Banking free in Scotland, not so in America - Failures rare amongst Scotch Banks, and profits considerable - Their superiority over English Banks - Their number - Their small circulation - Statistics illustrative of - Their cash - Credits and clearances - Account of the Bank of Scotland.

Scotland is about the only country, in which it can with any propriety be said that free banking prevails; and it tells much in favour of the system, that in no other country has Banking entailed so few losses, or conferred so many benefits upon the community. We constantly in disquisitions upon Banking, hear men talk of the free trade in Banking existing in the United States of America. Nothing can be more common, particularly in the House of Commons, and nothing more incorrect than averments of this kind. Banking is by no means free in America. No man or body of men can issue a note in any part of that republic without a charterl from the state in which the Bank is to be located, and such charter always contains a clause of limited responsibility. These conditions are incompatible with free, and not very favourable to good Banking - they are almost sure to lead to favouritism, partizanship, improvidence, and loss. In Scotland there is nothing of this kind: all Banks2 in that country are upon an equal footing; no monopoly, or exclusive privileges, no limitation of partners are known amongst them, and it is highly to the praise of the plan and system upon which they have been founded and are conducted, that failures are rare in the extreme amongst them, while considerable profits have been derived from their operations. In 1793 and 1825, when so many English Banks were carried away, not a single Scotch Bank stopped.

1 5419. Are any but chartered Banks allowed to issue their own notes? - I believe none but chartered Banks, with the exception of a single Bank by Mr. Girard, a person of very high character and wealth, who has recently died.

5420. Are they prevented by law from issuing? - Yes, I understand they are prevented by law. - Commons' Report, Bank of England Charter, etc. 1832. - Evidence of Mr. T. Tooke.

2 So little of legislative interference has there been with regard to the monetary system of Scotland, that "the issue of promissory notes, payable to bearer on demand, for a less sum than twenty shillings, has been at all times permitted by law, nor has any Act been passed limiting the period for which such issue shall continue legal in that country. In England the issue of promissory notes for a less sum than five pounds was prohibited by law from the year 1777 to the period of the Bank restriction. - Report, Commons' Committee, 1826.

To my mind it is the system here that is principally meritorious. I will allow credit for the remark that points to the habits of the people - to their industry, economy, and perseverance; I will admit that virtues of this description will work their way in the face of great difficulties, and cover a number of imperfections. I am also prepared to allow that the Scotch Banks have been managed with great skill and acuteness, and that there are peculiar facilities afforded by the Scotch law for reaching the property of debtors3; but after giving due weight to these things, separately, I cannot, seeing a marked and uniform difference between the results of Banking in Scotland and in England and noting concurrently certain essential differences between the two systems, I cannot, I say, but ascribe the superior advantages of the one over the other, in a great measure to a difference in the systems themselves.

3 A creditor in Scotland is empowered to attach the real and heritable, as well as the personal estate of his debtor, for payment of personal debts, amongst which may be classed, debts due by bills and promissory notes, and recourse may be had, for the purpose of procuring payment, to each description of property at the same time. Execution is not confined to the real property of a debtor merely during his life, but proceeds with equal effect upon the property after his decease . . . No purchase of an estate is secure until the seisine (that is the instrument certifying that actual delivery has been given) is put on record, nor is any mortgage effectual until the deed is in like manner recorded. These records are accessible at all times to all persons.

There is I believe but one Bank in Scotland, that of Alexander Allan and Co., which is not a Bank of issue. According to the Commons1 report on Banks of issue in 1841, there were then twenty-nine Banks of issue in Scotland, making weekly returns of their circulation to the Stamp Office, pursuant to the statute. But two of these, Sir W. Forbes, and the Glasgow Union, have become a united company with two establishments. In 1825 the number was 32. This summary, however, does not sufficiently indicate the fluctuations, or rather, the degree of speculation that has prevailed in Scotland in matters of Banking. It appears by the evidence given by Mr. Kennedy, manager of the Ayrshire Bank, to the Commons1 Committee of the same year, that five Banks had been consolidated with others during the interval named, and eight had become extinct; The Dundee Commercial, coalesced with the Eastern Bank; the Paisley Banking Company, with the British Linen Company; the Paisley Union with the Glasgow Union; and the Thistle, with the Glasgow Union.

The Banks that became extinct were, The Commercial Company of Aberdeen, New Bank of Dundee, Exchange and Deposit Bank, (Maberley's,) Ramsay, Bonner and Co, Falkirk Banking Company, Perth Union, Fife Banking Company, and Sterling Bank. Mr. Kennedy said that no loss had accrued from any of these, except the Falkirk and Sterling Banks - but this must be a mistake. Maberley's Exchange and Deposit Bank failed for a large amount, and is said to have paid only 3s. 6d. in the pound.