§ House in Committee on the Banking in Ireland and Scotland,
§ Sir R. Peel
said: Mr. Greene, I am about, Sir, to interpose between the stages of a discussion which has now continued for several nights, and which has excited the greatest interest—the consideration, or rather to-night the proposal, of a measure which can borrow no interest whatever from any connexion with any of those circumstances which have lent so much interest to the other debate, and which must be decided, at least can be only properly decided, by the weight of authority, by reason and by argument, and which requires on the part of this House a calm and dispassionate consideration. On one account, and on that only, I regret this interposition. The attention which I have been compelled to pay to the other debate, which has continued for so many nights, and the extreme pressure of other business, 1322 render me even more incapable than I otherwise should be to do justice to the subject which it is now my duty to brine before the House; and no consideration but the pledge which I gave to hon. Members connected with Scotland, would have induced me on this day to run the risk of making so imperfect a statement as I fear I shall make on the present occasion to the House. I trust, however, that the House will have the kindness to bear in mind the peculiar position in which, for several nights past, I have been placed on account of public business; and I hope it will view my explanation either of the principle or the details of the measures which, on the part of Her Majesty's Government, I am about to propose, with forbearance, allowing me to refer the particular clauses of the Bill, if leave be given, as I trust it will, to introduce it, for further consideration. Sir, the House will bear in mind that in the course of last Session the subject of Banking in this country occupied the attention of Parliament; that measures of great importance were adopted with reference to the circulation of the Bank of England, and with reference also to the circulation of the joint-stock and country banks in this part of the United Kingdom; and the House will allow me shortly to refer to the principal enactments on this subject, which then received the sanction of the Legislature. With regard to the Bank of England, the limitation imposed upon the issues of the Bank on securities was 14,000,000l. The Bank was permitted to issue promissory notes to the extent of 14,000,000l. on securities; but in regard to any additional issue, that issue could only take place on specie, the public being entitled to demand notes in exchange for specie, or coin in exchange for notes, and the whole of the circulation of the Bank of England beyond 14,000,000l. being determined by the free action of the public demanding either notes or gold, as they might require. With regard to the issues of the other banking establishments, the provision made was this—that in respect to every private bank of issue, or joint-stock bank of issue, an average amount of its circulation for the twelve weeks preceding the 27th of April, 1844, was taken; and those banks were required to confine their future issues of their own paper within that limit. There was no prohibition to their increase of the issue of promissory 1323 notes, provided that, beyond the prescribed limit, the issues should be of Bank of England paper, that Bank of England paper being founded on gold. I apprehend that the House sanctioned these measures on the following assumptions:—That the standard value, or standard of value, in this country is a certain quantity of gold, definite in point of weight, and definite in point of fineness; and that a promissory note being an undertaking to pay a pound, the issuer is bound to deliver neither more nor less to the holder of that note than a definite quantity of gold of a definite degree of fineness. The House assumed, too, that the issue of that promissory paper might fairly be subject to regulations to which other forms of paper credit need not necessarily be subject; that the issue of promissory notes representing gold, and acting as substitutes for gold, differed in character and effect from other forms of paper credit; that those who issued them were in possession of a valuable privilege—valuable to themselves, and important to the country; and that this House had a perfect right at any time to subject the issuers of that paper to such restrictions as might be deemed expedient for the public good. There was another assumption on which the House also acted, that with a perfectly unregulated competition in the issue of paper, there was no necessary guarantee for the permanence of the convertibility of that paper, or, I should rather say, that though there might be the guarantee of permanent convertibility, yet there was no guarantee, where competition was perfectly unrestricted and unlimited, against the occasional necessity of sudden and violent contractions of the circulation, leaving, indeed, the note convertible into gold, but deranging the monetary transactions of the country, and shaking all confidence in private, and even in public credit. On these general assumptions, this House and the other House of Parliament sanctioned the measures proposed by me as the organ of the Government, imposing certain limitations on the issue of promissory notes. I am quite aware that the interval has been but short since these measures came into operation. I am quite as well aware as, I believe, any one can be, of the necessity for great caution in drawing inferences as to the effect of measures of this nature on the circulation, and on the public credit of the country. I 1324 draw my inferences from the closest observation of the subject, and of the working of those measures, which the shortness of the interval would permit me to give them; and I must say, that so far as we can judge from experience, we have a perfect right to be satisfied with the operation of the measures which were then adopted. Admitting our experience of these measures to be short, so far as it has gone, I must contend that it has been decidedly in favour of the policy and justice of the measures sanctioned by this House in the course of the last Session of Parliament. Since these measures were adopted, we have had in this country a period of extraordinary commercial activity; we have had a great demand for the application of new capital to manufactures and other branches of the public industry; and we have had a very unusual degree of speculation in projects connected with the internal improvement of the country—I refer particularly to the projects for the extension of locomotion by means of railways. But I cannot find that the restrictions imposed last year have, in the slightest degree, cramped or fettered the commercial energies of the country. I cannot find that there has been the slightest check on the application of capital—that there has been the slightest ground of complaint, either that prices have been unduly affected, or that the increased demands of the country cannot be met on account of a restricted circulation. I find, at this present time, that the amount of specie in the Bank of England is—in gold bullion and in coin at the Bank, the two being held in nearly equal proportions—about 13,580,000l.; that the Bank is in possession, at the present time, in silver bars, of an amount of about 2,073,000l.; and of silver coin, about 188,600l.; making a total of bullion now held by the Bank, in silver coin, silver bars, gold bullion, and gold coin, of about 15,842,000l. I do find, also, among many of those who were the foremost opponents of those measures of last year, a disposition to admit that there has been an increased confidence in the monetary transactions of the country. I find a disposition also to admit that if, during the prevalence of the recent speculations, there had been an unlimited power of creating new banks of issue—that if there might have been established new banks of issue, these new banks, with the unlimited right of issue, acting and being 1325 reacted upon by this speculative mania, or rather, I should say, by the fever of speculation which prevailed, and still prevails to a great extent, in many parts of this country—I find, I say, an impression among many that the state of the credit of our paper circulation would not have been of as sound a character as it is now. I have not heard any complaints from the country bankers of the injurious effects of the restrictions imposed upon their paper. I have not heard such complaints; and I must say that they have very rarely reached that Department of the Government with which I am connected, even from the rural districts of this country. I certainly have heard that many of the bankers, whose issues were thus restricted, have been compelled to provide for their increased issues by the paper of the Bank of England; but I think that the slight expense to which they have been thus exposed in making that provision is but small as compared to the increased stability which they experience in their banking concerns, and the increased security which they feel in the conduct of their monetary transactions. I must say of the country banks, and of the joint-stock banks in the country, that I believe, speaking generally, that they have acted most fairly and most honourably in the execution of the acts referred to. There have, it is true, been occasional attempts to evade the provisions of the law. There have been in some districts of the country new forms of paper credit resorted to for the purpose of increasing the circulation; but I must say that those attempts have been, speaking generally, discouraged by country bankers, and by joint-stock banks—that they have shown no favour whatever to those efforts at the infraction of the law; and, although perfectly prepared—as I gave notice I should be perfectly prepared — if those attempts prevailed to any serious extent, to apply to Parliament for the means of repressing them, I cannot say that, up to the present time, there has appeared to me any necessity for parliamentary intervention. The law has worked, so far as I am aware, with general satisfaction; and the Government has met with the cordial co-operation of those whose circulation was restricted, but who still rendered a most willing, a most cheerful obedience to the law. The enactments to which I have now referred apply exclusively to this 1326 part of the United Kingdom. The restraints as to the circulation which were imposed, were imposed on the Bank of England, and on the issues of the joint-stock banks in this country; but there was another enactment, which passed simultaneously, and of general operation, which prevented the establishment in any part of the United Kingdom of any new bank of issue, and which restricted the privilege of issue to those bankers, in every part of the United Kingdom, who were entitled to exercise it on the 6th of May, 1844. The consequence has been, of course, that the existing banks in Ireland and in Scotland, although their circulation has not been in any respect interfered with, have yet been protected from the competition of other establishments, and enjoy the monopoly which that enactment was intended to confer upon them. The question now is, whether we shall apply to those banks thus protected from the competition of other issuers, the general enactments of the law which we have applied to the banks in this part of the country. I was requested the other night by the noble Lord the Member for Sunderland (Lord Howick) to postpone the consideration of this measure until another Session of Parliament. I felt it to be my duty to resist that request; because if it is right that this subject should be taken into consideration at all, the sooner it is disposed of the better. I can conceive nothing calculated to have a more injurious effect on a matter of this peculiar character than to give notice that, at some period of next Session, some measure would be brought forward, without entering at present into its principle or details; but leaving all those concerned in the banking interests of the country at a total loss to comprehend what these principles or what these details might be. I can conceive no measure affecting large and important interests, in reference to which it is more incumbent on the Government to be at once explicit and determined, than in reference to measures immediately connected with the public credit, and with the monetary transactions of the kingdom. It is fitting, therefore, that the House should at once decide whether they will apply to the other establishments entrusted with the charge of supplying the public with promissory paper the enactments which have been applied to the banks in Eng- 1327 land. When I speak of these enactments, I do not mean that we should necessarily apply them as to the letter, but as to the principles involved in them. If I thought that the general principles of these enactments could not be applied to Ireland and Scotland without the risk of inflicting injury on those parts of the United Kingdom, I would not propose that we should purchase any general theoretical or practical benefit at the expense of endangering the prosperity of those parts of the United Kingdom. I think that, in considering whether or no the enactments should be applied, it is perfectly fit for us to take into the account the peculiar habits and customs of those countries—to take into the account their local peculiarities—and not attempt rigidly to enforce a principle at the hazard of deranging the long-established habits of business, or I may say, shocking the feelings, or even the prejudices, of the people of those countries. Such was the principle on which we attempted to act last Session. We wished to secure the willing and cordial co-operation of those whose interests appeared at first sight to be affected. I think that in this we succeeded. After discussing the matter, those connected with the country and joint-stock banks were satisfied; and the banks, being satisfied, gave their cordial co-operation to the Government. In the same way, I now feel satisfied that it is easy to apply the general principle of the measure adopted last Session both to Scotland and Ireland, without in the slightest degree affecting the peculiar or local interests of those countries. The relative positions of Ireland and Scotland are in some respects different; and I will first state the position of Ireland in respect to its banking establishments, before I refer to Scotland, and point out the difference which exists between the two countries. In Ireland, you have what you have not in Scotland, a national bank with peculiar privileges. In Ireland you have, which you have not in Scotland, a national bank with peculiar privileges, holding a charter, which is determinable on a notice of six months. The Government has the power of giving that notice, and dissolving its connexion with the Bank of Ireland, and withdrawing from that bank the exclusive privileges which it now possesses. In Ireland you have, on the whole, eight banks of issue. There are no private banks of issue in 1328 that country. There are the Bank of Ireland and seven other banks of issue, being joint-stock banks. There are, in addition to the Bank of Ireland, the Provincial Bank, the National Bank, three joint-stock banks of issue in the town of Belfast, and two in the county of Tipperary—making, in the whole, seven banks of issue, being joint-stock companies, independently of the Bank of Ireland. In Ireland, the general law of banking requires to be considered. There are Statutes of the Irish Parliament still in force in that country, or which may be virtually regarded as yet in force, which place the joint-stock banks, and the partners in joint-stock banking companies, on a different footing from those in this country; and sometimes these ancient enactments come in conflict with that Act which passed some years since in the Imperial Parliament, and under which joint-stock banks in that country have since been regulated. Her Majesty's Government intends to consider the bearings of these several enactments, and, at some period of greater leisure, to amend and consolidate them into a general law. I will not, therefore, on the present occasion, divert the attention of the House by going into details not connected with the main subject, and will only state that we are perfectly aware that the general law in Ireland with respect to the business of banking, is in an imperfect, a confused, and a complicated state. The Bank of Ireland acts as the banker of the Government, conducts the general payment of the dividends, has the management of the debt, and, in short, transacts the general business of the Government. The capital of the Bank of Ireland is 2,769,000l. The debt from the Government to the Bank is rather a smaller sum than this, namely, 2,630,000l. We pay to the Bank an interest of 2½ per cent. on that amount. The Bank of Ireland has certain exclusive privileges. The privileges of that Bank are these—that no joint-stock bank in Ireland can have a house or place of business in Dublin, or within sixty-four English miles of the capital; that no joint-stock bank can issue in Dublin, or within sixty-four miles thereof, any promissory note, payable to bearer on demand, or any note payable at a less interval of time than six months; and that no joint-stock bank can issue any bank post bill, or draw any bill of exchange payable on demand, or any bill of exchange 1329 of a less amount than 50l. I am bound to say that these exclusive privileges have been loudly complained of by many parties. There are other establishments of great respectability, conducting business in Ireland to the general satisfaction of the country. I believe that in the other joint-stock banks, which are limited to seven in number, there are not less than 4,000 shareholders, and the number of their customers in various parts of the country exceeds that number by many thousands. The capital offers many advantages. It is the place of resort of the majority of the shareholders; it is the seat of the vice-regal court, and of the courts of law, the seat of the university, and the channel of communication between Ireland and this country; and it certainly is a source of inconvenience to many arriving in Dublin, of many whose business is transacted with great satisfaction through the intervention of the joint-stock banks, to be referred, while there, to another bank, and told that there is no place in the metropolis in connexion with the other banks to which they can go to conduct their affairs than the Bank of Ireland. I must own that, in my own opinion, provided you get security against excess of issue, it will be a great advantage to withdraw these exclusive privileges from the Bank of Ireland, and to permit the other banking establishments to issue their notes within the limits of sixty-four miles of the metropolis; to give them the privilege of establishing houses for agency, and for the transaction of business within these limits; to give them permission to draw bills of exchange without limitation, and, in short, to remove altogether the exclusive privileges of the Bank of Ireland. I am bound to say, in justice to the Bank of Ireland, that nothing could be more liberal than their own views on this subject. They do not wish to retain their exclusive privileges for any object of their own, and are perfectly content to relinquish them, provided only that, we subject others, as we subject them, to some limitation as to the amount of their issues. They feel this: that issues being limited, there will be no reason whatever for maintaining in Ireland their exclusive power—that there will be no particular reason for preventing other banking establishments from exercising those powers which have hitherto been denied them. In these matters the views of the Bank of Ireland perfectly coincide with those of Her Majesty's Government. I am 1330 bound also to say that the Bank of Ireland, an establishment consisting generally, I believe, of those who profess the Protestant religion—that those composing that establishment have been the first to ask that certain oaths which are now administered, distinguishing the Protestant members from their Roman Catholic brethren, shall be repealed. It is their earnest wish that no other oath shall be administered as a qualification for being a director of the Bank of Ireland than simply the oath of allegiance, and the oath that is requisite as to the possession of the amount of property qualifying a party to become a director. The governor and others connected with the Bank state that it is painful to them, when a Roman Catholic is called upon to qualify, that he has to be sent into a separate room, when a separate oath is administered to him; and it is at their express instance that I propose in the Bill which I now ask leave to introduce, that there shall in future be no distinction in the oath between a Protestant and a Roman Catholic director or proprietor of the Bank of Ireland. I hope the right hon. Gentleman opposite (Mr. F. Maule) approves of this. We propose that the Bank of Ireland shall still remain the banker of the Government, shall still be entrusted with the public business, and that we should continue to pay a sum of 3½ per cent. for ten years on the amount of the debt, that excess of interest covering the whole of the charges which the bank is to make for the conduct of the public business. That, we think, will be an economical arrangement. If we were to pay a separate sum in each item, probably there would be an excess; but we propose, partly in consideration of the perfect willingness with which the Bank of Ireland has relinquished its exclusive privileges, that the debt shall continue as the foundation of their issues for a period of ten years, and that the same rate of interest as before shall be paid to the bank; that establishment making no charge whatever for the various duties which it undertakes as the banker of the Government, and for the various services which it may render in that capacity. We propose, also, to subject the Bank of Ireland to an obligation to make a weekly return, exactly corresponding with that now made by the Bank of England. The Bank of Ireland makes no objection to such a return, and there will, therefore, in future, be a weekly return from that institution, similar to that now 1331 imposed as an obligation on the Bank of England. I apprehend that it is that weekly return containing a full development of the affairs of the bank, stating the amount held by it of bullion, and showing the variations which from time to time take place in the amount of bullion—to giving without reserve an account of the state of the bank, which has tended to give so much satisfaction and security to the commercial community of this country. These are, I believe, the main, if not the whole of the peculiarities in the condition of Ireland as compared to Scotland. I will now refer to the condition of Scotland; and as most of the regulations which we are about to propose will apply to the banks of the two countries, in order to spare the time of the House I will not make a separate statement as to each country, but, having referred generally to the position of Scotland, will state the nature of the measures which we propose to apply to both. In Scotland, there is no such establishment as the Bank of Ireland. There is some difference in the constitution of the different banking companies, but none as to equality of privileges. There is no reservation in favour of any; all stand upon an equal footing in respect to the privilege of issue. There are in Scotland three great chartered companies, the members of which have limited liabilities. There are altogether nineteen joint-stock banks in Scotland; for in Scotland, as in Ireland, there are no private banks of issue. All the banks of issue in that country are without exception joint-stock banks. Of the nineteen, three are the ancient chartered companies, with limited liabilities; there are two banking companies recently incorporated under the Act passed a few years ago, and fourteen other banks which are not incorporated under an Act of Parliament. But there is not the same necessity for their incorporation as existed with regard to the joint-stock banks in England, because the joint-stock banks in Scotland have, by the force of law, the privilege of suing and being sued. At the same time, I think it might be better that these fourteen banks should receive charters of incorporation, although that is a matter which must be left to their own discretion. But I think it would facilitate the conduct of their business, and give them facilities which they do not now, perhaps, possess as to tenure of property, 1332 if they did apply for charters of incorporation. To these nineteen banks in Scotland, as to the existing banks in Ireland, the privilege of issue, as defined by the Act of last Session, is now confined. I now proceed to state the regulations which we propose to apply to those banks. And we are first met with that question of exceeding interest in Scotland, and scarcely less so in Ireland — what will you do with the circulation of notes below 5l.? Now, Sir, I say at once that we don't propose, either in Scotland or in Ireland, to take away or to affect the privilege of issuing notes below 5l. Whether or not the importance attached to the continuance of that privilege can be perfectly justified by reason and argument I know not—whether there be not an undue value attached to them may be a fair question of doubt—still, in attempting to introduce principles which I believe to be good, I will not attempt to shock even the prejudices of the people of either country, or to run the risk of encountering that opposition which I know I would have to encounter from Scotland almost universally, and from Ireland, probably, following the example of Scotland, and desiring to retain the privilege to which she saw the people of Scotland attach so much importance. Without guaranteeing, therefore, the continuance of these notes, all I can say is, that we do not propose to prohibit them at present. I say nothing, however, as to the future. The discretion of Parliament must be left unfettered in respect to them. If the continuance of the privilege affects no interests, if it has no injurious effect upon the circulation either of Scotland or of other parts of the Empire, there is no doubt whatever that a future Parliament will entertain the same forbearance, and will not disturb the settled habits of business of a whole country, or run counter to its feelings, for the mere purpose of carrying out some theoretical principle. I do not propose any vexations interference with that system, which at present exists in both countries. I do not propose to establish any proportion between notes below 5l. and notes above 5l. I propose to leave to the banks of Scotland and Ireland respectively the privilege which they now possess, to issue notes below 5l. without limiting them as to the proportion which such notes shall bear to notes of a higher amount. The banks of Scotland and 1333 Ireland will thus have two advantages—they will have first the advantage of being protected from competition; and they will also retain a privilege which the banks of this country have been compelled to relinquish for nearly twenty years — namely, that of issuing notes under 5l. Now, leaving them in possession of both these privileges, I propose to apply to them principles, that in their character are analogous to those principles which we have held it to be necessary to apply to joint-stock company banks in this country. I propose that we should ascertain the amount in circulation for some years past of the issues of these banks in Ireland and in Scotland; not to impose any limitation on the amount of the future issue of paper, as far as that ascertained issue extends; but to require from them, if their issue should extend beyond that certain amount, then that that issue shall take place on specie. That principle we applied to the joint-stock banks in this country. We ascertained the amount of their issue for a certain period before the 27th of April. We limited their issues to that amount, ordaining, if their issues extended beyond that, they should consist of Bank of England paper, which is based on gold. I do not propose to introduce into Scotland and Ireland the provision, that it shall be compulsory upon the banks there to be provided with Bank of England notes. On the contrary, I wish only to clear up the doubts as to whether Bank of England paper be or be not a legal tender there. The most eminent legal authorities in Ireland are adverse to the construction put upon the law here. They are of opinion that Bank of England paper is not a legal tender there. I think it is fitting that there should no longer be any doubt. I consider that the best course for us to take is, to clear up that doubt by enacting, that paper of the Bank of England shall not necessarily be a legal tender either in Ireland or in Scotland. It will, I believe, be more acceptable to the bankers in Scotland and in Ireland, if they had to choose for providing for the excess of circulation, that it should be based on specie rather than on the paper of the Bank of England. So far as the public are concerned, I conceive that the manner in which the issue takes place is to them a matter of entire indifference. I consider that the Bank of England paper is now at all times perfectly equal 1334 to an issue in gold; yet still, as it is not current in Scotland, I propose to require that the excess of circulation in Scotland beyond the permitted amount should be issued upon specie, and not necessarily upon the paper of the Bank of England. I think it will be perfectly just to establish that principle both in Ireland and in Scotland. Now, let us bear in mind that we have a guarantee for the stability of our paper circulation in this part of the United Kingdom beyond the guarantees that we took in the course of the last Session, which does not practically exist either in Ireland or in Scotland. We have diffused generally over England and Wales a great specie circulation. The Bank of England can now issue no paper beyond 14,000,000l. except upon gold—so that we have a security that paper will be kept in value equivalent to gold. But we have also this additional guarantee, that there is a great basis of specie in our circulation on account of the almost universal diffusion of coin throughout every part of this country. It is then a question of some interest, though of some difficulty, to determine what is the probable amount of circulation in gold in this part of the United Kingdom. There has been issued to the public, that is, there has been coined at the Mint from 1816 to the month of June, 1842, about 60,106,000 sovereigns; and since June 1842, to the present time, there has been issued from the Mint to the Bank 17,013,000l. in silver. Since June 1842, there has been put into circulation 11,000,000l. out of these 17,000,000l. It is exceedingly difficult to hit upon anything like a satisfactory conjecture as to the amount of gold in circulation, and which affords the means of carrying on the minor affairs of trade. I do not know any better test—and that is a very imperfect one—than that of taking the amount of the light sovereigns which have been paid in, at different periods, at the Bank, and ascertaining the proportion which they bear at these different periods to the total amount of sovereigns paid in. In the year 1839—I will not take any more remote period—of the total amount of sovereigns paid into the Bank, 21½ per cent. were rejected, being below the legal weight. In the year 1840, 28 per cent. were rejected. In the year 1841, 27 per cent were rejected. In the year 1842, up to the 10th of June, 33 1–3rd per cent. were rejected. The proclamation was issued in the month of June 1335 calling in the light sovereigns; and from the 10th June, 1842, to the 31st December, 1843, the amount of light gold coin withdrawn from circulation was 11,137,000l. Now, if you estimate that that was at the rate of 33 per cent. upon the total amount which was paid in, on that calculation the amount of the gold circulation diffused through this country would be an amount varying between 30,000,000l. and 35,000,000l. If you estimate the number of guineas in circulation, and the amount of notes below 5l. belonging to the Bank of England and to private and other Banks, in circulation, before the withdrawal of the small notes below 5l.—if you take that as the criterion by which you attempt to judge, I do not believe that you will come to a very different conclusion. I think the best conjecture that can be formed—it is necessarily a very vague one—would give, as the probable amount of gold coin in circulation in this country, between 30,000,000l. and 35,000,000l. I am bound to admit that the data from which any conjecture can be formed are necessarily very vague; but, whatever the sum may be, it does, from its general diffusion, give stability to our paper currency; and, in addition to the measures adopted last Session, it is a guarantee which does not exist in Scotland or in Ireland. I propose, then, both in Scotland and in Ireland, to ascertain the average amount of the issues of each bank for a definite past period. I propose to permit the continuance of that amount of circulation, without any restriction whatever, applying there the principle which was applied to the English banks. We say to them, you are permitted to have that circulation without inquiry and without restraint; but that, if there be a circulation beyond that, that there shall be a security for it in gold. I propose to apply to them the simple principle that is acted upon here. The question then arises, what is the period to which the average shall be limited? I propose, in the case both of Ireland and of Scotland, to ascertain the average from the period which has elapsed since the announcement of the measure of last year, that is, from the 27th of April last. That will be a period of 13 lunar months. The variation is very great in Scotland at different periods of the year. In May and in November the amount of the issues exceeds the amount of the issues at other 1336 periods. I believe that so far as Scotland is concerned, it would be a matter of very great indifference whether you founded your average upon a review of two years, of one year, or of six months. Whether you took in two periods of extraordinary issue, or whether you took in one, in the one case, taking 12 and in the other 6 months, the amount of the circulation would in each case be nearly the same. In Ireland I am bound to say the period does make a considerable difference, because there has been of late a very rapid increase in the circulation of promissory notes; and I think it is but just, so far as the public interests are concerned, to extend the average over the whole period, and not to take in Ireland the last two months, or the last three months, when there has been a very large issue as compared with the former months. I propose in the two countries to take the average of the 13 lunar months before the 27th of April next. The average issue of each bank during that period will be, according to my proposition, the amount of issue to which it will hereafter be entitled. Now, it makes a material difference in Scotland whether you take the weekly return in the manner in which you take it in England, or in the manner in which it is now taken in Scotland. In England you require from the joint-stock banks a daily return of the amount of notes in circulation; you divide that return by the number of days of business, and that gives you the average amount of the notes actually in circulation. But in Scotland a different practice has prevailed. In Scotland the return required by the Act of 1841 was not a daily, but a weekly return—a return of the amount of notes actually in circulation on a given day in that week—namely, the last day of business in the week. A system of exchange between the banks has long prevailed in Scotland, and if you were to take the amount of issues of the banks without allowing for the exchange of one bank with other banks, you would have a return giving you a different amount of circulation from that which you would have, if you adhered to what has been the practice in Scotland. Now, I propose, that we should adhere to the present system in taking the returns in Scotland; that we should allow Scotland the benefit of these continued exchanges, and that we should permit that country to make a return, as it does at present, of the amount 1337 of bank-notes actually issued from each bank on the last day of business in each week. That is a point to which I apprehend Scotch banks attach considerable importance. I think the calculation made by the right hon. Gentleman opposite was, that it would make a difference of nearly 30 per cent. in the amount of the Scotch circulation, if you took the daily average of the notes, instead of taking the returns upon the last day of transacting business in the week; and that is the reason, I apprehend, why the amount of the circulation in Scotland appears so low. That return, if you were to rely upon it, would be a fallacious one. What we propose, therefore, is that, after having defined the amount which each bank shall issue, you shall for the future, after a given day, require each bank to certify the amount of its weekly issues, or rather the amount of its issues, as at present, on the last day of doing business; and that then, in Scotland, as in Ireland, you shall take a period of four weeks, and determine the average upon that period. If the average of the four future weeks does not exceed the amount of the permitted issue, in that case no restraint whatever will be imposed upon the bank; but if the issue for the four weeks exceed the permitted amount, in that case the excess, whatever it be, shall be issued on specie. That is the same principle as we applied to England, except that instead of requiring a daily return, as in England, we respect the custom which we found in Scotland, and give facility for the exchanges between the several banks. We then take a period of four weeks, and, dividing the returns by four, determine whether or not the bank has exceeded its privileged amount of issues. As I said before, if the issues for the month are within the limited amount, there will be no necessity for anything beyond that necessity which will still exist for the banks being able to pay their notes in specie on demand. There is to be no restraint upon them beyond their present liability to pay in specie. We do not interfere with that obligation. We leave to their own sense of what is for their own security, to do that which they think ought to be done; and provided they keep within the average of the thirteen months, we trust to their own discretion to do that which is calculated to secure the confidence of those who deal with them. I apply the same rule to Ireland. The 1338 average amount of the issues of each bank, and in this I include the Bank of Ireland, is to be that to which they are entitled by the average from their past circulation. They are to continue within that amount of circulation, and if there be an excess, then that excess shall be issued on specie. We are willing to trust to the honour of the bankers both in Scotland and in Ireland, as to their retaining in their custody a sufficient amount of assets to meet their circulation. We do not propose that there should be any certain amount of deposit as a security. As it is necessary, however, that we should have some security against fallacious returns, we propose that there shall be a return made to the Government of the amount of gold held by each bank, and that the Government shall have a power of instituting inquiries similar to that which was given to it in the case of English banks, in case there should be any suspicion as to the making of false returns. I believe it has not been necessary to exercise that power in the case of the joint-stock banks and the private banks of this country; and I do not think it will be necessary to exercise it in Ireland and Scotland. Now, we shall require from each bank a return of its weekly issues; we shall require a return of the amount of each description of issues; we shall require a distinction to be made between notes below and notes above 5l.; and further, we shall require a return of the amount of gold held by each bank, that return to be confidential. These are matters of great statistical interest, and we have a perfect right to require, from those who are intrusted with the privilege of issue, a full return on all these points. We shall require also a full specification of the names of all the partners, all those who are liable to the public for the solvency of their banks. We shall, I say, require a particular publication of the names of all the partners in banks. Each bank which does not exceed its permitted amount will return its amount of specie to the Government; but no use whatever will be made of that information. In the case of each bank which issues beyond the permitted amount, it will be necessary to certify to the public that that bank holds specie in satisfaction of the increased issue. We merely propose to publish that such a bank has so far exceeded its issue, but that it holds, in deposit, as required by 1339 law, an amount of gold sufficient to meet that excess of issue. There will thus be a weekly return of the gold held by the bank; and, in case of excess of issue, a certificate that that excess of issue is met. The return will be made to the Government weekly, and the publication by the Stamp Office will be monthly. The question may be put, in the event of an issue beyond the permitted amount, upon what that issue shall be made? Shall it be made exclusively upon gold coin; or shall silver be permitted to form part of the foundation of this issue? I think it will be of great advantage to permit silver coin to constitute part of that foundation. In the first place, silver coin will be a legal tender in discharge of any note below 2l.; and, although silver coin is here a token, it will be impossible for the bank to get silver, except by paying for it at its full value in circulation. Now, I think it will be evident that there will be great advantages in inducing the banks to hold a considerable amount of silver coin, particularly in Ireland, as it greatly facilitates circulation in that country. The Bank of Ireland will be subject to the same regulations; it will be permitted to issue to a certain amount, as at present, and there will remain the debt from the Government as the security. In short, we shall place the Bank of Ireland on exactly the same footing as any other bank, that is to say, we shall permit the Bank of Ireland to issue notes according to the present amount of its circulation; and beyond its present amount, provided it holds specie to the extent of its excess of circulation. Suppose the Bank of Ireland now circulates 1,200,000l., and suppose that it raises its circulation to 3,500,000l., and that its circulation should so continue; then we say that its excess of circulation must be founded on specie in the Bank. I conceive that the adoption of this principle will impose no unwarrantable restriction on any bank; that it will give increased security and additional stability to all banking concerns; and that it will do this without deranging the habits of business, either in Scotland or Ireland; whilst it enables the banks to give the same amount of accommodation they have been accustomed to afford to their customers. I know that at present some of the banks in Scotland feel it right to keep a considerable amount of specie by them. I believe that some 1340 banks in Scotland keep an amount of specie equal to not less than one-fourth or one-fifth of their circulation by them. Let us now see how the new regulations will operate in Scotland and in Ireland. I hold in my hand a Return of the aggregate amount of the circulation of the Scotch banks for thirteen lunar months, ending in March, 1845. According to that, in April, 1844, the amount in circulation was 2,714,000l., that was for the weekending April 27th. In the week ending May 25th, it was 3,041,000l.; and in the week ending June 23rd, it was 3,117,000l. That is one of the highest periods of circulation; whilst the highest amount of circulation for the year, is the week ending the 7th December. The circulation for the week ending the 12th October, 1844, was 2,987,000l.; and in the week ending the 7th December, in the same year, the circulation was 3,486,000l. There was thus an excess of issues at one time, as compared to another, of 500,000l., or one-sixth. At one period of the year, we find the issues of the Scotch banks large, as compared to another period; and no doubt it is necessary for the conduct of business that the issues in the month of December should be greater, perhaps by half a million, than four months earlier. The total average of circulation of the Scotch batiks, taking the thirteen months circulation to determine the average amount, is 3,041,000l. That, therefore, will be the amount which the Scotch banks will be permitted to issue. Suppose, then, that in the month of November, there should be 500,000l. in excess of that amount of circulation, then all which is required of them is merely that they should hold one-sixth of their circulation in specie. If they hold, or are permitted to hold, a circulation of 3,000,000l.—if the whole of the banks of Scotland amongst them require an excess of issues beyond that to the amount of 500,000l., then what they are required to do is, to have amongst them that additional sum in specie. Exactly the same power will be retained with respect to them, which is required in this country when there is an issue beyond the limited amount of circulation. Is this too much to ask from them, when they are secured against competition; and when they have the power also of issuing small notes? Is it too much to require that they should retain in their coffers such an amount of specie 1341 as that? Suppose the wants of the country increased. Suppose the circulation should rise to 4,000,000l. Why should not the Scotch banks be at the charge of supplying themselves with the necessary quantity of specie? and why should any bank deem it a hardship to retain such a sum as would secure stability in the currency, and prevent its being affected by any panic? I will give you a specimen of a bank conducted with a due regard to stability—a bank of the highest respectability—and whose proprietors were under no obligation to retain a deposit, which has attracted to it the general confidence—I allude to the Provincial Bank of Ireland. The Provincial Bank of Ireland, as I said before, is a most prosperous concern, and has attracted to it the general confidence. I do not mean to say that it is singular in this respect, nor that there are not other banks in Ireland equally stable, and alike prosperous; but I do not happen to have the amount of issues of any other bank but the Provincial Bank. Taking the first Saturday in May for several successive years, and comparing the amount of circulation with the amount of gold or specie of the bank, and when it was under no obligation beyond that which it had entered into with the Bank of Ireland, of retaining one fifth of its circulation in specie, and conducting its affairs in such a manner as to make the bank a profitable concern, I find its circulation and its specie to be this:—On the first Saturday in May, 1839, the Provincial Bank had 950,000l. in notes. On the same day it had in gold 305,000l., and in silver 42,000l. It had thus 347,000l. in specie. In 1840, on the same day, the amount of its notes was 860,000l.; it had in gold 330,000l.; and in silver 62,000l. In 1841, and on the same day, it had 832,000l. of notes in circulation: its gold was 321,000l.; and the amount in silver 70,000l.; being a deposit in specie of 391,000l., for the purpose of supporting a circulation of 832,000l.; or the specie was very nearly the half of the circulation. That was done voluntarily. They considered it right to have that foundation for their issues, and a fund in reserve to meet any demand that might be made upon them. Looking to the last Return, namely, for the first Saturday in March, in the present year, the amount of its notes in circulation I find was 1,046,000l.; it then 1342 had in gold 397,000l.; and in silver 29,000l.; that is, 426,000l. voluntarily held—except one-fifth, which it was bound to keep according to its agreement with the Bank of Ireland — as the foundation of its issues. Now, I ask from the Irish banks, and I ask from the Scotch banks, that they should hold no such corresponding amount of specie in proportion to their issue; but I ask them to give, in case of their exceeding the amount, a guarantee to the public that there should be a certain amount of specie, to meet demands, kept on hand. But, in order to avoid inconvenience of any kind, I propose that this plan shall not take effect till the 1st of January; and I am perfectly certain that each bank in Scotland and in Ireland, wilt be able, by that time, without the least disarrangement of their business, to make provisions for conducting their affairs under the new regulations. I have not stated yet what the bearing of those regulations will be on the banks in Ireland. In the case of all the banks of Ireland there has been a rapid increase of circulation since April last year. The Bank of Ireland has increased its circulation from 3,600,000l. last year, to 3,900,000l., at which it stands at present. The aggregate circulation of the other banks of Ireland had increased from 2,357,000l., in April last year, to 3,105,000l., at which it stands at present. If I compare the circulation of the banks in last year to their circulation at present, and, not including the Bank of Ireland, they have increased from 1,974,000l. to 3,105,000l. I should object, then, to take the last three months as the foundation by which I was to determine the future amount of issues. In Scotland it is of comparative unimportance at what time the average may be taken, because there has been no sudden increase of circulation; but seeing the rapid increase of circulation in Ireland of late, I think it right to extend the average circulation over the whole year. But, Sir, I am not prepared to say, that this great increase in the amount of the issues in Ireland has taken place unfairly, or with the view of giving to any party an undue advantage. Though undoubtedly this increase in the circulation in Ireland is great, I believe it may be to a considerable extent accounted for—I believe it arises partly from this circumstance, that the Returns have of late been made with greater accuracy 1343 than formerly. The actual amount of the circulation was formerly, I think, much larger than it appeared from the Returns; and the recent increase, I believe, arises partly from this circumstance, and partly from the more gratifying fact that we had last year a very good harvest in Ireland; and consequently, there has been an increased demand for capital in Ireland, and a requirement for increased circulation, all causing in some degree an increase in the issues of promissory notes. But if you take the case of the Provincial Bank of Ireland, the proposed regulations will have no effect in restricting its issues; so far from it, the Bank has very wisely a reserve of 400,000l., so that it may, in fact, under those regulations, increase its present circulation by that amount of 400,000l., provided that increase takes place on the basis of specie. And with regard to the other banks—as the Belfast Bank, the National Bank, and the various other banks of Ireland—I believe they have now an amount of specie in hand sufficient to enable them to work the measure without any inconvenience or disarrangement of their affairs. The total amount which under this Bill the Bank of Ireland will be permitted to issue without restriction will be, taking the average circulation of the last thirteen lunar months, 3,706,000l.; and the amount which the various other banks will be permitted to issue, under the same average, will be 2,565,000l., making a total amount of issues for Ireland of 6,271,000l. It is possible that this amount may be restricted by accidental circumstances, as failure and withdrawal; and in England, in the case of a bankruptcy, or the withdrawal of the circulation of any bank, you permitted the Bank of England to supply the void. Let us take the case of Scotland. The permitted amount of the circulation of Scotland will be 3,431,000l.; in the case of England, when a bank becomes bankrupt, the Bank of England is now entitled to step in and supply the void, and make fresh issues of notes, two-thirds of the amount being issued on security; and I may very fairly be asked the question, Suppose, from any similar circumstance, a void should occur in the circulation of Scotland, how would you supply it? It may be said, Suppose a bank should fail, and in consequence 200,000l. be withdrawn from the circulation, you will have restricted the circula- 1344 tion for Scotland to that extent; or you will impose on it the necessity of getting an additional supply of gold. I propose, in this respect, a rule for Scotland which is not adopted in England. I propose, in Scotland—as we have there no other establishments to deal with but joint-stock banks; and in Ireland also, I propose—to permit the union and incorporation of two joint-stock banks, and permit the banks so united to issue an amount of circulation equal to the amount of the circulation of the two separate banks. You do not permit that in England: here you do not permit a private bank to incorporate itself with a joint-stock bank, to prevent any sudden decrease in the circulation; but in the case of Scotland and Ireland, I propose to meet the void by permitting the bank, which is carrying on a good and flourishing business, to dispense the privilege to which it is entitled, to some other bank, and that the two shall be united and incorporated, and that the Returns of the future issues of those two banks shall be the average of the amount of the issues of both banks. It may be said, that a bankruptcy may happen so suddenly, that union and incorporation in the way I propose will be hardly possible; but I think it better not to anticipate such a difficulty. By so permitting the union of two banks, and permitting the issues of the united banks to be equal to the issues of the two banks, if separate, I think you will take ample security against such a possible diminution of the circulation as I have adverted to. If any sensible diminution were to occur—if the total circulation of Scotland were suddenly to fall below the 3,000,000l., to such an amount as to require the intervention of Parliament, there would be then no objection on the part of the Government to devise, or of Parliament to adopt some other remedy. I believe, however, that for such a remedy there will be no necessity; for I think the permission which we propose to give to unite and incorporate two banks will meet the difficulty. Sir, I do not know if there is any point requiring explanation which I have omitted to advert to. It will be seen that I have strictly applied to Ireland and to Scotland the principles which we have applied to the joint-stock banks in this country, imposing no obligation upon them, requiring no interference with their concerns, as is now the case in England, 1345 provided they do not exceed their limits. If they do exceed their limits, I apply to them the same principles as to the English banks, and require that the excess of their circulation should be based on specie. But there will be ample time, as much as the most sensitive can desire, for applying the new regulation. I impose no limitation in the amount of the issues. I permit to Ireland and to Scotland an unrestricted amount of issue, provided only it take place on the deposit of that which it professes to represent and excludes from the circulation — the coin of the realm. But I leave to the banks of Ireland and of Scotland that privilege which they have long enjoyed, and to winch I find they attach so much importance—the privilege of continuing the issue of 1l. and 2l. notes. If the House sanction the measure I propose to ask leave to bring in, I shall have the satisfaction of believing that it will add to the stability of the circulation of the United Kingdom; and by empowering the Bank of England to judge what is the amount of the circulation in every part of the United Kingdom, and giving a guarantee to the Bank of England, that under no circumstance shall that amount be exceeded unless the excess be based upon specie, we are adding an additional security to that circulation, in the maintenance of the confidence in which I believe the prosperity of the country mainly depends. And, Sir, do not let it be said that this interference is not necessary for the purpose, that the issues in Ireland and Scotland have never exercised a prejudicial effect on the issues of the Bank of England, I do not wish now to go into the consideration of that question; but I think I could show, were it necessary, that precisely at the period when the Bank of England was making great exertions to insure the convertibility of paper into coin—at that very time came the pressure both from Ireland and from Scotland which materially impeded the exertions made by the Bank to support commercial credit. I speak of the year 1836 and the year 1839; and, if it be necessary, I think I shall be able to show that it is but just to impose on Ireland, and to impose on Scotland, some part of the burden—for a burden I must admit it to be — borne by them in very unequal proportions—of being prepared to meet the demands which any sudden political panic 1346 or commercial difficulty may create. This may be done, as I think, to a great extent, without interfering with any vested interest or privilege which the banks of Ireland and Scotland now possess, or diminishing to any extent that legitimate accommodation which had been before granted to or could be expected by the agricultural or any other interest either in Scotland or in Ireland. I do hope on reflection—I deprecate premature discussion—I hope you will permit the Bill to be first laid before you, and see what are its enactments; and when you next come to consider it, I confidently expect that yon, Gentlemen of Scotland, and you Gentlemen of Ireland, will admit that the Bill gives additional security to the circulation of the country, without at the same time fettering any of those interests you naturally and justly cherish. The right Hon. Baronet concluded by moving the following Resolutions:—Resolved.—"1. That the Chairman be directed to move the House, that leave be given to bring in a Bill to regulate the issue of Bank Notes in Scotland.2. That the Chairman be directed to move the House, that leave be given to bring in a Bill to regulate the Issue of Bank Notes in Ireland, and to regulate the repayment of certain sums advanced by the Governor and Company of the Bank of Ireland for the Public Service.
§ Mr. C. Wood
wished to ask a question or two. The right hon. Baronet was probably aware that at present small notes for fractional parts of a pound circulated in Ireland; was it intended by the right hon. Baronet's measure to interfere with them, and prohibit the future issue of those 25s. and 30s. notes?
§ Sir R. Peel
was induced to think it might be a great improvement, considering the ample supply of silver coin in Ireland, to discontinue the issue of the notes to which the hon. Member had alluded; but he would not undertake to prohibit their issue, if it should appear that there was any great or general opinion in favour of their continued circulation. All his experience in such matters was favourable to making concessions to feelings, and even to prejudices, so far as it could be done consistently; and upon this point, therefore, though he thought it would be an improvement not to have these fractional notes in circulation, he was anxious to have an opportunity of 1347 considering the matter further, and hearing any objections that might be urged in their favour before he decided.
§ Mr. C. Wood
said, his object was rather to direct the right hon. Baronet's attention to the point, than to ask him at once to pronounce an opinion upon it one way or the other; but there was another question of more importance he wished to put. He understood the right hon. Baronet proposed that the returns of the issues of the Scotch hanks should be made as at present—weekly; and the right hon. Baronet then, as he understood, proposed to compound from those weekly returns a monthly return of the average circulation, which he compares, with the view of arriving at the limit of circulation to be imposed under the Bill. The right hon. Baronet compares the monthly average with the limit derived from the yearly average, and all notes beyond that limit were to be issued on the basis of specie—not specie deposited anywhere, but specie in the hands of the bank that made the issues. And to enable the Government to ascertain the specie in hand, all the banks were to be called upon to make a confidential return to the Government, at all times and under all circumstances, of the amount of specie in their coffers. And then, if the first monthly average of notes issued did not exceed the limit so laid down, no more of course was to be said; but if the amount of the monthly average were found to be beyond and in excess of the yearly limit, it would be sufficient for the Government if the amount of the excess did not exceed the amount of specie (which they would see by the Returns) held by the bank. If the monthly average did not exceed the yearly limit all would be right; and if it did, the Government would have in their hands a return which would enable them to see that the excess was provided for by an amount of specie which should be be-beyond, or equal, to that excess. [Sir R. Peel: Hear, hear.] Now, he apprehended, it would be found that the banks of Scotland generally held at all times a large quantity of specie equal to one-fourth or one-sixth, say an average of one-fifth, of all their issues, which was the amount the Provincial Bank of Ireland held, he believed, by agreement; and supposing the hanks of Scotland to hold one-fifth of their circulation in specie, he apprehended that they might, under the Government measure, without any increase whatever in the amount of their specie, 1348 and without anything being done, increase by one-fifth their issues of notes. Was he correct in that idea?
§ Sir R. Peel
observed, that the hon. Gentleman had most accurately described the principles he (Sir R. Peel) had laid down as those on which the Bill proceeded. In the case of England, they permitted the Bank of England to issue a certain amount of paper, viz., 8,000,000l., without requiring that it should hold 1s. in specie, or a note or a single security of any kind; but if they issued 500,000l. beyond that 8,000,000l., in that case they provided that the issues should be by Bank of England paper. They did not diminish their obligation to pay their notes in specie, nor did they inquire what was the amount of gold in circulation. With regard to the Scotch hanks, he believed the hon. Member would find that they did not all hold specie to the amount of one-fifth of the circulation. All he required, however, was security for having their notes converted into coin. He proposed to act in regard to the Scotch banks as he had acted in regard to the English banks, by requiring that any excess of issues should be based on at least an equal amount of specie in hand.
§ Mr. C. Wood
Was he to understand that there was to be no publication of returns beyond that they had already—the average of each lunar month?
§ Sir R. Peel
was not now entering into any contract with any Scotch bank. He was under no engagement with them, and he reserved to himself the power hereafter of requiring any returns he might think necessary.
§ Sir R. Peel
I intend to publish the same returns in the case of the Scotch banks as are now required in the case of the English banks—the return of the issues taken on the average returns of the four weeks, and I shall require also the publication of the names of all the parties, and of all who are subject to any liability on account of the bank. In short, I shall require from the Scotch banks the same returns as I do now from the English banks.
§ Mr. F. Baring
If I understand correctly, these banks are to be allowed to issue notes up to the amount of the limit in each case, and beyond that an excess in notes equal to the amount of specie in their possession?
§ Mr. Fox Maule
rose to do that which he felt bound to do on the present occasion, to give his best thanks to the right hon. Baronet for the clear and distinct explanation he had given of his measure, and to acknowledge that he had most fully redeemed every pledge he had given to the deputation (of which he was a member) that waited upon him a few days ago, notwithstanding the extreme pressure of public business which might well have been urged by the right hon. Baronet as an excuse for not doing so. Under the circumstances in which the measure was brought forward, it would not be proper to discuss it or pronounce any opinion upon it; but he must be permitted to say one thing. Without saying whether the measure was a good or bad one, he must admit that it was by no means so dangerous as he had expected. He made that admission freely, and in the same spirit in which the right hon. Baronet had given his explanation, without reference to any party feeling or any such low and unworthy motive; and he hoped in the same spirit the right hon. Baronet's explanation would be weighed by the approaching meetings in the various counties in Scotland. If they were to have interference with the banks of Scotland—and he could wish they were allowed to remain as they were—still it was gratifying that that interference would proceed on fair and reasonable terms, and without interrupting the confidence Scotland had in her present long-continued and hitherto unfettered system. He thought the right hon. Baronet had opened some grounds of argument which might be adverted to at a future stage of the Bill. He at one time considered that it might be more beneficial to the parties interested, that the explanation of the right hon. Baronet should go down to Scotland without any ulterior step being taken; but his opinion was now altered; he thought there was no ground for objecting to the introduction of the Bill; in its printed form they would be better able to judge of its details. All he would say on this occasion was, that in assenting to the introduction of the Bill, he must not be understood as bound to any of its details.
§ Mr. P. M. Stewart
had no intention to oppose the introduction of the Bill, but rather to express his surprise that the right hon. Baronet had thought it necessary in any degree, however slightly, to interfere with a system so perfect and unobjectionable as experience had proved the banking 1350 system of Scotland to be. But the slight manner in which the right hon. Baronet had redeemed his pledge—a pledge put forth first in the Speech from the Throne, and afterwards by the right hon. Baronet himself—the very slight and almost imperceptible manner in which he had touched upon it, convinced him that the right hon. Baronet was imbued with the opinion that the Scotch banking system was as perfect and unobjectionable as any system could be. He would not then enter into any of the details of the plan proposed. He believed it would not effect the great objects stated—he did not think it would add to the security of the currency of Scotland. It would not compel the banks of Scotland to keep one sovereign more in their coffers, or add to the respectability or responsibility of those establishments. And so far, it would not add to the security of the public or the character of their banks. But there was one thing he remarked in the plan—that it was carrying out the right hon. Baronet's favourite system of banking for the nation at large; for it would, as the right hon. Baronet said, bring under the revision of the Bank the precise and certain state of the general currency of the country. He could not separate from his mind the impression it took on the first statement made by the right hon. Baronet on the subject of banking last year: that it was the deliberate and determined ulterior object of the right hon. Baronet to establish but one bank of issue for the United Kingdom of England and Scotland. If the right hon. Baronet did harbour such an intention, he would refer him to a clear and able writer on the subject of the currency, the right hon. Gentleman who sat next to him, the Secretary for the Home Department, who in page 99 of the fourth edition of his book, called Corn and Currency, published in 1827, expresses his opinion of the dangerous tendency, in a national and political point of view of any such establishment. ["Oh, oh!"] The right hon. Gentlemen seemed to doubt the authority; he would read the passage if they wished. He wished merely to say, that what was now proposed in meddling with the Scotch banking system, amounted scarcely to any alteration at all, certainly to no addition to its security. But he would ask the right hon. Gentleman, whether the very limited circulation of Scotland, amounting to only about 3,000,000l., he believed—whether that aggregate amount, which was issued on a 1351 paid-up capital of more than 10,000,000l., by bankers who enjoyed so much the confidence of the country, that they had deposits of upwards of 30,000,000l.—whether a circulation so limited, yet sufficient for the trade of Scotland, would be always kept up under the working of the averages proposed? The right hon. Baronet had not alluded to, or hinted at, the weakness or insecurity of any Scotch bank; and what he meant to ask was, that should one bank fall short in the required weekly and monthly averages, and another bank should not, but be in excess, whether the total circulation would, under these circumstances, be maintained; and that if the aggregate circulation should not exceed the 3,000,000l., whether that should not be taken as proof sufficient that there had been no excess of issue? That was the only particular point requiring explanation that struck him in the right hon. Baronet's statement; and, reserving to himself the right to discuss the details of the measure when brought fairly before them, and expressing his surprise that the right hon. Baronet should have pledged himself to meddle with a system so perfectly unobjectionable—a pledge which he had redeemed with more sound than substance—he should not oppose the Motion.
§ Mr. Colquhoun
thanked the Government that, as there was to be interference in the system of banking in Scotland, it was of that limited nature that had called forth the qualified approbation of the right hon. Member for Perth. The Government had exercised a sound discretion on this subject, as well as on the Poor Law question, in not assimilating the institutions of Scotland to those of England. In agricultural districts he feared that the plan of the right hon. Baronet might act prejudicially. So far as he was informed (though in towns he believed the average of the thirteen lunar months would be fair enough) — in the agricultural districts, where there was a very large circulation during two months, as compared with the rest of the year, he feared the limitation during those two months would be by the proposed averages limited, and that limitation would press severely on the agricultural and commercial population. Under those circumstances he thought, in those parts of the country where it should be the object to extend the accommodation liberally, they would contract the circulation unfairly and injuriously.
§ Mr. Hume
had come down to the House 1352 entertaining some apprehensions that the right hon. Baronet intended to do more, and so to do mischief; but there was not one of the arrangements he had proposed, as regarded Scotland, that he thought the bankers of Scotland would object to carry out, except, perhaps, that one which had been hinted at by the hon. Member. It appeared from the evidence of intelligent men, both in Scotland and Ireland—but he spoke more especially as regarded Scotland—that during two months in the year parties went round the Highlands to collect cattle, and purchase many articles, to pay for which money was taken out of the banks, which money was spread round the country, and returned to the bank in about two or two and a half months from the time it was taken out. Now it was most important that they should not do anything that should check that circulation, which was more necessary to the industry of Scotland than any thing else. The notes issued by the Scotch banks ran upon the average not more than nine or ten days, but in these two particular months they did not find their way back to the bank in less than two or two and a half months, perhaps, and nothing could be more prejudicial to the industry of Scotland than any system of averages which would limit that circulation. That was the only objection he had to make, and that was a matter of detail with regard to the measure generally. So far as Scotland was concerned, the people would be relieved from the apprehensions they had formed; while for Ireland the advantage would be great, and he was perfectly satisfied that every Irishman would be gratified by the alteration proposed.
§ Mr. Baring
would not enter into the merits of the proposal, as he apprehended that it was understood that it was the best course at present merely to hear the explanation of the right hon. Gentleman, reserving any opinion which they might have to offer upon the subject for another opportunity. He should not, indeed, have thought it necessary to say a word, were it not that hon. Gentlemen on either side of him had not scrupled to express their opinion upon different points. He would merely say, however, that he reserved to himself perfect freedom of expression for a future occasion; and he assured the hon. Gentleman who sat near him that he could not consider anything which affected the circulation of Ireland and Scotland as foreign in interest to an English Member. If any 1353 serious objections were raised to the measure which they had just heard laid before them, the people of Scotland and Ireland would prove themselves more sensitive and less sensible than he had always imagined them to be.
§ Mr. Sheil
could not but express his strong approbation of the system proposed to be adopted towards provincial banking in Ireland, the state of which had for many years been made the subject of much and merited complaint. There was, for example, the town of Drogheda, the commerce and manufactures of which were rapidly extending, and which was connected with Dublin by, he might say, an hour's distance; there was Dundalk, within sixty-four miles of Dublin; and Carlow, still nearer the capital, All these towns must be essentially benefited by the measure now proposed. And it was to him matter of great gratification that the privileges now to be abolished had not been rudely torn from the Bank of Ireland, but on the contrary, voluntarily surrendered, so that there could arise no complaint from any quarter whatever upon the subject. A safeguard against excessive issue was most desirable, and he thought the proposition for taking thirteen lunar months as the time the average issues within which should be fixed as the maximum for future issues—any surplus issue over that amount requiring a like amount of specie to represent it—he repeated that that proposition seemed fair and reasonable.
§ Mr. Warburton
wished to have some explanation upon one point. The right hon. Baronet had stated that the deposit in specie—equivalent to the amount of excess of issue over the thirteen months averages—might be in gold or in silver. He presumed that in stating that he would thus give the option to banks of having their specie either in gold or silver, the right hon. Gentleman did not mean to exempt them from the obligation of paying in gold any notes that might be presented representing an amount above 40s. He wished for some positive assurance upon this point.
§ Sir Robert Peel
did not intend to lessen the responsibility at present weighing upon banks of paying their notes in gold coin. Every bank must provide itself with gold sufficient to meet the demand of holders of its notes; and although, as regarded the specie to be held equivalent to their issues, the option of holding gold or silver was given, that did not at all diminish the re- 1354 sponsibility and liability of banks to pay, when demanded, gold for their notes. Looking into the present state of banking in Scotland, he found, he was bound to say, that, notwithstanding the increasing prosperity and extending commerce of that country, no increase of bank issues had taken place of late years. He must also say, that he did think that the banking business of Scotland, speaking generally, was conducted on good principles. ["Hear, hear."] He said speaking generally. Whether or not the Scotch banks had not taken lower interest at the time that the Bank of England was increasing its rates of interest, he would not say; but certainly Scotland had not abused the system so long in force there. All that was now intended was an extension to Scotland of the principle of the measure in force in England. The hon. Member for Halifax had talked of a particular case, and put a question founded upon it. The hon. Gentleman had asked, supposing a bank to return its issues at a less amount than that fixed as the maximum for any excess over which specie would be required to be held—whether he would in such a case allow another bank, without holding equivalent specie, to overrun the maximum to the same extent as the first bank had failed in coming up to it. But how was the former bank to be aware of what was to be the amount of the issues of the latter, and how was the amount to be divided? He did not see how the case could occur at all. He did not see how the principle mentioned could be practically applied. However, he might say, that supposing it practicable, he did not mean to grant any such privilege. He proposed to limit the circulation of each bank to a certain amount, and if any bank issued less than that amount, he did not mean to give to another establishment the privilege of issuing more. Then, as to extending the period within which to strike the averages. The hon. Gentleman the Member for Montrose had stated that there were certain periods during which a great excess of issue, as compared with other periods, generally took place. Well, be did not propose to interfere with this increased issue. He did not wish to prevent it. He only wanted to have gold on which to found the excess of issue. In Ireland—and the case differed from that of Scotland—the amount of circulation had recently risen high above the average. Taking the average at 2,160,000l., and the late circulation at 3,105,000l., a difference was 1355 shown of 945,000l. of excess in issues; for which, of course, a corresponding amount of specie, according to the system laid down, would be required.
§ Mr. Hume
wished to make one observation. The right hon. Baronet had stated that the Scotch banks took a smaller, when the Bank of England charged a higher rate of interest. Now the evidence upon the subject proved that the reverse was the case. While the Scotch banks were charging 4 and 5 per cent. the Bank of England was lending money at 3½ per cent.
§ Resolutions agreed to.
§ House resumed. Resolutions reported. Bills ordered to be brought in.