interest to the individuals from whom | The number is at present seventy-four they borrowed, and the receipts which including seven colonial and eight joint they gave for deposits passed from hand stock banks. There are three private to hand in the same manner as Bank-banking-houses still carrying on business notes have since circulated. which were established before the Bank The taking of interest for the use of of England. These are Child's, estamoney was not rendered legal in Eng-blished in 1663; Hoare's, in 1680; and land until 1546, when the rate that could Snow's, in 1685. The London bankers be demanded was fixed at 10 per cent. continued to issue notes for some time In 1624 the legal rate was reduced to 8 after the closing of the Exchequer, but per cent., and a further reduction to 6 they have long since ceased to do so, per cent. took place in 1651. At this acting solely as depositaries of money, rate it still remains in Ireland, but was discounters of bills, and agents for lowered in England to 5 per cent. in bankers established in the country. No 1714, at which it now continues. These restriction has ever existed which prevents limitations have always been productive private banks in London, if they have of evil. Money-lenders by profession not more than six partners, from issuing will always be ready to take advantage their notes payable to bearer; that they of the necessities of borrowers, and being have ceased to do so has arisen from the left without competitors among the more conviction that paper money, issued on conscientious capitalists, demand not only the security of only a small number of a monopoly price for the use of their individuals, could not circulate profitably money, but also a further sum propor- in competition with that of a powerful tioned to the risk and penalties attend-joint-stock association. ing discovery. The Lombard merchants were accustomed to demand 20 per cent. interest, and even more, according to the urgency of the borrower's wants. The merchants of London had been used to deposit their money for security at the Mint in the Tower of London, whence they drew it out as occasion demanded; but in the year 1640 King Charles I. took possession of 200,000 thus lodged, which of course put a stop to that practice. This state of things preceded and most probably led to the extension of the business of the goldsmiths, as just explained. This business soon became very considerable, and was found convenient to the government. In 1672 King Charles II., who then owed 1,328,5267. to the bankers, borrowed at 8 per cent., shut up the Exchequer and for a time refused to pay either principal or interest, thus causing great distress among all classes of people. Yielding to the clamour raised against this dishonesty, the king at length consented to pay 6 per cent. interest, but the principal sum was not discharged until forty years afterwards. The number of private banks in London about 1793 was fifty-six, of which only twenty-four are now in existence. The business of a bank may be classed under the following heads:-1. Discounting bills of exchange. 2. Advancing money on cash credits. 3. Receiving deposits at interest. 4. Keeping current accounts for customers. 5. Issuing notes. 6. Acting as agents for others. Private bankers in London do not make any charge of commission to their customers, and generally grant facilities to them, both by discounting bills and by temporary loans, either with or without security. Even where this kind of accommodation is not required, it is almost a matter of necessity for every merchant or trader carrying on considerable business to have an account with a banker, through whom he makes his payments, and who will take from him the daily trouble of presenting bills and cheques for payment. At various times some banking establishments in London have adopted the principle of allowing interest upon deposits placed in their hands. The practice of most of the joint-stock banks is to allow a moderate interest, depending on the market-value of money, for any sum exceeding 100l., provided that it is not withdrawn by the depositor in less than three months. Some of these banks receive deposits as low as 107.; and others allow a higher rate of interest | of the arrangements of the Clearing on small than on larger sums. It is expressly stipulated by bankers in these cases that the rate of interest on the sum deposited will be liable to fluctuation according to the state of the money-market. The joint-stock banks also allow interest at the rate of one or two per cent. on the smallest balance on current accounts, if the balance has stood for a month; and some of them allow interest on the average daily balance for a month. The profits of London bankers are principally derived from discounting mercantile bills, either for their customers, or, through the intervention of brokers, for other parties. They have great facility as regards the security of this business, from the unreserved confidence which they are accustomed to place in one another as to the credit of their respective customers. house has recently been published by Mr. Tate (The System of the London Bankers' Clearances explained and exemplified'), to which we must refer those who desire something more than a general idea of the system. The Clearing-house is fitted up with desks for each of the present twenty-seven clearing-bankers, whose names, taking the first of each firm, are arranged in alphabetical order as follows, over each desk: Barclay : Curries Mr. Tate says, "The rapidity with which the last charges are required to be entered, and the bustle which is created by their swift distribution through the room, are difficult to be conceived. It is, then, on the point of striking four, and on days of heavy business, that the beauty of the alphabetical arrangement of the clearers' desk is to be seen. the distributors are moving the same way round the room, with no further interference than may arise from the more All The great amount of money transactions daily carried on in London, and which has been estimated at nearly five millions, has led to the invention of a simple and ingenious method for economizing the use of money, which is carried into effect at an establishment set on foot by the private bankers in 1770, called the Clearing-house. The present Clearinghouse is situated in the corner of a court at the back of the Guardian Insurance Office, in Lombard Street. The business was previously conducted in an apart-active pressing upon or outstripping the ment in the banking-house of Messrs. Smith, Payne, and Smiths, and still earlier at the banking-house of Messrs. Barnetts and Co., both in Lombard Street. The cheques and bills of exchange, on the authority of which a great part of the money paid and received by bankers is made, are taken from each of the clearingbankers to the Clearing-house several times in the day, and the cheques and bills drawn on one banker are cancelled by those which he holds on others. The joint-stock banks are excluded from this association of private bankers. Some of the private bankers, from the nature of their business, do not require the aid which these clearances afford, and others are too distant to maintain the necessary rapidity of communication with the Clearing-house. An authentic detail slower of their fellow-assistants. With equal celerity are their last credits entered by the clearers. A minute or two having passed, all the noise has ceased. The deputy-clearers have left with the last charges on their houses; the clearers are silently occupied in casting up the amounts of the accounts in their books, balancing them, and entering the differences in their balance-sheets, until at length announcements begin to be heard of the probable amounts to be received or paid, as a preparation for the final settlement. The four o'clock balances having been entered in the balance-sheet, each clearer goes round to check and mark off his accounts with the rest, with I charge you,' or 'I credit you,' according as each balance is in his favour or against him." T In the Appendix to the Second Report of the Select Committee of the House of Commons on Banks, there is a return of the payments made through the Clearinghouse for the year 1839, and, omitting all sums under 100l., the total was 954,401,600l. The average for each day would consequently be rather more than 3,000,000l. sterling (the actual payments range from 1,500,000l. to 6,250,000l.), while that of the sums actually paid was about 213,000l. It has, however, sometimes happened that a single house has had to pay above half a million of money. The payments through the Clearing house of three bankers, in 1839, ranged from 100,000,000l. to 107,000,000l. each. In 1840, according to a pamphlet on the currency by the late Mr. Leatham, banker, of Wakefield, the returns of the Clearinghouse reached to the enormous sum of 975,500,000l. There were very few country bankers established previous to the American war, but after the conclusion of that contest their numbers increased greatly. In 1793 they were subjected to heavy losses, consequent upon the breaking out of the French war, and twenty-two of them became bankrupt. The passing of the Bank Restriction Act was the signal for the formation of many establishments for banking in the country. In 1809, the first year when bankers were required to take out a licence, the number issued was 702, which gradually rose to 940 in 1814. In 1813-14 the number of licences taken out by country bankers for issuing notes was 733, and the number of partners in these banks was 2234. In 1814 and the two following years, eighty-nine country bankers failed, and their numbers fell off greatly. In each of the years 1825 and 1826 there were about 800 annual licences issued, but their numbers were again reduced by eighty bankruptcies, and in 1832 only 636 licences were demanded. From 1839 to 1843 inclusive the number of bankers gazetted as bankrupts was 82; and the number of banks of issue which failed during the same period was 29. In August, 1844, there were 117 private banks of issue in the United Kingdom; and there were 162 private banks which were not banks of issue. The number of private banks from 1826 to 1842 is given at the end of this section. Country banks in England are all of them banks of deposit and of discount; they act as agents for the remittance of money to and from London, and for effecting payments between different parts of the kingdom. A large number of them are also banks of issue, and their notes are in many cases made payable at some banking-house in London, as well as at the place where they are issued. The new regulations under which the issues of banks of all kinds are placed by 7 & 8 Vict. c. 32, have already been given in the analysis of the act, §§ 10 to 17 inclusive. The First Lord of the Treasury, in his speech of May 20, 1844, adopted them avowedly on the ground that, in periods when the principle of convertibility has been endangered, the country banks were unwilling or incompetent to reduce their issues. 2 A moderate rate of interest, from 2 to per cent., is allowed by country bankers upon deposits which remain with them for any period beyond six months: some make this allowance for shorter periods. Where a depositor has also a drawing account, the balance is struck every six months, and the interest due upon the average is placed to his credit. Upon drawing accounts, a commission, usually of a quarter per cent., is charged on all payments. The country banker, on bis part, pays his London agent for the trouble which he occasions, either by keeping a certain sum of money in his hands without interest, or by allowing a commission on the payments made for his account, or by a fixed annual payment in lieu of the same. The portion of funds in their hands arising from deposits and issues which is not required for discounting bills and making advances in the country, is invested in government or mercantile securities in London, which, in the event of a contraction of deposits or issues, can be made immediately available. The establishment of banks throughout the kingdom has contributed materially to the growth of trade. Without them it would hardly be possible for a manufac turer employing any great number of hands to collect the money required to pay the weekly wages of his people. It is not a valid argument against their utility that occasionally, by the facilities they have afforded, the tendency to overtrading has been encouraged. In 1826 the 7 Geo. IV. c. 6, provided for the gradual withdrawal of small notes from circulation, by prohibiting the future issue of any stamps for that purpose, and declared that their issue should wholly cease on the 5th of April, 1829. It was on the occasion of the introduction of this act that the Bank of England undertook, at the recommendation of government, to establish branches of its own body in different parts of the country. The practical effect of this measure of preventing the circulation of notes below 51. value, has been to lessen, in an important degree, the issues of country bankers. Previously to their suppression, the small notes formed more than one-half the circulation of country banks, whose issues have not, however, been reduced in that proportion, owing to an enlarged amount of 51. notes being taken by the public: the reduction, on the whole, has been estimated at 30 per cent. It is generally acknowledged by country bankers themselves, that the description of notes withdrawn formed by far the most dangerous part of their issues; that in the event of any run or panic, the notes of 17. value were always first brought in for payment, and that, in consequence, the situation of the country banker is now one of much greater security than it was while small notes were issued. The country bank notes in circulation in 1810 amounted to 23,893,8681. In July, 1844, the issues of private banks was 4,624,1797. and of jointstock banks 3,340,3267., being together less than eight millions. In February of the same year there were forty-three provincial bankers which, by an arrangement with the Bank of England, agreed to issue the notes of that establishment exclusively, to the amount of 2,429,000l. Up to 1832 no local circulation existed in the great manufacturing and trading county of Lancashire, where Bank of England notes alone passed from hand to hand, but a great number of payments were adjusted by means of bills of exchange drawn upon or made payable by London houses. Subsequently some of the joint-stock banks of Manchester and Liverpool issued notes. By 3 & 4 Will. IV. c. 83, banks issuing promissory notes were required, for the first time, to make quarterly returns to the Stamp-office of the average amount of notes in circulation; the quarterly average to be founded on the amount in circulation at the end of each week. The 4 & 5 Vict. c. 50, required the returns to be made at the end of every four weeks. The 7 & 8 Vict. c. 32, § 18, requires returns to be made of the notes in circulation on every day in each week; the average for the week; and a like average for every four weeks, and, as will be seen, gives the Commissioners of Stamps the power of inspecting bankers' books. At the time of passing the law for the suppression of small notes in England, provision was made by the legislature in the manner already described, for the establishment of joint-stock banks, which should be banks of issue, at any distance beyond sixty-five miles from London. In consequence of this act above one hundred joint-stock banking companies have been formed in England. About one hundred and thirty-eight private banks have been merged in joint-stock banks. The following table shows the number of joint-stock banks, &c. in the United Kingdom in January, 1839:Branches, No. of Banks. England... 105 Scotland... Ireland.... 18 No. of Partners. &c. 648 32,142 29 Total ..152 Of the 29 Scotch banks, one established by act of parliament, and four by royal charter, are not required to lodge lists o partners. According to some valuable tables in the 'Bankers' Magazine' for August, 1844, the number of joint-stock banks in the United Kingdom at that date was as follows:-England and Wales, 106; Scotland, 20; Ireland, 10; and there were besides 10 joint-stock Colonial banks in London. 1844 4,624,179 3,340,326 The system upon which the business of a joint-stock bank is conducted is the same generally as that pursued by private establishments; but it is, of course, more obligatory upon managers acting for others to adhere rigidly to system, than it is for an individual or a small number of partners without the same degree of responsibility. The disasters which befel several of the oint-stock banks ought long ago to have led to some general measure for placing these institutions on a safe footing. In 1837 there scarcely existed any legisla tive restrictions on the operation of the act 7 Geo. IV. c. 46, permitting the esta blishment of joint-stock banks. A jointstock bank could start into existence, whether for the purpose of deposit or issue, or of both, without any preliminary obligation beyond the payment of a licence-duty and the registration of the names of shareholders at the Stamp Office. A secret committee of the House of Commons, appointed in 1836 to inquire into the operation of the abovementioned act, reported that the law did not require a revision of the deed of settlement by any competent authority; that there was no restriction on the amount of nominal capital, which varied from 100,000l. to 5,000,000l., and in one case an unlimited power was reserved of issuing shares to any extent; that banking operations might be commenced before the whole or any certain amount of shares be subscribed for; that the law did not enforce any rule with respect to the nominal amount of shares, which varied from 51. to 1000l., nor with the amount of paid-up capital before the commencement of business, which varied from 51. to 1057., and that the law was not sufficiently stringent to ensure to the public that the names registered at the Stamp Office were the names of bona fide proprietors, who, having signed the deed of settlement, were responsible to the public. The committee also pointed out that the law did not limit the number of branches, or their distance from the central bank; and that the obligation of making their notes payable at the places of issue was disregarded. By 1 Vict. c. 73, shareholders in jointstock banks were rendered liable only to the extent of their shares, instead of the whole of their property being answerable; but up to the end of the parliamentary session of 1844, the joint-stock bank system laboured under a number of disadvantages, some of which are removed by the act 7 & 8 Vict. c. 113, "to regulate jointstock banks in England." Every new Company is required by this act to present a petition to the Queen in Council, signed by at least seven of the shareholders, praying that letters patent may be granted to them, and specifying very fully the |