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corresponded to the principal national coin of the country in which the bank was located. But as the actual coins were debased from time to time, their value fell below that of the ideal coin accepted by the bank as its standard, and, in some cases, particularly that of the Bank of Venice, many of the foreign coins were received at valuations higher than warranted by the value of pure gold or silver in them. But these various coins once deposited with the bank the account was turned into "ducats" and the depositor credited with so many "ducats" of the ideal standard established by the bank. The amount thus credited, or any part of it, was transferable on the books of the bank, at the option of the depositor, to any other person to whom he might desire to pay money; but the money could not be withdrawn. The depositor thus got the benefit of a premium on many foreign coins which was not warranted by the value of the pure gold or silver in them. But this last mentioned inducement to deposit money in bank was peculiar to the Bank of Venice, and was one of the secrets of its popularity and good credit for so many years. The object was to secure the coin for the government, and the deposit was practically a subscription to a national loan. In the twelfth and thirteenth centuries, when the common rate of interest ranged from 15 to 25 per cent per annum, the loss on these coins, received at an overvaluation by the bank, was considered a small rate to pay for the use of the money for the state. But aside from this there was the consideration to the depositor in other banks as well as that of Venice, that he was at once assured of the value of the coin he received. The credits at the banks, instead of being only on the books and transferable by order,
were soon made in the form of certificates of deposit, transferable by indorsement; and this suggested to a Swede named Palmstruck, who founded the Bank of Sweden, the idea of making the certificates in uniform amounts and the deposit payable to any holder, without indorsement. This conception was elaborated into the present bank note, the first note having been issued by the Bank of Sweden in 1658. "An enquète made by the French government, in 1729, recognizes the priority of Sweden in this matter, and declares the bank note to be an admirable Swedish invention, designed to facilitate commerce." *
BANKS IN GREAT BRITAIN AND IRELAND.
The Bank of England, founded in 1694, originated in the necessities of the government, then at war with France. William Paterson, a London merchant, conceived the scheme of organizing a bank to receive deposits and assist the government with money. The capital of £1,200,000 was raised by popular subscription, and it was provided that the whole of this should be permanently loaned to the government at 8 per cent per annum. The bank immediately issued notes of the denomination of £50 and upward. As there was no legal limit to the amount of issue, they soon depreciated, and in 1697 it was found necessary to increase the capital stock by £1,000,000. This was paid into the bank, and, for a short time, was not loaned to the government, and the effect was to cause the notes and the stock (which latter had fallen to 40 per cent discount)
*Palgrayes' Notes on Banking, page 87.
to appreciate to par. In 1844, an act was passed dividing the bank into two departments the issue and the
banking the object of which was to prevent the issue of notes without a sufficient reserve of specie to redeem them. At the time of the division into the two depart ments the aggregate of permanent loans made by the bank to the government was £11,015,000. This debt was now declared to be due from the government to the issue department, which was authorized to issue notes to circulate as money to that amount. But some of the provincial banks had also been authorized to issue notes to a limited extent on the deposit of securities, and it was provided in the act of 1844 that whenever any of these provincial banks diminished their circulation permanently, from any cause, their right to issue notes on the deposit of government securities should accrue to the Bank of England, but that the latter bank should only issue two-thirds as much as the amount which the provincial banks should cease to issue. Under this arrangement the amount of "permanent issue" had increased to £14,475,000 in 1858. For the notes issued under the foregoing provisions no reserve of specie is required, but for every other note more than are issued as above, coin or bullion must be paid into the bank before the issue of the note. There is no distinction in the appearance of the two classes of issue; but when gold is wanted from the bank for any pur pose, the notes are presented at the issue department, and, upon their redemption, are at once destroyed, and for every new deposit of bullion or coin, new notes are issued to the banking department.
Besides the Bank of England there were in England, in 1872, 116 joint stock banks with 1,007 branches.
In Ireland, in 1872, there were 9 joint stock banks
with 305 branches.
The following shows the relative position, in 1874, of the Bank of England, the London joint stock banks and the Scotch joint stock banks:*
* In an article by Mr. Charles Moran, in the New York Bulletin, in September, 1875, is the following succinct statement of the gradual development of the Bank of England:
All the above accessions of capital were loaned to the government.
The circulation, in 1875, is only equal to what it was in 1815. The deposits are about doubled, while the bullion has increased about seven-fold, and yet the securities held by the bank in 1875 are only £32,720,000, against £44,854,000 in 1815. These figures show clearly that the Bank of England has not kept pace in its operations with the vast increase of the production and commerce of Great Britain in the past sixty years.
But the Scotch banks are the most successful institutions of the kind that have ever existed. Until 1845 they were almost entirely exempt from legal
TABLE OF PAPER MONEY IN GREAT BRITAIN AND IRELAND.
Notes of the Bank of England, the Bank of Ireland, and of all joint stock and private banks in circulation at various periods:
The Bank of France was organized under that name in 1803, but had previously existed as the Royal Bank. It is a government institution, the government having the appointment of the governor of the Bank and two of the directors. Its issues are not limited by law. There are, in all, sixty-two branches of the Bank of France in the various cities.
Amount of the notes of the Bank of France in circulation at various periods from 1854 to 1876, expressed in their equivalent in American gold dollars:
restrictions and governmental control. They were limited neither as to their capital, the number and location of the branches they established, the number of their shareholders, nor the amount of their issues and discounts. From 1800 to 1814, owing to the scarcity of coin, they issued notes as low as three shillings sterling. In 1826, out of a circulation of £3,309,000, £2,079,000 were notes under £5. In 1836, out of a circulation of £3,800,000, two-thirds were under £5.