The following pages are the result of a revision and enlargement of a small book on banking and kindred subjects which was published in 1866 under the title of ' Banking Currency and the Exchanges' Exceedingly imperfect as that little work was in many respects, the public absorbed nearly one thousand copies, and that satisfactory result, all things considered, has been we think due almost entirely to the fact that it was a book about banks and banking, written after going over the ground and ascertaining by years of experience among bankers what the uninitiated wanted to know on the subject. While distinctly repudiating the smallest intention to disparage the meritorious and useful works on banking which many writers, having little besides theoretical knowledge to guide them, have published, we cannot refrain from remarking that it is impossible for writers thus equipped for the work to produce books on banking or any other science which shall be anything better than a partially safe and sound guide. No demonstration is required to prove to any one that unless a writer has practically seen for himself why this and that reform has been introduced, what has been the ensuing result, and why one way of doing the business is preferable to another and so forth, the teacher is a self-taught guide, who as Constable the painter said has been taught by a very ignorant person. Theoretical works on banking differ from practical treatises in this, that the theorist who knows little or nothing of the practice beyond what he has gained from books and hearsay, teaches to a great extent what he imagines to be instead of what he knows to be the practice. Headers can always feel whether their guide is treading along as if he did not fear to be heard by those who know, and whether or not he is quite familiar with the streams to be forded and the passes to be traversed. This revised and enlarged manual of banking makes no pretence to do anything more than to show to the best of our ability what banks are for and how they are worked. We have certainly in some respects gone over the limits marked out for the book of which this is the second edition, but that has been necessary for the simple reason that in ten years there have been some changes. These changes have likewise given rise to certain suggestions upon which we have ventured. We have not gone much into the subject of foreign banking, because banking abroad is very little developed as compared with this Kingdom; but we have devoted a few pages to it that the reader may compare the progress which neighbouring countries are making in this important science.

To preserve satisfactory and truthful records of the practice prevailing among bankers at different periods they should be taken as direct as possible to the pages of the book. This of course prescribes what is the most difficult of all methods of book-making. One of the reasons why people are so entertained by some of the best works of fiction is, that the narrative is made up in so many cases of the real truthful experience of the writer. Persons in the same class of life who read such works of fiction have had very similar experience; and if certain circumstances have not arisen within the knowledge of all in that class they will probably have had such a complete second-hand experience that they will appreciate the reproduction of those circumstances with almost as lively a sense of pleasure as if they were of first hand. The rapid spread of knowledge in these times so familiarises every grown person with the elements out of which the doctrine of probabilities is constructed that every one can better gauge the truthfulness of statements generally regarding the ordinary affairs of life than in times when people had more to feel their way than to see it. This is why the simple tale that is true pleases most people more than a finely written narrative of a writer who trusts entirely to his imagination.

Treatises composed on the ground and in the atmosphere of the subject, although they may be in some respects inferior to those produced by purely theoretical writers, will have the colours nearer the truth, if we may use the expression.

The banking practice of the present day is the result of an infinite number of reforms, and from an economic point of view it has been brought to a perfection that leaves little to be desired so far as existing conditions are concerned. As business people of the better class have gradually forsaken the city, and indeed a great part of the metropolis as a place to live in, and have spread themselves over the suburbs, the business days have been shortened. A reduction in the hours during which the banks are open necessitates an earlier closing of mercantile offices. Saturday may be called now almost a dies non and bids fair to be given up permanently to holiday making, a reform, if completely carried out, from which we believe more good than harm would result. The institution of Bank-holidays is a further encroachment of comparatively recent date on the number of days in the year allotted to work; all these movements in one direction show that what is lost in time must be made up for in despatch. Despatch in the execution of banking business is a force consequently which is constantly knocking at the door of Reform. Seven out of the twelve working hours the banks are open, and as the business increases a mere multiplication of hands is not all that is required to get the day's work properly finished. Even with the existing Clearing-House facilities, bank managers have a responsible time of it after the official bank hours. In the hurry that is inseparable from the work of getting all the cheques drawn against, passed to the debit of the drawers, mistakes will sometimes occur involving the bank in loss.

If a bank manager lays it down, as a rule, that he will not pay a cheque that is presented before the effects against which it was drawn are cleared, he is exposed to the risk of losing perhaps a good customer. For this reason cheques have frequently to be kept back while inquiries are made at the Clearing House. If all persons keeping banking accounts were to take care that the cheques drawn against should have time to be cleared the banker would be spared much trouble and often annoyance; but in the same way that the banker closes his doors now at 4 o'clock and on Saturday at 3 instead of 5 and 4 respectively, as was the case formerly, the customer on his side studies his own interests, and in many cases uses the bank for his purposes to the fullest extent possible, regardless of the interests or convenience of the establishment.

Macaulay in his essay on Milton said, "Any intelligent man may now, by resolutely applying himself for a few years to mathematics, learn more than the great Newton knew after half a century of study and meditation." Much on the same principle he who seeks to gain a knowledge of banking in the present day by studying a book which aims to photograph the practice, can understand in a short time the working of a system which is the result of the hard labour of generations of thoughtful men. The economic improvements introduced into the science of banking during the last forty years, have enabled the transactions in a day's work to be increased and executed with as much greater rapidity and certainty as in the parallel case of the transport of the population from place to place in a day by means of the locomotive.

Most writers, and especially theoretical writers, on banking are in our opinion too much given to hairsplitting in their definition of the technical terms employed. We refer to this point in order to state that we allow ourselves some latitude in this respect to escape a waste of time and space in discussing what are generally accepted as the precise definitions of the terms capital, money, value of money, and such like. In the strictly technical sense, no doubt, capital means that tangible surplus production which is preserved for reproductive purposes over and above what is required for consumption. The value of money is in the strict sense defined by the Latin pecus, cattle, or pecunia, and the Greek meaning the same thing. Our money is a different thing from the Greek coins with the ox stamped on them, although resting on as solid a basis. From the precious metals we have come to use paper to a large extent, and presuming always that paper, whether notes, bills of exchange or in any other form, can fall back ultimately on the more cumbersome but tangible pecus andwe have come by degrees to speak of bank notes as capital. Sticklers for technical accuracy will, therefore, do us the favour to understand that when speaking of capital, which in a variety of ways is a representative purchasing power, we mean that by which the two agencies (first), human beings employing their skill and energy, (secondly) on the globe on which they exist, are able to continue the reproduction of the necessaries and luxuries which are consumed.

The money market of London is a growth so much in advance of what any similar organization has ever reached, that a contemplation of the weak points in the system affords no other feasible suggestion for its improvement to our minds than that the lending business of London requires a representative government. Under the existing practice, if a bank finds out that it has made large advances to an unsound trader, instead of getting rid of him entirely out of the commercial system, an effort is made to hide his weakness and shift him and his liabilities on to some other bank. Instances of this have occurred within our knowledge. Instead of working together and for their mutual benefit and protection, under the present system each bank seems but to seek the destruction of its neighbour. Freedom is no doubt a great boon, and as a principle should be upheld whenever possible; but when freedom in certain departments of the world's affairs gives undue opportunities to one class to prey upon another, freedom then would seem to be less preferable than slavery. Political and social liberty are the greatest blessings men and women can enjoy; but to these there are limits, which the written law on the one hand defines, and the unwritten laws of good breeding and common sense define on the other. In commerce the law reaches but a limited number of the swindlers. Those who are detected and punished are to those who go unpunished as a drop to the water round the earth. To prevent the great community of capitalists from being cheated so that the cheat escapes through the bankruptcy court, or through that capacious aperture for the retreat of the unsuccessful trader, "liquidation by arrangement," the lenders of London require some sort of council of bankers to frustrate the designs of such under-miners as Collie. The thing is not impossible, but like other reforms we are as yet, perhaps, hardly ripe for it.

With a view to obtain the results of as wide a range of experience as possible in the several departments of banking and the kindred subjects treated in the following pages we have sought the assistance of kind friends, and must not conclude these prefatory remarks without offering our sincere and grateful acknowledgments to Mr. John Douglas Farrell, of the Bank of England, Mr. R. O. Yeats, manager of the Alliance Bank, and Mr. Henry Martin, of the National Bank of India.

April, 1877.