far. He therefore urged upon the London banks that they should make a monthly statement of their position, and this suggestion was adopted by the majority of them. The result was that they published a monthly statement showing how they stood on one day at the end of each month, and it thus followed that on one day at the end of each month the banks showed a proportion of cash to liabilities which they considered sufficiently adequate to stand the light of publicity. But the system has long been seen to be faulty, and a certain amount of abuse has grown up round it. It is strongly suspected, for example, that some of the banks which publish these statements make preparations for them by calling in loans or reducing their discounts for the day on which the statements are drawn up. As far as this is done the statement is to a certain extent misleading, and this practice of "window dressing," as it is called in Lombard street, has been subject to frequent criticism, so much so that one of the leading London banks-the London and County-adopted early in 1908 the practice of showing its daily average cash holding, thus demonstrating that it was not in the habit of preparing a statement which did not represent its position fairly throughout the month. So far the other banks have not followed its example, and it is very reasonably contended on their part that the monthly publicity to which they are subjected is an unfair handicap to them in the conduct of their business, seeing that they have to compete with other banks which do not make any such statement, and only show their position at the end of each half year when they draw up their half-yearly balance sheets. Lord Goschen's reform was a good one

as far as it went, but it was not adopted by all the London banks. None of the private banks thought that it applied in any way to them, and a large agglomeration of private banks, which has since then been united as a great joint stock bank, has not adopted the policy of a monthly statement. None of the country banks have joined the movement, and the application of publicity is thus partial and in some respects unfair.

It has been contended that before those banks which publish monthly statements can be expected to make them fuller or more fairly representative of their average position throughout the month the system should be applied more generally to the banking community as a whole, and especially that the country banks, which compete keenly in the large provincial centers with the branches of the London banks, should have the same extent of publicity applied to them as to their brethren who have head offices in London. It is extremely difficult, however, for those in favor of this reform to induce the country bankers to come into line in the matter, and since if they did so the extent of their credit operations would probably be considerably reduced, the mercantile community, which naturally resents any measure which would tend to restrict the supply of credit and possibly make it dearer, has not hitherto shown much enthusiasm for the reform. It has, however, been advocated by a committee of the Associated Chambers of Commerce of the United Kingdom that all the banks should publish monthly statements showing their average holding of cash, deposits, and other details. Certainly the operations of these smaller banks and the extent to which they raise a pyramid of credit on a small

cash basis is an element of some danger to the whole English banking community if at any time banking trouble should arise in England. It has been stated by a president of the English Bankers' Institute that the proportion of cash to liabilities shown by country banks ranges down to a point as low as 2.2 per cent. No one can contend that this is an adequate cash basis for banking to work on, and as long as certain members of the banking community conduct their business on these lines an obvious hardship is involved on those which keep a more prudent and strong reserve of cash. It is contended by the big strong banks that their smaller brethren compete with them by providing more credit than they have any right to create, relying on their assistance in times of difficulty.

The position is an extremely delicate and difficult one; the banking community as a whole resents any suggestion of interference by the Government, or of dictation from outside; it habitually, in the course of half-yearly meetings and of addresses at the Bankers' Institute, admits the fact that it conducts its business on inadequate cash reserves, and yet it is unable to put its own house in order owing to its own divergent interests and the difficulty of inducing the smaller banks to work on the same ideals as those which dictate the policy of the larger and stronger ones. Apart from this danger of the over-multiplication of credit on an inadequate cash basis, the complete absence of any legal or other restrictions on the operations of English banking enables it to work with extraordinary ease and readiness. As long as good unpledged security, whether in the form of bills of exchange, commodities, or Stock Exchange securities, are available in the hands of

customers the banks can advance against them to any extent that they consider prudent. Prudence dictates in the case of the great majority of them that a certain proportion of cash to liabilities shall be maintained, but, as was shown above in dealing with the Bank of England, the cash of English banking consists partly of credits with the Bank of England. These credits with the Bank of England, and consequently the cash credits of English banking, can be multiplied as rapidly as the Bank of England is prepared to make advances or discount bills, and so give credit in its books. The Bank of England is subjected to weekly publicity by the appearance of its account, which will be dealt with later, and it watches over its proportion of cash to liabilities with a vigilance which is greater than that of the rest of the banking community as a whole. Nevertheless, its prudence in this respect is the only restriction on it, and we thus arrive at the conclusion that the chief function of the English joint stock banks, that of providing the mercantile community with currency and credit, can be carried out to any extent as long as their customers have security to offer and their proportion of cash remains adequate to their sense of prudence. And further, their proportion of cash can be increased as rapidly as the Bank of England is prepared to make advances, which it can and does to an extent which again is only limited by its own prudence.

It follows that this system, by which checks drawn against banking credits are the chief currency in England, while banking credits can be multiplied to any extent that the prudence of bankers considers right and are based on credits at the Bank of England which can again be mul

tiplied without any legal restriction, has completely freed the English monetary machine from any regulations except those imposed by its own sense of duty and the possible criticism of the public; and the development of the use of checks has thus completely nullified the attempt to regulate the English currency system made by Peel's Bank Act of 1844, which will be considered later when we examine the legal restrictions imposed on the Bank of England. Besides this absence of outside regulation, the English monetary system is also distinguished by a remarkable lack of cohesion and cooperation among the members of its own body. Except to a certain extent in the country districts, where the rates allowed to depositors and charged to customers are to a certain extent a matter of convention, English banking works almost entirely at the mercy of very keen internal competition. It is true that in London the rate allowed to depositors is to a certain extent regulated by the Bank of England's official rate, and is fixed and published. Even in this case, however, bankers frequently make variations according to the length of the time for which the depositor is prepared to fix the transaction, and on the other side of the account the rate that the banks charge for loans and discounts is left entirely to the higgling of the market, each transaction being regulated by the exigencies of the moment, the nature of the security, and the standing of the customer. This extreme development of competition leaves the market liable to pronounced depression in rates at times when slackness of trade or other causes decrease the demand for credits. At these times the adroit bill brokers and discount houses, which are in some respects