JOINT-STOCK BANKING COMPANIES BILL.—SECOND READING. (Hansard, 13 July 1858)

§ EARL GRANVILLE
, in moving the second reading of the Bill, said the object of it was to apply to joint-stock banking companies that principle of limited liability which Parliament had already applied to other joint-stock companies. It was not necessary that he should enter into any argument on the subject. A noble Lord of high authority in these matters (Lord Overstone) had admitted that if the principle of limited liability were once conceded to joint-stock companies in general, there could be no valid reason for refusing to extend it to banking companies, and the same admission was made by his noble Friend near him (Lord Monteagle). Speaking generally, there was no doubt that the joint-stock banks had been conducted with considerable prudence, but the great temptation they had to contend with was to speculate beyond their bonâ fide resources on the credit of their shareholders. He had no wish at the present moment to advocate the exclusive adoption either of limited or unlimited liability by these banks; but he saw no reason why, with the enforcement of full publicity, the shareholders should not have limited liability; and it would then be for the public to 1352 determine whether they would deal with those establishments which were conducted with limited liability or with those that were not. The only object of the Bill was to give them the power of conducting their business on that principle if they chose, after full notice given to the public.

§ LORD MONTEAGLE
said, the noble Earl had overlooked the great distinction between banking companies and joint-stock companies in general, namely, that the former received the money of others on deposit. There was also this peculiarity in joint-stock banks, that they were founded by the creation of shares, but owing to the practice which prevailed of making advances to the shareholders on the deposit of shares the general public were deprived of the security which they would otherwise have had from the calling in of the capital not paid tip. He begged the noble Earl opposite (the Earl of Derby) to pause before he assented to this measure.

§ THE EARL OF DERBY
said, he confessed it was not without some hesitation that he gave his assent to the second reading of this Bill. But he could not help thinking that the dangers arising from the excessive speculation of banks must be incurred whether those establishments were founded on the principle of limited or of unlimited liability. They were all aware that some of the greatest commercial frauds that had been perpetrated of late years had followed from the practice of giving undue credit to the shareholders in banks whose liabilities were unlimited. That was an evil which attached not to a vice in the system itself of banking, but to a vice in the mode in which banking was conducted. He confessed that he could not draw a distinction between credit to be given to banks and credit to be given to other commercial bodies, in reference to the limited or the unlimited liability of the proprietors. The public must be left to decide for themselves on the amount of confidence which should be bestowed on any commercial establishment. Under all the circumstances of the case, although he thought that the subject ought to be considered very carefully, he could not take upon himself to refuse his support to the second reading of the Bill which merely extended an existing system to joint-stock banks.

§ LORD WENSLEYDALE
said, he did not mean to oppose the second reading of the Bill. It appeared to him to be framed 1353 in conformity with that principle which had been generally adopted in our recent commercial legislation, of allowing the public to determine for themselves what was the amount of credit they should give to any commercial body. But he should observe that he thought it was desirable to introduce some clause into the measure under which joint-stock banking companies should be compelled, at stated periods, to declare the extent of their capital as well as the extent of their obligations, and should not be allowed to confine the information which they afforded the public to the mere names of their subscribers and the amount of money which had been subscribed.

§ LORD STANLEY OF ALDERLEY
said, he deplored what had taken place in the Scotch banks, but it should be recollected that all those were banks of unlimited liability. He believed that where banks were limited the public would feel it more incumbent on them to inquire into the affairs of the bank, and that in this way, to a certain extent, limited liability would be a security against false confidence. The colonial banks were banks of limited liability, though not in the sense to be established through this Bill, and he had not beard of any failures amongst them. The only proper protection for the public was, that they should not remove the obligation which rested on every one to look after his own interests.