The Sun.
London, England, 1832-09-05 00:00:00

the banks newly established 2—That has fotareil a
matter of some difficulty, and been a suljeet of ne-
gotiation. When a bank was not previously •
es'abltshed, it was not possible to obtain any state-
ment of what their circulation would be ; it must
depend upon the nature of their business, and the
extent to which that business would require circula-
tion, which could only be ascertained by experience.
In those cases has any limit been fixed ?—lt has
been fixed in some cases; there are two, I think:
not yet fixed.
Does this include any joint stock companies, or
merely the country bankers 2—Both.
In No. 30, there is an account of 13 country
bankers who do not take fixed amounts for circula-
tion ; are there any bankers that do not take fixed
amounts 2—There are, I believe, 11.
Can you furnish an account of the country banks
or hankers who do take fixed amounts for circti-,
lation ?—Certainly. There are three classes of
country banks that act with the branch banks. The
first is, the batiks that act with the Bank of Eng-
land circulation, and always have done so ; the se-
coud are, the country banks evho have adopted the
B ulk of England circulation in lieu of their own;
and the third are, the country bankers who issue
their own notes, but who keep their accounts with
the Bank, and have been supplied ►with coin.
You have furnished an account with regard to the
first at d third classes, and with regard to the second
description you will furnish an account ?—Yes.
With reference to account No. 31, can you state
to the Committee whether there is any particular
circumstance which has caused so great an increase
between 1830 and 1831, as it appears that it has
grown from 700,0001. to 1,718,000/. in one year;
is that a growth from natural causes or from any ac-
cidental circumstances 2-1 believe it to have arisen
from the particular state of the money market in
London; the great contraction which existed in
London during the year 1831 rendered it difficult for
those bankers who have discounted with the Bank
of England to obtain the same facilities in the Lon-
don market which they formerly possessed ; they
consequently applied for a further issue direct from
the branch banks.
Do you wish the Committee to infer that that is
likely to continue, or that it is merely an accidental
circumstance ?—I should think it is accidental, and
that it is likely to last no longer than the scarcity
of money continues in London.
With reference to account No. 37, has any coin
been transmitted from the branch bunks to the Bank
of England ?—There may have been some guineas
arid half-sovereigns, but to no very large amount.
Are the losses of the branch banks included in
the general account before the Committee ?—Yes,
they are.
What is the principle by which, in ordinary times,
the Bank is guided in the regulation of their issues ?
—The principle, with reference to the period of a
full currency, and consequently a par of exchange,
by which the Bank is guided in the regulation of
their issues (excepting under special circumstances),
is to invest and retain in securities, bearing interest,
a given proportion of the deposits, and the value
received for the notes in circulation, the remainder
being held in coin arid bullion; the proportions
which seem to be desirable, under existing circum-
stances, may be stated ut about two-thirds in secu-
rities and one-third in bullion; the circulation of the
country, so far as the same may depend on the B ink,
being subsequently regulated by the action of foreign
exchanges.
By the circulation of the country do you mean
the whole :circulation of the country, arid not the
country circulation 2—The whole circulation of the
country.
When you say that as a general principle you
think it desirable to have one-third of bullion in
your coffers, against your circulation, you mean to
include in that circulation not only your paper out,
but all deposits, whether of Government or indivi-
duals ?—Yes.
In short, all liabilities to pay on demand ?—Yes.
And you hold the liability to pay on demand
arising from a deposit, to be equivalent to a note
out ?—I hold it to be that sort of liability which the
Bank are bound to provide for by a reserve of bul-
lion.

Do you think the liability arising from the de-
posit to be more dangerous to the Bank, as sudden
to calls,or less dangerous to it than the same amount
out in paper ?—Less dangerous.
According to your description of the principle
upon which the affairs of the Bank are conducted,
to not the directors of the Bank of England possess
the power of regulating the whole circulation of the
country ?—The Bank are very desirous not to exer-
cise any power, but to leave the public to use the
power which they possess of returning Bank paper
for bullion.

Would the exchanges be corrected if the amount
of currency was left wholly in the hands of the
public ?—They have been principally corrected
under that management.
Is the Bank exposed to no inconvenience, by
waiting to have the correction take place in this
method, in preference to itself interfering by that
power to diminish the circulation in case of a fall
of exchange ?—No; provided they are adequately
supplied with bullion when the exch inges are sit
par, and which proportion I have stated to be about
one-third.

Does not the Bank, if it thinks proper, possess
the power of extending the currency or at' diminish-
ing it, without waiting for the interference of the
public ?—lt has the power.
Would the Bank forcibly contract their issues by
a sale of securities during an unfavourable course of
?xchange with foreign countries, and would they
forcibly extend their issues by the purchase of secu-
rities when the exchange was favourable ?—I think
not, except under special circumstances.
You mean to say that the Bank. would not for-
cibly do that, but that it would leave it to the public
to act upon the Bank, and produce the effect at
which it would arrive ?—I do.
It appears by the accounts before the Committee
that for the last four years the amount of securities
,n the hands of the Bank varied very little; do you
consider it important in the management of the
Bank to keep the securities at nearly the same
amount ?—As nearly as the same can be managed.
What is the reason why you think it nece-sary
to keep the securities at the same amount ?—Be-
cause the public are thereby enabled, without any
forced action on the part of the Bank, to act for
themselves in returning notes for bullion for expor-
tation, when the exchanges are unfavourable. If
the exchanges continue favourable f:r any great
length 'of time, then the influx of treasure will com-
mand an increased issue of paper, and which may
derange the proportions ; but it does not follow that
the Bank ought, upon that account, immediately to
~xtend its issue upon securities. When, however,
it is clearly ascertained to be desirable that part of
the excess of bullion so received should be returned
to the Continent, then it may be necessary for the
Bank to re-assume its proportion, by transferring
part of the bullion into securities, still preserving
the proportions of one-third and two-thirds.
In times of great commercial prosperity, would
not the leaving to the public the correction cf a
redundant currency lead to a greater redundancy
excessive speculation ?—I think not.
You have stated one-third of bullion to be, in
your opinion, about the proper proportion fesr the
Bank to hold, in proportion to its liabilities; is that
proportion the result of your experience in the ma-
nagement of the Bank ?—Yes, with reference to
periods of a full currency.
Have you any information as to whether that
tt:
have proportion
vtehonot tr.oe is heldoo
oinr other Bthaks
ent r
ufs t
true one
h e world t o
—No , I

Do you consider that it is desirable for the Bitik
of England, under the circumstances in which it is
placed, to reserve a larger deposit of bullion that; it
.vould be under ordinary circumstances of banking?
—The Bank of England, under existing. co cum-
stances, appears to be called upon to retain a largr.c
proportion of bullion than it would do if it ir.:l
merely to provide for its own circulation.
Will you explain what you mean by prJv