Imágenes de páginas
PDF
EPUB

and interest is charged or credited upon the daily | reduced to the miserable expedient of sending up balance, as the case may be. From the facility the bills they had discounted in Glasgow to be rewhich these cash-credits give to all the small discounted in London; and when this resource transactions of the country, and from the oppor- failed them, and the other banks declined to come tunities which they afford to persons who begin forward to their assistance, they had nothing for it business with little or no capital but their charac- but to shut their doors. On the stoppage taking ter, to employ profitably the minutest products of place the affairs of the bank were found to be in a their industry, it cannot be doubted that the most much worse state than any one could have antiimportant advantages are derived to the whole cipated. The losses are estimated at above community. The advantage to the banks who 3,000,000Z., so that, besides the sacrifice of their give these cash-credits arises from the call which paid-up capital of 1,500,000Z., the shareholders they continually produce for the issue of their have had to advance a farther sum of more than paper, and from the opportunity which they afford that amount to meet the demands upon them. No for the profitable employment of part of their such gigantic failure ever occurred in Scotland. deposits. The banks are indeed so sensible that, The holders of notes and deposit-receipts will be in order to make this part of the business advan-paid in full. But of the 1,200 or 1,300 individuals tageous and secure, it is necessary that their cash-who held shares in the bank, a large proportion have credits should (as they express it) be frequently been nearly, and many entirely, ruined. It is difoperated upon, that they refuse to continue them ficult, indeed, to imagine the distress and misery unless this implied condition be fulfilled. The of which this catastrophe has been productive. total amount of the cash-credits is stated by one witness to be 5,000,000Z., of which the average amount advanced by the banks may be one-third.' The expense of a bond for a cash-credit of 5004. is 12s. 6d. stamp duty, and a charge of from 5s. to 10s. 6d. per cent. for preparing it.

Stability of the Scotch Banks.-There have been, until lately, comparatively few failures among the Scotch banks. In 1793 and 1825, when so many of the English banks were swept off, there was not a single establishment in Scotland that gave way. This superior solidity appears to have been owing to various causes, partly to the banks having, for the most part, large bodies of partners, who, being conjointly and individually bound for the debts of the companies to which they belong, go far to render their ultimate security all but unquestionable; and partly to the facility afforded by the law of Scotland, of attaching a debtor's property, whether it consist of land or moveables, and making it available for the payment of his debts. But, on the whole, we are inclined to think that the long familiarity of the inhabitants with banks and paper money, and the less risk that has attended the business of banking in Scotland, have been the principal causes of the greater stability of the Scotch banks. Latterly, however, owing to the rapid growth of Glasgow, Dundee, and other commercial towns, the risk attending banking in Scotland has materially increased. And while hazard has been augmenting on the one hand, there appears, on the other, to have been a still more rapid decrease of that cautious policy that was supposed to be a characteristic of Scotch bankers. In the crisis of 1857 two of the principal Scotch banks, the head-quarters of which were in Glasgow, were compelled to stop payments. They had very large capitals, the Western Bank 1,500,000, and the City of Glasgow Bank 1,000,0007., with a great many branches, large amounts of deposits, and very numerous and wealthy proprietary bodies. Had their management displayed anything like ordinary skill and prudence, they might have gone triumphantly through a far more serious trial, But the management of the Western Bank was characterised by the most marvellous folly and recklessness; that of the City of Glasgow Bank, though in many respects blameworthy, has been, as compared with that of the Western Bank, prudent and skilful. It has recommenced business; and it is to be hoped that its managers will profit by the lesson they have received. Having advanced immense sums to a few firms that never were entitled to any considerable credit, the Western Bank was so crippled that, for a lengthened period before its stoppage, the directors were

The ruin in which the bank has been involved did not come suddenly upon it. On the contrary, it was accumulating for years. And yet the directors took no steps, or none that were efficient, to arrest the progress of the evil; nor did they apprise their contiding constituents of the perilous condition into which the bank had got. Concealment was practised to the very last moment, till the concern was irretrievably sunk in the abyss of bankruptcy. It is much to be wished that directors who have so acted were really responsible for their conduct. No charge of corruption is brought against them; but their inattention to, and neglect of, the important interests committed to their charge, has been wholly inexcusable. They were bound, on undertaking the office of directors, to bestow unremitting care and diligence upon the performance of the duties which it imposed on them. They might neglect their own business; but they could not, without a flagrant breach of trust, neglect the duties they had undertaken to discharge on account of others. This, however, is precisely what they have done. They appear to have selected the most reckless and incompetent managers, and then to have given them carte blanche. Whatever such conduct may be in law, it is morally and politically in the highest degree culpable. Hundreds have been sent to the antipodes and the treadmill for offences that were comparatively innocuous. No doubt, the grand source of mismanagement in banks and other associations is to be found in the apathy of the shareholders, in the blind and often undeserved confidence they place in those who are, no matter how, at the head of their concerns. If those who may be ruined by the proceedings of their own officers and servants will not look after them, it were idle to attempt to throw such a duty upon others.

In a public point of view, the stoppage of the Glasgow banks was productive of the very worst results. By creating a panic, and occasioning a heavy internal demand for gold, it may indeed be said to have been the main cause of the suspension of the Act of 1844.

SEC. VIII-BANKING IN IRELAND. Banking in Ireland. In no country, perhaps,' says Sir Henry Parnell, has the issuing of papermoney been carried to such an injurious excess as in Ireland. A national bank was established in 1783, with similar privileges to those of the Bank of England, in respect to the restriction of more than six partners in a bank; and the injury that Ireland has sustained from the repeated failure of banks may be mainly attributed to this defective

regulation. Had the trade of banking been left as free in Ireland as in Scotland, the want of paper-money that would have arisen with the progress of trade would in all probability have been supplied by joint-stock companies, supported with large capitals, and governed by wise and effectual rules.

In 1797, when the Bank of England suspended its payments, the same privilege was extended to Ireland; and after this period the issues of the Bank of Ireland were rapidly increased. In 1797 the amount of the notes of the Bank of Ireland in circulation was 621,9177; in 1801, 2,266,4714; and in 1814, 2,986,999.

These increased issues led to corresponding increased issues by the private banks, of which the number was fifty in 1804. The consequence of this increase of paper was its great depreciation; the price of bullion and guineas arose to 10 per cent, above the Mint price; and the exchange with London became as high as 18 per cent., the par being 8. This unfavourable exchange was afterwards corrected, not by any reduction in the issues of the Bank of Ireland, but by the depreciation of the British currency in the year 1810, when the exchange between London and Dublin settled again at about par. [EXCHANGE.]

The loss that Ireland has sustained by the failure of banks may be described in a few words. It appears by the Report of the Committee on Irish Exchanges in 1804, that there were, at that time, in Ireland fifty registered banks. Since that year a great many more have been established, but the whole have failed, one after the other, involving the country from time to time in immense distress, with the following exceptions: First, a few that withdrew from business; secondly, four banks in Dublin; thirdly, three at Belfast; and, lastly, one at Mallow. These eight banks, with the new Provincial Bank and the Bank of Ireland, are the only banks now (1827) existing in Ireland.

In 1821, in consequence of eleven banks having failed nearly at the same time, in the preceding year, in the south of Ireland, Government succeeded in making an arrangement with the Bank of Ireland, by which joint-stock companies were allowed to be established at a distance of fifty miles (Irish) from Dublin, and the bank was permitted to increase its capital from 2,500,000l. to 3,000,000% sterling. The Act 1 & 2 Geo. IV. c. 72 was founded on this agreement. But ministers having omitted to repeal in this Act various restrictions on the trade of banking that had been imposed by 33 Geo. II. c. 14, no new company was formed. In 1824 a party of merchants of Belfast, wishing to establish a joint-stock com

pany, petitioned Parliament for the repeal of this Act of Geo. II.; and an Act was accordingly passed in that session, repealing some of its most objectionable restrictions. (5 Geo. IV. c. 73.)

In consequence of this Act, the Northern Bank of Belfast was converted into a joint-stock company, with a (nominal) capital of 500,000Z., and commenced business on the 1st of January, 1825. But the restrictions of 33 Geo. II., and certain provisions contained in the Acts 1 & 2 Geo. III. and 5 Geo. IV., obstructed its progress, and they found it necessary to apply to Government to remove them; and a bill was accordingly introduced, which would have repealed all the obnoxious clauses of the 33 Geo. II., had it not been so altered in the committee as to leave several of them in force. In 1825 the Provincial Bank of Ireland commenced business with a (nominal) capital of 2,000,000l.; and the Bank of Ireland has of late established branches in all the principal towns.' (Observations on Paper-Money &c. by Sir Henry Parnell, p. 171.)

Since Sir Henry Parnell published the pamphlet from which we have taken the foregoing extract, several joint-stock banking companies have been founded in Ireland. The Provincial Bank, to which Sir Henry alludes, has a paid-up capital of 540,000l., and has been well and profitably managed. But others have been less fortunate. The Agricultural and Commercial Bank of Ireland, established in 1834, with 2,170 partners, a paid-up capital of 352,7901, and many branches, stopped payment during the pressure in November 1836, and by doing so involved many persons in great distress. It appears to have been extremely ill-managed. The auditors appointed to examine into its affairs reported that 'Its book-keeping has been found to be so faulty, that we are convinced no accurate balance-sheet could at any time have been constructed.' And they significantly added, the personal accounts at the head office require a diligent and searching revision.'

The Tipperary Joint-Stock Bank, which was established in 1839, and stopped payments in 1855, appears to have been little, if at all, better than a mere swindling engine. Luckily it did not issue notes; and the sphere of its operations was not very extensive. But, so far as its influence went, nothing could be worse, being ruinous alike to the majority of its partners and the public.

The existing Irish joint-stock banks, amounting to eight, have been all established between 1824 and 1864. We borrow principally from Thom's Irish Almanac, the most valuable publication of its class, the following details with respect to the Irish banks in 1867:

Account of the Joint-Stock Banks existing in Ireland in 1867; their Branches, fixed Issues &c.

[blocks in formation]

offices till nine P. By 27 & 28 Vict. c. 7 the | to great fluctuations; and it was chiefly to remedy notary is not constrained to keep his office open after six P.M., and every note or bill, payment of which is not presented upon this hour, is held to be dishonoured.

By 27 & 28 Vict. c. 20 so much of 8 & 9 Vict. c. 37 as prohibits the negotiation of bills of exchange and promissory notes below 5l. is repeated for the space of two years.

By c. 86 the Treasury may compound with bankers in Ireland for the stamp duty on bank post bills for a period of three years.

By 28 & 29 Vict. c. 16 the interest payable to the governor and company of the Bank of Ireland in respect of 2,630,7691. 4s. 8d., due to them by the public, is fixed at 3 per cent. The payment in respect of the management of the public debt is 450l. per million, if the debt be under 30,000,000Z.; 3007. per million, when between 30,000,000l. and 40,000.000l.; and if above 40,000,000l., then 1507. per million for each additional million.

SEC. IX.-BANKS OF VENICE, AMSTERDAM &c. It would far exceed our limits to enter into any detailed statements with respect to the banks and banking systems of foreign countries; we shall therefore confine ourselves to a brief notice of such banks as have been most celebrated, or are at present of the greatest importance.

this inconvenience, and to fix the value or par of the current money of the country, that the merchants of Amsterdam established a 'bank,' on the model of that of Venice. Its first capital was formed of Spanish ducats or ducatoons, a silver coin which Spain had struck in the war with Holland, and with which the tide of commerce had enriched the country it was formed to overthrow. The bank afterwards accepted the coins of all countries, worn or new, at their intrinsic value, and made its own bank-money payable in standard coin of the country, of full weight, deducting a 'brassage' for the expense of coinage, and giving a credit on its books, or bank-money,' for the deposits.

[ocr errors]

The Bank of Amsterdam professed not to lend out any part of the specie entrusted to its keeping, but to retain in its coffers all that was inscribed on its books. In 1672, when Louis XIV. penetrated to Utrecht, almost every one who had an account with the bank demanded his deposit, and could exist as to the fidelity of the administrathese were paid off so readily that no suspicion tion. Many of the coins then brought forth bore marks of the conflagration which happened at the Hôtel de Ville, soon after the establishment of the bank. This good faith was maintained till about the middle of last century, when the managers secretly lent part of their bullion to the East India Company and Government. usual oaths of office' were taken by the magis tracy of a religious community that all was safe; and the good people of Holland believed, as an article of their creed, that every florin which circulated as bank-money had its metallic constituent in the treasury of the bank, sealed up and secured by oaths, honesty, and good policy. This blind confidence was dissipated in December 1790, by a declaration that the bank would retain 10 per cent. of all deposits, and would return none of a less amount than 2,500 florins.

The

Bank of Venice.-The Bank of Venice was the most ancient bank in Europe. Historians inform us that the republic being hard pressed for money, was obliged, upon three different occasions, in 1156, 1480, and 1510, to levy forced contributions upon the citizens, giving them in return perpetual annuities at certain rates per cent. The annuities on the forced loan of 1480 were to be suspended during periods of war. The annuities due under the forced loan of 1156 were, however, finally extinguished in the sixteenth century. And the offices for the payment of the annuities due under the other two loans having been consolidated, eventually became the Bank of Venice. (Cleirac, Du Négoce, de la Banque &c.-Bordeaux, 1656, pp. 112-117. a scarce and valuable volume.) This might be effected as follows: The interest on the loan to Government being paid punctually, every claim registered in the books of the office would be considered as a productive capital; and these claims, or the right of receiving the annuity accruing thereon, must soon have been transferred, by demise or cession, from one person to another. This practice would naturally suggest to holders of stock the simple and easy method of discharging This epoch marked the fall of an institution their mutual debts by transfers on the office books, which had long enjoyed an unlimited credit, and and as soon as they became sensible of the advan-had rendered the greatest services. The amount tages to be derived from this method of accounting, of treasure in the vaults of the bank, in 1775, bank-money was invented. was estimated by Mr. Hope at 33,000,000 florins. (Storch, Cours d'Economie Politique, tom. iv. p. 102.)

The Bank of Venice was essentially a deposit bank. Though established without a capital, its bills bore at all times an agio or premium above the current money of the republic. The invasion of the French, in 1797, occasioned the ruin of this establishment.

[ocr errors]

Even this was submitted to and forgiven. But four years afterwards, on the invasion of the French, the bank was obliged to declare that it had advanced to the states of Holland and West Friesland, and the East India Company, more than 10,500,000 florins, which sum they were, of course, unable to make up to their depositors, to whom, however they assigned their claims on the states and the company. Bank-money, which previously bore an agio of 5 per cent., immediately fell to 16 per cent. below current money.

Bank of Hamburg.-The Bank of Hamburg was established in 1619, on the model of that of Amsterdam. It is purely a deposit bank for the transfer of sums from the account of one indiviBank of Amsterdam.-The Bank of Amsterdam dual to that of another. It receives no deposits was founded in 1609, on strictly commercial prin- in coin, but only in bullion of a certain degree of ciples and views, and not to afford any assistance, fineness. Down to 1845 it charged itself with or to commix with the finances of the state. the bullion at the rate of 442 schillings the mark, Amsterdam was then the great entrepôt of the and issued it at the rate of 444 schillings, being a commerce of the world, and, of course, the coins of charge of four-ninths, or nearly one-half per cent., all Europe passed current in it. Many of them, for its retention; but since that date it receives however, were so worn and defaced as to reduce and issues bullion at the same rate, charging one their general average value to about 9 per cent. less per mille for its expenses. It advances money on than their Mint value; and, in consequence, the jewels to three-fourths of their value. The city new coins were immediately melted down and ex-is answerable for all pledges deposited with the ported. The currency of the city was thus exposed bank: they may be sold by auction if they re

main one year and six weeks without any interest | ferent parts of the country. This, however, being paid. If the value be not claimed within might have been effected by the mere stoppage three years, it is forfeited to the poor. This of the issues of the departmental banks, without bank is universally admitted to be very well consolidating them with the Bank of France. managed. The latter measure is one of which the policy is very questionable; and there are, as already seen, good grounds for thinking that the banking business of the departments would have been more likely to be well conducted by local associations than by branches of the Bank of France.

SEC. X.-THE BANK OF FRANCE, which is second only in magnitude and importance to the Bank of England, was originally founded in 1800, but was not placed on a solid and well-defined basis till 1806. Her capital, which was originally fixed at 45,000,000 fr., was raised in the last mentioned year to 90,000,000 fr., divided into 90,000 shares, or actions, of 1,000 fr. each. Of these shares, 67,900 have passed into the hands of the public; the remaining 22,100, having been purchased up by the bank out of her surplus profits, were subsequently cancelled. Hence her capital amounted, down to 1848, to 67,900,000 fr. (2,716,0007.), with a reserve fund, first of 10,000,000 fr., and more recently of 12,980,750 fr. Since 1806 the bank has enjoyed the privilege of being the only institution in Paris entitled to issue notes payable on demand; and, as will be afterwards seen, she is now the only authorised issuer of such paper in France. Her charter and exclusive privileges have been prolonged and varied by laws passed at different periods; according to existing arrangements they are not terminable till 1897.

The bank has established, at different periods between 1817 and 1856, offices or branches (succursales) in different parts of the country. They are managed nearly in the same way as the parent establishment; but their operations have been on a comparatively small scale. These are exclusive of the departmental banks, united, as will be immediately seen, to the bank in 1848. Notwithstanding the skill and caution with which her affairs have generally been conducted, the Revolution of 1848 brought the bank into a situation of extreme danger. She had to make large advances to the provisional Government and the city of Paris. And these circumstances, combined with the distrust that was universally prevalent, occasioned so severe a drain upon her for gold, that, to prevent the total exhaustion of her coffers, she was authorised, by a decree of March 16, 1848, to suspend cash payments, her notes being at the same time made legal tender. But to prevent the abuse that might otherwise have taken place under the suspension, the maximum amount of her issues was fixed at 350 millions. She was then also authorised to reduce the value of her notes from 500 fr. to 200 and 100 fr.

Previously to 1848, joint-stock banks, on the model of that of Paris, and issuing notes, had been established in Lyons, Marseilles, Bordeaux, Rouen, and other large cities. And it was then determined that these banks should be incorporated with the Bank of France, and made branches of the latter. This was effected by decrees issued on April 27 and May 2, 1848, by which the shareholders of the banks referred to (nine in number) were allowed, for every 1,000 fr. nominal value of their shares, a share of 1,000 fr. nominal value of the stock of the Bank of France. And, in consequence of this measure, 23,351 new shares, representing a capital of 23,351,000 fr., were added to the stock of the Bank of France, making the latter consist of 91,250,000 fr., divided into 91,250 shares. In 1851 the bank resumed, and has since continued, specie payments.

Owing to the peculiar circumstances of the last few years, occasioned partly by the war with Russia, but more by the rage for speculation and the drain for silver to the East, the Bank of France has been exposed to considerable difficulties. And in the view of strengthening her position, and also, it may be presumed, of providing a loan for Government, a law has been recently passed (June 9, 1857), by which the capital of the bank has been doubled. Previously to this law, her capital amounted, as already seen, to 91,250 shares of 1,000 fr. each; whereas it now consists of 182,500 shares of 1,000 fr. each. The new shares were assigned to the existing proprietors at the rate of 1,100 fr. per share, producing a sum total of 100,370,000 fr., of which 100,000,000 fr. have been lent to Government at 3 per cent. Hence the measure, though it has added to the credit and security of the bank, has not made any addition to the means directly at her disposal.

Down to the passing of this law, the bank could not raise the rate of interest on loans and discounts above 6 per cent. But this impolitic restriction is now removed, and the bank may charge any rate of interest which she reckons expedient, except upon advances to Government, the maximum interest on which is limited to 3 per cent. The bank has been farther authorised to issue notes of the value of 50 fr., to make advances on railway shares &c. and the charter has been extended to 1897.

The bank is obliged to open a compte courant for anyone who requires it, and performs services, for those who have such accounts, similar to those performed for their customers by the banks in London. She does not charge any commission on current accounts, so that her only remuneration arises from the use of the money placed in her hands by the individuals whose payments she makes. It is probable, therefore, as has been alleged, that this part of her business is but little profitable. The bank also discounts bills with three signatures, at variable dates, but not having more than three months or ninety days to run. In 1855 the aggregate amount of these discounts in Paris and the departments amounted to the very large sum of 3,262,000,000 fr., the interest being 5 per cent. till October 18, and afterwards 6 per cent. Besides discounting bills, the bank makes advances on stocks and pledges of various kinds, and undertakes the care of valuable articles, such as plate, jewels, title-deeds &c. at a charge of one-eighth per cent, on the value of the deposit, for every period of six months and under. Nothing can show more clearly the petty retail character of the trade of Paris, and generally of France, than the smallness of the value of the bills discounted by the bank. Thus of 963,000 bills discounted in 1847, the average amount was only 55l. 4s., and of these no fewer than 126,000 were for less than 200 fr. (8.), and 470,000 for less than 1,000 frs. (207.), each. (Tooke and Newmarch On Prices, vi. 51.)

The suppression of the local issues of the de- The administration of the bank is vested in a partmental banks was, no doubt, a judicious council of twenty-one members, viz. a governor measure, and was indispensable, indeed, to secure and two sub-governors, nominated by the Emthe equal value of the paper circulation in dif-peror; and fifteen directors and three censors,

nominated by the shareholders. The bank has a large surplus capital or rest. In 1855 and 1856 she divided no less than 200 fr. and 272 fr. profits on each share; but these have much exceeded the dividends in any previous year. In 1848 the dividends only amounted to 75 fr. per share. In

July 1856 the 1,000 fr. share of bank-stock was worth 4,075 fr.; in July 1857 it had sunk to 2,880 fr. Her intimate connection with the Government is decidedly the most objectionable feature in the constitution of the Bank of France.

The following is an Account of the Bank of France for the Five Years ending 1865, stated in English money at 25 francs=11.

[merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][ocr errors][ocr errors][ocr errors][ocr errors][ocr errors][merged small][merged small][merged small][merged small][merged small][merged small][ocr errors][ocr errors][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][ocr errors][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small]
« AnteriorContinuar »