The Norfolk weekly news-journal., 1910-03-18
THE BANK OF BELGIUM.
Charles A. conant Tells OF System
Used in Monograph.


bank idea, recently brought into pub
lie discussion in this country by the
speeches of President Taft, will find
material for study and argument in
the monograph on The National
Bank of Belgium" by Charles A. Con-
ant, the well known banker. This
monograph by MIR. Conant was is.
sued by the national monetary COM
mission.
The National Bank of Belgium dates
only from the year 1850 and was af.
forwards made the model of the re-
vision of the Charter of the Bank of
Netherlands and of the National Bank
of Japan. The foundation of the Ma
tional Bank of Belgium followed the
collapse of the system of issuing bank
notes through banks which engaged
largely in financing instead of basing
their issues upon liquid assets. The
errors of previous banking expert.
ments were thus avoided in the en-
actment of the charter of the National
bank and, as Mr.. Conant declares, the
institution bears the stamp Of the
two or three characteristics which
are regarded by many economic stu.
dents as belonging to the ideal bank
of issue"
1t was the banking crisis of 1S4S
which led to definite action by the gov.
eminent In this crisis both the So
ciete Generate and the existing Bank
of Belgium were compelled to sus.
pend payments. The government aid
ed them for the moment by making
their notes legal tender but having de-
manded that they restrict their in
vestments to commercial paper and
this demand having been refused, the
government was in a position to lay
the foundations of the new institu-
ton. From these conditions sprang
the national bank, which was estab-
lished by law of May s. 1850, for a
term of twenty-five years with a cap
ital of 25.000,000 francs ($4,S25000
The charter has been continued by
subsequent extensions, with some
amendments, until 1929, and the CAPT
tai is now 50,000000 francs.
The bank was subjected to a seri-
Gus test of it's solvency and ability to
handle business by the war between
France and Germany in 1870. Belgium
was close to the route of the con-
tending armies but, as neutral coun-
try, was awaited of as the agent of
many financial transactions conducted
by French and Germany tinanciers.
| The bank met the pressure resolutely
by reducing it's holding of foreign
bills. importing gold, and raising the
rate of discount.
The basis upon which the notes of
the bank are issued is convertible
commercial paper maturing within
| short terms. The note issue unlimited
in amount and is not restricted by the
charter as to the proportion of cash
reserve required to be held. The pro-
portion of reserve was left to be fixed
by the statutes of the bank, which are
| a subject of mutual agreement be-
tween the minister of finance and the
administration of the bank. BY this
authority the proportion of cash notes
has been fixed at 1913 per cent, but
the minister of finance has power to
suspend this requirement in an emer-
gency. Foreign bills of exchange have
long been counted as the equivalent of
gold in the reserve and have proved
useful on critical occasions in main
tanning control of the exchanges.
Interest is not paid upon deposits
in the national bank, in order that
such deposits as are attracted shall
be those growing out of commercial
operations and not those partaking of
| the nature of investments made for
| the sake of the interest earned.
Regulation of the money market is
attained in part, as in other European
countries lowered with central bank
of issue, by changing the discount rate.
The problem of money and exchange
| in Belgium has been complicated by
| the large amount of silver coins which
were issued before the suspension of
free coinage by the Latin union in
1873, and by the fact that this silver
has degenerated into the position OF
token coin, kept at gold par largely
through the control exercised by the
national bank over exchange. Gold
has practically disappeared from cir
culation, partly by reason of the is
sue of notes in large amounts down
to the denomination of twenty francs
1886, and partly as the result OF
some hesitation on the part of the
bank to raise the discount rate sharp
ly to Offset the adverse current OF
exchange. The bank has preferred to
large extent the policy of the Bank
of France of replenishing its gold re-
serve at its own expense rather than
by the elevation of the discount rate.
The organization of the National
Bank of Belgium is not unlike that
of the banks of France and Germany.
The governor of the bank is appoint
ed by the king; but the government
has no share in the ownership, and
the administrative boards are chosen
by the shareholders. The state has
kept its hands clean from dipping
into the resources of the bank by
loans, but it has from time to time,
n,;th tho raDauyol Of tho charter add.