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Appendix, No. 1.

Effect of prohibitory

enactments.

Summary.

To sum up, the effect of the foregoing enactments appears to be that the prohibitions contained in the Acts of 1697 and 1707, as explained and reiterated by the Act of 1800, absolutely forbidding the establishment of joint stock banks of issue, are still in force except in so far as they are modified by subsequent legislation; that such modification amounts only to allowing such joint stock banks to be established before 1844 beyond the 65-mile limit from London, provided they have no branch in London, and to abolishing the restrictions with respect to their dealings with bills of exchange.

The total result of the foregoing enactments as to banks of issue appears to be :-
(1.) That no country bank of issue consisting of more than six persons can have a
branch bank in London.

(2.) That no country bank of issue can increase its numbers beyond six without
forfeiting its issue.

(3.) That no country bank of issue can issue any amount of notes beyond the average amount it issued at the time of the passing of the Act of 1844.

(4.) That no country bank of issue can issue notes within the City of London, or 65

miles thereof.

(5.) That notes cannot be issued of a less value than 5 1.

Enumeration of
Scotch banks.

Dates of establihment of Scotch banks.

Law as to issue of notes in Scotland.

Comparison of privileges of English and Scotch banks.

PART II.

HISTORY OF BANKING IN SCOTLAND.*

Banking in Scotland is conducted by eleven joint stock banks, all of them banks of issue; they are—

1. The Bank of Scotland.

2. The Royal Bank of Scotland.

3. The British Linen Company.

4. The Commercial Bank of Scotland.

5. The National Bank of Scotland.

6. The Union Bank of Scotland.

7. The Aberdeen Town and County Banking Company.

8. The North of Scotland Banking Company.

9. The Clydesdale Banking Company.

10. The City of Glasgow Bank.

11. The Caledonian Banking Company.

The first of these banks, the Bank of Scotland, was founded by Parliament in 1695. The second, the Royal Bank of Scotland, by charter, dated 1st May 1727. The third, the British Linen Company, by Royal charter, dated 6th July 1746. The fourth, the Commercial Bank of Scotland, by a Royal charter, dated the 5th August 1831. The fifth, the National Bank of Scotland, was established on the 21st March 1825, by contract of copartnership. The remaining six banks have been constituted since the year 1825 as joint stock companies under contracts of copartnership, and with the exception of the Caledonian Banking Company, have all been registered and incorporated under the Cʊmpanies Act, 1862.

The right to issue bank notes is conceived to be a common law right in Scotland, and until 1844 no restrictions were ever placed on the issue, except a provision that a bank note should not be issued for less than 20 s.† The Act of 1844, 7 & 8 Vict. c 32, s. 10, provided that from and after the passing of that Act no person other than a banker, who on the 6th May 1844 was lawfully issuing his own bank notes, should make or issue bank notes in any part of the United Kingdom; and in 1845 this Act was followed by 8 & 9 Vict. c. 38, which provided that the Commissioners of Stamps and Taxes should ascertain, as respects each bank of issue in Scotland, the average amount of its circulation during the year preceding the 1st May 1845, and it was declared that such bank should thenceforth be prohibited from issuing its own notes beyond the certified average amount and monthly average amount of gold and silver coin, held by such bank at the head office or principal place of issue.

Comparing then the privileges of Scotch banks with English, it appears that they can issue notes of a minimum value of 1 l., whilst the English banks are restricted to a inini

mum

• The information as to banking in Scotland is derived from Mr. Fleming's memorandum. (See Appendix 2.)

A provision to this effect is contained in the Act of 1845, 8 & 9 Vict. c. 38, s. 5.

mum value of 5 l.; that they can issue notes against gold to any amount, whilst they are Appendix, No. 1. subjected, at all events in their own country, to none of the restrictions to which country banks of issue are subjected in England.

It would further seem that Scotch banks of issue may issue notes of 5 l. and upwards in England, as such notes do not fall within the prohibition of 9 Geo. 4, c. 65.

Account of Act

There is one additional fact which it is necessary to notice in relation to Scotch banking enabling Royal as having a possible bearing on the case. The charter of the Royal Bank of Scotland Bank of Scotland gave the bank power to exercise the right of banking in that part of the United Kingdom to have a branch in called Scotland only, and in consequence of this it was probably illegal for the bank to establish any agency out of Scotland. From the year 1866 to the year 1872 applications were from time to time made to the Government to grant them a supplemental charter permitting them to have branches in England. These applications were refused, but last year the Royal Bank of Scotland having brought in a private Bill to enable them to carry on the business of banking in any part of the United Kingdom, the Government allowed the Bill to pass on condition that their power to carry on banking was restricted to London, and that they were forbidden to issue their notes elsewhere than in Scotland.

PART III.

GENERAL CONCLUSION.

Such being the circumstances of the case, the first question is whether it is or is not legal for Scotch joint stock company banks of issue to establish branches in England. In answer to that question it is submitted that the prohibitions contained in the Acts of 1697 and 1708 and repeated in 1800 are still in force, with the special modification introduced by the Act of 1826, and are perfectly general in their terms and extend to Scotch banks of issue as well as to country banks of issue in England, and consequently that, with the exception of the Royal Bank of Scotland, which is empowered by Act of Parliament to have a branch in Londou, all other branches belonging to Scotch banks of issue in London or within 65 miles thereof are illegal. † On the other hand, there does not appear to be any legal prohibition against the Clydesdale Banking Company establishing their branches in Cumberland, being at a distance of more than 65 miles from London. With respect to the expediency of restricting by law the Clydesdale Banking Company coming into England, many arguments may be urged in its favour. Scotch joint stock banks are subject to none of the special restrictions under which English country banks labour. Scotch banks can increase their partners to any number, can issue notes against gold, and last, but not least, have power to circulate notes of a minimum value of 17. It is submitted that the Government may fairly say, "If you desire the privileges of Eng"lish country banks, you must submit to the restrictions, and we will deprive you of your "privilege of issuing notes of a minimum value of 1 l., and of issuing notes at all against "securities, or else you must submit to withdraw your branches from England." The policy of the Government has ever been to maintain the existing restrictions on English country bank notes with a view to eventually make an arrangement whereby their issues may be brought to an end. This policy must be abandoned unless some restrictions are placed on the Scotch banks, as it would seem impossible to leave the banks of one part of the United Kingdom subject to restrictions from which those situate in another part of the United Kingdom are free.

In a political point of view, then, the inquiry would seem to resolve itself into this; which is the more expedient course, to relax the restrictions to which English country banks of issue are subject, or to cause the Scotch banks to withdraw from England under the threat of being placed on a par with the English banks by having the value of their notes restricted to a minimum of 5 l., and no issues permitted against securities. 25 May 1874.

Henry Thring.

In 1826 it was the intention of the Government to have extended the prohibition of 1 1. and 27. notes to Scotland and Ireland, but so much ferment was excited in Scotland that the intention was abandoned. + Act of 1697, 8 & 9 Will. 3, c. 20; Act of 1708, 7 Anne, c. 7 (c. 30, in Record Edition); Act of 1800, 39 & 40 Geo. 3, c. 28; Act of 1826, 7 Geo. 4, c. 46.

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APPENDIX 1

SUMMARY OF ACTS IN FORCE RELATING TO BANKING IN ENGLAND.

Title of Act.

An Act for granting to their Majesties

several rates and duties upon tonnage of
ships and vessels, and upon beer, ale,
and other liquors, for securing certain
recompenses and advantages in the said
Act mentioned, to such persons as shall
voluntarily advance the sum of fifteen
hundred thousand pounds towards carry-
ing on the war against France.

8 & 9 Will. 3, c. 20, An Act for making good the deficiencies of

8. 28.

3 & 4 Anne, c. 9 (c. 8 in Record edi

tion).

6 Anne, c, 32. Record edition, 6 Anne, c. 59.

7 Anne, c. 7, s. 61 (c. 30, s. 66, in Record edition).

1709

8 Anne, c. 1

several funds therein mentioned; and for
enlarging the capital stock of the Bank of
England; and for raising the public credit.
An Act for giving like remedy upon pro-
missory notes as is now used upon bills of
exchange, and for the better payment of
inland bills of exchange.

An Act for regulating the qualifications of
the elections of the Governor, Deputy
Governor, Directors, and Voters of the
Governor and Company of the Bank of
England.

An Act for enlarging the capital stock of
the Bank of England, and for raising a
further supply to Her Majesty, for the
service of the year one thousand seven
hundred and nine.

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Makes all notes in writing made and signed by any person or body politic or corporate, or by the servant or agent of any corporation, banker, goldsmith, merchant, or trader, usually entrusted with such power of signature, and containing a promise to pay to any person or persons, body politic or or corporate, his, her, or their order, or unto bearer, any sum of money mentioned in such note, assignable and endorsable in the same manner as inland bills of exchange are or may be according to the custom of merchants; and by s. 2 the payee is enabled to maintain an action on such notes.

During the continuance of the Bank of England, no company or partnership exceeding six persons, in England, to borrow, owe, or take up any sum or sums of money on their bills or notes, payable on demand, or at any less time than six months from the borrowing thereof.

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This prohibition was originally contained in 6 Anne, c. 22, in Ruffhead's edit. (6 Anne, c. 50, in the Record edit.), repealed Statute Law Revision Act, 1867. See also 4 Geo. 3, c. 25, s. 13 (1763), repealed Statute Law Revision Act, 1870.

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This Act relates to capital only.

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An Act for granting an aid to Her Majesty,
to be raised by a land tax in Great
Britain for the service of the year one
thousand seven hundred and ten.

An Act, the title of which begins with the
words, "An Act for redeeming several
funds," and ends with the words, "and
for other purposes in this Act mentioned."

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It is the true intent and meaning of this Act, that (1) during the continuance of the said privilege granted to the Governor and Company of the Bank of England, no other bank shall be erected, established, or allowed by Parliament; and (2) that it shall not be lawful for any body politic or corporate whatsoever, erected or to be erected, or for any other persons, united or to be united in covenants or partnership exceeding the number of six persons, in that part of Great Britain called England, to borrow, owe, or take up, any sum or sums of money on their bills or notes, payable on demand, or at any less time than six months from the borrowing thereof, during the continuance of the said privilege to the said Governor and Company, who are hereby declared to be and remain a corporation, with the privilege of exclusive banking, as before recited, subject to redemption on the terms and conditions in this Act mentioned. See above, 15 Geo. 2, c. 13.

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Observations.

APPENDIX 1.-Summary of Acts in Force relating to Banking in England-continued.

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Nature of Body created.

Copartnership, with power to sue
and be sued, of more than six
persons beyond 65 miles from
London.

Special Provisions as to Banking.

Power to make and issue their bills or notes at any
place or places in England, exceeding the distance
of sixty-five miles from London, payable on de-
mand or otherwise, at some place or places specified
upon such bills or notes, exceeding the distance of
sixty-five miles from London, and not elsewhere, and to borrow, owe, or take up any
sum or sums of money on their bills or notes so made and issued at any such place
or places as aforesaid: Provided (1) that such corporations or persons carrying on
such trade or business of bankers in copartnership shall not have any house of busi-
ness or establishment as bankers in London, or at any place or places not exceeding
the distance of sixty-five miles from London; and (2) that nothing shall extend to
enable any such corporation or copartnership, either by any member of or person be-
longing to any such corporation or copartnership, or by any agent or agents, or any
other person or persons on behalf of any such corporation or copartnership, to issue or
re-issue in London, or at any place or places not exceeding the distance of sixty-five
miles from London, any bill or note of such corporation or copartnership, which
shall be payable to bearer on demand, or any bank post bill; nor to draw upon any
partner or agent, or other person or persons who may be resident in London, or at
any place or places not exceeding the distance of sixty-five miles from London, any
bill of exchange which shall be payable on demand, or which shall be for a less
amount than fifty pounds: (3) that nothing in this Act contained shall extend to
enable or authorise any such corporation or copartnership exceeding the number
of six persons, so carrying on the trade or business of bankers in England as afore-
said, or any member, agent, or agents of any such corporation or copartnership,
to borrow, owe, or take up in London, or at any place or places not exceeding the
distance of sixty-five miles from London, any sum or sums of money on any bill
or promissory note of any such corporation or copartnership payable on demand,
or at any less time than six months from the borrowing thereof, nor to make or
issue any bill or bills of exchange or promissory note or notes of such corporation
or copartnership contrary to the provisions of the said recited Act of the thirty-
ninth and fortieth year of King George the Third, save as provided by this Act in
that behalf.

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1828

9 Geo. 4, c. 65

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