1640. Thenceforth they lodged it with the goldsmiths, who began to do banking business in a small way, encouraging deposits by allowing interest (4d. a day) for their use, lending money for short periods, discounting bills, etc. The bank-note was first invented and issued in 1690 by the Bank of Sweden, founded by Palmstruck in 1688.
Bank of England.—The Bank of England, the most important banking establishment in the world, was projected by William Paterson. It was the first public bank in the United Kingdom, and was chartered in 1694 by an act which, among other things, secured certain recompenses to such persons as should advance the sum of £1,500,000 toward carrying on the war against France. Subscribers to the loan became, under the act, stockholders, to the amount of their respective subscriptions, in the capital stock of a corporation, denominated the Governor and Company of the Bank of England. The company thus formed advanced to the government £1,200,000 at an interest of 8 per cent.—the government making an additional bonus or allowance to the bank of £4,000 annually for the management of this loan (which, in fact, constituted the capital of the bank), and for settling the interest and making transfers, etc., among the various stockholders. This bank, like that of Venice, was thus originally an engine of the government, and not a mere commercial establishment. Its capital had been added to from time to time, the original capital of £1,200,000 having increased to £14,553,000, in 1816, since which no further augmentation has taken place. There exists besides, however, a variable “rest” of over £3,000,000. The issue department of the bank was established as distinct from the general banking department, the sole business intrusted to the former being the issue of notes. The bank is now permitted to issue notes against securities to the amount of £18,450,000, but for every note that the issue department may issue beyond this total an equivalent amount of coin or bullion must be paid into the coffers of the bank. The Bank of England notes are, therefore, really equivalent to, and at any time convertible into, gold. At the end of 1919 the total of notes issued was £108,748,000. Notes once issued by the bank and returned to it are not reissued but are destroyed—a system adopted in order to facilitate the keeping of an account of the numbers of the notes in circulation, and so prevent forgery.
The total deposits and post bills of the banking department at the end of 1919 was £199,862,000.
The management of the bank is in the hands of a governor, deputy-governor and 24 directors, elected by stockholders who have held £500 of stock for six months previous to the election. A director is required to hold £2,000, a deputy-governor £3,000, and a governor £4,000 of the stock.
Other English Banks.—The other English banks consist of numerous joint stock and private banks in London and the provinces, many of the provincial establishments of both kinds having the right to issue notes. Private banks in London with not more than six partners have never been prevented from issuing notes, but they could not profitably compete with the Bank of England. The maximum issues of the provincial banks are limited to a certain amount against which they are not compelled to hold gold in reserve, and they have no power to issue against specie in excess of the fixed circulation. Their actual issues are considerably below this amount.
In Scotland there are no private banks, the only banks in that portion of the United Kingdom being the Bank of Scotland (1695), the Royal Bank of Scotland (1727), the British Linen Company (1746), and 10 other joint-stock banks of issue, with many branches. By the act of 1845 new banks of issue were prohibited, a monopoly being given to such establishments as existed in the year previous to May 1, 1845. At the same time the issue of each was limited to the amount of its average circulation during that year, together with the specie held at the head office. Any bank issuing notes in excess of this limit is supposed to hold an equivalent amount in gold.
The banks in Ireland consist of one public or National bank, the Bank of Ireland, 8 joint-stock and several private banks. The authorized note circulation is arranged on the same footing as that of the Scotch banks. If any bank discontinues its issue and issues notes of the Bank of Ireland, the circulation of the latter may be, to an equal amount, increased.
In Canada the banks are not allowed to issue notes of lower denominations than $5, notes for small amounts up to $4 being issued by the Dominion Government; and the banking laws are such that there is no possibility of holders of bank-notes being losers by them.
Bank of France.—Of all other banks, the Bank of France is second in importance only to the Bank of England. It was established in the beginning of the 19th century, at first with a capital of 45,000,000 francs, and with the exclusive privilege in Paris of issuing notes pay-
