The list of banks in the London Stock Exchange official list is to some extent made up of colonial and foreign banks, or at least of banks whose main business is conducted out of this country. I do not propose to refer to these, but only to the joint-stock banks transacting business in the United Kingdom.

The subscribed capital of the joint-stock banks in the United Kingdom, as detailed in 'The Economist' of 17th October last, amounted to £285,352,000, of which £79,541,000 was paid up. These banks held on deposit at that date the following sums:-

'The Economist' gives an estimate of the market value of the paid-up capital of the joint-stock banks, the figures for those of England and Wales being £200,010,000, or 318 per cent of the capital paid up; Scotland, £32,620,000, or 350 percent of the capital paid up; and Ireland, £22,312,000, or 306 per cent of the capital paid up. In England and Wales there are, excluding the Bank of England, twelve which have a paid-up capital of 1 million sterling and upwards, while in Scotland there are seven with a capital of 1 million and upwards, the total paid-up capital of the latter being £8,500,000. Another comparison between the banks of England and Scotland may interest you. The English banks held reserve funds amounting to £37,232,000, being 59 per cent of their paid-up capital; while the reserve of the Scottish banks aggregated £7,409,724, or 79 per cent of their paid-up capital.

I have already referred to the adoption of the limited liability principle by the Scottish banks in the case of those in which prior to 1879 the liability was unlimited. It was understood that the Bank of Scotland, the British Linen Company Bank, and the Royal Bank of Scotland, being incorporated banks, were not subject to unlimited liability. The others increased their capital to five times its original amount at the time they adopted the limited liability principle, the original amount only being paid up. Thus the Clydesdale, Commercial, National, and Union Banks, which each had a capital of 1 million sterling, increased their capital to 5 millions, of which 1 million was paid-up and 4 millions uncalled. In some cases the provision was made that a portion of the uncalled capital should be paid up if it should be thought desirable, the balance to be called up only in the event of emergency. No alteration was made at that time in the three incorporated banks. In the case of one of these - namely, the Bank of Scotland - the stock is paid up only to the extent of two-thirds, so that a holder of £1000 is liable for a further sum of £500. The only particular as to which the liability of the limited banks is unlimited is with regard to the note issues, which are a first charge with unlimited liability on the assets of the banks.

The Bank of England does not appear among the banks in the Share List, but is entered in the list of British Funds. It was established in July 1694 to advance the Government a loan of £1,200,000 at 8 per cent. For 130 to 140 years its only competitors in England were private bankers; for up till 1826 joint-stock banks were not allowed in England, and even then they were prohibited to trade within sixty-five miles of London. In 1833 the limit was removed, and joint-stock banks were allowed in London as well as in the provinces; but the Bank of England has still the sole right of issuing notes within the sixty-five mile radius. The Bank of Scotland was constituted by Act of the Scottish Parliament in 1695, - a year later than the Bank of England, - and it was followed by the Royal Bank of Scotland, which was founded by Royal Charter in 1727, and the British Linen Company Bank, which was also incorporated by Royal Charter, in 1746.

Bank shares and stock have a privilege on the Stock Exchange possessed by no other stock or shares. The seller must furnish the registered number or description of his holding when it is put up for sale. The object of this rule is to prevent speculation in bank stock. In all other classes there is nothing to prevent any one selling stock even although he has none in his possession. If you think Great Britain is likely to be involved in war with Russia, and that Consols will fall in price, you may back your opinion by getting your stockbroker to sell £100,000 Consols for you on the Stock Exchange, even although you have not a penny of the stock in your possession. Or you may think railway stocks are likely to drop, and may sell large blocks of North British or Caledonian deferred, without having either one or other. Of course you will some day have to buy in the stock you have sold, in order to deliver it to the purchaser; but you can, if the stock is large enough, delay doing so from account to account. Of course such transactions really constitute a form of gambling, and it is to protect banks from the possibility of such improper speculation that the rule is made which compels the seller to show that he actually has the bank shares he wishes to sell.

There are restrictions on the free sale and disposal of bank shares, and of shares generally that are only partly paid up. If a sale is effected on the Stock Exchange the seller has first to make an offer of the stock to the bank or company, at the same time stating the price and the name of the intending purchaser. The directors may elect to purchase for behoof of the bank or company at that price, and they have a certain number of days allowed them for accepting or declining the offer. If they decline, or do not accept, within the period the shareholder may carry through the sale to the proposed purchaser at the price stated. But he is not entitled to make such sale at a lower price until a new written offer at the lower price shall have been made to the directors, and declined or not accepted by them. The theory of this restriction on the free sale of shares, involving possible liability, is no doubt based on the fact that it is the duty of the directors to see that the shares do not pass into the hands of parties notoriously unable to meet the liability of their share of the uncalled capital, and in the case of a bank especially, the right of the directors to veto a transfer by any shareholder indebted to the bank for advances, or an obli-gant on bills or cautionary obligations, or otherwise a debtor.

It is interesting to note that bank shares have not suffered depreciation like Consols and gilt-edged securities during the last seven years. This is partly due to the circumstance that they are seldom held on borrowed money, the liability attaching to them for uncalled capital excluding them from the class of securities accepted by bankers themselves as cover for speculative advances; and partly because the conditions of trade and finance which in the period in question have unfavourably affected other first-class securities have contributed to the increased prosperity of banking institutions. Taking the principal banks in Scotland, the average dividend on their paid-up capital has increased from 12 per cent in 1896 to 15 per cent in 1903. In addition they were able out of their profits to increase their reserves from 67 per cent in 1896 to 81 per cent in 1903; and the average price of the shares has appreciated from 312 for each £100 in 1896 to 351 in 1903.

I should like to have been able to give you some advice as to bank shares as investments. The fact that a sum of £32,000,000 - if we take the amount at market value - is almost entirely held in Scotland in this form of security shows its high estimation in the public mind. The subject, however, is too complicated, and could not be satisfactorily taken up as part only of a lecture; nor could I deal with it except in a very superficial way. I would hope that some member of the Institute of Bankers may some day be induced to give you the benefit of his skilled knowledge on this most important point.