Home >> Business Encyclopedia And Legal Adviser >> Bank Rate to Clearing >> Banking_P1

Banking

notes, banks, bank, scotland, issue, act and england

Page: 1 2

BANKING, Scotch.—The issue of bank notes in Scotland is regulated by an Act of 1845, founded upon the same principles as the English Act of 1844, which serves as a charter for the Bank of England. But the Act of 1845 did not create an exclusively privileged bank ; for since the seventeenth century banks in Scotland had been freely founded, and had multiplied exceedingly without the aid of State privilege, bait as a result of private enterprise. In 1695, however, by an Act of the Scotch Parliament, an ex clusive privilege of banking in Scotland had been granted to the Bank of Scotland. This monopoly was limited by the same Act to the duration of a period of twenty-oneyears ; since the expiration of whit:h all banks have enjoyed equal rights of banking, and, subject to the Act of 1815. an unlimited right to issue notes. The leading provisions of the latter Act may be briefly enumerated. All existing banks which then issued notes had reserved to them the sole right to issue in the future, thus practically preventing the creation of new hanks in Scotland. The banks were allowed to issue notes without the security of a reserve of gold, or otherwise, up to an aggregate amount of £3,087,209; each bank to issue only up to its own proportionate part of that aggregate, as determined by a process set out in the Act. All notes issued beyond the fixed limit were required to be provided for by thq issuing bank, such provision to be a reserve of coin representing the excess. Banks amalgamating are allowed to retain the aggregate fixed issue of the separate banks ; the circulation of Al notes is allowed ; Bank of England notes are not legal tender in Scotland. The banks must make a return of the amount of notes in circulation, and if notes are issued in excess of the authorised circulation without reserve against such excess, there is a forfeiture of the amount not covered by gold ; and the Government reserves the right to inspect the books of the bank in order to verify the returns.

The Scotch banks of issue were, at the time of the Act, nineteen in number, but since then there has been a reduction in number through amalgamations and failures. There has also since been substituted for the unlimited liability of the shareholders, which was formerly the rule, with a few exceptions, the system of incorporation with limited liability. Now the banks are ten in

number, and allowing for the preservation of the right to issue in cases of amalgamations and for the loss thereof in cases of failure, the present aggregate authorised circulation of notes amounts to 1)2,676,550. As illustrating the increasing importance of the bank note in tie system of Scotch banking, it should be observed that fifty years after the Act, that is in 1895, the cir culation of notes had reached the sum of £6,938,579, there thus being an excess of the authorised issue amounting to £4,262,529, against which would be held in re:erve an equal amount in gold. The development of Scotch banking has always been on characteristic lines. In the first place its origin was earlier than that of banking in any other modern country ; in the second place, the nature of its operations has been peculiarly adapted to the wants and means of the small and thrifty capitalist—a class absolutely overlooked and disregarded in English banking almost to the present time. All this is very obvious upon the consideration of two comparisons ; one of which is that a few years ago there was in England one banking-office to every 8915 inhabitants ; in Scotland one to every 4260. The other is that, at about the same period, there was in England one bank share in the hands of each 416 persons ; in Scotland, one in each 253. From these comparisons we may say, generally, that in Scotland there are twice as many people, proportionately, as in England who deal with a bank, and nearly tw ice as many who are shareholders in banks. Thus the banks and the people arc, in Scotland, in close touch one with the other ; the people, though customers, being at the same time Woprietors, or at the least having such an interest in the banks' stability and property as to develop confidence and prevent general runs in times of panic and commercial disaster. The banking operations, which have always been characteristic to Scotland, aro found in the issue of bank notes, and the systems of interest on current accounts, of deposits, and of cash credits.

Page: 1 2