It is stated that this may be gold coin or silver thalers, or bar-gold at the rate of 1392 marks (£69, 12s. reckoning marks as 20 = £1) the pound fine of gold. In practice, however, facilities have not always been given by the Reichsbank for the payment of its obligations in gold, though the importance of this is admitted. In the balance-sheet for 1906 the bills held amounted to £67,000,000, and the loans and advances to £14,200,000. The notes issued averaged for the year £69,000,000. The gold held amounted, 30th December 1906, to £24,069,000. If the condition of business requires that the notes in circulation should exceed the limits allowed by the law, the bank is permitted to do this on the payment of 5% on the surplus. In this respect the German act differs from the English act, which allows no such automatic statutory power of overpassing the limit of issue. Some good authorities consider that this arrangement is an advantage for the German bank, and the fact that it has been made use of annually since 1895 appears to show that it is needed by the business requirements of the country.
Of late years the excess of issue of the Reichsbank has been annual and large, having been £25,267,000 on the 29th of September 1906 and £28,632,000 on the 31st of December of the same year. The amount of the duty paid on the excess issue in the year 1906 was £184,764, and the total amount paid thus from 1876 to 1906 was £839,052. The increase of the uncovered limit (untaxed limit of issue called in Germany the "note reserve") has not been sufficient to obviate the need for an excess of issue beyond the limit.
In accordance with a law passed in 1906 the Imperial Bank issues notes (Reichsbanknoten) of the value of 20 marks (£1), and 50 marks (£2, 10s.) in addition to the 5, 10, 100 and 1000 mark notes (5s., 10s., £5, £50) previously in circulation. Imperial paper currency of the value of 20 or 50 marks (£1 and £2, 10s.) had previously existed only in the form of treasury notes (Reichskassenscheine); these will in consequence be withdrawn from circulation.
The amendment of the banking law of Germany, passed in 1899, not only affects the position of the Reichsbank, but that of the four other note-issuing banks. The capital of the Reichsbank has been raised by the bill of that year to £9,000,000. The reserve fund has been raised out of surplus profits to £3,240,000. This exceeds the amount required by the act of 1899, which was £3,000,000. The amending act further diminishes the dividend receivable by the stockholders of the Reichsbank and increases the share which the government will obtain.
The arrangement with the four note-issuing banks is designed to cause them to work in harmony with the Reichsbank when the Reichsbank has to raise its bank-rate in order to protect its gold reserves. The official published rate of discount of the Reichsbank is to be binding on the private note-issuing banks after it has reached or when it reaches 4%. At other times they are not to discount at more than &FRAC14;% below the official rate of the Reichsbank, or in case the Reichsbank itself discounts at a lower rate than the official rate, at more than ⅛% below that rate. If the Reichsbank discounts below the official rate, it is to announce that fact in the Gazette.
The subject being important, we quote from the amending act the sections governing the discount rate: - Gesetz, betreffend die Abänderung des Bankgesetzes vom 14. März 1875; vom 7. Juni 1899, Artikel 7, S. 1. The private note-issuing banks are bound by Artikel 7, S. 2, after the 1st of January 1901: - "(1) Not to discount below the rate published in S. 15 of the bank law, so long as this rate attains or exceeds 4%, and (2) moreover, not to discount at more than &FRAC14;% below the Reichsbank rate, published in S. 15 of the bank law, or in case the Reichsbank itself discounts at a lower rate, not to discount at more than ⅛% below that rate."
It remains to be seen whether the note-issuing banks will find these conditions too onerous, and rather than be bound by them will give up their right of issuing notes. The object of the enactment is apparently to protect the specie reserve of the Reichsbank, but it may be doubted whether, considering the importance of the other banks of Germany - none of which is bound by similar conditions - relatively to the note-issuing banks, the restrictions put on the note-issuing banks will have any practical effect.
Since 1870 banking has made immense progress in Germany, but it may be some time before the habit of making payments by cheque instead of specie or notes becomes general.
Parliamentary Papers: Report, together with Minutes of Evidence and Accounts, from the Select Committee on the High Price of Gold Bullion, House of Commons, 8th of June 1810; Reports, Committee of Secrecy on Bank of England Charter, House of Commons, 1832; Select Committee on Banks of Issue, House of Commons, 1840; First and Second Reports, Select Committee on Banks of Issue, House of Commons, 1841; First and Second Reports, Secret Committee on Commercial Distress, House of Commons, 1848; Report, Select Committee on Bank Acts, House of Commons, 1857; Report, Select Committee on Bank Acts, House of Commons, 1858; Report, Select Committee on Banks of Issue, House of Commons, 1875; Report from Secret Committee of the House of Lords on the Causes of the Distress which has for some time prevailed among the Commercial Classes, and how far it had been affected by the Laws for regulating the Issue of Bank Notes payable on demand, session 1847-1848; Analysis of the Minutes of Evidence taken before the Select Committee of the House of Commons on Banks of Issue, 1875, with a selection from the evidence, by R. H. Inglis Palgrave, London, 1876 (printed for private circulation).