in the methods of winding up and administering the affairs of a suspended bank. By an act passed by this same legislature the Canadian Bankers' Association was incorporated, and the bank act provided for the appointment of a curator by this Association to take charge of the affairs of a suspended bank. It further granted to this Association authority to supervise the making, delivery and destruction of bank-notes.

The Canadian Banker's Association, thus given a part in the administration of the banking system of the country, in its membership includes nearly all the banks, and includes among its main functions the publication of a periodical known as the Journal of the Canadian Bankers' Association, and the provisions of means for the education and training of bank officials. This Association has already done admirable work and is destined to play a constantly increasing rôle in the banking history of the Dominion.

REFERENCES

The chief works on the history of banking in Canada are Breckenridge, The Canadian Banking System, 1817-1890, Pubs. Amer. Econ. Asn. vol. x. numbers 1, 2 and 3, and The History of Banking in Canada, published by the National Monetary Commission; Walker, Banking in Canada, in vol.. III of History of Banking in all the leading Nations; and the following articles by Professor Adam Shortt published in the Journal of the Canadian Bankers Association: The Early History of Canadian Banking, vols. Iv and v; Canadian Currency and Exchange under French Rule, vols. v and vi; and The History of Canadian Currency, Banking and Exchange, vols. VII to XIV. The Journal of the Canadian Bankers' Association published quarterly since 1893 is the best source of information on all phases of Canadian banking history and practice. See also Conant's Modern Banks of Issue, ch. xvi; and White, ch. xv.

CHAPTER XII

BANKING IN ENGLAND

DURING the middle ages and early modern times banking was carried on in England at first chiefly, if not exclusively, by Jews and later by Italians called Lombards, and later still by the so-called goldsmiths or workers and dealers in the precious metals. There were no incorporated institutions engaged in this business previous to the establishment of the Bank of England in 1694. These early private bankers were located chiefly in London. In the country villages and smaller provincial towns banking was not much developed before the middle of the eighteenth century.

1. The early history of the Bank of England.—The Bank of England was incorporated by Parliament in pursuance of a plan devised by a Scotchman named Wm. Patterson, an important feature of which was a loan to the government of £1,200,000 at seven per cent. interest. On account of the great need for funds caused by the war which William and Mary were then waging against the exiled Stuarts and their continental backers, the loan of such a sum at so favorable a rate of interest, and the prospect of further financial assistance from the new institution, were inducements sufficient to secure the assent of Parliament to certain special privileges to be enjoyed by the incorporators. These were: limited liability, that is liability on the part of each stockholder for the debts of the bank only to the extent of his holdings of stock; and the use of the government balances.

The right to issue notes was also specifically granted in the original charter, but was not prohibited to other in

stitutions or persons. The bank, however, coveted this also as a special privilege and in 1697 secured the passage of an act which bound Parliament not to grant banking privileges to any other institution during the continuance of her charter. The terms of this act, not being sufficiently clear, and attempts to infringe upon this privilege having been made, another act was passed in 1708, the most important clause of which was as follows:

"That during the continuance of the said Corporation of the Governor and Company of the Bank of England, it shall not be lawful for any body politic or corporate whatsoever, erected or to be erected (other than the said Governor and Company of the Bank of England), or for any other persons whatsoever united or to be united in covenants or partnerships, exceeding the number of six persons, in that part of Great Britain called England, to borrow, owe or take up any sum or sums of money on their bills or notes payable at demand, or at less time than six months from the borrowing thereof."

This act left private bankers and partnerships of less than six persons free to issue notes and to carry on all other branches of the banking business, and the records of the Bank of England during the first century of her history indicate that, in spite of her privileges, these private bankers more than held their own in competition for the business of merchants and other private individuals. During all this period the balances due the government constituted the bank's chief liability, and loans to the government her chief resource.*

2. Country banking and the act of 1826.-About the middle of the eighteenth century private bankers began to appear in the provincial towns. By the end of the century three hundred or more were in existence and during the *For statistics see Lawson's History of Banking, pp. 44 and 45.

next few years their numbers increased very rapidly. These bankers issued notes freely, before 1777 in such denominations as they desired, frequently below one pound, and at times, if not ordinarily, were far from conservative and discriminating in making loans and in granting credit to the various enterprises then competing for public favor. Especially during the Napoleonic wars and the years immediately succeeding, when specie payments were suspended, they greatly abused their privileges and contributed to the speculation which preceded the crisis of 1825. The failure of many of them at this time and during the period of depression which followed, revealed the fact that they were greatly undercapitalized and sometimes entirely without capital resources and that the property of their proprietors was inadequate to meet their obligations.

The issue of notes of low denominations was also seen to have been a dangerous privilege, these notes having quite generally taken the place of coin in the circulation.

A widespread demand for reform followed, resulting in 1826 in a new law which provided among other things that banks with an unlimited number of partners might be established in any place in England distant more than sixtyfive miles from London and that the Bank of England might establish branches in any place in England. The purpose of this law was the encouragement of the establishment in provincial towns of banks with a larger and financially stronger proprietary than was previously possible under the limitations imposed by the act of 1708. The privilege of extension into the provinces granted to the Bank of England was designed in part to compensate her for the further limitations imposed on her monopoly and in part to give the provinces the advantages of a closer and more direct contact with her.

Taking advantage of the provisions of the act, the Bank

of England established branches in Gloucester, Manchester and Swansea in 1826, in Birmingham, Liverpool, Bristol and Leeds in 1827, in Newcastle in 1828, in Hull and Norwich in 1829, and in Portsmouth in 1834.

Provincial joint-stock banks were incorporated at first in small numbers only, but after 1833 more rapidly. In the year 1836 upwards of forty were established, and by 1844 their number exceeded one hundred.

After the passage of the act of 1826 the number of private banks decreased from over four hundred to less than three hundred in 1844, some of them having been absorbed by the new joint-stock institutions, and others forced to the wall by their competitors or by inherent weaknesses. The new banks were not immune from failure and their methods differed little, if any, from those of their private competitors. Their chief superiority consisted in their greater ability to meet their obligations in case of failure, the number of their proprietors being greater and each one being responsible for the debts of the bank to the full extent of his property.

3. The first banks of deposit.-In 1834 another type of joint-stock bank appeared in the city of London, one destined to prevail and to become second in importance only to the Bank of England. This was the incorporated bank of deposit without the right to issue notes and catering to the varying and growing needs of commerce in all of its branches instead of to the landlord and official classes. The London and Westminster Bank, opened for business March 10, 1834, was the first of this type to be established. Its founder was a Mr. Gilbart who believed that the clauses of the various charters of the Bank of England defining her exclusive privileges did not prohibit this kind of a jointstock bank even in the city of London, and the surrounding territory. This interpretation was adopted by Parlia