§ Order for Second Reading read.
§ Motion made, and Question proposed, "That the Bill be now read a second time."—(Sir Henry Selwin-Ibbetson.)
§ MR. RAMSAY,
in moving that the Bill be read a second time that day six months, said, he must be allowed to express his surprise that, when introducing a Bill involving principles so important, Her Majesty's Ministers, who had charge of the measure, had not given some explanation as to its provisions and intended effect. He need not occupy much of the time of the House in stating the reasons why he objected to its passing. He had opposed the Bill when it was before the House last Session, and he had hitherto heard neither explanation nor justification of it. What was proposed by the Bill was to grant certain powers, privileges, and immunities to particular institutions specified in the Schedule, and he could see no special reason for granting such powers and privileges. He did not desire to say anything against the institutions in question. He had no doubt that they were perfectly respectable; but he could see no reason for granting to them special powers and privileges which were not conferred upon other bodies carrying on the same business in the same localities, and which did not enjoy such special advantages. That was the chief ground upon which he urged his objection. He would not feel disposed, seeing that these Charters were terminable, to object to a proposal to extend their provisions for a certain period, say five years; but when asked to perpetuate indefinitely those powers and privileges on some in- 568 stitutions which others did not enjoy, all he could say was, rather than sanction a proposal so exceptional, it would be better that the Charters should be swept away at once, and that all who carried on the business of banking should be placed on the same footing. Certain institutions had obtained by Charter powers which, in fact, constituted a sort of monopoly, and that by the Bill Parliament was asked to sanction for ever. To such a proposal he had serious objection. He thought it detrimental to the public interest in the Colonies and in the United Kingdom. As he had already said, if the proposal was for a limited period, he would not offer opposition; and probably within five years the whole subject of banking would have to be dealt with by Parliament. In Scotland they had an analogous state of things to that which it was proposed to institute by the Bill. Three of the leading banks had certain powers and privileges which other institutions did not enjoy, one by Act of Parliament and two by Charters, and the Bill proposed to establish a similar inequality in the respective Colonies. To that system might be traced a great deal of the evils which had attended the operations of some of those institutions which were not so favoured. Further, as an inducement to the House to pause before going on with the Bill, they had not got the Charters before them, in order to judge of what they were doing; but they were really being asked to legislate entirely in the dark. It was not reasonable to ask the House to sanction a proposal to confer exceptional powers and privileges, of the nature and extent of which neither the Members of that House nor the public had any knowledge. Let the Charters be produced and explained that they might know what they were doing. He did not say that he had any objection to the institutions sought to be favoured by this measure. They were, no doubt, as was said, highly respectable. He felt sure of that, and when waited on himself last year to try to pursuade him to withdraw his opposition to the Bill, he said that if a Bill were introduced to confer on all banking institutions having offices in the respective localities the same privileges, he would not hesitate to give such a measure most favourable consideration, and, at least, it might pass without his oppo- 569 sition. But he did decidedly object to confirm a monopoly of this character—if not a monopoly, at least an exceptional advantage—for if it was not an advantage, why were they asked to legislate on the subject? Those were the grounds upon which he opposed the Bill at first; they were now equally strong, and he should, accordingly move its rejection.
, in rising to second the Amendment, said, that if any hon. Member of the House desired to inform himself on the subject of chartered banks, he would find great difficulty in doing so. He had asked the Treasury and the Board of Trade to lay before the House a Return on the subject, and he was told that the Charters were public documents, and that they could Be obtained. He had found that statement correct; but on examination he found that these Charters were preserved in the Record Office in such a form as rendered them practically unavailable for reference. They were often extremely voluminous and complicated documents. Yet they were asked, without a word of inquiry, to renew all the Charters of the colonial banks by a stroke of the pen. His hon. Friend (Mr. Ramsay) had referred to the banks scheduled as being the only banks dealt with by the Bill; but that appeared not to be the case. So far as he could make out, it was proposed in the case of the banks scheduled that they should be able to do some things, which at present they required the sanction of the Treasury to do, without any sanction at all; but as far as other banks were concerned—[The CHANCELLOR of the EXCHEQUER: Those are the only banks.] The words of the Bill were—Nothing in this Act shall authorize any Banking Companies mentioned under the Schedule of this Act to exercise any power in relation to the issue or otherwise in respect of notes, or in relation to the establishment of branches in the Colony that is not exercised at the time of the passing of this Act.That did not refer to all the chartered banks. [The CHANCELLOR of the EXCHEQUER: Yes.] On what grounds, then, were they to deal with the chartered banks in the Colonies without dealing with those at home? The Government did not, and never had, carried out the investigations with regard 570 to these banks, for which they were responsible. For instance, banks were compelled to hold gold against notes, and the Treasury had the power of seeing that they did so; but, as was shown after the City of Glasgow Bank failure, they never performed that duty. There were two privileges conferred on these chartered banks by the Charter which it was proposed to perpetuate. These were the limitation of liability, and the power of issuing notes. The power of issuing notes was a matter which did not so much interest the public in this country; but the matter of limitation of liability undoubtedly did. Now, they would find in the banks scheduled that in some cases the liability was limited to the amount of shares; in other cases it was limited to twice that amount; in the case of the Ionian Bank, it was limited, in respect of the shares held in Greece, to the amount paid up; while in respect of those held in England, it was double that amount. Again, in the case of the Egyptian Bank it was twice the amount of shares, and the liability ceased at the time of transfer. That was quite a different liability to any contemplated under the Companies Acts. Why were they to give these banks perpetual Charters? Even the Bank of England had no such Charter. Its privileges were terminable one year after the payment of the Public Debt. Under this Bill they proposed to give perpetuity to all the anomalies existing in chartered banks—a power and privilege which they did not consider necessary in the case of the Bank of England. He would also point out that it was not easy to arrive at what the limitations of the liabilities of these banks were. All his information was gathered from theStock Exchange year Book;but the compiler of that work was compelled to rely for his information on the officials of the various Chartered Companies. There was practically no means of obtaining independent information as to the liabilities of these banks, and the subject was pre-eminently one which, before being dealt with, should be investigated by a Committee. He should have no objection to what was proposed, if the Bill limited the privileges of the Charters to two, three, or five years; but he most decidedly objected to their being made perpetual. He, therefore, seconded the Amendment.
§ Amendment proposed, to leave out the word "now," and at the end of the Question to add the words "upon this day six months."—(Mr. Ramsay.)
§ Question proposed, "That the word 'now' stand part of the Question."
§ SIR HENRY SELWIN-IBBETSON
said, that he would not have moved the Second Reading of the Bill in silence had it not been identical with that which was introduced last Session, but did not pass into law. The reasons for the introduction of the Bill were very simple. The House was aware that, before the passing of the Limited Companies Liability Acts, there had existed for more than 30 or 40 years certain banks which possessed Royal Charters. For any alteration or extension of their branches, or for the renewal of a term upon which their Charters were originally granted, those banks had to come to the Treasury for such renewal or increase of their powers. A responsibility was thus thrown upon the Treasury in regard to matters on which it was not very well able to form an opinion or to exercise a sound judgment. It was, therefore, thought at one time that it might be possible to let the Charters expire; but the disadvantages of placing those banks under the Limited Companies Acts were found to be so great that the Charters were renewed for a short period, in order that a Bill might be submitted to the House for the purpose of relieving the Treasury from a responsibility which it could not properly exercise. Under the present Bill the banks would simply have the same powers which they now possessed, subject to the legislation of the countries in which they existed. The only object of the Bill, therefore, was to relieve the Treasury from the responsibility of renewing the Charters, and to place the banks under the jurisdiction of the countries in which they carried on business.
§ MR. MUNTZ
understood the object of the Bill to be the perpetual renewal of the Charters under which these banks existed. The House had had no time to look into the matter, for this Bill was not introduced until the end of last Session, and was withdrawn without being fully discussed. He should like to know whether it was proposed to give the 572 Legislatures of all the countries in which the banks carried on business power to alter their constitutions? For instance, was the Bank of Egypt to be subject to the jurisdiction of the Khedive? Then, with regard to Canada, he doubted very much whether the House had power to make laws with regard to banks in the Dominion. Before a measure of this kind was passed they ought to have time to consider the subject fully. There must be some object in view with regard to the Bill; and if that object were only to relieve the Treasury from an unpleasant duty, he should suggest that the Charters should be renewed for five, seven, or 10 years, and not in perpetuity.
§ THE CHANCELLOR OF THE EXCHEQUER
said, that one of the greatest objections to continuing these Charters for a limited time was that one of the banks held a perpetual Charter. He would endeavour to explain how the matter stood. A good many years ago, before the establishment of joint stock banks was authorized by law, banks could not exist without some kind of Charter. About 1840, and in later years, the promoters of banks in the Colonies were in the habit of asking the Crown for Charters to enable them to exist. In no other way could they be established, and the Crown usually granted the Charters. Almost all those Charters contained a proviso that the actions of the banks should be regulated by the consent of the Treasury. Subsequently, joint stock banks were founded under the sanction of Parliament. The 11 banks referred to in the Bill had, however, remained in the condition of chartered banks, and as such had, no doubt, certain advantages, both as regarded their standing and also as being, to a certain extent, independent of the legislation of the Colonies. They were under the regulation of the Treasury; but, as time went on, the Treasury found it exceedingly awkward to exercise the power confided to it. Matters requiring alterations of the Charters, either by the establishment of branch banks or by changes in the system of issuing notes, had to be decided in Downing Street by officers of the Treasury, who had no great knowledge of the matter. The Treasury would have been glad to renew the Charters for a limited time, and then 573 allowed them to cease. But that would have thrown the banks out of gear, and it would have been exceedingly difficult for them to register themselves as joint stock hanks, and there was the further difficulty that one of the banks had a perpetual Charter. The banks had carried on their business exceedingly well, and there was no reason for wishing to put an end to their existence. The difficulties in the way of altering their constitution by bringing them under the Companies Acts were very great, owing to numbers of the shares being in the names of trustees, and other matters of that kind. Moreover, the effect of that measure would have been still to leave one chartered bank, and one only, in existence. The Government, therefore, thought it best to get rid of the responsibility of having to revise and correct the proceedings of these banks, and to establish, in the first place, certain general principles as to the mode in which they were to act in matters affecting their constitution; and, in the second place, to leave to the Colonial Governments such power of regulating their proceedings as might prevent their having any unfair advantages in comparison with other banks. They, therefore, proposed in this Bill to make Charters perpetual, and to leave to the bank itself, under proper conditions, the power of increasing its capital, altering the amount of its shares, and other such matters—in fact, to apply to them similar provisions to those by which other joint stock banks were regulated. Clause 6 was very important, for it was the clause which put the bank under the regulation of the Government of the Colony in which it existed. First of all, with regard to the issue of notes, it was provided that nothing in the Act should authorize the banks to exercise any power which they were not exercising at the passing of the Act, save with the consent of the Governor of the Colony. Further, the banks were to do nothing at any time or place which might, at that time, be illegal according to the law in force in the Colony. If the Legislature of any Colony passed a law regulating banks, then these banks would be as much subject to it as other banks in the Colony. The Treasury had considered whether it would be best for it to take the responsibility of extin- 574 guishing the Charters of the banks, or introducing new restrictions. They had found that they would not be able to extinguish the Charter of one of the largest and most important of these banks; and they had, therefore, thought it best to introduce the present measure. If the House rejected the Bill their present difficulties would continue. He, therefore, hoped the House would see that there was nothing in it which should cause anxiety, and would allow it to proceed.
§ MR. RATHBONE
did not see that there was any objection to relieving the Treasury from its present responsibility; but he thought they should know exactly what they were doing. No doubt, if the House had everything before it, it would agree with the proposal of the Government; but it had not at present the materials before it upon which to form an opinion. He should like to know what the provision of the Charters in question were? He would venture to ask the right hon. Gentleman the Chancellor of the Exchequer to lay the Charters before the House prior to asking it to come to a conclusion. He did not mean to suggest that the Charters should be printed and circulated, but that hon. Members should have access to them. No doubt it would be found that the banks had been well conducted, and that their Charters were good; but at present they had no means of knowing whether the banks were complying with their Charters or not. It seemed to him to be very important, for the safety of the public and of the proprietors of the banks, that they should have every information before them before passing this Act.
§ MR. RYLANDS
did not object to the Bill, but, on the contrary, was entirely in its favour. The Bill appeared to him to be not only a reasonable but a necessary measure. He was aware that the gentlemen connected with the chartered banks had found great difficulties in developing their business in consequence of the restrictions imposed by the Treasury. His hon. Friend (Dr. Cameron) looked with very great suspicion upon the proposal to place these chartered banks upon a permanent footing. The possession of a Charter was a considerable advantage to a bank, and the public had a right to know that the powers and privileges 575 given to the chartered banks were of such a nature as not to be injurious to the public at large, or to be an interference with the fair prosecution of business by similar institutions. With every disposition to support the Second Reading of the Bill, he was very much inclined to think that, before the Bill was absolutely passed into law, it would be desirable that an opportunity should be given, by referring the matter to a Select Committee, to ascertain the exact position now occupied by the chartered banks. It did appear to him that, without the publication of Charters, it might be possible for a Committee to which the Bill could be referred to ascertain the nature of the Charters and the way in which business was now carried on. If it were found that the nature of the Charters was unobjectionable, then he did not think there was any right to refuse to grant the holders a permanent interest in them. He observed that there was a provision in the Bill which met some of the objections raised. It was provided that nothing in the Act should prevent Her Majesty revoking the Charters if necessity should arise. There was another provision—namely, in the event of insolvency the Charters and supplemental Charters issued to the bank should be revoked and become void. That was necessary to prevent some arrangement being made by which, in the case of insolvency, the bank could pass its Charter over to another institution. He presumed that, had there been any legal means of establishing joint stock banks in former days, these Charters would never have been granted; and, undoubtedly, no further Charters would be issued, because banks would be established under the Acts now in operation. But they were dealing with property which did exist, and which ought not to be interfered with unless good cause could be shown to the contrary. Before legislating on the subject, it would be, however, only reasonable that the House should know exactly, through a Committee, or otherwise, the position of the banks under the Bill.
§ MR. CHILDERS
wished to say a few words upon the Bill from more than one point of view. In the Colony with which he had been many years ago connected, they had some banks chartered by the Imperial Government, and others 576 by the local Legislature under special Acts. The question was more than once raised in the Colony of a general Banking Act, especially in connection with the issue of paper money; and it became his duty as a Minister of the Colony to look carefully into the question whether these anomalies could be removed, and especially that Charters should be made uniform. He was bound to say that the result of his consideration was that something like the present Bill would be an improvement. He did not think that the Treasury or the Board of Trade should be allowed to retain the power of granting Charters in Her Majesty's name; but he thought that the banks that now existed might be allowed to retain their Charters permanently if they were adapted to the present condition of things. He quite agreed with the general scope of the Bill which was now brought forward. From an Imperial point of view, he was strongly impressed with the necessity of taking the conduct of this business from the Treasury and the Board of Trade, by passing some general Act which would relieve them from functions which they could not satisfactorily perform. From both points of view, therefore, he could not but give his support to the Bill. The only question that presented itself was whether the Charters were well adapted to the state of things which now existed; and it struck him that the words of the Act did not make it sufficiently clear that it was absolutely left to every Colony to make its own general laws with respect to banks and to deal with the privileges of the chartered banks provided the Acts referred to all other banks in the Colony. On the other hand, it was necessary to remember that many of these banks did not carry on business in one Colony, only but in several, and thus could not, without complication, rest on local Charters only. In providing, therefore, that the Colonial Legislature should be at liberty to take away the privileges of these banks they must be careful to make them also subject to Imperial legislation, where they existed in more than one Colony. He thought it very desirable that the Bill should pass into law, subject to such minute inquiry as would be made before a Select Committee. He could hardly support the suggestion that all they required to know was the nature of the Charters. Al- 577 though, from one point of view, this was a public measure, yet it was also essentially a Private Bill, because it endowed certain private companies with various powers and privileges. It partook, therefore, both of the nature of a public and a Private Bill, and he did not think the House should pass it without careful examination; and he would propose that it should be referred to a Select Committee. If the Government would consent to that course being taken, he thought the objections of his hon. Friends would be very fairly met. The Bill could be referred to a Select Committee, with power to make the fullest investigations into each Charter, and when their Report had been received the Bill would again come before the House.
§ SIR JOHN LUBBOCK
entirely concurred with the proposal of the right hon. Gentleman the Member for Ponte-fract that the Bill should be referred to a Select Committee. He thought that if Her Majesty's Government would modify Clause 2 by allowing the Treasury, after the expiry of the Charters, to terminate them at any time on giving reasonable notice, and that until this was done, they should continue in force, the proposal, he believed, would meet a great many of the objections raised.
§ MR. RAMSAY
would ask leave to withdraw his Amendment, on the understanding that the Bill went before a Select Committee, with power to have the Charters before it. He hoped that the question, in all its bearings, would be fully gone into before the Committee. He only required investigation of the subject, and fully approved of the proposal in the Bill to relieve the Treasury of the responsibility of dealing with these Charters.
§ Amendment, by leave,withdrawn.Main Question put, andagreed to.Bill read a second time, andcommittedto a Select Committee.
§ And, on February 20, Committeenominated asfollows:—Mr. LOWE, Sir JOHN LUBBOCK, Mr. MULHOLLAND, Mr. RAMSAY, Mr. ARTHUR MILLS, Mr. SHAW, Mr. FRESHFIELD, Mr. SAMPSON LLOYD, and Sir HENRY SELWIN-IBRETSON:—Power to send for persons, papers, and records; Five to be the quorum.