Mr. Goschen-continued.

your having the facilities which you possess?All accounts begin by being small ones; but those very accounts grow into large ones, and we value our issue as a means of doing the small transactions of the market which grow into large ones, which form the beginnings of banking; so that it is really of very great additional value to us as a feeder in the long run to our business.

4678. It is in the beginnings of the accounts, through the small transactions of the market as you express it, that you have the advantage?— It is so.

4679. Will you explain how that is?-By being able to cash cheques in the market. Persons holding those cheques bring them to us to be cashed; they take our notes in exchange, and hold a certain amount of our notes in their pockets from week to week, which is exactly the same thing to us as a very small deposit. As the business grows larger, they will bring those notes and pay them in, and open a banking account, and draw cheques.

4680. Cannot they do precisely the same with joint stock banks? No, because they cannot take those cheques to a joint stock bank which does not issue (we are speaking of the distinction between banks of issue and banks of non-issue), and get them cashed without a charge; and the consequence is that they do not go to them for that class of business.

4681. Would not the joint stock banks give them Bank of England notes, or whatever they may hold against that cheque, without charge?No, certainly not; because they would be two or three days out of their money.

4682. Of what class of cheques are you speaking?-One of the instances which I gave was that of a market gardener in our neighbourhood, who would send his goods to Manchester, and would receive a cheque on a Manchester bank by post, in return for those goods, and that cheque he brings to us.

4683. Do you mean cheques upon other places than your own?- Cheques upon other places

than our own.

4684. And you are able to do that without charge, because it only involves putting your own notes in circulation for a certain number of days?--That is so.

4685. Whereas in the other case it would have a distinct effect upon their till ?-Yes, that is the truth.

4686. You do not find, as I understand, that your system of issue stimulates deposits ?—I should not think so.

4687. In the case of the Scotch banks, we have understood that their system has stimulated deposits very much; I understand you rather to demur to the view that the private banks of issue stimulate deposits?-They may stimulate deposits, taking the word "deposits" as meaning current accounts, in the way that I have just explained, but beyond that I cannot see what possible effect they can have in that direction. A note is a form of deposit in fact. It is held by the person holding it, instead of his opening a bank account.

Sir John Lubbock.

4688. It may stimulate deposits by enabling banks to open branches, where branches, where otherwise branches would not pay ?-Certainly.

Mr. Goschen.

4689. Have you any branches? — We have three branches besides our head office.

4690. And through those branches you would get deposits that you would not get if those branches were not there?-The branches are in fact banks in themselves; we have no very small branches.

4691. You are not in such a position that the withdrawal of your issues from you in any way would have any effect in requiring the suppression of branches?-Not as regards my own bank : but I am informed that, for instance, the large bank in Somersetshire, Stuckey's Bank, would have to withdraw a considerable number of branches if they had not their issue.

4692. You would hold that small branches can be kept up in country districts where private bankers have issues, which would not be able to be kept up, or would not be remunerative if those issues were withdrawn ?-Certainly.

4693. And that is on account of the facility of supplying the till with notes without loss of interest?—Yes; and in our own case a great number of shopkeepers who freely exchange cheques, and who are, to some extent, therefore the bankers of the village, would be, to a certain extent, restricted in the same way.

Mr. Hubbard.

4694. I think I understood you to say that country bank notes are practically exchangeable all over England by banks, irrespective of their being connected with the issuing bank itself?No, not exactly that; they are practically, wherever there is a local issue, exchangeable from the fact that the shopkeeper, or whoever it is who exchanges them for the public, can bring them to the market town that he goes to, and get them exchanged without charge, into whatever he likes.

4695. By way of illustration, bank notes issued anywhere in England would be exchanged at Hitchin by the bank with which you are connected, because yours is an issuing bank ?—Yes, any cheque or bank note would be equally exchangeable into our own notes provided that we knew the person, and felt that it was safe.

4696. Do you apply that qualification to the note or to the person?-To the person; we should not have the slightest difficulty in exchanging any bank note at all, I think; but where it is a cheque of course everything depends upon whether the cheque is a good one.

4697. I am not alluding to cheques, but I am simply referring to the matter of bank notes, and I understand you to say that country bank notes wherever issued, whether by a private or by a joint stock issuing bank, would be practically exchangeable at Hitchin if presented to your bank? -Yes, and that would apply equally to Bank of England notes.

4698. Did I correctly understand you to say, that in that respect the country bank notes have an advantage over Bank of England notes, inasmuch as the Bank of England does not at one branch pay its bank notes issued at another branch? The advantage which is given by the local issue over all the other notes lies in this, that wherever there is an issue, that issue can be given for either notes or cheques, whatever they are; and the Bank of England cannot do the same, for the reasons that I have shown.

4709. I THINK you wish to explain two or three answers which you gave upon the last occasion ?—I have been looking through the evidence in type, and there are one or two points upon which I should like to make an explanation. The first is the answer to Question 4644; I must have misapprehended the meaning of that question; it runs thus: "You do not believe that in such districts as the neighbourhood of Portsmouth, or the parts of Northumberland or Lancashire that you have mentioned, small traders have the same advantages of getting a credit, and getting a start in business, that they have in such a neighbourhood as your own"? My answer appears to have been: "The result of my inquiries is decidedly that they have not." I understood that question to refer to the advantages derived to small traders in the cashing of their cheques in the early stages of their business without charge, and not to their obtaining credits or loans. I should not feel that we have any right to say that in other places where there are no issues there is not the same chance of persons getting into business by getting credits or loans.

Chairman.

4710. But you still maintain that in these districts they would have less advantages in the way of getting cheques cashed?—Yes. The next point was the general question involved in the questions of the Right honourable Member for the City of London, Mr. Goschen, upon the distinction between the class of business which is done by the old issuing banks and the class of business which is done by the new larger joint stock banks. I think that there is some little confusion in the questions and answers for want of a clear understanding of the difference between what is meant by a deposit account and a current account; understanding a deposit account to be an account in which money is lodged at interest for safe keeping, and against which cheques are not drawn, and understanding a current account to be an account where money is simply deposited generally, without interest or

Chairman-continued.

with a smaller rate of interest, and against which cheques are drawn; and that distinction being clearly appreciated, then I think the difference between the business of the old banks of issue and the new joint stock banks would be this: that the new joint stock banks have gone into that line of business which is meant by the term "deposits," whereas the old banks of issue have cultivated more largely the business connected with current accounts, and have not thought it right to stimulate so largely the deposit branch of their business. I think that it will be seen that there is a very great difference between a private bank, at any rate, and one of the large joint stock banks with a very large amount of capital, and that it would not be wise for the private banks to try to obtain, by offering large rates of interest, the very large funds which it may, or may not, be justifiable for the joint stock banks with their larger capitals, to ask for.

Mr. Anderson.

4711. You mean that in the event of a panic it would be dangerous for the private banks to be largely in the deposit business?-I mean that the feeling of the private banks with regard to the business of banking is this: that they are the custodians for the convenience of the public of the loose monies, the loose balances of the public, and that they are not places for permanent investment, and that it would not be safe for them to go largely into that branch of business, which practically comes to holding money by way of investment.

Sir John Lubbock.

4712. That opinion, I think, does not rest merely upon any question of difference of capital, but as a general principle; many of the private banks hold the same view ?-I should not like to give an opinion as to how far it is justifiable for the large joint stock banks to do that class of business; but certainly my opinion would be that it would be very unjustifiable for private banks as a class to stimulate at all largely that class of business.

4727. And in such a part of the country as Cumberland, where the transactions with Scotland are more numerous, those considerations would be of great importance, would they not?I think that they would, because they would not only affect those who were allied to the Scotch banks in their business, but they would have a tendency to drive to the Scotch banks those English customers of the English banks, who had transactions with Scotland.

4728. I suppose we may take it, that practically the advantage to the country banker in the form of commission, seldom exceeds, say 2s. 6d. per cent. upon an account, and consequently, if that banker has to pay 2 s. to the Scotch bank, any transactions of that kind would practically leave a loss to the English bank, would it not?It would either probably have the effect of leaving a loss to the English banker, or it would oblige him to charge a higher commission for those transactions than the Scotch banks or Scotch branches in England charged.

4729. And therefore it would put him to considerable disadvantage in competing with the Scotch banks in the same locality, would it not? --Certainly, as regards that class of business.

4730. And therefore the privilege which the Scotch banks enjoy acts in a very different manner from the enjoyment of a mere subsidy from the State, does it not?-Entirely so.

4731. Of course it would be unfair that any undue advantage should be given to one bank over another, in the form of a subsidy; that in itself would give the bank a considerable advantage, because it would be equivalent to the enjoyment of capital upon lower terms; but I understand you to maintain that the Scotch privileges are much more serious and quite different, because the monopoly which they have enables the Scotch bankers to, in fact, levy a tax upon the English bankers upon every transaction, which one of the English banker's customers has with Scotland?-Of course, a subsidy would, pro tanto, have the effect of giving the bank that was subsidised some sort of advantage over the bank that was not. But in the case of the Scotch, the greatest difficulty is, that the subsidy is not only a subsidy, but one which has enabled them to make themselves into a tight monopoly.

4732. And, therefore, the competition with Scotch banks is a very different thing from the competition with such English banks, for instance, as the National Provincial, or the London and County? I think it would be so in those districts chiefly where there was a good deal of Scotch business.

4733. There is no part of England in which any particular banks have a monopoly, because it is quite open to any English bank to open branches in any other part of England, is it not, except with reference to London alone; that is to say, you could go and open in Wales or in Corn

Sir John Lubbock-continued. wall, or in any other part of England, if you felt it desirable to do so?-There is no restriction at all, that I know of, in that respect.

4734. And when Parliament gave those advantages to the Scotch banks, in your opinion, it was clearly the intention that they should confine their business to Scotland, was it not?-I think that the whole range of the the whole range of the legislation regarding English and Scotch banking seems to have tacitly assumed that the two were different systems, and that probably there was no intention or thought of the Scotch banks banking in England.

4735. We have it stated in evidence that the system of charges and the whole arrangements of the Scotch banks are the same throughout Scotland, whereas in England the mode of doing business differs somewhat in different localities; do you think that the similarity of charges throughout Scotland is on the whole an advantage or a disadvantage?-I should not like to give an opinion as regards Scotland, but I think that it would be entirely impossible in England, and that anything like uniformity of charge in a manufacturing or an agricultural district would become an absurdity.

4736. Will you explain why you think that different systems are adapted to different localities? Because I think that charges, like other things, should follow the laws of supply and demand, and that in districts where, for instance, capital is in very great demand, the local capital of the district would naturally command a higher rate of interest; and again, in districts where the transactions were very large, and involved considerable risk, almost without the possibility of evading it, the charges by way of commission must necessarily be larger.

4737. The Scotch banks have a system of making a different charge upon cheques according to the distance of the town upon which they are drawn; do you think that that is a system which would be favourably regarded by men of business in England?—I should think that it belongs to the coaching days. I never could see why, since the penny postage was established, and the postage from Edinburgh has become practically a one-day post, the distance should be made the excuse for an additional charge.

Mr. Beckett Denison.

4738. I wish to refer you to Question 4654, as to private bankers giving security for their issues; will you explain to the Committee a little more fully than your answer to that question does, what your ideas upon that subject are?—I stated that the practical difficulty in discussing the question of what sort of security could be given seems to be this: that it is very difficult to devise a security which shall not be double in its action. What I meant was this, that if the security be lodged in London against the note issue, it would not prevent a certain amount of gold, or legal tender being held in the country to secure the convertibility of the notes, and that, therefore, if the security were lodged to the whole of the amount, it would be practically locking up funds which ought to be available for making the note convertible in the locality where it is

issued.

4739. But you go on to say in answer to the next question, that there would be no objection if a portion of the note-issue were represented by securities deposited with the State. Upon