The Sun.
London, England, 1844-05-07 00:00:00

Governor and Deputy-GovernorTof the Bank of Enqland
" As under the provisions of the 3d and 4th of William IV.,
chap. 98, the lit of August is the day after which it is com-
petent for the House of Commons to give notice to the
Bank of the determination of their exclusive privileges, her
Majesty's Government think it advisable to come to some
understanding with the Bank as to its connection with the
Government. In submitting to you the views of the Govern-
ment, I would premise that the main object of the Govern-
ment, in any new renewal of the charter of the Bank, is one
that the Bank can be scarcely less interested in than the
Government, namely, that of placing the monetary
system of the cetuati7 on a sound foundation.
It appeared highly desirable that any arrangement
that might be made should be founded on the basis of entire
separation of the business of Wising notes from that of bank-
in that might be obtained by some public department
being established for the issue of notes, independent of the
Bank ; but her Majesty's' Government are willing to con-
sider whether this might not be effected by dividing the busi-
ness of the Bank. The first question for the Bank to consider
is, how far they would be willing to undertake this duty,
how far they would be disposed to administer the functions
of issue. It is desirable that the Bank should have the
power of issuing a certain amount of notes, and that all other
notes should be issued either in exchange for bullion, or
upon securities that would admit of ready convertibility, and
not to exceed the amount fixed except under the approval
of the Government. It was proposed from henceforth to
prohibit the establishment of any new bank of issue, to re-
strict the issue of their own notes to those banks at present
exercising that privilege, and to limit the issue of those
banks to the amount of notes issued by them on the average
in a given preceding period ; and in the event of their failure
of liquidation to prohibit, under any circumstances, the re-
sumption of their own circulation. The void created by the
withdrawal of any existing private or joint-stock bank from
circulation, either voluntary or under the circumstances al-
luded to, should be supplied, if necessary, by the
substitution of notes of the Bank of England; and
in such a case the Bank, acting in concert with
the Government, should be authorised to make
a proportionate increase in the amount of those securities
which constitute the foundation of the issue of paper—the
whole nett profit derived from that additional issue would be
carried to the account of the Government.—(Hear.) It was
intended that a weekly publication should take place of the
state both of the issue and of the banking department of the
Bask ; and it would be required that each private bank and
joint-stock bank issuing their own notes should make once a
week a publication of the amount of their notes in circula-
tion. Lnder such an arrangement, it was obvious the Bank
would not merely retain its existing privileges of having no
hank of more than six partners issuing notes within a circle
of sixty-five miles of London, but it would be secured
against competition from any new bank, even with
less than six partners, and although any profit derived
from any increased issue would be placed henceforth to the
account of the Government, and the Bank would not derive
any immediate pecuniary advantage from it, yet the ex-
tension of business and circulation consequent on that further
extension, must be to the Bank a source of no inconsiderable
benefit. It was not proposed to continue the prohibition
now in force as to the drawing, accepting, or paying of bills,
within the 65 miles circle round London. Should any ar-
rangement on this principle meet the views of the Bang the
points remaining for consideration would be the period for
which the Bank charter, should be renewed, and the amount
of the payments which ought to be made by the Bank to the
public during the period of its continuance. The Govern-
ment considered it advisable that the charter should be
granted for ten years from the Ist of August, 1845,
determinable at any period within that time upon a notice of
twelve mouths ; but until such notice be given to continue in
force. The amount of payments to be made to the public by
the Bank would depend upon the consideration of the
benefits secured by this arrangement to the bank-
ing department of the Bank, and in proportion to
the profits of issue which the public were entitled to
claim. The Bank should retain the management of
the public debt, and the advantage of the Government
deposits, and the balance of the several public accounts at
the Bank. It must, however, be distinctly understood that
the Government retained the entire discretion as to the amount
of such deposits to be made in the Bank. With reference
to the profits of the circulation department, supposing the
amount of securities to be fourteen millions, the profit would
be the difference between the interest received on those se-
curities and the expense required for managing the issue of
notes, and treating the accounts connected with them, and
the receipts and credit of the bullion which must from
time to time come into the hands of that depart-
ment. Assuming three per cent. as the rate of in-
terest, the gross profit of the circulation depai talent would be
420,000/. It had been stated by the Bank, in a paper pre-
sented to the Committee on the Bank charter in 1832, that
the expense of the circulation was at that time 106,000/. It
would be desirable that the items constituting this aggregate
sum should be separately considered with a view to ascer-
taining whether, without diminishing the advantages now
secured to the public, a reduction might not be effected in the
amount. Ile would assume 100,000/. as the expense, and
that would leave 320,0001. as the profit of the circulation de-
partment, from which should be deducted 60,0001., the amount
of stamp duty paid on the notes of the Bank of England,
and also whatever sum the Bank allowed to other banks
which substituted Bank of England notes for their own
paper. He would take that amount at 20,000/. The nett
property therefore which the public would have a right to
share would be 240,0001., or if it were more desirable to re-
move the stamp duty on the notes of the Bank, it
would be 300,0001. In this arrangement he did
not put out of view the claim of the Bank for
remuneration for the management of the circulation.
It appeared to him that the real interests of the Bank would
be promoted by the proposed arrangement. It proposed to
leave the management of the circulation in the hands of the
Bank, which would continue the confidence of the public in
it, and would be calculated to increase the control of the Bank
over the paper and currency of the country, and would secure it
from the expenses and danger to which it was hitherto exposed.
The Deputy-Governor then read the reply of the Directors,
dated the 30th of April, 1844, and addressed to the Chancellor
of the Exchequer. After acknowledging the receipt of his
letter, they stated that they were desirous of an early
settlement of the currency question, and were disposed
to consider favourably any measure of her Majesty's Ministers
which would place the circulation of the country on a sound
footing. They had no objection to the separation of the issue
and banking departments, and thought that such a separa-
tion could be °fleeted without difficulty. They had no
difference with regard to the principle of the in-
tended measure. The Bank had no pecuniary interest in
the general adoption of their notes. 'When, in 1835, they
agreed to pay the public 120,0001., advantages were held
out to the Bank from the extension of the circulation of their
notes, but those advantages had never been realised. With
regard to the weekly publication of the amount of issues,
there was no objection on the part of the Bank to accede to
such an arrangement. With regard to the renewal of the
charter from the Ist of August for ten years, it was proposed
that the charter should terminate upon twelve months no-
tice being given. They would propose that, if such notice was
not given at the end of ten years, the charter should continue for
ten additional years. This would give the Bank increased se-
curity, and it would put an end to the annual discussions which
were held on the subject. With regard to the advantages
which the Bank derived from having the deposits, the benefit
was diminished in consequence of the risk of forgeries.—
(Hear.) The benefits which the Bank derived were also
diminished from the expenses and risk they incurred in col-
lecting the ordinary revenue. In 1843 the clerks of the Bank
travelled over 75,090 miles, and carried with them 9,049,000/.
The Bank incurred all the expense and risk of this—(Hear)
—they therefore thought that some abatement of the
120,0001. paid to the public might be reasonably expected.
The Governor thought it necessary to explain that there
was a mistake as to the expense of issues. Instead of
as the branch bank
'la) He had next to
al
tI3L,OX
Leicester
it te r wwa
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uhdee
d1.11,(01010e/a.
request the attention of the Court to a letter addressed to the
Directors on May 2, by the Chancellor of the Exchequer. The
letter acknowledged the receipt of the reply of the Directors
to his former letter of April 30, and expressed the satis-
faction of her Majesty's Government to know that on the
part of the Bank there was a general concurrence in the
principles which in that letter he (the Chancellor of the Ex-
chequer) had laid down. It was satisfactory to the
Government that although the Bank Directors doubted
the utility of a weekly publication of the accounts
no objection to it.
made
of opinion that such publi-
cationoiler the
Majesty's Bank,
Government yet they
were
would be useful, by giving satisfaction to the public
and increasing the confidence in the stability and good ma-
nagement of the establishment. Ile (the Chancellor of the
Exchequer) agreed with the Directors, that the removal of
the existing prohibition of issuing bills within the
sixty-five miles circle round London might lead to
the introduction of new paper, and be liable to abuse. He did
not think, however, that it was necessary now to make an
attempt to limit the amount of bills to be issued, and the
times of payment ; but considered it preferable to leave with
the Government the power of calling on the Legislature to
interfere, if any abuse should arise. The Chancellor of the
Ezzhequer thought also that it was better that the new
aneajagement should be made terminable at the end of ten
ears, ,y hen that it should be extended to twenty years. Indeed,
he believasd that it. would be more conducive to the perma-
nence of this arrangement, as there would be a greater likeli-
hood of calls fey a change in the course of the period, if it
were fixed at tseeiatY years. Her Majesty's Government pro-
posed to accept of 60,001N1, in lieu of the stamp duty, which
would make the whole amount paid by the Bank to the public,
in return for its privileges, 180,000/.
The answer of the Court of Directors to the last communi-
cation was then read. It was dated the 3d of May, and, after
acknowledging the receipt of the letter of the Chancellor of
the Exchequer of the 2d May, 'the Directors, in their answer,
stated that, although they were of opinion that some abate-
ment in the payment of the 18 0,0001. might reasonably have
been, expected, they had resoilveg however, under all the
circumstances, to recommend the -Court of Proprietors to
accede to the propositions of the: Government.
The GOVERNOR had now react the whole of the correspond-
ence with the Government on the subject of the renewal of
the charter„ and at the proper time it would be his duty to
submit to the Court a resolution similar to that one which had
been submitted to the Cour t on a similar occasion in
the year 1833, viz., that the Cu eurt of Directors having taken
the subject into their serious consideration, do recommend
the Court of Proprietors to accede to the proposal of her
Majesty's Government for the renewal of the charter, and
for providingthe general regula lions referred to in the letters
of the Chancellor of the Excise squer, as soon as they should
osed to Parliament to I
be crcy s which her Ma-
them in full possession of all ti se proposal
jesty's raquistere had made on tie subject, and as they had
taking
the submiz.come for
adepted. He had now put
tted to Parliament, the time was
subject.
present ; that any advsanNte t°' that
In answer to some question s, the CrwituAx
stated
it did
the payment of staZia duty WOI ild remain nearly as at
the opinion (a' the Court of Dir actors on the
tive substitution of Bank of .
aa'als ;land notes for
those of other
ed solely from the fact that the
banks of issue, would be dens'
circulation would be 'ader footi
'lig and that they
be derived from the prospec-
tive
a soh h, ping of the banking
would be less embarrassed i a keeping of the banking
would be less ensbarra,ssed L
accounts.
Mr. FIRMER considered the terms proposed by the Go-
vernment most harsh and uni air. There were stringent re-
gulations for the Bank, but no; ae for the Government or the
forward to assist Government fn
private banks. They were to 1 le limited as to their profits,
but not as to their losses. It should be remembered that
they haul met with losses hen itofore ; that they had come
iguently, and frequently at a
loss. They had conic forward in 1835,.and by an immense
advance had saved the country, and now, because the Go-
vernment had managed by imposts gan income-tax in p
the
ace
dit
and threatened to crush them if tl ley
to raise the funds to par, they turf yellrodunnod upon the
to Bank
terms. The Government had not t feted in the fair, open, and
candid manner in which they otsgt tto have acted. Ile hoped
that some alteration would be al 4,e .8 in the plan before it was
acted on.
Mr. WILLIAMSON asked if it was understood that the
120,000/., and the 60,000/,, wa is the outside of what was to
be paid to the Government.?
The GovEnslort stated that i twas-
Mr. WxEDLNG adverted to t •Ge course taken by the Board
of Directors, when the Bank • charter was renewed in 1833 ;
the papers were then printed a, ad distributed among the Pro-
prietors, and time allowed for their consideration. He recom-
mended that the same sours( i should be pursued on the
present occasion. There was one thing that he should wish
to see introduced into their cl tarter—Os:it was, an alteration