take into account all the liabilities of the other banks in the United Kingdom. These are, probably, without considering the Bank of England, more than twice as large as the estimated liabilities of the clearing bankers. What would be the position of these outside banks, and especially of the country banks without London offices, in any time of panic, if the plan as it originally stood were carried through? Would the "Clearing Bankers' Reserve" be sufficient to meet their wants? If it were not, and these banks were to go with bills on the best houses in Europe to the Bank of England at such a time, and ask for advances on those bills, would the Bank of England be likely to assist them? Would not the Bank of England say, "your friends, your London agents, have established their own system, apply to them for help." And it is most likely that the Bank of England would have to give this or some similar answer; for if the proposed arrangement were carried through, it really appears doubtful whether the Bank of England would be in a position to afford considerable assistance to any other bank in a time of trouble. And this would be far from being a desirable thing. Of course it is not possible for any one to predict what course the Bank of England might take as to the proportion to be maintained between its reserve and its liabilities, in case the proposed plan were carried out. But it is possible, in some degree, to trace what the effect as to the past would have been, had the plan been followed before this; and a consideration of the past is sometimes an assistance in looking forward to the future. The amount of the reserve of the Bank of England has been published every week since 1844, and the amounts of the London bankers' balances have also been published in various Parliamentary papers down to the end of 1873. It is very likely that, although the Bank of England, from motives of its own policy, has preserved its reserve at the amount which it has done, it really requires rather a smaller reserve than other banks do, seeing that a large part of its business is Government business, the drafts on which can be reckoned on almost to a fraction. It is quite possible, therefore, to suppose that the Bank would not-if the clearing bankers withdrew their balances from it-increase its own reserve at all beyond the amount at which it would then stand. That is to say, it may fairly be supposed that if the liabilities of the Bank were diminished by the balances of the clearing banks, the Bank would remain satisfied with the reserve which would then remain. To show what the result of such a measure would be, we have added a table, showing what would have happened had it been carried out.

Bank of England. Amount of its Reserves, with the Proportion they bear to its liabilities.

The first column of the table contains the annual averages of the banking reserve of the Bank; in the next column, what those amounts would have been if the average deposits of the London bankers had been deducted from them; in the third column, the proportion of the banking reserve, as it has been, to the total liabilities of the Bank; and in the fourth, what that proportion would have been, after the London

bankers' balances had been deducted both from the liabilities and the reserve. A study of this table will afford much useful information. Most persons will be inclined to admit that, except in the year 1866, it is probable that the Bank would not, if the London bankers had withdrawn their balances from it, have increased its reserve beyond the point at which it would have been left by that withdrawal. It is perfectly true that in the year 1872 the proportion of the "reserve" to the "liabilities" would, instead of standing at 42 per cent., have been only 21 per cent., and in 1873, instead of 41 per cent., only 17 per cent. But, taking the general character of the business of the Bank into consideration, the large proportion of its deposits, which consist of public money, the demands on which, as previously mentioned, can be easily estimated, it is very likely that in the ordinary course of events, the Bank would have considered a reserve of one-fifth and of one-sixth of its total liabilities, a very handsome and sufficient proportion to maintain. Such a reserve might, and probably would, be fully sufficient for the requirements of the Bank itself; but it is quite clear that it would leave but a narrow margin to assist any other bank from. It is perfectly true that the power of the London bankers to increase their balances with the Bank at any time of pressure is very great, and that they have the means of increasing the amount standing to their credit with the Bank at such a time with extraordinary rapidity. The history of the last two crises shows this very plainly.

The balances of the London bankers in 1857, and in 1866, were as follows:

But the reserve of the Bank of England at the same periods underwent a very different change.

It must be borne in mind that the amount of notes allowed under the Act of 1844 to be issued beyond the bullion in the "Issue Department" was £14,475,000

It must be remembered that these totals include not only the reserve in London, but the cash in the tills of the twelve branches of the Bank, at some of which (at Manchester and Liverpool for instance) there must probably have been comparatively large sums kept in hand. The amount really available as reserve in London must at both these times have been quite fractional. Now, considering these figures, and the probability that the next crisis cannot be less severe, to say the least, than any of its predecessors, and that the demand on the Bank for discounts from other quarters than bankers, are not likely to be less, but greatly more at such a time than they ever have been,-considering what the experiences of the past have shown, should the same class of events recur, with the bankers' reserve outside instead of within the Bank of England, we must feel at once that, though at such a time the London bankers might hold eight millions' worth of "legal tender," they could hardly be said to hold eight millions of " money. "The reserve of the Bank of England was utterly insufficient, at either of the periods we have mentioned, to meet the London bankers' balances, as the amounts just mentioned show. As long as all this was a mere matter of account in the books of the same bank, it was not so completely obvious as it would become were the bankers' reserve separated from the Bank of England, and although there is, of course, gold in the "Issue Department" for every note issued beyond the £15,000,000 of securities, yet it may well be supposed that the presentation of, let us say, "a million's worth of notes," and a demand for gold in exchange for them, would hardly be agreeable to the Bank at such a time. If the next crisis is as severe as that of 1866, with the "circulation" increased by eight millions, as it would be by this plan, and the demand is not only for "legal tender," but for "gold" for

at this date; but in the return of the 18th November, 1857, the items of the "securities" in that department were as follows:

Government debt
Other securities

Two extra millions of securities having been transferred to the Issue Department in consequence of the letter from the Government to the Bank of the 12th November, 1857. Without this timely assistance, the reserve would have been exhausted on the 18th of November.

export, while there may also be simultaneously a demand for "notes," the strain on the resources of the Bank will hardly be lightened by the proposed alteration in keeping the reserves, which, it must be observed, would only change the manner in which they were held, and would not, as far as we can see, increase their real amount at all.

To show a danger without proposing a remedy, is of little service. The Bank of England would apparently prefer that the remedy should take the form of increased balances, to be kept by the London bankers in their hands. Let them keep, say eighteen millions with the Bank,-and what use would the Bank make of these increased deposits? As far as we can judge, it would continue the existing practice on an enlarged scale; it would lend this additional money, this reserve intended to be kept for the security of the bankers' deposits; and it would treat these additional funds exactly like the rest of its resources; it would, in fact, discount more than it previously has done; it would apparently keep no more real “ money" in hand. This might suit the Bank of England very well, but the figures of the banking reserve at the last two crisis are not encouraging as to the result of this mode of proceeding. It cannot be desirable that the bankers' reserves, the only available "cash" in any considerable bulk in the country, should be loaned out like any other deposits. From a banking point of view, there is no doubt economy in making the Bank keep the reserves of the bankers; though, from a mercantile point of view it is equally certain that the doing this tends to place any pressure always at one point, and consequently tends to great unsteadiness in the value of money.

But to propose a change in a system, so vast and so complicated as the banking arrangements of this country, which may be beneficial, is not easy. Great part, however, of the existing system is quite modern, having grown up within a comparatively recent period, and in its complete form is not yet twenty years old. It followed, by some little time, the admission of the principal London Joint-Stock Banks to the Clearing-House, which was arranged in the years 1853 and 1854. Before that time the clearing balances were settled with Bank notes; this caused a considerable extra circulation of Bank of England notes, and a drop in the Metropolitan issue of the notes of the Bank followed on the arrangement of settling the "clearings" by cheques on the Bank of England; exactly as a considerable rise in the circulation would follow if eight millions of Bank notes were, as proposed, withdrawn from the Bank and locked up in the clearing banker's strong room. We