable the Bank to trade upon, and lend its own botia-fde capital, and not to depend upon the Bank of England dis- counting regularly and constantly their bills, thereby finding the cash for the bank to trade with, which is, and will be, a very hazardous mode of conducting business." This mode of doing banking business, by re-dis- counting bills, will appear rather strange to some 55 Scotch bankers, whose practice it is not to re-discount any bills. The late Sir John Hay, Baronet, who was senior partner in the eminent banking- house of Sir AVilliani Forbes and Company, of Edinbiu'gh, did me the honour to write me a letter of date 8th February, 1830, regarding- banking, and I here insert an extract from that letter : — " I have to *' mention to you, what perhaps you already know, " that we never negociate or endorse away any of " our bills, keeping them till they are near due, and " remitting them direct to our bankers, Messrs. " Coutts and Co. and Messrs. Barclay and Co., and " we never draw bills on them at a longer date than " our par of 20 days." It may be here mentioned, that the Bank of England discounts at three per cent, to those country banks who issue no notes of their own, while they charge four per cent, to those banks who do issue their own promissory notes. Banking Companies are now spreading over England, and will eventually have to transact the principal part of the banking business of the country. It appears, therefore, necessary that the Legislature should frame such regulations for their establishment and government, as will make them perfectly safe to the public, and able to assist commerce and agricul- ture in times of alarm and pressure. The act of Parliament should be amended so as to prevent Banking Companies carrying on business without a sufficient ])aid up capital. Many think 56 £100,000 should be the minimum : that they should be allowed to make their promissory notes payable at a London banker's, as well as at their own house in the country : that they should be allowed to draw bills for sums under £50, which the act at present prevents : that a list of all the shareholders, with a statement of the j)aid up capital of the company, should be directed to be put up in a conspicuous place of the bank's principal office, and published annually in the newspaper of the district : that a charter should be granted to all such companies, not limiting the responsibility of the shareholders, but similar to the one granted to the Commercial Bank of Scotland, which is inserted in the Appendix. The Act of 7 Geo. IV. prevents Banking Compa- nies of more than six partners from establishing a banking house of their own in London. In enacting this clause I have no doubt that the Bank of Eng- land had in view the preventing of Joint Stock Banks establishing houses of their own in London, so as to interfere with their monopoly ; and, notwithstanding the evidence before the Bank Charter Committee in favour of allowing Banking Companies to establish houses of their own in London, I venture to doubt the propriety of granting them this privilege. It may be the means of creating a false capital, and fostering over-trading to a prodigious extent. A great part of the currency of England being in bills of exchange, a Banking Company in the country may establish a house in London, and may draw bills on 57 this house (their own house) at two or three months, which they can put into circulation l)y receiving- cash for them through the public, or from bill brokers, or from the Bank of England. In such a case as this, it is almost unnecessary to say anything about a large or a small paid up capital, because this bill-drawing system would raise caj)ital to any amount, as it has already done in many instances. A bank (not in a very large town) in Yorkshire, which stopped during the panic, had upwards of £312,000 current in bills on its own house when it stopped. Here was a sum equal to the j)aid up capitals of several Scotch banks together, created by merely paying for stamps, and by a system on which the Scotch banks do not raise one shilling. I have been informed, on good authority, that the first alarming symptom of the panic was the refusal by the Bank of England to discount drafts of the description alluded to, at two or three months' date. It is worthy of observation that the bank in York- shire, which produced such disastrous effects in that county by its failure in the panic, could not have existed but for this system of bill drawing (o/i itself,^ and its one pound note circulation. To have been compelled to give security in Exchequer Bills for the latter, or to have been prevented raising money by drawing on its own house in London, would have proved fatal to its existence, long before the panic overthrew the house, even with these artificial suj)- 58 ports. It would appear quite fallacious and incon- sistent to call upon bankers to give security for their issues of promissory notes, and yet leave tliem at liberty to put into circulation an unrestricted amount of paper in the shape of drafts on their own house in London (drawn on credit), without being the representative of value, and this will be abun- dantly confirmed by the fact that the bank alluded to had in circulation when it stopped — Paper in promissory notes, chiefly of £1 value, £113,400 Paper in drafts at two and three months, drawn on its own house in London, 312,800 £426,200 When a country banker draws to a considerable extent on a respectable London banker, (not on himself,) he is reminded by the London house, that before they will accept, he must put tangible funds into their hands, and this check operates on the country bank, so as to make it trade according to its means. In my opinion no bank in the country, public or private, ought to have the privilege of establishing a house in London, and no London bank ought to have the power of establishing a house in the country. It has been stated as a reason why Banking Com- 59 panies should be allowed to establish a house in London, that the coiuitry banks have sustained great losses by the failures of London bankers. But this could be obviated, if the Bank of England were to form a country office in their establishment, and do business on the same terms as the London bankers, with less of the hauteur and formality so common in large establishments. It should also learn to bend occasionally from the rigour of general rules, and ada})t itself to the varying circumstances of the country. The country bankers would then have power to choose betwixt the Bank of England and other respectable London bankers. It has been already stated that a large and suffi- cient paid up capital should be made a sine qua non in the formation of Banking Companies in England. The prodigious extent of business done, and the great variety which obtains in the doing of that business, would establish the importance of that principle ; but it woidd apj)ear to be necessary even in Scotland, where the business is nnicli more limit- ed, and where the mode of doing that business is very uniform. Within these few years three Bank- ing Companies have wound up in Scotland with great loss to the shareholders, and it is remarkable they all had small paid up capitals, — two of them so small that it appears a sort of humbug to have given them the name of banks ; and had the amount of their capitals been published, they never could have obtained the credit in that countrv which thev did. 60 The East Lothian Banking Company at Dunbar, consisting" of 400 shares of £200 each, with a paid up capital of £40,000 The Montrose Banking Company, consisting of 150 shares of £100 each, with a paid up capital of . . . 15,000 The Fife Banking Company, con- sisting of 60 shares of £500 each, with a paid up capital of 15,000 The paid up capitals on each were lost : and the shareholders of the Dunbar bank had to pay £475 on each share, to meet engagements and bad debts. The shareholders of the Montrose bank had to pay £150 on each share, and £50 more will be required to pay off all obligations ; — and the shareholders of the Fife Banking Company had to pay £2,500 on each share, to pay off all the obligations and bad debts of the bank. Dishonesty and mismanagement were partly the causes of the losses made by the Dunbar and Fife banks ; and the losses of the Mon- trose bank were principally caused by bad debts made at its branches. In fact the company was ruined by its branch banks. There is one part of the banking system which has not yet been particularly adverted to, and that is, the power of banks to establish an unlimited number of branches throughout the country. 61 Where the proprietary of a Bankino- Company consists chiefly of mercantile men, it is supposed that they establish their bank for the purpose of aiding the trade of their district, and increasing its prosperity ; and therefore, to open banking houses in towns with which they have no connection, appears to be dej)arting from the legitimate object of a Joint Stock Bank. In that case gain can be their only object. Each district, I apprehend, should be left to the gentlemen residing in it to form a Banking C'ompany of their own, if they consider such an establishment would be usefid and profitable. And here I cannot help expressing my siu'prise that government, in the Act 7 Geo. 4, should have authorized the stamp office to charge £30 a year for every branch license if they do not exceed four, but if they exceed foin*, all the other branches, although thev mav be a hundred, are charged nothing by the stamp office. This is like giving a bounty on the increase of branches, whereas the legitimate business of banking appears to require that a check should be put on this system of bank-overtrading by means of branches, &c. To show that this is no new opinion of mine, and not caused by the formation of recent establish- ments, I insert an extract of a letter, dated the 2nd of April, 1830, which I had the honour to receive from one of the most distinguished statesmen of the present day ; and an extract of ni}- reply, dated 7th April, 1830:— II 62 " April 2nd, 1830. " I shall be glad to hear what, in your opinion, are the " reasons against a limitation of the responsibility of partners " in a Joint Stock Banking Company. It does not follow that " the responsibility must be necessarily limited to the amount of '^ the ^share'Jield. Each shareholder might be responsible to " three or four times the amount of the sum subscribed by i' him." " 7th April, 1830. " I have the honour to acknowledge the receipt of your letter " of 2nd instant, and have been prevented by indisposition from " replying to it sooner. " With regard to objections that may be stated against limit- " ing the responsibility of partners in public Banking Com- " panies, I beg leave to observe, that I feel inclined to deny the " necessity of the limitation altogether. It is my opinion that, " if the Act of 7th Geo. 4, be amended, Banking Companies " will gradually be formed in many towns in England, without " limited responsibility. It would not be for the good of the " country that numerous establishments of this kind should " spring up all at once. " I consider public Banking Companies should be formed " with a view of benefiting the district where they are estab- " lished, as much as with an idea of profit to the partners. " By limiting the responsibility of partners to a few hundred " pounds, a great temptation is held out to them to become " trading bankers, and to push their business and establishments " into towns and districts where they are not wanted, and " where they have no legitimate right to appear. This would " be injurious to the present respectable bankers, and excite a " spirit of competition in banking, which would lead to conse- " quences you would deprecate. " The effect of charters with limited responsibility would " be, to place the business of banking in the hands of a few " large companies, such as the Provincial Bank of Ireland, and " the projected Metropolitan Bank, which contemplates having " 200 branches. I am decidedly of opinion that such wide " spreading branches would not benefit the country in the man- ()3 " ner which local establishments, similar to the Iluddorstield " Banking Company, are calculated to do. " Besides, it ought not to be taken for granted that there is " a great want of accommodation, which these new banks would " supply. " No London Branch Bank, nor Joint Stock Bank, could " exceed the liberal and judicious accommodation afforded to " the mercantile community of Leeds, (at the panic,) by the " wealthy private bank of INIessrs. Beckett and Co. " I have the honour to be, &c., (Signed) " H. WATT." In the letter just quoted, allusion is made to the propriety of rendering- parties responsible for five or six times the amount of the shares subscribed. Now, in the working- of the Joint Stock Bank sys- tem, the evil which experience has shown ought to be guarded against is, the allowing parties to sub- scribe for ten, twenty, or even fifty times more than they are ever able to pay for. The shares in Banking Companies are called £100 shares, but the framers of some of them say to parties subscribing, that not more than £5 on each share will ever be called for, and persons subscribe for^eir 50, 100, or 1,000 shares, pledging them- selves in a deed of settlement to pay up £100 on each share, when demanded ; whereas it is notorious that they could as soon pay off the National Debt as pay the sums to which they have subscribed their names. Tliere is, therefore, a complete deception prac- tised on the subject, but it answers the purpose of the framers of these companies, by enabling them to announce in the newspapers, &c., " Capital half 64 a million, or one million sterling !" &c. ; wliereas the hona-Jide capital is perhaps £15,000 or £20,000 only. It is altogether a delusion to consider any sum as the capital of a bank, but what has actually been paid up by the shareholders. This paid up capital ought to be published, and all publications of merely " subscribed capital" pro- hibited, so as not to deceive the public. By such delusions some Banking Companies obtain a great circulation both of notes and bills, and make the public believe that they are based upon a vast capital, when, in reality, no capital as a ground of security exists at all. It may be thought that prudential considerations would operate against shareholders continuing such a system, but it has been found that the cupidity of individuals is sufficient to outweigh all other con- siderations. In several of the publications on banking and currency, it has been strongly recommended, as a correction of the evils of the system, that a publi- cation of the accounts, &c. of banks should be ordered by the legislature. I do not think that any publication of the accounts of country banks would be of the least use in pre- venting the abuses complained of. And as, in all matters of this kind, practice is superior to theory, it is instructive to attend to the following statement of the affairs of a bank in Yorkshire, which failed during the panic. f)5 The following- statement was exhibited soon after the house stopped : — ENGAGEMENTS. Lodgments and Balances due, X199,818 Balance due to Bank, 88,982 16 9 Notes in circulation, 113,407 Drafts, 312,880 Surplus, ASSETS. 713,087 1« 9 108,785 3 3 £821,853 £848,284 Book debts, including good, bad, and dubious. 110,089 Bills on hand, part with London Bankers. 36,500 Bills, promissory notes, and securities advanced upon, part with London Bankers. £821,853 PARTICULARS OF THE ASSETS. £ 65,573 Balances due from persons who had become bankrupt, or otherwise insolvent, befveen 1st October, 1812, and 8th December, 1825, 165,749 In accounts of bankrupts subsequently declared, 4,306 Debts under trust deeds, 4,385 Due from persons otherwise insolvent, since 1825, 228,183 Set off by mutual debts, or by bills and notes brought in, j 10,406 Balance at the debit of profit and loss, J 189,882 (iood and doubtful debts, 89,805 Unpaid bills with London bankers, 13,252 ditto with London bankers, 29,272 Promissory notes and collateral securities, 11,090 Good bills with London bankers, 21,795 ditto with do. 8,375 Cash and good bills, £821,853 648,264 173,589 £821,853 ASSETS REALISED, AFTER SEVERAL YEARS' WINDING UP. £ 65,573 wliolly unproductive, 165,749 have produced 4,308 unproductive, 4,385 do. 228,183 do. 10,408 profit and loss : nominal in itself, 169,882 collected from this head, 89,805^ 13,252 Vhave produced, 29,272 ) 11,090 retained by London bankers, 21,795 good, 8,375 do £821,853 £ 2,850 58,385 38,614 21,795 8,375 £128,019 66 The first part of this statement shows the engag-e- ments and assets, which appears to leave a surplus of upwards of £100,000, after paying all debts : The second part shows the particulars of the assets : — and The third part is the result, after several years' winding up the concern, by a gentleman of great talents and ability in all complicated accounts ; and it shows £128,019 only, as recoverable from assets amounting to the enormous sum of £821,853. Now, of what use would the publication of the first part of the above statement, be, to enable the public to know that they were banking with a house of wealth and undoubted safety ? It would tend rather to give a false confidence in a concern that ought never to have been allowed to issue either notes or bills. Connected as I have been almost all my life with respectable Banking Companies, I feel anxious to point out their advantages. They inspire confidence in towns that may have suffered from the failures of weak banks : — they give confidence to depositors lodging their money in them, and confidence to the trading interests of the town and neighbourhood where they are established. If I appear anxious to explain the defects in the system in England, it is because I feel a great desire to see them established on a principle of giving per_ 67 feet security to the public, of benefiting" the share- holders, and of assisting- in putting- the banking business of the kingdom on such a basis as to pre- serve at all times perfect confidence, amidst the fluctuations of trade and commerce. As Parliament is about to be called on to regu- late banks of issue, and amend the Act of 7 George IV., allowing Joint Stock Banks to be established, I venture to off'er my opinion, as a practical banker, that all Joint Stock Banks ought to have a large paid up capital, and to publish its amount, and the names of their shareholders, at least once a year. I consider Banking Companies formed on this principle, with no limitation of responsibility by shareholders, and managed with a view to benefit the trade of their districts, are calculated to be of lasting benefit to the conmuuiity, as well as to the individual proprietors. It ought also to be con- sidered that the publication of such accounts as may be necessary in a national concern like the Bank of England, may be very injudicious and improj)er in local establishments. Their ramifications are described by Mr. Tlios. Attwood, jVI. V. in an important answer he gave before the Bank Charter Committee, to the follow- ing question : — " Does the Joint Stock Bank at " Birmingham interfere nnich with the private " bankers ?" He replied — " \'^ery much ; the Country Bankers having, during the fluctuations that have existed in the last fifteen years, stood in 68 the position of borrowers on the one hand and lenders on the other;, they have at each period of the three great fluctuations been as it were guarantees between the debtor and the creditor interest of the country^ and forced to make good the engage- ments of the debtor to the creditor at a time when, at three different periods, the burthen of debts has been nearly doubled ; the consequence of this painful and urgent position of the Bankers has been to expose them all, without exception, to very great injuries and losses ; it has likewise been to expose them all to a great number of difficult entanglements and locked up debts ; the means of supporting those entanglements and doubtful and locked up debts, and the means of supporting the losses upon their capital, in a great degree arose from the masses of money which the public have been in the habit of keeping in their hands, and also from the annual profits of their business ; now the annual profits of their business are broken down and nearly annihilated ; that I will call a comparative trifle ; but combinations of the richer customers and the richer con- nexions have been engaged against them, who draw away their own balances, which were formerly in the hands of the Country Bankers, to form powerful combinations of former friends converted into bitter enemies ; and these powerful combinations prevail, by the influence of numbers and of solicitation, in draw- ing away large masses of money from the old establishments ; the consequence of which is, that the old establishments are left in a great degree with all manner of difficulties and entangle- ments, and the means by which hitherto they have supported such entanglements, are mainly djawn away, or are in the act of being drawn away. This is my principal reason for considering the Joint Stock Banks exceedingly injurious to the Banking system, and, through that, to the country at large." I quote this answer witli a different view from that which Mr. Attwood had when he gave it to the Committee ; — his object appears to have been to throw discredit on Joint Stock Banks, and persuade the Legislature to increase their restrictions. It is 69 out of the question for either the Government or the Leg-ishiture to attempt increasing- the restrictions on Banking- Companies, so as to prevent their form- ation altog-ether ; and it is equally futile and vain for Mr. Attwood, or anv other person to attempt to throw discredit on respectable and wealthy Banking- Companies, similar to the Huddersfield Banking- Com- pany,* the Bradford Banking Company, and others of the same class. But as the effect of Companies being established will to a certain extent be as described by Mr. Attwood in the foregoing answers, it appears to me to be of great consequence to the people of England, that these Companies should be formed on a basis not to be shaken by the alarm or the reality of a panic; and I respectfully submit that this can be most effectually done by the Legislature passing an act, providing — That no Banking Companv in England be allowed to carry on business, without obtaining a charter similar to that of the Commercial Bank of Scotland* — (See Appendix i No. 1 :) That the paid up capital be not less than One Hundred Thousand Pounds : That no Banking Company be allowed to estab- lish more than three Branch Banks : That no Banking Company be allowed to estab- lish a house of its own in London, to draw upon : That a certified list of all the shareholders, witli the amount of paid up capital, &c., be placed in a • For a list of the Shareholders, &c., see the Appendix, No. C>. I 70 conspicuous place of the Banking-liouse, and pub- lished annually in the newspaper of the district where the bank is situated. — (See Appendix, No. 6.) In concluding" this short and imperfect sketch of the practice of banking- in Scotland and England, I would beg leave to observe, that the undoubted security given to the public by the Banking Com- panies in Scotland has generated a feeling of entire confidence, so that it never enters into the head of any individual there that he can lose by the banks breaking. In England the same feeling of confi- dence has hitherto not generally prevailed, because of the failures of some banks, and because others of little property have obtained great credit, merely from allowing more favourable terms of business. I cannot, therefore, express my opinion of the two systems more correctly than by stating, that the Scotch system is one of entire confidence, and devoid of fear ; while the English system is rather one of fear, and, to a certain extent, one of prepa- ration for meeting sudden demands. In Scotland these sudden demands are never anticipated. When I was bank agent at two country towns in Scotland, it occasionally happened that I had paid away all the money (notes) that was in the bank^ and I had to tell some parties who wanted money that they must call to-morrow, or the day after, when I should have received a supply of notes from the head office. I never had any hesitation in telling them so, nor did they conceive for a moment 71 that the respectability or ability of the bank was in the least affected by my running short of notes. It would, however, be rather a dangerous experi- ment for a bank in England to be found, not only without its own notes, but without Bank of England notes and gold. The English bank might be equally safe with the Scotch one, yet the different systems, and the different feelings towards banks in the two coun- tries render a different arrangement and manage- ment necessary. APPENDIX. No. 1. WARRANT FOR THE CHARTER OF THE COMMERCIAL BANK OP SCOTLAND. Our Sovereign Lord, considering that a humble petition has been presented to his Majesty, by and on behalf of the Directors of the Commercial Bank of Scotland ; which petition represents, that the petitioners, and many other persons, re- siding in that part of his Majesty's dominions, called Scotland, had formed themselves into a society or partnership, and estab- lished the same in the said city of Edinburgh, under the name of the Commercial Banking Company of Scotland, for carrying on the business of Banking, in all its branches, had subscribed and raised amongst themselves a large capital, in transferable shares : That the public had greatly benefited by the formation of their society, and that a considerable revenue was derived to his Majesty therefrom : That it would greatly tend to the benefit and good management of the concerns of the said Com- pany, established by the petitioners and others as above written, if his Majesty would be graciously pleased to grant to the said Company a Royal Charter of Incorporation ; and, therefore, the petitioners humbly prayed, that his Majesty would be graci- ously pleased to grant to the said Company a royal charter, for incorporating them, and such persons as might be thereafter duly admitted members of the said society, into one body cor- porate and politic, by the name and style of the Commercial Bank of Scotland, with a perpetual endurance and succession, and with power to hold heritable property, and such other powers and privileges as are usually granted to other bodies corporate and politic of the same nature, and in such manner as to his Majesty in his royal wisdom should seem proper. And his Majesty having taken the said petition into his royal con- 73 sideratioii, and being willing to give all proper encouragement to an establishment calculated to be beneficial to the public, and which had carried on business, with advantage to the country, since the year 1810: Therefork, and in compli- ance with the humble petition above mentioned, and having regard to the circumstances already mentioned, particularly, that the said Company has existed and carried on business for so many years, and was the first which, after the lapse of up- wards of half a century, had been established on the principles of a Joint Stock Society, extending over the whole of Scot- land, — during Avhich period the agriculture, manufactures, and commerce of the country had greatly improved and increased, and a new institution of the kind became thereby useful and necessary : And, farther, that the said Company had rendered useful service to the country and the government, in receiving and remitting the public revenue : His Majesty, by virtue of his prerogative royal, and of his special grace, certain know- ledge, and mere motion, ordains a Charter to be made out, and passed under the seal appointed by the Treaty of Union to be kept and used in Scotland, in place of the great seal thereof formerly used there, — constituting, erecting, and incorporating, as his JNIajesty, for himself and his royal successors, hereby Constitutes, Erects, and Incorporates the said petitioners, and such other person or persons as now are or shall hereafter become members of the society or company, into one body politic and corporate, by the name and style of the Commercial Bank of Scoti^and, for the purpose of carrying on the business of Banking, in all its branches : And as such, and by such name, and for such purposes only, to have perpe- tual endurance and succession ; with powers to the said society and corporation, under the name and style aforesaid, to take, hold, and enjoy such lands, tenements, or other heritages, as may be necessary or useful in carrying on their said trade or busi- ness ; and, if necessary, to sell, dispone, and convey the same ; and to lend money upon heritable and personal securities ; and to hold goods, effects, and chattels, for the uses and purposes of the said society and corporation, as hereby defined : De- claring, that all charters, dispositions, heritable securities, and other deeds or instruments affecting heritable or personal pro- 74 perty^ to be granted to the said society and corporation, shall and may be taken to them, under the foresaid corporate name of the Commercial Bank of Scotland ; and that any charters, dispositions, or other deeds or instruments to be granted by the said society and corporation, shall be subscribed by two or more of the ordinary directors, and by the manager or secretary for the time being, and to which the common seal which the said society or corporation is authorized to use, as after mentioned, may be appended : And it is hereby declared, that all such deeds or instruments shall be equally valid and sufficient, as if the same had been subscribed by the whole directors and partners of the said society or corporation : And with power to the said society or corporation, to sue and be sued, defend and be defended, plead and be impleaded, in whatever courts and places, and before whatever Judges, Justices, or other officers, in all actions, pleas, suits, complaints, matters, and things whatsoever, in such manner and form as any of his Majesty's subjects, or any other body corporate or politic may or can be ; and to sue out and execute all manner of diligence, real and personal, by the foresaid corporate name of the Com,' mercial Bank of Scotland, or in the name of the manager for the time being : Declaring, that a summons or citation in actions against the said society or corporation, given to their said manager or secretary at the society's head office, or other usual place of business in Edinburgh, shall be sufficient to oblige the said society or corporation to answer to any suit or process : and that all actions at the suit or instance of the said society or corporation may be brought and maintained in their said corporate name, or in the name of the manager for the time being ; and with power to the said society or corporation, to have and use a common seal, and to change the same from time to time, as to the said society or corporation may seem expedient. And, further, his Majesty doth hereby ordain and declare, that the capital stock of the said corporation or com- pany of the Commercial Bank of Scotland is, and shall be, three millions sterling, and to be held and disposed of in the manner mentioned in the deed of partnership of the said Company, bearing date the 31st day of October, 1810, and several sub- sequent dates ; the whole, or any part of which capital stock. 75 in addition to i.^600,000 paid up, it shall and may be lawful for the directors of the said company for the time being, to call up and require payment of, pursuant to the said deed of partner- ship, at such time or times, from time to time, and to such amount, as the said directors for the time being shall order and direct in that behalf, pursuant to any bye-law which may be made in the manner herein directed. And his Majesty doth further ordain and declare, that the said directors for the time being, shall have power, and tliey are hereby empowered, to use and employ the funds of the said corporation, not only in the ordinary business of banking, but also in purchasing or acquiring any of the government stocks or securities, transfer- able at the Bank of England or Bank of Ireland, exchequer bills, or other government securities, of whatever nature the same may be , any part of the stock of the Bank of England or Bank of Ireland, or of any incorporated company, or any bills of excliange, bullion, gold, or silver, and every other kind of personal property, that may be acquired or purchased for behoof of the proprietors of the said Comimrcial Bank of Scofland ; and to sell, dispose of, or transfer all such government stocks, and other securities or properties, as the said Commercial Bank of Scotland may require or be possessed of, in as full and ample manner as any body politic or corporate, or any company or in- dividual whatever, in any part of his Majesty's dominions, may or can do. And his IMajesty hereby grants and declares, that the present extraordinary and ordinary directors of the said society, as a company, shall continue in office, and act as such respectively, until the seventeenth day of December, eighteen hundred and thirty-one years ; upon which day, at two o'clock in the afternoon, there shall be held in the society's head office in Edinburgh, a general meeting of the partners or members of the said society or corporation ; at which meeting, and at the meetings to be held annually upon the 17th day of December, if a lawful day, or the first lawful day thereafter, the society or corporation shall elect extraordinary and ordinary directors according to the rules and regulations now observed by the said society, or according to any other rules or regulations which they may hereafter make by any bye-law in that behalf : And they shall also, at the said first meeting, or at any future meeting, elect 76 a governor and deputy-governor, and shall do the same annually thereafter, upon the said 17th day of December, if a lawful day, or on the first lawful day following ; which several gover- nors or directors shall hold their offices respectively, and shall have full power to manage, direct, order, and appoint, in all matters and things touching and respecting the said society, in terms of, and conform to, the bye-laws and regulations of the said society, in that behalf made, and now in observance, or hereafter to be made and provided. And, further, his Majesty gives and grants to the said society or corporation, power and authority at their said annual general meeting, or at any other general meeting of the members or partners, called upon at least thirty days previous intimation, in the Edinburgh Even- ing Courant, Caledonian Mercury, and Edinburgh Adver- tiser ; and in case of the discontinuance of these newspapers, or any of them, by intimation in any other three newspapers, to be fixed by the ordinary directors for the time being, — to alter or annul any bye-laws, rules, and regulations, of the said society in observance, and to make and frame such other bye- laws, rules, and regulations, as the said society or corporation, or the major part of its members assembled for the time, shall judge proper and necessary, for the better government and direction of the said society or corporation, — the votes of the said members assembled at the said meeting being taken in the manner provided by the laws and rules then in obser- vance ; and afterwards to alter or annul such bye-laws, rules, and regulations, from time to time, as the said society or corporation, or the major part of its members assembled for the time, shall think fit and necessary, — but so always as the said bye-laws, rules, and regulations be no wise contrary to the laws of the realm. And his Majesty further grants and confirms to the said company or corporation, all the goods, sums of money, property, heritable and moveable, real and personal, rights, profits, benefits, securities, powers, pri- vileges, and others whatsoever, heretofore acquired and pos- sessed, enjoyed and exercised by the said corporation, to be possessed, enjoyed, and exercised by them in all time coming, in manner at more length above specified : But declaring hereby, that nothing contained in these presents, shall he construed and 77 intended to limit the respomihiliti/ and liahililij of the individual part- ners of the said corporation for the debts and engagements lairfidly contracted, or to he contracted, hy the said corporation, "-rchich responsihility and liability is to remain as valid and effectual, as if these presents had not been granted, any law or practice to the con- trary notwithstanding : Providing and declaring always, that the said society or corporation shall be duly authorized, in vir- tue of the charter to follow hereon, to carry on the business of banking in all its branches, and shall not be empowered, in virtue thereof, to carry on any other trade or business what- ever : And further providing and declaring, that the said company or corporation shall render annually to the Lords Com- missioners of his Majesty's Treasury, an account, certified by the cashier, secretary, or accountant of the said company, showing the weekly amount of their notes in circulation, of each denomination. And his IMajesty further grants, by these presents, for himself, his heirs and successors, that the charter to follow hereon shall be in and by all things valid and effectual in law, according to the true intent and meaning of the same, and shall be held, and construed, and adjudged in the most favourable and beneficial sense, for the best advantage of the said corporation, notwithstanding any misrecital, defect, un- certainty, or imperfection therein contained. And his Ma- jesty doth hereby, for himself, his heirs and successors, cove- nant, grant, and agree to and with the said corporation or body politic, and their successors. That he, his heirs and successors, shall and will from time to time, and at all times hereafter, upon the humble suit and request of the said corporation or body politic and their successors, give and grant unto them all such further and other privileges, authorities, matters, and things, for rendering more effectual this his grant, according to the true intent and meaning of these presents, which he or they can or may lawfully grant, and as shall be reasonably advised and devised by the counsel, learned in the law, of the said corporation or body politic for the time being, and shall be approved of by the Lord Advocate or Solicitor-General for Scotland of his IMajesty, his heirs and successors, on his and their behalf. And his IMajesty doth further will and command, that this charter do pass the seal appointed by the treaty of 78 union to be kept and used in Scotland^ in place of the great seal thereof formerly used there^ without passing any other seal or register. For the doing whereof, as well to the director of his Majesty's chancery for writing the same, as to the Lord Keeper of the seal, for causing the said seal to be appended thereto, this shall be a sufficient warrant. Given at his Majesty's Court at Saint James's, the fifth day of August, 1831, in the second year of his Majesty's reign. No. 2. rORBI OF A BOND FOR A CASH ACCOUNT IN SCOTCH BANKS. We, a. B., C. D., and E. F., considering that the Commer- mercial Bank of Scotland has agreed to allow us a standing credit to the extent of One Thousand Pounds sterling upon a cash credit account to be kept in the name of one of us, the said A. B, in the books of the said bank, and to be operated upon by him, and may also discount or purchase bills, whereon the name of the said A. B., or the firm of any company of which he is a partner, may stand as drawer, acceptor, or endorser, and that upon condition of our granting these presents : Therefore we, the said A. B., C. D., and E. F., hereby bind and oblige ourselves, as full debtors and co-obligants, and our respective heirs, executors, and successors whomsoever, all conjunctly and severally to content and pay to the said bank the foresaid sum of One Thousand Pounds sterling, or such part or parts thereof as the said A, B, or any person or person having his letter or other written authority, shall value for or draw out by orders or drafts on the said bank, or its manager, cashier, or any of its officers at Edinburgh, or any of its agents, cashiers, or other officers elsewhere, in virtue of the foresaid credit : and also such sum or sums of money as the said A. B. shall stand engaged for or be indebted, resting or owing to the said bank on account of any bills discounted or held by it whereon his name as an individual, or the firm of any company of which he is a partner, shall stand as drawer, acceptor, or endorser, or any sum or sums for which he or they shall stand engaged or indebted to the said bank by acceptances, endorsations 79 letters of credit, guarantees, or in any other manner of way whatsoever, and all or any of which ohligations as aforesaid, the said bank shall be entitled to place to the debit of the said account and of the obligants hereto, at any time before this bond is discharged and delivered up, and that without intimation to anv of the said parties, but not exceeding in all the said princi- pal sum of One Thousand Pounds sterling, and interest due thereon ; and that at any time, when the same shall be demanded after three months from the date hereof, together with the lega\ interest thereof, from the time or times of the respective advances until the same be repaid, with a fifth part more of the said prin- cipal sum due of penalty in case of failure. And it is hereby specially conditioned and agreed to, that a stated account, made out from^the books of the said bank, and signed by one of its accountants, shall be sufficient to constitute a charge or balance against us and each of us, whereof no suspension shall pass at the instance of any us, except on consignation only of the sum due thereon. And it is hereby declared that there is nothing hereby meant to supersede or vacate the security which the said bank already holds, or may hold, over any shares of stock of the said bank and profits thereon, belonging or that may belong to any of us for any advances under this bond or otherways, it being always in the power of the said bank to appropriate or allow of the disposal in any way whatever of all or any of the shares of said stock ; and the said parties to this bond hereby declare that they have no lien over the said shares, or any right to insist upon the application of the same to payment of any debts to be hereby contracted. And further the said parties agree that the obligation hereby come under shall remain in full force in the same manner and to the extent as if such shares of stock had never belonged to any of the parties hereto, and it being hereby agreed that the said bank may allow credit on the said shares, or the same to be sold, and the price to be paid to the seller, or may apply the same to any other purpose accord- ing as it shall deem expedient, being bound in the latter case to account only to the person or persons to whom the shares belonged. And farther declaring, as the said cash credit account is to be in the name of the said A. B, and he is to con- duct the transactions thereon, it is hereby especially provided 80 and agreed to, that all communications on the part of the bank regarding either the management by him of the account, or re- payment of the balance or balances which may become due thereon, shall or may be made to us, the other parties, through the said A. B, with whom the said bank shall be at liberty to make any arrangements, by affording farther opportunities for better management of the account, according to the rules of the said bank, if deviated from, or in any other way required, or by giving time for re-payment of the balance or balances thereof, without any direct application to or concurrence by us, the said C. D, and E. F, on the subject, until the said bank shall consider this necessary for a final settlement ; and it shall also have the power, without consultation with or consent by us ; to compro- mise with, or give time to any of the parties on the bills dis- counted or held by it as aforesaid, we, the said C. D, and E. F, having always full opportunity afibrded us by the said bank, whenever we or either of us wish and apply for the same, to see any of the transactions and state of the said cash credit account, and other transactions of the said A. B, in which we may be interested by the obligations of this bond, and the said bank shall only be bound to attend to any instructions we may give on the subject in writing, and acknowledged in writing to have been received. It being hereby expressly declared, that all the parties to this bond are pari passu co-obligants to the said bank, and that all and each of us are equally bound to it, and shall not be entitled to plead that any of us are The Cautioners for the other. And we the said A. B, C. D, and E. F, consent to the registration hereof, and of the foresaid stated account in the books of Council and Session, that letters of horning on six days' charge, and all other execution necessary, may pass on a decree to be interponed there, and thereto in form as effeirs, and for that purpose we constitute Our Procurators, &c. In witness whereof these presents written upon this sheet of stamped paper, by 81 No. 3. FORM OF A BOND IN ENGLISH BANKS. Know all Men by these Presents^ that we, are held and firmly bound to in the sum of One Thousand Pounds of lawful money of Great Britain, to be paid to the said or their certain attorney, executors, administrators or assigns, for which payment well and truly to be made, JVe bind ourselves and each of us, and our heirs, executors, and administrators, and the heirs, executors, and administrators of each of us, jointly, severally, and respectively, firmly by these presents, sealed with our respective seals. Dated Whereas, the above bounden are desirous of opening a banking account with the said company according to the usual and ordinary course, and upon the terms of business done and to be done by the said company. And whereas, in order to secure the re-payment of such sum or sums of money as the said may either by themselves or jointly with any other person or persons as a partner or part- ners with them, or otherwise become engaged or indebted to the said company upon or by virtue of such banking account, or on any other account whatsoever, the said and also the above bounden as their surety, have agreed to enter into the above written bond or obligation to the extent and subject to the condition hereinafter contained. Noiv therefore the condition of the above written bond or obliga- tion is such, that if the said their heirs, executors, administrators, or assigns do and shall, ujion demand, well and truly pay, or cause to be paid, unto the said their executors, administrators, or assigns, or the trustees for the time being of the said company, the amount of all and every the sum and sums of money which at the balance and ultimate or final close of such account, shall be due and o\\'ing to the said company in respect of any cash-bills of exchange, promissory notes, notes of hand, notes or bills of the Governor and Com- pany of the Bank of England, bank post bills, drafts or checks already lent, advanced, or paid, or hereafter to be lent, advanced, 82 or paid by or on the account of the said company, to or for, or on the account, or for the accommodation, or upon the credit or security of the said either alone or jointly as aforesaid, together with interest, postages, stamps, commission^ discount, and the usual and ordinary charges made by bankers to their customers, and all other the sum and sums of money which shall then be in anywise due and owing from the said their executors, administrators, or assigns, either alone or jointly as aforesaid, to the said company, or which the said company shall have engaged or become liable to pay for them, then the above Avritten bond or obligation to be void> otherwise to be and remain in full force and virtue. Provided always, and it is hereby declared and agreed, that the sum of money ultimately to be recoverable by virtue of these presents shall not exceed the sum of Five Hundred Pounds, but should the balance of such account on its ultimate or final close aforesaid, and the sums of money above-mentioned exceed that sum, then these presents are to stand and be a security to the extent only of so much and portion of the said balance and sums of money, as shall not exceed the said sum of Five Hundred Pounds. Signed, sealed, and delivered, (being first duly stamped) by the above bounden in the presence of No. 4. BANK OF ENGLAND MEETING, 16th AuG. 1832. The Governor stated the amount of surplus fund to be £2,900,000, not including the building and some other things. If they were added, it would in the whole amount to about £4,000,000. Paid up capital of the Bank — £14,553,000. Dividends paid 8 per cent. Present selling price of £100 shares, £198 to £200. 83 No. 5. BANK OF IRELAND. Capital paid up— £3,000,000. Dividend paid is 9 per cent, per annum. At a general meeting of Proprietors on 14tli Sept. 1832, the directors declared that the amount of the surplus fund, that is, of the property of the corporation over and above the capital stock, was at that date one million and forty-nine thousand, five hun- dred and seventy-three pounds British currency (<£l,049,573)i and that this amount was independent of the value of the bank premises both in Dublin and at the several country offices. £100 shares, selling at present about £200 per share. Extract from a letter of the Eari. of LI^-ERPOOL, and the Right Hon. F. J. Robinson, (now Lord Goderich,) to the Governor and Deputy Governor of the Bank of England, dated Jan. 13, 1826 ; — '• With respect to the extension of the term of the exclusive privileges of the Bank of England, it is obvious from what passed before, that Parliament will never agree to it. Such privileges are out of fashion, and what expectation can the bank,under present circumstances, entertain, that theirs will bereneAved? But there is no reason why the Bank of Eng- land should look at this consequence with dismay. They will remain a chartered corporation for carrying on the business of banking. In that character they will, we trust, always continue to be the sole bankers of the state, and with these advantages, so long as they conduct their affairs wisely and prudently, they always must be the great centre of banking and circulation. Theirs is the only establishment at which the dividends due to the public creditor can by law be paid." 84 No. 6. FORM OF THE LIST OF SHAREHOLDERS;, &C. Proposed (in page 69) to be hung up in the Banks and published in the newspapers. HUDDERSFIELD BANKING COMPANY, IN 5000 SHARES OF £100 EACH. Subscribed Capital, £500,000. PAID UP CAPITAL, ONE HUNDRED THOUSAND POUNDS. DIRECTORS OF THE BANK. WILLIAM BROOKE, Esq., Honley, Chairman. Joseph Walker, Esq., Lascelles Hall. James Brook, Esq., Thornton Lodge. W. W. Bat T YE, Esq., Moldgreen. George Senior, Esq., Dalton. John Starkey, Esq., Spring Lodge. John Oldfield, Esq., Parkton ©rove. TRUSTEES, &c. OF THE COMPANY, WHOSE NAMES ARE REGISTERED AT THE STAMP-OFFICE, ACCORDING TO ACT OF PARLIAMENT, AND IN WHOSE NAMES THE COMPANY CAN SUE OR BE SUED. Joseph Armitage, Esq., Milnsbridge House. Joseph Walker, Esq., LasceUes Hall. William Walker Battye, Esq., Moldgreen. [[Then should follow a list of all the Shareholders of the Com- pany, stating names, place of residence, designation and pro- fession, and the number of shares held by each individual.] EDWARD RAINES AND SON, PRINTERS, LEEDS