and to considerable expense. There are certain classes who cannot conveniently keep their account with a bank that does not clear. The banks have to keep a larger amount of money in their tills, and thus there is a loss of interest. They have to employ more clerks, to present their bills and cheques at the houses of the clearing bankers, and thus there is a greater expenditure in salaries. In lending money on the Stock Exchange, they have to stipulate for payment in bank notes, and not by a clearing cheque. In selling stock they have to make the same agreement. In these cases they have sometimes to submit to less favourable terms, as. it is not always convenient, and never agreeable, to the stock-brokers to supply bank notes in the middle of the day. Other inconveniences are also occasionally experienced.

"The exclusion of the joint-stock banks inflicts also some inconvenience and loss on the clearing bankers. The jointstock banks present all their bills and cheques at the counters of the respective clearing bankers three times a day, and receive payment in bank notes. On the other hand, each clearing banker presents his bills and notes at the same hours on the several joint-stock banks, at their respective counters, and receives payment in bank notes, To meet the claims made upon them daily by the private banks, the joint-stock banks have to keep in their tills a larger amount of bank notes than they would keep were they members of the Clearing-house. And, on the other hand, each clearing banker has also to keep a larger amount of bank notes to meet the claims made upon him at his counter, by the joint-stock banks. The customer of the private banker must also make provision the day before they fall due for any bills he may have made payable at his banker's. For those bills may be in the hands of joint-stock banks, who will present them early in the morning, and if provision be not previously made, the bills will be dishonoured. Stock-brokers, too, have sometimes sustained annoyance from this cause. They have sold stock for parties who keep their account with a joint-stock bank; and when their cheque has been presented for payment by the joint-stock bank, it has not been paid. The answer given has been that it must come

through the clearing; and as the joint-stock bank could not pass it through the clearing, it has been returned dishonoured to the broker's customer. These inconveniences and annoyances to all parties will necessarily multiply as the business of the joint-stock banks shall increase."

The Clearing-house was established about seventy-five years ago, by some of the London bankers, for the purpose of facilitating their exchanges with each other. It was at first by no means generally approved, and some of the principal bankers refused to have recourse to it. After the number of clearing bankers had increased, a committee was formed for its government. This committee is composed of five or six of the leading bankers, and any new bank that desires to have the privilege of clearing, must now apply for permission to the committee.

The object the clearing bankers had in view was to exchange bills and cheques against bills and cheques, and thus be enabled to carry on their business with a less amount of capital. But while the bankers endeavoured to promote their own interest, they promoted at the same time the interest of the public. The sums liberated from employment in this way became available for employment in agriculture, manufacture, and commerce. Whenever

any banker, therefore, is excluded from the Clearinghouse, and is consequently obliged to keep a larger amount of cash in his coffers, his available capital is so far reduced, and thus the agriculture, manufactures, and commerce of the country receive less encouragement.

The establishment of the Clearing-house has led to new arrangements in several branches of business. The stockbrokers, for instance, now settle all their receipts and payments by cheques, to be paid through the Clearing-house. The cheques a broker draws on his banker are paid at the Clearing-house by cheques of other brokers, which he lodges to his credit. The colonial brokers also, and other classes of commercial men, have fixed days for settling their accounts, and on these days draw cheques on their bankers in the morning, and pay in cheques to meet them at a subsequent part of the day. Thus the institution of the Clearing-house has become entwined with the commerce of the country, and could not be discontined without

deranging every branch of business. It has also received the sanction of the law of the land, the courts of law having decided that the presentment of a bill of exchange at the Clearing-house is a legal presentment. In this case, as in many others, the custom of bankers and merchants has become law. Many of our commercial laws have had the same origin. They have at first been mere regulations established by merchants for their own convenience; these regulations have been adopted by other classes of the community; they have been followed for a number of years; and then the law has recognised them as a portion of the commercial institutions of the country. Such was the origin of allowing three days' grace upon bills of exchange, and such has been the case with the Clearinghouse. The Clearing-house is no longer, therefore, a private subscription-room, from which the parties admitted may exclude whomsoever they please at their own caprice. They may exclude improper banking companies, as the Edinburgh banks refuse to exchange with any bank that is not respectable; but they are bound in justice to admit all respectable banks who may apply for admission.

"Another amendment which I would propose as connected with the currency of London, would be a regulation of the Clearing-house by the Legislature. Although the Clearing-house was a voluntary association of bankers at first, yet it has now existed for sixty years, and has become interwoven with several branches of London trade; it is therefore for all practical purposes a public institution, and, like a market, or any other public institution, might become the subject of legislative interference. The exclusion of banks in London from the Clearing-house whose capital now amounts to about two millions sterling, and who have about 2,000 partners, is not only a great inconvenience and a great loss to those banks, but is a great inconvenience also to the public in general, and such an interference with the freedom of trade, as carried on by individual companies in London, as alone would justify the interference of the Legislature; and, besides, it is quite unreasonable that an association of omnibus proprietors should be indicted and tried for a conspiracy because they have tried to run a rival omnibus off the

road, and yet that a body of bankers may conspire for a similar object without any interference of the Legislature at all."*

The following evidence was given by the Governor of the Bank of England, before the Committee on Commercial Distress, in answer to questions from Sir William Clay :

"It must be known to you, I suppose, that the joint-stock banks of London are excluded from the Clearing-house?-Yes. "Are you of opinion that that exclusion (which of course it is perfectly within the right and discretion of private banks to insist upon, if they please) tends to public inconvenience, inasmuch as it lessens, pro tanto, that economy of the circulating medium which the Clearing-house is calculated to produce?-Allowing joint-stock banks to clear with other bankers, I have no doubt would produce an economy in the use of bank notes.

"And economy in the circulating medium ?—And economy in the circulating medium.

"Have you any means of ascertaining the amount to which the admission to the Clearing-house of joint-stock banks would economise the amount of circulation now required for the use of London?—I have not; I have heard it stated at half a million, but I cannot say if that is correct.

"I believe that the chairman of one large London joint-stock bank, viz. the London and Westminster, did state publicly that they were under the necessity of keeping a reserve of 150,000l. in bank notes, more than it would have been necessary for them to keep if they had been admitted to the Clearing-house?—I know that he made some statement of that sort; I cannot say what it was.

"That must imply, not perhaps the necessity of a corresponding amount being kept by all private banks, but something approaching to it, inasmuch as all cheques on such banks held by joint-stock banks must be presented in the course of the morning at the banks, instead of being brought to the Clearing-house in the evening? Yes.

"It is, therefore, not merely the amount of notes which the joint-stock banks are obliged to keep in reserve, but the amount of extra bank notes which the private bankers are obliged to keep in reserve ?—Yes.

"There are, besides the London and Westminster, four other joint-stock banks in London; I believe their capital, from the published reports, amounts to 2,645,000l. paid-up capital, and

Evidence of J. W. Gilbart before the Committee on Banks of Issue, March, 1841.

their deposits to 8,864,0007., together 11,509,000, of which these joint-stock banks have the control?—I cannot say whether those figures are correct or not.

"But assuming that those figures are correct, and that it is also correct that one of these banks, viz. the London and Westminster, is compelled to keep 150,000l. more of notes in reserve, because they are not admitted to the Clearing-house, is it not probable that the sum you have mentioned of 500,000l. is not too large an estimate of the increased quantity of circulating medium, which is rendered necessary by the circumstance of these jointstock banks not being admitted to the Clearing-house?-Assuming as a fact, that the London and Westminster Bank keep 150,000%. of notes more than they would otherwise keep in consequence of not being able to clear, probably, I should say, that that statement is correct.

"But at all events, without assuming that these figures are exactly correct, is it not true, that that exclusion must, in reality, produce the necessity for a larger amount of circulating medium to supply the daily necessities of the public ?—Yes."

SECTION IV.

THE COUNTRY PRIVATE BANKS.

THESE banks cannot have more than six partners. They are banks of deposit, of loan, and of discount. As banks of deposit, they usually allow interest on both deposits and balances of current accounts, and charge a commission on the amount of the transactions. In commercial or manufacturing districts, their advances are usually made by way of discount; in agricultural districts, frequently by loans. They remit money by issuing bills or letters of credit on London, or they direct their agents to make payments to bankers or other parties resident in London. As banks of circulation, they have at various times occupied a large portion of public attention, and have been the subject of much legislation.

Those bankers who wish to issue notes must take out a licence, which will cost 301., and must be renewed every year. They may re-issue any notes not above the value of 1007. as often as they think proper. And should any of the firm die or remove from the business, the notes may be issued by the remaining partners. But they