1. The returns since 1834 are formed upon the average of the preceding quarter. The amounts on each Saturday night, for thirteen weeks in succession, are added together, and the sum divided by thirteen; this gives the average of the quarter. Hence these returns do not show the progress of the affairs of the Bank during the quarter. For instance, the amount of notes in circulation may be high in the beginning of the quarter, and low at the end of the quarter, or the reverse; or the amounts may be low at both the beginning and the end, and high in the middle of the quarter, or the reverse-and yet all these cases may produce the same average. 2. The circulation" includes the notes of the head-office, and of all the branches; it also includes the Bank Post Bills issued at the former, and the drafts drawn by the branches upon the parent establishment, or upon each other. The bank did not publish the branch circulation separately until the year 1840, when it was furnished to the Parliamentary Committee on Banks of Issue, from whose Report it appears to have fluctuated in the years 1838 and 1839 from £3,723,000 to £4,397,000. 3. The deposits include those at the head-office and all the branches. 4. The securities also include those at the head-office and at the branches: they are formed of bills under discount, Exchequer bills, the dead weight, and other government securities, loans on mortgage, &c. 5. The bullion includes both gold and silver, whether coined or uncoined, and whether at the head-office or the branches. 6. The difference between the liabilities and the assets forms the "rest," or surplus capital, arising out of accumulated profits, and which is over and above the capital of £14,553,000, upon which the dividends are paid to the proprietors. The defects of the quarterly returns have been supplied by the last report of the Committee on Banks of Issue (Par. Paper of 7th August 1840, No. 602), the Appendix to which contains a weekly statement of the liabilities and assets of the bank from March 1832 to March 1840. The following is a copy of the last of these statements :BANK OF ENGLAND, March 31, 1840. IV. LONDON BANKERS.-The private bankers in London were formerly the goldsmiths, as already noticed, who, after a time, gradually relinquished their original pursuit and became exclusively bankers. They issued notes, and continued to do so even after the establishment of the Bank of England; but from this branch of business they have long since withdrawn. There are at present fifty-four private banking-houses in London, and of these, three, namely, Messrs Child and Company, Messrs Hoares and Company, and Messrs Snows and Company, were in existence before the Bank of England. Their business chiefly consists in acting as depositaries of money, discounting bills, and officiating as agents for banks out of London. They allow no interest on deposits; but, on the other hand, they charge no commission for paying the drafts of those who keep accounts, or for the trouble of presenting their cheques and bills for payment; the balance at their credit being considered a sufficient remuneration for keeping the account, and this balance is expected to be large or small, according to the number, amount, and nature of the transactions. They likewise afford considerable facilities to their customers, both in discounting bills, and by temporary loans, with or without security, according to circumstances. Bills for other parties are commonly discounted through the medium of brokers. This branch of business they transact with great advantages as to security, from the unreserved confidence which they are accustomed to place in one another as to the credit of their respective customers. "The deposits held by the London bankers are generally composed of very large sums, which are necessarily payable on demand; and hence they cannot be made use of to the same extent as those which are intrusted to country bankers, and which, whenever interest is allowed. are usually left with them for a stipulated period." "The London banks, in order to be able to meet their engagements, usually keep a large deposit, nearly equal perhaps to half of what they hold in reserve in the Bank of England; a portion of their current funds they necessarily hold at home in bankpaper, and a small amount in gold." "In order to turn their funds to profit, the London bankers employ as much money as they can amongst their customers. They invest a considerably larger proportion of their deposits in bills of exchange and promissory notes than in public securities. The city banker is, however, under a disadvantage in this respect which is not felt by the banker at the west end of the town. The latter may, to a certain extent, depend upon the use of the money deposited with him, as his accounts are usually those of country gentlemen and individuals out of trade; whereas the former, whose accounts are principally those of persons actively engaged in commercial or money operations, can hardly know three days beforehand what the amount of his deposits may be at any given period. The London bankers are obliged to employ their money occasionally at a very low rate of interest." (Mr Glyn's Evidence, 1832.) The Clearing-House was instituted by the London bankers about the year 1775, in order to save the time, risk, and inconvenience of sending round to each other for payment of the numerous cheques which they daily receive from their customers. In a large room in Lombard Street, about thirty clerks from the several London bankers take their stations, in alphabetical order, at desks placed round the room; each having a small open box by his side, and the name of the firm to which he belongs in large characters on the wall above his head. From time to time other clerks from every house enter the room, and, passing along, drop into the box the cheques due by that firm to the house from which this distributor is sent. The clerk at the table enters the amount of the several cheques in a book previously prepared, under the name of the bank to which they are respectively due." "At four o'clock all the boxes are removed, and each clerk adds up the amount of the cheques put into his box and payable by his own to other houses. He also receives another book from his own house, containing the amounts of the cheques which their distributing clerk has put into the box of every other banker. Having compared these, he writes out the balances due to or from his own house opposite the name of each of the other banks; and having verified this statement by a comparison with the similar list made by the clerks of those houses, he sends to his own bank the general balance resulting from this sheet, the amount of which, if it is due from that to other houses, is sent back in bank notes. At five o'clock the inspector takes his seat; when each clerk, who has, upon the result of all the transactions, a balance to pay to various other houses, pays it to the inspector, who gives a ticket for the amount. The clerks of those houses to whom money is due, then receive the several sums from the inspector, who takes from them a ticket for the amount. Thus the whole of these payments are made by a double system of balance, a very small amount of bank notes passing from hand to hand, and scarcely any coin." "It is difficult to form a satisfactory estimate of the sums which daily pass through this operation they fluctuate from two millions to perhaps fifteen. About two millions and a half may possibly be considered as something like an average, requiring for its adjustment perhaps £200,000 in bank notes, and £20 in specie. By an agreement between the different bankers, all cheques which have the name of any firm written across them must pass through the clearing-house; consequently, if any such cheque should be lost, the firm on which it is drawn would refuse to pay it at the counter; a circumstance which adds greatly to the convenience of commerce. The advantage of this system is such, that two meetings a-day have been recently established-one at twelve, the other at three o'clock; but the payment of balances takes place once only, at five o'clock. If all the private banks kept accounts with the Bank of England, it would be possible to carry on the whole of these transactions with a still smaller quantity of circulating medium." (Babbage's Economy of Machinery and Manufactures.) The establishment of the clearing-house has led to new arrangements in several branches of business. The stockbrokers for instance now settle all their receipts and payments by cheques, to be paid through the clearing-house: the cheques which a broker draws on his banker being paid by the cheques of other brokers which he lodges to his credit. The colonial brokers and other classes have fixed days for settling their accounts, and on these days draw cheques on their bankers in the morning, and deposit others to meet them at a subsequent part of the day. The institution of the clearing-house has thus become entwined with the general commerce of the country. Metropolitan Joint-stock Banks.--Of late years several extensive joint-stock banks have been established in the capital, as the London and Westminster, the London Joint-stock, the Metropolitan, the Union, and others. These banks conduct their business in some respects differently from the private bankers, particularly in reference to deposits on which they allow interest; charging likewise a commission upon the drawing accounts instead of requiring a balance. They are viewed with jealousy by the Bank of England as well as the private bankers, by whom they are excluded from the clearing-house; but being powerfully supported, they have been euabled successfully to meet this opposition; and it is considered probable that their number will increase. V. ENGLISH PROVINCIAL BANKS.-The act of 1708 exercised an unfavourable influence upon the banking business out of London, the prohibition of the number of partners to six, having, as already noticed, been understood to apply not to banks of issue alone, but to banks of all kinds. At the time the enactment took place, and for many years after, the extent of injury arising from it was not perceived, as there were few provincial banks in England, and consequently few failures among them; but during the greater part of the last half century, the case has been very different. After 1770, the increase of town population, consequent on the progress of the cotton and iron manufactures, occasioned an addition to the number of banks; and during the ten years of prosperity and peace (1783-93) which followed the close of the American war, they multiplied with great rapidity. The sudden check, however, which was given to trade by the transition from peace to war in 1793, fell directly on the provincial banks, and by causing twenty-two of them to declare their insolvency in one year, brought into view the pernicious effect of the act of 1708. In 1797, when their number was about 280, leave was given to them, as well as to the Bank of England, to issue £1 and £2 notes. This privilege having been coupled with the important one of not paying their notes in cash, an extraordinary extension of their business suddenly took place; and between 1797 and 1814 their number increased to 900. In the course of the three years 1814, 1815, and 1816, however, ninety insolvencies occurred, and an equal number of dissolutions of partnership, which reduced the number of banks to between seven and eight hundred. In the year of speculation, 1825, their number again increased, but it was once more reduced by the failure of eighty in that and the following year. These stoppages, and the injury which resulted from them, at last forced the defective constitution of the provincial banks upon the attention of the government, and this more particularly from the contrast presented by the state of banking in Scotland, where, for upwards of a century, scarcely a single bank of issue had proved insolvent in consequence chiefly of the non-existence of the limitation in question. Accordingly, in 1826, the act 7 Geo. IV. c. 46, was passed, allowing joint-stock banks to be formed in all places beyond the metropolitan district, it being at the same time arranged (7 Geo. IV. c. 46, § 15) that the Bank of England should establish branches, and that notes under £5 should be withdrawn from circulation by April 5, 1829. By a subsequent act in 1833, the provincial banks were allowed to tender Bank of England notes instead of gold in exchange for their notes. Statutory Regulations.-These are principally embodied in 7 Geo. IV. c. 46, and 3 & 4 Wm. IV. c. 83, already noticed. The statute first mentioned, enacts (§ 1), that copartnerships or societies, though consisting of more than six persons, may be bankers in England, and may issue notes, provided such copartnerships shall have the whole of their banking establishments beyond sixty-five miles from London, and that all the partners are liable for the whole debts of the bank; and (§§ 4, 5) that a return be made to the Stamp-office, before commencing business, and between the 28th February and 25th March annually, of the name of their firm, of the names and places of abode of all their partners, of the places where the banks are established, and of two or more of their number who shall have been appointed public officers, which returns shall be open for the inspection of the public on payment of one shilling for every search. (§8) Special returns must be made of any additional public officers, of all retiring and newly-appointed partners, and of any new agencies. (§ 9) Such banking companies are entitled to sue and be sued in the name of their public officers; and (§§ 12, 13) when judgment is obtained against such public officers, execution may be issued against any member of the copartnership. (§ 16) The banks are allowed to compound for the stampduties on their notes at the rate of 7s. per annum for every £100 in circulation. (§ 17) If a company issuing notes has two, three, or four places of issue, a license is required for each; but four licenses will suffice for any number of places of issue. (§ 18) A company delaying to make the said return to the Stamp-office forfeits £500 per week during the delay, and, if a false return is made, £500 is forfeited by them, and £100 by the officer who makes the return. The statute 3 & 4 Wm. IV. c. 83, enacts (§ 1), that partnerships and persons carrying on banking business and issuing notes shall make returns to the Stamp-office, London, of the average amount of notes in circulation in the quarters ending January 1, April 1, July 1, and October 1, in each year; the quarterly average to be formed from the amount in circulation at the end of each week; such returns to be verified on oath, and to be made under a penalty for default of £500. ($2) Banks of more than six persons may draw on any agent in London on demand, or otherwise, for less than £50, notwithstanding the provision to the contrary in the act 7 Geo. IV. c. 46. The temporary acts, 1 & 2 Vict. c. 96, and 3 & 4 Vict. c. 111, contain provisions applicable to legal proceedings by joint-stock banking companies against their own members, and by such members against the companies. The 3 & 4 Vict. c. 111, likewise provides for the punishment of members of banking companies embezzling notes, &c. The statute 55 Geo. III. c. 184, imposed the following stamp-duties on the notes of country bankers; namely-not exceeding £1, 1s.,-5d.; exceeding £1, 1s. and not exceeding £2, 28.,-10d."; from £2, 2s. to £5, 5s.,-1s. 3d.; from £5, 5s, to £10,-1s. 9d.; from £10 to £20,-28.; from £20 to £30,-3s.; froni £30 to £50,-5s.; from £50 to £100,-8s. 6d. Nature of Business.-All the provincial banks discount bills, grant advances or credits on accounts, effect remittances, and receive deposits on which they allow interest; but their mode of transacting business is not uniform. On current accounts, they allow from 2 to 4 per cent. interest,-a commission of per cent. being charged on all sums paid by the bank, besides from 4 to 5 per cent. interest on overdrafts; the usages in this respect, however, differ much in different districts. Advances are often made without security, but more commonly upon a promissory note by the party with sureties; sometimes also upon bonds, and the lodgement of title-deeds. The rate of interest allowed on deposits varies from about 2 to 3 per cent., and notice is in general required before any considerable sum can be withdrawn. Current or drawing accounts are balanced half-yearly; and bills lodged by parties having such accounts, are passed to their credit, as on June 30, and December 31. English bills are always made payable at a London bank, a circumstance which facilitates their circulation, and enables provincial bankers more readily to meet any exigency by rediscounting them. The London agent of a provincial bank is paid for his trouble either by a certain amount being allowed to remain in his hands without interest, by a commission on his payments, or by a fixed annual sum. Most of these banks issue notes which are often made payable at their London agent's establishment, as well as at their own. The profits from this source were reduced by the suppression of those under £5, which, prior to 1829, formed about one-half of the circulation; but the reduction is estimated at only 30 per cent., owing to the larger amount of other notes since taken by the public. There are exchanges of notes between the banks in the country towns either once or twice a-week as may be arranged, and the balance is paid by an order at sight upon London. The system of exchanges is less comprehensive than in Scotland; but in that part of the island, the circulation of the larger banks is very widely diffused through their numerous branches; whereas, the country circulation of England pretty much divides and restricts itself to particular districts, and within which, in each case, the issues of the several banks almost exclusively circulate. Any notes that find their way beyond such limits are of trifling amount, and are speedily returned to the banks by whom they were issued, or their London agents. ACCOUNT showing the Amount of Notes circulated in England and Wales by Private Banks, and Joint-stock Banks and their Branches, from Returns under 3 & 4 Wm. IV. c. 83. June Sept. Joint Quarters to 1837. April July Sept. Dec. Private. Stock. Total. £ £ £ 1..7,275,784 3,755,279 11,031,063 1..7,187,673 3,684,764 10,872,437 30..6,701,996 3,440,053 10,142,049 30..7,043,470 3,826,665 10,870,135 28..8,875,795 1,642,887 10,518,682 1835. March 28.. 8,231,206 2,188,954 10,420,160 June 27..8,455,114 2,184,687 10,939,101 1836. March 26..8,353,894 3,094,025 11,447,919 June 30..7,383,247,4,362,256 11,745,503 Sept. 29..7,083,811 4,281,151 11,364,962 Dec. 31..7,599,942 4,625,546 12,225,488 June Sept. 29..7,610,708 4,665,110 12,275,818 28.. 6,917,657 4,167,313 11,684,970 28.. 7,251,678 4,170,767 11,422,445 28..6,893,012 3.940,232 10,833,244 June 25..8,614,132 3,588,064 12,202,196 ENGLISH PROVINCIAL JOINT STOCK BANKS. (The capital, and the circulation of these banks which issue notes, are stated according to the House of Commons Report for 1836, Par. Paper No. 591, and their Report for 1837, P. P. No. 531. The number of partners and branches are shown for 1839, according to Return to the House of Commons in that year, P. P. No. 530.) The number of branches, though taken from a return made by the Stamp-office, is not always accurate, as it is a common practice of the banks to insert in their licenses places where circumstances may induce them to establish branches, but where none were in existence at the time the license was granted. 1836 157 22,625 9,555 1832 96 23,380 16,255 Manchester. 1834 627 16 262,485 113,527 Gloucester. 1836 276 8 176,750 87,424 1835 276 1 43,490 31,225 1836 152 4 32,700 18,439 Union Banking Company.. Agricultural and Commer. Bg Co. York.. Western District Banking Company... Bank of... Wolverhampton & Staffordshire Bank. Co.. Wolverhampton 1831 230 Yorkshire District Bank. Plymouth 1836 322 7 30,600 17,880 1836 442 19 63,105 74,976 Whitehaven..... 1829 228 1 28,050 42,331 0 50,000 51,228 1830 263 7 75,000 94,500 1833 271 10 63,000 81,090 Leeds. 1834 1055 30 389,985 231,483 1836 618 6 72,875 16,224 |