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Bank of Issue

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BANK OF ISSUE. A bank which issues its own notes payable to bearer on demand. The Bank of England is a bank of issue, and its issue is regulated by the Bank Charter Act, 1844 (see BANK OF ENGLAND and BANK OF ENGLAND NOTES). It can issue bank notes throughout England and Wales, and has the monopoly in London and within three miles thereof. The only other banks of issue are those which were lawfully issuing bank notes, on May 6, 1844.

The regulations regarding banks of issue are contained in various acts of Parliament. All banks beyond sixty-five miles from Lon don which were lawfully issuing their own notes on May 6, 1S44, may continue to issue them, except those banks where the partners consisted at that date of not more than six persons and where the number of partners has since increased in number. Beyond three miles from London and within sixty five miles, banks consisting of not more than six partners, who were lawfully issuing their own notes on May 6, 1844, may continue to issue them. There are thus three distinct areas defined in the Acts, (1, the City of London and within three miles thereof (counting from the Royal Exchange), where the Bank of England has the sole right to issue notes. (2) Beyond three and within sixty-five miles of London, where the Bank of England shares the right with banks of not more than six members, which were lawfully issuing notes on May 6, 1844. (3) Beyond sixty-five miles, where the Bank of England shares the right with the other banks which were lawfully issuing notes on May 6. 1844.

No person other than a banker who, on May 6, 1S44, was lawfully issuing his own bank notes shall make or issue bank notes in any part of the United Kingdom.

If a country bank of issue opens an office in London, or, there being more than six partners, if it comes within sixty-five miles of London. it loses its right of issue. A bank which consisted of not more than six partners on May 6, 1844, will lose its right to issue notes after the number of partners therein shall exceed six in the whole, but two banks each consisting of not more than six partners may combine and unite their separate issues so long as the number of partners does not exceed six. A bank ceases to have the right of issue by bankruptcy, or by giving up business or by discontinuing its issue either by agreement with the Bank of England or otherwise. Where a private issuing bank is absorbed by a joint stock bank, its issue lapses, and if an amalgamation between two joint stock banks of issue results in the formation of a new bank, the issue of both the banks will lapse. The Bank of England has the right to increase its own issue against securities to the extent of two-thirds of all lapsed issues. The Bank of England has power under Sections 23 and 24 of the Bank Charter Act, 1844, to make payment of annual compositions to certain bankers on their giving up the privilege of issuing their own notes, but when such bankers cease to carry on business, it has been held that the compositions cease.

The amount of notes which may be issued by a bank of issue is fixed, and is the amount certified by the Commissioners of Stamps and Taxes as being the average amount of the bank notes of such bank as were in circulation during a period of twelve •CAS preceding April 27, 1844.

If the monthly average circulation of bank notes of any banker shall at any time exceed the amount which the banker is authorised to issue, such banker shall in every such case forfeit a sum equal to the amount by which the average monthly circulation shall have exceeded the amount he was authorised to issue and to have in circulation.

A bank of issue registered as a limited company is not entitled to limited liability in respect of its notes. and the members thereof shall be liable in respect of its notes in the same manner as if it had been registered as an unlimited company. (See Section 251 of the Companies (Consolidation) Act, 1908, under BANKING COMPANY.) The issue of bank notes in Ireland is regulated by S 9 Viet. c. 37. The tender of a note or notes of the Bank of England is not a legal tender in Ireland, but nothing in the Act is to be construed as prohibiting the circulation in Ireland of the notes of the Bank of England. A banker in Ireland is prohibited from issuing notes in excess of the amount certified by the Commissioners (that is. the average amount of notes in circulation for one year previous to May 1, 1S45), except against the monthly average amount of gold and silver coin held by such banker during the same period of four weeks.

As to the coin against which notes may be issued, there shall be included only the gold and silver coin held by such banker at the several head offices or principal places of issue in Ireland, such head offices or principal places not to exceed four in number, of which not more than two shall be situated in the same province ; and notes shall not be issued on any amount of silver coin exceeding the proportion of one-fourth part of the gold coin held by such banker. Bank notes issued in Ireland are to be " for payment of a sum in pounds sterling, without any fractional parts of a pound." The issue of bank notes in Scotland is regulated by 9 Viet. c. 38, and the regulations arc practically the same as for the banks in Ireland (see above), except that by Section 6 it shall not be lawful for any banker in Scotland to issue a greater amount of notes than the amount certified by the Commissioners and " the monthly average amount of gold and silver coin held by such banker at the head office or principal place of issue of such banker during the same period of four weeks." In Scotland and Ireland bank notes may be for one pound and upwards, but in England the lowest amount is five pounds. There are no notes legal tender in Scotland and none in Ireland, with the exception of Bank of Ireland notes in payment of part of the public revenue of Ireland. This exception is contained in 1 4_C: 2 Geo. IV c.

72.

Principally through amalgamations, banks of issue are rapidly disappearing in England. The authorised issues at present are as follows :