BY the Act of 1844, the banking department of the Bank of England was separated from its issuing department; and was to be managed like "any other banking concern issuing Bank of England notes." Taking this view of the banking department, we propose to inquire on what principles it ought to be administered. We shall do this, however, not so much with the view of bringing forward any notions of our own, as to lay before the reader some account of those principles which the bank directors have adopted for their government. This will lead us, peradventure, to discuss some principles of practical banking to which we have not hitherto had occasion to refer. We shall then trace the operations of this department for some years subsequent to the passing of the Act of 1844.
The Bank of England is governed by a court consisting of a governor and deputy-governor, and twenty-four directors. These are selected from the mercantile classes of London, virtually, by the other directors, who form what is called the House List. They recommend certain persons to be chosen as directors, and the proprietors almost invariably follow this recommendation. The court hold their meetings every Thursday, and they then receive a report of the position of the various bank accounts up to the preceding night. They also consider all proposals for discount accounts, or for exceptional advances, and generally all such business as the governors and the committee of daily waiting may not be empowered to determine on their own responsibility.
The executive administration in the meantime is in the hands of the governor and deputy-governor, who may be advised or assisted by the committee of treasury. This committee is composed of those directors who have held the office of governor, of the existing governor and deputy-governor, and of the director who is intended to be the next deputy-governor. A director is at first an ordinary director, and attends the weekly meetings of the court. In turn he becomes for one year a member of the committee of treasury, then deputy-governor for two years, then governor for two years, and afterwards a permanent member of the committee of treasury. This committee meets once a week, and at such other times as they may be called together specially by the governor. Sometimes they discuss the measures that are to be submitted to the next meeting of the court; but the court do not now so readily as formerly adopt their recommendations. The governor and deputy-governor for the time being make all loans and advances, and sometimes raise the rate of discount without waiting for the opinion of the court. They conduct all negotiations with the Government, and, subject to the sanction of the court, have the whole administration of the affairs of the bank. Each director must hold £2,000 bank stock, the deputy-governor £3,000, and the governor £4,000. It was the rule that every director should take his turn for becoming governor; but now it is the practice to place in that office the director whom the other directors shall, by ballot, think best qualified. Several suggestions were made before the parliamentary committees for improving the composition of the court of directors. It was proposed that all the directors should not be taken from the commercial classes, but that some should be selected from the banking and manufacturing interests. It was also asked, whether a permanent governor, either for life or for a number of years, would not be preferable to the present system.
The Act for separating the two departments came into operation on the 31st of August, 1844, and the following was the first return made under the Act, showing the condition of the banking department on the 7th of September, 1844: -
Account of the Liabilities and Assets of the Bank of England, for the week ending 1th September, 1844.
Gold coin and bullion
Silver bullion .