The most important requirement of banking in the United Kingdom is still the establishment of an efficient specie reserve. The reserve in the banking department of the Bank of England averaged: -

£8,500,000 in 1845.

£11,600,000 in 1875.

8,400,000 in 1855.

15,100,000 in 1885.

8,000,000 in 1865.

29,900,000 in 1895.

£23,500,000 in 1906.

This provides but a narrow basis for the whole business The "Reserve" question. requirements of the country. Though much larger than in several previous years, it cannot be regarded as adequate. The figures fluctuate more severely than these decennial averages show, and the progress has not been one of uniform increase. Thus the £15,100,000 in 1885 was followed by £12,700,000 in 1888. The £29,900,000 of 1895 was followed by £34,600,000 in 1896 and £21,200,000 in 1899.

Beyond, or side by side with, the reserve of the Bank of England there are the reserves held by the other banks. Part of these are held in the form of balances at the Bank of England, part in specie and bank notes in their own tills. The latter, hence, are not unlikely to be estimated twice over. The published figures on this point are meagre.

The expectations expressed by Sir Robert Peel in his speech on the bank charter and the currency of the 6th of May 1844 have not yet been fulfilled. "I rejoice," he said, "on public grounds, in the hope that the wisdom of parliament will at length devise measures which shall inspire just confidence in the medium of exchange, shall put a check on improvident speculations, and shall ensure the just reward of industry and the legitimate profit of commercial enterprise conducted with integrity and controlled by provident calculation."

The extreme measures which have been required since the act af 1844 point out for themselves the necessity for reform. Three times since the date of the Bank Act of 1844 it has been needful to give permission for the suspension of that act which forms the very foundation of the monetary system of Great Britain. This, whenever it has occurred, has exercised a very injurious effect on credit abroad, as well as on prosperity at home.

The British money-market, the clearing-house of the world, is, in consequence of the smallness of its reserve, exposed to greater fluctuations than that of any other country. These fluctuations may arise from the need of meeting the requirements of other countries for specie or those arising from domestic trade. The recorded excess of imports over exports, £147,000,000 in 1906, though the difference is eventually balanced by the "invisible" exports, gives foreign nations at times a power over the British money-market greater than has ever previously been the case. The current must always have a tendency to flow outwards; this is enhanced by the great increase in the number of foreign banks which have branches in England. The need of providing sufficient reserves to meet requirements thus occasioned is obvious.

As regards the banks in which British interests are concerned in British banking abroad. British colonies and other countries we can only speak briefly. It must not be overlooked that in the Dominion of Canada there are 29 banks, many of them large, managed much on the Scottish principle with capitals of nearly £19,000,000 and deposits of about £140,000,000. These banks have more than 1200 offices. In Australia and New Zealand there are 24 banks with capitals of nearly £18,000,000 and deposits of about £130,000,000. The number of offices is nearly 1700. There are, including the three Presidency banks, about 15 banks doing business mainly in India - in some cases connecting neighbouring countries and places like Bangkok, Hong-Kong and Zanzibar. These banks have capitals of more than £5,000,000 and deposits of fully £36,000,000 and over 210 offices. There are at least 8 banks in South and West Africa with capitals of nearly £5,000,000, deposits of nearly £50,000,000 and nearly 370 offices. There are 5 banks, including the Colonial Bank, in other British territories with capitals of about £1,000,000 and deposits of £3,300,000, and about 25 offices.

There are thus, besides many private firms doing very considerable business, more than 80 joint-stock British banks working in the colonies with capitals amounting to £48,000,000, deposits £360,000,000 and offices 3505. Outside British territories there are 6 banks, principally in South America, with nearly £4,000,000 capital, £36,000,000 deposits and about 60 offices. There are 6 large banks doing business principally in the East with more than £6,700,000 capitals, £77,000,000 deposits and 106 offices: and 7 other banks, including Barings, with about £4,500,000 capitals and £22,000,000 deposits There are thus about 20 British banks doing business in foreign countries with capitals amounting to £15,200,000, deposits £135,000,000 and offices 173.

In this statement we have included only the more important banks, which collectively wield about £63,000,000 capital and more than £495,000,000 deposits - in all about £560,000,000 of resources operating at about 3700 offices situated in places as different from each other and as widely separated as California and Hong-Kong, Constantinople and New Zealand.