Mr. Beckett Denison.

403. Mr. Fleming has read to the Committee in his last examination the following enacting clause of the Act of 1826: "Provided always that such corporations or persons carrying on such trade or business of bankers in co-partnership shall not have any house of business or establishment as bankers in London, or at any place or places not exceeding the distance of 65 miles from London." The marginal note to that is: "In what cases and under what circumstances and conditions co-partnerships of more than six in number may carry on business as bankers in England." It is contended by Mr. Fleming, that because under that Act English joint stock banks cannot have places of business in London, therefore Scotch banks may come into England outside the 65 miles circle. Do you think it reasonable to contend, that because this particular section of the Act of 1826 permits joint stock banks in England outside the 65 miles circle, it should be construed to extend to Scotch banks coming to England also without that 65 miles circle?-I do not quite understand the form in which the question is put. The Act of 1826 says that joint stock banks of issue may be formed provided that they have not any house of business or establishment as bankers in London. Therefore I consider that a Scotch bank of issue may not have a branch in London.

404. The Act says that any joint stock bank may carry on business in England, provided it does not come within the 65 miles radius?-That was a question upon which I said I did not quite agree with Mr. Fitzjames Stephen. The preamble says: "Provided they shall have the whole of their banking establishments in England." A Scotch bank has not the whole of its banking establishments in England; therefore Mr. Fitzjames Stephen says that a Scotch bank of issue cannot come into England at all. That being in the preamble, and not in the enacting clause, I rather disagree with Mr. Fitzjames Stephen; and I think that they may come beyond the 65 miles radius, but not within it. However, I am not at all satisfied about it.

Mr. Anderson.

405. Does that mean whether they bring their issue with them or not?-Of course they do not bring their issue in one sense.

406. Supposing that they leave their issue behind them in Scotland, are they still prohibited from coming into England?-What I understand is this; all Scotch banks are banks of issue. I consider that was originally a general prohibition against banks of issue being set up in England at all if they were joint stock banks. Then the question is whether that prohibition is sufficiently relaxed by the Act of 1826. I think it is relaxed to this extent: that they cannot have a branch in London or within the 65 miles limit, but they may have a branch beyond. On the other hand, Mr. Fitzjames Stephen goes still further; he thinks that a Scotch bank cannot have a branch in England at all, because the preamble states that the banks in respect of which the relaxation is made must have the whole of their banking establishments in England.

406*. Then you do not draw any distinction between their leaving their issue behind them or not. In your "general conclusion" you say that there is no prohibition against the Clydes

Mr. Anderson-continued. dale Banking Company establishing their branches in Cumberland, but there is a prohibition against the Clydesdale Banking Company issuing its notes in Cumberland; therefore there is a clear distinction in that case, is there not, between a bank establishing itself and bringing its issue with it?-My Memorandum is simply addressed to the question of their establishing branches. I will answer any question about their notes that I can, but a bank of issue never brings, in that sense, its issue with it. There is a distinct prohibition, I believe, against it.

407. But you say that they are allowed to establish their branches in England?-Branches of deposit, as I understand.

408. We know that they are not allowed to issue their notes, and you say that they are not allowed to establish their branches in London, or within the 65 miles; are they not allowed to do so, even supposing that they refrain from issuing notes?-A Scotch bank is a bank of issue. I am aware that it cannot issue its notes in England; but it is nevertheless a bank of issue in its character. Then it seems to me that, being a joint stock bank of issue in its character, the Act of Parliament applies in the same way as it does to the English provincial joint stock banks of issue. The Act says that they shall not have a branch in London without giving up their issue, and I think that applies to the Scotch banks.

Chairman.

409. But supposing that you had a Scotch joint stock bank which was not a bank of issue, do you think that could come to London?-I am not aware that there is any prohibition.

Mr. Anderson.

410. Is it not the case that a Scotch bank is not a bank of issue as regards England, since it cannot issue in England?-That is a very fair argument for the Scotch banks to advance. I think, on the whole, that it is a bank of issue for every purpose; but I am perfectly aware that you might argue the other way, and say that it was not. Mr. Orr Ewing.

411. In what consisted the Bank of England's exclusive privileges before the Act of 1826 ?—It is an exceedingly difficult question to answer. I have set out the material clauses, and I can only read them to you.

412. You are not prepared to give an answer upon that point?-No, not beyond what I have stated in my Memorandum. Beyond that my answer would be of no value at all.

413. Are you able to state what alterations were made therein by the Acts of 1826 and 1833 respectively?—I have stated them completely in my Memorandum to the best of my ability.

414. What led you to pay particular attention to the Banking Acts?-I am constantly asked by the Government, as the Chancellor of the Exchequer or Mr. Goschen will tell you, to report upon certain questions, for the assistance of the Government, although it is not exactly or technically my business. In this case I was asked to report on the Banking Acts.

Mr. Anderson.

415. Then was this Memorandum made for the assistance of the Government?-Yes. I may say that my Memorandum contains my unbiassed

416. If the Clydesdale Bank is entitled in your opinion to come to the provinces of England, but not to London, and if this right is dependent upon the Acts of 1826 and 1833, or either of them, in what respect is the right of the Bank of Scotland to be in London different from the right of the Clydesdale Bank to be in the provinces?-I rely upon that particular clause, that they may come, "provided that such corporations or persons carrying on such trade or business of bankers in co-partnership shall not have any house of business or establishment as bankers in London, or at any place or places not exceeding the distance of 65 miles from London."

417. Does not the clause refer to banks of issue in England?-I do not think it refers to them alone; but it is perfectly arguable the other way. I have stated in my Memorandum that I think it applies to the banks in Scotland.

418. Though they are not mentioned?- I think it is a general prohibition.

419. Does it not specially refer to banks of issue in England ?-I do not think it does.

420. Does it not say, "carrying on the business of bankers at any place or places in England"? There is the general enactment of 1697 (which is stated in my Memorandum) prohibiting all banks whatever except the Bank of England; that enactment is no doubt excessively difficult to construe, and is repeated, in other forms equally difficult to construe, till we come down to the Act of 1826. Some Members of the Committee think that there was no prohibition applicable to Scotch joint stock banks of issue before the Act of 1826. I think it may be very doubtful; but, looking at the whole current of legislation, I think the Act of 1826 explains the preceding legislation, and says in effect (proceeding on the assumption that the preceding prohibitions apply to Scotch banks of issue) that those banks may come to England, provided that they do not have branches in London, or within 65 miles of London. The question, as I understand it, is this: Can Scotch banks of issue have branches in London? I think, on the whole, they cannot. Then the question is, Why? Because, looking at the whole current of legislation which I have set out, so that honourable Members of the Committee can judge really quite as well as I can, whether I am right or wrong, I think it applies to Scotch banks, and that being joint stock banks of issue they are prohibited from having branches in London.

Sir J. Lubbock.

421. I think this clause is a relaxing clause, and therefore if the honourable Member's argument is correct, that because it mentions banks in England it does not apply to banks in Scotland, then the Scotch banks clearly could not take advantage of the relaxation ?-Of course not; they would be under the preceding prohibition.

422. If they take advantage of the relaxation they must come under the conditions; and if they do not come under the conditions they cannot

Sir J. Lubbock-continued.

take advantage of the relaxation? That is my view of the case, but it is open to argument.

Mr. Campbell-Bannerman.

423. Do you agree with Mr. Fitzjames Stephen's opinion that the prohibition extends to all banks of issue, wherever the issue may be?

Yes, I think it must be considered to be so. My idea of the legislation is that these cases were never contemplated at all; it was never supposed for a moment that Scotch banks or Irish banks were coming into England, and the Legislature regarded Scotland and Ireland entirely as foreign countries. It is quite clear that in the earlier years there were no such things as banks of deposit at all; then by-and-by banks of deposit sprang up, and the question arose whether the provisions of the Acts of Parliament applied to banks of deposit as well as to banks of issue; and so it has been with this question, as it seems to Banks other than English banks have come into England, and the question is whether enactments which at the date of their passing were directed only against English banks apply also to banks domiciled in other countries which have since come into England. My technical answer would be, that I think the enactments in question extend to all banks which have issues; in Japan or wherever it may be.

me.

424. Do you not think that a good deal turns upon whether the issues which the bank makes are in diminution of, and in competition with those of the Bank of England, or not?--It is a question of construction.

425. Was not the reason for imposing restrictions upon banks of issue a desire to protect for public purposes the rights of issue of the Bank of England, and therefore where you find a bank, whose issue is in Japan, or in Amsterdam, or in Scotland (which for this purpose is a foreign country), is not that a different case altogether from a bank whose issues are in England, and are in direct competition with the Bank of England? -Yes; and I assume that the Bank of England would not care for a bank whose issues did not compete with its own, and would care for a bank whose issues did compete with its own; but still the words appear to me to cover both descriptions of banks.

426. Do you not think that the legislation was directed against banks whose issues competed with the issues of the Bank of England?-The legislation, no doubt, from beginning to end was to protect the monopoly of the Bank of England. The Act says that the bank was content to relax that monopoly to a certain point, and then the question is what that relaxation means; but there is no doubt that the whole of the legislation was intended to protect the monopoly of the Bank of England.

Mr. Orr Ewing..

427. And its issues?-I suppose so.

Mr. Campbell-Bannerman.

428. The issues of the Scotch banks do not.. clash with the issues of the Bank of England at all, do they?—I cannot tell whether that be so or not, but it seems to me that the Scotch banks of issue are covered by the words, though it might not be the intention to cover them.

429. But we may construe the words in the light of what is obviously the intention, and the intention

Mr. Campbell-Bannerman-continued. intention being to protect the privileges of the Bank of England, surely where issues have nothing to do with those privileges at all, they are as much beside the question as whether the bank has its head quarters in a stone house or in a brick house?-I am sorry to say if you go to the question of intention, I should give the strongest possible opinion the other way; for it seems to me perfectly incredible that Parliament, if it had its attention directed to it, should have intended that a bank of issue in Somersetshire should be prohibited from having a branch in London, and that a Scotch bank of issue should be allowed to have a branch in London. It seems to me that if that is the intention, it is a hundred to one against you.

4

430. That is entirely a separate ground; it appears to me that there are two grounds urged against the Scotch banks coming to London; one is, that they are Banks of Issue irrespectively of the place where the issue is made, and the mere fact of their being banks of issue is enough to prohibit it. That I understand to be the ground of Mr. Fitzjames Stephen. Then, again, it is said that their right of issuing in Scotland is a privilege granted to them by the Government of this country and that, strengthened by that privilege, they come here and compete with others. That is the ground I think that you rather take now? -I take this ground. I have to construe a certain set of Acts of Parliament, and I construe them as well as I can, taking all the circumstances into view which I think ought to be taken. The origin of the legislation is clearly the desire to protect the monopoly of the Bank of England. Out of that there obviously branched, for some reason or other, a prohibition against country banks having branches in London. Out of that I think that there also branched words that cover banks of issue in Scotland. It does not seem to me that the question of the monopoly interferes. I cannot say whether or not the prohibition of country banks of issue having branches in London was because the Bank of England was afraid of the issue. I should suppose that it was because they were afraid of the country banks conducting a large London business.

431. Are you aware that the Bank of England has never made any complaint of the Scotch banks coming to London?-I know nothing whatever about it; I have simply read through the Acts and endeavoured to represent as well as I could to the Government what I thought was the law.

432. Do you draw any distinction between the Scotch banks and the Irish banks which have come to London and the colonial banks which are banks of issue?-So far as I know, none. I have not looked into the matter as regarded any of the other banks, simply because I had not time.

433. Does the same objection which you think applies to the Scotch banks apply to the colonial banks and foreign banks?-Yes, I think it must >apply to all if they are joint stock banks of issue.

434. So that it rests upon the fact of their issuing ?--I think so; it appears to me that that must be the interpretation. I think it is well covered by the words; but I admit that any other person is entitled to a different opinion.

435. Do you know anything of the circumstances of the passing of the Royal Bank of Scot

437. I understand you to say that you do not consider the fact of the absolute prohibition of the circulation of Scotch notes to affect the questions which have just been addressed to you by the honourable Member for Stirling; we have had it in evidence that the law absolutely prevented the circulating of, or dealing in, or exchange in England of a Scotch note under 5l., and you think that that fact does not place the Scotch banks in a different position from the English banks of issue?--I do not, with respect

to the words.

438. You confine yourself then not at all to the general policy of the Acts which you have already said appears to you to be to prevent the competition with the Bank of England issue of the private banks' issue; but you are now giving us your impression of the verbal reading of those Acts?-I take the Acts as I usually do; it is not possible to separate policy altogether from the words, because the words in a certain degree show the policy. If I find words that over-ride the policy, I construe those words as best I

can.

439. The notes of the English banks are current in England so far as they are popular with the people of England; but the issue of Scotch banks is illegal in England, and therefore the competition which might ensue between the issue of the English banks and the issue of the Bank of England, could not ensue in the case of the Scotch banks; is not that so?-I do not see that that affects the question.

Mr. Mundella.

440. I want to ask you substantially the same question which I asked Mr. Fitzjames Stephen, which is this: Do you agree with him, as the sum of your evidence, that no bank having a note issue in Ireland, Scotland, the colonies, or elsewhere, can legally transact banking business in London ?-I think they cannot have any house of business or establishment as bankers in London or any place or places not exceeding a distance of 65 miles from London, if they are joint stock banks of issue.

441. Do you agree with him also that it is illegal to cash any note under 5 l.?—I know nothing about that.

442. You consider that it is illegal for any foreign bank (and for this purpose, Ireland, Scotland, and the colonies are foreign countries) to transact business in London, having note issues in their own localities?—I do not think it is illegal for them to transact business; they are not to have a house of business or establishment as bankers, which I should think is different; I suppose they may have agencies.

443. If any banks in Ireland, Scotland, or the colonies having a note issue, establish a banking business in London, it would be illegal, would it not?-It would.

444. Then if that is the case, is it necessary to introduce a further Act of Parliament to make it illegal ?-I should think exactly the contrary; because the real truth is that there is so much

29 April 1875.

Mr. Mundella-continued.

doubt about it, that I should, if I were advising the Government, do exactly what was done with respect to banks of deposit in 1833; I should clear up the question in one way or other by an Act of Parliament.

445. You think that there is so much doubt about it that it is necessary that there should be an Act of Parliament ?-Certainly. I began by stating that my own opinion was in favour of the Scotch banks being excluded from coming to London; but there is the greatest possible difficulty with respect to the question, in my judg

ment.

Mr. William Shaw.

446. I think you stated to the Committee that the Act of 1833 cleared up something very distinctly what did it clear up?--I have not mentioned the Act of 1833.

447. I thought you said, in answer to the honourable Member for Sheffield, that we ought to do now as was done in 1833 ?-There is a clause in the Act of 1833 which declares that banks of deposit may be established; that clause was obviously intended to clear up doubts, because the Attorney General and Solicitor General, or some other great people, had said that there was a doubt.

448. Then, according to your notion, there is a great deal of illegality about the present state of banking in London ?-Certainly, so far as I have stated.

449. Have you read the speech of the Chancellor of the Exchequer in introducing the Act of 1833?-I have not.

450. Are you aware that he stated distinctly there that his only object was to prevent competition with the Bank of England?—I think it is very possible.

451. But Scotch and Irish banks do not compete with the Bank of England, do they?—That is quite possible, but that is one of the questions I cannot answer.

Mr. Leveson Gower.

452. You think it desirable to introduce an Act because the law is doubtful; would it not be best to find it first whether the law is doubtful or not? I do not quite see how you would find it out; besides, then you might do great injustice. So far as I can judge, the whole question is in a state of great difficulty; it is impossible to say what is the law; I would say, with great humility, that it would be very difficult to say what ought to be the law, but I should certainly legislate upon the question; I think both the policy and the law are altogether doubtful.

Mr. Backhouse.

453. The words of the Act of 1828 (9 Geo. 4, c. 65), are that if any corporation or person, "by any art, device, or means whatsoever, publish, utter, negotiate, or transfer in any part of England any promissory or other note, draft, engagement, or undertaking in writing, made payable on demand to the bearer thereof, and being negotiable or transferable, for the payment of any sum of money less than 57." he or they shall be subject to a penalty of 207.; what do you understand that to refer to ?-I should say that that meant simply transferring between different people, and did not mean simply the changing of a note, but that it was intended to stop the circulation of those notes in England.

Mr. Backhouse-continued.

454. Has your attention been drawn to clause 4, of the Act of George the Fourth, the Act of 1826, with regard to two or more persons being members of a banking corporation, resident in England, being the registered officers under the Act?-It has not.

455. Does not that rather confirm the preamble with regard to the Act being confined to persons having their banking establishments in England? Yes; I think it is in favour of it.

Mr. Hussey Vivian.

456. Mr. Fitzjames Stephen based his opinion that the Act of 1826 was confined to England, first, on the fact that the title of the Act is "for the better regulating of co-partnerships in England," has your attention been drawn to that particular point?-No; but surely that would not confine it to England, except in the sense that it prohibited other companies from coming into England.

457. I understand that you are of opinion that under the Act of 1826, any joint stock bank, wherever it may be, may establish a branch outside the 65 miles radius ?-That is my opinion; but I am bound to say, as I replied to another honourable Member, that Mr. Fitzjames Stephen is against me, and no doubt that particular clause which he quoted, is rather in favour of the ex

tension.

458. The recital of that Act is not contained in the notes which you gave to the Committee; may I ask whether your opinion is in any way modified by reference to the title of that Act, which is "an Act for the better regulating of co-partnerships of certain bankers in England"?— I think that it is in favour of Mr. Fitzjames Stephen's opinion as against mine.

459. In the fourth section of that Act, I think you will find that registration is required of such co-partnerships in London ?-I think that again, as I replied to an honourable Member of the Committee, is in favour of Mr. Fitzjames Stephen's opinion.

460. Then you will find that there is a provision in the first section: "That every member of any such corporation or co-partnership shall be liable to and responsible for the due payment of all bills and notes which shall be issued, and for all sums of money which shall be borrowed, owed, or taken up by the corporation or co-partnership of which such person shall be a member," that makes every one who constitutes that joint stock company liable for the whole of its debts, does it not?-Certainly.

461. Then supposing that the persons who constituted that joint stock company were out of this country, and were at a great distance, say in China, it would be exceedingly difficult to estalish their liability in England, would it not, and to recover against them?-True.

462. The manifest intention of the Act was to secure the payment of any notes which the corporation might issue, was it not?-Yes, I presume that the intention of putting in that clause was to prevent limited liability banking companies coming into England.

463. Or foreign banking companies in which the partners would not be accessible or amenable to the English law ?-Yes. I fancy the meaning of it is this: at that time there were no limited liability companies allowed in England except the Bank of England, and therefore it is,

in

Mr. Hussey Vivian-continued.

in fact, a prohibition against a limited liability company coming into England.

464. I understood that the opinion which you first expressed was that joint stock companies, wherever they might be domiciled or located, had the right under the Act of 1826 of establishing branches outside the 65 mile radius ?-Yes, I said I rather thought they had.

465. But in the first place that Act is an Act for regulating co-partnerships in England; England; secondly, it is required that those co-partnerships shall be registered in London; and, thirdly, it is provided that each partner in those co-partnerships shall be individually liable. I want to know how you think that those provisions are consistent with the domicile of the company being in any remote portion of the world?-My opinion is certainly shaken as to the part of England beyond the 65 miles radius.

466. It seems to me that this Act is distinctly an Act for England, and I wished to have my mind cleared as to the inference which may be drawn from the various provisions which I have now cited; do they not show that it is an Act. limited to the regulation of co-partnerships in England? So far as I understand, with respect to the 65 mile limit, that is so, but I also think that there is a great deal to be said for Mr. Fitzjames Stephen's opinion that they cannot

come at all.

467. What I want to ask is, whether the whole scope and provisions of that Act do not point to its being an Act to regulate, as it states in the preamble, co-partnerships in England?-Certainly. Supposing that you made a monopoly with respect to London, then of course you would affect all the rest of England, and not London only. If you create a monopoly or quasi monopoly with respect to England, you surely affect every other country; you do not confine it to England in that sense.

468. Parliament, as it appears to me, was extremely cautious when it gave this great power and opened the door to joint stock banks, in providing that the parties who accepted the notes of any such joint stock bank should really hold a valid security, or otherwise there is no meaning in that proviso which I have read?-No doubt tendency to exclude other people.

469. It is clear, is it not, that the intention of that provisio was that there should be a substantial backbone to the note that was issued ?-Yes, I think so.

470. Then assuming that this Act enabled a joint stock banking company, from any part of the world, to open a branch in England and to issue notes, surely this proviso would be inconsistent with that?-No doubt it strengthens the argument of Mr. Fitzjames Stephen in favour of a more enlarged version of the Acts.

471. You have three points; you have first of all the title of the Act that it is to regulate copartnerships in England; next that those copartnerships must be registered in London; and thirdly that each individual constituting those co-partnerships is liable for the whole of the debts of the co-partnership. It seems to me that all those things are inconsistent with the possibility of that Act including co-partnerships outside of England?-I do not think they are inconsistent with the possibility of it, but I perfectly admit that they are in favour of Mr. Fitzjames

472. Supposing that a Scotch incorporated company had a right to come to England, and that they incorporated themselves under this Act, would they not be as much under this Act as an incorporation of Englishmen ?-If a Scotch company gets an English incorporation, it becomes an English company.

473. And therefore if they were entitled to come here and were incorporated, this Act would apply to them as much as to Englishmen, would it not?-A company may be composed of Scotchmen and yet be an English company. If it is registered in England it is an English company and not a Scotch company at all.

474. And therefore the argument of the honourable Member is not applicable; it only rendered it necessary for any company transacting banking business to be incorporated under this Act?-I understood the honourable Member to ask me with respect to a company domiciled outside of England. A company may be domiciled in England and not consist of English

men.

475. But I suppose that if a company came to England and were incorporated under this Act, their domicile would be England?-A company cannot come in its corporate capacity.

476. Supposing that a bank came from Australia, and was incorporated under this Act, and had its domicile in England, for the purposes of this Act, would not its domicile be England? -If it be possible for an Australian company to get rid of its Australian character, and be domiciled in England, it follows of course that it is an English company; but I am not aware of any method by which it can be done.

Mr. Backhouse.

477. Will you tell me whether an action would lie in England against a Scotch bank as at present constituted, if it were not registered under the English Acts, or whether the action would have to be brought in Scotland ?-S.posing that a Scotch bank has a legal branch in London, I believe you may bring an action against it in England; but my opinion is not worth anything upon the subject, unless I had time to get it up.

Mr. Beckett Denison.

478. You remember, of course, that the Act of 1826, c. 46, and the Scotch Act of 1826, c. 67, received the Royal assent on the same date; do you think it at all probable that with two Acts before Parliament at one and the same time, one of them referring specially to Scotch banks, any point in their position as regards their powers in England would have been left doubtful at that time?-I think that the currents of Scotch and English legislation on these matters have run entirely separately.

Sir John Lubbock.

479. The co-existence of those two Acts is an additional argument in favour of the view of the honourable Member for Glamorganshire, is it not?—I think that the whole of banking legislation has always practically considered Scotland, and Ireland, and England as separate countries.

29 April

1875.