The Imperial Bank of Germany; commonly called the Reichsbank. The King of Prussia in 1765 founded a State institution entitled The Royal Bank, which continued until 1846, when it underwent a change and became a bank of issue. On the 31st of December, 1875, it was succeeded by the Imperial Bank of Germany. This institution, like the Bank of France, is under governmental control, but its ownership is represented by shares in the hands of individuals. It is situated in Berlin, where it carries on a very large business, but also has branches forming a net work throughout Germany. It receives, holds, and disburses the government funds, discounts bills, both inland and foreign, which is a very large proportion of its business, receives deposits and issues circulation, but is compelled by law to retain in its vaults cash to the amount of one-third of its notes outstanding, which cash must consist of legal tender notes of the Empire, gold bars, or foreign coins of a prescribed weight and fineness. The remainder must be represented by discounted bills. Its notes are not legal tender, but must be paid in gold upon presentation at any of its branches. They have no prior claim upon the bank's assets, but are simply part of the general liabilities. There are three limitations placed upon the note issue; first, no more than 472,829,000 marks,2 which is called its " Kontingent," can be issued in excess of what is covered by the cash reserve; second, a 5% per annum tax on any excess above this limit; and, third, the one-third cash holding already mentioned.
1 Law of February 11, 1906.
2 This sum is subject to further increase, for as a smaller bank of issue in Germany goes out of business its " Kontingent " passes to the Reichsbank, and so increases the latter's limit by whatever the limit was of the bank giving up.
The rate of discount has been raised to 7% but once in thirty years - December 19, 1899, to January 11, 1900 - and has never exceeded that figure.1