One Hundred Years of British Banking

TpE writer of the article upon," Two Hundred Years of British-Banking," which will doubtless appear in the bicentenary number of the. Spectator, will have the great advantage of being able to compare the position in 2028 with that of a century previous. For unless there is to be some great demolition of public libraries in the meantime, full statistics will be available of the banking position in 1928.

In 1828, however, not only were statistical records poorly kept, but owing to the fact that most of the banks were then in the nature of private firms, it is impossible to furnish a reliable record either of the number of banks or of the total deposits of the United Kingdom a century ago. Records show, however, that the deposits in the Bank of England in 1828 amounted to about £7,000,000, whereas to-day the total is nearer to £114,000,000, while the growth in banking deposits in the aggregate has been stupendous. Indeed, in many respects, banking to-day presents striking contrasts with 1828, though, curiously enough, there is one great similarity between the present position and that of a century ago. Then, as now, the country was slowly recovering from a great war and the Dank Act of 1826 was passed eleven years after Waterloo, while to-day, some ten years after the Armistice, we are slowly recovering from the Great War of 1914-18.

A BANKING CENTENARY.

The history of British banking goes, of course, much farther back than the centenary now being celebrated by the Spectator. Yet in one sense it might be said that British banking, as we know it to-day, is also celebrating its centenary. Almost exactly one hundred years ago joint stock banking received its great impetus from the Act of Parliament passed to remove the restriction pre- venting the formation of banks having more than six partners within a certain radius of London. Previously such expansion of joint stock banking had been prevented by a clanse which in 1708 had been inserted in the Charter of the Bank of England prohibiting the establishment of ,any other bank with more than six partners within sixty-five miles of the Metropolis. From about 1888 onwards the history of the rapid growth in joint stock banking enterprise and in the industrial enterprise of the country as a whole may be said to have run almost on parallel lines. The increase in banking and credit facilities played a great part in stimulating industrial activity, but expansion of banking credit was based on the soundest lines, being closely linked to the gold standard.

THE FIRST BIG BANK.

In 1886 the London and Westminster and the London Joint StOek Banks were formed, the London and County following in 1889. For some ten years business was still hampered however, by many legal questions affecting the acceptance of bills, etc., but most of the disabilities were swept away by the Joint Stock Banking Act of 1844, and in 1858 a still further stimulus was given by an Act permitting the formation of joint stock banks with limited liability. Making all due recognition of the services rendered to the country by the private banks, there is little doubt that the original stimulus to joint stock banking was largely supplied by the shortcomings and failures of many of these small private concerns during the latter part of the eighteenth century. Failures were numerous and not a few of the troubles were con- nected with the note issues. Indeed, it was such troubles which finally resulted in the Bank Act of 1844 giving even more attention to the safeguarding of the notes than to the general safeguarding of the system of deposit banking.

SOME CONTRASTS.

I have described this article as " A Study in Contrasts," and because of severe limitations of space, I cannot, perhaps, better outline the progress made in banking and the changes which have taken place in banking conditions during the century than by mentioning a few points of contrast.

In the first place, it is interesting to note the contrast in the number of British banks to-day and those of a century ago. A century ago the number of banking concerns of all sorts and kinds throughout the country ran into many hundreds, although, of course, at that time there were no Oversea Dominion banks such as exist to-day. At the present time, in addition to the oversea banks there are some important private banking firms still in existence, but there are only ten joint stock banks in what is known as the Clearing House. During the early part of the century many of the small banking concerns failed, and although our banking records compare favourably with those of other countries, we have had our great crises of the century, and notably those of 1825, 1847, 1857, 1866, 1878 and 1890. Indeed, the periodicity of these crises at one time created a theory of their inevitability. As a matter of fact, time and experience have really demonstrated that throughout there has been a process of evolution in the direction of increasing strength and a perfecting of the credit system.

AMALGAMATIONS.

Following upon almost every crisis there has been absorption after absorption of small banks by the larger institutions, while, in the years preceding the War and those which immediately followed, the amalgamation movements among even the large Joint Stock Banks attained such proportions as to occasion a halt by general consent. Nevertheless, not the least inter- esting contrast between the position to-day and one hundred years ago is the fact that, whereas everyone in 1828 was concerned with the great number' of banks, to-day the question is sometimes raised as to whether banking facilities have gone into too few hands.

GROWTH IN DEPOSITS.

The greatest contrast of all, however, between banking of to-day and one hundred years ago, is furnished in the remarkable growth which has taken place in the liquid wealth of the country, as expressed in banking deposits. The real growth in banking deposits may be said to have commenced with the establishment of the Joint Stock Bank movement in 1886, from which time the expansion has been persistent. By the year 1890 the total deposits of the country had risen to over £650,000,000, but since then the advance has been far more striking, and some few years ago the total of deposits and note circulation exceeded £8,000,000,000. A large part of the increase at that time, indeed,was directly connected with inflation arising out of the War, but even to-day the total stands at well over £2,800,000,000. Some idea, too, of the increasing activity of the turnover of banking business may be gathered from the statistics of the bankers' " clearings," for, whereas the average daily " clearings " in 1878 was £16,262,000, the average for last year was £135,343,000. For the entire year the figures are even more striking. In 1900, for example, the total was £8,960,000,000, while last year it was £41,551,000,000.

BANKING AND INDUSTRY.

It is sometimes urged that, with the almost complete disappearance of the private banker, the profession is less human than a century ago and the relations between banker and customer are less intimate. In a sense that is true, but it must be remembered that it is not only banking which has changed in those respects, for the growth of the joint-stock system in industry made a corresponding change in the organization of the institutions financing those industries almost inevitable.

REBUILDING THE. CITY.

Evidence of the great physical changes accomplished and in course of accomplishment in the matter of banking structures is patent to anyone taking a ten minutes' stroll through the City to-day, and if citizens of a century ago were now to visit the vicinity of the Bank of England and thelloyal Exchange, they might find the surroundings difficult to recognize. There is a sense, however, in which the new type of buildings, in their magnificence and efficiency of construction, constitute in themselves an expression of the evolution in banking during the century. We have, indeed, gone far from those conditions described so picturesquely in The Tale of Two Cities when, in referring to the premises of the great private banking firm of " Tellson's," Dickens says : " It was an old-fashioned place, but the partners were proud of its smallness, proud of its darkness, proud of its ugliness, proud of its incommodiousness. . . . Tellson's (they said) wanted no elbow room, Tellson's wanted no light, Tellson's wanted no embellishment. Noakes & Co.'s might, or Snooks Brothers might ; but Tellion's, thank Heaven—Any one of these partners would have disinherited his son on the question of rebuilding Tellson's."

To-day the fine buildings which have been reared, and the new structures, including the Bank of England, which have yet to be completed, not merely in their size and beauty, but in their structural adaptation to modern requirements, afford no mean testimony to the part which has been played by British banking in everything pertaining to the growth in size and importance of the Empire. For it must not be forgotten that among the many services performed by banking during the century has been the part played in financing our Oversea Dominions. Whereas a hundred years ago British banking was mainly confined to the financing of British trade, we now have a host of Colonial banks, some working independently and some allied with the English joint stock banks, all, however, concerned in ministering to the requirements of our Empire overseas. In fact, throughout the century the growth in our banking system has been closely linked with the growth in the wealth of the United Kingdom and the development of its Oversea,