Bank. In 1814 a new bank was established, called the Bank of the Netherlands, on the plan of the Bank of England. The Bank of Hamburg was established in 1619, and is a well-managed institution, conducted upon nearly the same plan as the Bank of England. The Bank of England, which we have separately noticed, was opened in 1694. The Bank of Vienna, established in 1703 as a bank of deposit and circulation, subsequently (1793) became a bank of issue; and its notes were the sole circulating medium in Austria; but having fallen to a considerable discount in consequence of their excessive quantity, the Austrian National Bank was established in 1816, with the object of diminishing the paper currency, and of performing the ordinary banking functions. The banks of Berlin and Breslau were erected in 1765, under the sanction of the state. These are banks of deposit and issue, and are likewise discounting-offices for bills of exchange. During the reign of the Empress Catherine, three different banks were established at St. Petersburg; these were, the Loan Bank, the Assignation Bank, and the Loan Bank for the nobility and towns. The Loan Bank, or Lombard, or Russian Mont de Piété, was established in 1772, and makes advances upon deposits of bullion and jewels, and allows interest upon all sums deposited for at least a year. The operations of this bank as a Mont de Piété are still carried on for the profit of the Foundling Hospital in St. Petersburg. The Assignation Bank, opened in St. Petersburg in 1768, and Moscow in 1770, issues the government paper-money, and is in all respects an imperial establishment: it is now called the Imperial National Note Bank, having been changed into a Reichs (imperial) assignation bank at St. Petersburg in 1786. The Loan Bank, established in 1786, for the nobility and towns, advances money on real security. It is likewise a discount-bank, and acts as an insurance company. The Aid Bank, established in 1797, advances money to relieve estates from mortgages, and to provide for their improvement. The punctual payment of interest upon its advances is enforced by taking their estates from the possession of defaulters until the entire debt is discharged. The Imperial National Commercial Bank of Russia, which was established in 1818, receives deposits of coin and bullion, and has a department for transferring credits from one account to another, in the manner of the banks of Amsterdam and Hamburg. It is also a bank of discount, and makes advances upon merchandise of home production. Its capital, about a million and a half sterling, is declared to be sacred on the part of the Russian government, and free from all taxation, sequestration, or attachment, as well as from calls for assistance on the part of the state. This bank has branches at Moscow, Archangel, and other important commercial towns in the empire. The Bank of France, established in 1803, has a capital of 3,596,000l. sterling. This association alone enjoys the privilege of issuing notes in France, which are for 1000 to 500 francs each. The bank is a bank of deposit and circulation, and has several branches. It is obliged to open an account with any person who may require it; and is not allowed to charge any commission for the transaction of ordinary banking business. Its profits result from the use of money deposited by its customers, from the issue of its own notes, and from discounts upon mercantile bills; besides which, a charge is made every six months of ouc-eighth per cent. for the safe custody of plate, jewels, and other valuables upon which it has made advances. The affairs of this bank are managed by a governor and deputygovernor, who are nominated by the king, and by seventeen regents and three censors elected from among the shareholders. A full statement (compte rendu) is published every quarter (pursuant to the law of 30th of June, 1840), which furnishes a complete exposition of the affairs of the bank, which is one of the most flourishing and best managed banks in Europe. The official return of the operations and state of the bank for the quarter ending 25th September, 1844, contained the following items:-Sundry Cash Receipts 44,309,380l.; Cash paid 44,173,028/.; Commercial Bills discounted 11,140,8967.; Notes outstanding 9,636,7244.; Cash in hand 10,449,8761.; | in London, do not allow any interest Public Securities 2,009,200l. This return upon sums placed in their custody. shows that the capital of the bank in bullion exceeded the amount of notes in cir culation. Banks have been established at Calcutta, Bombay, and Madras; and in the interior of India the natives are extensively engaged in banking, but chiefly in issuing and discounting bills of exchange. Within the last few years several banks have been established in London which confine their business chiefly to particular colonies, where they have branches. II. Objects and General Principles of Banking Banking establishments may be divided into three classes, banks of deposit, banks of issue, and banks which exercise both these functions. Banks of deposit, strictly speaking, are those which, like the old bank of Amsterdam, simply receive the money or valuables of others into custody, and keep them hoarded in their coffers till called for by the depositors. However convenient such an establishment may be to the persons by whom it is used, it must be evident that it can contribute nothing to the general wealth of a community, and that the only means of profit which it provides for those who conduct it, must arise from payments made by its customers in the shape of commissions, or fines which partake of the nature of commissions. If, instead of burying the clipt and worn coins of which its hoards were composed, the Bank of Amsterdam had converted them into money of the proper standard, and had lent the same at interest upon proper securities, no commissions need have been required from its customers, who would in so far have been benefited: and a considerable capital being set free for the prosecution of commercial enterprises, the country might have thence derived continued additions to its wealth. Banks of deposit, in this confined sense of the word, are now very little used, and the term is generally understood to mean an establishment which lends as well as receives the property of others, and derives its profits from charging a higher rate of interest than it allows. Some banks of this description, such as the private banks In like manner there are few, if any, establishments which are purely banks of issue. A banker sends forth his promissory notes that he may employ to his own profit, during the time that the notes remain in circulation, the money or property for which he may have exchanged them, and by this course he gives to his establishment the mixed character of a bank of issue and of circulation. The most usual means by which a banker gets his notes into circulation is by lending them on personal or other security to customers engaged in business, who have a running account at the bank. In general, those bankers who issue their own notes likewise receive deposits: this at least is the practice in England. Bankers and banking associations usually possess considerable wealth, and are thought deserving of confidence on the part of the public; and there can be no doubt that, so long as they conduct their business with integrity and prudence, they are of material service in giving life and activity to commercial dealings. They are, in fact, the means of keeping that portion of the floating capital of a country fully and constantly employed, which but for their agency would frequently lie dormant and unproductive for uncertain periods in the hands of individuals. Thus, while banking does not directly create capital, the issue of bank notes enables people to buy who could not buy for want of a medium of exchange. Again, a large farmer has grain and stock, and he wants to drain; but money is short. He goes to a bank and gets bank-notes on the security of his property. That is a useful operation. Another thing is, people may deposit small sums of money at a bank, which the banker lends. Thus a bank is a mean of facilitating the loan of money from the possessor of money to the farmer or manufacturer who has goods, but wants ready money. The lending of money is the operation of banking, and a bank is a centre which facilitates this lending: it enables people to lend through a banker and his connexion, who could not lend without that. But the real legal loan is the banker's. The man who puts Public banks, when established under proper regulations, are calculated to benefit the community in the greatest degree, and if at any time their course of management has been such as to counteract the advantages they bring, and to derange the money dealings of the country in which they are established, the evil has arisen from the want of an adequate acquaintance with the principles upon which their proceedings should be founded. In this respect, public banks may indeed be rendered in the highest degree public nuisances, but such an effect is far from being the necessary attendant of the banking system; on the contrary, it may be confidently affirmed, that no institutions are so well calculated to preserve order and steadiness throughout commercial transactions. In this country, and in our own day, we have seen and felt the disastrous effects of a want of knowledge in this branch of political science on the part of those who have directed our national bank, one of the most powerful engines of modern times, and it has only been through the discussions and investigations that have arisen out of those disasters that we have at length brought out, so as to be felt and acknowledged and acted upon, sound and safe principles for regulating the trade of a banker. his money in the bank looks to the banker | than would otherwise be so, that the most only. Ånd every man who holds a judicious operations of banking can inbanker's note is his creditor to that crease the industry of the country. That amount. How to secure the safety of part of his capital which a dealer is obthis operation, so that he who has a note liged to keep by him unemployed and in shall always get what he gave for it, is ready money, for answering occasional the question that concerns the public. demands, is so much dead stock-which, so long as it remains in this situation, produces nothing, either to him or to his country. The judicious operations of banking enable him to convert this dead stock into active and productive stockinto materials to work upon, into tools to work with, and into provisions and subsistence to work for into stock which produces something both to himself and to his country. The gold and silver money which circulates in any country, and by means of which the produce of its land and labour is annually circulated and distributed to the proper customers, is, in the same manner as the ready money of the dealer, all dead stock. It is a very valuable part of the capital of the country which produces nothing to the country. The judicious operations of banking, by substituting paper in the room of a great portion of this gold and silver, enable the country to convert a great part of this dead stock into active and productive stock-into stock which produces something to the country. The gold and silver money which circulates in any country may very properly be compared to a highway, which, while it circulates and carries to market all the grass and corn of the country, itself produces not a single pile of either. The judicious operations of banking, by providing (if I may be allowed so violent a metaphor) a sort of waggon-way through the air enable the country to convert as it were a great part of its highways into pastures and corn-fields, and thereby to increase very considerably the annual produce of its land and labour." The true principle upon which bank issues should be governed is now understood to be that the circulation should at all times be kept full, but without any redundancy; and the simple means whereby this state of things may be determined and regulated are (except on very extraordinary emergencies) offered by the state of the foreign exchanges. We cannot better close this part of the subject than by the following quotation from Dr. Smith (Wealth of Nations, vol. ii. p. 69), in his chapter on Money:"It is not by augmenting the capital of the country, but by rendering a greater part of that capital active and productive : III. History and Constitution of the Bank of England.-This establishment, unquestionably the largest of its kind in Europe, was projected by a Scotch gentleman, Mr. William Patterson, in 1694. The scheme having received the sanction and support of the Government, to whom the whole of the capital was to be lent, the subscription was filled in ten days from its being first opened; and on the The original capital of the Bank, which amounted to 1,200,000l., was, as already mentioned, lent to Government, who paid interest for the same at the rate of 8 per cent., with a further allowance of 4000l. a year for management. The first charter was granted to continue for eleven years certain, or till a year's notice after the 1st of August, 1705. In 1697 a new subscription was raised and lent to Government, to the amount of 1,001,1717. 10s., which sum was repaid in 1707, and the capital again reduced to In the following | its original amount. From its first institution, the Bank of England has discounted mercantile bills. The rate of discount charged fluctuated at first, but was usually between 44 and 6 per cent. In 1695 a distinction was made in this respect, in favour of persons who used the Bank for purposes of deposit: for such persons inland bills were discounted at 4, and foreign bills at 3 per cent.; while to all other persons the rate was 6 per cent. upon both descriptions of bills. After that time the rates were equalized to all classes, and fluctuated between 4 and 5 per cent. until 1773, when 5 per cent. was fixed as the rate of discount upon all descriptions of bills; and at this per-centage the Bank continued to discount bills until June, 1822, when it was lowered to 4 per cent. The rate was again advanced to 5 per cent. during the panic, in December, 1825; but was lowered in July, 1827, to 4 per cent. Shortly after its first establishment, the Bank was involved in some difficulties, and was obliged, in 1696, even to suspend the payment of its notes, which were then at a considerable discount. Having received assistance from Government, this difficulty was soon surmounted; and the establishment was not again placed in the same dilemma until 1797, when the celebrated Bank Restriction Act was passed, which will require a more particular notice. In 1708 an Act was passed, greatly in favour of the Bank of England, declaring that "during the continuance of that corporation it should not be lawful for any other body politic, erected or to be erected, other than the said Governor and Company of the Bank of England, or for any other persons whatever united, or to be united, in covenants of partnership exceeding the number of six persons, in that part of Great Britain called England, to borrow, owe, or take up any sum or sums of money on their bills or notes payable on demand, or in any less time than six months from the borrowing thereof." This Act continued in force until 1826, when it was partially repealed, so as to admit of the formation of banking establishments for the issue of notes with more than six partners, at any distance exceeding sixty-five miles from London; but these establishments were restrained from having any branches in London; and it was expressly declared that the partners, jointly and severally, should be held liable for all the debts of the bank with which they might be connected. Until a very recent period, it was not doubted that the Act of 1708, as above described, forbade the formation of banks of all descriptions having more than six partners, and this impression was universally acted upon. Even the discussions which preceded the partial relax | ation of its provisions, in 1826, failed to produce any different views regarding it. During the negotiations of 1833 for the renewal of the Bank Charter, strong doubts were conceived upon the point as to whether the restriction was not confined to the forbidding only of banks of issue; and the law-officers of the crown having been called upon for their opinion on the subject, gave it as their decided opinion, that banks, provided they did not issue their own notes payable to bearer, might have been at any time established in any part of the kingdom. To remove all doubts upon the subject, a clause was introduced in the Act of 1833, expressly authorizing the establishment of banks which do not issue notes, with any number of partners, in any place within or without the limits to which the exclusive privilege of the Bank of England, in regard to issuing notes, now applies. The Bank is expressly prohibited from engaging in any commercial undertaking, other than transactions purely and legitimately connected with banking operations, such as the buying and selling of coin or bullion, and bills of exchange. But a power being given to the corporation to advance money upon the security of goods and merchandise, it was of course necessary to empower the directors to sell the same for their reimbursement. In the year 1759 the Bank began to issue notes for 10l., having previously not put any into circulation below 201. Notes of 5l. value were first issued in 1793; and in March, 1797, 17. and 27. notes were brought into use. The issue of the latter, except in one partial instance, ceased in fact in 1821, and by law on the 5th of April, 1829, since which time 51. is the smallest sum for which any bank in England may send forth its notes payable to bearer. The necessity for the issue of notes for so small an amount as 17. arose out of the act of 1797, which restricted the Bank from making payments in gold, a measure which was forced upon it by the financial operations of the Government, then very largely indebted to the corporation. Under these circumstances it became a matter of necessity as well as |