BANKING. Banking was introduced into Great Britain by the goldsmiths of London in the sev enteenth century. The banking systems of Eng land and Scotland have developed independently and naturally along somewhat divergent lines. In England the first connection of the Govern ment with banking occurred in 1694, when the financial exigencies of the nation made necessary the advancement of a loan, and the Bank of England was chartered in order that a loan might be secured. This bank, through special privileges granted it by the Government—as, for instance, giving it the management of the national debt, making it the bank of the Government, allowing it until 1826 the privilege of being the only joint stock bank in England, and granting it the power to issue notes—has attained an overshadowing prominence among the banks of that country, and even among the banks of the world. The mo nopoly rights of course implied restrictions on other banks, so that provincial banking in Great Britain is generally admitted to have been inad equately provided for. The Bank of Scotland was organized one year later (1695) than the Bank of England, and it, too, at first (for twenty-one years) enjoyed monopoly rights; but, unlike the English bank, it did not secure a renewal of its patent rights. This gave an opportunity for the growth of other banks, which have cooperated to secure a uniform system of banking throughout Scotland. The formation of joint-stock com panies was also permitted with liberal priv ileges in the matter of issuance of notes. The authorized note issues of Scotch banks may be exceeded, providing there is a specie reserve equal in amount to the excess of the issues, a precaution which, of course, strengthens the cir culation. This reserve is considered as part of the cash balance of the bank. The Scotch banks do not lose their rights of issue in Scotland when they open offices or branches in London or in the English provincial towns. In England laws were passed in 1826 which admitted the establish ment of joint-stock banks beyond a radius of 65 miles from London, the number of partners not to exceed six. This number was increased in 1862 to ten, except for banks of issue; they are still limited to six.
By the Bank Charter Act of 1844 the issue de partment was separated from the banking depart ment of each bank, and the issue of bank-notes was limited to those banks already exercising that privilege. These institutions were restricted to a fixed issue, and if they established themselves within a radius of 65 miles from London they forfeited their rights to issue notes. Under these laws the number of note-issuing banks is decreasing, and this function will probably be come the exclusive right of the Bank of Eng land unless the laws are changed. The Bank of England notes are legal tender for all sums over 15 except at the bank and its branches, and in Scotland and Ireland. The English and Scotch bankers pursue different policies in matters of interest and commission, the English being in clined to cut rates and to underbid for business, while the Scotch adhere to uniform terms in ac cordance with an agreement between them. The
policies also differ in respect to the dependence placed upon different sources of profit. In Eng land the directors have more to do in the man agement than in Scotland, while in Scotland the agents play a more important part than in England. The Scotch bankers have become famous for the perfection attained in book keeping methods.
In 1901 there were 3 private and 16joint stock banks belonging to the clearing-house in London, the process of consolidation having re duced the number in recent years, though at the same time the number of branches has greatly increased. In 1827 there were 465 private and 6 joint-stock banks in England and Wales; in 1900 the private banks had decreased to 21 and the joint-stock banks had increased to 82. In 1900 the joint-stock banks were represented by 3824 branches. In Scotland there are but 11 banks (all joint-stock), with 1077 branches. In June, 1900, the Bank of England, with its 11 branches, had capital reserve and undivided profits amount ing to £17,800,000; deposits, £48,500,000; loans and discounts, £30,500,000; and cash on hand and money on call or at short notice, £33,600,000. The corresponding figures for the England and Wales joint-stock banks and branches were respectively £80,400,000, £571,700,000, and £386,800,000, and £136,,100,000: for the England and Wales private banks, £7,100,000, £42,100,000, £23,500,000, and £10,500,000; and for the Scotch joint-stock banks and branches, £17,100,000, £103,700,000, £70,500, 000, and £25,600,000 respectively. The colonial and the foreign joint-stock banks with London offices have added largely to the total banking business of the Kingdom.
lishment of the postal savings banks. In the last two decades of the nineteenth century the capital of the old savings banks fluctuated about £45,000,000 with a rising tendency at the end of that period, while the postal savings banks increased their capital over four times, the amount in 1899 being £130,118,605.
The scheme for the operation of postal savings banks went into effect in 1861. Deposits, includ ing interest, have a maximum limit of £200. De positors cannot deposit more than £50 in any one year. Two and one-half per cent. interest is allowed on deposits. The depositor may with draw his money at once through any postal savings bank in the Kingdom. The number of depositors in the postal savings banks increased from 2,184,972 in 1880 to 8,046,680 in 1899, and the amount they invested increased during the same period from £11,079,137 to £42,145,981. The number of depositors in the trustees sav ings banks remained about the same during the before-mentioned period, being 1,519,805 in 1880, and 1,601,485 in 1899. The amount invested in the latter banks was £9,008,315 in 1880, as against £12,737,645 in 1899. Penny savings banks and special savings banks for soldiers and seamen have been established. The granting of annuities and the insuring of lives are also pro vided for through the postal service.