VI. SCOTTISH BANKS.-The introduction of banking into Scotland took place in 1695, in which year the Bank of Scotland was founded, with a capital of £100,000 sterling (or £1,200,000 Scots); but such was then the poverty of the country, that not more than £30,000 were for a considerable time called up, and a large portion even of this sum was advanced by natives of Holland, Hamburg, and England. It remained the only bank until 1727, when the Royal Bank was established by the subscription of £111,347: 19: 10 of the stock of the Equivalent Company, an association which acquired right to the greater part of the compensation (£398,085, 108.) granted by parliament to Scotland at the Union in 1707. In 1746, the British Linen Company was chartered, with a capital of £100,000, and, having shortly thereafter abandoned the linen trade, became exclusively a banking concern. Smaller banks were soon afterwards instituted in different parts of the country. The expansion of the national resources which occurred after the close of the American war in 1783, naturally led, as in the south, to a great increase of business, and considerable additions were then made to the capital of the larger banks, while about the same time they established branches in the several counties. The banks have since increased with the advancing prosperity of the country, and their number at present is about thirty, which have mostly numerous bodies of partners, as the act of 1708, limiting the number in English banks to six, did not extend to Scotland. Five of these possess charters, which, however, confer upon them no privileges, in regard either to the issue of notes or any other department of business. The charters of the three oldest are by some said to have the effect of restricting the liability of the partners to the amount of their shares; but, however this may be, no doubt is entertained that the responsibility of the partners of all the others extends to the full amount of their property, both real and personal: this circumstance has contributed powerfully to the solidity of the Scottish banks.

Notes payable to the bearer on demand were first issued in 1704, by the Bank of Scotland. During last century, these were frequently circulated for smaller sums than £1; and at one period, owing to the runs made by the banks upon each other, they were made payable either on demand, or six months after with interest; but these practices were suppressed in 1765. În 1826, when Parliament prohibited one pound notes in England, a similar attempt was made in regard to North Britain ; but, a Committee being called for by the Scottish members, the result was, a determination not to interfere with the existing system.

The Statutory Regulations are principally embodied in the 5 Geo. III. c. 49, which requires that all bank-notes, circulated like specie, shall be made payable on demand, and prohibits those for sums under £1; and in the 7 Geo. IV. c. 67, the enactments of which are similar to those of the 7 Geo. IV. c. 46, already quoted in reference to England. In the act 7 Geo. IV. c. 67, however, the period within which the yearly returns of managers, branches, and partners, must be made to the Edinburgh Stamp-office, is from May 25 to July 25. The stamp-duties payable on notes are the same as in England.

Business Operations.-These possess a more uniform character than in the south, owing chiefly to the circumstance, that the Edinburgh banks have long had branches established over all the country, in which business is transacted in the same manner as at the head offices. The exchange regulations, afterwards explained, have likewise contributed to this result, by producing a kind of federative connexion between the banks themselves. The system which has thus grown up, will, however, be best explained in detail.

1. Deposits are received of sums from £10 upwards, which are repaid on demand, with interest at a rate varying from 2 to 3 per cent. They are composed in nearly equal parts of Deposit Receipts granted for money allowed to lie for considerable periods, and of Deposit Accounts, or drawing accounts, which are balanced yearly. The banks make no charge for keeping these accounts, but are supposed to be remunerated by the note circulation connected with the operations upon them. No overdrafts are allowed as in England. The amount of deposits in the Scottish banks is estimated at £25,000,000, nearly one-half consisting of sums not exceeding £200.

2. Cash-credit Accounts, the nature of which has been already explained, form a characteristic feature in the Scottish system, into which they were introduced by the Royal Bank in the year 1729. The sureties, commonly two in number, are bound jointly and individually with the principal, for the balance which shall ultimately arise, including all his liabilities to the amount of the bond. These credits are also granted on the security of real property, and occasionally, under certain restrictions, of the bank-stock. The interest charged on the current balances is commonly the same as the market-rate of discount on bills; occasionally it is one-half per cent. higher; but no commission is ever charged, the banks looking, as in the case of deposit-accounts, to the note circulation arising out of the operations on the accounts, as their remuneration for the trouble of keeping them. On this ground, cash-credits are not allowed to continue as dead loans: unless frequently operated upon, they are withdrawn. The number of these accounts at present in Scotland is estimated at 15,000, and the total amount of the bonds, £7,500,000, nearly two-thirds of

which are supposed to be drawn out. The bonds are rarely for sums exceeding £5000, or below £100; their average amount is about £500.

3. Bills are discounted at a rate varying in general from 4 to 5 per cent., and a commission is seldom charged. The practice in Scotland, with regard to bills, differs from that of England, in respect that comparatively few are made payable in London; and they are never credited by the bank to parties keeping accounts at stated periods half yearly, as common in that country.

4. The issue of notes is intimately connected with all the operations of the Scottish banks, and by the profits derived from it, they are enabled to transact business, particularly as regards deposits and cash-credits, on a footing highly advantageous to the public. The notes issued at present are for sums of £1, £5, £10, £20, and £100; and, with the exception of silver and copper coins, they compose almost the entire circulation. They are convertible at the head offices into gold, or notes of the Bank of England. The amount in circulation varies, being greatest at the money terms; but, on an average, is nearly £3,250,000, about one-half of which consists of £1 notes.

5. The Scottish banks also negotiate bills on all parts of the United Kingdom, and on many places abroad-buy and sell for their customers stock in the public funds-draw the dividends thereon-and effect remittances from one part of the kingdom to another, by means of letters of credit or bills; the par date for those from Edinburgh or Glasgow on London being 20 days. They likewise facilitate remittances to many other countries, by means of bills drawn at a certain date on their agents in London; which bills, after being sent abroad, are again readily purchased for remittances to Britain. This branch of business has greatly increased since the opening of the trade to India and China. "We perceive," says the author of the Commerce, Money, and Banking of India, "that in the Calcutta price currents the rates of Scotch bank bills are regularly quoted. We have one of these bills now before us of the Royal Bank for £500, with no less than fourteen indorsements, and which had travelled over all India."

6. An organized system of exchanges has been long rigorously acted upon by the whole of the Scottish banks, under which all their mutual claims arising out of the possession of notes, drafts, or cheques, are settled at short intervals. Among provincial banks or branches, the exchange is adjusted weekly, and the balance liquidated by a draft payable on demand at Edinburgh, where the system is concentrated, and where all the banks are represented either by agents or their head offices. In Edinburgh, the exchanges are adjusted twice a-week, and the balances paid in Exchequer bills, 400 of which, each of the value of £1000, are kept by the banks in proportions corresponding to the estimated amount of their circulation, including that of the provincial establishments which they represent. These bills are applied to no other use, each bearing the distinguishing mark of “ Edinburgh Exchange Bill," and any bank holding more than its quota is obliged to sell at par to another requiring bills; the price of such bills being paid by a draft on London, at five days' date, and the current interest, at Exchequer rate, settled in cash. All sums under £1000 are paid in Bank of England notes or gold. The balance receivable or payable by a bank depends upon the nature and amount of its business, and the exchange is said to be favourable when a balance is receivable, and unfavourable when the contrary. In general, the tendency of deposits, lodgements on current-accounts or for the purpose of remittance, and in short of all receipts, is to render the exchange favourable; and of loans, discounts (more particularly of bills not payable in the place), the payment of drafts, and of all advances, is to render it unfavourable; while the increase or decrease of these operations at particular times is productive of corresponding fluctuations.

The characteristics of the Scottish system of banking, it will be thus seen, are freedom, economy, and security. No monopoly is enjoyed by any one bank to the prejudice of others, and the money trade, like every other, is open to all who choose to engage in it. The currency employed is of the cheapest kind; and the joint effect of the deposit and cash-credit system is to prevent any part of the money capital of the country from remaining unproductive. The security of the whole is generally provided by numerous bodies of partners, large paid-up capital, and the system of exchanges, the practical operation of which is to drive from the field any establishment extending its business in a manner disproportioned to its resources. In the case of the celebrated Ayr Bank, of the East Lothian Bank, and of a few others, heavy losses were sustained by the partners; but the only banks of issue by which the public have sustained losses, since the introduction of banking into Scotland in 1695, are the Stirling Merchant, and Falkirk Union Banks, two small concerns, the aggregate amount of whose deficiencies did not exceed £36,344.

The whole of these banks issue notes, and all are joint-stock companies, except Nos. 4, 15, 16, 17, 21. Two other joint-stock banks are at this date (August 1840) projected-the Greenock Union Banking Company, and the Glasgow Joint-Stock Banking Company. Messrs A. Allan & Co., Edinburgh, are now the only private bankers who do not issue notes.

VII. BANKS IN IRELAND.-The introduction of banking into Ireland took place at a later period than in the two other parts of the kingdom; and its history may be termed a bad epitome of that of England, the same faults having been committed, and the evil arising from them having been much more conspicuous. The Bank of Ireland, which was incorporated in 1782, with a capital of £600,000 Irish, was invested with privileges similar to those of the Bank of England, and its charter contained unfortunately a clause that "no other bank issuing notes should consist of more than six partners." This restriction was inserted in order to give it a monopoly of the circulation; but the effect, as in England, has been to lead to the formation of country banks with inadequate resources. The evils resulting from such banks have been already described in the case of England; but in Ireland they were much more serious, from the less commercial habits of the people; and of fifty country banks established in 1804, no fewer than forty stopped payment of these, ten failed in one year, namely, 1820, all in the southern part of the island.

The Bank of Ireland was placed in nearly the same relation to the State as the Bank of England. It advanced the greater part of its capital to government; and was intrusted with the management of the Irish department of the national debt. The exemption from paying in cash, granted to the latter establishment in 1797, was extended in the same year to the former, and led to a great increase in its circulation, which, from little more than £500,000 in 1796, was increased by 1815 to £3,000,000. A serious depreciation of the notes of the bank arose in consequence; and the silver currency of the country, though generally in a debased state, became more valuable in the form of bullion, and was all melted down. The community being, in consequence, exposed to the greatest inconvenience, the place of the coins was supplied in Dublin and other parts by counterfeits, and in several districts by a paper currency issued for sums gradually decreasing from 6s. to 6d., and even 3d. It was estimated that about 1804 there were dispersed throughout Ireland 295 issuers of this paper money, chiefly consisting of a motley body of shopkeepers, merchants, and petty dealers. The forgeries, frauds, and general inconvenience which resulted from this exceptionable currency led at length to its suppression by law; and the wants of the trade were supplied by the issue of stamped dollars by the Bank.

The charter of the Bank of Ireland was successively renewed, and its capital increased, until 1821, when, on the renewal of the charter for seventeen years (1 and 2 Geo. IV. c. 72), the capital was raised to £3,000,000 Irish, of which £2,850,000 Irish, or £2,630,769:4:8 sterling, were deposited with government,-namely, £1,615,384: 12:4 at 4 per cent., and £1,015,384: 12:4 at 5 per cent. interest. The yearly dividends of the Bank have been at no time less than 5 per cent., excepting in 1783-4, when they were 5, and in 1792-3, when they were 23 per cent. From 1800 to 1814, however, they were 7, 74, and 7; from 1814 to 1829, excepting two years, they were 10 per cent. ; and since 1829 the rates have been 9, 84, and 8 per cent. Besides these dividends, the proprietors, at different times since 1793, have received bonuses amounting to no less than £665,000 Irish.

The only benefits ever granted by the Bank to the public, in consideration of its privileges, were a payment of £60,000 Irish in 1791, and, since 1808, the management of the Irish department of the national debt free of charge. The deposit with

government of £2,850,000 Irish at the high rates of 4 and 5 per cent. cannot be viewed as any advantage to the latter. On the other hand, it ought to be remarked, that notwithstanding the vicious state of country banking in Ireland in consequence of the Bank's monopoly, no attempt was made by them to establish branches until 1825, when incited by the rivalry of the Provincial Bank. Since the expiry of the charter in 1838, special acts have been passed continuing it from year to year, until after the Report of the sitting Committee of the House of Commons, when the subject of its renewal will be discussed by Parliament, and when it is deemed probable that it will be placed nearly on a footing with those granted to the chartered companies in Scotland.

In the Appendix to the late Report (1840) of the Committee of the House of Commons on Banks of Issue, a weekly statement is given of the liabilities and assets of the Bank of Ireland from July 1832 to March 1840. The following is the account for the week ending 28th March 1840 :—

On the renewal of the Bank's charter in 1821, an arrangement was made by which joint-stock banks were allowed to be established at a distance of fifty Irish miles from Dublin; but this arrangement remained inoperative until several vexatious restrictions annexed to it were repealed by an act in 1824. This relief was followed by the institution of the Northern Banking Company at Belfast, the Provincial Bank, and several others.

The statutory regulations of the Irish joint-stock banks are principally embodied in the 6th Geo. IV. c. 42, the enactments of which are similar to those of the 6th Geo. IV. c. 46, already quoted in reference to England. In the former, however, the period within which the annual returns of managers, branches, and partners, are required to be made, extends from the 25th March in any year, to the same date in the year following.

The Bank of Ireland, and all the joint-stock banks, excepting the Hibernian and Royal Banks, issue notes for £1 and upwards; and their total circulation, according to the Bank Report for 1840, fluctuates from about £5,500,000 to £6,500,000. The Bank of Ireland, Hibernian Bank, and Royal Bank, receive deposits and discount bills; but the first does not allow interest, and not one of the three grants cash-credits. The other joint-stock banks conduct business on the Scottish system, or a modification of it. Bills on London are drawn at 21 days' date in exchange for cash, and letters of credit are granted for a premium of per cent.

BANKING COMPANIES in Ireland, with their advanced Capital, according to Returns to Parliament in 1837, and the Numbers of their Partners and Branches, according to Returns in 1839.

The Hibernian Joint-Stock Loan Company was instituted chiefly by Roman Catholic gentlemen,

Exclusive of branch partners.

in opposition to the Bank of Ireland in Dublin. It cannot, under the existing law, issue notes or establish branches. The Royal Bank is subject to the same restrictions.

The Provincial Bank is managed by a board in London, the shareholders being principally resident in England. It carries on business in most of the principal towns of Ireland. The management of each branch bank, subject to the control of the directors, is vested in an agent, with a committee of advice, consisting of two or more gentlemen residing in the district, each of whom must hold at least ten shares.

The National Bank consists also of a board in London, connected with branch or local banks throughout the principal towns in Ireland; but its principle of operation is different from that of the Provincial Bank. The capital of each branch is subscribed equally by the London company, and by a body of local shareholders, and profits are divided in the same proportion. The supreme control is vested in the London board; but it is provided "that each local bank shall be managed by a board of local directors, elected by the local shareholders, subject to the approbation of the directors in London."* The National Banks established on January 5, 1839, with the number of partners attached to each were as follows:-Limerick, 684; Clonmel, 646; Carrick-on-Suir, 571; Waterford, 618; Wexford and Enniscorthy, 589; Tipperary, 620; Tralee, 609; Cork, 530; Kilkenny, 546.

There are few private banks in Ireland.

The currency of Ireland was assimilated to that of Britain from and after January 5, 1826, by the act 6 Geo. IV. c. 79. The proportion of the late Irish currency to sterling was as 13 to 12, or £108:6:8 Irish = £100 sterling.

An account of the principles which regulate the value of bank paper, and a fuller explanation of the rules which govern its circulation in the United Kingdom, are given in the article MONEY, under which head are likewise considered the improvements or alterations in the system of the United Kingdom, suggested in the Reports made to the House of Commons by the Select Committee on Joint-stock Banks, and Banks of Issue, first appointed in 1836 on the motion of Mr Clay.

Principal Works on Banking, &c. :-Adam Smith's Wealth of Nations (Mr M'Culloch's edition); Thornton on the Paper Credit of Great Britain; Report of the Bullion Committee of the House of Commons, 1810; Blake on the Course of Exchange; Tooke on Prices; G. R. Porter's Progress of the Nation, sections III. and IV.; Sir H. Parnell's Historical Sketch of the Bank of England; Sir H. Parnell's Observations on Paper Money, Banking, &c.; J. W. Gilbart's Practical Treatise on Banking; J. W. Gilbart's History and Principles of Banking; Ricardo's Plan for the Establishment of a National Bank, 1824 ; Reports of the Parliamentary Committees on Scottish Banks, &c. in 1826; Report of the Committee of the House of Commons on the Charter of the Bank of England, 1832; Reports by the Committees of the House of Commons on Joint-Stock Banks, and Banks of Issue, in 1836, 1837, and 1840; and Pamphlets by Messrs Samuel Jones Loyd, J. Horsley Palmer, W. Clay, and R.Torrens. See BANKS. S BANKS (LOAN) are institutions formed for the purpose of advancing money upon articles of merchandise. The charters granted to the Bank of England, Bank of Scotland, and Royal Bank of Scotland, authorize them to advance money in this way; but in the present article it is intended to treat only of those loan banks which originated in motives of charity. Institutions of this kind are sometimes called Montes Pietatis; the term mont or mount being at an early period applied to any pecuniary fund. They were first established in the fifteenth century, for the purpose of checking the extortions of usurers by lending money gratuitously to the poor upon pledges: they were originally supported by voluntary contributions, but as these were found insufficient, it became necessary to charge interest for the loans. A bank of this kind was formed at Perugia in 1464; another at Rome in 1539; and one at Naples, which was considered the greatest in Europe, in the following year. The present Mont de Pieté at Paris was established in 1777, and so largely has the public taken advantage of it, that it has been known to have in its possession forty casks filled with gold watches.

Banks of this kind are also called "Lombards," from the name of the original bankers or money-lenders. One of these was established in Russia in 1772, and the profit derived from it was given to the Foundling Hospital of St Petersburg.

In the United Kingdom, the business of making advances to the poor is committed to PAWNBROKERS and LOAN SOCIETIES.

BANKS FOR SAVINGS are institutions for the deposit of savings from the earnings of the poorer classes. They were established on a small scale in a few country parishes about the beginning of the present century; but it was not until after the formation of the Edinburgh Savings Bank by Mr Forbes (now Lord

This plan is understood to have been lately changed for that of the Provincial Bank, except at one or two of the branches.