Mr. 28 June 1875. Sir John Lubbock-continued. Sir John Lubbock-continued. error in Mr. Gairdner's statement was this: that he expected to find out that English banking was far more profitable than Scotch banking, and he simply accepted the first returns that came to his notice. notice. Mr. Moxon, a gentleman living at Stockport, whom I have not the pleasure of knowing at all, has drawn up a statement of a similar description, and I observe that he says, that upon capital and reserve, the country banks in England make 123 per cent., the London banks 14 per cent., and the Scotch banks 11 per cent. I find, to give an instance of the working of particular banks, that the rate of net profit of the London and County Bank for last year on its working resources was 1 l. 4 s. 1 d., while that of the Bank of Scotland, estimated in the same way, for as nearly the same period as I can state it, was 1 l. 7 s. 1 d., and think this shows what indeed we might expect to find, that where banking businesses are conducted under similar circumstances, the profits are nearly similar. I think, therefore, that this statement gives no reliable information upon which the Committee can, in any sense, depend. Palgrave. which has been put in by Mr. Gairdner with reference to the comparative charges of English banks and Scotch banks?-I have seen that paper, but I have only taken a casual view of it. 6125. Are you prepared to admit the principles upon which that paper has been calculated?The honourable Member will feel that he places me in rather a difficult position; he is examining me, as I have been examined before in the course of this inquiry, upon statements based on a book of my own writing; but I will endeavour to answer him without partiality, and entirely as if this statement was based upon some one else's figures than my own; I think the honourable Member will feel that no sum can work out correctly which has an error in its first stating; and that is exactly the point upon which this statement appears to me to go astray; it must be understood that there is a vast difference between the manner in which business is carried on in England and the manner in which business is carried on in Scotland. In England the district over which banking extends is usually very limited in its area, whereas in Scotland it is usually a very large district. Now there are 6126. Mr. Somers, in his book says, "Take very great advantages and disadvantages in each away the right of issue, and the Scotch banks method. For instance, the field over which the would either have to withdraw most of their banking operations extend may not supply the branches in the rural districts, or to propose a bank with sufficient deposits, or equally it may lower interest and less promptitude of repayment fail to supply it with the opportunity of using to depositors." After the evidence which you them; but where it does it cannot be doubted have heard before this Committee, do you agree that there the profits are by far the greatest. The with Mr. Somers in his estimate as to the importEnglish private bankers generally are persons who ance of the privileges enjoyed by the Scotch know every one in their districts, and are known. Banks?—I think that if they lost their right of by every one; they have the knowledge which issue, beyond question they would have to make enables them to employ their deposits to the a vast alteration in their business, which, I congreatest advantage, and they are persons usually clude, would also affect the interest which they of considerable standing in their own districts; I allow to depositors. must be understood not to speak from any personal point of view, but simply of English bankers with whom I have been associated in the course of my life; and in this description I should include the principal managers of the joint stock banks so far as I have the privilege of knowing them. Of course it is obvious that where there are few branches in a bank the profits are far greater as calculated by this statement, because the expenses are far smaller. This return which has been put in contains a statement as to 11 English banks, of which by far the greater part have but a small number of branches. One bank only among them, the National Provincial Bank, in the slightest degree approaches in magnitude any Scotch bank; that bank has 137 branches, and I observe that the per-centage of business profit shown by it, upon its cash deposits, amounts to 1 1. 9 s,, which is very close to that shown by the British Linen Company in Scotland. I there fore think that this statement has, as I say, such an error in its first statement that it cannot be taken in any degree as a reliable basis for this Committee to form an opinion upon. I should be extremely sorry in saying that, to convey to the Committee any idea, on my part, that the gentleman who drew up this statement in any degree intended to lay before the Committee anything that would cause them to form an incorrect judgment as to the position of banking in the two countries; but there is nothing more difficult, I may be allowed to state, from experience, than to draw up a statistical statement which will be absolutely fair. There is a probable error in every observer; and I take it that the probable Mr. Anderson. 6127. You said, in answer to the honourable Member for Maidstone, that you thought that it was unjust that Scotch banks should be allowed to come to do business in England; would your opinion go so far as to lead you to say, that those Scotch banks which are already established in England should be driven out? The wisdom of Parliament has allowed them to come, and the wisdom of Parliament must decide hat point; I think that in the face of Acts of Parent so recently passed, it would be out of the question for me to express an opinion upon that Port Mr. Mulholland. 6126. I think that you said that, in your Spi-ի nion, the economy of the precious metals whi would be derived from the circulation of 1 7. not would be dearly purchased by reducing the stoc of gold in the country?—Yes. 6129. Is it then your opinion that the proportion of paper circulation to the total stock of gold in the country has just arrived at the proper point under the present system of things?--I hardly know that I can answer that question in the affirmative; I think that a diminution of the gold circulation concurrently with an increase in the note circulation would be a very distinct disadvantage. 6130. The total unsecured circulation not represented by gold I think, according to your paper, is about 29,000,000l., and the stock of gold in the country you estimate at 110,000,000 l., the proportion would be between 25 and 30 per cent. ; Mr. Mulholland-continued. cent.; do you think that that is about the proportion which the uncovered paper circulation ought to bear to the stock of gold in the country? -That is a purely theoretic question upon which I can hardly give a practical answer that would be of any service to the Committee. 6131. The answer which you gave with respect to the advantages derived from the provincial banks having a right to issue was this: that where there was an exceptional demand for currency at certain periods of the year, they have the power to issue a given amount of paper without having gold opposite to it; and that therefore the strain upon the banking reserve in London was diminished?-Certainly. 6132. I see that the amount of their excess of issue in the months of October, during the average of the 10 years, is only 257,000 l. ?— But the honourable Member must not exactly calculate it in that way. It depends upon the difference between the power of rise in any individual bank, from the lowest point to the highest point. I gave an instance of our own bank at Yarmouth. I may also mention the case of a bank in the north of England, where they annually meet the pay of a lead mine in the same manner. I have also before me the statement of a bank, in which the authorised issue in the course of 1874 was only 59,851 l., but the lowest point which I have observed the issue of that bank was 44,339 7., and the highest point was 86,020 l., from which the honourable gentleman will see that there may be very large variations in the issue of an individual bank, which are apparently covered by a small aggregate rise. 6133. At the same time, the advantage which you have referred to is merely the advantage arising from the power to issue a further portion of paper money, unrepresented by gold? It is the advantage, as I understand it, arising from the fact that those demands are not centralised on the Bank of England in the same manner. 6134. But it amounts to this: that by being centralised they would require to be met by an equal deposit of gold, and that not being centralised, the portion of the circulation to which you alluded would not require to be so covered? -I am not prepared to express any opinion except as to the particular manner in which those demands arise. 6135. Of course there is no such advantage in the case of those banks which are already up to their authorised issue ?-Obviously not. 6136. I see that the excess of the issue of the provincial banks in the month of October for a ten years' average was 257,000 l.?-The ten years' average covers a great many variations. 6137. I find that in the Bank of England, in the month of November, the excess of issue above the average issue of the year is 4 per cent. upon the average issue, or about 900,000 l.; do you think that in a question referring to the circulation of the country 900,000 l., more or less, ought to cause the fluctuations that you speak of in the rate of the bank, when, according to your Tables, the total exports and imports are 600,000,000 7. a year?—I think that, as a matter of fact, the manner in which the business of a country is centralised upon one individual reserve, has that effect; and what are apparently small effects may, nevertheless, produce large results in their working. Mr. Mulholland-continued. 6138. Was it not the intention of the Act of 1844, that any increase of circulation should have an effect upon the rate of interest ?—I really can scarcely answer as to the intentions of the framers of that Act. 6139. Do you not think that the fluctuations to which you have referred ought to be more attributed to the smallness of the banking reserves in proportion to the total banking transactions of the country?—That is a very large question, and, I think, I ought not to be asked as to any opinion respecting the reserve of the Bank of England, which I take it is included in the honourable gentleman's question. 6140. Is it not the case that in France they have, generally speaking, one source of issue?— The circumstances of the Bank of France are so widely different from those in England that it is scarcely possible to draw an advantageous parallel between the two countries; I believe that, as a matter of fact, there are one or two other banks of issue in France besides the Bank of France, but I have not absolute information upon that point. 6141. They have not the same fluctuations in the rate of interest in France that we have in England, have they?—I think I may reply that the state of business is so different that you can hardly draw any inference from that; but, as a matter of fact, I am aware that the fluctuations are not so extreme in France. 6142. The periodical pressure that you allude to from a demand for currency, would be the same, would it not, under a circulation altogether metallic?-I think that it might be. 6143. Do you find that the circulation, in your own bank, extends much beyond the districts ?No, it does not. 6144 Do you find that the notes which you issue exceptionally at certain periods, soon return to you again?-With very great rapidity; they meet the immediate want of the moment. 6145. Do you think that it would be desirable on the faith of the exceptional demand for Scotland, if the average were spread over a larger period for which the gold had to be kept?-I think that a longer average would be a great advantage, and probably an annual average will be sufficient to meet the wants of the case. 6146. And the same for the Irish banks?Certainly. 6147. That would remove the suddenness and intensity of the pressure in those particular months, would it not?-It would beyond question tend to do so, but it is almost impossible to say how an arrangement not yet made may work. 6148. You have alluded to the peculiar value of the right of issue in Scotland under the Scotch system; that value is no greater, is it, than the value of the right of issue to those English banks which are already considerably under their authorised issue?—I think that it is far larger, because they are able to keep up to their authorised issue through their power of issuing 1 l. notes, and keeping exactly up to the limit, or exceeding it, through their power of issuing against gold. 6149. I merely alluded to the right of issuing against gold; in that respect are they better off than the English banks, which have already an amount of authorised issue in their till which they do not require to circulate?-I think that the fact that Scotch banks have the power to issue against gold gives them an advantage over Mr. Palgrave. 28 June 1875. Mr. Palgrave 28 June 1875. Mr. Mulholland-continued.. English banks, and I think that it is impossible, in speaking of the Scotch banks, to separate the 11. notes from the rest of the circulation. Mr. Campbell-Bannerman. 6150. Do you regard the case of an English bank desiring to open a branch in Scotland, and the case of a Scotch bank desiring to open a branch in London, as at all analogous ? Certainly not. 6151. Supposing that it was not only practically impossible, owing to a monopoly existing in Scotland, for an English bank to set up a branch in Scotland; but even supposing, to go further, that it was legislatively prohibited, would there be anything unfair in allowing a Scotch bank to come to London when such a burden was laid upon an English bank?-I think that it is be yond question that it would not be fair to allow to a Scotch bank privileges that were denied to an English bank. 6152. Do you consider the privilege to be the same of a Scotch bank to open a branch in London as of an English bank to open a branch in Scotland?-London opens so far wider a field that I think that the circumstances are scarcely comparable. 6153. And therefore it is no set-off against the Scotch banks being prohibited from coming to London to say that the English banks are unable to go to Scotland?-I think that the English banks are practically unable to go to Scotland. 6154. But it is not in their interest to go to Scotland in the same way that it is the interest of the Scotch banks to come to London? I conclude that it is not from the fact that they have never gone. 6155. The business of England does not centre in Scotland in the same way that the business of Scotland centres in London does, so that there are peculiar reasons for the Scotch banks coming to London which do not exist in the case of a bank setting up a branch in any other part of the country?-Yes, I think that there are, but that has nothing to do with the question of the propriety of their doing so. 6157. On Thursday you answered as to the capital and deposit of joint stock banks in England; from inquiries which you have made confidentially, are you of opinion that the capitals and deposits of private banks have also increased in the last 30 years?-I believe that they have increased in about the same proportion. 6158. In answering the honourable Member for Glasgow, on the last occasion, with regard to the average amount of gold held by banks of issue against their notes, have you any further explanation to give?-On further consideration I think that the non-issuing bank would have to hold a larger proportion of gold than the issuing bank. 6159. Abstractedly the bank of issue without any other business, would have to hold a considerable amount of legal currency to meet its Mr. Backhouse-continued. notes, would it not?-If such a bank exists, beyond any question it would. 6160. But, practically, all banks of issue, having much larger business than their amount of issue, which is very small relatively to the rest of their business, they have not to hold either bank notes or gold specially against that issue? Practically they hold the amounts that they do retain against their business generally. 6161. Banks of issue in this country hold a much larger amount both of gold and of Bank of England notes than the whole amount of their issues, do they not? - Beyond any question they do. 6162. Are the bank notes of the Bank of Prussia legal tender or not? They are not a legal tender, nor the bank notes of the Bank of France under an ordinary state of things. 6163. Have you any knowledge of the banking system of Sweden ?-The banking system of Sweden, respecting which I obtained information in that country some years ago, is so remarkable that I think that a few points in it may be mentioned with advantage. It is a system in some respects corresponding to that of Scotland; but it has one great advantage, that it is a self-contained system. It possesses a note circulation which has a very high credit, and which amounts to about 17. per head of the whole population. The main. curity of the note circulation alone, but the secu feature in the Swedish law points not to the serity of those who deal with the banker in any form.. The Swedish Banking Law owes its existence very largely to the exertions of Mr. Wallenberg, Member of the Upper Chamber of the Swedish a very able banker in Stockholm, who is also a Diet. The law, arranged on its present footing, was, as I understand, mainly through his exertions. I may mention that there is precisely the same. banks as there appears to exist among the Scotch tendency to amalgamation amongst the Swedish banks. In 1872, according to statements which are published, with an exactness which exceeds that of any other country in the world with which I am acquainted, there were 41,250 accounts in Sweden, that is to say one to every 100 of the population. In 1875 the number of depositors had increased to 90,520, that is to say, to one in 44 of the population, and the amount of deposits of the banks which published the accounts in the published accounts of the banks had gone up in that interval of three years from 5,000,000 7. to 8,000,000 7. The Swedish Law appears to me to have some very useful points in it. One point in it is a matter which was endeavoured to be attained in this country through Mr. Leeman's Act, as to the transfer of shares in joint stock banks, which are completely controlled through an enactment, that no transfer of shares in the bank can take place except at a general meeting of the bank, and thus: being sanctioned by the general body of the shareholders. (Section 5 of the Banking Law of Sweden.) The system seems to me to include most of the advantages of private partnerships and of joint stock associations; I think, therefore, it might be of use to the Committee if the banking law of Sweden were included in my my evidence. I can place it before them, either in the original language or in a translation, including the latest amendments, which reached me. only a few weeks ago, as may be most convenient to them. I shall have much pleasure in including it Mr. Backhouse-continued. it in my evidence if it is the wish of the Committee. 6164. Do you think that it would be possible to assimilate the banking law of England, Scotland, and Ireland?-I hardly see how it is possible to do so; it is absolutely impossible, as it appears to me, to allow the issue of 17. notes in England, and therefore I think that on that point we cannot ever look to the assimilation of the law of the three countries. As gold is the only legal tender in Scotland and Ireland, it appears to me that we might approach assimilation in one point if we made gold the only legal tender in the payment of provincial notes in England. In that sense I think that we might approach similarity. I think also that the power of amalgamation which has been extended, as it appears to me, with great advantage to Scotland, might be allowed in its fullest sense to England; that is to say, that any English bank should be permitted to part not only with the whole of its issue, but with any portion of its issue if it desired to do so. I think also that the license duties which have been shown to differ very widely in the two countries ought to be considered, and that they might be assimilated in further legislation upon this subject. 6165. Have you any information as to the amount of foreign bills floating in this country? -The amount of foreign bills floating in this country at any time it is difficult to ascertain; but I have endeavoured to ascertain the amount through an estimate formed upon the amount of stamps issued. It appears to me that the estimated amount of foreign bills drawn in this country or foreign countries, is about 60,000,000 7. in a year. I cannot help thinking that it might be desirable if arrangements were made for holding Mr. 28 June 1875. Mr. Backhouse-continued. bills in this country, upon the principal of foreign Palgrave. centres of exchange. At this time, as I understand it, the practice is that all foreign bills in London are sold twice a week, upon Tuesdays and Fridays. Between those days, from the best information which I can obtain, there are scarcely any foreign bills floating in London. I think it is very desirable that a larger amount of those bills should be held in this country, but I scarcely see how it would be possible to arrange for it through any legislative enactment. 6166. The honourable Member for Bodmin asked you whether the Governor and Directors of the Bank of England would not take into consideration the source from which any reduction of their bullion arose; is it not the case that the Act of 1844 was intended to take away the discretion of the Directors, and rather to compel them to raise or reduce the rate of interest in accordance with the reserve without regard to the quarter from which the demand came?-I have no knowledge whatever as to the practice of the Directors of the Bank of England; but it appears to me that in the alterations in the rate of discount they are governed by the proportion of their reserve to their liabilities actually at the moment, and so far as anyone outside the Bank of England can ascertain, by no other cause what ever. 6167. You were also asked about the publication of accounts; is it not the case that the public can learn very little of the real position of any bank from a mere published statement of their accounts, which gives no clue to the value of their assets or to their general position?Published accounts really give a very limited amount of information to the shareholders. Mr. Palgrave. Mr. ROBERT HARRY INGLIS PALGRAVE, re-called; and further Examined. Chairman. 6168. I THINK that you wish to make one or two corrections in your evidence?-I wish to 1 July 1875. make two corrections in my evidence, and I therefore desire to be allowed to make them before the Committee. The Question No. 5800 is this: "Can you not give the Committee information as to how many partners you have in each of your concerns;" and I have answered, "I can put in a statement which will show that, but I have not yet prepared it." I desire to be allowed to reply instead of that, that the names are returned annually to the Stamp Office, which is an official publication of them. With regard to Question 6125, I said this towards the close of my answer: "I have also another statement made upon similar principles to Mr. Gairdner's." That is a general statement. I think that a particular statement will be of more use to the Committee, and I have, therefore, prepared the following statement: I find, to give an instance of the working of a particular bank, that the rate of net profit of the London and County Bank for the last year, on its working resources, was 1 l. 4 s. 1d. per cent., while that of the Bank of Scotland, estimated in the same way, for as nearly the same period as I can state it, was 17. 7 s. 1 d. per cent.; and I think this shows what indeed we might expect to find, that where banking Mr. Dun. Mr. JOHN DUN, called in; and Examined. Sir John Lubbock. 6171. I THINK that you are the General Manager of Parr's Banking Company, are you not?—Yes. 6172. Is that a bank of issue?-It is not a bank of issue. 6173. How many branches have you?-We have 11 daily branches, and six sub-branches, which are open either one, two, or three days a week, as the case may be. 6174. Do you approve generally of the policy of Mr. Goschen's Bill ?-I do, most certainly. Sir John Lubbock-continued. 6175. You consider that either the English banks ought to be placed upon the same footing as the Scotch banks or that the special privileges of the Scotch banks ought to be withdrawn, or if neither of those lines can be taken, that then the Scotch banks ought to confine themselves within their own area; is that the general view which you take?-Most distinctly. 6176. On what do you mainly found your objections to the Scotch banks coming to England? In a great measure upon what I may venture to style |