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own sake, annually publish an account of its assets and liabilities, verified by two auditors of known character and standing, so that the public may be fully satisfied that the rules and regulations for the efficient management of the affairs of the bank, on which alone depends the public safety and its own, are strictly complied with by those entrusted with the direction of its affairs.
ON THE LAWS, CUSTOMS, AND PRACTICES OF BANKING IN SCOTLAND.
1. The general provisions of the Law of Scotland in respect to Banking.
2. On the Special Law regulating the issue of Notes in Scotland.
3. The difference between the English and Scotch Banks. 4. Some Account of the Origin of Cash Credits.
5. All the Scotch Banks allow interest on Current and Deposit Accounts.
6. How Scotch Banks are supported. 7. The Exchange Banks of Scotland.
1. The general provisions of the law of Scotland in respect of banking were, previous to the 8 & 9 Vict. cap. 38, very different to those of England or Ireland, and even the following are still in force:
1. There is no limitation of the number of partners in banks, whether private or joint-stock.
2. The private fortune of every partner is liable for the debts of the bank.
3. Land as well as every other property may be attached for debt; and as all land in Scotland is registered, it is easy for any individual, by referring to the records, to ascertain what landed property is possessed by the partners of a bank, and also whether or not it is encumbered.
The Register Office in Edinburgh is a remnant of the
old established Ecclesiastical Court during the time that Catholicism was the acknowledged religion of the country. The clergy of that day were empowered to determine civil pleas as well as ecclesiastical. The names of all the parties who refused or neglected to pay the clergy dues or other debts were registered in an office called the Register Office, and after a certain number of days the creditors were empowered to seize either the person or property of the debtor.
The holders of all unpaid bills that have been duly protested may at any time, within six months after their dishonour, produce such bills and protest, when the same will be registered in the court books, and in six days from the registration execution may be issued against the debtor without any further process.
To entitle the holders of dishonoured bills to this privilege there must be no alteration, interlineation, erasure, or ambiguity on the face of the bill. Notice of non-acceptance or non-payment to the parties implicated on the bill must be strictly attended to.
The bill must be duly protested, and the protest be extended and recorded: if for non-acceptance, against the drawer and endorser.
Action on bills of exchange is cut off by limitation in England and by prescription in Scotland after the lapse of six years. In the former case an acknowledgment in writing or a partial payment will interrupt the limitation, but prescription cannot be so interrupted. It can, however, be interrupted by an action, and after it has run against the bill, the consideration on which the bill was given may be proved from other sources.
The Act 7 & 8 Vict., cap. 38, requires the banks in Scotland to keep a much larger amount of gold in their coffers than heretofore. This has had the effect of inducing the banks to increase their charges; for as the gold yields no interest they found their profits decreased. To make up for this loss the charges for discount and advances have been increased.
The Act, however, has not been able to create in the minds of the people of Scotland a fondness for gold. Hence, when the amount of the circulation gets beyond the legal standard, gold is sent from London to Édinburgh, and is quietly locked up in the vaults of the bank,
and when no longer required is returned to London. Of course this process is a loss to the banks of issue, but still it is in this way a much less loss than if the gold was circulated, and a corresponding amount of their notes withdrawn from circulation.
2. The 8 & 9 Vict., cap. 38, regulates the future issues of notes by the banks in Scotland without distinction, and compels them to make weekly returns to the stamp office of the amount of notes in circulation, and of the gold and silver in hand. Although the Act does not prevent the issue of one pound notes, but only limits the maximum amount of circulating paper, it absolutely confers a monopoly on the existing banks by preventing the formation of any future banks of issue. This is one of its most objectionable points, and the only one that made the law palatable to the banking interest of Scotland.
All banks, except the Bank of Scotland, the Royal Bank of Scotland, and the British Linen Company, must annually, between the 1st and 13th January, send to the stamp office the names of all the shareholders in the bank.
3. The differences between the English and Scotch banks are as follows:
1. The Scotch banks are all joint-stock banks. In England there is a mixture of joint-stock and private banks.
2. The Scotch banks are nearly all banks of issue. In England there are many both private and jointstock banks that are not banks of issue.
3. The Scotch banks generally have branches. In England most of the private banks and many of the joint-stock banks have no branches.
4. The Scotch banks, universally, allow interest on the balance of current accounts-a practice not usually adopted in England, especially in London. 5. The Scotch banks issue notes as low as one pound. In England notes under five pounds are absolutely prohibited.
6. The mode of making advances by way of cash credits is general in Scotland, but very rare in England.
4. Cash credits have been so frequently described as to render any lengthened notice respecting them unnecessary; suffice it to say, that the bank which first opened a cash credit opened it with an individual shopkeeper, who, instead of putting the money he daily received in exchange for his goods into his till, handed it over to the banker, and left his own till with only the change which he could not well do without.
When the tradesman required to make payments, he drew a cheque on the bank, the banker giving in return the notes of the bank. That was the process adopted on their first introduction, when there was only the notes of the one bank and a metallic currency. If we apply the same principle where there are thirty branches, the result would be the same, but the proportion between the parts would vary.
5. The Scotch banks have carried the practice of receiving money at interest to the utmost extent, and the deposit business forms a very important branch of the banking system of Scotland. Deposits for any amount from ten pounds and upwards are received.
The whole or any part of the deposit may be withdrawn at the pleasure of the depositor, without any notice.
Interest is allowed on the deposit from the day it is lodged in the bank until the day it is withdrawn.
The balance of a current account bears interest at the same rate as though it were a permanent deposit.
The system of banking in Scotland is an extension of the provident bank system. Half-yearly or yearly the depositors go to the bank, and add the savings of their labour, with the interest that has accrued from the previous half-year or year, to the principal.
In this way it goes on, without being at all reduced, accumulating till the depositor is able either to buy or build a house, or till he is able to commence business as a master in the line in which he has hitherto been a servant.
6. Almost every individual throughout Scotland, who has by trade or otherwise accumulated capital, becomes a partner in the banking establishment in his immediate neighbourhood, or otherwise interests himself in its
This is, in truth, the foundation of the unlimited credit