its subject or its complicated treatment, is not comprehended by the public, is as good as lost-for there is not, and cannot be, any force of public opinion behind it; yet to Mr. Gladstone this is no difficulty at all. Now, a Currency Bill is precisely a measure of this kind; and also it is one to which Mr. Gladstone is obviously impelled, alike by his native energy, his restless passion for work, and by the perfectly laudable desire to keep green his laurels in a field peculiarly favourable to his ambition. It is precisely because of Mr. Gladstone's peerless advantages for dealing with this and cognate matters of legislation that there is so much ground for apprehension as to the results of his now announced intention of dealing with the currency of the entire kingdom. And most of all, we should think, will such apprehensions be entertained by the Scottish public when the declared and paramount principle of the Gladstonian currency legislation is the total Abolition of Bank-notes.

The mere announcement of an intention of this kind upon the part of the Government is fitted to arouse the keenest interest alike of the banking establishments and of the public, and most of all in Scotland, which has been greatly indebted to its own bank-notes for its progress and prosperity during the past and the present centuries. It must seem strange, at first sight, that the announcement in question has remained unnoticed, to all appearance, in England, and has been but partially taken notice of in Scotland. The explanation is, that the announcement of the Ministerial intentions-which, of course, means the views of the Prime Minister is contained in a very small Parliamentary Paper, in two parts, which was ordered by the House of Commons to be printed in June last, but the contents of

which excited no comment in either House of Parliament. Doubtless this was chiefly explainable by the monopoly of interest attaching to the Irish Land Bill, and to the extreme lassitude and indifference to other questions on the part of the House of Commons, after one of the longest and most exhausting and wearisome sessions of Parliament during the present generation. The Parliamentary Paper of which we speak, contains a correspondence between the Treasury and the three chartered banks of Scotland; and the facts and circumstances of the case may be summarised as follows:

The calamitous fall of the shamefully managed City of Glasgow Bank excited the public mind in two opposite directions. The frightful ruin in which the shareholders of that bank were involved created a panic among bank shareholders against unlimited liability; at the same time, the public came to see how important it was for their interests that the liability of bank partners or shareholders should be sufficiently extensive to cover heavier losses than had hitherto been deemed possible, at least as a reasonable source of danger. No doubt the apprehension took an exaggerated form; for, as every one knows, the collapse of the City of Glasgow Bank was not owing to ordinary causes: it was not owing to "mismanagement," but to actual crime on the part of some of the leading administrators of the Bank. The calamity was really as exceptional as the occurrence of an earthquake in northern latitudes. Of the two forms which the panic assumed, the first which we have named-that is, the dread of unlimited liability on the part of shareholders, or of the banking community was alike the more extensive, and what was deemed the more reasonable.

-

Banks in all

parts of the kingdom cried out for "limited liability," and with general approval the late Government brought in a Bill (we cannot say as well framed as it might have been) enabling unlimited banks to become "limited,”—a Bill of which even the most powerful of the great London banks have not hesitated to avail themselves.

Sir Stafford Northcote's Bill was the result of a widespread and wellnigh panic-struck demand for limitation of banking liability; and considering how large, we may almost say universal, was the eager rush of banks to avail themselves of this measure of shelter, it is somewhat surprising, and most noteworthy, that an entirely counter-movement should be made by the Scotch banks which are already fully protected. It must be said, however, that from the very outset there has existed a remarkable "solidarity" of interests in Scotland between the banks and the community at large. The Scottish people is proud of its banks; they have been national institutions rather than private establishments. Banking in Englandexcept the Bank of England, founded by a Scotchman-has been prosecuted exactly like any other branch of trade. But in Scotland-and strange as the statement may appear to our English readers, it is no exaggeration-banking has been carried on as a serious and all-important national trust. While seeking a fair profit upon their capital, labour, and skill, the Scotch banks have always regarded themselves as agents of the common weal. They have been prime factors of the national progress, and the good of the community has been an object which they have respected co-ordinately with their own interests. Scotchmen are proverbially "clannish;" they are much more ready than the English people to hold together for a common purpose, at some sacrifice

to individual interests. No doubt this difference between the two peoples-this peculiarity of Scotch national character-is partly owing to the fact that they are, and have always been, a small nation, and a poor one. Throughout their history, "holding together" was indispensable to their independent national existence, and in later times to their industrial progress and prosperity. A family which has to struggle for existence is much more likely to hold together and combine their efforts than a family each of whose members can readily do for himself. We might claim much more for the Scotch than this; because this sense of the nation or community, this regard for the general interest, is the beginning of the ideal of human society in its high and mature form,-the growth of which is indispensable to the progress of a healthy civilisation, and the attainment of which must mark the crowning-point of national life.

Strange, perhaps, as the statement may appear in London commercial circles, we believe that at any meeting of the shareholders of a Scotch bank it would be a most effective argument against any proposal if it could be shown to involve a departure from the national character and policy of Scottish Banking, and to be designed to benefit the shareholders by an abandonment of the policy of ceaselessly meeting the growing banking requirements of the people-as, for example, by the extension or multiplication of bank-branches. We have before us a list of the dividends paid by the English banks in the year 1864, showing dividends of 20, 25, and even 35 per cent. The Scotch banks, although few in number, and practically possessing a monopoly, have constantly abjured the appropriation of such large profits. Speaking roundly, they have regarded 10 per cent as

about the maximum legitimate dividend. What do they do with the surplus gains? They devote them to multiplying their branches, -to extending banking facilities throughout the country,-establishing branches in small towns, even villages where a branch is not expected to pay, it may be for a good many years to come. Diminish the profits of the Scotch banks, and the first result must be an abandonment of not a few of these branches, and a consequent decline in the general wellbeing of the country. And, as will appear byand-by and as indeed is well known throughout Scotland-such a retrogression and curtailment of the banking facilities in the poorer districts of the country, would necessarily follow an abolition of Scotch bank-notes, or a taxing away of the present profits thereon. Not as a mere individual opinion, but as a fact demonstrated by their historic policy, we unhesitatingly claim for the Scotch banks an unrivalled loyalty to the interests of their country, that they regard those national interests as co-ordinate with their own. But if their own profits be curtailed, it cannot be expected that the advantages which at present, as hitherto, they extend to their country, should not likewise suffer.

The three oldest of the Scottish banks-namely, the Bank of Scotland, the Royal Bank of Scotland, and the British Linen Companyare chartered establishments. Each of them was established (the Bank of Scotland so long ago as 1695) by a royal charter, and all their powers, as to capital, &c., are defined by those charters, and can only be altered by means of an Act of Parliament. Like all chartered corporations, their liability is limited to the amount of capital which the charter empowers them to raise. Accordingly, these three

"lim

chartered banks are strictly ited." And what they now desire is, to remove this limitation on their liability. While the large class of "unlimited" banks throughout the kingdom have been eagerly availing themselves of Sir Stafford Northcote's Bill (which, indeed, was brought forward in answer to their appeal to the Government), and have been curtailing their liabilities to the public, these old Scottish banks have resolved to abandon the protection to their shareholders afforded by their charters; and during last session they introduced Bills into Parliament asking for power to enlarge their liability to the public-in fact, to "un-limit" themselves. It is in the history of this affair in the correspondence between these banks and the Government-that the announcement has been made that the present Ministry are resolved to entirely abolish bank-notes, in Scotland and throughout the whole kingdom; and that they will do this (or attempt it) next session, if the Scotch banks will lend them a hand! A strange expectation of assistance, savouring somewhat of irony or insult.

First, let us briefly describe the present position of the three chartered Scottish banks as regards liability to the public. The Bank of Scotland, established in 1695, is at present authorised to have a capital of £4,500,000-of which sum £1,875,000 has been created or subscribed, but only £1,250,000 has been paid up, leaving £625,000 unpaid and liable to be called up. Thus the Bank's reserve amounts to one-half of its capital. the Bank desires to increase the amount of its uncalled capital, or the extent of its liability to the public, and therefore proposes to create the £2,625,000 of capital which it is empowered to raise, but which as yet has not been issued

But

and subscribed. Of course it can do this of its own power, but it desires to call up this large amount of uncreated capital in a manner more favourable to the public than the Bank is at present empowered to do by Act of Parliament. When the Bank obtained power from Parliament in 1873 to increase its capital by the addition of three millions sterling, it sought leave to raise that capital in such proportions as to "paid-up" and "unpaid-up" as the Bank might deem best. This arrangement was approved by the House of Commons; but in the Upper House it was enacted that the new capital should be raised in such manner that for each £100 paid up, there should be £50 uncalled and in reserve. Such a proportion of reserve certainly seems sufficient; and in fixing this mode of issuing the new capital, the House of Lords were doubtless apprehensive that, if left to its own judgment, the Bank would keep a less reserve than this, and would make the paid-up portion of the new capital larger than two-thirds of the whole. As now shown, this was a mistake; for the Bank desires to leave a larger proportion of the new capital uncalled therefore in up, and reserve. What the Bank of Scotland now asks of Parliament is, that it may be allowed to leave more than onethird of its new capital uncalled, so as correspondingly to increase its liability to the public. At present, as above stated, the Bank of Scotland's paid-up capital amounts to £1,250,000, and the unpaid portion of the subscribed capital amounts to £625,000, or one-half; and if it were to issue the £2,625,000 of remaining authorised capital in the same proportions (as at present enacted), the Bank would have a total subscribed or created capital of £4,500,000, of which two-thirds would be paid up, and one-third,

or £1,500,000, would remain unpaid and in reserve. A reserve of 50 per cent, or of a million and a half upon a paid-up capital of three millions, is certainly a large proportion of reserve to working capital; and that any bank should wish to establish a still larger proportion of reserve speaks volumes as to its desire to give ample security to the public by such an extension of its liabilities. Although a bank established by royal charter, and therefore strictly "limited," if it choose to keep itself so, this oldest of the Scottish banks has issued its capital in such a manner that it is practically "unlimited," i.e., to the extent of onehalf its working or paid-up capital; and not content with this, it goes to Parliament for power to increase still further its reserve, and liability to the public. There is no sign here of standing over-much by ancient and well-established privileges.

The case of the two other chartered banks is similar, and also simpler. The Royal Bank of Scotland (established 1727) has a capital of £2,000,000 wholly paid up

all of which large sum must of course be lost before the slightest loss could befall its customers or depositors; and in 1873 this Bank obtained from Parliament a further extension of its powers. Finally, the British Linen Company (established in 1746) has an authorised capital of £1,500,000, of which £1,000,000 has been subscribed and fully paid up.

These three banks, then, went to Parliament last session asking for power to create larger reserves of uncalled capital than they have hitherto been permitted by their constitutions to raise, although the liability of each and all of them was strictly limited to the amount of their subscribed capital. At the same time they voluntarily proposed to put their note-issues on the most

perfect footing of security that has ever been suggested. At present, under the Act of 1845, there is no special security for the "authorised" note-issues of the Scottish banks; and although these banks are obliged to keep an amount of gold equal to that of their notes in excess of the authorised issue, that gold is not set apart for the note-holders, but, in the event of bankruptcy, would simply form part of the general assets,-as indeed is also the case with respect to the gold kept in the Issue Department of the Bank of England. To improve upon this state of matters, the three chartered banks proposed (1) that this amount of gold should be specially set apart as security for the note-holders; and (2), that they would henceforth keep an equal amount of Consols in security for the "authorised " portion of their note-issues, likewise specially set apart for the note-holders. Such security for note-issues is the most perfect that has ever been proposed; it is a great improvement upon the terms of the Acts either of 1844 or 1845, and consequently superior to the security for the note-circulation of the Bank of England, or of any other bank in the kingdom.

One would have thought that such applications would have been at once acceded to, and without any comment save words of praise to these banks for their broad views and loyalty to the public interests. And such, we feel assured, would have been the fortune of these applications had they ever obtained an ordinary hearing in the Houses of Parliament. But the Government interfered to prevent any hearing of the cause. Much to the surprise of the banks, Mr. Gladstone set his face against their Bills; and one of his objections, and the fundamental one, is based upon his desire and in

tention to abolish bank-notes altogether.

The first of the objections taken by the Treasury on behalf of the Prime Minister, was that the banks brought forward their application in the form of private Bills. It is hard to see how they could have done otherwise. It is by private Bills that corporations or chartered institutions apply to Parliament when they seek to obtain alterations in their charters; and it has been by private Bills that these chartered banks have hitherto obtained additions to the amount of capital authorised in their charters. The second demand made by the Treasury was, that these banks should take the title of "Limited." This demand, we admit, was not altogether unreasonable in itself, but it was both unreasonable and unfair under the circumstances of the case. Every corporation-that is, an institution or partnership established by royal charter-is de jure limited in liability to the amount of capital authorised in its charter. A corporation, in the eye of the law, is like an individual, possessed of not a penny more or less capital than that named in its charter. Hence every corporation or chartered institution is strictly limited. These three Scotch banks stand on exactly the same footing as the Bank of England and the Bank of Ireland,—all of them being chartered establishments or "corporations." All these chartered establishments lie outside the laws relating to joint-stock companies. They form a class by themselves. No one has asked that the Bank of England should take the title of "Limited" (although its liability is strictly limited); neither is any other corporation required to assume that title-because the title would be a superfluity, the very fact of an institution being a corporation, or established by charter,