1 Lords' Report, p. 266. 2 Ibid. p. 235.
"When the banks reduced their interest some time ago, a great part of the deposits was drawn out, to be invested in various different ways. And as the depositors did not get from the bants the interest on which they were depending, and did not choose to take a less interest, many of them went into schemes, which have turned out very ruinous to them. It has been one great cause of over-speculation, that the people did not get the interest they had been accustomed to from the banks. They, therefore, drew it out to invest it in joint-stock companies, lent it to builders, or other inferior securities, or became builders themselves." l
4. The system of deposits is advantageous to the banks - by inducing every person to deposit his money in a bank - by furnishing the banks with capital to carry on their business-and by putting in circulation a large amount of their notes.
"The universal practice at Glasgow is, to pay into the bank with which the individual transacts his business, the whole of the notes he has in his possession, or nearly the whole, every day." 2
"Unquestionably, the giving of interest upon deposits is an inducement to every person that has any surplus money in his hands, to place it in the hands of his banker. And in the same way in the case of cash accounts, every payment by the holder of a cash account into the bank, either diminishes the interest he has to pay to the bank, or if the account should turn in his favour, enables him to get interest from the bank, and that is a great inducement for every person to pay in daily into his banker's hands all the money which he does not require for the purposes of his business." 1
1 Lords' Report, p. 250.
' Commons' Report, p. 50.
"The means of a bank I conceive to consist of three things-first, capital paid in its own stock-secondly, the notes which the bank is able to keep afloat in the circle-thirdly, the amount of the deposits." 2
"And if the amount of deposits were lessened, in that case their means of issuing money upon discount would be proportionably lessened?-Yes." 3
" Every bank constituted as the banks of Scotland are, makes advances in two ways.-They make them upon cash credits, and they make them upon the discount of bills. They also borrow in two ways.-They borrow upon deposit receipts, and they borrow also upon accounts current. That is, if a gentleman opens an account, and puts =£100 to his credit, and operates upon it, drawing out a part of it, leaving a balance in the hands of the bank, then there is a borrowing to the extent of the balance that is so left. Those accounts we do not allow to be overdrawn, so that the advance is in two ways, and the borrowing in two ways -that is, in two different forms." 4
"In the case of small depositors, a considerable part of the profit arising from the deposit of that money is the circulation of the notes. When a depositor withdraws his money from the bank he receives it in the notes of the bank, and, of course, they go into circulation. As long as they remain out they are a source of profit." 5
"The banks issue their notes two ways; they make advances upon cash accounts, and they make advances upon discounts. They also issue their notes in payments upon accounts current, and also in the repayment of deposit receipts." 1
1 Commons' Report, p. 201. 3 Commons' Report, p. 150. 5 Ibid. p. 45.
2 Lords' Report, p. 195. 4 Commons' Report, p. 180.
"The deposit and cash accounts are the instruments for supporting our circulation, and without the continued operations upon the deposits and cash accounts our circulation cannot be maintained." 2
Rules to be observed at the Exchanges of Notes and General Settlements of Balances between the Banks in Edinburgh. I. There shall he exchanges of notes, and general settlements of these exchanges, and of the Clearing-House, as follows :-
Exchange of Notes.
General Settlement of Exchanges and Clearing.
Daily, except Monday, at 10
Monday at 2
The Notes of Thursday and Friday, and the large Notes of Saturday; also the Glasgow and Country Exchanges of Saturday.
Friday, Saturday, and Monday.
Also on Saturday, at 1.30 p.m., for large Notes only.
Thursday at 2
The Small Notes of Saturday, the Notes of Monday, Tuesday, and Wednesday; also the Country Exchanges of Wednesday, and the Glasgow and Leith Settlements of Thursday morning.
Tuesday, Wednesday, and Thursday.
1 Lords' Report, p. 236. 2 Lords' Report, p. 135.
The general settlements shall be made by the clearing clerks.
II. When Monday is a holiday, the general settlement shall be made on Tuesday, but there shall be no exchange of notes on that day; when Thursday is a holiday, the general settlement shall be made on Friday; when Saturday is a holiday, there shall be an exchange on Friday afternoon.
When the Term Day falls on a Saturday, the exchange shall meet in the afternoon, at such hour as may be agreed upon.
III. The clerks shall be in attendance punctually at the hours stated, fifteen minutes after which the doors are to be closed, and the notes in the hands of the banks not represented excluded until next exchange. Such banks shall, however, retire, in accordance with Rule VII., the notes brought into the exchange against them by other banks.
IV. Each bank shall be represented by at least two clerks. On arriving at the Exchange Room, one of the clerks shall deliver the notes, and the other clerk shall remain in the box to receive the notes from the other banks. Unless there is a clerk to receive them, on no account shall any notes be passed through the wickets. No one shall enter the box of another bank,-the door must be kept locked.
V. The clerks from each bank shall all remain in the Exchange Room until the whole of the notes received by them have been counted, and at least one clerk from each bank shall remain until the whole of the notes delivered by that bank have been counted. The notes received from any one bank shall not be mixed with those received from the other banks, until they have been found to agree with the specification received along with them. In case of a dispute arising on any occasion as to the amount contained in any parcel of notes, received or delivered by a bank which has infringed the rules in this clause, such bank shall, in the absence of conclusive evidence in its favour, be held to be in the wrong.
To prevent any undue delay in counting the notes, each of the banks shall provide a competent staff for that purpose, to the satisfaction of the settling bank of the day.
VI. The settlements shall be undertaken each alternate month by the Bank of Scotland, and by the Royal Bank of Scotland; but neither bank shall be held to incur any responsibility in respect of these transactions.
On Monday and Thursday, the balances shall be included in the general settlement of the exchange and clearing. On Tuesday, Wednesday, Friday, and Saturday morning, unless when a general settlement falls on any of these days, the exchange balances shall be combined with the general balance of the clearing of the same day. On Saturday afternoon the settling bank shall grant and receive vouchers for the balances, which shall be carried into the next day's clearing, and shall bear interest at the fixed rate of 2 per cent.
VII. When the balances of the general settlement have been struck, the settling clerk of the day shall at once enter the particulars in a record provided for that purpose, and the banks who are debtors in the settlement shall, on the same day before the close of business, send to the banks who are creditors, letters intimating that in four days thereafter the respective amounts due will be transferred to their credit in London. The debtor banks shall, on the settling day, pay in cash to the respective banks to whom such letters are addressed, four days' interest on the amounts, at the rate of 3 per cent. per annum.
VIII. In the event of the amount of any transfer by advice not being duly paid in London, without prompt and satisfactory explanation of the cause, the bank issuing such intimation of transfer shall be immediately excluded from the Exchange Room and Clearing-House.
IX. When exchanges are established in provincial towns, the exchangeable notes received at the agencies must be exchanged there; and must, under no pretext, be forwarded to meet the exchanges in Edinburgh, or at the other agencies.
X. It is further understood and agreed, in consideration of the circulation of each bank (other than what may be issued against gold and silver coin) being fixed and limited by the Act 8 and 9 Vict., cap. 38, that the banks shall bring to the Exchange Room regularly, at their head offices and agencies, all the exchangeable notes which they receive; and that under no circumstances shall any of the subscribing banks issue the notes of another bank of issue in Scotland, without permission first asked and obtained.
XL The vouchers of the Glasgow exchanges shall be conveyed by railway guard; and the letters containing the vouchers shall be delivered by the guard to the Clearing-House messenger, to be delivered by him personally at the banks to which they are addressed in Edinburgh.
XII. The record of the general settlements shall be open for the inspection of any of the subscribing banks, at such times as may be convenient.
XIII. Any of the parties to this agreement shall be entitled to withdraw from it on giving three months' notice.
For the Bank of Scotland, James A. "Wenley, Treasurer.
For the Royal Bank of Scotland, J. S. Fleming, Cashier.
For the British Linen Company, James Syme, Manager.
For the Commercial Bank of Scotland, A. K. Mackenzie, Manager.
For the National Bank of Scotland, W. J. Duncan, Manager.
For the Union Bank of Scotland, Charles Gairdner, General Manager.
For the Clydesdale Banking Company, George Readman, General Manager.
Edinburgh, March, 1880.