BANK CHARTER ACT.

Press, Volume L, Issue 15037, 4 August 1914, Page 10

BANK CHARTER ACT.

WHAT. SUSPENSION MEANS

BANK OF ENGLAND'S POWER.

(SPECIAL TO "THE PRESS.") WELLINGTON, August 3. The following information regarding the operations of tho Hank Charter Act of 1844 were supplied to your representative to-night ny Mr Harold Beauchamp. chairman of tho Bank of New Zealand:—" "By tho Act of IS4-1 regulating tho note issue of the country, the Bank of England becamo the eolo source from which legal tender notes can bo obtained—a power important.at all times, .but preeminently so in timo of pressure. The authority to supply tho notos is required when the notes needed by the public exceed in amount the limit fixed. The Act of 1841 was granted by the Government 3t the request of the Bank on three occasions only, between 1844 and 1906, hence tho Bank of England becomes the centre of interest in times of pressure, when a 'Treasury letter,' permitting an excess issuo is required, and holds then a power the force of which cau hardly be estimated. "If, through any circumstance (and this is the important point) the Bank o.*- England bo callod upon for a larger sum in notes or specie than tho notes held .in . its banking department amount to, permission has to be obtained from the uovernment to 'suspend the Bank Act,' m order to allow the demand to bo met, whatever tho -amount.-.of_specie in" the. 'issue department' may be.- - "Three*times since the passing of the Bank Act—during the crises of 1847, 1857, and 1866 —authority has been given for the suspension of that Act. On one of these dates only—in 1857 — the limits of the Act were exceeded.,On tlio other two occasions tho fact that the permission had been given-stayed the alarm. • "Bytho Act of 1844 the issue of notes was restricted to an issuo or £14.000,000 (since increased to £18,----450,000) against Government securities (of which the Government debt to the Bank was to form nart)l The remainder ofithe issue' was to be against bullion and 'specie, and to -. he governed in amount by the. fluctuations in the stock of bullion and specie.''