It

99. The Act of 1833 is an Act interpreting the Act of 1826, is it not?-No; the Act of 1833 is an Act interpreting the exclusive privileges of the Bank of England, which exclusive privileges were originally dependent upon the Act of 1697. The Act of 1697 (quoted on page 3 of Sir Henry Thring's Memorandum) is in these words: "That during the continuance of the Corporation of the Governor and Company of the Bank of England, no other bank, or any other corporation, society, fellowship, company, or constitution, in the nature of a bank, shall be erected or established, permitted, suffered, countenanced, or allowed by Act of Parliament, within this kingdom"; that is, within England. was found that that was not sufficient to guard the exclusive privileges of the Bank of England, and in the year 1708, another Act (7 Anne, c. 7) was passed, enacting, "That during the continuance of the said Corporation of the Governor and Company of the Bank of England, it shall not be lawful for any body politic or corporate whatsoever, erected or to be erected (other than the said Governor and Company of the Bank of England), or for any other persons whatsoever 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 at demand, or at any less time than six months from the borrowing thereof." Then there followed a variety of Acts securing to the Bank of England those exclusive privileges in pretty much the same terms. Then there broke out the dispute between the Government and the Bank of England in 1833; and the Act of 1833 was declaratory of what the exclusive privileges of the Bank of England were, but in a sense totally opposed to the sense previously attached to them by the Bank of England. In short, the Government and the Bank of England negotiated for an increase of privilege to joint stock banks, which the Bank of England resisted, and it was only when the state of the law was discovered that they were obliged to give way.

100. Then your contention is, that the Government and the Bank of England in this negociation deliberately made an arrangement by which the Scotch joint stock banks might come to London, whereas English joint stock banks were prohibited from doing so?-I do not mean to put it in that light, by any means. All I mean to say is this, that in 1833 for the first time the Government desired that joint stock banks should be at liberty to conduct business in the City of London or within the 65 miles circle; the Bank of England resisted that proposal; the Government consulted their law advisers, and were told that the Bank of England were entirely wrong in the interpretation which they were putting upon their exclusive privileges; and that being so, and in order to make it clear that joint stock banks might be established in London without contravening the privileges of the Bank of England, this Act was passed. It was declaratory so far of what was then for the first time discovered to

Sir John Lubbock-continued. have been the law all through; but it was intended to carry out a policy, to which the Government committed themselves, of permitting the introduction or the erection of joint stock banks in the City of London.

101. You do not think it at all probable that the Government of the day wished to give a privilege to Scotch joint stock banks which they deliberately withheld from the English joint stock banks?—Not specially; but I think it was the policy of the Government to permit the introduction of all joint stock banks into England, Scotch, Irish, or foreign, because those banks in no way whatever affected the exclusive privileges of the Bank of England; that is to say, they did not come into competition with the right of issue, which was the thing which the Government desired should remain exclusively in the hands of the Bank of England; and that was the principle upon which the law was changed.

102. Your case as regards the Act of 1833 rests in the main upon the third clause, does it not?-It does as regards London.

103. That clause recites the Act of 1826, and then proceeds to remove doubts which have arisen with reference to it, does it not?-That is so.

104. It surely therefore did not intend to convey privileges which clearly were denied by the Act of 1826, but its object was rather to remove doubts which had arisen as to the interpretation of the Act of 1826?-The object of the Act was to make it clear that privileges which had never been thought of in 1826 were not infringements of the exclusive privilege of the Bank of England.

105. Therefore it must be interpreted by the Act of 1826, and no privileges which were clearly not given by the Act of 1826 could be given by the Act of 1833?—That by no means follows, I think, because it was the very object of the Act of 1833 to permit what the Act of 1826 expressly prohibited. The Act of 1826 prohibited any joint stock banks coming to London or within 65 miles of it, whereas the Act of 1833 was expressly and avowedly for the purpose of allowing the formation of joint stock banks within the 65 miles circle.

106. But that was limited to banks which did not owe any sum of money on bills or notes payable on demand, was it not?-In England.

107. And therefore no banks which did not come under the Act of 1826 could come under the Act of 1833, so far as regards this clause?— No banks could come to London at all under the Act of 1826. It was not till the passing of the Act of 1833 that any joint stock bank could come, and no such bank was established in London before 1833.

108. Then what was the meaning of the words, "doubts have arisen as to the construction of the said Acts"?-I have endeavoured to explain that already, but I shall be glad to repeat my explanation. Under the Act of 1697 it was believed that the Bank of England had acquired exclusive privileges of banking in England except to this extent, that partnerships with not more than six members should be at liberty to carry on the business of banking. That idea continued to possess the public mind, as well as the banking mind, up to about the year 1822, when a new idea was ventilated, that upon a strict interpretation of the exclusive privileges of the Bank of England they were something

totally

Sir John Lubbock-continued. totally different from what had previously been supposed. That new notion did not take hold of the public mind or of the banking mind either, and it was not until the year 1833 that it was thoroughly investigated. The Government of the day asked advice upon the subject from their own law officers, and they were told that the true interpretation of the old privileges of the Bank of England was that there had never been from the year 1697 down to that time, any exclusion in any part of England of banks of deposit with any number of partners. It was in order to give effect to this new discovery that the Government passed the Act of 1833, but it was a perfectly new theory of the exclusive privileges of the Bank of England that was then started.

Mr. Beckett Denison.

109. I will not ask you anything regarding the London banks, but I wish to have this perfectly clear, that according to your view of the law it was only the Act of 1826 which enabled Scotch banks, with their privileges of issue, to come into the English provinces within the 65 mile radius?-I think so. No joint stock bank with more than six partners, according to the notions then existing, could have come to England at all; it did not matter whether they were English, Irish, Scotch, or foreign.

110. When you speak of joint stock banks, you put all the Scotch banks, whether chartered or not, on the same footing, do you not?-I do.

111. Then the whole question, as regards the dispute which has given rise to this Committee, between the Scotch banks and the English provincial banks, will turn upon the construction of a particular clause of the Act of 1826 ?—I should say to the Committee that, as representing here merely the Royal Bank of Scotland, I feel that I have no interest in that question, because the Royal Bank of Scotland has by its constitution no power to go into the provinces of England. It is, perhaps, right that, at this stage of my examination, I should state the position in which I am before the Committee. I have been unexpectedly summoned to appear, before any meeting of the Scotch banks has been held, and in no sense of the word can I be regarded as a representative of the Scotch banks. Therefore, in all that I may say, I must be regarded as simply expressing my own individual opinions, without binding the Scotch banks to anything. Dealing with myself as the representative simply of the Royal Bank of Scotland, and as called upon to give information to the Committee, which I am very willing to do. I should say that the Royal Bank of Scotland had no interest whatever in the question of the provinces. By their special Act of Parliament of 1873, they consented as a matter of stipulation with the English provincial bankers, having no intention to go into the provinces, to limit the powers sought by their Act; and accordingly their powers are limited to London.

Mr. Anderson.

112. At the time you drew up these notes of yours, had you seen Sir Henry Thring's note ?— No; I never saw Sir Henry Thring's note till two days ago. The Lord Advocate, about a year ago, requested me to see Sir Henry Thring about this matter. Sir Henry told me what he had been instructed by the Government to do, and asked

Mr. Anderson-continued.

me if I would furnish him with a memorandum

specially applicable to Scotland, and I did so.

113. You have now seen the general conclusion, have you not?-I have not seen the general conclusion until this moment.

114. He there sums up what he considers to be the state of the law?-That is not in the copy which the Chancellor of the Exchequer kindly sent to me.

115. I gather from the evidence which you have already given, that you differ entirely in opinion as to the legal position of the case with reference both to the provinces and to London? -Apparently, judging from this, Sir Henry Thring is of opinion that there is no legal prohibition against the Clydesdale Banking Company establishing branches in Cumberland, being more than 65 miles from London.

116. And he appears to draw no distinction between its bringing its issue and leaving its issue behind?-Clearly it cannot bring its issue with it; that is perfectly plain. The Act of 1844 expressly prohibits any bank not carrying on business in England, on the 6th of May 1844, from issuing bank notes thereafter; so that no Scotch or Irish bank could issue a single note in England.

117. Then, although Sir Henry Thring does not say so, he must have meant that?-No doubt.

118. I think you have stated that, according to your opinion, an English bank of issue had a perfect right by law to go to Scotland, leaving its issue behind it in England?-Undoubtedly.

119. It could go into Scotland and do all general banking business in Scotland provided it left its issue in England?-Certainly.

120. And you consider that the state of the law with reference to a Scotch bank of issue is just the same, and that it can go to England and do business there, provided it leaves its issue behind it ?-Exactly; provided it leaves its issue behind it, and provided it has power by its own constitution to go.

121. Its own constitution is a matter of internal regulation, is it not?-No doubt.

122. With regard to the monopoly of the Scotch banks in Scotland, is it the Act of 1845 that creates that monopoly?-It is the Act of 1844 that creates what is called a monopoly; but I do not admit that it is a monopoly of banking: it is a monopoly of issue, I admit.

123. That monopoly of issue has had the effect, has it not, of creating a monopoly of banking?— I cannot admit that, but I know it is a disputed point. That it has practically had that effect is undoubted; but when I look to Ireland and find that banks have been established there in the face of a right of issue much more valuable than that exists in Scotland, I cannot admit that it is a necessary effect.

any

124. Do you think that it is from that Act that the monopoly has sprung ?—I do not.

125. Do you know anything of the Act of 1846 as to joint stock banks in Scotland ?—I do not recollect any Act of 1846. The Act of 1844 created a monopoly of issue, because it declared that in no part of the United Kingdom should any new bank of issue be established; therefore from the passing of the Act of 1844 the existing Scotch banks have had a monopoly of issue, just as the existing Irish banks and the existing English banks have had in their respec

Mr. Anderson-continued.

tive countries. The Act of 1845 had no bearing upon that question; it was the Act of 1844 that did it.

126. You base the case of the Scotch banks coming to London upon the Act of 1833, and you called that a declaratory Act; but I think you must have meant that it was something more than declaratory, that it enacted as well as declared?--It professes to be a declaratory Act; but when one looks at the circumstances under which the Act was passed, it is plain that the Government resolved on a change in the law, and then discovered that there was no actual change in the law required, hence the declaratory character of it. The Government negotiated with the Bank of England for a restriction of their exclusive privileges to the extent which was ultimately sanctioned by the Act of 1833, but they discovered that it was unnecessary to have entered into any such negotiation, because the law was as they

wished it to be.

127. Do you observe that in Clause 3 the words used are, "Be it therefore declared and enacted"?—Yes.

128. That makes it a little more than declaratory, does it not?-No doubt.

Mr. Mulholland.

129. I think I understand from you that the Act of 1826 interfered with the previous privileges of the Bank of England so far as to permit issues outside of the 65 miles radius ?-Not so far as to permit issues, for issues had always been permitted; any persons might carry on business as bankers in England, provided they were not a partnership of more than six partners. The Act of 1826 was the Act which for the first time permitted the establishment of joint stock banks.

130. And then the Act of 1833 interfered further with the so-called privileges of the Bank of England, by allowing banks which did not issue to come within the 65 mile radius ?—It did

So.

131. Then I think the Act of 1833 might be called declaratory with respect to the privileges possessed by the Bank of England, and enacting with respect to the power of banks to come to London and within the 65 mile radius; and that in that way it was both declaratory and enacting ?-Yes.

132. There is an apparent ambiguity in the phraseology of the Act of 1826, where it is enacted that bankers "shall have the whole of their banking establishments and carry on their business as bankers at any place or places in England exceeding the distance of 65 miles from London." There is a similar clause in the Act of 1833, where the same provision is repeated in different words: "Be it therefore declared and enacted, that any body politic, &c., consisting of more than six persons may carry on the trade or business of banking in London, or within 65 miles thereof, provided that such body politic, &c. do not borrow, owe, or take up in England any sum or sums of money." Does not that to some extent explain the provision in the other Act?The Act of 1826 is ambiguous, and I quite admit that it is subject to the interpretation put upon it by Sir John Lubbock.

133. I think you stated that the three old incorporated banks are, in your opinion, limited banks?-I think they are.

Mr. Mulholland-continued.

134. Then those banks would not have come within the provisions of the Act of 1826, would they? If they had availed themselves of those privileges they would of course have incurred the liability, but that liability is a good deal more restricted, I think, than it would appear from Sir Henry Thring's Memorandum to be; because it only extends to money owed or taken up in respect of notes payable on demand, or of bills at six months. They would not have incurred universal liability for any other description of obligation.

Mr. Orr Ewing.

135. You think that the words referred to by the honourable baronet the Member for Maidstone are a little ambiguous; do you not think that the Act of 1826, limiting the circulation of notes below 51. of Scotch and Irish banks, precludes the interpretation which he puts upon them? I think so; I think that the Act of 1828 shows that at some time or other somebody must have had in contemplation the possibility, if not the probability, of Scotch and Irish banks carrying on business in England, and actually issuing notes; they never did so, certainly.

136. You referred, in speaking specially of the enactments of 1826 and 1833, to a correspondence and to speeches that were made upon the subject; could you read some of the pithiest sentences of them to the Committee?-The letter that I referred to was addressed to the Governor of the Bank of England by the Government, was dated 13th January 1826, and was signed by Lord Liverpool, who was then Prime Minister, and Mr. Frederick John Robinson, who was then Chancellor of the Exchequer. In that letter the Government discussed very fully the state of the country banking system of England, and contrasted it with the state of the Scotch banking system, with very strong disapproval of the English, and very strong approval of the Scotch system; so that in passing the Act of 1826 the position of the Scotch banks was prominently in the view of Government. Among other things in this letter the Government said: "In England there are said to be between 800 and 900 country banks, and it is no exaggeration to suppose that a great proportion of them have not been conducted with a due attention to those precautions which are necessary for the safety of all banking establishments, even where their property is most ample. When such banks stop, their creditors may ultimately be paid the whole of their demands; but the delay and shock to credit may in the meantime involve them in the same difficulty, and is always attended with the greatest injury and suffering in the districts where such stoppages occur. If this be the case where the solidity of the bank is unquestionable, what must it be when (as too often happens) they rest on no solid foundation? In Scotland there are not more than 30 banks, and these banks have stood firm amidst all the convulsions in the money market in England, and amidst all the distresses to which the manufacturing and agricultural interests in Scotland, as well as in England, have occasionally been subject. Banks of this description must necessarily be conducted upon the generally understood and approved principles of banking." Then, further on, they say, The effect of the law at present is to permit every description of banking except that

which

Mr. Orr Ewing-continued. which is solid and secure." I refer to that as leading me to think that the Scotch banks having been so prominently in the view of the Government immediately before the introduction of the Act of 1826, it is a fair conclusion (I do not say that it is absolutely proved) that as the object of the Government was to introduce into England a system similar to that of the Scotch banks, there is no reason why the Scotch banks themselves should not have been left at liberty under the Act to come here. That is rather supported by the view of Sir Robert Peel, as expressed on the introduction of the Bill of 1826, when he said that, "He could not help thinking that if in the year 1793 a set of banks had been established in this country on the system of the Scotch banks, it would have escaped the danger in which it was then involved, as also the certainty which now impended over it." Then Lord Liverpool, in introducing the Act in the House of Lords, used some very strong language with regard to the English banks, which I do not care to repeat; but he again speaks in terms of commendation of the Scotch banks. Sir Robert Peel's speech is at page 291 of the 14th volume of the second series of Hansard, and Lord Liverpool's speech is at page 462 of the same. volume; the one on the 13th of February 1826, and the other on the 17th of February of the same year.

Mr. Mundella.

137. Do I correctly understand that you are of opinion that, by the Act of 1826, Scotch bankers had a perfect right to establish branches anywhere in England outside the 65 miles radius? -I think so, otherwise the Act of 1828 is utterly unintelligible; for the Act of 1828 prohibits the circulation of 17. notes, and by implication leaves lawful the circulation of 51. notes and upwards. I cannot reconcile the passing of that Act with any other state of the law than the one which your question supposes.

138. Was not the intention of the Act of 1828 rather to enforce a previous prohibition under additional penalties against the circulation of Scotch and Irish notes in England?-It really does not matter whether that was so or not, from my point of view; because the implication is the valuable thing, as throwing light upon the policy of the Government in 1826. The implied right to circulate 57. notes necessarily, I think, leads to the conclusion that Scotch banks had the power to do the thing which, was not forbidden.

139. But the Act of 1828 reads thus: "Whereas an Act was passed in the seventh year of his present Majesty's reign" (that was the Act of 1826), intituled an Act to limit and, after a certain period, to prohibit, the issuing of promissory notes under a limited sum in England, and doubts may arise how far the provisions of the said Act may be effectual to restrain the circulating in England of certain notes, drafts, or under takings made or issued in Scotland or Ireland: be it therefore enacted," &c.; so that it is assumed that the Act of 1826 did prohibit the circulation of Scotch or Irish notes in England? Of 17. notes undoubtedly, but of no others.

140. And that Act puts an additional penalty upon their circulation, does it not?-Upon the circulation of notes under 57. undoubtedly. That was the object of the Act.

Mr. Mundella-continued.

141. Then, in your opinion, the Act of 1833 admitted the universal right to establish banks in London, of everybody except English Banks of Issue? That is my opinion.

142. Did you not obtain an Act yourselves last year to allow you to establish a bank in London ?-That is so.

143. If, in your view, the law, prior to the passing of your own special Act, allowed the Scotch banks to come to London and the English provinces, why did you stipulate last year not to enter the English provinces ?-For this simple reason that by our charter we were expressly confined to Scotland. We were incorporated in the year 1727 with power to carry on the business of banking in Scotland only, and therefore we were restrained by our own constitution. We did not ask Parliament to change the law for our benefit, but to relieve us of a restraint imposed by our own internal constitution, and to put us on an equality, in the eye of the law, with other banks.

144. Then with respect to establishing branches in England outside the 65 mile radius, you have put yourselves under a restraint under which no other Scotch bankers labour; is that so?—That is so. That was specially explained to the English bankers at the time it was agreed to, in a letter dated the 18th of February 1873, addressed by me to Mr. Wade, of the National Provincial Bank of England, who was the chairman of a committee of country bankers. That letter is as follows:-" Mr. Davidson, of the Bank of Scotland, has been good enough with your approval as I understand, to communicate to me the import of his conversation with you in London the other day, in regard to the Bill about to be introduced into Parliament to extend the powers of this bank. I gather from him that the committee of country bankers, of which you are the chairman, regard the Bill as objectionable in respect of the power which it would confer on this bank to enter into competition with them in English provincial towns, and that if the powers sought were restricted to London, the Bill would be deemed unobjectionable. If I had been aware last week of the objection now stated, I should have taken the opportunity when in London, of explaining to you personally the views and objects of the directors of this bank in promoting the Bill, and I lose no time now in saying that I am sure it has never been in their contemplation that this bank should carry on business in England elsewhere than in London. It is no doubt true that any Scotch bank now entitled to carry on business in London is equally entitled to do so in the provinces, and our Bill, in its present form, would therefore only put this bank on the same footing as other Scotch banks already established, or having the power to establish themselves in London. But so far as we are concerned, our main object is to secure the same facilities for conducting our business in London as other Scotch banks now possess; and if you will favour me by stating in what form you would wish the second clause of the Bill modified, so as to restrict its operation to London, I shall have pleasure in bringing the matter before the direc tors, and I think I may say, that no difficulty will be experienced in bringing the Bill into a shape which will secure for it the approval of

Mr. Mundella-continued.

the body you represent. Permit me to add, that nothing could be further from our wish than to be brought into conflict in any form with the English country bankers, with so many of whom this bank has for a very long period had the most friendly business relations." So that it was quite in view of the right of other Scotch banks, as I assume it to be, that we voluntarily limited the operation of the Bill to London, having no desire or intention of going to the provinces.

145. Is it not the fact that you have voluntarily placed yourselves under a statutory disability under which no other bank labours, in order that you might buy off the opposition of the London bankers?-On the contrary, there was no opposition of the London bankers.

146. What was the object of your placing yourselves under that voluntary disability ?For the simple reason that we had no power to come to London, and that we did not care for any other power than the power of coming to London, and we said, " If it pleases you, by all means have it so." It was done at the request of the English country bankers.

Mr. W. Shaw.

147. Your position respecting circulation is exactly the same, I suppose, as that of the Bank of England and the Irish banks ?-It is the same as that of the Irish banks, but not the same as that of the Bank of England.

148. You issue on gold, do you not?-We issue on gold,but we may have out more than our gold covers, provided, on the average, we do not exceed it. The Bank of England cannot send out a 5 l. note without having 5 l. in gold against it; they have not the advantage of averages that the Scotch and Irish banks have.

149. Has not the tendency of legislation in England upon this subject been to discourage all private issues?-No doubt.

150. And to make the Bank of England issue the issue of this country?-No doubt.

151. And there is an express machinery provided in the Act, is there not, for any banks giving up issues in England?-That is so. 152. There is no such machinery, is there, in the Acts extending to Scotland? No, there is not.

153. And if you had had, as the National Provincial Bank of England had to do, to give up your issue, there is really no way of supplying deficiency?-There is not.

154. You would have to issue the notes of your competitors?-We could not carry on our business, as it is now carried on.

155. There is no bank in Scotland, is there,. similar to the Bank of England?-No; the banks in Scotland are all on an equality.

156. So that really there is a material difference between the two countries in that respect, and that perhaps may have been in the minds of the gentlemen who drew this Act of Parliament, though it is not expressed very clearly?—Quite

so.

Mr. Balfour.

157. As I understand, it is rather misleading to say that the Scotch right of coming to England depends upon the Act of 1833; what ought to be said is, that the Act of 1833 explicitly states what was implicitly allowed,

Mr. Balfour-continued. though it was not known to be allowed, in all previous Acts?-Probably that is so. It is, perhaps, necessary, when you put it in that way, to go back even beyond 1697. Before 1697 there was absolute freedom of issue in England, as there always was in Scotland. That was interfered with in 1697 in the interest of the Bank of England; it was interfered with in terms which led the Bank of England and everybody else to suppose that the right of carrying on the business of banking was restrained throughout England except by private bankers, not more than six in number. That idea prevailed until 1833, and the Act of 1833 was meant to declare what was the law.

158. And what had been the law ?-And what had been the law.

Mr. Leveson Gower.

159. The Royal Bank of Scotland was the only Scotch bank which was precluded by its constitution from coming to England, was it not? -It was the only Scotch bank which was expressly precluded. I am not aware that there is such an exclusion in the case of any other Scotch bank.

160. How did that exceptional state of things arise? It is not easy to tell what were the motives in 1727; the Bank of Scotland was the only bank existing up to that period. The Royal Bank grew out of a previous corporation called the Equivalent Company, which was established on the union of England and Scotland. This Equivalent Company made proposals to the Bank of Scotland of union with of the Equivalent stock, who were Englishmen, them, which were rejected; and the holders and almost exclusively London merchants, having certain influences at Court and also with the of England, obtained the Charter constituting Bank of England, and being aided by the Bank England, therefore, would naturally guard the Royal Bank of Scotland. The Bank of England. I am not saying that that is the real against any infringement of their rights in state of the matter, but I think it is not at all

improbable that it was so.

Mr. Backhouse.

161. Were not the whole of the Acts, beginning with the Act of 1707, intended to confer certain exclusive privileges upon the Bank of England, and have not the subsequent Acts always confirmed those privileges, though modifying them?-No doubt.

162. You stated, did you not, that before the year 1826 there was an entire prohibition upon any Scotch bank of issue coming to England at all?It was believed to be so, but it turned out afterwards that it was not so.

163. And up to the year 1833 the prohibition against coming to England remained?—Yes, to London.

164. Sir Henry Thring gives an interpretation, which you admit, I suppose, that a bank under the old Acts was simply a bank of issue?—I do not think that the earlier banks in England, or in any part of the kingdom, were anything else but banks of issue for a long time after their creation.

165. But in the former Acts of Parliament the word "banks" always means bank of issue, did it not?