The Government pays the Bank about £172,000 per annum for undertaking the entire management of the National Debt. This debt amounts to £589,147,000, and is divided amongst about 170,000 holders.

Although no interest is allowed the deposits in recent years have increased to a large extent, showing the confidence which the public have in that institution.

Annual Average of Deposits.

1844 = 13,300,000 1850 = 17,600,000 1855 = 16,800,000 1860 = 20,100,000 1865 = 20,700,000 1872 = 29,300,000 1875 = 26,413,000 1880 = 32,950,000 1885 = 33,451,000 1890 = 33,364,000 1895 = 40,556,000

Whenever there has existed in the country a feeling of distrust against banks, leading to a withdrawal of deposits, the Bank of England has always been an exception. The deposits during such periods have invariably increased. We might consider it as a model institution for the other banks of the country.

If at any time its management has been censured, it was in consequence of its position as a bank of issue, or as a bank holding the gold reserve of the country. It cannot be said that the Bank has lent money in a reckless manner.

The public deposits vary considerably according to the requirements of the Government. It has been stated that it would be better for the Money Market if the Government account was divided amongst the various banks of the Metropolis, on the understanding that such banks should hold Government securities against the Government balances. This would have prevented large withdrawals of available capital from one institution instead of from a larger number. Every bank in this case would keep a certain reserve against the said balances.

The seven day and other bills issued have diminished considerably. In the year 1844 they were more than £1,000,000, now they only amount to £201,000. The great decrease in these bills is no doubt due to the greater facilities offered by the joint-stock banks of the country. All the branch banks issue drafts upon their London offices.

The "other deposits" stated in the weekly report include the bankers' balances, which certainly ought to be utilised by the Bank with great caution.

Mr. Hankey states that when the bankers' balances are very large, the Bank does not use the amount in excess. These balances form a part of the reserve of the bankers and the amount has increased considerably in late years. If the London bankers kept their own reserves, they would collectively keep a larger amount. At times we may expect to see fluctuations in the rate due to the Bank holding the cash reserves of other banks.

We will now consider the assets in the Banking Department.

The Government securities amount to £10,785,000; thus nearly the whole of the capital of the Bank is invested in interest-bearing securities.

The amount of the other securities has increased as follows:

1844= 9,400,000 1850 = 11,100,000 1855 = 15,300,000 1865 = 20,500,000 1870 = 18,600,000 1872 = 21,400,000 1892 = 29,777,000

These other securities include the bills discounted. If we deduct the temporary advances and the bills discounted we find that the fluctuations of the remainder have been small in late years: 1844= 5,400,000 1850= 7,200,000 1860 = 11,100,000 1870= 8,500,000 1872 = 10,600,000

The bills discounted from 1844 to 1872 have fluctuated greatly, which is due to the fact that any one properly introduced may have a discount account. This is quite a different method from that of the other London banks. However, the Bank as a discounter of bills does not occupy in the present day the same position as in former years. This is in consequence of the growth of capital leading to the formation of joint-stock banks and discount companies.

The competition between the Bank and the outer market is great. If the Bank's rate is below that of the outer market, there will be a large increase of business from outsiders. This would cause a demand, and consequently the rate of interest rises.

In consequence of competition in recent years, the Bank stated that although the published rate was the official minimum, yet under certain conditions it would discount bills at a lower rate of interest.

During commercial crises the bills discounted amount to a very large sum, because every one expects at such times it should lend money in the shape of loans and advances.

Mr. Hankey states that the Bank ought never to have encouraged this opinion, but at these periods it has been found expedient to lend freely. In the year 1825 the directors stated: "The Bank had taken a firm and deliberate resolution to make common cause with the country".

Its position during the commercial crises of 1847, 1857 and 1866 was entirely due to monopoly. If banking had been free, the risks would have been divided amongst many banking institutions, and consequently tend to minimise panics.

At the present time the joint-stock banks have larger reserves, and therefore would not be so dependent upon the Bank of England in cases of emergency.

The following table shows the average amount of bills discounted: £ 1834 = 1,800,000 1844 = 2,700,000 1855 = 6,000,000 1866 = 9,600,000 1868 = 5,000,000

1872 = 6,900,000

1873 = 7,737,000

1874 = 4,665,000

1875 = 4,402,000

The average rates of discount have decreased in recent years.

Average rate from 1844-1856 = £3 15s. 3d. per cent. „ 1857-1872 = £4 3s. per cent. „ 1890-1894 = £3 1s. 10d. per cent.

The latter half of the year always shows the highest rates. This is in consequence of more business being transacted in autumn and early spring.

The action of the Bank during commercial crises we shall consider separately. Since the year 1825 the following facilities with others have been granted to the cus-tomers of the Bank: (1) The Bank receives dividends by power of attorney for all persons having drawing accounts at the Bank.

(2) Cheques may be drawn for £5 and upwards instead of .£10 as heretofore.

(3) Cash boxes taken in, contents unknown, for such parties as keep accounts at the Bank.

(4) Bank notes are paid at the counter instead of drawing tickets for them as heretofore.

(5) Cheques on city bankers, paid in by 3 p.m., are received and passed to account the same evening.

(6) Bills of exchange payable at the Bank are paid with or without advice, heretofore with advice only.

(7) Notes of country bankers payable in London are sent out the same day for payment.

(8) Cheques are given out in books and not in sheets as heretofore.