Evening star. [volume] (Washington, D.C.) 1854-1972, 1897-09-27
BANK OF ENGLAND RESERVE
Assistant Controller Coffin Discusses The
London Protest.
Vast Structure Of Credit RestinR Upou
Comparatively Small Amount
Of Gold.

Star reporter today of the protest of Lon
don banks against a silver reserve for the
Bank of England. He said:
''The lecent protest of the London clear
ing house banks against the Bank of Eng
lands proposition to hold a portion of its
reserve In silver was most natural, and
their failure to do this would have evinced
ignorance of or indifference to the very
vital interest they have in the matter: for
the Bank of England is the great reposi-
tory for the reserves against deposits held
by the banks in Great Britain, Just as the
national banks in New York. Chicago and
st. Louis are the reserve agents for thous-
apds of banks outside Of these cities.
TO what extent the Bank of England
holds balances due to other British banks
Il is hard to say with exactness. because
the item other deposits In it's weekly state
ment includes what American bankers call
individual deposits with balances due To
that the $2e00oO,000 of other deposits held
by the bank on September included about
$lO.O0O.OOO of balances due to other Brit
ish banks.
1T is fact well known in London that
the joint stock banks throughout Great
Britain keep a very small percentage O:
actual cash in bank. and no doubt such as
they DO Keep consists of silver coin AMI
little gold coin, SO that the Bank of Eng
land practically holds such of the coun-
try's stock of gold as is in bank and not
In actual circulation coin.
This stock of gold coin and bullion in
the Bank of England ON September s was
about SlIaOO0.o0O, and, compared with its
outstanding liabilities for its own notes
ana to depositors, amounting in all to
serve of about 50 per cent of the bank' 9
liabilities. But as the bank holds this gold
as reserve also against the liabilities of
the banks which deposit their balances
~ hold L. 80 ~@l.l
own vaults, the amount of these liabilities
bears very close relation to the subject
ard explains why the London banks are SO
deeply Interested in the recent silver propo-
sition of the Bank of England.
THE latest available figures show that
the estimated total of deposits and current
accounts held by banks of all kinds in
Great britain amounted to about $36G0-
oOO.Ooo, and If We add the $37OO00,O00 liza
bilities of the Bank of England we have
a grand total of about $4,0OOOOOOoO liabili-
ties, against which a gold reserve of but
S1!!.o0D0 is held in the Bank of England
which expressed in a ratio represents a
gold reserve of about four and a half-tenths
4.4 per cent of liabilities.
Compared with this feature the national
banks in the United States on July q held
IN ADDITION to all other forms of coin ard
currency, about $196 000.O0 of gold coin
against about s., ,400.O00,OO0 of liabilities for
deposits OF all kinds, and bank balances, or
over eight () per cent gold reserve against
Iour ana IOur-tentnS t4-4D per cent gold re-
serve held by the British banks.
These figures convey some idea not only
of the great extent to which banking trans
actions IN Great Britain are conducted on
creolt and not on actual currency, but also
now greatly this vast structure of British
credit rests upon the Bank of England
whose gold reserve may well be compared
TO the keystone Of the arch supporting the
mighty burden.
This being true the Bank of England
cannot too scrupulously safeguard its
credit, upon which so much depends
1T is not forgotten that three times since
1874 the bank has been compelled to sus-
pend payment ir gold, and as lately as 1866,
when this great gold reserve ran down to
mace now in the face of a reasonable GER
tainty that the bank must soon part with
more or less gold for shipment to the
United States and already has raised the
discount rate to 2h per cent. This plan
of raising the rate of discount Is put into
operation every time there is a natural
demand for gold for shipment, to check
the outflow, and the bank goes further and
deliberately borrows large amounts in Lon
don al the same time to lock I'D funds and
MAKE gold hard to get.
There must be something radically
wrong with any system which necessitates
an interference with the natural law of
supply and demand, and one of these de-
fects in the banks plan is. think, that
$o5,OO0OO of its notes do not represent ac-
tual gold deposited, but a government debt
on open account. and another that the
British banks hold too little cash in their
own vaults and depend too largely upon
the Bank of England. For myself L prefer
the American system of more free and in
dependent banking, and not putting too
many eggs in one basket as in the Bank
of England