V 
 THE UNIVERSITY 
 
 OF ILLINOIS 
 
 LIBRARY 
 
 332 
 B875 
 
 V- 32 

 
 &n <£00«s? 
 
 ON THE 
 
 NATIONAL DEBT AND FINANCE 
 
 OF 
 
 GREAT BRITAIN; 
 
 WHEREIN IS SHEWN 
 
 THE RUINOUS TENDENCY OF THE PUBLIC DEBT 
 
 AND THE 
 SERIOUS E-VIL OF CONNECTING THE REVENUE 
 
 WITH TRADE AND COMMERCE; 
 
 THE PRACTICABILITY OF LIQUIDATING 
 
 • - 
 
 THE NATIONAL DEBT; 
 
 AND 
 THE NECESSITY OF ADOPTING 
 
 A MORE SIMPLE SYSTEM OF FINANCE. 
 
 LONDON : 
 EFFINGHAM WILSON, ROYAL EXCHANGE. 
 
 MDCCCXXXIII,
 
 
 52 
 
 portunity seems thus to be afforded them for setting the 
 example to the other wealthy members of the community, 
 by promoting a measure which would be alike just 
 towards others, and honourable to themselves. 
 
 Yours, &c. 
 
 Mercator. 
 22nd March.
 
 x> 
 
 THE ADVANTAGES 
 
 OF THE PROPOSED 
 
 NATIONAL 
 
 BANK OF ENGLAND, 
 
 BOTH TO THE 
 
 PUBLIC AND ITS PROPRIETORY, 
 
 EXPLAINED; 
 
 By THOMAS JOPLIN, 
 
 LONDON: 
 
 PUBLISHED BY RIDGWAY, PICCADILLY; 
 
 BALDWIN & CRADOCK, PATERNOSTER ROW; 
 
 i 
 
 AND ALL BOOKSELLERS. 
 
 1833.
 
 PRINTED BY W. J. RUFFY, 29, BUDGE ROW, WALBROOK.
 
 THE ADVANTAGES, <fcc. 
 
 CHAPTER I. 
 
 Necessity for, and advantage to be derived from, 
 Joint Stock Banking in England. 
 
 The invention of Banking; to assist and enlarge the com- 
 merce of mankind, has been happily compared with that of 
 arithmetic to extend and expedite their powers of calculation. 
 The utility, therefore, of Banks to a commercial nation like 
 this, need hardly be descanted upon. They are the channels 
 by which remittances of money are made in every direction 
 throughout the country ; and by which the transactions of all 
 the component parts of the community, infinite as may be the 
 number of their combinations, are balanced and settled between 
 each and all, without the risk, the trouble, or the inconvenience 
 of individual transference. They are the medium through 
 which all bills, when due, are presented ; thus giving to pro- 
 missory engagements a character which renders them service- 
 able and negotiable, by affording a necessary focus for the 
 punctuality of their payment. By most classes, moreover, 
 they are preferred as depositaries of money. The merchant 
 and trader, of every description, confide to their keeping such
 
 4 
 
 sums as the current demands of their business may require 
 them to possess ; the capitalist not unfrequently lodges larger 
 amounts in their hands, to be available for any investment he 
 may determine upon ; and the landed proprietor deposits with 
 them the ready cash which he may not want for immediate 
 expenditure or use. The floating capital, again, thus placed at 
 their disposal, is capable of being re-advanced to the public on 
 proper securities, assuring facility to the commerce, accommo- 
 dation to the trade, and support to the industry of the country. 
 Nor is this all : the Country Banks, to which we are specially 
 adverting, are not only the reservoirs of our capital, but the 
 fountains of our currency ; their promissory notes being adopted, 
 to a great extent, as a more convenient substitute for the costly 
 and clumsy circulation of metals. 
 
 That the public should feel an intense and nervous interest 
 in the welfare of establishments, to which such important func- 
 tions as these are intrusted, is no matter of surprise. Indepen- 
 dent of other considerations, every man who possesses so much 
 as a Bank Note is concerned in their stability ; and nothing 
 can affect their credit without spreading agitation and terror 
 throughout the whole sphere of their dealings. The moment 
 that any apprehension, no matter how slight or groundless, is 
 excited as to the solvency of a Bank, hundreds rush to its doors 
 to demand cash for its notes, or to withdraw from it their 
 deposits ; and thus, by their own precipitation, often create the 
 very evil which they fear. Many Country Banks, which are 
 solvent and even wealthy, cannot, at a peremptory notice, 
 convert their assets so as to meet the whole weight of their 
 liabilities ; and, under these circumstances, as a bad Bank is 
 crushed by the run from its weakness, so a good one may be 
 borne down before its strength and resources can be collected 
 to encounter it. When a Bank, thus beset, is brought to a 
 stop, the desolation and misery which it produces are incal-
 
 5 
 
 culable ; nor are the consequences trifling, should it even be 
 safe from such a catastrophe. Though it may weather the 
 storm, it is only by hauling in every inch of canvass it can 
 handle, and cutting away every spar it can dispense with. It 
 is no longer the convoy it was, protecting trade from alarm, 
 and drawing commerce in its wake ; but rides on the subsiding 
 swell in timid security, incapable of relieving the distress or 
 averting the ruin which surround it. In fact, although a run 
 may not compel a Bank to stop payment, it causes it to put a 
 temporary stop to its usual Banking operations. All its func- 
 tions quoad benefit to the public, are partially suspended ; and 
 men of business being suddenly deprived of the assistance and 
 accommodation upon which they have been accustomed to 
 rely, and upon which the regularity of their payments and the 
 maintenance of their credit depend ; confusion, embarassment, 
 and bankruptcy, find victims in every part of the district that 
 is affected. 
 
 Every one knows that these are not merely speculative evils ; 
 they are not only of constant occurrence in isolated instances, 
 but for the last forty years seem to have periodically set in 
 with the devastating violence of a hurricane. In 1793, there 
 were twenty-six such bankruptcies; in the years 1814, 1815, 
 and 1816, there were ninety-tzvo ; between 1816 and 1825, 
 sixty-two ; and from October 1825, to February 1826, no 
 less than jifty-n'me ! In that period, in short, no less than 
 Jour hundred Country Banks have been declared bankrupt; 
 and to these, upon undisputed authority, are to be added 
 twelve hundred cases of composition and suspended and pro- 
 tracted payments ! It is unnecessary to dwell upon the havoc 
 of private fortune and national wealth, which these failures 
 must have occasioned. The panic of 1825 is so recent, and 
 its effects even yet so extensively felt, as to render such a deli- 
 neation superfluous.
 
 6 
 
 But it is an ill wind, indeed, that does not bring with it the 
 seeds of something that is good ; and the panic of 1825 in 
 some measure justified the proverb. Amidst the countless evils 
 which it inflicted, it effected one great improvement, in giving 
 to that nervous interest, which we have described the public 
 as taking in the character of Country Banks, a somewhat more 
 rational complexion. Hitherto it has amounted only to a 
 dozing suspicion, which even a whisper would startle into pre- 
 cipitation, as perilous to itself as to the objects of its fitful 
 vigilance ; but the disasters of that memorable convulsion ele- 
 vated it into a more sedate principle of caution, and disposed 
 our minds for the suggestion, that, although it was well to be 
 awake to the alarm of danger, it was much better to be safe 
 against it. Public attention had already been called to the 
 superiority of the Banking System in Scotland ; but, the mono- 
 poly of the Bank of England rendering that system impracti- 
 cable with us by law, the subject had not met with that con- 
 sideration which it deserved. The tremendous crisis, however, 
 of 1825, not only opened our eyes to the past evils, but gave 
 a proper direction to our views for the future. The broad 
 and simple fact stared us in the face, that, during all the vicis- 
 situdes which had attended Banking in England, Scotland had 
 been exempt from them ; and that even the last general epi- 
 demic, which had raged amongst the Banks in England, in- 
 volving in one common calamity the healthy and the infirm, 
 had been stayed, as if by a talisman, at the Border. The 
 effects of the panic, it is true, afflicted every country connected 
 with us, and Scotland with the rest. But the panic did not 
 itself extend to Scotland ; and was only felt there sympa- 
 thetically from the relations existing between us. 
 
 The truth was perceived then, and is now universally acknow- 
 ledged, that the security of the Scotch Banks arose from their 
 being Joint Stock Companies. Such a company, as it exists in 
 Scotland — for those since established in England differ in a
 
 7 
 most material feature of their constitution — is all but absolutely 
 safe against distrust, and proof against danger. The amount 
 of its capital, and the number of its shareholders, guarantee 
 the country from eventual loss ; while, at the same time, the 
 publicity of its affairs firmly fixes the public confidence. The 
 directors are called upon, annually, for an account of their 
 stewardship, and to declare a dividend of the profits they have 
 made ; and it is beyond the limits of probable villainy or 
 possible fraud, that they should do this otherwise than honestly. 
 The communication thus made to the shareholders, is virtually 
 made to the world at large ; and the dividend paid by such a 
 Bank, is, therefore, a practical expose of its condition. With 
 Private Banks in this country, on the other hand, undoubtedly 
 there are many which realise large profits, and are as solvent 
 as any Bank in Scotland can be ; but the public have no evi- 
 dence of this. There is no satisfactory mode of ascertaining 
 their capital or prosperity ; and, in periods of alarm, they 
 are liable to the same distrust as weaker establishments. 
 Another, and very important advantage of the Scotch system, 
 is this : if the credit of an individual Bank is questioned, the 
 whole body of these establishments, having the same confidence 
 in each other which the public have in them at large, are able 
 and ready to support it. It is their interest, of course, to do 
 so, to prevent the confusion which a stoppage would produce. 
 Or, if a Bank, from not doing well, though still solvent, should 
 be disposed to wind up its affairs, it would have no difficulty 
 in finding another Bank to undertake its obligations, and carry 
 on its business as before. Much public inconvenience is thus 
 avoided ; and, perhaps, much ultimate ruin averted. Our 
 country Banks, on the contrary, in critical emergencies, cannot 
 assist each other ; for they are generally all in discredit at the 
 same time. 
 
 This grievous contrast between the Scotch and English 
 Banks in point of security, was pressed so severely on our
 
 8 
 attention by the phenomena of the last panic, that we began 
 not only to desire an improvement, but to comprehend the 
 means of it ; and the Government, as was their duty and policy, 
 so far concurred in this disposition of the public, as to effect 
 such an alteration in the Charter of the Bank of England, as 
 permitted, under certain restrictions, the establishment of Joint 
 Stock Banking Companies in England. But there were higher 
 considerations than the mere security of Banks in the abstract, 
 which should have induced the Government, not only to permit 
 the individual formation of such establishments, but to promote 
 them on a sound and comprehensive basis, which would have 
 ensured to the nation all the advantages, of which the system, 
 properly modified and perfected, is capable. Let us briefly, 
 by reverting to Scotland, examine what those advantages are. 
 
 From the unlimited confidence which the capital and pub- 
 licity of the Scotch Banks command, deposits are made with 
 them to an extent little conceived in this country. The 
 English, as well as the Scotch Banks, allow interest upon 
 deposits ; but in England, the deposits with Banks are very 
 much confined to the amount that people would keep at home, 
 for the demands of business and expenditure, if there were no 
 Banks to deal with. In Scotland, on the contrary, people keep 
 money in Banks, not merely as a place of convenience, but as 
 a place of investment. Upwards of fourteen millions, it is said, 
 are thus deposited with the five principal Banking Companies, 
 in sums not exceeding two hundred pounds ; and it is a curious 
 fact, indicative of the permanency of these deposits, that though 
 the Banks since the war have reduced the rate of interest from 
 four to two per cent., it has had little or no effect in reducing 
 the amount of money lodged in their hands. 
 
 The same spirit of confidence which brings this money to 
 their coffers, enables them, also, to make the best use of it, 
 without any reservation from the fear of its being suddenly 
 recalled or materially diminished. A Country Banker in
 
 9 
 
 England, who must always be prepared for a run, can only 
 advance money on commercial bills, which he can get re-dis- 
 counted elsewhere, should an unexpected demand upon him 
 arise. But the Scotch Banks are not thus fettered. They 
 can lend money in any way that may be beneficial to the coun- 
 try, and profitable to themselves ; and make a practice of ad- 
 vancing it on what are called Cash Accounts. Any farmer, or 
 person in trade, upon finding sufficient securities or responsible 
 sureties, may open an account with a Bank, and overdraw it to 
 the stipulated extent, paying interest on the balance against 
 him, which he may increase or lessen at his pleasure. The 
 money thus advanced is the best employed capital in Scotland, 
 calling forth, as it does, a large amount of skill and industry 
 into productive activity, which would otherwise be dormant, or 
 misdirected. In England, however, this is called "illegitimate 
 banking," because the money would be out of reach in the event 
 of a panic ; whereas, in Scotland, it is the most legitimate of 
 any, not only for the country, but for the Banks themselves, 
 as they seldom suffer for their liberality. 
 
 The benefits from which we are thus debarred, by the 
 constraint felt by our Country Banks, are of no slight import- 
 ance ; but the positive evil which it occasionally inflicts, is still 
 more momentous. The Banks being able to advance money 
 on commercial bills alone, the consumptive circulation of the 
 country, which consists mainly of their issues, depends upon 
 the uncertain amount of such bills which they can obtain. 
 The Bank of England, in dealing with the public, confines 
 itself, also, to the discount of commercial bills ; but when it 
 has not a sufficient demand for money upon such bills, it keeps 
 up its issues by the purchase of Exchequer Bills. In the like 
 manner, the Private Bankers in London, when they cannot 
 lend out the money deposited with them on commercial bills, 
 return it into circulation by the same means, or in lending it 
 on the security of stock. In London, therefore, the system 
 adopted by the Banks, of advancing money to their customers
 
 10 
 
 on bills only, is productive of no evil ; because they can keep 
 up the circulation, by resorting to the Stock Exchange, when- 
 ever the demand for money upon bills is not sufficient for the 
 purpose. But in the country, if the Private Banks cannot lend 
 money upon bills, they cannot lend it at all ; and their issues 
 are, consequently, contracted. 
 
 With Joint Stock Banks such as Scotland possesses, results 
 like these never need occur. As they can safely lend upon any 
 good securities without reference to time, they are able to keep 
 up their issues by loans upon mortgage and other permanent 
 advances, whenever an anomaly in the working of the monetary 
 system arises to contract them. It is evident, therefore, that 
 our Country Banks ought to be Banks of this nature, and of 
 the strongest description. They never ought to be deterred, 
 when the state of the currency requires it, from lending money 
 in any proper way when there may be a demand for it, as an 
 equivalent to the power which the Bank of England possesses 
 of keeping up its issues by the purchase of Exchequer Bills. 
 And in those districts where the agriculturists, who have no 
 bills to discount, are the only borrowers, and who can never 
 borrow with advantage, unless allowed their own time for repay- 
 ment, the necessity for such Banks is more particularly urgent ; 
 whereas it is in these very districts that our Private Banks 
 are the weakest. The extent of business done and profits 
 made are not sufficient to induce men of large capital to un- 
 dertake the trade ; and it is, consequently, pursued by parties 
 of comparatively limited property, who are obliged to confine 
 themselves to the narrowest principles of Private Banking. 
 
 The Joint Stock Banks which have been already established 
 under the Act of 1826, are, certainly, so many steps in the 
 right direction ; but they go a very little way, and do not pro- 
 mise, in any finite time, to lead us to the desired improvement. 
 Individually considered, they lack, as we shall see in the suc- 
 ceeding section, the primary qualities that are necessary to re- 
 alise the objects we have pointed out : and we have the evidence
 
 11 
 
 of the seven past years, that there is no tendency in them to 
 organise and propagate, which would lead us to regard them as 
 the germs of a system in its growth towards perfection. Some 
 more comprehensive design, and more powerful agency, are 
 manifestly wanting ; and it is the purpose of these observations 
 to shew what the desideratum is, and to point out the means of 
 attaining it.
 
 12 
 
 CHAPTER II. 
 
 The Joint Stock system required a Metropolitan 
 one, such as exists in Scotland. 
 
 We have already observed, that it is in agricultural districts 
 that the benefit of Joint Stock Banks would be most sensibly 
 felt, the present system of Private Banking being wholly inade- 
 quate to their wants. The superior credit of Joint Stock Banks 
 enables them to obtain deposits, to a greater amount, and at a 
 lower rate of interest, than a Private Bank on the one hand ; 
 and the more liberal nature of their dealings enables them to 
 lend it at a higher rate of interest on the other. They are 
 calculated, therefore, not only to afford the accommodation 
 which a Private Bank, with safety, cannot, but to afford it in 
 localities where a Private Bank cannot even exist. Hence it 
 is, that in Scotland the convenience of Banking is extended to 
 places, where a private Bank could not clear its expences. In 
 the little village of Coldstream, well known to the northern 
 traveller as lying in an agricultural district on the border of 
 Northumberland, there is a branch of one of the Scotch Com- 
 panies, which does more business than is transacted in any of 
 the towns of that extensive county, except Newcastle and 
 Shields. Instances like these — and in Scotland they are ob- 
 servable in every central spot for the transactions of a neigh- 
 bourhood — demonstrate the demand which really exists for 
 Banking Establishments on a system adapted to its wants ; and 
 at the same time incontestibly prove, not only that a field for
 
 13 
 
 Banking is to be found among our agricultural communities, 
 the most open and improvable, but that such Banks as we 
 recommend, are alone adequate to occupy it with benefit to 
 themselves and advantage to the country. 
 
 But even of the few Joint Stock Banks which have hitherto 
 been formed, the great majority have been established in large 
 commercial and manufacturing towns, where private Banking 
 exists in the greatest perfection, and where the want of that 
 accommodation which Joint Stock Banks can afford, is the least 
 called for or felt. In the smaller market towns, which are re- 
 spectively a nucleus for the agricultural money dealings of its 
 neighbourhood, and where Banking is either unknown or con- 
 ducted on the most unsafe and unsuitable principles, very few 
 such establishments can yet be found. The causes of this de- 
 ficiency and backwardness will at once lead us to the remedy 
 for them. 
 
 The comparatively limited progress then, we must remark, 
 which Joint Stock Banks have hitherto made in this country, 
 cannot be attributed to the indifference of the Public regarding 
 them. We may hear them every where adverted to as desir- 
 able and important objects ; and whereever they have been set 
 on foot, they have been subscribed to with an avidity, which is 
 not likely to be diminished by the great success which has uni- 
 formly attended them. But the Public, though by no means 
 timid in such undertakings, generally hang back until parties of 
 wealth and influence take the lead. With respect to Banking 
 Companies in particular, they naturally wish, and in the first 
 instance expect to see, people of considerable respectability at 
 the head of them ; and such people in provincial places, from 
 personal and other motives, are slow in coming forward. In 
 general they do not possess that information of the nature and 
 details of the business, which is requisite to its commencement 
 and conduct ; and this want of knowledge is not only an impe- 
 diment in itself, but productive also of another, in augmenting
 
 14 
 
 their apprehension of the responsibility involved. The leading 
 people, moreover, in second rate market towns, moving in the 
 same little sphere of society, are mostly intimate or connected 
 with the existing Bankers, and, therefore, feel a delicacy in 
 proposing any measure that may be injurious to them. 
 
 It is thus that we are often forced into the right method of ac- 
 complishing an object, by the difficulties and ill success of attempt- 
 ing it in a wrong one. From the comparatively slow advance al- 
 ready made in the establishment of Joint Stock Banks, more espe- 
 cially in those districts where they are most wanted, it is obvious 
 that little is to be expected from the local efforts of individuals 
 in originating their formation; and we naturally turn to Scotland, 
 from whence the system is borrowed, to ascertain by what omis- 
 sion or misdirection we have failed in our endeavours to adopt 
 it. Now it is not only true that the best Banks in Scotland are 
 metropolitan institutions, but that the local Joint Stock Banks 
 which may be found in the principal towns, owe to these institu- 
 tions their origin and progress. In Ireland, likewise, it was 
 not until the Provincial Bank of Ireland, which is a London 
 Company, had established its Branches, that local Companies 
 started into existence. It is idle, therefore, to look for any 
 extensive improvement from the solitary and unattested attempts 
 that have already been made. An impulse must be given from 
 some great central seat of intelligence and wealth ; and London 
 is evidently the spot best calculated for the purpose. 
 
 It is not, however, in the paucity alone of the present Joint 
 Stock Banks that a reason exists for the comprehensive measure 
 we are contemplating. Were they to become ever so general, 
 they are of too feeble a character to accomplish the great objects 
 of their design. A large majority of them have a cash Capital 
 varying only from twenty to fifty thousand pounds. Such 
 Banks, being unable to pay the expence of a proper system of 
 checks, and possessing a more confined knowledge of the busi- 
 ness of Banking, are at once more liable to loss and less com-
 
 15 
 
 petent to bear it. With such small capitals, it is clear, they 
 could never conduct their operations on a broad scale of 
 public accommodation. With resources so limited, they must, 
 like private Banks, keep their funds within reach ; and in 
 agricultural districts, where the accommodation required is of 
 a permanent description, they could never afford it on the prin- 
 ciple, or to the extent, that is necessary. For the same reason, 
 they would be unable to prevent the capricious contractions of 
 their circulation. As we have before observed, they ought not 
 for this purpose, to be deterred from lending money on any 
 good security that the Public may have to offer, when a suffi- 
 cient demand for it does not exist in the ordinary channels — a 
 useful liberality of which such Banks are incapable. Neither, 
 again, does their insulated position bring within their scope 
 the information necessary to govern them in checking an im- 
 proper expansion of their issues, when the demand for money 
 beyond the supply has a tendency unduly to enlarge them, and 
 renders a judicious controul over their operations, one of the 
 most delicate and important functions of their office. 
 
 In short, though these Banks may do very well, as in Scot- 
 land, if the system be upheld by more powerful establishments, 
 yet, without that support, they would, however numerous, be 
 unproductive of the benefits desired. The radical principle of 
 their weakness is, that the capital they possess wants the power 
 of consolidation. With a large establishment, a much smaller 
 amount of capital is requisite than with a number of small ones. 
 The British Linen Company of Scotland has about twenty-five 
 establishments ; and if its capital were equally divided amongst 
 them, the portion to each would be i?20,000 — a sum totally 
 inadequate to sustain the credit of the least of them. Yet 
 united, its capital is fully sufficient for all the business it can 
 obtain. Thus, also, it is with the Joint Stock Banks constituted 
 here. United, their capitals would be ample ; but as at pre- 
 sent constructed, they are wholly unequal to the duties, which
 
 16 
 
 it is the interest of the Public that they should be able to 
 perform. 
 
 In whatever light, therefore, we consider the subject — whe- 
 ther we direct our views to the means of stimulating the forma- 
 tion of local Banks and supporting those already in operation ; 
 or of giving accommodation to the Public on a better system 
 of dealing ; or of supplying the largest amount of credit to the 
 business of Banking, with the smallest amount of capital, as in 
 Scotland — a system which is not only the best but the cheapest 
 for the country — in whatever light, we repeat, the subject is 
 considered, a Metropolitan Institution is obviously the deside- 
 ratum to be sought. 
 
 We may also mention, that such an Institution is necessary 
 as a stay to the existing Country Banks, which will never 
 be wholly superseded, and which, therefore, it is desirable 
 to protect. A great source of difficulty to private Banks, in 
 periods of difficulty, arises from their being driven to London 
 for assistance. If they could obtain it on the spot, as they 
 could with a Branch of a Metropolitan Establishment in their 
 neighbourhood, it would enable them to do business more 
 safely and extensively than they do, because, on an emergency, 
 they would have assistance at hand, which would never be 
 refused or niggardly afforded. Such an Establishment, in 
 fact, would have the same interest in supporting a private 
 Bank, that the Scotch Banks have in supporting each other.
 
 17 
 
 CHAPTER III. 
 
 Profits which may be anticipated. 
 
 Having thus pointed out the necessity for a Metropolitan 
 establishment, we shall now say a few words as to the profits 
 likely to be derived from such an undertaking, to those who 
 embark their capital in it. 
 
 And in the first place we may remark that it will not be 
 attended with risk. Numerous instances may be pointed out 
 of large fortunes being lost by Banks, but none, in modern 
 times at least, of any serious loss by Joint Stock Banks pos- 
 sessing large capitals, and doing business on an extensive scale. 
 Nothing, indeed, can be more safe and steady than the business 
 and profit of such an establishment. The great Scotch Banks 
 pay their dividends derived from the profits of their trade, with 
 as much certainty as the Government pays the interest to the 
 fundholder ; so regular and steady, indeed, are their dividends 
 paid, that a three per cent, dividend by a Scotch Bank, sells 
 nearly as high as the three per cent, consols,* a circumstance 
 which clearly proves that experience has taught the people of 
 Scotland, that Banking by Joint Stock Companies on a large 
 scale, is a business from which no loss, so serious as to affect 
 their dividends, need ever be anticipated. Nor is this peculiar 
 to Scotland: the Provincial Bank of Ireland is a London 
 
 • The following, for instance, is a list of the dividends paid by the fire 
 great Scotch Banks, the market prices of their stocks, and the value which 
 
 B
 
 18 
 
 Company, conducting business in Ireland on a great scale; 
 and though it has had very serious losses and difficulties to 
 contend with from its first establishment, these losses have 
 never affected its dividends, which have gradually improved. 
 We may, therefore, safely affirm, that whether Banking by 
 Joint Stock Companies be a trade of great profit or not, it is 
 certainly not one of any risk at all affecting the capital embarked 
 in it. 
 
 This affirmation, however, can only be made of Banks with 
 large capitals, and which will afford the expense of the machi- 
 nery of a proper system of control and inspection. Two small 
 Joint Stock Banks in Scotland have, within these few years, failed, 
 
 three per cent, of their dividends is worth at such market price : — 
 
 Amount of 
 Capital 
 
 £. 
 
 Bank of Scotland 
 
 Royal ditto ditto 
 
 Commercial ditto ditto 
 National ditto ditto...... 
 
 British Linen Company 
 
 1,500,000 
 
 1,500,000 
 
 600,000 
 
 500,000 
 
 500,000 
 
 Total... 
 
 Dividends 
 per Cent. 
 
 Price of 
 the Stock 
 per Cent. 
 
 Price of 
 3perCent. 
 
 of each 
 Dividend. 
 
 6 per cent. 
 
 182$ 
 
 91-5 
 
 5^ per ditto 
 6 per ditto 
 
 153 
 163 
 
 83-9 
 81-10 
 
 5 per ditto 
 
 136 
 
 81-12 
 
 8 per ditto 
 
 236 
 
 88-10 
 
 £30f 
 
 £870 
 
 Average 
 
 £85-10 
 
 The above is from WetenhalPs list of the 10th May, 1833, on which day 
 the highest price of the 3 per cent, consols was £87. and a fraction. Thus, 
 on the average, the stock of the Scotch Banks is nearly as high as the stock of 
 government. 
 
 The dividends of these Banks, it must be also observed, greatly depend 
 upon the annual profits derived from their respective trades ; more especially 
 the three last. The capitals of these will, at 4 per cent., yield, two of them 
 £20,000. each, and the other one £24,000., independent of their trade. But 
 they have large and expensive establishments in Edinburgh, and someway 
 about thirty branch establishments each ; so that their standing expences to 
 be paid, whether they make any profit or not, cannot be less than from 20 
 or £30,000. each, or at all events, not less than the amount of interest they 
 derive from their capitals. Their standing expenditure being thus at least 
 equal to their standing income, their dividends must be exclusively paid out 
 of the annual profits of Banking, which it is obvious, if it were a hazardous 
 business, could never be done with that certainty wbjch is calculated upon.
 
 19 
 
 with infinite mischief to their proprietory. They were esta- 
 blished in small places ; the directors, in each case, contracted 
 an undue confidence in the manager, and left the management 
 exclusively to him, without inspection or control, and they 
 were, in both cases, tempted to abuse the confidence i*eposed 
 in them, and make away with the Banks' money to a great 
 extent ; whereas, if these Banks had been under the controul 
 of a larger establishment, this could not have occurred. 
 
 Having thus shewn that the proposed undertaking is one to 
 which no risk attaches, we shall next consider the profit that 
 may be expected from it. 
 
 In subscribing to a new undertaking, the object, in general, 
 is not only to obtain a good interest, but to improve the prin- 
 cipal sum embarked. This, in a Bank, if it be successful, the 
 subscriber is enabled to do by selling his share or interest in 
 the concern. Such, indeed, is his only mode of retiring from 
 it ; and few people will have any connexion with a commercial 
 undertaking which they do not expect to retire from with the 
 advantage. Hence, in subscribing to a new Bank, the public 
 are led to consider the probable future price of its stock, the 
 same as they would that of an estate, or any other thing in 
 which they embark their capital, not for the sake of income 
 alone, but in anticipation of again selling it. In forming a 
 Bank, also, if there be any risk of loss, they run it, and they 
 are entitled to any gain, on the other hand, that may be the 
 result Hence, with reference to the formation of Banks, we 
 are necessarily led to consider the price at which their stocks 
 are likely to sell after they are formed.* And our best evi- 
 
 * In this respect, the present appears to be a very favorable time for their 
 establishment, even much more favorable than during the war, when the 
 profits of Banking, like all other profits, were much higher than they are at
 
 20 
 
 dence on this point is furnished by the price at which the 
 shares of the Banks, established under the Act of 1826, 
 have sold. 
 
 It was some little time before Banks began to be established 
 under this Act, and the first were formed with difficulty. 
 Three out of the first four did not obtain subscriptions for 
 
 present. This will be evident upon reference to the following account of the 
 price of stock, and of the amount of the dividends of the Bank of Scotland, 
 from the year 1810 to 1830. 
 
 Dividend upon paid up Price of che Stock per cent. 
 
 Capital. on paid up Capital.* 
 
 'In 1811 74 per cent 169 16 
 
 1812 7* — 169 11 
 
 1813 7J — 165 19 
 
 1814 7| — 171 
 
 1815 1\ — 167 8 
 
 1816 7| 81— 367 8 
 
 1817 8| 9|— 201 4 
 
 1818 94 — and a bonus of 20 per cent 255 14 
 
 1819 94 — 243 
 
 1820 94 — 239 10 
 
 1821 9| — 237 4 
 
 1822 94 _ 247 13 
 
 1823 94 8 — 233 10 
 
 1824 8 — 242 1 
 
 1825 8 — andabonusof 20 per cent 262 
 
 1826 8 — 229 19 
 
 1827 6 _ 209 8 
 
 1828 6 _ 207 12 
 
 1829 6 — , 207 12 3 
 
 1830 6 _ 205 5 8 
 
 The Bank of Scotland, it must be observed, never pays its dividend out of 
 
 any fund except income legitimately derived from the interest of its capital, 
 and from the profits of Banking. But during the war, the Bank, from the 
 high rate of interest obtained, was induced to invest largely in Government 
 securities. From the sale of these, a great profit was realized on the return 
 of peace, which the Bank divided, by giving its shareholders the two bonusses 
 
 * The price of the stock of this B ank in the Stock Exchange lists, is quoted at its price per share, 
 ■upon which £83. 15s. 4d. has been paid. The dividend, however, is given as above stated.
 
 21 
 
 more than two-thirds of their capitals, and it was, in each case, 
 a question of much doubt whether they should be able to obtain 
 subscribers sufficient to enable them to go on. Their success, 
 however, exceeded all expectation : for within two years, sales 
 of their shares were made at the following premiums upon 
 the capital paid up. 
 
 The Lancaster Bank Shares sold at 100 per cent. prem. 
 
 The Huddersfield Bank do 50 do. 
 
 The Bradford Bank do 50 do. 
 
 The Norwich Bank do 50 do. 
 
 This was the result of actual success. In the first instance 
 their shares were unsaleable, and a forced sale, at least, could 
 only have been made at a discount. These premiums have 
 since varied: the shires of the Lancaster Bank have fallen to 
 60 per cent., and the Norwich have also fallen ; but the Hud- 
 dersfield have risen considerably ; and the last sale of the shares 
 of the Bradford Bank have been made at 130 premium ; so that, 
 upon the average, they have been maintained. 
 
 Banks, however, since then have, in a majority of cases, been 
 subscribed to with great eagerness, and several more have been 
 established, and it is understood that the shares of all of them 
 sell for a greater or less amount of premium. The following 
 may be quoted as the premiums of some of them : — 
 
 of 20 per cent, above mentioned; and the dividends now paid, are derived 
 from the interest of its capital and profits of Banking annually made, the 
 same as during the war. 
 
 A similar scale of prices and dividends of the other Scotch Banks that are 
 governed by the same principles, would show the same results. 
 
 It is thus seen, that though the dividends are now 20 per cent, less than 
 in 1811, a period when banking was considered to be in its most flourishing 
 state, the price of the shares are nearly 20 per cent, higher. Hence, to the 
 shareholders, Banking is, in the market, more valuable now than it was then. 
 A person concerned in forming a new Bank, in which he will obtain his shares 
 at par, may expect to make 20 per cent, mor by the sale of them.
 
 22 
 
 Manchester Bank 30 per cent. prem. 
 
 Workington Bank 50 do. 
 
 Halifax Bank 60 do. 
 
 Lancaster Bank 60 do. 
 
 Huddersfield Bank 70 do. 
 
 Gloucester Bank 90 do. 
 
 Bradford Bank 130 do. 
 
 Bank of Birmingham 100 do. 
 
 Birmingham Bank 160 do. 
 
 Now none of these premiums have been given in anticipation 
 of success, and, in general, they have risen gradually, each 
 succeeding sale being at a higher rate than the last. 
 
 After this, little further need be observed upon the benefits 
 to be derived from forming Joint Stock Banks in England, to 
 those who form them. 
 
 These Banks, it may likewise be observed, for the most part, 
 have had no peculiar advantages. They in general have had 
 very powerful old established Private Banks to compete with, 
 and yet have succeeded in this extraordinary manner. In 
 Norwich, for instance, where the Private Banks are extremely 
 popular and powerful, one recently gave up business, and two 
 thirds of its customers, notwithstanding the superiority of the 
 Private Banks they had the option to deal with, transferred 
 their accounts to the Joint Stock Company. Having made, how- 
 ever, a considerable bad debt, its shares do not at present bear 
 the premium they did, though the Bank will not sell what it 
 holds itself, at less than 50 per cent., the premium which they 
 have hitherto borne. 
 
 It cannot, of course, be denied that the great premium upon 
 the stock of some of these Banks results from the limited 
 capital paid up, compared with the business transacted and 
 profits realized. But on the plan proposed, the capital will 
 not be greater in proportion. The magnitude of the capital of
 
 the proposed Bank, it must be remembered, will result from 
 the concentration of a number of small capitals in one. The 
 amount of capital to which the profits of each branch will apply, 
 will probably not be much larger than the capitals which are 
 saleable at the above premiums. 
 
 But, independent of the profits to be derived from Banking, 
 it is intended that the first cstablishers of the proposed under- 
 taking shall be benefitted by another arrangement, connected 
 with the raising of the capital.
 
 24 
 
 CHAPTER IV. 
 
 Plan of raising the Capital, and Profit to be derived 
 
 from it. 
 
 Banking is a trade which may be conducted without capi- 
 tal, inasmuch as a Bank deals in the capital of the public, 
 and not in its own. Nevertheless, the larger the capital applied 
 to the trade of Banking, the more successfully it can be pur- 
 sued ; and the more beneficial it can be rendered to the agri- 
 cultural and landed interests. Banking, even in Scotland, has 
 never yet been carried to the beneficial extent to which it 
 might be carried, acting, as the Banks are obliged to do, under 
 the constant dread of embarrassment, produced by the changes 
 and shocks so frequently given to all monetary and commercial 
 proceedings by the Banking system of England. It would be 
 well if there was not a Bank in England with less than a million 
 of paid-up capital ; and still better if there was not a Bank with 
 less than five million. Public credit would then be based upon 
 a foundation which could never be in the least affected, and the 
 proceedings of Banks would be governed by calculations having 
 reference to the natural supply and demand for money alone. 
 And it is highly desirable for the public, that any Banking 
 establishment should contain within it the principle of extension 
 as to its capital, so that it may become as large as possible. 
 
 It is likewise desirable that the proposed institution should be 
 induced by the strongest motives to carry its branches into the 
 remotest districts— into the agricultural districts as well as into 
 the commercial, which there are many reasons to suppose it
 
 25 
 
 might not be induced to do on the principles upon which 
 Banks are usually founded. 
 
 The plan commonly adopted of raising the capital for an 
 undertaking of this nature, is to fix the amount of it much 
 higher than ever, in any probability, will be wanted ; and then 
 to call up at the outset, and on future occasions, such parts of 
 it as the progress of the concern may demand. 
 
 But, on this plan, it has been found by experience, that 
 every call would be certain to bring so many shares at one time 
 into the market, as would greatly depress them, and subject 
 their marketable value to continual fluctuation. This would 
 generate a practice of jobbing in them, and all the mischievous 
 consequences attendant upon it, which, of all things, it is 
 desirable to prevent. 
 
 In the next place, so far from the directors having a motive 
 to extend the concern, their interest would be the very reverse. 
 After having made calls to the amount of a million or two, and 
 found the unpopularity of them, they would rather be induced 
 to limit the operations of the company to the capital paid up, 
 than to call for more. Again they would argue — " why should 
 we create for ourselves additional trouble by extending our 
 business, if it is neither to augment our dividends, nor improve 
 the price of our stock? By making further calls, the addi- 
 tional gains will be merely diffused over a wider surface ; and, 
 while the returns on the existing capital will not be increased, 
 the market value of it will be reduced I 11 The course they 
 would under such circumstances pursue, is clear. In prefer- 
 ence to enlarging their operations, they would confine them to 
 the capital in hand, and thus partially defeat the higher objects 
 of the institution. 
 
 And, lastly, it is doubtful whether on this plan it would suit 
 persons to subscribe for the purpose of investment. Few would 
 find it their interest, if they even found it convenient, to keep 
 by them, for every share they held, and upon which 10 per
 
 26 
 
 cent, might have been paid, a further considerable portion of 
 its nominal value to meet the contingency of future calls. Yet 
 this, if desirous to hold their shares, must necessarily be the 
 case. Perhaps also, it would as little suit the views of specu- 
 lators ; for, as every call would have a tendency to reduce the 
 market price of shares, they would speculate upon purchasing 
 them at a discount, and with this expectation would rather be 
 induced to hold off than to subscribe. It is, therefore, proble- 
 matical at least, whether the capital on this plan could be raised 
 at all. 
 
 Then why not obviate the necessity of calls by having the 
 requisite capital paid up at once ? But to this there is an 
 insuperable obstacle. The institution, if successful, may ulti- 
 mately require five, and not improbably, ten millions of money ; 
 and to call up the least of these sums, in the first instance, 
 would be impossible. The public would never subscribe to 
 an undertaking, in which it was proposed to call up so large a 
 capital, for the purposes of a business to be created. 
 
 It is evident, therefore, that some other plan of raising the 
 capital must be devised ; and every difficulty is easily avoided 
 by striking in the right direction at a very equitable principle — 
 namely, that those who incur the risk and trouble of establish- 
 ing the concern, shall enjoy the benefits resulting from the ex- 
 tension of it. This is professedly aimed at in every under- 
 taking, but often in so clumsy a manner, that those who first 
 venture to establish it are considerable sufferers, while the 
 benefits of it are reaped by the less deserving parties who suc- 
 ceed them. The plan which we propose is simply as follows :— 
 
 Let a capital, not more than sufficient to commence 
 with — a million for instance — be raised at the outset ; 
 and let this be termed the Original Capital. As fresh 
 fields present themselves for branches of the institution, 
 let the additional capital required, be raised by a fresh
 
 27 
 
 issue of shares — to be issued by the directors at zohat- 
 ever premium they are worth, and the premium to go 
 exclusively to the original shareholders and establishers 
 of the concern. 
 
 By this plan all the objections will be effectually removed. 
 
 In the first place there would be no nominal capital. As 
 the capital first raised would not exceed the amount necessary 
 to commence with, the whole of it must be paid up ; and, as 
 fresh shares would only be issued at such times, and to such 
 extent, as fresh capital was wanted, the full value of them 
 would also be paid up for the same reason. 
 
 In the next place, the price of the stock would be kept 
 steady, and all jobbing prevented. The company, on the one 
 hand, would not issue fresh shares unless a fair price could be 
 obtained for them ; while, the issue being unrestricted on the 
 other, they could hardly at any time rise much above the com- 
 pany 's price, until the utmost extent of capital was raised that 
 it might be deemed desirable to employ. All inducements, 
 therefore, to speculation, except for the legitimate object of 
 investment, would be effectually discouraged. 
 
 In the third place, the original capital being paid up, and 
 the public being left to their own judgment, whether more can 
 be employed profitably or not, no person will at any time be 
 compelled to embark a shilling against his inclination. The 
 directors cannot indulge fanciful prospects, as too frequently 
 happens on the plan of calls, and compel the shareholders to 
 advance more money at par, when, if they wished to increase 
 their interest in the concern, they could do it better by pur- 
 chasing other shares at a discount. 
 
 In the fourth place, the premium to be obtained from the 
 sale of additional shares, would be a considerable source of 
 profit, provided that the institution made way in the estimation 
 of the public. The directors, therefore, would have the 
 strongest motives to improve and extend the business of the
 
 28 
 
 concern, in order to justify their enlarging the capital. Nor 
 is there any danger of their doing this improperly ; for the 
 shares of the institution would bear no premium unless pre- 
 viously merited by its success. Thus, the Directors would not 
 only have ample inducement to carry their operations wherever 
 there was a field for their exertions, but a sufficient check 
 against their doing so incautiously or unfairly ; and the objects 
 of the institution, instead of being retarded by the necessity of 
 fresh calls for capital, would be promoted and quickened by 
 their impulse, as far as a safe and honest principle of profitable 
 management was capable of realizing them. 
 
 Lastly, instead of any difficulty in raising the capital, it 
 would be rendered doubly certain ; first, by the limited amount 
 required at the outset, and next, by the additional profit secured 
 to the original subscriber. There is nothing extravagant in 
 supposing that the shares in seven years would rise to 50 per 
 cent, premium; from the instances pointed out of weaker esta- 
 blishments making a much greater premium in a much shorter 
 period of time. Indeed, it carries with it all the promise of 
 certainty ; and, if so, it cannot be doubted that the concern 
 might simultaneously be extended, so as to employ at least five 
 millions of capital. Now, assuming that only twenty-jive per 
 cent, premium would on the average be obtained on the four 
 millions of additional issue, it would bring the original sub- 
 scriber an aggregate premium on his share of one hundred per 
 cent. To this must be added, the intrinsic premium on the 
 share of fifty per cent. ; altogether raising its value, in seven 
 years, from one hundred to two hundred andjifty pounds. Nor 
 is this a very sanguine calculation ; for the experience of such 
 Joint Stock Banks as have been already established, shews 
 that the results are as likely to exceed, as to be under it.
 
 29 
 
 On the principles developed in the foregoing Pamphlet, an 
 Establishment is now in the progress of formation, and the 
 following Gentlemen (with power to add to their number) 
 constitute the Committee for carrying it into effect. 
 
 Hon. D. G. Hallyburton, M.P. 
 
 Hon. C. Langdale, M.P. 
 
 Rt.Hon.SirH.PARNELL.Bart.M.P. 
 
 Rt. Hon. C. Tennyson, M.P. 
 
 G. F. Angas, Esq. 
 
 Edward Bainbridge, Esq. M.P. 
 
 Edward Blount, Esq. 
 
 Sir Robert Campbell, Bart. 
 
 William Clay, Esq. M.P. 
 
 Sir William Cosway, Kt. 
 
 W. Keith Douglass, Esq. 
 
 Oliver Farrer, Esq. 
 
 H. D. Goring, Esq. M.P. 
 
 John Hardy, Esq. M.P. 
 
 A. L. Hay, Esq. M.P. 
 
 W. James, Esq. M.P. 
 W. A. Mackinnon, Esq. 
 T. P. Macqueen, Esq. 
 S. E. Magan, Esq. 
 William Pratt, Esq. 
 G. R. Robinson, Esq. M.P. 
 H. Ross, Esq. M.P. 
 P. M. Stewart, Esq. M.P. 
 Edward Stewart, Esq. 
 Sir Thomas Winnington, Bt. M.P. 
 John Wright, Esq. 
 John Young, Esq. M.P. 
 Thomas Joplin, Esq. 
 And L. Murray, Esq. Hon. Sec. 
 
 Communications may be addressed to the Committee, at 
 Levant House, St. Helens Place, Bisliopsgate Street, London, 
 
 or to the following- Agents. 
 
 Ashburton George Caunter, Esq Solicitor 
 
 Bath Robert Cook, Esq 
 
 Birmingham Messrs. Tyndall & Rawlins .. 
 
 Bolton Messrs. A. L. & E. Haworth. 
 
 Bristol Messrs. Clarke & Sons 
 
 Ditto 
 Ditto 
 Ditto 
 Ditto 
 
 Bury St. Edmund's... Charles D. Leech, Esq Ditto 
 
 Cardiff E. P. Richards, Esq Ditto 
 
 Carlisle Messrs. Law & Bendle Ditto 
 
 Cheltenham Messrs. Straford & Cox Ditto 
 
 Chester H. Kelsall, Esq Ditto 
 
 Derby F. Jessopp, Esq Ditto 
 
 Dover R. W. Watson, Esq Ditto
 
 Glocestkh B. Bonner, Esq...., Solicitor 
 
 Hereford William Humfrys, Esq. Ditto 
 
 Horncastle W. Parker, Esq Ditto 
 
 Huddersfield Messrs. Whitehead & Robinson Ditto 
 
 Hull C. Frost, Esq Ditto 
 
 Leeds Messrs. Moore & Snowdon .., Ditto 
 
 Leicester Messrs. Robinson & Ingram... Ditto 
 
 Leominster W. Preece, Esq Ditto 
 
 Liverpool William Wood, Esq Ditto 
 
 Louth F. Lucas, Esq Ditto 
 
 Ludlow Messrs. Anderson & Downes... Ditto 
 
 Manchester T. W. Winstanley, Esq Ditto 
 
 Newcastle-on-Tyne Messrs. C. & P. Fenwick Ditto 
 
 Nottingham C. Swann, Esq Ditto 
 
 Plymouth G. S. Baron, Esq Ditto 
 
 Ramsgate John Mercer, Esq Ditto 
 
 Rochdale J. Woods, Esq Ditto 
 
 Scarborough Messrs. Hesp ScUppleby Ditto 
 
 Sheffield B. I. Wake, Esq Ditto 
 
 Shrewsbury Messrs. Williams & Ford Ditto 
 
 Stafford T. D. Weaver, Esq Ditto 
 
 Stockton Messrs. Bay ley & Newby Ditto 
 
 Wakefield T. Taylor, Esq Ditto 
 
 Wareham Tho s . Phippard, Jun., Esq. ... Ditto 
 
 Wellington, Salop C. R. Robinson, Esq Ditto 
 
 Wigan J. Lord, Esq Ditto 
 
 Wolverhampton Jos. Foster, Esq Ditto 
 
 Worcester Messrs. Saunders & Helm Ditto 
 
 York Messrs. Seymour & Son Ditto 
 
 Printed by W. J. RUFFY, 29, Budge Row, Walbrook.
 
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