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CAPITAL OF IRISH

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Originally appearing in Volume V03, Page 344 of the 1911 Encyclopedia Britannica.
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CAPITAL OF IRISH JOINT-STOCK BANKS IN 1906 Name of Bank and Year when Capital Rate of Dividend established. paid-up. per annum. Bank of Ireland 1783 . £2,769,230 II Hibernian Bank* 1824 500,000 Io Provincial Bank . 1825 . 540,000 20 Northern Banking Co.1825 500,000 181 Belfast Banking Co. 1827 . 500,000 36 National Bank . 1835 I'500,000 8 Ulster Banking Co. . 1836 . 500,000 18 Royal Bank* 1836 300,000 12 Munster Bank, Ltd.* 1864 200,000 8 * Thus marked are not banks of issue. Banking, like every other business, has to pass through periods of difficulty. The severity of these in the case of banking is intensified by the vast number of interests affected. Banking These, on the one hand, are world-wide in their scope, crises. on the other they touch every home in the country. The stringency of such a time in England has since the passing of the act of 1844 been greatly enhanced by a doubt being some-times felt as to whether a relaxation of the act of 1844 would be allowed. In any case, some little time must elapse before the assent of the ministers of the crown to the request of the Bank of England can be known. Since 1844 there have been five periods of pressure,—during 1847, 1857, 1866, 1870 and 1890. Of these in three, 1847, 1857 and 1866, the difficulties reached panic. The crisis of 1847 was brought on by the speculation in railway enterprise which had gone on since 1845. So little had the anxieties of the autumn been anticipated that the bank rate of discount was 3 % on the 1st of January. It was raised to 31% on the 14th and to 4 % on the 21st. It became 5 % on 8th April, 51 % on 5th August, 6 % on 3oth September and 8 % on 25th October. This was the highest. It was lowered to 7 % on 22nd November, on and December to 6 % and on 23rd December to 5 0, An announcement was made on the 1st of October that no advances would be made on public securities. This was followed by general anxiety and alarm. The reserve of the bank was rapidly reduced to a very low ebb. Bank of England Reserve of Specie. 1847, 16th October . £3,070,000 23rd October 1,990,000 , 30th October . . 1,600,000 Meanwhile the anxiety and alarm prevailing were causing a general hoarding of coin and bank notes, and it really appeared not unlikely that the banking department of the Bank of England might be compelled to stop payment while there was more than £6,000,000 of specie in the issue department. The chancellor of the exchequer (Sir C. Wood, afterwards Lord Halifax) was urged by many deputations and remonstrances to relax the Bank Act, but he declined. At last, on the 22nd or 23rd of October, some of the leading city bankers had an interview with the prime minister (Lord John, afterwards Earl, Russell), and on their explaining the necessities of the position, the desired relaxation was given. The official letter (25th October) recommended " the directors of the Bank of England, in the present emergency, to enlarge the amount of their discounts and advances upon approved security." A high rate, 8 %, was to be charged to keep these operations within reasonable limits; a bill of indemnity was promised'if the arrangement led to a breach of the law. The extra profit derived was to be for the benefit of thepublic. The effect of the government letter in allaying the panic was complete. The crisis of 1857 was the last occasion of an official inquiry. This is contained in the Report and Evidence of the Select Committee of the House of Commons on the Bank Acts (1857, 1858). The evidence given by Mr Sheffield Neave, the governor, and Mr Bonamy Dobree, deputy-governor of the bank in 1858, gives a vivid picture not only of what occurred, but of what might be expected to recur on such occasions. The wildest alarm prevailed, exchequer bills were scarcely saleable, and the bank itself sold £3,000,000 government securities at a considerable loss. The extreme pressure was relaxed by the letter issued by the government on the 12th of November 1857, signed by Lord Palmerston, then premier, and Sir G. C. Lewis, which allowed a temporary relaxation of the Bank Act of 1844. The public alarm, however, was so great that it was not until the 21st of November that the severity of the pressure was in any way diminished. On the loth of November the notes issued to the public on securities beyond the statutory limit (then £14,47 5,000) reached the sum of £928,000. By the next week the issue was almost down to the limit, and in the week following it was within the limit. On the 1st of January 1858 the bank rate was lowered to 8 % and the anxiety gradually passed away. Had the treasury letter been issued earlier, the pressure might not have been so severe, and the governor of the bank expressed a strong opinion that, if it had been later, it would not have been sufficient. November 1857 was the only occasion when the limits of the Bank Act as to issue were actually passed. During the crisis of May 1866 £4,000,000 left the bank on one day in notes and coin, and the reserve of the bank was reduced in the return of the 1st of June of that year to £415,000. The bank rate was raised to to % and permission was given by the government to suspend the act. This, however, was not done. Tradition says that the bank asked the bankers, during the period of heaviest pressure of that terrible crisis—pressure more severe than anything that had taken place before or that has occurred since, to pay in every night the notes they had drawn out in the morning which were still in their tills at the close of the day, and that hence the legal limit was never exceeded. But it was not till the 6th of August that the rate was reduced to 8 %. The effect of the crisis of October 1890 was far less severe. This was due to the judgment and skill displayed by the governor (Mr Lidderdale) and the directors of the bank, who imported £3,000,000 in gold from Paris. The reserve in that year never dropped below £Io,000,000, and before the end of November the anxiety had greatly passed away. " Caution prevailed, but not panic, and the distinction is a very clear one." (See arts. on " Crises," Dictionary of Political Economy, vol. i.) The most important requirement of banking in the United Kingdom is still the establishment of an efficient specie reserve. The reserve in the banking department of the Bank of England averaged: £8,Soo,000 in 1845. £11,600,000 in 1875. 8,400,000 in 1855. 15,100,000 in 1885. 8,000,000 in 1865. 29,900,000 in 1895. £23,500,000 in 1906. This provides but a narrow basis for the whole business requirements of the country. Though much larger than in several previous years, it cannot be regarded as adequate. The "Re-The figures fluctuate more severely than these decen- serve " nial averages show, and the progress has not been one question. of uniform increase. Thus the £15,100,000 in 1885 was followed by £12,700,000 in 1888. The £29,900,000 of 1895 was followed by £34,600,000 in 1896 and £21,200,000 in 1899. Beyond, or side by side with, the reserve of the Bank of England there are the reserves held by the other banks. Part of these are held in the form of balances at the Bank of England, part in specie and bank notes in their own tills. The latter, hence, are not unlikely to be estimated twice over. The published figures on this point are meagre. The expectations expressed by Sir Robert Peel in his speech 342 on the bank charter and the currency of the 6th of May 1844 have not yet been fulfilled. " I rejoice," he said, " on public grounds, in the hope that the wisdom of parliament will at length devise measures which shall inspire just confidence in the medium of exchange, shall put a check on improvident speculations, and shall ensure the just reward of industry and the legitimate profit of commercial enterprise conducted with integrity and controlled by provident calculation." The extreme measures which have been required since the act sf 1844 point out for themselves the necessity for reform. Three times since the date of the Bank Act of 1844 it has been needful to give permission for the suspension of that act which forms the very foundation of the monetary system of Great Britain. This, whenever it has occurred, has exercised a very injurious effect on credit abroad, as well as on prosperity at home. The British money-market, the clearing-house of the world, is, in consequence of the smallness of its reserve, exposed to greater fluctuations than that of any other country. These fluctuations may arise from the need of meeting the requirements of other countries for specie or those arising from domestic trade. The recorded excess of imports over exports, £147,000,000 in 1906, though the difference is eventually balanced by the " in-visible " exports, gives foreign nations at times a power over the British money-market greater than has ever previously been the case. The current must always have a tendency to flow outwards; this is enhanced by the great increase in the number of foreign banks which have branches in England. The need of providing sufficient reserves to meet requirements thus occasioned is obvious. As regards the banks in which British interests are concerned in British colonies and other countries we can only speak briefly. It must not be overlooked that in the Dominion of Canada Brfti,h there are 29 banks, many of them large, managed banking much on the Scottish principle with capitals of nearly abroad. £19,000,000 and deposits of about £140,000,000. These banks have more than 1200 offices. In Australia and New Zealand there are 24 banks with capitals of nearly £18,000,000 and deposits of about £130,000,000 The number of offices is nearly 1700. There are, including the three Presidency banks, about 15 banks doing business mainly in India—in some cases connecting neighbouring countries and places like Bangkok, Hong-Kong and Zanzibar. These banks have capitals of more than £5,000,000 and deposits of fully £36,000,000 and over 210 offices. There are at least 8 banks in South and West Africa with capitals of nearly £5,000,000, deposits of nearly £50,000,000 and nearly 370 offices. There are 5 banks, including the Colonial Bank, in other British territories with capitals of about £1,000,000 and deposits of £3,300,000, and about 25 offices. There are thus, besides many private firms doing very considerable business, more than 8o joint-stock British banks working in the colonies with capitals amounting to £48,000,000, deposits £360,000,000 and offices 3505. Outside British territories there are 6 banks, principally in South America, with nearly £4,000,000 capital, £36,000,000 deposits and about 6o offices. There are 6 large banks doing business principally in the East with more than £6,700,000 capitals, £77,000,000 deposits and 106 offices: and 7 other banks, including Barings, with about £4,500,000 capitals and £22,000,000 deposits There are thus about 20 British banks doing business in foreign countries with capitals amounting to £15,200,000, deposits £135,000,000 and offices 173. In this statement we have included only the more important banks, which collectively wield about £63,000,000 capital and more than £495,000,000 deposits—in all about £560,000,000 of resources operating at about 3700 offices situated in places as different from each other and as widely separated as California and Hong-Kong, Constantinople and New Zealand. France: In France the first bank of issue, originally called the Banque Generale, was established in 1716 by John Law, the author of the Mississippi Scheme and the Systemic. Law's bank, which had been converted into the Banque Royale in 1718, and its notes guaranteed by the king (Louis XV.), came to an end in 1721; an attempt at reconstruction was made in 1767, but the bank thus established was suppressed in 1793. Other banks, some issuing notes, then carried on operations with limited success, but these never attained any real power. There were many negotiations on the subject of the establishment of a bank in 1796. The financial difficulties of the times prevented any immediate result, but the advice of those engaged in this plan was of great assistance to Napoleon I., who, aided by his minister Mollien, founded in 'Soothe Bank of France, which has remained[FRENCH from that time to the present by far the most powerful financial institution in the country. The objects for which it was established were to support the trade and industry of France and to supply the use of loanable capital at a moderate charge. These functions it has exercised ever since with great vigour and great judgment, extending itself through its branches and towns attached to branches over the whole country. At its establishment and for some time subsequently the operations of the hank did not extend over the whole of France. Departmental banks with the privilege of issue had been formed under a law adopted in 1803. At the close of 1847 there were nine of these banks existing in as many of the larger towns. In 1848, however, they were absorbed into the Bank of France, which has since possessed an exclusive privilege of issue, and in 1863 took over the Bank of Savoy after that province was united to France. The Bank of France has successfully surmounted many political as well as financial troubles both during and since the times of Napoleon I. The overthrow of the government of Louis Philippe in 1848, the war with Germany in 1870, the many difficulties that followed when the Commune reigned in Paris in 1871, the payment of the war indemnity—not completed till 1873—were all happily overcome. Great pains, too, have been taken, especially of recent years, to render services to large and small businesses and to agricultural industry. In 1877 the offices of the Bank of France were 78 in number; in 1906 they were 447, including the towns " connected with the branches "—an arrangement which, without putting the bank to the expense of opening a branch, gives the place connected many of the advantages which a branch caifers. The quantity of commercial paper discounted is very large. More than 20,000,000 bills were discounted in 1906, the total amount being £559,234,996. The advances on securities were in the same year £106,280,124. The rate of discount in Paris is as a rule lower and the number of alterations fewer than in London. From May 1900 to January 1906 there was no change, the rate remaining uniformly at 3 %. Bills as low as 4s. 2d. are admitted to discount, including those below 8s.; about 232,000 of this class were discounted in 1906. Since the 27th of March 1890 loans of as small an amount as £10 are granted. In most cases three " names " must be furnished for each bill, or suitable guarantees or security given, but these necessary safeguards have not to be furnished in such a manner as to hamper applicants for loans unduly. In this manner the Bank of France is of great service to the industry of the country. It has never succeeded, however, in attracting deposits on anything like the scale of the Bank of England or the banks of the English-speaking peoples, but it held, as stated in the balance-sheet for the 23rd of December 1906, about £35,000,000 in deposits, of which £14,000,000 was on account of the treasury and £21,000,000 for individuals, and the amount held in this manner gradually increases. The report for 1904 says " each year the movement in these in-creases, and this economical and safe mode of effecting receipts and payments is more and more appreciated by the public." In one respect the Bank of France stands at a great advantage in connexion with this branch of its business. The average amount held in this manner for individuals during 1906 was about £23,000,000. As the accounts numbered 77,159 the average for each account was comparatively small. Accounts so subdivided give a great probability of permanence. The figures of the accounts for 1904 were as follows: 11,178 current accounts, with power of discount. 4,576 simple current accounts. 26,709 current accounts, with advances. 24,106 accounts, deposits. Total 66,569 accounts, against 59,182 at the end of 1903. At the present time the Bank of France operates chiefly through its enormous note circulation (averaging in 1906 £186,300,000), by means of which most business transactions in France are carried on. The limits of the circulation of the Bank of France and the dates when it has been extended are as follows:— Dates. Millions of Converting the Francs. Franc as 25 =£I. 15th March 1848 . 350 £14,000,000 27th April, 2nd May 1848 452 18,000,000 2nd December 1849 525 21,000,000 12th August 1870 . 1800 32,000,000 14th August 1870 . 2400 96,000.000 29th December 1871 . 2800 112 ,000,000 15th July 1872 3200 128,000 000 3oth 1884 3500 140,000,000 i 25th Januaryanuary 1893 4000 160000,000 17th December 1897 . 5000 200,000,000 In 1906 5800 232,000,000 GERMAN] Most business transactions in France are liquidated, not in cheques as in England, but in notes of the Bank of France. These, owing to their convenience, are preferred to specie. This is accumulated in the vaults of the Bank of France, which in 1906 held on average £115,000,000 gold and £42,000,000 silver. The gold held by the Bank of France is generally considerably larger in amount than that held by the Bank of England, which in the autumn of 1890 had to borrow £3,000,000 in gold from the Bank of France at the time of the Baring crisis. The large specie reserve of the bank has given stability to the trade of France, and has enabled the bank to manage its business without the numerous fluctuations in the rate of discount which are constantly occurring in England. It is true that the holding this very large amount of specie imposes a very heavy burden on the shoulders of the shareholders of the bank, but they do not complain. The advantage to business from the low rate of interest which has to be paid for the use of borrowed capital in France is a great advantage to the trade and industry of that country. The mass of the reserve in France is so great that the movements of the precious metals, when they are the result only of natural causes, are allowed to go on without corresponding movements in the discount rate. But it must be remembered that this large reserve is held in part against a gigantic note issue, and also that the trade activity and enterprise of the French people are less intense than in either the United Kingdom or Gerthany; thus it is much easier for the Bank of France to maintain a steady rate of discount. Besides the Bank of France, several great credit institutions carry on business in the country; as the Banque de Paris et des Pays-Bas (capital and reserve, £3,729,000; other liabilities, deposits, &c., £14,842,000), the Banque Frangaise pour le Commerce et l'Industrie (£2,450,000; and £3,505,000), the Credit Lyonnais (£14,000,000; and £82,570,000), the Comptoir National d'Escompte de Paris (£6,772,000; and £47,593,000), the Societe Generale pour favoriser le developpement du Commerce et de l'Industrie en France (47,469,000; and £45,800,000), and the Societe Generale de Credit Industriel et Commercial (£1,600,000; and £10,060,000). There is also the Credit Foncier de France with a very considerable capital, but the business done is so largely that of mortgages that it can hardly be included among banks, though it carries on in some measure the business of banking. Besides the six important joint-stock banks mentioned above, there exists in France a large number of banks, principally in the provinces, carrying on a very considerable business. Little is known as to their deposits, but their business appears to be conducted with great prudence and discretion. One hundred and eighty-two of these firms were members of the French Country Bankers' Association in 1898. They carry on business in 66 out of the 86 departments into which France is divided. More than one of these banks has several offices—one possessing 18, including the head office. These branches are situated in the small towns in the vicinity. In this the business follows more the English method of small branches. The French Country Bankers' Association holds its meetings in Paris, where matters of interest to bankers are discussed. (See Bankers' Magazine, July 1898.) Germany. — Besides the Imperial Bank of Germany, the " Reichsbank," there are about 140 banks doing business in the states which form the German empire. These credit and industrial banks with their large resources have had an immense influence in bringing about the astonishing industrial development of their country. Five banks possess the right of uncovered note-issue ; these are : The Imperial Bank of Germany with right of issue £23,641,450 The Bank of Saxony „ „ „ 838,500 The Bank of Bavaria „ „ „ 1,600,000 The Bank of Wurttemberg „ „ „ 500,000 The Bank of Baden 500,000 £27,079,950 At the Bank of Germany the coin and bullion held is sometimes larger than at the Bank of England. The statement of the specie in the weekly accounts includes silver. The amounts held in gold and silver are only separated once a year, when the balance-sheet is published. The figures of the balance-sheet for the 31st of December 1906 showed in round numbers £24,000,000 gold and £9,000,000 silver. As far as the capital is concerned the £18,000,000 of the Bank of England considerably exceeds the £9,000,000 of the Bank of France and the £12,200,000 of the Bank of Germany. The note circulation of both the other banks is considerably larger than that of the Bank of England, that of the Bank of France being £186,300,000, and of the Imperial Bank of Germany £69,000,000 in 1906. The capitals and reserves of the German banks, including those of banks established to do business in other countries, as South America and the Far East, and of the Bank of Germany, are about £133,000,000, with further resources, including deposits, notes and343 mortgage bonds, amounting to fully £414,000,000. The amount of the capital compares very closely with that of the capitals of the banks of the United Kingdom. The deposits are increasing. The deposits, however, are not the whole of the resources of the German banks. The banks make use, besides, of their acceptances in a manner which is not practised by the banks of other countries, and the average note circulation of the Reichsbank, included in the statement given above, is between £60,000,000 and £70,000,000. A large and apparently increasing proportion of the resources of the German banks is employed in industrial concerns, some of which are beyond the boundaries of the empire. The dangers of this practice have called forth many criticisms in Germany, among which may be quoted the remarks of Caesar Strauss and of Dr R. Koch, the president of the Reichsbank. Dr Kock especially points out the need of the development of powerful banks in Germany unconnected with speculative business of this kind. The object of employing their funds thus is the higher rate of interest to be obtained from these investments than from discounting bills or making loans at home. But such an employment of the resources of a bank is opposed to all regular rules of business and of banking tradition, which abstains from making fixed investments of any large part of the resources of a bank. On the other hand, Dr Koch observes that the risks of the one " reserve system " mentioned by Bagehot are not to be feared in Germany.' The recent movement in favour of concentration among the banks has been described by Dr E. Depitre and Dr Riesser, who give particulars of the business done by these banks, which does not correspond with banking as practised in the United Kingdom, being more of an industrial character. There are also many private banking firms in Germany which do a considerable amount of business. The Reichsbank, by far the most powerful banking institution in Germany, is managed by the bank directory appointed by the chancellor of the empire. The shareholders join in the management through a committee, of which each member must be qualified by holding not less than three shares. The government exercises complete powers of control through the chancellor of the empire. The influence of the Imperial Bank now permeates, by means of its branches, all the separate kingdoms of the empire —the uniformity of coinage introduced through the laws of 1871–1893 rendering this possible. The Imperial Bank assists business principally in two ways—first, through the clearing system (Giro-Verkehr), which it has greatly developed, and secondly, through the facilities given to business by its note circulation. The Imperial Bank also receives deposits, and cheques are drawn against these, but in Germany notes are principally used in payments for ordinary business. Before the Reichsbank was established, Hamburg was the first, and for a long time the only, example of a clearing in Germany. This was taken up by the Reichsbank when it established its office in Hamburg in the time-honoured building which had belonged to the Hamburg Clearing House. Similar business had long been undertaken by the Bank of Prussia. This was absorbed and developed by the Reichsbank in 1876. Through the " clearing system " money can be remitted from any of the 443 places in which there is an office of the Reichsbank, to any of these places, without charge either to the sender or the receiver. It is sufficient that the person to whom the money is to be remitted should have an account at the bank. Any person owing him money in the remotest parts of the empire may go to the office of the bank which is most convenient to him and pay in the amount of his debt, which is credited on the following day at the office of the bank, without charge, to the account of his creditor wherever he may reside. The person who makes the payment need not have any account with the bank. The impetus given to business by this arrangement has been very considerable. It practically amounts to a money-order system without charge or risk of loss in transmission. From Hamburg and Bremen to the frontiers of Russia, from the shores of the Baltic to the frontiers of Switzerland, the whole of the empire of Germany has thus become for monetary purposes one country only. The amount of these transfers for the year 1906 exceeded £i,86o,000,000. The note circulation is also a powerful factor of the business of the Reichsbank. It is governed by the law of 1875 and the amending law of 1899, corresponding in some degree to Peel's act of 1844, which regulates the note circulation of the Bank of England. An uncovered limit, originally £12,500,000, increased to £14,811,450 by the lapse of the issues of other banks allowed to it, has been ex-tended by these and by the act of the 5th of June 1902 to £23,641,450, Against the notes thus issued which are not represented by specie, treasury notes (Reichskassenscheine, the legal tender notes of the r See Vortrage and Aufsiitze hauptsachlich aus dem Handels- and Wechselrecht, von Dr R. Koch, pp. 163-164. empire) 1 and notes of the issuing banks which are allowed to be reckoned as specie or discounted bills, must be held—maturing not later than three months after being taken—with, as a rule, three, but never less than two, good indorsements. There is also a pro-vision that at least one-third of the notes in circulation must be covered by current German notes, money, notes of the imperial treasury, and gold in bullion or foreign coin reckoned at £69, 125. per pound fine. The Reichsbank is bound by law to redeem its notes in current German money. It is stated that this may be gold coin or silver thalers, or bar-gold at the rate of 1392 marks (L69, 12s. reckoning marks as 20=£I) the pound fine of gold. In practice, however, facilities have not always been given by the Reichsbank for the payment of its obligations in gold, though the importance of this is admitted. 'In the balance-sheet for 1906 the bills held amounted to £67,000,000, and the loans and advances to £14,200,000. The notes issued averaged for the year £69;000,000. The gold held amounted, 30th December 1906, to £24,0669,000. If the condition of business requires that the notes in circulation should exceed the limits allowed by the law, the bank is permitted to do this on the payment of 5 % on the surplus. In this respect the German act differs from the English act, which allows no such automatic statutory power of overpassing the limit of issue. Some good authorities consider that this arrangement is an advantage for the German bank, and the fact that it has been made use of annually since 1895 appears to show that it is needed by the business requirements of the country. Of late years the excess of issue of the Reichsbank has been annual and large, having been £25,267,000 on the 29th of September 1906 and £28,632,000 on the 31st of December of the same year. The amount of the duty paid on the excess issue in the year 1906 was £184,764, and the total amount paid thus from 1876 to 1906 was £839,052. The increase of the uncovered limit (untaxed limit of issue called in Germany the " note reserve ") has not been sufficient to obviate the need for an excess of issue beyond the limit. In accordance with a law passed in 1906 the Imperial Bank issues notes (Reichsbanknoten) of the value of 20 marks (LI), and 50 marks (L2, 1os.) in addition to the 5, 10, 100 and 1000 mark notes (5s., I05., £5, £50) previously in circulation. Imperial paper currency of the value of 20 or 50 marks (LI and £2, Ios.) had previously existed only in the form of treasury notes (Reichskassenscheine) ; these will in consequence be withdrawn from circulation. The amendment of the banking law of Germany, passed in 1899, not only affects the position of the Reichsbank, but that of the four other note-issuing banks. The capital of the Reichsbank has been raised by the bill of that year to £9,000,000. The reserve fund has been raised out of surplus profits to £3,240,000. This exceeds the amount required by the act of 1899, which was £3,000,000. The amending act further diminishes the dividend receivable by the stockholders of the Reichsbank and increases the share which the government will obtain. The arrangement with the four note-issuing banks is designed to cause them to work in harmony with the Reichsbank when the Reichsbank has to raise its bank-rate in order to protect its gold reserves. The official published rate of discount of the Reichsbank is to be binding on the private note-issuing banks after it has reached or when it reaches 4 %. At other times they are not to discount at more than i % below the official rate of the Reichsbank, or in case the Reichsbank itself discounts at a lower rate than the official rate, at more thane % below that rate. If the Reichsbank discounts below the official rate, it is to announce that fact in the Gazette. The subject being important, we quote from the amending act the sections governing the discount rate:—Gesetz, betreffend die Abanderung des Bankgesetzes vom 14. Maltz 1875; vow 7. Juni 1899, Artikel 7, S. 1. The private note-issuing banks are bound by Artikel 7, S. 2, after the 1st of January 1901 :—" (I) Not to discount below the rate published in S. 15 of the bank law, so long as this rate attains or exceeds 4 %, and (2) moreover, not to discount at more than % below the Reichsbank rate, published in S. 15 of the bank law, or in case the Reichsbank itself discounts at a lower rate, not to discount at more thane % below that rate." It remains to be seen whether the note-issuing banks will find these conditions too onerous, and rather than be bound by them will give up their right of issuing notes. The object of the enactment is apparently to protect the specie reserve of the Reichsbank, but it may be doubted whether, considering the importance of the other banks of Germany—none of which is bound by similar conditions—relatively to the note-issuing banks, the restrictions put on the note-issuing banks will have any practical effect. Since 1870 banking has made immense progress in Germany, but it may be some time before the habit of making payments by cheque instead of specie or notes becomes general. AuTHORITIES.—Parliamentary Papers: Report, together with Minutes of Evidence and Accounts, from the Select Committee on the High Price of Gold Bullion, House of Commons, 8th of June 181o; r The imperial treasury is hound to pay the state notes in cash. at any time when this is required, but an independent fund of cash set apart for this purpose does not exist. See Handworterbuch der Staatswissenschaften, vol. v. art. " Papiergeld," p. 97 (Jena, 1893; ed. T. Conrad, L. Elster, W. Lexis and E. Loning). Reports, Committee of Secrecy on Bank of England Charter, House of Commons, 1832; Select Committee on Banks of Issue, House of Commons, 184o; First and Second Reports, Select Committee on Banks of Issue, House of Commons, 1841; First and Second Reports, Secret Committee on Commercial Distress, House of Commons, 1848; Report, Select Committee on Bank Acts, House of Commons, 1857; Report, Select Committee on Bank Acts, Hoi.ise of Commons, 1858; Report, Select Committee on Banks of Issue, House of Commons, 1875; Report from Secret Committee of the House of Lords on the Causes of the Distress which has for some time prevailed among the Commercial Classes, and how far it had been affected by the Laws for regulating the Issue of Bank Notes payable on demand, session 1847–1848; Analysis of the Minutes of Evidence taken before the Select Committee of the House of Commons on Banks of Issue, 1875, with a selection from the evidence, by R. H. Inglis Palgrave, London, 1876 (printed for private circulation).
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