Notes In Circulation

The monthly return of the circulation ending the 12th of October 1844 (stamps and taxes, 25th October);

England.

Bank of England

£20,228,800

Private banks

4,674,162

Joint-stock banks

3,331,516


Scotland.

Chartered, private and joint-stock banks

2,987,665


Ireland.

Bank of Ireland

3,597,850

Private and joint-stock banks

2,456,261

Total

£37,276,254

In May 1907 the number and amounts were reduced to: -

Authorized Issue.

Actual Issue.

12 private banks

£482,744

£122,536

17 joint-stock banks

1,084,836

437,693

The reason why the actual circulation of these banks is so far below the authorized issue is that under existing circumstances their circulation can only extend over a very limited area. The notes of country banks are now almost unknown except in the immediate neighbourhood of the places where they are issued; though they may all be payable in London, yet there is often considerable difficulty in getting them cashed.

The average circulation in 1906 was as follows: -

Bank of England

£28,890,000

Private banks

124,000

Joint-stock banks

429,000

Total in England

£29,443,000

Scotland

7,477,000

Ireland

6,452,000

Total in United Kingdom

£43,372,000

This shows an apparent increase of more than £6,000,000 since 1844. The decrease of the country circulation in England and the increase of the Scottish and Irish circulations may be set off against each other. The increase is mainly in the notes of the Bank of England. In 1844 the number of banking offices in England and Wales was 976, while in 1906 there were more than 5880. Each of these offices must hold some till-money, and of this Bank of England notes almost always form a part. Hence it is probable that a large part of the increase in the circulation of the Bank of England since 1844 is held in the tills of the banks in England and Wales, and that the active note circulation of the United Kingdom is but little larger than it was.

It may be added that the government received from the note circulation for a typical year (ending 5th of April 1904), out of the profits of issue (Bank of England) £184,930, 2s. 2d., and also composition for the duties on the bills and notes of the banks of England and Ireland and of country bankers, £120,768, 18s. 6d.

In 1906 the banking business of England was carried on practically by about ten private and sixty joint-stock banks of which more than one was properly a private firm under a joint-stock form of organization. Though the number of individual banks had diminished, the offices had greatly increased.

The records of the numbers of banks in the United Kingdom have up to quite recent years been very imperfect. Such as exist were made by individual observers. The banks of England and Wales are believed to have been 350 in number in 1792. Those registered from 1826 to 1842 were: -

Private.

Joint-stock.

1826

554

...

1827

465

6

1833

416

35

1842

311

118

The number of banking offices in England and Wales was estimated by Mr. William Leatham in 1840 as being 697. The Banking Almanac for 1845 gives the number in 1844 for England and Wales as 336 private bank offices and 640 joint-stock offices, Scotland 368 offices, Ireland 180 offices.

The number of inhabitants to each office was as follows in 1844 and 1906: -

Number of
Banking
Offices.

Number of
Inhabitants to
Each Office.

1844.

1906.

1844.

1906.

England and Wales

976

5527

16,305

5885

Isle of Man

...

23

...

2417

Scotland

368

1180

7,120

3790

Ireland

180

777

45,417

5738

In United Kingdom

1524

7507

17,526

5530

In the latter years of the 18th century and the early years of the 19th, the note circulation was a very important part of the business, but about that date the deposits began to be, as they have continued since, far more important. It is unfortunately impossible to give any trustworthy statistics of the position of banking in the United Kingdom extending back for more than forty or fifty years. Even the Scottish banks, who have been less reticent as to their position than the English banks, did not publish their accounts generally till 1865. The figures of the total deposits and cash balances in the Irish joint-stock banks were published collectively from the year 1840 by the care of Dr Neilson Hancock, but it is only of quite recent years that any statement of the general position other than an estimate has been possible owing to the long-continued reluctance of many banks to allow any publication of their balance-sheets. A paper by W. Newmarch, printed in the Journal of the Statistical Society for 1851, supplies the earliest basis for a trustworthy estimate.

According to this the total amount of deposits, including the Bank of England, in England and Wales, Scotland and Ireland, may have been at that date from £250,000,000 to £360,000,000. The estimate in Palgrave's Notes on Banking (1872), excluding deposits in discount houses and the capitals of banks, was from £430,000,000 to £450,000,000. The corresponding amounts at the close of 1906 were, in round figures, including acceptances etc., £997,000,000. The total resources, including capitals and reserves and note circulation (in round figures £177,500,000), were for 1906: -

England and Wales -

Bank of England and other banks

£922,297,000

Scotland

135,042,000

Ireland

73,707,000

Isle of Man

898,000

£1,131,944,000

The progressive growth in bank deposits since it has been possible to keep a record of their amounts, affords some means of checking roughly the correctness of the estimates of 1851 and 1872. Broadly speaking, it may be said that the bank deposits of the United Kingdom have about doubled since 1872.

The purely city banks had associated themselves in a "Clearing Clearing. House" certainly by 1776. An entry in the books of the Grasshopper,[4] namely - "1773 to quarterly charge for use of the Clearing-room of 19/6d.," points to an earlier and perhaps less definitely organized system of settlement. A house was taken for the purpose in 1810, in which year the number of banking houses who settled their accounts with each other at the "Clearing House" was forty-six (Gilbart's History and Principles of Banking, p. 78). The Bank of England has never been a member of the Clearing House, though it "clears on one side," i.e. its claim on the clearing bankers is made through the Clearing House, but the claims of the clearing bankers on the bank are forwarded direct to Threadneedle Street twice or thrice daily. Nor did the banks in Fleet Street or at Charing Cross belong to it. In 1858 the clearing of country cheques was added through arrangements made by Lord Avebury, then Sir John Lubbock. The "country clearing" is a great assistance to business, as it enables a cheque drawn on the most distant village in England to be dealt with as conveniently as a cheque on London. Of the forty-nine banks in London in 1844, twenty-six were connected with the Clearing House. At that time only private banks were allowed to be members.