QUESTION. (Hansard, 26 June 1873)

THE CHANCELLOR OF THE EXCHEQUER

Sir, the nature of these banks seems to be this:—They receive money on deposit, and against that deposit issue cheques which cannot be filled up with a greater value than-£10. These cheques are drawn payable either to the drawer or to the order of the drawer. My hon. Friend asks me whether I consider that such an institution interferes with the principles of the Bank Act. Now, Sir, the only principle clearly laid down with which I can think it would interfere is Section 11 of the 7 & 8 Vic., which says that bankers shall not issue bills, promissory notes, or Bank Notes payable on demand. These cheques, however, are not payable on demand; they are payable to the drawer or his order, and do not, therefore, come within the words of the section. They are, in fact, in the nature of Bills of Exchange which have not been accepted, and payment is coupled with the condition that there should be assets to meet them. It is not everything which economizes or dispenses with currency which contravenes the Bank Act, otherwise it might be objected that the general system of deposits economizes currency, and therefore contravenes the Act. The question really is, whether these notes are so much in the nature of Bank Notes that they do the duty of Bank Notes, and thereby infringe the Law. Now, I think this is not the case, because they are Bills of Exchange not accepted, and the nature of them is that the person holding them, if not paid, has no remedy against the person accepting them, but against the person who gave them to him. As the holder, therefore, has no remedy against the Bank, but only against the person who gives him the bill for payment, it is a matter of personal credit between these two persons, and the question of interfering with the currency does not arise.