The different classes of bills with which banking is so intimately associated are varied in character.

We have noticed that a great proportion of trade transactions are effected through the medium of credit documents. Goods are purchased and paid for by means of bills drawn at various dates, either by a transfer of a debt due from one person to another, or by a promise to pay at a later date. If a banker looks carefully through the bills passing through his hands, he soon discovers that they represent various transactions.

The first division would be inland and foreign, the former representing the home trade, and drawn in this country, the latter representing the foreign trade, and therefore drawn abroad, but as a rule payable here.

Mr. Newmarch in 1851 classified the inland bills into three divisions, viz.: (1) Bills up to £50 of an average amount of £23 8s., with an usance of 2-8 months; (2) bills up to £300 of an average amount of £142 7s., with an usance of 3-5 months; (3) bills above £300, with an usance of 4 months and an average amount of £1206 3s. The third class would be bills drawn between merchants, producers and manufacturers and wholesale dealers and large consumers of raw material, or, speaking generally, between merchants and dealers. The second class would be bills drawn between houses of less extent of business and wielding a less powerful capital, and also between large wholesale houses, and in general terms between dealers and retailers. The first class would be bills which belong to the retail trade, and may be described with considerable propriety as drawn between retailers and consumers.

The number of bills drawn on London from foreign countries is very large, and they are the means of discharging international indebtedness. Again, London has become the financial centre of the World, and therefore debts are discharged by means of bills drawn on London.

The foreign bills are for large amounts and are principally in the hands of the bill brokers. These bills to a great extent represent the proceeds of foreign loans, and also payments for interest on money raised in this country. The enormous transactions in foreign bills are an additional element in banking business which may exercise a very great influence at any time.

When we consider the magnitude of these financial operations effected by means of credit documents which find their way into the banks, we are astounded at the wonderful system of finance by which all payments are punctually met.

There has been a large increase in the amount of bills in circulation during the present century. Various estimates have been given; the first was by Mr. Leatham, and afterwards by Mr. Newmarch and others :-

There would be some difficulty in estimating the amount now in circulation, because the Government returns include stamps for bills, postage and other purposes. It is to be regretted that some of the banks do not separate in their balance sheets the amount of bills held in proportion to other advances.

Mr. John Dun estimated some years ago the amount of bills held by the banks from the returns of those which separated bills from other advances, as follows: -

According to a recent statement in the Economist, there has been a great decrease in the amount of bills in comparison with advances.

Banks Of United Kingdom

The following estimate of bills discounted by the banks was given by Mr. Dun: -

In a recent address by a vice-president of the Institute of Bankers (Mr. Birch) it was stated that, from published reports, the bills discounted by the banks are now less than they were nine years ago. He says: "From the published reports it would appear that certain banks (excluding the Bank of England), with 100 millions more of deposits, paid-up capital and reserves than they had nine years ago, have increased their discounts by only £8,000,000, and that the proportion of discounts to the total assets which in 1880 was 26 per cent. has now fallen to 21 1/2 per cent. The amount of bills taken off the London market by discount daily was estimated by Mr. Palgrave to be £3,000,000.

The number of bills passing through the banks is so great that it has been found necessary in all the large banking institutions to have a separate department, where all matters appertaining to such credit documents are effected.

In a London bank, the bill transactions would represent a medium by which the trade of this country is carried on. Bills discounted are perhaps the most important of credit documents held as security for money lent. These documents would be closely examined in order to ascertain whether they have been properly executed, The banker would also make inquiries as to the standing and position of the various parties, and keep a record of the information so obtained.

Another class of bills are those left for collection and designated "short," because of their having only a few days to run.

Again, bills sent up for collection by the county banks would form another division, and are presented for acceptance if requisite.

Then we have bills drawn by the country bank on its London agent and which require acceptance. The London banker also receives foreign bills for sale in the market at the exchange of the day.

Another class would be those drawn abroad by foreign correspondents on their London agents. These bills are known as acceptances in the market, and are of so much importance in modern banking that it will be necessary to show how they differ from ordinary trade bills. Some of the bills drawn abroad by foreign correspondents are utilised for the purpose of profiting by the variation in the exchanges upon England. Again a large number of bills payable in the country are also left with the bankers for collection.

The London banks are so intimately connected with the bill brokers that the former have always a large number of bills left by the latter as security against money lent at call.

The bill brokers now take bills payable in the country, if first class, and such bills have to be collected at maturity. All the various transactions connected with these documents require time and attention. The banks ascertain whether they are drawn upon proper stamps, and whether the acceptances and endorsements are in order; the due date of each bill is also marked upon it. It is very important that they should be presented for payment at maturity, and if not paid it is necessary either to note or protest for non-payment.

Another class would be those conditionally accepted, that is, to be paid on production of bills of lading and shipping documents. We have therefore bills representing transactions all over the world being negotiated daily in every banking institution. The comparatively small number unpaid shows us how important these documents are as security to banks for money lent, and also as a medium for the payment of debts.