Richmond dispatch. [volume] (Richmond, Va.) 1884-1903, 1897-03-18
GERMANS BANKING SYSTEM.

The March No. Of the Bankers Maga-
zine contains an article on THE Imperial
Bank of Germany" which presents some
exceedingly interesting facts regarding
the operations of the German banking
system. especially the operation Of its
eastic-currency feature. The general
German system is based somewhat upon
the English system, though in the former
Is permitted a degree of currency eXpan-
sion that could not obtain under the
latter. unless the English banking act
were suspended Again. the Imperial
Bank of Germany and the state banks
working under the same law are not
like the Bank of England. required TO
hold public securities against their au-
thorized circulation, but must hold at
least one third of the amount in metallic
currency. and the remainder in good
commercial paper.
II is, however, as above Indicated, the
excess Of circulation subject TO spe-
cial tax. which marks the radical de-
parture of the German from the English
system of note-issues. This emergency
circulation. which may be issued By the
Imperial Bank at any time upon bust
ness assets, is subject to tax of per
cent. per year. As the excess above the
authorized limit including the notes
fully covered by coin, seldom lasts more
than n few weeks. the law prescribes
that the tax shall be computed upon the
weekly excess at the rate of five forty
IS &c
near as may be to per cent. annually
computed by the week. The bank. there
fore. in extending accommodation to
commerce and the money market, it
will be seen. is hampered only by the
rate of interest While money is so
plentiful that the interest rate keeps
down the per cent, there is no tempta-
ton to increase the circulation. The
moment that the interest rate goes
higher, there is a profit in expanding the
circulation beyond the limit, and the eX-
pansion almost invariably occurs The
system, II is contended is hardly capa-
Bile of abuse because the interest rate
must fall again If the bank exceeds the
limits of prudence in it's issues and makes
money plentiful and the fall Of the rate de-
stroys the profit on the excessive circu-
lation. The notes which are received
on deposit and in settlement Of dis
counts are retired and cancelled, and the
circulation is quickly brought within the
legal limit.
The article in question then goes on
to say that the German system has
worked almost as admirably in supply
ing an elastic currency as the Scotch and
Canadian systems have done within their
respective fields OF action; and, in order
10 an Illustration of the automatic work
Ing Of the circulation feature, quotes the
following from Berlin letter:
That the Reichsbank is admirably
adapted to meet the varying demands OF
trade Is well known by the variations IN
its note circulation in September ana
October The nine weekly statements OF
The bank from August S0th 10 October
3lst inclusive showed the following
changes I'm the note-circulation: August
goth Increase $4,000; September 6th'
decrease. s76S coo; September 18TH. de-
crease. s2,45O.OO0; September 25d. increase,
$4,000: September 3Oth, increase. S@'-
10000; October 7th, decrease SlZ'ONOOJ;
October 10TH, uecfedse, $ivflvfsNNvf OClObti
2sd. decrease SlO000,00O; october 3st, in
crease, 100000
The article. while citing as proof Of
the general safeness and soundness Of
the system the faa that it has passed
successfully through several severe
strains. admits that the remarkable ex-
pansion In recent years of German com
mercial interests has developed some
weakness In the law--that is TO say, the
law has become somewhat antiquated,
and certain reforms are needed in order
20 adjust more thoroughly the system TO
the needs Of changed conditions. Ger
many is. therefore. but in an infinitely less
degree, confronted in her banking sys-
TEN with problem similar 20 the prob
lem that confronts US IN our national
banking system. That problem is. how
10 bring banking sauarely up to date.
But there Is still this radical difference
IN the conditions IN the two countries;
0eTmapy's system is already Vastly IN