Between 1877 and 1889, banks were opened in 461 places where previously no bank existed. These great facilities for banking have been of much value to the community.

However, we must consider whether the present banking system is advantageous to all classes of society. The tendency of modern banking is one of amalgamation. New banks are not being formed for the purpose of providing additional facilities, which from time to time are necessary on account of growth of population and increased commerce. No doubt the public may benefit by these bank amalgamations in one way, viz., by reducing the cost for banking accommodation. The working expenses of two banks which amalgamate ought to be less, especially if competition had previously existed between them.

On the other hand, it is not desirable to establish a monopoly of banking. We know that in Scotland it would be impossible for a new bank to start with any prospect of success. The branch system has been so extended in that country, combined with a monopoly of note issue, the sine qua non of Scotch banking, that it would prevent a new institution from making a profit. It is possible that if the £90,000,000 of capital deposited in the Scotch banks were divided amongst twenty banks instead of ten, it would not be necessary for those institutions to compete with the London banks.

A system of monopoly might be the means of increasing the charges for banking facilities. It is, therefore, desirable to consider whether a monopoly of banking is being created in this country.

We think that the branch system is not desirable in one way, and that is the continual reference to the head office on all business of importance in connection with the branch. We believe that in some banks no loans above a certain amount are allowed unless sanctioned by the head office. This not only means delay but it also makes the board of directors practically responsible for the business of every branch.

Again, it is not possible that directors can judge accurately upon a written report what is the real position of their customers. A bond fide applicant may not be able to get the accommodation he requires. We know that capital may be lent in some cases to persons without any risk, in fact without security, if a thorough knowledge of such persons is obtainable. A board of directors cannot possibly judge the personal character of customers who are unknown to them.

A bank may be transacting business in 150 different places where a diversity of trades and manufactures exists. It is questionable whether the wants of a local community are best satisfied by the branch system.

A recent writer in the Economist stated that the centralisation of control means the stifling of individual intelligence and energy, coupled with failure to gauge the needs of local commerce. It also meant the starving of enterprise in the provinces, because the capital of each district was sent to London for investment. No doubt the local wants of a community are best satisfied by a local bank, because if some new undertaking is required a local bank would be more inclined to assist than a board of directors in London. Of course a branch manager may be able to state accurately the requirements of the district to the board of directors, and thus satisfy the wants of the community. We think that a local bank with few branches, say for every county of England or spread over certain defined areas, would be the best system.

If a bank with a large number of branches tailed, the distress occasioned by the failure would be felt over a larger area than if confined to one district. There is, of course, less possibility of capital lying idle in the case of a bank with branches over a large area, because, if not required for one district, it may be utilised in another. Banking, however, is now so much centralised in London that the metropolis has become the great distributer of capital. What we really want in banking is economy combined with efficiency. Our system must not only supply the wants of the community, but it must be perfectly sound. No breath of suspicion should ever reach any of our banking institutions. Every one admires and has an unlimited faith in the Bank of England, because it has always studied strength rather than dividends. It might have had branches throughout this country, but did not care to extend its responsibility, whilst it holds, as it were, the key of our banking system. We presume the Bank recognises that each branch established means in a sense additional responsibility, and also another outlet for specie payments.

We have already shown that the establishment of branches has not been, with few exceptions, the means of increased dividends. Some think that the high dividends paid by the banks should be the means of the public obtaining cheaper or better banking facilities.

On the other hand, it might be argued that facilities for banking are too cheap, because the banks of this country have at the present moment £39,000,000 of reserve on which no dividend is paid.

Possibly competition and the tendency for the rate of interest to decline have been the causes of stationary dividends. The profits made by banks on their total resources seem small. For example, the purely London banks only earn 10s. l0d. per cent. on their total resources, but banks with country branches, where a higher rate is charged for loans, etc., earn from 15s. to 19s. 8d. per cent. Competition between banks is not desirable if it tends to speculation in order to maintain dividend, but, on the other hand, we do not want a monopoly of banking.

The remarks of Mr. Martin in the Economic Journal on "The Evolution of our Banking System" are well worthy of consideration. He says: "The provincial banks under the old system have done good service to the trade of this country. Intimately connected with the needs of their district, the position and character of their customers, they have fostered and developed local trade, agriculture and industries in a manner that might be impossible under new conditions. It has been made a complaint from Scotland that the resources of the country have, since the Scotch banks opened branches in London, been diverted from their legitimate use to the metropolis, and that heavy discount rates are charged locally, while the money is being employed at lower rates in the London money market. The same complaint has here and there been made in England, and it seems desirable that any change in the conditions of banking in this respect should take place gradually, rather than by any sudden movement that might entail some dislocation of local trade and industry."