THE BANKING SYSTEM. From the Government Gazette.

New Zealander, Volume 3, Issue 129, 25 August 1847, Page 4

THE BANKING SYSTEM.

From the Government Gazette.

Private and Joint-stock Banks. — The Ilalian merchants who, under the name of Loinbutds, settled in Kuglfiud during (lie tliirtcetilli century, and previously to that time the Jews, performed the greatei part of the money business of the country. They were not, however, bankeis in the modern acceptation of the woid, and, in (act, the business of banking does not ap pear to have been can ied on among us ear)>er than flic middle oi the 17th century. The gold smiths of London, who, before tliat time, had restricted their Hade in money to the purchase and sale of loieign coin, then extended their business by honovung mid lending money. The latter part of their business— that of lending— wuspiineipally transacted with the King, to whom lltt 1 ) made advances on tins security of the taxes. The taking of interest for the use of mone) Mas not tendered legal in England until 1516, when the rate that could be demanded was fixed at 10 per cent. In 1024 the legal rate was reduced to 8 per cent., and a further deduction to 6 per cent., took place in 1051. The merchants of London had been used to deposit their money forsecuiity in tin Mint, in the Tower of London, whence they drew it out as occasion demanded $ but in the year ] 040, King Ghailes I, took possession of £200,000 thus lodged, which of course put a stop to that practice. This state of things preceded, and, most probably, led to the extension of the business of the goldsmith as just explained. This business soon became very considerable, and was found convenient to the government. In 1G72 King Charles 11., who then owed £1,328,520 to the bankers, boi rowed ut 8 per cent., shut up the exchequer, and for a time i efused principal or interest, thus causing great distress among all clashes of people. Yielding to te clamour raised against this dishonest y, the King at last consented to pay 0 per cent., but the principal sum was not discharged till forty years afterwards. There are three private banking houses 6lill carrying on business in London which ■were established before the Bank of England. — The London bankers continued for some time after that event to issue notes, but have long since ceuseil to do so, acting solely as depositaries of money, discounter! of bills, and agents for bankers established in the country. No rcstiiction has ever existed which prevents private banks in London, having not more than six part* no it, from issuing their notes, payable to beaierj that they have ceased to do so has arisen from the conviction that paper money, issued on the security of only a small number of individuals,

could not circulate profitably joint-stock association. Private bankers in London do not make any charge of commission to their customers, and generally grant considerable facilities to them, both by discounting bills and by temporary loans I'iiher with or without senility. Even where this kind of accomodation is nut required, it is almost a matter of necessity for every merchant or tinder, carrying on considerable business, to have an account with a banker, thiough whom he makes his payments, and who Mill take from him the daily trouble of presenting bills and checks for payment. The profits of London bankers are principally dot ived Horn discounting mercantile bills, either for their customers, or through the intei vention of Irokers, for other parlies. They have great facility, as far as regards the security of this business, from the unreserved confidence which they are accustomed to place in one another, as U> the credit of their respective customers. The Clea ving-house.— The great amount of money transactions daily carried on in London, and which has been estimated at nearly four millions, has led to the intervention of a simple and ingenious method for economising the use of money. Almost all the payments aie in the form of cheques upon bankets, or of bills of exchange, addressed to bankers for payment. At three o'clock every afternoon a clerk Horn e.ich hanking house proceeds to a house in Lom-bard-street, called the clearing housi*, taking with him all the drafls on other bankers which have been paid into his house that day, and depobiu them hi drawers allotted to the different bankeis. Another clerk is. afterwards sent, who dclivcis to the first all the drafls paid into the banking house up to four o'clock, and these are flisli ihtiicd in the manner already described.— lie then gives credit to each respectively for the amount of drafts on his own bank, which he finds in his own drawer. Balances are then struck, and the claims thus found aie transferred fiom one accouni to another, and so wound up and cancelled that each cleik has to settle with probably only two or three others, and transactions to the extent of millions are settled by the employment of £200,000 to £300,000 in » ank notes On the dajs appointed for the settlement of the accounts at the Stock Exchange, the money transactions thus settled are miicli larger than at other times, and have amounted to nearly 15 millions The money required for the ultimate settlement is not, however, mci eased pioportionallv, and hasseldom exceeded half a million. The bills, or chedes, which bankers do not choose to pay, are returned after the dealing to the houses by whom they were piesented, ana by whom the amount is then refunded. Drafts which are not yet paid in until alter four o'clock are 6ent to the banking houses upon which they are drawn, to be maiked for payment the follow-

ing day, and this proceeding, which has been adopted for the convenience of Ihe bankers making up their accounts daily ut a certain hour is of the same effect as regards the drawers, and the persons by whom the drafts are paid in, at if the payment had been made. There were very few country bunks in England established pievious to the American war, but after the conclusion of that contest, their numbeis increased greatly, In 1793 they were subjected to heavy losses consequent upon the breaking out of the war, and twenty-two of them became bankrupts. Country banks in England are, all of them hanks of deposit and of discount; they acts as agpnts for the remittance of money to and fro from London, and for effecting payments between different p.irls of the kingdom. The greater part of them are 'also banks of issue, and their notes are, iv many cases, made payable at some bunking house in London as well, or at the place iv here they aie •issued. A moderate rate of interest, from 2to 2\ per cent , is allowed by country bankers upon deposits which remain with them for any period beyond six months ; some make this allowance for shorter periods. The poition of funds in their hands, arising from deposits and issues, which is not required for discounting bills and making advances in the coun try, is invested in government or mercant'le securities in London, which, in the event of a contradiction of deposits or issues, can be made immediately available. The establishment of hanks throughout the kingdom has contributed materially to the growth of trade. Without them it could hardly he possible fop a manufacturer, employing any great number of hands, to collect the money required to pay llie weekly waives of his people. It is not a valid argument against their utilily that occasionally, by the facilities ihey have afforded, the tendency to over-trading has been encouraged— l here are few benefits which are not capable of being abused ; but it is to be hoped that the light which has been thrown upon the nature of th is branch of business will be the means of checking the evils without much diminishing the good which it is calculated to effect. It has been urged that country banks have never paid attention to the state of the exchanges or the circulation of the Bank of England as indications whereby to regulate their own issue, but that they have always been anxious to put out their note*, whenever they could do so, upon what they considered good security. The vicious system has received a material check from the suppression of all notes under £5 value, a measure which arose out of the investigation which followed the memorable panic of 1825. The act of 22nd March, 182G, by which this change was effected, provided for the gradual withdrawal of small notes Irom circulation by prohibiting the future issue of any stamps for that purpose, and declared that their issue should wholly cease on the sth April, 1829. It was on the occasion oi the introduction of this net that the Bank of Knglaud undertook, at the rccom mendalion of government, to establish branches its own in di Heron t parts of the country.

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