This differs absolutely from what was contemplated by Sir Robert Peel; no attempt is or can be made to cause such a paper circulation to fluctuate as if it were one of specie only. One result of the limitation of the power of note-issue to the banks in Scotland which possessed that power in 1845 has been that no important bank has been established in that country since. Notes are so largely employed in ordinary business in Scotland that a bank which does not possess the power, practically cannot carry on business and supply the needs of its customers. This limitation in the number of the banks has, however, not been accompanied by any deficiency in the supply of banking accommodation to the people. There is a larger number of banking offices in proportion to the population in Scotland than in England and Wales or Ireland.
The large number of branches must, however, be a cause of great expense, and in several other respects it is obvious that a business carried on in such thinly peopled districts as are found in many parts of Scotland, must be conducted at a disadvantage in comparison with those banks which deal with more active centres of commerce. Although the profit derived from their large issue of notes may be thought to be considerable, yet, when we consider the many expenses incurred in conducting a large note circulation, the cost of printing, stamp duty, and the charges on importing gold from London when the circulation exceeds the limit fixed by the act of 1845. no small deductions must be made from the apparent profit to be derived from this head, if there is any direct profit at all.
On the other hand, the great number of branches possessed by the Scottish banks tends beyond doubt to their stability and prosperity. The network of banks on the surface of Scotland is as important to the development of the prosperity of the country as the network of the railways. It has caused a great economy of capital, as the universal practice of people, even of the most moderate means, is to lodge their money with the banks.
The early history of banking in Ireland was marked by Irish banks. legislation even less favourable to the formation of a steady and dependable system than in England, and in 1695 several of the principal merchants in Dublin met together for the purpose of forming a public bank for Ireland on the model of the Bank of England. For many years this proposal met with no favour. It was not till 1783 that the Bank of Ireland was established and commenced its business. The first governor was David La Touche, junior, and two other members of his family were amongst the first board of directors. The bank met with very great success, but the jealousy against rival establishments was extreme. By the act forming the Bank of Ireland it was enacted that no company or society exceeding six in number, except the Bank of Ireland, should borrow or take up money on their bills or notes payable on demand. In the year 1821 the act was so far modified as to permit the establishment of banking companies exceeding six in number at a distance of 50 m. from Dublin. In 1824, in consequence of the ambiguity of that act, an act had to be passed to explain it.
It was not till 1845 that the restriction as to the 50-m. limit was withdrawn.
The establishment of any other bank but the Bank of Ireland was for a long time hindered by the legislation on the subject. Some of the restrictions were so extraordinary that it will be interesting to refer to three of the more important acts.
1741, 15 Geo. II. - Partnerships authorized for the purpose of trade and manufacture; but such partnerships were not to exceed nine in number, nor was the capital stock of such co-partnership to exceed, at any time, the sum of £10,000.
1780-1781, 21 and 22 Geo. III. - "Anonymous Partnership Act," - limited liability not to exceed £50,000, but "business of banking or discounters of money" expressly excluded.
1759, 33 Geo. II. - By this act a person while he continued a banker could not make a marriage settlement on a son or daughter, a grandson or granddaughter, so as to be good against his creditors, though for a valuable consideration, and though such creditors were not creditors at the time the grant was made. This act gave power to creditors over all conveyances by bankers affecting real estates; and all dispositions after the 10th of May 1760 by bankers of real or leasehold interest therein to or for children were made void as against creditors, though for valuable consideration and though not creditors at the time. No banker to issue notes or receipts bearing interest after the 10th of May 1760. Some of these enactments appear to be in force at the present day; suggestions have been made, though apparently unsuccessfully, for their repeal.
So extraordinary were the views of the common people that a banker in Dublin of the name of Beresford having made himself very unpopular, a "large assemblage of ignorant country people having previously collected a quantity of Beresford's notes, publicly burnt them, crying out with enthusiasm while the promises to pay on demand were consuming, 'What will he do now; his bank will surely break.'"
The number of banks which failed in Ireland in earlier times was extraordinary; thus Sir Robert Peel in his speech of the 9th of June 1845 on the Bank Act of that year, made a quotation "from the report of the committee of Irish exchanges, which sat in 1804. At that period there were fifty registered banks, but they all failed, and their failures, I know personally, led to the most fearful distress." Since the legislation of 1845, however, the business has been carried on with equally extraordinary steadiness and success, and at the present time is on a footing fully equal to that of any other part of the United Kingdom.
The earlier history of banking in Ireland pursued very closely the same process of development as in England. Circulation preceded and fed deposits. The credit which the banks obtained by the ready acceptance of their notes brought customers to their counters, and thus the existing system, fortunate in excellent managers, was built up gradually and surely.