Services Of The Bank Of France

The services of the Bank of France are most important in connection with the discount of bills of exchange, which form the basis of the French discount market. Here, the Bank of France extends a most liberal policy. As in the system of banking in the United States under the Federal Reserve, and as in the English banking system, gold, silver, and commercial paper form the basis of the note issue in France. We have related how the Federal Reserve banks may rediscount quantities of eligible paper, and thus obtain the proceeds in Federal Reserve notes as a basis of circulation of credit. In France, commercial paper of a certain quality is likewise interchangeable for bank notes.

Credits in France; classes of eligible paper; paper discountable. - With the exception of land credits and of cooperative credits, the French credit system shows little specialization. In France, paper brokers exist to a limited extent, their operations not being as wide as those of the English paper brokers and discount houses. The elasticity of credit in France is also not as broad as in England.

The majority of paper discounted in France is for amounts of 100 francs or less, and the average time to maturity is thirty days. In France, eligible paper must bear three names, two of which are required to be of parties domiciled in France and known to be solvent. Two name bills are accepted only in cases where they are accompanied by satisfactory collateral, and where both parties are French. They are to a large extent the paper dealt in by private bankers, who, by adding their own indorsement, make it a three name paper eligible for rediscount with the Bank of France. The private bankers also make a practice of discounting each other's acceptances, the usual charges for such acceptance accommodation being one-quarter of one per cent, for drafts which have three months to run, and sometimes going lower than this figure. A good portion of the bills discounted arise from agricultural as well as from commercial transactions.

The Extensive Use of Acceptances Over the Open Account