The peculiarities of this position, which sometimes lead to an erroneous classification of the Bank of England as a government bank, have been much emphasized by the manner in which the other constituents of the English banking system have developed in recent years. The private banking houses have steadily declined in number. The advantages of joint-stock organization and limited liability have led in many cases to their absorption or conversion into companies of larger capital, and have hindered the opening of new private banks, even if establishments of such a decaying type could any longer command the credit once given to them in the English financial world. On the other hand, the joint-stock and limited companies have grown rapidly in the last two generations, both in relative and in absolute importance.1 They have felt the strong modern tendency to concentration and by consolidations have greatly diminished their number, but with a vast increase, not only of individual, but of aggregate importance. At the same time, by the establishment of branches they have everywhere brought themselves into close contact with the general commercial life of the country, so that most of the banking of English trade and commerce is now carried on by their agency.

1 This prohibition continued until the year 1793.

The Bank of England, on the other hand, having established eleven branches before the year 1830, has gone no farther in that direction.2 It enters into little competition with its younger neighbors for the business which is offered by the growing industry and wealth of the nation, but is satisfied with the scope which its position as the head of the banking hierarchy affords for employing its capital and the energies of its managers. Its long-existing prestige and prescriptive leadership have enabled it to maintain relations and acquire an influence whose importance is not measured by the magnitude of its banking operations. This influence, it must be added, is due only indirectly and in a small degree to any connection between the Bank and the government. The fact that the Bank is the depository of the public moneys and performs for a consideration some other public functions, does not give it in any special way the protection or support of the government, nor place it in any way under the control or direction of any public officer. Its present position and power over the London money market is a development from a long train of causes which have finally imposed upon the Bank some of the responsibilities of a public institution. It is only by degrees and reluctantly that its management have been led to recognize the fact that the Bank is under obligations essentially different in kind and in range from those resting upon any of its neighbors.

1 In May, 1890, there were 104 joint-stock banks in England and Wales, with nearly two thousand branches. In May, 1917, there were only 35 joint-stock banks, but with more than six thousand branches. For English banking statistics generally, see the Banking Supplement published by the Economist in May and October.

2 The location of its branches has undergone some changes.

Perhaps the most striking illustration of an extra legal obligation recognized and acted upon by the Bank is the action taken by it in the emergency created by the suspension of the great firm of Baring Brothers & Co. in November, 1890. The Bank then undertook, with great judgment and energy, to save the public from a possibly disastrous panic. To do this, it not only strengthened its reserve by borrowing £3,000,000 from the Bank of France and £1,600,000 from the Russian government, but it undertook, with the aid of other banks and bankers, to guarantee the payment at maturity of all obligations of the failing house, and to look for repayment to the gradual collection of its assets. To this guarantee the Bank was the largest subscriber, the directors agreeing to risk £1,000,000 in the liquidation of an indebtedness of £21,000,000, and the marketing of a corresponding mass of assets, a considerable part of which were supposed to be of uncertain value.1 It is true that this risk, assumed by the Bank in order to quiet public apprehension, was to be weighed against the loss which might fall upon it if a general panic were to break out and run its course of ruin. Still, it was the general opinion at the time that the directors deliberately set at risk a substantial part of the property of their stockholders in a manner required neither by any legal obligation nor by a calculation of probable advantage, and their right to deal in this manner with the interests entrusted to their care was questioned by some writers. By a natural although illogical process, the success of the operation disarmed criticism,2 objection died away, and thus a precedent was established which in any future case of the same kind the Bank would find it hard to set aside.

The Bank is governed by twenty-four direc-tors, who, by long established custom, must not be bankers, and by a governor and deputy gov-ernor. The directors are elected annually, and by usage a part of the board is changed every year; but the changes take place among the younger members, so that after some years of possibly intermittent service, the director's tenure of his position is practically for life. After many years he usually becomes deputy governor for two years in due rotation, and then governor for the like term, after which and for the remainder of his official life he is a member of an executive council of directors known as the committee of treasury. The director enters upon office, therefore, at an early age, and reaches the positions of most active responsibility only after a long training in the Bank itself. Such an organization would hardly be proposed if the case were new, but it is, no doubt, well fitted, to preserve the traditions of policy and of management which secure the Bank from rapid change.1

1 Two or three of the large joint-stock banks subscribed £750,-000 each. The total guarantee was £17,250,000.

2 The liquidation was finally closed in January, 1895, with a balance of more than half a million pounds in securities to be returned to the firm.

1 On the government of the Bank, see Bagehot, Lombard Street, ch. viii.