The Sun.
London, England, 1864-10-05 00:00:00

Liverpool Cotton Market—This Day,

The market opens with a steady feeling. Sales
probably 5,000 bales.

The Leeds Banking Company.

(From tire Economist.)
The affairs of the Leeds Banding Company are of the
greatest interest, both because they afford a signal indica-
tion of the possible extent and inevitable result of reckless
banking, and because the sort of reckless banking which
they exhibit is the very sort which is now most to be dreaded.
As long as a bank is lending actual money—the money of
its shareholders or of its depositors—there are plain safe-
guards from error, and there are close limits to recklessness;
but when a bank is giving acceptances and endorsements—
when it is lending its name—there is no close limit ; crimi
nal folly and criminal wildness may soon and easily accu-
mulate liabilities which far exceed and swallow up any paid
up capital or reserve fund.
There are three questions to be asked on the failure of
every joint-stock bank-1. Whatimoney has been lost? 2.
How it has been lost ? 3. What additional money must be
paid up by the shareholders if the public is to be paid in
full ? The accounts presented by the professional gentlemen
to the meeting certainly give the means of answering these
questions, but their form is involved and complicated, and
very few, if any, men of business will spare the time to work
out and solve them, We may therefore be of use in throw-
ing the matter into an easy and popular shape.
The sum for which the Leeds Banking Company are
liable—the sum they had to dispose of—is close on three
millions, and is shown at a single view by the following
account :

LIABILITIES.
To Shareholders.
Ca; ital £llo,loo 0 0
Reserve and contingent

fund - 106,655 9 6
Premium on shares sold p 7,304 5 0
Unclaimed dividends 1,714 6 0
Balance of profit and loss
account, charges to bs
entered, and sundries
unclaimed
£314,050 3 1

To the Public.

Doposit on current or
other accounts
Sundry bankers 89,383 15 8
Creditors holding security 90,971 12 1
Liabilities on endorse-
ments of bills of ex-
change .. 1 919,991 14 3

2,650,300 6 10

Total liabilities £2,961,350 9 11
And against this they have to show :

ASSETS.

e. d.
Cash 15,327 8 7
Estimated produce of bills receivable un-
pledged
Debts, good and unpledged.. 618,384 14 1
Bills endorsed by the bank which it is
believed will be paid by the acceptors
at maturity
Bills endorsed by the bank which it is
believed will be ultimately recovered
from the acceptor or the drawers,
though not paid at maturity 400,000 0 0
Securities held by special creditors
Charges due from customers
Stationery, ete. ..

Totil assets £2,146,687 3 0
showing a deficiency of £817,663 Gs lld, which, therefore,
is the sum the managers of the bank have made away with.
It is eight times the capital of the bank, and exceeds by
nearly 60 per cent. the legitimate liabilities of the bank—
its liabilities to depositors. We do not remember to have
seen before a first account in which the deficit of the bank
without circulation was more than the money depoeitel
with it.
How, then, has it been lost ? The figures speak for
themselves. Though the capital of the bank was only
£lOO,OOO, it has been giving enaorements, lending its name
and credit for all but two millions, and these two millions
were of so bad a character that the accountant divides thus :

To be paid at maturity
Not to be paid at maturity 1,000,000 0 0

What possible reoklessness could have£llll
of bills, 919
What bl4a. n k 3 with
£lOO,OOO of capital to give its endorsements to two millions
of which 50 per cent, of which ons million will not
be paid when due,is at first sight hard to conceive. It is true
a considerable part, say £600,000 of these bills, are esti-
mated to be ultimately paid, but even that leaves a loss of
£100,0003 or four times the bank capital. And when a bank
is lending its name on a scale so prodigious, ultimate pay-
ment has nothing to do with the matter. Instant payment
by the acceptor of the bill is essential to the safety of the
bank. As soon as an acceptor dishonours a bill, the
holder looks for the best end)rser. He sees the en-
dorsement of a bank—the bank doors are always open—he
presents the bill, and it must be paid or the bank stops.
The Leeds Banking Company were liable by endorsement
on £1,000,000 of bills, which would not be paid on matu-
rity by the acceptors, which, therefore, they would have
to pay. And what had they to pay with ? Not a penny of
Consols, not a penny to call in London which they could
use, and only £15,000 of cash in the bank. We should
inquire not how such a concern came at last to stop, brit
how, during so many months of dear money and critical
credit, it has contrived to shiver on.
The explanation of such seemingly inexplicable wildness
is a very wild one, of which there have been hundreds of
examples before, and of which while human nature remains
what it is there will always be a certain number. The
manager of the bank, the uncontrolled manager, for the
directors did not control him, was frightened by the most
pressing of banking dangers. He had lent a good deal of
money to certain insolvent persons, and he did not dare to
bring those insolvents to a stand for fear of stopping the
bank. Some years ago an enterprising broker, who
which
aft er-
wards failed, gave his acceptance payable at a bank
the bank will
also has long since stopped, and said, " Oh,
discount it." On trial the bank would not discount it, and
the holder brought it back to,ths dr. met% " Won't I Ley
discount it P" he replied, " there must be a mistake. I sere
is my cheque for the same am runt. See if they do not cash
that " And they did cash it, not daring for their own cre-
dit to refuse; the amount he owed them was so enorn pus.