REPORT OF TIIE SELECT COMMITTEE OF THE HOUSE OF COMMONS
ON BANKS OF ISSUE.
Your Committee. in prosecuting the inquiry intrusted to them by the House, have examined evidence and called for various accounts, for the pureose of elucidating the natnagernent of the affairs of the Bank of England :ince the last renewal of its charter ; and also of ascertaining the amount of the circula• tion of the oilier Lanka issuing notes payable on demand, throughout the United Kingdom during the same period.
- at has been required from the Bank of Eugland.
• k Banks of Ireland have furnished accounts of ae of the Private and Joint-Stock Banks of England. aa,der it to be only just and due, bath to the Bank of a.rious parties, to state that the greatest readiness has . turhishing all the accounts which your Committee have
s idence whicli your Committee Lave taken, they, in the
• . -everal oitnesses, who stated generally the eials which in tb• opinion, been caused by the trianagement of before theM two of the Directors of the .., detailed information as to the management l• al *their intention to have aroceceled, in the s of' such with/as:es as, roight hate- afforded . manfie‘frnent t,f otber of of the ads -ses oe the part of- f be tiiat it Y. (1111,1 durin:.!
‘.f 0.-it With • • :,•, ••■11' Committee thought x it • io, Ix of wit nesxi, Nstud to , 'or : t•.• virticulat attention
ao f;x:., am: ssI..evideuce upon thi io fore them.
iv:count far their
a to • oo Cm main imi,jx.c't of tic ir ; f, lh, 11,111Itt.lrg tic tte• /Hoot.: • ' , the.'" ate fully aw cr fittl.,,,•.;;,.!•,f • I.', f.; I ‘.111 oee heiree • f f.t, r,f frc,cuu szazoitiiag tic J vt:o.r :tr,;,ortbnt a their isocAtigarerr, Accounts containing the most minute information upon every point which it appeared to your Committee desirable to call fur relating to the Bank of England have been furnished by the Bank. The Private and Joint•Stock Banks in England and Wales have sent, through the Stamp•office, returns of their issues, from week to week, for the bat six years.
A similar asio : •-•• been furnished by the various banks in Scotland, which inform. before The Las:.
week duziny The PrI, • their issues .7 Your Com rr.
England an,1 to Th• Leen sbar. i.
requ:red. Wit:. r• first
IL tielavt: < the circ,..:•:* Esak of I. , the 'fa:: Tifat r;l• • . , wa• rds 'the •
Beek of lb!
present .• • • ether Inst.:. • , it more
IOrnzctomc c.:.•• • ' •
- seat in returns of its liabilities, and assets for every
They also submit, in the appendix, the accounts to which they have before referred; in which, as well as In the evidence, they feel confident that much valuable information will he found upon the subject of their inquiry: a renewal of which they would earnestly recommend to the early attention of the House in the next session of Parliament.
In the course of the inquiry into the management of the affairs of the Bank of England, the attention of your Committee has necessarily been directed to the principle by which it was stated in the evidence taken before the Batik Charter Committee, in 1838, that the Bank was in ordinary circumstances guided in the regulation of its issues. The principle has been restated to your Committee, Mr. Horsley ralmer's evidence, in the following questions and answers- " Chairman—As it was mainly your evidence given before the Bank Chartet Committee in 1832 which contained the exposthou of the principle by which in ordinary times the Bank is guided in the regulation of its issues, will you have the goodness to restate that principle to the Committee will restate it in as nearly the same words as I can. The principle, with reference to thr period of a full currency, and consequently par of exchange, by which the Bank has been guided in the regulation of its issues, always excepting special circumstances, has been to retain an investment in securities, hearing interest to the extent of two-thirds of their liabilities, the remaining one-third being held in bullion and coin ; the reduction of tlw circulation, as far as may be de- pendent upon the Bank, being subsequently solely effected by the foreign ex- changes or by internal extra detnand.
Did you not also state it as desirable, in ordinary circumstances, that the severities should be retained at nearly the same amount ?—Yes; the object of retaieing a fixed amount of' securines by the Bank. at the period alluded to, and continuing it afterwards, as far as may be practicable, is to throw the ac- tion of' the increase or decrease in the circulation upon the public, with re- ference to the state of the foreign exchanges, in the import or export of bullion. " Are the answers which you have now given a fitly exaosition of the prin- ciples upon which the conduct of the Bunk. hiss been regulated shire the period of the renewal of its charter S—I should say certainly, always taking into con. sideration the extraordinary ch•cumstances that have intervened."
Your Committee would imon this point wish to call the attention of the House to the evidence of the two Bank Directors who have been examined, Mr. llorshy Palmer and Mr. Norman from which it ;imams that in ECVCI;;: inttanct:S since I;:-82 the rule then laid down has not liven adhered to ; and doubis have been expressed as to the soundness of its principle as applicable to the Bank of England, front its mixing up deposits and circulation. It appears. however, at the same time, from the following questions and answers in Mr. Norman's evidence, that the Bank Directors conceive that this rule has re- ceived some sort of legislative sanction, in consequence of which they feel bound to adhere to it, as nearly as circumstances will permit, and that on a .mpression-
particular occasion they were fettered by this "Referring to the accounts of the Batik, does it not nppear that the drain, in the first quarter of 18e38, fell almost enth•ely upon the deposits of the Bala.
and in no degree upon the circulation believe that it fill almost wholly upon the deposits. "The effect, then, which You anticipated in a former part of your evidence, front any reduction of circulation during a drain, did nut take place during that quarter?—No, not to any considerable extent. " 'Would it not have been expedient that tau Bank should in that quarter have taken some further measures for the reduction of the circulation, looking to the rapid. drain which was going on ?—The Bank considered itself at that time hound to adhere as nearly as it could to the principle of' holding a fixed amount ot' securities, that. principle having been to a certain extent recognized by the LegLlatuse and the public ; but if I am asked now, with my present experience, whether it would not have been wise in the Bank to have taken eat her measures, I must say that I think it would have bcen wise so to do."
Without entering into the question either of the soundness of the rule, or of the degree of sanction which it may be supposed to have received from the Legislature, your Committee are clearly of opinion that such an impression on the part of the Directors of the Bank of' England ought oot to prevent them from adopting any other principle of management which, after then' further experience, and upon mature consideration they may consider to be bate) adapted to the primary object of preserving, under all circumstances, the con- vertibility of their notes.