A BANK RETURN
Notes Issued L56,908,235 Government Debt L11,015,100 Other Securities 7,434,900 Gold Coin and Bullion 38,458,235 Silver Bullion --- ----------- ----------- L56,908,235 L56,908,235 ----------- -----------
Proprietors' Capital L14,553,000 Government Securities L11,005,126 Rest 3,431,484 Other Securities 33,623,288 Public Deposits 13,318,714 Notes 27,592,980 Other Deposits 42,485,605 Gold and Silver Coin 1,596,419 Seven Day and other Bills 29,010 ----------- ----------- L73,817,813 L73,817,813 ----------- -----------
With the Bank of England thus acting as a centre to the system, there has grown up around it a circle of the great joint stock banks, which provide credit and currency for commerce and finance by lending money and taking it on deposit, or on current account. These banks work under practically no legal restrictions of any kind with regard to the amount of cash that they hold, or the use that they make of the money that is entrusted to their keeping. They are not allowed, if they have an office in London, to issue notes at all, but in all other respects they are left free to conduct their business along the lines that experience has shown them to be most profitable to themselves, and most convenient for their customers. Being joint stock companies they have to publish periodically, for the information of their shareholders, a balance sheet showing their position. Before the war most of them published a monthly statement of their position, but this habit has lately been given up. No legal regulations guide them in the form or extent of the information that they give in their balance sheets, and their great success and solidity is a triumph of unfettered business freedom. This absence of restriction gives great elasticity and adaptability to the credit machinery of London. Here is a specimen of one of their balance sheets, slightly simplified, and dating from the days before the war:--
Capital (subscribed) L14,000,000 ---------- Paid up 3,500,000 Reserve 4,000,000 Deposits 87,000,000 Circular Notes, etc. 3,000,000 Acceptances 6,000,000 Profit and loss 500,000 ----------- L104,000,000 -----------
Cash in hand and at Bank of England L12,500,000 Cash at call and short notice 13,000,000 Bills discounted 19,000,000 Govt. Securities 5,000,000 Other Investments 4,500,000 Advances and loans 42,000,000 Liability of customers on account of Acceptances 6,000,000 Promises 2,000,000 ----------- L104,000,000 -----------
On one side are the sums that the bank has received, in the shape of capital subscribed, from its shareholders, and in the shape of deposits from its customers, including Dr. Pillman and thousands like him; on the other the cash that it holds, in coin, notes and credit at the Bank of England, its cash lent at call or short notice to bill brokers (of whom more anon) and the Stock Exchange, the bills of exchange that it holds, its investments in British Government and other stocks, and the big item of loans and advances, through which it finances industry and commerce at home. It should be noted that the entry on the left side of the balance sheet, "Acceptances," refers to bills of exchange which the bank has accepted for merchants and manufacturers who are importing goods and raw material, and have instructed the foreign exporters to draw bills on their bankers. As these merchants and manufacturers are responsible to the bank for meeting the bills when they fall due, the acceptance item is balanced by an exactly equivalent entry on the other side, showing this liability of customers as an asset in the bank's favour.