The weekly return of assets and liabilities issued by the Bank of England which appears in each Friday morning's paper has a significance far above that of the balance sheets of any other bank. The Bank Return is the barometer of the Money Market. It enables the financial man to forecast the probable "dearness "or "cheapness" of money, not always with exactitude, for, like all barometers, its accuracy is not always unimpeachable, but with approximate correctness.

Subjoined is the Return for the week ending August 17th, 1904:

Bank of England.

An account, pursuant to the Act 7 & 8 Vict. c. 32, for the week ending on Wednesday, August 17th, 1904.

Issue Department.

£ Notes issued- - 52,196,935

£52,196,935

£ Government debt - 11,015,100 Other securities - 7,434,900 Gold coin and bullion - - 33,746,935

£52,196,935

Banking Department.

£ Proprietors' capital 14,553,000 Rest - - - 3,503,418 Public deposits0 - 6,528,913 Other deposits - 40,231,792 Seven-day and other bills- - 99,251

£64,916,374

£

Government securities - - 14,234.402

Other securities - 25.049,787

Notes - - - 23,607,925

Gold and silver coin- - - 2,024,260

£64,916,374

* Including Exchequer, Savings Banks, Commissioners of National Debt, and Dividend Accounts.

(Signed) J. G. Nairne,

Aug. 18th. Chief cashier.

It will be noticed that the Return is divided into two parts, the Issue Department and the Banking Department, according to the terms of the Act of 1844. It is an arrangement peculiar to the Bank of England, and has been copied by none of the continental State banks.

The sole function of the Issue Department is to issue notes; of the total of £52,196,935 in the Return before us, £18,450,000 is issued against securities, the "fiduciary issue""as it is called; the remainder is represented on the asset side by gold coin and bullion. The amount of securities in the Issue Department was fixed by the Act of 1844 at £14,000,000, but it has since been periodically increased owing to the lapse of country bank issues, the Bank of England being permitted to increase their issue against securities to the extent of two-thirds of such lapsed amounts. Of this amount of £18,450,000, the sum of £11,015,100 is the debt due to the Bank by the Government, money lent to the State from time to time in return for the privileges of "exclusive banking," which were granted to the Governor and Company. This amount has not been increased since 1833.

The total amount of notes which appears on the liability side of the Issue Department is by no means the amount actually in active circulation. The action of the Issue Department is quite automatic, and it is compelled to issue notes to anyone offering gold, at the rate of £3 17s, 9d. per ounce of standard gold. These notes are transferred to the Banking Department, and the surplus not required by the public forms part of the Bank Reserve. If it is desired to ascertain the amount of the active circulation, that is to say, the circulation in the hands of the public and the Other Banks, the amount of notes in the Banking Department must be subtracted from the total issued by the Issue Department; in this case it will be £28,589,010, which is about the average amount, the total varying surprisingly little from day to day.

The asset in the Issue Department, "£33,746,935, gold coin and bullion," comprises practically the whole stock of gold in the Bank. A certain amount of gold and silver coin is kept in the Banking Department and at the branches for immediate use, but beyond this amount, generally about two millions, all gold is transferred to the Issue Department. The Bank is allowed to hold silver in the Issue Department to an amount not exceeding a fifth part of the whole sum, but this privilege has not been exercised for many years.

It should be thoroughly understood, after what was said in the chapter on the Bank Act, that the above total of £52,196,935 can only be increased by adding a corresponding amount to the gold on the asset side, and that this gold can only be withdrawn from the Issue Department by cancelling a corresponding amount of notes, either by transferring them from the Reserve in the Banking Department, or withdrawing them from active circulation.

To turn now to the Banking Department, the first liability is Proprietors' Capital, £14,553,000. The amount of the capital stock was originally £1,200,000, but it has remained unchanged since 1833, and it will be observed that, compared with the paid-up capital of the leading joint stock banks, it is a very large amount. This, of course, adds to the security of the Bank, but it forbids the payment of a high rate of dividend, and the usual 9 or 10 per cent. paid by the Bank is, considering its age and reputation, and also the fact that it pays no interest on its deposits, a very modest one.

The next item, Rest, £3,503,418, is the amount of the undivided profits of the Bank, and in most bank balance sheets would take the form of a Reserve Fund and Profit and Loss Account. Most banks separate these two latter accounts, but the Bank of England combine them in one. As, however, it is the practice of the Bank of England never to reduce the Rest below three millions, this sum practically represents their Reserve Fund, and the surplus is the Profit and Loss account available, for dividend purposes, so that it is possible to forecast the probable dividend of the Bank with some degree of accuracy by a study of the amount of the Rest.

The Public Deposits are explained by the footnote to the Return; they are the balances standing to the credit of the various Government Accounts. The Other Deposits include not only the deposits of the Bank's ordinary customers, but also of the joint-stock and private banks who keep accounts at the Bank, including, of course, all the Clearing Bankers. At one time the Bankers' balances were published separately, but the practice was discontinued in 1877. The Bankers' balances naturally afford the best criterion of the amount of money available for lending to the Market, but in default of detailed information on this point, the amount of the Other Deposits is of the most importance in this respect.