The great volume and diversity of bills of exchange coming into the London market constantly has given rise to a special class of dealers in bills, known as discount houses. They act as a kind of intermediary between the drawers of the bills and the bankers, who are the ultimate buyers, holding them as investments until maturity. Some of these firms do a brokerage business only, selling bills on the best terms they can get and charging a commission for the service, but the large houses keep a floating supply of bills for sale to the banks. These discount houses are large borrowers from the banks on call or short notice, and their operations have considerable influence upon the London money market and the movement of gold.
The strong features of the English banking system are: first, the banks of the country have a centralized reserve controlled by one great institution, the Bank of England; second, the banks are almost entirely free from legal restrictions and regulations, and consequently are able under wise management to develop the banking and credit business in accordance with business needs. The system is weak in that it fails to provide adequate publicity. The statements of English banks are very unsatisfactory; they do not distinguish between deposit accounts and current accounts, or between loans on collateral where money goes largely into permanent investments and loans on discounted bills to finance the current needs of trade and industry. It has often been noted, also that the Bank of England, which is responsible for the protection of the gold reserve of the entire kingdom, carries a reserve (an average of about $150,000,000) entirely too small to insure safety and stability in times of financial stress.