The banking system of France resembles that of Germany in being centralized in a great institution which controls a large part of the entire business of the republic. This institution is the Bank of France. Its central office is situated in the city of Paris, and it has one or more branches in each of the departments. Since 1848 this institution has enjoyed a complete monopoly of the right to issue notes, and, owing to the comparatively slight development of deposit banking until very recent times, has on this account had the largest share of the entire banking business of the country.
The chief characteristics of this institution are due to its comparative freedom from legislative regulations pertaining to the details of its business, and to its close connection with the government. The limit to its note issues is fixed by law at 4,000,000,000 francs, and it is compelled to redeem its notes on demand, but the selection of its securities and the regulation of the cash The Chief Banking Systems of the World. 203 reserve is left to the discretion of its own officers. Its capital is also fixed by law, but the protection of depositors depends chiefly upon the management of the institution, for which also its own officers are responsible.
The relation of the bank to the government is such that it may be regarded as essentially a state institution, notwithstanding the fact that its capital is owned by private individuals, who also participate in its management. The ministry appoints its governor and two sub-governors, and the legislative department of the government is enabled to completely review its affairs on the occasions when it asks for a renewal of its charter and at other times, if it is desired. The fact that its capital is invested chiefly in public securities and that it serves as the financial agent of the government has given it a large interest in public affairs and made its good management and safety matters of great importance to the State. The manner of its foundation and the chief events of its history are, however, largely responsible for the feeling, which is general in France and widespread throughout the world, that it is in reality a state institution.
The bank was founded by the great Napoleon as a part of the financial machinery of the First Empire, and though it was not always favoured and protected during the period of the restoration, all the other French governments, whether imperial or republican, have treated it as a state institution. They have looked to it for assistance in times of financial exigency, and have aided it when disaster threatened. In 1830, 1848, and 1870 it furnished the government with much-needed funds, and in 1871 it managed the payment to Germany of the enormous indemnity imposed by the treaty which marked the close of the Franco-Prussian War. On several occasions, when the bank has been forced to the verge of bankruptcy, the government has permitted it to suspend specie payments and has invested its notes with the legal-tender power. Such proceedings have furnished ample grounds for the feeling that the State is behind the bank and will not permit it to fail.
On account of the monopoly of note issues enjoyed by the Bank of France, independent institutions, either of a joint-stock or private character, have never had a free field for development. From time to time, when it has been temporarily deprived of this monopoly, such institutions have sprung up in the financial centres, only to be absorbed or driven out of existence subsequently by the renewal of its monoply. In recent times, however, conditions have greatly changed. The use of deposits as currency has been rapidly extended, and this branch of business has been absorbed chiefly by independent institutions, the deposits of four of which at the present time greatly exceed those of the Bank of France.
In December, 1899, the outstanding circulation of the Bank of France amounted to 3,937,894,690 francs. Its deposits subject to check at that time amounted to only 512,361,646 francs, of which over five-sixths were at the central institution at Paris, and the rest at the various branches. At the same time Professor Leroy-Beaulieu estimated the accounts current of the four leading independent banks of deposit at 1,057,000,000 francs, and this added to their deposits payable on demand made, according to his estimate, an aggregate of 2,040,000,000 francs in these four institutions. The circulation of gold coin at the close of 1899 was estimated at 40,530,000,000 francs, of full legal-tender silver at 1,830,500,000 francs, and of subsidiary silver at 270,000,000 francs.