When the circulation is full, an attempt on the part of the Bank to compete with other bankers in private transactions, might lead to excess and prevent the due regulation of the issues. The chief functions of the Bank are the supply of a paper circulation to the public, and to be a safe deposit for the public money and for the money of individuals who prefer a public body to a private banker. The Bank cannot safely offer accommodation to the industrious classes, but their circulation is so employed by other bankers. The Bank of England keeps its notes in circulation by the securities they hold or the bullion they possess; and they provide for the continual issue of paper by purchase in the market, when any part they hold is redeemed or paid off, and these purchases are necessary for a due regulation of the general currency of the country. The Bank, by the restriction, and when 5 per cent. was a low interest, discounted much commercial paper; this was during the war. But the Bank can never issue on discounts below the market rate of interest without leading to excess. The Bank could not have discounted bills under the then market rate had it then paid in specie. The Bank of England is required to provide a requisite supply of paper money for the average circulation of the sphere in which it acts, and to uphold public and private credit when called upon. When commercial credit is affected, it is in such times that the credit of a great body like the Bank of England is available, and has the power to uphold the credit of the country.

THURSDAY, MAY 31.

11. Control and Management of the Bank. (p. 199.)

The control of the Bank is in the Court of Directors, the whole court interfering in its general concerns. To them is read a weekly statement of the actual position of the Bank, its securities, its bullion, and its liabilities. All the directors have equal power. There is no secret committee: the committee of treasury may suggest to the court, but it is perfectly free and open. The majority of directors might reverse the whole present management of the Bank if they disapproved of it. The governor or deputy governor is always in the house. A committee of three directors sit daily, and the whole court meets weekly. The daily committee decide on bills presented by the public to be discounted. If any unusual demand appeared, notice would be given to the governor, who would summon the whole court, if necessary, or act otherwise as became the emergency. No step of importance is taken without the assent of the court. A court of ten sit on Wednesday to consider all London notes and bills; and on Thursday all notes of more than 2000l. value come before the whole Court of Directors.

12. Bank occasionally exports Silver, Bullion, &c. (p. 212.) The purchase of bullion is always regulated by the governor, who has no power to refuse notes for bullion tendered to him at the Bank.

The price of gold bullion is 3l. 17s. 9d. That of silver differs with the course of the exchanges. The Bank has sent specie abroad chiefly for the purpose of acting directly on the exchange of Paris. These remittances are in silver, never in gold. Silver specie is bullion, foreign coin, and bar silver. The whole sum so sent in the last three years does not exceed a million. The advantages have been great when exchanges were unfavourable. But the Bank would not do this, if there should be a demand in the London market for silver. The sole operation of the Bank in silver is to protect gold. It would not do to practise the export of silver at all times, but it must be regulated by the demand for silver in London. Is not of opinion that, by the operations of any individual, or any combination of individuals, the foreign exchanges can be controlled for any length of time.

13. Directors confidence reposed in them, &c. (p. 227).

The continual change in the Court of Directors, of course, introduces new opinions, and individuals exert individual influence. The accounts have never been laid before the proprietors in general meeting. The proprietors have always conceived it to be more for their interest that the accounts should be left to the directors, and not be laid before a meeting. The proprietors are satisfied with the management, or they would demand the accounts. Individual demands have been made, but immense majorities have opposed the question, and it is believed that the proprietors individually understand the system of management sufficiently to justify their confidence in it. It was asked, "Have not you heard complaints made that the Bank has been acting capriciously in withholding accommodation, when you yourself were aware that they were acting upon principle and upon a regular system?" "No," said the witness," I have not; I have seen reports in the newspapers, but I have never heard it stated by any body, within my own sphere, that the Bank had acted capriciously." A proprietor, to vote, must hold stock worth 500l., and to be a director, his stock must be 2000l. there has not been any late contested election for a director, but eight go out and eight come in yearly. This annual change does not produce any prejudicial effect. No director holds more bank stock than is required for his qualification, and they remained small proprictors in 1816, when the Bank made a most magnificent donation to the proprietors: there has been no alteration made in the regulated time for holding office. The governor has been allowed to continue this year only on account of the present inquiry. If a person applied to be made a director, the whole court would give attention to his character, and their influence would be given accordingly.

14. Circulation equalized. (p. 255.)

For the last three years the Bank has equalized the circulation of London every three months, by advancing notes on securities to prevent the scarcity that would otherwise follow the quarterly

payments into the exchequer. This regulation has been most beneficial.

15. Management. (p. 263.)

The Court of Directors is consulted on every point, even between the days of their regular sitting, and the select committee is composed wholly of directors who have been governors.

16. Small Note Circulation the cause of irregular demands upon the Bank for Bullion, &c. (p. 209.)

Since 1825 the Bank has not taken any step to contract the currency. The contraction has been effected by the exchange of notes for gold and silver. Before 1825 it was impossible for the Bank to act on this principle, from the great internal demand, its liability to small note issues, and other matters. The difficulty of 1825, the scarcity of bullion, and the demand on the Bank to the amount of two and a half millions, was wholly to support the small note circulation. For the holders of small notes were poor persons, whose fears were easily wrought on, and for the 17. note there was no legal exchange but the sovereign, therefore every poor man knocked at the door of the Bank of England during the panic. The Bank did not wait to be compelled to withdraw their own small note circulation-they anticipated the period by gradual withdrawal in 1821, though not bound till 1822. Parliament then extended for ten years the privilege of the country bankers to issue 17. notes. Since 17. notes ceased to be returnable to the Bank, the occasional demand for coin has ceased also.

17. Political Panic. (p. 283.)

The following question and answer are quoted literatim :— "Has there not occasionally been a pressure for such gold, nearly amounting to the pressure that took place during the time of the circulation of 17. notes?" "During the last fortnight there has been a very considerable pressure from an internal demand, but that I take to have arisen from a totally different cause; the demand has been one of political discredit, and the committee, perhaps, will understand the character of that discredit, when I mention that there is no return to the Bank down to this day of any part of this issue."-[i.e. between the resignation of Earl Grey and his restoration.] The notice issued by the Bank, that it would lend money on securities at 4 per cent. did not put an end to the run for gold. The Bank during that run paid out in gold 1,600,000l. and, besides, the money paid out for the April dividends has not returned to the Bank; so that nearly two millions were absorbed by that political stroke. About 100,000l. of this was sent to support the Scotch Banks. At Liverpool, the issues during the effort at a run did not exceed the receipts; at Birmingham the demand was 151,0007.; and at Manchester 148,000l. The run appears to be merely that of a created alarm, for the sums were small, and they remain in the hands probably of their drawers, not having returned to the Bank; the individual loss of interest would be the

269

extent of the evil. This unexpected and needless demand affected the proportions of bullion and securities by several millions. The proportion of one-third bullion to two-thirds securities, is only for a period of full currency, and in readiness for a demand. During this run there was a very large importation of gold, which outlived the demand. It was a national, and not a forced influx. Before the drain began the Bank had 6,500,000l. in bullion; after the drain was over the amount was 5,000,000l.: it is now 5,500,000l., and none of that drain has returned. The Bank refused to give notes for gold because the weighing occupied the clerks too long. 18. Amount of Sovereigns which the Bank can pay in a Day. (p. 305.) The Bank can pay over the counter to individuals 200,000l. a day, counting every sovereign; when demanded in large quantities it is delivered in bags, in that form any sum can be paid in a day. 307,000l. was paid in one day during the late run, part being paid in weight. When twenty-five clerks are employed counting by hand, 500,000l. can be paid in a day. The tellers put twenty-five sovereigns into one scale, and twenty-five into another, and continue till each scale contains 200, by which means 1000 can be paid in a few minutes; this was done during the run in May. If a merchant, in foreign exchanges, wants 200,000l., and receives it by weight, it can be handed to him in a quarter of an hour.

*

19. Deposits. (p. 318.)

There has been no demand on the deposits: they continue nearly equal. The deposits have increased since 1825 without any attempt on the part of the Bank to make it so. The Bank never allows a dealing party to overdraw his account;

When large sums are applied for by bankers, or others, the practice of the tellers is to count 25 sovereigns and put them into one scale, then 25 more into the other scale, and if they balance they repeat the operation until there are 200 in each scale. In this way 1,000 sovereigns can be counted in a few minutes; and this method was generally adopted on the 12th, 14th, 15th, 16th, 17th, and 18th of May.

In the above manner 307,000l. were paid to the bankers and others on the 14th May, 1832, irrespective of sums received from the bankers and the public (amounting to 14,000l.) by about 25 clerks.

Bank of England, June 4, 1832.

J. RIPPON, Chief Cashier.

↑ Facilities granted in drawing Accounts since the year 1825. March, 1825. 1.-The Bank receive dividends by power of attorney for all persons having drawing accounts at the Bank.

2.-Dividend warrants are received at the drawing office for ditto.

3. Exchequer bills and other securities are received for ditto; the bills exchanged, the interest received, and the amount carried to their respective

accounts.

4. Checks may be drawn for 51. and upwards, instead of 10l. as heretofore. 5.-Cash boxes taken in, contents unknown, for such parties as keep accounts at the Bank.

6.-Bank notes are paid at the counter, instead of drawing tickets for them on the pay clerks, as heretofore.

nor do they allow any interest on deposits. The increased deposits cause a greater quantity of bullion to be kept at the Bank, and that bullion is represented by bank notes. In August 1830 the Bank held in bullion 12,300,000l. The exchanges turned, and in nineteen months the bullion was reduced to 5,300,000l. This caused a corresponding contraction in the deposits, and a consequent contraction of the circulation. The greatest diminution of deposits was in those of the bankers, which sunk to one half, while other deposits fell only one sixteenth. The bullion was diminished seven parts in twelve. There are separate deposit accounts: one for government, and one for private deposits. The government deposits are above 4,000,000l.; those of a private kind 6,000,000l. The securities on which investments are made, are commercial bills, exchequer bills, dead weight, and city bonds (500,0007.) and only one mortgage. The deposits are made in coin or bank notes, so that increased deposits necessarily contract the circulation. The Bank would not act on a week's increase of deposits. If they kept increasing for six months, then they might extend their notes on the ground of such increase. In 1825 the Bank's issue was to an enormous extent upon commercial bills, arising out of the discredit of London. But if money be taken largely (from hands employing it) and placed in the Bank, the diminished circulation will be prejudicial to the public. The money now paid into the Bank from assignees' estates will have that effect for a short time.

20. Issues and their Effects. (p. 361.)

A rapid increase of Bank of England notes causes an increase in the notes of country bankers, but it is different with the rapid diminution of the Bank of England issues. The increase of country notes diminishes the value of money, turns the course of the exchanges, compels the Bank to a reduction of its bullion, and then to an increased issue of its notes. It was so in 1825, 1828, 1880, and 1832. As well from Ireland and Scotland, as from the interior of England, did that demand

7. Checks on city bankers, paid in by three o'clock, may be drawn for between four and five; and those paid in before four will be received and passed to account the same evening.

8.-Checks paid in after four are sent out at nine o'clock the following morning, received and passed to account, and may be drawn for as soon as received.

9.-Dividend warrants taken in at the drawing-office until five in the afternoon, instead of till three, as heretofore.

10.-Credits paid into account and received without the Bank-book, and are afterwards entered therein, without the party claiming them.

11.-Bills of exchange accepted payable at the Bank, are paid with or without advice; heretofore with advice only.

12.-Notes of country bankers payable in London are sent out the same day for

payment.

13.-Checks are given out in books, and not in sheets, as heretofore.

Bank of England, 4th June, 1832.

J. RIPPON, Chief Cashier.