The charter of 1857 also authorized the issue of notes as small as fifty francs, and the government was empowered after 1867 to require the opening of a branch in every department. The Bank was reluctant, but before 1869 sixty-five branches had been authorized. The republican government in 1873 again applied the spur, and in 1880 all the required branches had been authorized, although a few were not brought into operation until as late as 1882. Since that time the number of communities directly served by the Bank has been further increased, in part upon the initiative of the Bank, but in some measure in response to requirements imposed when its charter was revised in 1897 and again in 1911.

In 1914 there were 142 branches and a great number of auxiliary offices, making in all 583 "places bancables."

Although branches of the Bank of France do not perform all the functions of the ordinary bank, the insistent pressure for the extension of its facilities affords striking evidence of the slow development in France of adequate banking facilities. In addition to the necessity resting upon it as a central bank to keep itself in a highly liquid condition, the Bank of France is subject to a special statutory restriction which narrows the field of its operations. The Bank may discount only paper bearing three signatures, unless accompanied by a limited range of securities or by warehouse receipts which may be taken in lieu of one signature. The practical effect of this restriction is to limit the business of the Bank almost entirely to rediscounts for other banks and bankereexcept in localities in whicffsuch lending agencies are lacking or insufficient. In England and in the United States, countries in which banking facilities are widely diffused, little or no business except from banks would be secured by a central bank which required three signatures. In France a considerable part of the business at the smaller branches comes from individual borrowers.

The slow development of adequate banking agencies in France is to be attributed to a variety of causes. The monopoly of note issue has worked powerfully against the spread of banking facilities among a people which has manifested a strong preference for coin and notes as a medium of payment. Aside from the Bank of France and the short-lived provincial banks of issue, the business of banking until after 1848 was conducted entirely by private banking firms working with their own capital and the funds left with them more or less permanently by a limited circle of depositors. Some of these firms were financially powerful, but many were weak and failures were numerous, especially in 1830 and in 1848, the years of revolutionary changes in government.

178 The French Banking System deposit were established during the period of rapid economic advance which marked the early-years of the regime of the third Napoleon. The number of deposit banks in France has, however, at no time been large, and since the last decade of the nineteenth century four large credit institutions operating numerous branches have virtually monopolized the entire field. The considerable though declining number of private banking firms find it increasingly difficult to hold their own in competition with the credit banks. These institutions compete vigorously with each other, but only within the narrow limits which are largely determined for them by the magnitude of their operations and the wide geographical diffusion of their branches. Little initiative can be allowed the managers of the branches, who are subject to rigid rules and constant supervision from the head office. Loans based on confidence in the character and ability of the borrower the branch manager cannot be permitted to grant since he is commonly a stranger only temporarily in the locality. Small regional banks operating a few branches could make such loans with less danger of frequent losses, but banks of this kind have not been able to live in competition with the great Paris banks which absorb the bulk of the loans of the highest quality throughout the entire country.

With the opening of the Franco-German war in July, 1870, the Bank of France entered upon the most remarkable period of its existence, that in which its vicissitudes were most startling and critical, its services to the country most distinguished, and the success of its management most brilliant. Three weeks before the breaking out of hostilities the Bank of France had in its vaults a reserve of cash almost equal to its notes, and amounting to nearly two thirds of all its cash liabilities.1 The approach of war caused a heavy pressure upon the Bank for loans, and both notes and specie were drawn from it in large amounts, and began to find their way either into private hoards or into foreign hands. Neither the government nor the public could see with patience this dispersion of a stock of specie which, it was felt, might be an important resource in the desperate struggle with Germany, and suspension of payment as a precautionary step thus became probable early in August. Shortly afterward the government resolved upon the adoption of a measure sus pending the collection of commercial obligations, and this made the suspension of the Bank a necessity. On the 12th of August, then, four weeks from the beginning of the war, a law was passed, as a government measure, and with but one dissenting vote in each house, authorizing the Bank to refuse payment of its notes in specie, and for the second time in its history making its notes a legal tender for debts public and private. The issue was at the same time limited to 1,800,000,000 francs, and authority was given for the emission of notes as small as 25 francs each. On the next day, August 13th, was passed the first of the measures establishing a moratorium which postponed all commercial debts for one month, and then, by successive extensions of time, until July, 1871, without other burden to the debtor than liability for interest until the final payment.1 And finally, on the 14th of August, the limit of issues by the Bank was raised to 2,400,000,000 francs, on the ground that for the Bank to continue its discounts it must have a wider margin than was allowed by the law of the 12th. This completed the series of measures under the authority of which the Bank was administered during the war.