Up till 1854 admission to the Clearing-House was jealously restricted by the private bankers, but in that year the joint-stock banks were admitted, and the Bank of sessors of it in any advantageous position in competition with their very powerful London neighbours. The application of the joint-stock bank with the country branches alluded to, was refused on the ground that its business was at the time too unimportant to justify its admission; but surely this could not have been the only objection, as the bank in question had capital and deposits considerably larger than the joint capital and deposits of two banks admitted at the time of its rejection.
If the exclusiveness shown by the clearing bankers really springs, as seems probable, from a jealousy of any encroachment upon the banking business of London now in their hands, it seems a pity that so powerful a body, who have nothing to fear from any amount of competition, should place themselves in such antagonism to institutions which have come to London in no aggressive spirit, but have had the necessity imposed upon them by the requirements of their customers, very many of whom have London houses.
The chief objects of the Clearing-House are avowedly to facilitate the exchanges between bankers, to economize capital, to minimize risk, and thereby afford greater facilities to the public; but these objects cannot be fully attained if large banking companies are to be arbitrarily excluded, and forced to collect their cheques and bills upon clearing bankers second-hand through the Bank of England; and still less can they be attained so long as the clearing banks persist in collecting the cheques, etc, held by them, in the old cumbrous way.
But apart altogether from these considerations, it might be thought that the committee, in the interest of the body they represent, if not in the public interest, would be glad to admit all respectable banks doing a London business. To persist in excluding them is to force upon them the consideration of the expediency of adopting tactics which have proved effectual in procuring the admission of more than one of the present members of the clearing. Were the non-clearing banks to take up a hostile attitude and present all their "charges" upon the clearing bankers over the counter (instead of as at present through the clearing by the medium of the Bank of England or some other clearing bank), and demand cash in payment, it is not difficult to imagine the inconvenience and loss which all the clearing bankers, especially the smaller private ones, would suffer. The effect, it is plain, would be, that the
England al>out ten years later. The Bank of England, however, clear only on one side; that is to say, they clear only their charges against the other banks, through the clearing banks would be obliged to keep two or three millions of additional, unemployed, unremunerative money in their tills wherewith to pay these charges. And not only would this be a serious direct loss to the banks, but it would also, pro tanto, lessen their power of accommodating their customers, and hence be a direct inconvenience to the public. The direct loss, of course, would not be measured by the amount that the excluded banks might be able to pass through the out-clearing, but by the amount which the customers of the clearing banks might possibly draw during the day, and for which provision in cash would require to be made. And the more numerous the customers and the more important the accounts, the more extensive the provision would necessarily require to be. Again, were the non-clearing banks to have recourse to the action referred to, the clearing banks would be daily placed on the horns of a dilemma. If acceptances in the hands of the former, payable at the banks of the latter, instead of being sent through the Clearing-House as at present (thus giving the acceptors the entire day to provide for them) were to be presented over the counter, the clearing bankers would in very numerous cases be obliged to pay them, when there were insufficient funds to meet them, and so run the risk of loss; or be obliged to return them, and so injure the credit of their customers.
It may be said that the clearing banks could act against the non-clearing banks in the same way. As a matter of fact the former do so to the extent of presenting every article over the counters of the latter at the present time; and the only additional inconvenience they could impose would be to demand cash in payment, instead of transfer cheques. But this inconvenience would be almost nominal, from the circumstance that, comparatively, the London accounts of the non-clearing banks are few in number. The great bulk of the "charges" of the clearing banks against the non-clearing banks consists of drafts drawn by the very numerous branches of the latter, and of the acceptances of their country customers. But as these drafts and acceptances are regularly advised by the branches, the non-clearing banks of London need not provide a single penny more than is necessary to meet them.
But, by way of looking at the question from every position, and of showing from how many points the clearing banks are open to attack, let us reverse the argument, and let us suppose that the non-clearing clearing; the other banks, as members of the clearing being obliged to keep an account with the Bank of England, pay in their charges against the bank direct to the credit of their account.
The admission of these important establishments has enlarged to an immense extent the business of the Clearing-House, which is performed with a simplicity, exactitude, and regularity as astonishing as the great development of its transactions.
The following are :banks would insist on paying the clearing banks in cash instead of by transfer cheque. This would be a very effective coercive measure in the hands of the former, for it is clear that the risks attendant on the walk-clerks of the latter, while on their rounds, carrying large amounts of cash with them about the streets, would soon press so heavily as to be intolerable. And not only would the risks be intolerable, but the inconvenience would be equally so by reason of the labour of the necessary clerical and other work in connection with the bank notes so received. And upon the Bank of England the burden would fall with concentrated severity because of the enormous extra volume of notes which, in the first place, they would have to print, and in the second place, to cancel, day by day.