The Sun.
London, England, 1860-09-10 00:00:00

,~

lEPOSITS

JOINT STOC

BA

'K C.-.

INTEREST.

(From the Money Market Review.)
The practice of allowing interest on deposits at
call, and to a certain extent on current accounts, is
one of the principal features of the business of our
joint-stock banks. If the system did not precisely
originate with them, they at least, with one or two
exceptions, have developed it. To those who feel
a preference for a sound steady business, instead of
a brilliant and speculative one, this circumstance
innovation
in always be a matter of regret. The
in fact will not bear examination, and appears en-
tirely at variance with true banking policy.
The proper mode of conducting a bank is too
well understood to need much. reference here .
A banker undertakes the custody of BUMS
of money, which he is ready to deliver on de-
mand. At the same time he knows that by.re-
taining a certain proportion he is quite safe against
all ordinary contingencies, and the remainder lie
can employ for his own profit. In the latter ease
his chief object is to hold such securities as can be
realised at almost any moment, or to discount com-
mercial paper falling due at a fixed and early period.
The propriety of this course is evident. As long as
a trader has numerous claims to meet, which may
come upon him at any time without notice, he must
protect himself by having all his assets readily con-
vertible. Another important point is also to be con-
sidered. It is in the highest degree improbable that
la good bank will, even in hard times, be exposed
to a run, but it is very likely it will suffer great
pressure. Bankers, whose business it is to watch
the varying phases of the money market, are acute
enough to foresee such events. If their business is con-
ducted in the recognised mode, they can strengthen
their position gradually with the least incon-
venience to themselves and the public. This power
of adaptation to circumstances is of enormous
value to an institution like a bank, but appears
to be to say the least, considerably weakened by
the practice of allowing interest on deposits.
In the first place, a bank allowing interest is
no longer an entirely free agent. It may doubt.
the wisdom of employing Isere than a
.certain
proportion of the deposits it holds; but if that
limitation should involve a loss, it is sure in the
long run to be set aside. No bank would dream
of keeping idle for any appreciable time a balance
interest.
It which it has to pay a regular rate of
If money is worth 5 per cent. in the open market,
and a bank allows 4, it is clear it would be a
losing business not to lend out about £BO,OOO out
of every £lOO.OOO deposited, although prudence
might dictate the employment of a much smaller
proportion. The bank may, it is true, get
out of the difficulty by altogether refusing
to take deposits at an inconvenient moment, but
with the present competition between bankers,
the risk of disobliging a customer. is carefully
avoided, and such instances of denial are conse-
quently rare. It thus follows that under the pre-
sent system it is nearly impossible for a bank to
regulate the whole of its business simply according
to the state of the money market ; arid in critical
times an establishment may go on for months
keeping its connection together, but still with an
uneasy feeling that its position is by no means as
secure as it ought to be.
Secondly, the practice tends in no small degree
to foster undue speculation. This is especially
observable at a time when the rates of interest
are high. Since depositors receive a fixed rate of 1
per cent. below the Bank minimum, the proportion
of their balanses that must be used is constantly
varying. Thus, with money at 3 per cent., a banker
can retain one-third of his deposits in cash, but at
6 or 7 he can afford to retain only about a sixth.
As a result of these arrangements, and of the
co
consequent necessity of employing money, commer-
cial paper is occasionally scrutinised less narrowly
than it should be, and speculators take the oppor-
tunity of extending their paper transactions to the
utmost. It would be unfair to charge a disturbance
like the crisis of 1857 to nothing else than taking
deposits at interest, but by indirectly giving rise to
a hazardous style of doing business the practice
certainly tends that way.
While convinced of the inexpediency of a bank
taking deposits bearing interest and repayable at
call, we admit that, with the limitation of fixed
periods, and at such rates as may be convenient,
there is nothing to be said against these transac-
tions. As a middle-man between the person who
has money to lend and the one who wishes to bor-
row, a banker but fulfils a part of his functions in
providing each with the requisite facilities in consi-
deration of a moderate commission. The plan,
however, of taking money at interest, repayable on
demand, and lending it out for a fixed period, is
not only unsound in itself but likely in Kerne con-
unctures to create no small amount of diffeculty.

DECIMAL Z;OINAUE.

TO Tl{ EDITOR OF THE ILLUSTRATED LONDON NEW:;
As the present appears to be the most fa vourable
opportunity that has ever occurred for the introduc-
tion of a decimal currency, I take the liberty of
offering the following for the consideration of those
most interested in the proposed change :
The new copper coinage is nearly ready for circu-
lation. Pence, halfpence, and farthings are already
coined, each of rather less value than tho se at pre-
sent in use. To introduce the decimal system, it is
only necessary to reduce the value of a farthing to
to the I,oooth part of a pound instead of the 960th,
as at present, and to issue one new coin of the value
of ten farthings, and the whole matter gill be ac-
complished without the necessity of deranging ac-
counts or interfering with them in any way except
to render them more simple and less liable to error.
The alteration would not even necessitate new
account-books, as accounts would still be kept in
pounds ; and, as 10 of the new coins (wb ich I should
name decime) would be equal to one :florin, they
would stand thus—pounds, florins, decimes, far-
' things, instead of pounds, shillings, pence,far-
things ; but this would be sufficiently indicated by
merely pointing off the figures to the right hand—
thus, 9,8, 7, 6 would represent 9 pound's, 8 florins,
7 decimes, 6 farthings. But, as farthings have
always been represented as fractional parts of a
penny, so they may be still written as fractional
parts of a decime in the decime column ; thus, 9,8,
7 3-10th, or 3-x, would represent nine pounds, eight
florins, seven decimes, three farthings. By this
arranvment nearly the whole of the coin at pre-
sent in use might be retained until completely worn
out, their relative value to the pound being still the
same, the only variation in real value beinge
far-
fined to the most insignificant coin—viz., th
thing. to
I should, however, recommend. fidi
4. qt® the intro-
confusion , and to simplify and facitlie #avoid
threepenny
in, and, as
dud of the decimal currency;
_a,f9.
41:PenPY Ricces be at--9-n-c-e---4,llletifownpieces
soon as convenient the-ciiiivyna
d coins of tho value of
be advantageously in-
would then be all of a
also; in lieu of which nerhgt
two and three florins g
decimal character, and
afoul: would still represent
utrnoidfourcmed:hothueghofortenst:icginys
would stand as follows
Farthings,
nue come ;
one
tpr
resent
fnt
at
Ps
he nan 'ogafOnfociwfwouldW whichv ihos
tenti nlwrwoe uepulrdleasr
resent
ape
which te
The
Pecimes,
Florins,
onef
no
repi florin,
11
I iana
the sixpence the quarter florin. But the sooner they
could be altogether superseded by pieces of a strictly
decimal character so much the better, and these
might be of the respecti •
ve value of two and five
decimes, and would prove admirable substitutes for
both
coins ; the one being named
the half florin, the
other the double decime. Both the decime anti
double decime should be silver coins.
The advantages of the intrauction of this system
of accounts are not easily realised. The saving in
time in calculating extensive monetary transactiona
cannot be estimated ; but when the simplicity of the
mode of converting any
.amount of the lowest de-
nomination into its equivalent in the highest be
taken into consideration, it will readily be con-
ceived that the saving in the number of clerks alone
in all Government offices, and the reduction in
quantity of all kinds of stationery used in them,
will be quite sufficient to justify me in saying that
it would soon prove very nearly, if not quite, an
equivalent for the total repeal of the excise duty
upon paper.

A DECIMAL FRACTION•

It is the intention of the Queen to give a new west
window to the Church of Sidmouth, in memory a bet
Majesty's lamented father, who died there. T'I":
parishioners feel much pleased at, this gift, which 41'
materially add to the beauty of the church, but acreo%;
what in a dilemma, as the organ, if it remains, Nara
„i ties to
the window being seen, and there are real diill,_::° i:
overcome as to removing the organ.—Court lour"'
sell and
The disputes between Mr. Scott iltist Eastern
bitrators, Messrs.
the Great Ship Company relating to the Or*"
have at length been decided by the ei!ding him the sum
Hawkshaw, M'Lean, and Fowler, ova
of LlB,OOO. bas been issued. of the
et Shrewsbuvy with the
A preliminary prospect"and Coast of Wales Rail_
the
w and the
w"
aWy,e,—st
al‘lliindelaenfd9,oSrahrireczburfo,nue
°sin, through some ,Df the most
f'v ales, and avoiding. heavy
under £lO,OOO per mile,
of one tunnel of a ' -
sea coast at portmadoe, pas
mile and.
pwiecrtukrse,sqwui et h parts
th
a-half. Theona
line " will beke
n.c. with whom favourable traffic rand maintained by
eoxfc eNpacirge 13.11
ett Midland
ffic arrange-
Railway C°T2s7iiisuring a fair ntinim,c• '
molts practically
, it dividend will be
made."
A aerman paper says that there are thirty-seven
Hungarian officers serving under Garibaldi, o of
one-half
whom went
.expressly from Hungary to Ital n
y,the re-
mainder having been emigrants Ten* •
• Hungarian officers,
• it is added, fought at-INa-
-421, and of them sevenwere killed
or badly wounded,