In the issue department of the Bank of England, its sole business is to give out notes to the public. Before the separation of the departments, the government was due to the bank £11,015,100. This sum was declared to be now a debt due to the issue department, and for the issues of notes to that amount, no gold requires to be held by it. This was just the same thing as if the bank had originally lent £11,015,100 of its notes to govern ment, and these notes had found their way into circulation. The bank was also allowed to issue additional notes on securities—that is, to lend them to a limit which at present amounts to and this also without holding gold. The amount of notes which maythus be issued, without gold being in reserve against it, is £15,000,000. All notes issued above that amount can be issued only in exchange for gold. At the passing of the act in 1844, the limit of notes to be issued against the government debt and securi ties was fixed at experience having shown that there was not the least risk of their being at any time less than that amount of Bank of England notes in the hands of the public. The addition of the £1,000,000 is an extra issue, authorized by the act, in consequence of certain issuing banks having since ceased to issue. The bank has to account to government for the net profit of this issue loan of notes of £1,000,000, and the profit the bank derives from its issue department is the interest received on the £14,000,000 of government debt and securities, which, at 3 per cent, s £420,000 yearly. But out of this the bank pays to government, for its banking privileges, and in lieu of stamp-duties, £180,000. If we assume the expense of the issue department to be £160. 000, the net profit upon it would be £80,000. The bank also makes a profit upon bul lion and foreign coin. These are brought to the bank for notes; they are worth £3 17s. lOid. per ounce; but the bank is obliged by its charter to purchase them at £317s. Pd. The holders prefer taking this price to having their bullion and foreign coin coined, free of charge, at the public mint, as the delay in the coining is equal to a loss of interest of 11d. per ounce. The amount of notes in the bands of the public averages about £23,000,000; but the amount issued by the issue department is greater. The difference is the amount lying in the banking department, and represents the reserve of gold of that department; that is to say, the banking department retains only a half or three fourths of a million of coin, and transfers the bulk of its reserve to the issue department. in exchange for notes. We therefore require to regard the reserve of the banking department as gold, though lying in the shape of notes issued by the other department.
Viewed in its banking department, the bank differs from other banks in having the management of the public debt, and paying the dividends on it; in holding the deposits belonging to government. and making advances to it when necessary; in aiding in the collection of the public revenue, and in being the bank of other banks, For the manage anent of the public debt, the bank receives about £247,000, against which there has to be set £.124,000 of charges. The remaining profits of the bank are derived from its use of its deposits, on which it allows no interest, and of its own capital. The capital was originally £1,200.000; in 1816, it reached £14,553,000—the present amount. There is besides a rest of about £3,500,000. In 1877-8 the public deposits varied from £3,422,248 to £19,852,358, and the private from £19,629,343 to £27,321,423; the maximum of depos its, public and private, was £43,047,038.
In 1797, the bank found itself likely to be obliged to suspend payments, and its notes were declared by law a legal tender, although no longer convertible into coin. This state of matters continued till 1821.. The notes during this interval not having been convertible into coin on demand, there was no check upon the bank in the amount of its issues; and the currency became depreciated—that is, a £5 note would not exchange for five sovereigns; and every man to whom £5 was due, was thus obliged to accept pay ment in a £5 note, not worth £5. It is, however, said that the value of gold at the time was enhanced owing to absorption by hoarding and by military-chests, and that tho depreciation was more apparent than real. The export of gold following on a rise of prices occasioned by an issue of bank or government notes is unlimited, except by exhaustion, if these notes arc not payable in coin on demand, and are issued without any check from without or self-imposed. But as prices estimated in these notes rise, thu price of bullion, like other commodities, rises too, and the price of coin which can be converted into bullion, or be used abroad at its previous purchasing power, rises also. Since 1821, the bank has been oftener than once on the verge of a suspension of pay ments, owing to foreign drains of gold. The separation of the bank into two depart ments is regarded by many as having a tendency to produce a suspension in times of panic, when the reserve is reduced by withdrawals to supply a foreign drain, or to meet an internal rim. Before the separation, the bank, in the case of withdrawals of gold, had the whole amount of gold within the bank to meet them; but now it loses the com mand of all the gold in the issue department. It cannot get that gold unless in exchange fur notes, but, its reserve being reduced or exhausted, it has none to spare. The restric tion of credit consequent upon the approach to nu exhaustion of the reserve of the bank ing department, is so.great, that the fear of it occasions a panic; and in 1847, 1857, and 1866, on the possible suspension of payments by the banking department, owing to a reduction of its reserve, being apparent, the government of the day took the responsi bility of authorizing the bank to lend additional notes, not represented by gold, which was an indirect way of getting at the gold in the issue department, where the object of - — the borrowers was to obtain gold. In 1857, it was found necessary to take the benefit of this authorization.
The bank of England is situated in the center of London; but it has a branch in the w. end, and nine branches in the provinces.
Ranks in England and 1878, there were 119 of these banks, of which 53 in the provinces were entitled to issue notes to the amount of £2,164,221 with out its being compulsory to hold any gold against them. But as they are prohibited from exceeding their authorized issue, the amount of notes actually in the hands of the public is always somewhat less. The deposits of the 10 joint-stock banks in London which may be considered London banks, and excluding the national provincial bank of England, the national bank, and the Scotch banks, who, although they carry on bUsine;s in London, have the great bulk of their business in the country, amount to about £80,000,000, and the acceptances granted by them to about £17,000,000. Their paid-up capital is £9,270,000.