« ZurückWeiter »
tion being thus over 45 per cent. In the case both of the Scotch banks and of the Bank of England the cash held against notes is regulated by law, and above a certain limit each note issued must be represented by bullion. But the Scotch banks have developed deposit banking facilities to an extent which has made their total cash holding small in proportion to their total liabilities on notes and deposits, while the Bank of England, owing to the high proportion that it maintains against the liabilities of its ordinary banking business, still shows in the return given 45 per cent of cash against its notes outstanding and its liability on deposit and drafts, which compares very favorably with the proportion that we found in the hands of the Scotch banks.
At the same time, though, as compared with Scotch practice, the Bank of England's ideal is a high one. The fact that the reserve of its banking department (held against the liabilities which include the balances of the other banks which are an important part of the basis of English credit) consists largely of its own paper, which is based to the extent of about one-third on government debt or securities, is an example of credit based on credit that is sometimes pointed to as a too successful extension of the economy of metal which, within due limits, is one of the most important functions of modern banking. And there is a strong feeling among the English banking community that the Bank's fiduciary issue should be gradually abolished, and that the Bank of England note, which is now held largely as a reserve by the Bank of England and the other banks, also has become part of the
basis of credit, should be, actually and in fact, a bullion certificate.
The amount of the Bank of England's reserve, as shown in its weekly return, is an item of the utmost importance to those who have to forecast the condition of the London money market. The amount of the reserve is now rarely allowed to fall below 20 millions, though there are many still alive who can remember the time when a 10-million reserve was considered an adequate amount. When gold is taken from the Bank, it follows that the notes issued against it by the issue department are canceled, and thus the amount of notes held among the assets of the banking department are canceled likewise. The export of gold so immediately reduces the reserve of the banking department and lowers the proportion between it and the Bank's liabilities on public and other deposits and seven-day bills. Both the amount of the reserve and its proportion to liabilities are carefully watched by the bank court, and any serious reduction in them is met by measures described above, viz, the raising of its official rate, accompanied, if necessary, by the borrowing process by which, as has been shown, the Bank of England frequently has to make its rate effective.
(B) THE ENGLISH JOINT STOCK BANKS.
With regard to the provisions laid down by the law for the organization and working of the ordinary English joint stock banks, it may be said that, except with regard to note issue and one or two quite unimportant details, no special provisions are made; and it has already been shown that the note issues of the English banks, apart
from the Bank of England, are now a quite negligible quantity, averaging something under half a million; and since no joint stock bank with an office in London can possess the right of note issue, it follows that all the great English banks, which necessarily from their position must have an office in London, are debarred altogether from note issuing. Nevertheless, for the sake of completeness, it would be as well to state the nature of the restrictions upon the right of note issue which govern those of the few country joint stock banks which still maintain them.
By the act of 1844 it was laid down that no banking company in England which did not then possess the right of issue could acquire it, and that those which then exercised it could not under any circumstances increase their note issue above the limit laid down by the act, which was based on the average of its circulation during the twelve weeks preceding the 27th of April, 1844. The right of issue might only be exercised outside a circle drawn around London with a radius of 65 miles, within which the Bank of England's monopoly was protected against competition by other joint stock companies.
In order to exercise the privilege, a bank must annually take out a license subject to a duty of £30, a separate license being necessary for every place at which notes are issued. In respect of the note issue, the law thus laid down an absolute limit upon English banking, and also made strict regulations for the presentation of returns showing that it had not been exceeded. The bank charter act provides that a weekly return shall be sent to the commissioners of stamps and taxes, giving an
account of the circulation of bank notes on every day during the previous week, and also the average amount of the circulation, and at the end of every period of four weeks an average circulation during the four weeks is to be stated, and also the amount of notes which the Bank is authorized to issue under the act.
These returns were to be published by the commissioners in the London Gazette, and though, owing to the supersession of the note by the check, they have no practical value as a statement of English currency movements, these returns do still make their appearance in the Gazette, an official publication which is read only by those in search of curious information. It may be added that any neglect of the duty of presenting this return to the commissioners, or any falsification of the accounts, render the Bank liable to a fine of £100. · Under the act the commissioners have the right to inspect the books of the noteissuing banks, but this right does not appear to have ever been exercised.
Before leaving the subject of notes, we may add that the limitation of liability on bank shares does not apply to the liability under notes. But here again, owing to the insignificant dimensions of the note issue of the English banks, this provision is of no importance. Under the provisions of the joint stock companies acts, which apply to all joint stock companies as such, the English joint stock banks have to furnish to the registrar of joint stock companies an annual list of shareholders in the company, with their names, addresses, and occupations, and the number of shares held by them. A banking company must add to this list a statement of
the names of the several places in which it carries on business. The register of members is to be kept at the registered office of the company, and any shareholders in a joint stock bank can claim to inspect the list during business hours.
A special provision with regard to the purchase and sale of bank shares on the stock exchange was laid down by a statute, commonly known as Leeman's Act, which provides that all contracts and claims for sale and purchase in the shares of joint stock banking companies shall be null and void unless they shall set forth the numbers of the shares transferred. The object of this provision was to prevent attacks on the credit of banks, which might have serious results from the public point of view, by means of bear sales on the stock exchange. Its practical result was that nobody could sell a bank share unless be possessed them or could borrow them from some actual holder, and so was able to give the numbers of the shares at the time when the sale was effected; and it was thus made impossible by means of fictitious sales, with a view to repurchase before the completion of the bargain, to give any appearance of weakness to the position of a bank.
With regard to the liability of directors and officers, the banks are again subject to the ordinary law of joint stock companies. Under this law it is permitted to companies to provide under their memorandum of association that the liability of the directors shall be unlimited, but this provision is rarely, if ever, made use of. The directors of a company, being to all intents and purposes a specially elected committee of shareholders appointed to manage its affairs in the interests of the company as a whole, thus