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that the issue department contains one line of liability, viz, the notes issued. On the other side, giving the list of the assets held against these notes, the first line is “Government debt,” which is the original debt from the Government to the Bank, to provide which the Bank of England was founded in 1694, swollen from the original £1,200,000 to over 1 millions by subsequent additions. The next line, “Other securities,” gives the holding of British Government stock, which raises the fiduciary backing of the Bank of England's note issue to the £18,450,000 at which it now stands. The rest of the notes issued are backed by gold coin and bullion, though the line “Silver bullion” recalls the fact that by the bank act of 1844 the Bank was empowered to hold silver against its notes to the extent of one-fourth of the gold or onefifth of the total bullion. But, as has been recorded above, it is more than half a century since this right has been exercised, and a recent attempt to put it into force was so strongly resisted by city opinion that it was promptly dropped.

The items in the banking department require a little explanation. The “Proprietors' capital” speaks for itself, except that it differs from that of other English banking companies by being fully paid up, though, as was observed above, there is some doubt as to whether there is further liability on it.

The next item among the liabilities, “the rest,” as it is called, is the Bank of England's reserve fund in the ordinary sense of the word—that is to say, an accumulation of profits which have not been divided among the proprietors but have been kept in hand to strengthen the Bank's posi

tion. Unlike most reserve funds, however, this item, “the rest,” fluctuates from week to week, and may be supposed to contain the current profit and loss account balance. It should be added that, by unwritten custom, it is never reduced below £3,000,000, and the amount above this level at which it stands at the end of the Bank's half

year is the amount available for distribution by way of dividend among the proprietors.

The public deposits are the deposits of the various departments of the British Government which the Bank holds on its account as keeper of the national balances. In the account presented above this item is shown swollen by the collection of the direct taxes, which proceeds during the quarter from January to March. The other deposits are the Bank's liabilities to all customers other than the British Government, and so include the balances of the other banks which use the Bank of England as their banker and holder of a considerable portion of their cash reserves. Included along with them, however, there are the balances of the Bank's private customers, including municipalities, colonial goverments, etc., and the amount of the bankers' balances on which the resources of the London money market, apart from the Bank of England, really depend, can only be guessed at. It is believed that they generally average about 22 or 23 millions, and it is generally found that when the amount of the other deposits as a whole falls to about 4ro millions, money in Lombard street is scarce and comparatively dear.

In the account given above it will be seen that the pressure of tax payments has reduced them below 40 millions, and, as usual during the January to March

quarter, the market was actually at the date of this. return obliged to borrow from the Bank of England in order to restore its balances.

The item of seven-day and other bills is an oldfashioned form of remittance provided by the Bank and used chiefly for the purposes of revenue payments.

On the other side of the account we find the Bank's assets divided into “Government” and “Other securities” and its holding of its own notes and of gold and silver coin. Here again “Government” means only the British Government, and under the item “Government securities” are included the Bank's holding of consols and other British Government stocks, treasury bills, or other forms of unfunded debt, and likewise any promises to pay that it may hold from the Government against temporary advances that it may have made to it in the ordinary course of its relation with it as its banker.

The “Other securities” item is equally, or still more, comprehensive. It includes the Bank's holding of stocks or shares, any bills that it may have taken from the London market, its loans to private customers or to bill brokers or stockbrokers, and the discounts and advances that it makes in the course of its ordinary banking business at its branches in the country. It will thus be seen that the return in this respect is far from informing, and it is contended, not without reason, that the Bank of England might well set an example of clearness in the account which it presents by separating its loans, its discounts, and its holding of securities as investments.

It may perhaps also be added while we are on this subject of suggested improvements in the Bank of Eng

land's return, that it has been frequently suggested that the bankers' balances should be separated from the other items included in the other deposits. It is unlikely, however, that this suggestion will be revived among the other bankers, who were its most important advocates, because it has been borne in upon them that if this reform were carried out the willingness of the Bank of England to lend money at times when emergency credit is required might be very seriously modified. There can be no doubt that at the end of the half-year, when the Bank of England frequently adds 15 or 20 millions to the amount of the bankers' balances, by the loans which it makes to the bill brokers and others who place the credit so created to the account of their bankers at the Bank of England, these bankers' balances must be raised to a level which is considerably above that of the Bank of England's reserve; and it seems more than probable that if the amount of the bankers' balances were separately published, the Bank of England might be unwilling to allow this process to be indulged in with the same freedom.

If this were so, the whole mechanism of the London money market would be modified in a manner which its components would probably find inconvenient, and since this aspect of the case has been recognized the agitation in favor of the separate publication of the bankers' balances has been practically dropped.

The last two items among the assets of the banking department contain what is usually called the “Bank of England's reserve." It is not a reserve in the ordinary sense of the word, accumulated profits held as a reserve fund. That we find among the liabilities under the name

“rest.” When reference is made to the Bank of England's reserve, what is meant is its holding of cash in the banking department. This cash consists very largely of the Bank of England's notes issued by the issue department. It will be observed that in the return before us the notes issued, the liability of the issue department, amount to nearly 56 millions, while the notes held by the Bank in the banking department amount to 271 millions. Subtracting one item from the other, we find that some 28% millions was the amount of the Bank's actual note circulation. It thus appears that a very large proportion of the cash held by the Bank of England to meet demands upon it consists of the liabilities of its issue department, and the system of treating a liability as an asset, which has been academically criticised above in the case of the Scottish banks, is thus practiced by the Bank of England. But there is this important difference between the two

The Scottish banks, as was shown by the evidence of their own representatives, take advantage of their noteissuing privilege to economize metal to the extent of 8 or 10 millions. And so it follows that their holding of actual cash is decidedly low when compared with their liabilities against notes and deposits. The Bank of England, on the other hand, habitually holds a very high proportion of cash. In the return given above its liability on notes outstanding is £28,672,000, taking the notes issued less those held by the banking department as an asset, and its liabilities on public and other deposits and seven-day and other bills come to £57,170,000, making a total of £85,842,000. Against these liabilities it holds in its two departments £39,172,000 in coin and bullion, the propor


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