From and after 31st August the Issue Department of the Bank of England shall be separated from the Banking Department; that the Issuing Department may issue notes to the extent of £14,000,000 upon securities set apart for that purpose, of which the debt of £11,015,100 due from the Government to the Bank shall form a part; that no amount of notes above £14,000,000 shall be issued except against gold coin or gold or silver bullion, and that the silver bullion shall not exceed one quarter of the amount of gold coin or bullion.

Any person is entitled to demand notes from the Issuing Department in exchange for gold bullion at the rate of £3 17s. 9d. per oz.

Should any banker discontinue his issue of notes, the Bank of England may upon application be empowered by an Order of Council to increase its issue to the extent of two-thirds of the issue thus withdrawn, but all the profit of this increased issue must go to the Government.

The Bank of England is allowed to compound with issuing banks, and consequently forty-three banks in England made agreements to that effect with the Bank of England. The Bank of England is exempt from Stamp duty.

No new banks of issue shall be formed?

That bankers claiming to issue notes shall send a return of their issue during the twelve weeks next preceding the 27th April, 1844, in order to obtain the average amount of their issues.

Banks uniting need not give up their note issue, provided that it shall not be lawful for any such united bank to issue notes at any time after the number of partners therein shall exceed six persons.

Every banker must transmit a weekly account to the Commissioner of Stamps and Taxes.

Certain penalties are incurred by issuing more notes and not making returns in accordance with the Act.

The Bank of England's weekly account should be in the following form: Issuing Department.

Notes issued.

Government debt. Other securities. Gold coin and bullion. Silver bullion.

Banking Department.

Proprietors' capital.

Rest.

Public deposits.

Other deposits.

Seven days' and other bills.

Government securities.

Other securities.

Notes.

Gold and silver coin.

In 1854 bank notes were defined by Act of Parliament as "bills, drafts or notes issued by a banker for the payment of money to bearer on demand, and which shall entitle the holder thereof without indorsation to the payment of any sum of money on demand, whether the same shall be expressed or not, in whatsoever form shall be deemed to be bank notes".

The following table shows the increase in the note circulation of the Bank of England: -

From these tables we observe that there has been a large increase in the note circulation of the Bank of England. This is more clearly seen if we compare the note circulation of the United Kingdom with the increase in the number of bank offices and also with the population.

Thus, while the population between 1851 and 1878 grew 23 per cent, the circulation of bank notes grew 35 per cent, and although the bank offices had increased 91 per cent, which would mean a greater use of cheques, there was still a great development in the note circulation.

The following table will show the present position of the issue of English country banks in 1896: -

* The recent amalgamation of private banks with Messrs. Barclay and Co. will reduce the number to 43, and the authorised issue will be £677,385 less.

The following table shows the decrease in the average circulation of country banks since 1844: 1844 = 8,170,000 1850 = 6,320,000 1855 = 6,850,000 1861 = 6,110,000 1865 = 5,800,000 1870 = 4,890,000 1875 = 4,812,000 1880 = 3,400,000 1885 = 3,036,000 1890 = 2,367,073 1895 = 1,747,925

There has been a diminution of 43 per cent in the issue of private banks and 55 per cent. in joint-stock banks. Of the issue of joint-stock banks, 74 per cent, was compulsorily forfeited under the Act and 26 per cent. by bankruptcy. Of the issue of private banks 32 per cent was forfeited under the Act, 21 per cent. was given up voluntarily, and 47 per cent. was lost through bankruptcy.

Authorised issue lapsed: 1844-8 =423,410 1849-53 = 282,981 1854-8 =234,174 1859-63 = 173,212 1864-68 = 753,814* 1869-73 = 157,099 1874-75 = 163,178

£2,187,868 1875-95 = 2,236,363

£4,424,231

In consequence of the above lapsed issues the Bank of England authorised circulation has increased from £14,000,000 to £16,800,000.

* The large amount lapsed in 1864-68 was principally due to the National Provincial Bank giving up its issue on opening a London office.

From the above tables it will be seen that there has been a gradual diminution in the issues of country banks caused either by bankruptcy or amalgamation. Again the greater use of Bank of England notes has superseded the local issue.

The banks issuing notes within sixty-five miles of London have diminished in much greater proportion than those beyond, which is due to the fact of their nearness to London.

It is to be noticed that the country note circulation is less in August than in May, the difference being about £500,000.

Mr. Jevons has prepared a statement showing the variations from week to week from 1845 to 1862: -

Bank of England notes are a legal tender for payment of debts in England, but not in Scotland. With regard to country bank notes they are a legal tender if not objected to on that account, but the holder must circulate or present them for payment the next day after their receipt if he wishes to charge the transferor in case the banker fails. The holder, in fact, must treat country bank notes as cheques, in order to preserve his rights to sue in case of dishonour.