The Express.
London, England, 1858-01-06 00:00:00

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LONDON, WEDNESDAY, JANUARY 6.

Tess periodical meetings of the proprietors of the
various London Joint-Stock Banks are about to be
held, and the results are looked for with more
than usual interest. These institutions have been
managed with much ability, are annually increasing
In importance, and, in fact, occupy a field of so muck
utility, that they now form an indispensable portion
of the commercial machinery of the metropolis. The
greater the influence exercised by them, however,
the more necessary is it that their operation and
practice should be adapted as closely is
possible to the reasonable requirements of
the times. Recent experience has proved
more clearly than ever that certain reforms
and amendments of the existing system are
essential, both to the dignity and stability of the
Joint-Stock Banks themselves, and to the security of
the public, who of late years have reposed so mach
confidence in them. The measure of this confidence
is sufficiently denoted by the faci that, according to
the returns last issued, the seven great joint-stock
banks of London (we exclude, for the present, the
Western and Unity Banks, which are of very recent
formation, and the operations of which are compara-
tively circumscribed) were entrusted with the enor-
mous amount of 42,733,4301. of deposits. It is, of
course, through the handling of this vast sum
that the banks have in nearly all cases
attained such extraordinarily high rates of
dividend. The profits accruing from the employment
of 42,733,4301. of deposits, have been applied as
dividend upon an aggregate paid-up capital of only
3,657,23.51. The majority of impartial persons
concur in the opinion that the inadequacy of the
proportion of paid-up capital to deposits detracts
from the stability of these institutions, and that,
unless the basis of the superstructure be widened by
an increase of the paid-up capital, they must lack
that degree of solidity which commands implicit
trust. In some instances the disproportion of de-
posits to paid-up capital is very striking. For
example, whilst the London and County
Bank, with 3,837,2811. of deposits, bad •
paid-up capital of half a million, and the Commer-
cial Bank, with 936,7241. of deposits, had a paid-up
capital of 300,0001. (or nearly one-third), the London
Joint Stock Bank, with only 600,0001. of proprietors'
capital paid up, held 10,698,6301. of deposits ; the
Union Bank, also with 800,0001. of paid-up capital,
held 10,874,6401. of deposits ; and the London and
Westminster, which does the largest business of all,
with a paid-up capital of one million, held nearly
fourteen millions of deposits. These figures are de-
rived from the official statements last issued ; and we
will here take the opportunity of acknowledging
that we have mado use of the tabular statistics for-
nished in a pamphlet on " The London Joint Stock
1" Banks," from the pen of Mr. JAMES KNIGHT.

It will perhaps be remarked, in objection to this
view, that although the paid-up capital of the seven
banks referred to—viz., the London and Westmin-
ster, London Joint Stoek,Union, London and County,
Commercial, City, and Bank of London—is only
3,557,2351., the total nominal capital, the balance of
which the proprietors may at any time be called upon
to pay up, is as much as 14,950,0001. But we do not
see how this fact affects the question of the working
capital and current operations of the banks. The
directors have apparently not the most remote
intention of calling for, nor the proprietors the
slightest idea of being required to furnish, any por-
tion of the remaining 11,392,7651. of capital nomi-
nally subscribed. Nor, practically, does this reserve
of unpaid capital form any additional security to
depositors, for everybody knows, or ought to know,
that the reserve pledged for the fulfilment of every
obligation of the banks, is, really, not merely the
11,392,7651. alluded to, but the entire property of
every shareholder. lf, as is understood to be the
ease, there exists no intention whatever of calling up
any more capital, that portion nominally subscribed
but unpaid is a mere myth. Supposing what we will
call such an improbable event as that of ajoint-stock
bank making a heavy loss, to an amount exceeding
the current profits and the entire reserve fund, the
deficiency would, of course, have to be made up by
calling up more capital. But as it is only in this
extreme event that • call is to be made upon the
shareholders, the real capital of the seven beaks is
practically only 3,557,2351.
The motive of the banks in having so slender a
basis of paid-up capital is obvious. The smaller the
amount of capital receiving dividend, the larger
must be the ratio of dividend derived from the
profits on the employment of the deposits. Thus
it is that dividends and bonuses at the astonish-
ing rate of even twenty to twenty-six per
cent. per annum have been, in some eases, distri-
buted amongst the fortunate proprietaries. The
community have watched with satisfaction so extra-
ordinary a measure of success; but it is time the
Joint-Stook Banks should be reminded that the
eminent and lucrative position accorded to them
imposes upon them obligations which, in their
eagerness for large dividends, they have hitherto
insufficiently regarded. If the proportion of paid-up
capital is not to be increased, mach more attention
ought to be paid to the accumul►tion of an adequate
reserved fund. Upon this point the public,
who have so liberally supported the Joint-
Stock Banks, have a right to insist, for their
own protection. And if the public will give their