"With regard to the Treasury's objection to legislation by private bill, the banks submitted that no other course was left open to them, as it was impossible for them,'as banking corporations, to come under the Companies' Acts; and they submitted the opinion of several eminent counsel, that in no other way than by private bill could they attain the objects they had in view.
Following upon this correspondence the banks had an interview with the Treasury, with the view of giving further explanations, and endeavouring to meet their wishes with respect to the note issues. At that interview the banks offered to secure the note issues in a more absolute form than by the mere unlimited liability of the shareholders-they offered to secure them by a special appropriation of government securities" to the amount of their present authorized circulation, and of coin to the extent of the remainder of the circulation in the hands of the public. But this advance on the part of the banks did not meet with the cordial response from the Treasury which the former might reasonably have expected, considering the terms of the first minute, wherein their lordships expressed their readiness to consider any proposals by means of which the banks might be able to meet their wishes with regard to security for the note issues.
"With reference to this interview, and in reply to the letter of the banks, the Treasury issued another minute, dated the 4th of June. In this minute they addressed their arguments chiefly to the two main points of difference between themselves and the banks, viz., the questions of issue and title. With regard to the title, they simply affirmed that they could see no reason why a bill conferring new powers should not require a limited bank adopting those powers to conform to the general banking law of the United Kingdom, and announce its status to the public beyond the possibility of misapprehension, by adopting the title of "limited."
Respecting the question of issue, the government admitted the difficulty under which the banks would labour if they endeavoured to impose unlimited liability for notes on present shareholders; but they announced in definite terms their determination to grant no new privilege which would hinder or delay the gradual absorption of private issues, with the view of these being ultimately replaced by a State issue.
Accordingly the government declined the offer of the banks to secure their issues by the deposit of government securities and coin, ostensibly on the ground that it would introduce into private legislation a principle of banking which was new, and which had not received the sanction of Her Majesty's Government.
On the other hand, the Treasury offered to the banks a lease of their right of issue for a number of years certain, subject to the payment of a moderate royalty. This offer was based on the principle of a measure dealing with English banks of issue introduced before parliament by the government of Lord Palmerston in 1865, but never passed into law.
As an alternative offer, the Treasury proposed to the banks that the latter should join the government in considering the terms upon which a State issue of notes, conducted through the agency of all the banks, and maintain-ing the specialty of the one-pound circulation, might be introduced into Scotland in lieu of the present note circulation of the banks.
In their reply to this minute the three banks maintained the accuracy and justice of their view of the unreasonableness of being required to adopt the affix of "limited," which, they contended, would be in their case a meaning-less and inappropriate title, and would put them out of harmony with the designations of the only other two banks similarly constituted in the kingdom.
The question, however, of the note issues was that to which the banks chiefly addressed themselves.
It seemed as if the government had made a complete change of front. In their first minute their chief care was to protect the public, by imposing on the banks, as the price of the powers they sought, unlimited liability for the notes. The banks offered a more absolute security than this, viz.. government securities and coin specially earmarked. Then the Treasury said they could not accept this as a settlement of the question, as they were determined to adhere to the policy of successive governments ever since 1844, to grant no new privilege which would hinder or delay the gradual absorption of private issues.
With reference to this the banks pointed out in their reply to the Treasury that the policy which they professed to follow had been very frequently departed from. Government had very lately granted enlarged powers, capital and otherwise, to the Bank of Scotland and the Royal Bank; had conceded the important privileges, already referred to, to the chartered colonial banks in 1880; and had by the very Act of 1879 granted to every unlimited bank the privilege of limiting their liability-none of which powers or privileges were ever intended to hasten, but, on the contrary, were calculated to delay, the absorption of private issues.
The banks further pointed out that the suggestions offered by the Treasury made it plain that what they desired was the absolute surrender by the banks of their rights of issue, and not the protection of the public, for the Treasury were willing to grant a lease of the rights of issue without any security whatever.
The offer of a lease of the rights of issue was naturally rejected by the banks, who pointed out that those rights were already theirs, and had been exercised under express grants from the Crown or Parliament for from 135 years in the case of the youngest, to 186 in the case of the oldest of the three.
With regard to the Treasury suggestion of a State issue, the banks replied that in their opinion, that would not be acceptable to the people of Scotland, inasmuch as the suppression of the present issues would be more detrimental to the public than to the banks, and would involve the closing of many of the branch banks now existing, and lead to a serious diminution of banking facilities.