to bearer on demand, the transfer from one person to another being accomplished by mere delivery, no indorsement or other formality being required. (See "National Bank Notes.") Paul Leroy-Beaulieu defines a bank note" as a" promise made by a banker to pay a definite sum to bearer at sight." Many financiers claim that there is no essential difference between a "bank check" and a "bank note" for the reason that the depositor is a voluntary creditor of the bank, but his checks do not obtain wide circulation without indorsement; while a bank note finds circulation as a substitute for money among people who have little or no knowledge of the bank by which it was issued. In both cases, however, the check and note represent money and must both be redeemed upon presentation. Bank of Circulation. One which issues bank notes. Also called "bank of issue." Bank of Deposit. It would seem that any banking institution receiving deposits might properly be called a "bank of deposit," but banking men understand an institution of this class to be not a trust company, savings bank, or any such taking "time deposits," or deposits upon which interest is allowed, but banks which receive deposits subject to check, and upon which no interest is allowed. State and national banks are of this latter class. Bank of Discount. other funds largely in bills of exchange, etc. savings banks are not. One which employs its deposits and discounting (see "Discount ") notes, National banks are of this kind, but Bank of England. Known as the "Old Lady of Threadneedle Street." Its corporate name is "The Governor and Company of the Bank of England." Situated in an irregular square opposite the Royal Exchange and residence of the Lord Mayor in London; bounded on every side by the open street, it covers about four acres, all light being secured from interior courts. The largest financial institution in the world. Since the great riot of 1780 a guard of soldiers has been marched into the bank every night for protection. The employees number over 925. The land covered by this building is probably one of the most valuable pieces on the surface of the earth. The original charter was granted in 1694, and its existence is due to one William Paterson,2 a Scotchman. The present 1 Gilbart said in 1834 that " a bank which receives lodgments of money, is called a bank of deposit." 2 Those interested in the granting of this charter used as an argument that "it would rescue the nation out of the hands of extortioners and usurers, lower interest, raise the value of land, revive and establish public charter was granted in 1844. The currency of England today is largely in the hands of this bank. The "Bank of England" probably has greater influence upon the financial concerns of the world than any other institution. Its statements are published weekly, and give the minimum rate of discount at which the Bank will handle first-class paper. The influence of the Directors' Meeting, which takes place on every Thursday, is felt throughout the world. The rate of discount established by the " Bank of England" fixes the rate of interest allowed by all the London jointstock banks on deposits, such interest being generally at the rate of about one and one-half per cent. less than the " Bank of England" rate of discount. This rate of discount also establishes the interest rates which London banks allow on cash balances of foreign correspondents, as well as the rate of interest charged on over-drafts; besides the discount rate in the open market throughout Great Britain. Likewise, it fixes the rate of discount on documentary bills, as to the rebating of interest on account of anticipating repayment. Its influence is felt on the value of all international bills of exchange. It often works as a protection to the gold reserve held by the bank itself, for it often increases the value of money in London, checking exports of gold as well as encouraging imports of the same.1 By it are issued the " Bank of England Notes." It allows no interest on deposits. It is a bank in which all London banks keep their reserves. It receives and disburses the government funds and manages the government debt. The management of the Bank rests in the hands of a Governor, Deputy Governor, and twenty-four Directors, who are elected by the shareholders. It is a private corporation. Although the above is but a brief sketch of the "Bank of England" and the field which it covers, yet it is sufficient to make one comprehend the magnitude of this institution's position in the financial world. credit, extend circulation, consequently improve commerce, facilitate the annual supplies, and connect the people the more closely with the government."Smollett's History of England. This fact was well illustrated by the action of the Bank on Oct. 19, 1906, in raising the discount rate to 6%, it already having previously been raised to 5%. This was on Friday. It was natural to expect any change in the rate to have been made at the regular bank meeting on Thursday. There had been a tremendous drain of gold to America, a large demand from Egypt, and an anticipated demand from Argentina, besides which it was reported that the Bank of Germany was accumulating gold for Russian account. The reserve in the Bank of England had been reduced by gold withdrawals to about £18,000,000, and it was to check further encroachments upon this that the sensational advance referred to was made. This was the highest rate since Friday, Nov. 1, 1890, just before the "Baring Panic," when the rate was advanced to 6%. Bank of England Discount Rate. Each week the "Bank of England" publishes a statement and makes an announcement as to the minimum rate of discount at which it will handle first-class paper. This may be better understood by reading the preceding subject. Bank of England Notes. The promise to pay of the " Bank of England" in the form of " paper money," much the same as our "national bank circulation." The only form of paper money or bank bills in general use in Great Britain, as the issues of other banks are of no great volume. The "Bank of England" has a separate department, called the "Issue Department," where the notes are printed and all the machinery of issuing, redeeming, cancellation, etc., is carried on. "Bank of England notes" are secured to the amount of £11,015,100, by a debt due to it from the government. In that particular there is quite a similarity to our national bank notes secured by a deposit of government bonds. It is allowed to issue £7,434,900 against securities, and against all additional notes issued there must be a deposit of coin or bullion. Although gold alone is used, it is legally permissible to use one-fifth silver. As appeared in the bank's statement of Nov. 9, 1905, the total amount of notes issued was £48,612,645. Bank of England Return. See "Bank of England Statement." Bank of England Statement. An idea of the weekly statement of the Bank of England (for further information upon this subject see "Bank of England ") is given from the following, which is the actual statement as issued Nov. 9, 1905: 1. Notes Issued ISSUE DEPARTMENT £48,612,645 2. Government Debt £11,015,100 7,434,900 No. 1 needs no explanation, as that is simply the bank circulation. No. 2 is the debt due the bank from the government, and against which the bank is allowed to issue circulation. 1 Pratt declares that "The Bank of England discount rate sounds the key-note of the international monetary situation." No. 3. Through the retirement of the banks issuing notes at the time of the Bank Act of 1844, the Bank of England has been able, under the provisions of the Act, to issue new notes against securities to the amount of £4,450,000, which brings its total issue up to £18,450,000. No. 4. In the statement above there is shown an issue of £48,612,645 in notes. If we deduct from this issue the £18,450,000, notes authorized to be issued against the government debt and other securities, we find the amount of notes uncovered- unsecured to be £30,162,645, which is exactly the amount of gold coin and bullion on hand in the Issue Depart ment. No. 5 represents the proprietors' advances in cash to the Government. This is the bank's capital the same as that of any other institution. No. 6. Reserve fund and undivided profits. This is not allowed to fall below £3,000,000, the excess being considered available for dividends. No. 7. Deposits made by the Government, No. 8. Deposits of banks, corporations, firms, and individuals. No. 9. Bills of exchange, etc. No. 10. Government Securities needs no explanation. No. 11. Same may be said of this. No. 12. Bank notes. No. 13. Needs no explanation, other than to say that these, together with the notes, constitute the real reserve of the bank held against deposits, and any changes are watched for with keen interest. Bank of France. Established during 1800 by Napoleon, after he became First Consul, who desired a financial institution that should not only be of service to the Government, but also subservient to it.1 It has one central, or head office, in Paris, but has branches or auxiliary offices in, or is connected with, all the principal cities and towns in the country. The governor and two subgovernors are nominated by the Government, but the general council, consisting of fifteen regents and three censeurs, are chosen by the stockholders, except that three of the regents must be selected from the treasury disbursing agents. The business of discounts and advances at all its offices is transacted at the same rates as in Paris, which regulates interest rates throughout the country. The Bank has never raised its rate of discount over 9% and the fluctuations in its rate have always been less violent and frequent than in the case of the Bank of England. From 1844 to 1900 the rate of discount of the former was altered 111 times, and of the latter, 400 times. The ownership in the Bank of France is represented by shares held by individuals, but is very largely under the control of the Government. It is the only institution in the country which can issue bank notes, which is done under the direction of the regents, who are responsible, and report to the Government. The only security behind the notes is the general assets and credit of the Bank, although, in case of necessity, the Government would sustain the bank with 1 "The Modern Bank," A. K. Fiske. "Bank Rate and the Money Market," R. H. Inglis Palgrave. its credit. These notes are legal tender so long as they are redeemed in specie. The maximum limit of issue has been increased until now it stands at 5,800,000,000 francs.1 Although no special reserve is held, the Bank makes a point of retaining on hand a large amount of bullion and coin. It protects its gold reserve by charging a premium when it is demanded for export. From the fact that checks are still comparatively little used in that country, bank notes and specie are principally employed in making payments. This naturally results in the extensive use of bank notes throughout the country, and calls for a large issue on the part of the Bank of France, which is generally six or seven times the amount of the deposits. The Bank receives deposits of public money, and is, to a great extent, the Government's fiscal agent. Bank of Germany. The Imperial Bank of Germany; commonly called the Reichsbank. The King of Prussia in 1765 founded a State institution entitled The Royal Bank, which continued until 1846, when it underwent a change and became a bank of issue. On the 31st of December, 1875, it was succeeded by the Imperial Bank of Germany. This institution, like the Bank of France, is under governmental control, but its ownership is represented by shares in the hands of individuals. It is situated in Berlin, where it carries on a very large business, but also has branches forming a net work throughout Germany. It receives, holds, and disburses the government funds, discounts bills, both inland and foreign, which is a very large proportion of its business, receives deposits and issues circulation, but is compelled by law to retain in its vaults cash to the amount of one-third of its notes outstanding, which cash must consist of legal tender notes of the Empire, gold bars, or foreign coins of a prescribed weight and fineness. The remainder must be represented by discounted bills. Its notes are not legal tender, but must be paid in gold upon presentation at any of its branches. They have no prior claim upon the bank's assets, but are simply part of the general liabilities. There are three limitations. placed upon the note issue; first, no more than 472,829,000 marks, which is called its "Kontingent," can be issued in excess of what is covered by the cash reserve; second, a 5% per annum tax on any excess above this limit; and, third, the one-third cash holding already mentioned.3 1 Law of February 11, 1906. 2 This sum is subject to further increase, for as a smaller bank of issue in Germany goes out of business its "Kontingent" passes to the Reichsbank, and so increases the latter's limit by whatever the limit was of the bank giving up. 3"Bank Rate and the Money Market in England, France, Germany, Belgium, and Holland, 1844-1900," R. H. Inglis Palgrave. |