The banks wound up their letter by indicating that, in view of the attitude taken up by the government, they would not proceed further with their bills; and the correspondence was closed by a letter from the Treasury regretting that the views of the government did not accord with those held by the banks.
Whatever may be the opinions entertained respecting the result of the applications by the banks-and no doubt such opinions will naturally be largely coloured by the self-interest of those entertaining: them-it must be ad-mitted that in themselves the applications seemed perfectly legitimate and praiseworthy. "What the banks sought to do was simply to create further capital, a nominal portion of which should be called up, and the remainder held as a reserve liability in the interest of the creditors, and in harmony with the spirit of recent opinion. Many times in their previous history, each of the three banks had been authorized to increase its capital; and there seems to have been no adequate reason for refusing a similar extension on the present occasion, especially when the application was avowedly made in the interests of the public. The banks seemingly could have rested with perfect ease upon the confidence reposed in them by the public, as evidenced by the fact that since the failure of the City of Glasgow Bank, when it became generally known that the three banks were limited, however dimly the fact may have been understood before, the deposits of the three banks have increased over four millions.
And however opinions may differ as to the result of the applications by the banks, it is to be regretted, on general grounds, that the discussion on the part of the government was not conducted with more care and with less appearance of their decision having been arrived at arbitrarily, instead of under the weight of reason.
It will have been noticed that the Treasury minutes were rather contradictory of each other, and that some portions of the same minute stultified others.
In the first minute the Government professed to have the interests of the note-holders at heart, and on that ground intimated that they would refuse the applications of. the banks unless they were accompanied by unlimited liability for the notes. The banks offered a more absolute security than this-government securities and gold which offer the Treasury declined, but they made a counter offer of a lease of the right of issue for a certain number of years, unaccompanied by any protection to the public in the shape of unlimited liability, or any other kind of security, for the note issues.
The Treasury also in their first minute stated as an objection to the bills, that since the banks did not propose to assume the title of limited, it would be a departure from the uniformity of the banking regulations introduced by Sir Stafford Northcote's Act to grant them. With regard to this, the banks showed the Treasury that they had already agreed to depart from this uniformity by promising to the chartered colonial banks to continue their charters in perpetuity without requiring them to take the title of limited.
Further, the Treasury in their second minute, in rcius-ing the offer by the banks of security for the note issues, stated that it had been the policy of the Treasury since 1844 to grant no new privilege which would hinder or delay the gradual absorption of private issues. In answer to this, the banks showed that parliament had very frequently granted privileges which had precisely the opposite effect, and notably so in passing the Act of 1879.
The truth seems to be, that a considerable change came over the views of the government between the issue of the first minute and the second. And the key-note of the change seems to lie in the enunciation of the principle in the second minute, that " the right of issuing notes appertains to and should be controlled by the State." If this be so, it is perhaps not to be wondered at that the government should have embraced the opportunity of publicly raising the question of their right to the issue, and so paving the way for dealing with the matter when the opportune time should arrive.
While freely admitting the soundness of the principle, as between the government and the banks of issue, that the right of issue should belong to the State, we cannot but think it is much to be regretted that the Treasury should have so hastily declined the offer of the Scotch banks to secure their issues in the way they proposed. That course would have protected the public in the most absolute form; it would have established a precedent which it would be necessary to follow whenever opportunity offered; and it would have saved the government from the necessity at some future day of experimenting with the issues, perhaps at a cost which would render the experiment a failure; and it would, moreover, have saved to the public the banking facilities of which they shall be deprived if the issues be taken from the banks. It must not be forgotten that this is more a question for the general public than for the banks. The removal of the issues from the banks would be but a comparatively trifling circumstance to them, but it would inflict an irreparable injury on the welfare of the country.
As a pendant to the Act of 1879 it may be advisable to mention that a further Act was passed in 1880 (43 Vict. c. 19), empowering any company to return to its shareholders any accumulated profits in reduction of paid-up capital; but requiring at the same time that the unpaid capital should be increased by a similar amount. It also provided that any shareholder might, instead of taking payment in cash, require the company to hold and invest his share of the returned capital to meet any future calls. The Act also gave power to the Registrar of Joint-Stock Companies to strike the names of defunct companies off the register in certain circumstances.
It is enacted that this Act shall be construed as one with the Companies' Acts of 1862, 1867, 1877, and 1870, and that the said Acts, and this Act, may be referred to as the Companies' Acts, 1862 to 1880.