Mr. Buckhouse-continued. -counts, do you attach much value to the statements of accounts that are issued to the public without any details that can give you any clue to the character of the assets of the bank ?-I attach very great value to the publication of the balancesheets of joint stock banks, because although they do not give all the information which sometimes would be desirable, still the information which they give is considerable.

6498. With regard to the establishment of banks in Ireland, is it not a fact that the position of the Bank of Ireland is a very different position from that which any one bank in Scotfand holds, and that the position of the circulation of the Bank of Ireland at the present moment enables the banks of non-issue to use that circulation, and, therefore, enables banks which have no power to issue to open branches in that country, and to compete with issuing banks?-I am not informed upon the subject of any allowance which is made by the Bank of Ireland.

6499. The Bank of Ireland being a bank in which the Government account is kept, and which has always held a peculiar position in Ireland, does not that give its notes some particular advantage, somewhat similar to that which Bank of England notes have in England? It may in some degree; but that can afford no facility to non-issuing banks in using its notes as compared with the facility which they would have if they had the privilege of issue for themselves.

6500. But it places them much in the same position as non-issuing banks in England are in, which issue Bank of England notes, does it not? Yes, I should think so; but I would be understood to guard any expression of opinion which I may give with reference to Irish banks. by this remark; that I am not familiar with the practice of banking in Ireland.

Mr. Hussey Vivian.

6501. I think you suggested that the State should hold the reserve of bankers; of what nature would that reserve be; would it be bullion or would it be securities?-Bullion, or notes. representing bullion.

6502. Bank of England notes?-Or State notes if the issue was transferred to the State.

6503. And you consider that the advantage of that would not be accessible to the ordinary operations of trade ?-That is so. The balances of bankers are at present traded with by the Bank of England; if they were lodged with the State they would not be traded with, but they would be treated as a pure reserve.

6504. You think that the bullion in the Bank of England is inadequate to the great commercial transactions of this country at present?—I think so; the reserve of notes.

6505. I think you went so far as to say that you believed that it would be an advantage to a private banker to be able to issue notes if he deposited gold against those notes, which gold was actually ear-marked for the payment of the notes? -I did not go so far as to say that. What I said, I believe, was this: that it would be profitable to a banker to issue notes, even although he had to hold gold equivalent (I might have said "for," and hence the misapprehension of the honourable Member) to the amount of notes which he has in the hands of the public.

6506. Then you would not consider that it

Mr. Hussey Vivian-continued. would be any advantage to the banker to issue notes against gold actually deposited by him in a state reserve; if he so issued notes he would be to a certain extent in the same condition as the Scotch banks are in now, namely, he would be able to keep notes in the various tills of his branches and only to deposit gold when those notes were actually issued; would not that be an advantage?-I think the honourable Member will see that in the case which he has supposed, the English bankers would not be in the same position as the Scotch banks are in now, because the Scotch banks are compelled to have the coin, but they do not lodge it with the State; they do not part with it, and in fact, I believe, Scotch banks do not hold any more coin than they would have to hold against their ordinary liabilities if they had not a single pound note issued in the hands of the public; and yet they have the advantage of that coin being regarded as a basis of increased issue.

6507. You would propose, I presume, to introduce such a system as that into England?-I think not.

6508. You desire, if possible, to obtain the advantage of having the use of unissued notes for the working of your branches?—Yes.

6509. But you do not consider that it would be worth your while to purchase that advantage by the deposit of gold in a state reserve, such deposit only to be made when the notes were issued?-I have not gone into any calculation upon that point. I should very much question whether it would be worth the banks' while to lock up the money in gold merely for the sake of having the notes in the hands of the public.

6510. You would have the advantage of the unissued notes in your tills against which you had deposited no gold? There would be an advantage, but it would be exceedingly difficult to work the arrangement; because, as the honourable Member will see, the amount of notes in the hands of the public would naturally fluctuate, and gold would have to be taken in and put out of the hands of the State department to answer and correspond with those fluctuations.

6511. Supposing that it were worked on precisely the same principle as the Scotch, namely, by a weekly return, would it not then be an advantage? There would certainly be some advantage to the English banks. An issue that was based upon such a scheme as you propose would not be utterly valueless, but it would be not nearly so valuable as the present system of Scotch issues.

6512. Because the Scotch have in truth the advantage of issuing to an almost unlimited extent, simply against gold which they hold for other purposes?-Yes; the bullion in the Scotch banks does double duty.

6513. And that bullion does not really represent the note in any way?--No.

6514. So that you calculate that the Scotch note has about 10 d. at its back, assuming the gold to be only liable to a proportion of the whole of the liabilities of the bank?-Under the scheme which the honourable Member suggests, the gold, as I understand it, would be locked against the actual amount in circulation. only would that gold be beyond the control of the bank, but the bank would have to keep such a quantity of gold as might be necessary to cash the notes when they were presented for pay

Not

Mr. Dun.

Mr. Hussey Vivian-continued.

ment, so that there would have to be almost a 1 July 1875. double amount of coin held, or not absolutely a double amount, but half as much again, perhaps. For the advantage of circulation in the hands of the public to the extent of 100,000l., there would be absorbed by the bank, sunk unprofitably, say, a sum of 150,000 7. in bullion.

6515. But you would consider it a great advantage if you could deposit Government securities against the issue of notes, would you not, because those securities would be bearing interest at the same time that they were representing the note issue? That would be an advantage, certainly; but there are a good many complications connected with such a system. It would be a much simpler method to make the issues a first charge upon the estate, and I do not think that it would be inequitable as between depositors and note holders.

6516. You do not think that it would be inequitable as against depositors?—I think not,

6517. You stated that the banking system now is better than it was in 1844, but did not the gold in 1844 represent a much larger per-centage on liabilities than it does now in banks in general? -Yes; because since 1844 there has been a great extension of what you may call deposit banking.

6518. Do you consider deposit banking safe? -Yes, when it has a substratum of a sufficient amount of capital and proprietors' funds.

6519. And that I think you have defined as 20 per cent.?-I think I remarked that I should be very sorry to lay down a hard-and-fast rule. Much would depend upon the character of the business of the bank, upon the position which it occupies in the country, whether it is in a rural district or in an urban district.

6520. It has been stated in evidence before this Committee that banks representing a very large amount have only 11-28 per cent. of capital in proportion to their deposits; do you consider that a desirable condition of things?-That, I presume, refers to the eleven London joint stock banks. On what I may call purely scientific principles I should be disposed to say that it was too small. I should be very sorry to point to any individual bank and say that it was too small, but I think that the average is too small. At the same time in saying so, I would be distinctly understood to say that the amount of the proprietors' funds relatively to the liabilities cannot be taken as the sole test by any manner of means. Another test which must be taken along with it is the amount of readily available funds which a bank keeps to meet any demand that may be made upon it.

6521. What proportion do you think of first

class securities and bullion should be held to liabilities? That again is a difficult question to answer, because it depends very much upon the position which the bank holds in the country; but one-third of the liabilities to the public, it seems to me, should be held in cash, first-rate Government and other securities, and otherwise employed at call or within short notice.

6522. You are well acquainted with the Scotch system, and also with the English system of banking. Will you shortly state the difference between the Scotch system and the English system of banking, irrespectively of the note issue? -I do not know of any difference in the practical

Mr. Hussey Vivian-continued. transactions with the customers, if that is what the honourable Member refers to.

6523. I mean the whole system of banking, irrespectively altogether of the note issue; de they keep larger reserves, or do they discount more or less, or is there, in point of fact, any peculiarity in the Scotch system which has been so much vaunted, or are not the two systems precisely and identically the same?--I know that the operations which I assist in conducting in Lancashire are precisely the operations which I used to see conducted in Scotland. We make advances to our customers, and we take from them letters of guarantee by friends, very much to the same purpose as the Scotch cash credits are, and we also advance money; and we have this advantage, I think, in banking in England which Scotland has not, that we advance money upon the deposit of title deeds, which forms an equitable mortgage upon property.

6524. Generally speaking, there is no great and radical difference between the Scotch system of banking and the English system of banking, is there? I think none.

Mr. Beckett Denison.

6525. You have had experience in Scotland as well as in England?-Yes.

6526. Were you in Scotland as a banker at the time the Act of 1845 was passed?-Not as a banker.

6527. Do you know whether it was at any time during the discussion which went on in Scotland, proposed that the gold to be held against the extra issue of notes should be hypothecated for that issue?-I cannot answer that question.

6528. You have said more than once that you are in favour of all banks in England having power to issue notes in proportion to their paid-up capital?—Yes.

6529. Your words are, I think, "to issue notes paid-up capital against the deposit with the State, to an amount not exceeding, say, one-half of its of English Government securities for an equivalent amount, with a margin of, say 20 per cent, always holding coin, or Bank of England notes, to cover possible depreciation, on condition of to the amount of say one-third, or one-half of its notes in the hands of the public." You are perhaps aware, from the returns which have been given to this Committee, that, in the case of the 36 issuing joint stock banks in England and Wales, the actual issue in 1874 was only 4 per cent., in proportion to the amount of deposits held by those 36 banks?-I am not cognisant that they are correct. of the figures, but I am quite willing to assume

6530. Wherein do you think would be the advantage to the public in calling upon banks to find security for the note issue as against the deposits, giving the note issue rather a preference is a preferential claim on the part of the public over the deposits of the country ?--I think there founded on justice, because, as I have already stated in answer to a previous question, the note holder is, you may say, an involuntary creditor, whilst the depositor is a voluntary creditor.

6531. From what point of view is the note holder an involuntary creditor?-He takes the notes because they pass current in his district. If he is a shopkeeper, and he refuses a local note,

his

Mr. Dun.

Mr. Beckett Denison-continued.

his customer will most probably go and take his business elsewhere.

6532. With regard to your suggestion about the note issue being in proportion to the paid-up capital, I will call your attention to what Sir Robert Peel said, on that very point, in 1845. He said: "But let me tell the honourable gentleman that it is quite clear he is of the old school of political economists, who think that the prosperity of a bank depends upon its paid-up capital. He says that certain banks have a paid-up capital of 10 millions, and he proposes that their circulation should bear some proportion to the paid-up capital; now, let me say that nothing can be more unsound than that doctrine. There would be no security for the business of banking if the principle were once admitted that without reference to the exchanges, without reference to investigation, and only by the establishment of a bank with a great amount of paid-up capital, there should be an issue of promissory notes. I daresay the honourable gentleman would think that that was quite safe, if a bank with 10 millions of paid-up capital should issue five millions of promissory notes"? But the honourable Member will recollect that that had reference to an issue which had no other guarantee whatever, was no preferable claim upon the capital, and was not fenced round by any other restrictions, except in reference to the amount of paidup capital; and Sir Robert Peel, it was well known, did not regard favourably joint stock banks, though the joint stock banks have, since Sir Robert Peel's time, amply vindicated their claim to the confidence and support of the public. 6533. Would it not also be important to remember that the deposits of the country have multiplied something like 250 times what they were in those days? They are very much multiplied, certainly.

--

Mr. Beckett Denison-continued. 6534. In point of fact, cheques have very 1 July 1875, largely taken the place of bank notes, have they not? They have; but not as till-money, of course. It is the power of unissued, but issuable, notes which, I think, is the magic power of circulation.

Sir John Lubbock.

6535. With reference to the question of Irish banks, would you have the goodness to look at the Banking Almanack, and tell the Committee what is the paid-up capital of the Bank of Ireland?-The paid-up capital of the Bank of Ireland is 3,000,000 7. in Irish currency; that converted into English currency is equivalent to 2,769,230 l.

6536. What is the paid-up capital of the Munster Bank?-The paid-up capital of the Munster Bank is 350,000 7.

6537. Therefore the capital of the Munster Bank is about one-ninth of that of the Bank of Ireland?-That is so.

6538. And consequently the amount of profit which would pay 12 per cent. upon the capital of the Munster Bank would only pay 1 per cent. upon the capital of the Bank of Ireland?—I have not calculated your figures, but I have no doubt that that is so.

6539. In answer to the honourable Member for Stirling, you admitted very fairly the hardship of requiring the National and other Scotch banks which have established themselves in Eng. land, either to retire or to abandon their privilege; but, on the other hand, you consider that to allow those highly privileged banks to compete with the English banks in England is a still greater hardship; that is your position, is it not? I think so.

T. Cooke,

Chairman.

6540. You are, I think, Chairman of the Manchester and Liverpool District Bank?

5 July 1875. Yes.

6541. That is not a bank of issue, is it?-It is not.

6542. How long have you been chairman ?I have been chairman or deputy chairman since

1859.

6543. When was that bank first established? -I think in 1829.

6544. Is it a bank of limited or unlimited liability?-It is a bank of unlimited liability. 6545. Where is your head office?-In Manchester.

6546. How many branches have you ?—Fifty, I believe.

6547. Where are they?-They are chiefly in Lancashire and Cheshire, and some in Staffordshire, Shropshire, and Derbyshire. Nine of them are not daily banks, but are only open for one or two days a week.

6548. On market days, I suppose?—Yes. The others are open the week through.

6549. Do you pay a separate license for each branch? No, I believe not. I do not think that we are liable to any license. I have never heard of our paying anything, and we have opened branches quite recently.

6550. What is the amount of your paid-up capital?-£.905,000.

6551. What is the amount of your deposits?About 12,500,000 7.

6552. What proportion do your reserves bear to your liabilities?-The last time that I looked into it the proportion was about 12 per cent. 6553. What do you include under the term "reserves"?-In giving the proportion as 12 per cent., I include only our paid-up capital and reserved profits, or rest. We generally have a very large amount of cash in London, but it is all lent at call, or short notice; we have always a very large sum in our own tills, and in the branches of the Bank of England in Manchester and Liverpool. The average last year of the money in our tills and the two branches of the Bank of England was 738,000l., which sum is absolutely

Chairman-continued.

66

necessary for the working of the bank. Including these two, our reserves at Christmas last were equal to 34 per cent. of our liabilities to the public.

6554. Have you any proportion of your capital not called up?-Yes, one-half of it is not called up; the shareholders are liable to the directors for 905,000 7. more; but the bank being an unlimited one, of course the shareholders would be liable to a liquidator to the extent of their property. The directors have no power under the trust deed to call up more than as much as is already called, viz., 10. a share.

6555. Do you keep any part of your reserves at the Bank of England?-Yes, we have generally a considerable reserve in the Bank of England in Manchester, and also in the Bank of England in Liverpool.

6556. Do you keep any account at any other of the branches of the Bank of England?-No, we have no account with any other part of the Bank of England establishment; we have no account with the Bank of England in London, though our money is paid in there in order that they may give it to us in Manchester, through their branch there.

6557. Then your account is kept with the Manchester Branch of the Bank of England?Yes, that is our chief account; but we have also an account with the branch of the Bank of England in Liverpool, which our manager there deals with.

6558. Do you experience any difficulty in exchanging at the Manchester and Liverpool branches of the Bank of England, Bank of England notes issued in London, or at other branches of the Bank of England?-We rarely ask the Bank of England in Manchester or Liverpool to change London notes, or the notes of any of their other branches, because they are not legally obliged to pay them there, but we have no difficulty about dealing with such notes. If they are of denominations to suit our customers we pay them away, and they are never objected to. If they are dirty, far worn, or of unusual denomi

nations,

Chairman-continued.

nations, such as 1,000 7., which the Bank issues only in London, the branches will receive them and put the amounts to the credit of our banking accounts; but of course they would not do that for persons not having banking accounts with them.

6559. Have you heard any complaints on the part of the public, or in any other way, as to the inconvenience arising from the branches of the Bank of England not cashing Bank of England notes unless they are issued at the particular branch at which they are presented?-Occasionally slight inconvenience arises to those who may have come to Manchester with the notes of some other locality in their pockets, and such people are introduced to us, and we are asked as a favour to cash the notes for them; but those are not frequent occurrences. Of course it would be a convenience to everybody if the Bank of England cashed its notes indiscriminately at each of its establishments, but I scarcely think it would be a fair duty to impose upon the bank. 6560. Do you make any charge for cashing a Bank of England note, if it is issued from some other branch than that in the town where it is presented?—Yes; if our customers pay into our bank notes of that kind, we make them, when they draw the money out, the usual banker's charge, by which we are paid for our services. It is the custom in the provinces, or at all events in Manchester, to allow interest upon all money paid into the bank, whether it is paid in as a deposit, or paid into a current account; we allow interest from the next day upon everything paid in, and inasmuch as no London banks do that, nor any Scotch bank, to the full extent that we do, we need to charge a commission to remunerate us for our banking services.

6561. If 100 7. were paid into your bank in Bank of England notes, issued, let us say, by the Plymouth Branch, should you immediately allow interest upon that 100 7., without making any deduction?-Yes.

6562. Although those notes would not be cashed at the branch bank at Liverpool?Yes.

6563. You would not treat Bank of England notes issued from the Plymouth branch of the Bank of England in any way different from that in which you would treat Bank of England notes issued from the Manchester branch ?-No.

6564. What dividend has your bank paid to your shareholders during the last three years? I believe that we have paid 20 per cent. to our shareholders for something like nine years; and the same every year.

6565. Is your circulation entirely composed of Bank of England notes and gold?-Entirely.

6566. Do you find that that circumstance materially circumscribes your ability to afford all reasonable banking accommodation to your customers? I do not think that it does; of course we cannot do what the Scotch bankers can do ; their privileges of issue, which are very valuable in themselves (I mean directly), are of immense value to them in facilitating the establishment of their branches; one great cost of every branch to us is the idle money that we must have there upon which we are paying interest; the Scotch banks, making their own notes, do not lose that interest which we lose.

6567. Comparing yourselves for the moment, not with the Scotch banks, but with the English

Chairman-continued.

issuing banks, do you consider that an English issuing bank has an advantage over you?— Decidedly; but not to such an extent as the Scotch banks have, because the issues of the English banks are more restricted, whereas I take it that the issues of the Scotch banks are practically unlimited; they have a monopoly ; no bank can be established in opposition to them, because no bank can live in Scotland without the power of issuing; and in all important places great numbers of them are congregated, and they have very great facility at the end of the week, before they make their return to the Government, of putting out of sight, out of the term "circulation," if I may so express myself, a very large portion of the notes that have been in circulation during the week; I do not know to what extent the circulation of the Scotch banks is so hidden by those weekly exchanges, but I suspect it is to a very great extent, and I think it is most important that everybody dealing with this subject should know what is the amount of those weekly exchanges; it is very important also to the whole commercial community to know that, for if the sum is as large as I suspect, it bears a very large proportion to the whole circulation of the country, which every commercial man ought to be acquainted with.

6568. I wish to ascertain whether you consider that there is any difference in kind between the advantage which the Scotch banks have over you, and the advantages which the English provincial banks of issue have over you; there may be a difference in degree but is there any dif ference in kind?-I do not see any difference in kind; the difference is only in degree.

6569. Do you see any reason to complain of the advantage which the provincial banks of issue in England have over you?-It has always appeared to me a somewhat unfair privilege for them to enjoy, but I do not think that the nonissuing banks suffer from it to such a degree that they would have been moved into any activity against it, but for the incursion of the Scotch banks, which is a very different thing. There is this also to be said as régards the English provincial issues; that they are gradually decreasing, and year by year, partly by that decrease, and partly by the increased number of nonissuing banks, bearing a very much smaller proportion to the whole of the circulation of England.

6570. Was your own bank at any time a bank of issue?-Yes, it was a bank of issue from its establishment in 1829 until 1844; and you will find, I think, that it is one of the banks scheduled in the Act of 1844 as having consented to take a composition, or an annuity to be paid by the Bank of England on the part of the Government to all those banks that were willing to forego their own issues and issue Bank of England

notes.

6571. How was that annuity calculated?-We were offered an annuity of 1 per cent. upon the then amount of our issue, or a discount account with the Bank of England to the same amount. That was at 1 per cent., I think, under the Bank of England published rate, but the account was at all times to be kept full. In our case the amount of issue was 69,000 l.; our annuity which we took in preference to the discount account is 690 7. a-year, which is paid to this day. If we had taken the discount account we should have had to keep under discount at all