'issue circulation', the portion of it in the hands of the public being the
'active circulation', and that still in the banking department being the
'note reserve'. This 'note reserve' represents really the amount of bullion
in the issue department available for the use of the banking department. Of
the other items in the account it may be noted that the proprietors' 'rest'
is a varying surplus increased always by accumulated profits up to 5th
April and 10th Oct., when the bank dividends are paid to the shareholders;
and that the public deposits, which include sums lodged on account of the
customs, inland revenue, &c., increase through revenue receipts until the
dividend terms in January, April, July, and October. The other or private
deposits comprise those of bankers, merchants, and other persons. An
increase in these private deposits indicates an increase of monetary ease,
while a decrease informs us that bankers, merchants, and traders have calls
upon them for money. A better indication of the demand for money is
furnished, however, by the advances on commercial securities, and it is by
this and the condition of the reserve that the bank rate of discount is
regulated. When the reserve is high and the advances moderate the discount
rate is low, and it is raised according as the reserve falls and advances
are more in request, especially during an adverse foreign exchange and
drain of gold. Gold is thus restrained from going abroad, and its influx
into the country is encouraged. In addition to the profit which the bank
may make by ordinary banking business, by the Bank Act of 1892 and the
Revenue Act of 1906, it receives an allowance for the management of the
national debt, at the rate of L325 per million on 500 millions, and L100
per million on all debt above that sum. The annual sum is not to be less
than L160,000. It also derives a profit from foreign gold coin and bullion
brought to it, for which it pays L3, 17s. 9d., or 1-1/2d. per ounce less
than the real value.
The management of the bank is in the hands of a governor, deputy-governor,
and twenty-four directors, elected by stock-holders who have held L500 of
stock for six months previous to the election. A director is required to
hold L2000, a deputy-governor L3000, and a governor L4000 of the stock. The
court or board of directors meets every Thursday, when the weekly account
is presented. The Bank of England has branches in Liverpool, Manchester,
Newcastle, Birmingham, Leeds, Hull, Bristol, Plymouth, and Portsmouth.
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. No union can take place
between a joint-stock bank and a private bank, or between two joint-stock
banks of issue, without one of them losing its issue. Their total
authorized circulation is about L2,958,900, but the actual circulation of
these banks is now only about L1,200,000, being distributed among about
eighteen private and about twenty joint-stock banks. The notes of these
banks are payable in Bank of England paper. The greater number of
joint-stock banks are of limited liability, though their liability in
respect of their notes is unlimited. Some of them have a large number of
branches. All the joint-stock banks allow interest on money deposited with
them. The total paid-up capital and reserves of the English joint-stock
banks is about L100,000,000.
_Scotland_.--In Scotland there are no private banks, the only banks in that
portion of the United Kingdom being eight joint-stock banks of issue, and
their branches (the Mercantile and Savings not being banks of issue). By
the Act of 1845 new banks of issue were prohibited, a monopoly being given
to such establishments (nineteen in number) as existed in the year previous
to 1st May, 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 of gold. The aggregate
authorized circulation is now L2,676,350; the average actual circulation is
fully L7,000,000. The Bank of Scotland, established by Act of Parliament in
1695, had for its original capital only L100,000, increased to L200,000 in
1744; but it now has a capital of L1,325,000 paid up. It remained the only
bank in Scotland till the Royal Bank of Scotland was established in 1727,
with an original capital of L151,000, which has grown to L2,000,000 paid
up. The British Linen Company was incorporated in 1746, for the purpose of
promoting the linen manufacture, but soon became a general banking company;
capital, L1,250,000 paid up. These three banks claim to be by their
charters banks of limited liability. All the other Scottish banks have been
established within the nineteenth century. They are all incorporated by
royal charter or Act of Parliament, which enables them to sue and be sued
as a corporation, and latterly they have all become banks of limited
liability, except that their liability is not to be limited in respect to
their note issue. The total paid-up capital of the Scotch banks is
L9,300,000. A large number of one-pound notes circulate in Scotland, thus
tending to keep the requirements for gold low. From allowing a moderate
rate of interest on deposit accounts (although not on current accounts) it
is not uncommon for depositors in Scottish banks to lodge their money
permanently as an investment; and the habit of keeping an account with a
banker is much more general in Scotland than in England, branch offices of
the banks being very numerous. Several of the Scotch banks have branch
offices in London, but of course they cannot issue their own notes from
these offices. The Scotch banks have enjoyed a high reputation for
stability, and though public confidence was somewhat shaken by the failure
of the Western Bank in 1857, and even more rudely by that of the City of
Glasgow Bank in 1878, their shares are generally looked upon as a safe and
remunerative investment. Their total deposits amount to fully L107,000,000.
_Ireland._--The banks in Ireland consist of one public or national bank,
the Bank of Ireland, and of sundry joint-stock and 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. The authorized circulation is L6,354,494; the actual circulation
is sometimes a little above, sometimes a little below. The Bank of Ireland,
which was established by charter in 1783 with similar privileges to those
granted to the Bank of England, has lent the greater portion of its capital
to Government. Its capital is L2,769,230 (or L3,000,000 Irish); it has also
a rest or reserve of over L1,000,000. The bank allows interest on deposits
when lodged for a stated period.
_Banque de France._--The Bank of France is second in importance only to the
Bank of England. It was established in the beginning of the nineteenth
century, at first with a capital of 45,000,000 francs, and with the
exclusive privilege in Paris of issuing notes payable to bearer, a
privilege which was extended in 1848 to cover the whole of France. It has
numerous branches in the larger towns, a number of these having been
acquired in 1848, when certain joint-stock banks of issue were by
Government decree incorporated with the Bank of France, the capital of
which was then increased to 91,250,000 francs (L3,650,000), in 91,250
shares of 1000 francs each. In 1857 the capital was doubled, and besides
this it has a large surplus capital or rest. Like the Bank of England, it
is a bank of deposit, discount, and circulation, and is a large creditor of
the State. The Government appoints the governor and the two
deputy-governors, who are all required to be stockholders. There is also a
body of fifteen directors and three censors, nominated by the shareholders.
The value of its note circulation in March, 1922, was 36,225,852,000
francs.
_British Colonies._--With regard to the banks in British colonies little
need be said. All the more important are joint-stock concerns, and they are
carried on subject to Acts passed by the respective colonial legislatures.
Some of them have their head-quarters in London, and have been established
by English capital. In Canada the banks are not allowed to issue notes of
lower denominations than five dollars, notes for one and two dollars and
higher amounts 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. The total paid-up capital of the Canadian banks is about
L20,000,000; their total deposits about L135,000,000.
_United States._--The more important of the banks of the United States are
what are called national banks, established in accordance with an Act
passed in 1863. Associations of this kind at starting must invest at least
a third of their paid-up capital in Government bonds, which pay them an
interest of 4 per cent more or less. They then obtain from the Government
bureau, established for the purpose, 90 per cent of paper-money sheets,
which they sign and pay out, this constituting their note circulation.
These banks pay no interest to depositors. Besides the notes of these banks
a large portion of the currency of the United States consists of Government
notes issued from the national treasury. There are also banks chartered by
the different States and private banks.
_Savings-banks_ are banks established for the receiving of small sums, so
as to be taken advantage of by the poorer classes, and they are carried on
entirely for the benefit of the depositors. They are of comparatively
recent origin, one of the earliest having been an institution in which
small sums were received, and interest allowed on them, established by Mrs.
Priscilla Wakefield, at Tottenham, near London, in 1803. The first
savings-bank in Scotland was formed in 1810 by the Rev. Henry Duncan, of
Ruthwell, Dumfriesshire. In 1814 the Edinburgh savings-bank was established
on the same principles, and the system soon spread over the kingdom. The
first Act relating to savings-banks was passed in 1817. By it all deposits
in savings-banks, as soon as they reached L50, were placed in the hands of
the National Debt Commissioners, who allowed interest on them. In 1824 it
was enacted that the deposits for the first year should not exceed L50, nor
those in subsequent years L30, the total deposits being limited to L150,
and interest ceasing to be paid when accrued interest made the total L200.
By the Act of 1893 the limit of annual deposit was raised to L50, and the
interest is now rather less than 3 per cent. An Act of 1833 had provided
for the purchase of Government annuities by depositors either for life or
for a term of years; and an annuity of any amount up to L100 may now be
obtained. Depositors in savings-banks (by an Act of 1880) can also have
their money invested for them in Government stock, the banks collecting and
paying the dividends; and when accrued interest raises an account above
L200 the excess is now so invested for the depositor. The total amount
invested by one person in Government stock is not to exceed L500, nor L200
in one year. These banks are managed by local trustees having no personal
interest in the business, and by certain paid officers. A new class of
savings-banks, namely, _Post Office Savings-banks_, was established in
Britain in connection with the money-order department of the Post Office in
1861. Any sum not less than a shilling is received, provided that the total
amount banked does not exceed L50 in one year, or more than L200 in all;
the excess of accrued interest above this being invested in Government
stock. Interest is paid on every complete pound at the rate of 2-1/2 per
cent. For the deposits the Government is responsible, and they may be drawn
from any Post Office Savings-bank in the kingdom. These savings-banks have
become very numerous, and much of the funds formerly in the trustees'
savings-banks has been transferred to them. The total amount deposited in
the old banks is now about L52,000,000, in the new about L157,600,000. The
regulations regarding the purchase of Government stock and annuities
correspond with those given above. Savings-banks are now well known in all
civilized countries, and the good they have done is incalculable. In the
United States there is an enormous amount of money deposited in them. Post
Office Savings-banks have been proposed to be established in the States,
but have not yet been so. In Canada, Australia, and other British colonies
they are established, as well as savings-banks of several other kinds.
School savings-banks are the most recent institutions of this kind, and
have had a marked effect for good.
_Bank Holidays_, in England and Ireland, Good Friday, Easter Monday, Whit
Monday, first Monday in August, Christmas and following day, or 27th (if
next day is a Sunday); in Scotland, New-Year's Day, first Monday of May and
August and Christmas.
BANKRUPT (from It. _banca rotta_ 'bank broken' or 'bench broken'. Dr.
Johnson said that the word originated from the Italian custom of breaking
the bench of an insolvent money-changer; but _rotta_ also means
'interrupted' or 'stopped', and is here used more in the sense of our
colloquial word _broken_, and means 'insolvent'), a person whom the law
does or may take cognizance of as unable to pay his debts. Properly it is
of narrower signification than _insolvent_, an insolvent person simply
being unable to pay all his debts. In England up till 1861 the term
_bankrupt_ was limited to an insolvent trader, and such traders were on a
different footing from other insolvent persons, the latter not getting the
same legal relief from their debts. In all civilized communities laws have
been passed regarding bankruptcy. At present bankruptcy in England is
regulated by the Bankruptcy Acts of 1883 and 1890, which have as one chief
feature the intervention of the Board of Trade in the proceedings, with the
object of obtaining full official supervision and control. A bankruptcy
petition may be presented either by a creditor or a debtor. A creditor's
petition must be founded on a debt of not less than fifty pounds, due to
one or more creditors, and on an 'act of bankruptcy' committed by the
debtor within three months before the presentation of the petition. A
debtor commits an act of bankruptcy if he makes a conveyance of his
property to a trustee for the benefit of his creditors; if he makes a
fraudulent transfer of any part of his property; if, to defeat or delay his
creditors, he conceal himself either at home or abroad; if execution issued
against him has been enforced by seizure and sale of his goods under
process in an action in any court; if he files in court a declaration of
inability to pay his debts, or presents a bankruptcy petition against
himself; if a creditor has obtained a final judgment against him for any
amount and he fail to pay the judgment debt without satisfactory reason; or
if the debtor gives notice to any of his creditors that he has suspended,
or is about to suspend, payment of his debts. In London jurisdiction in
bankruptcy now rests with the High Court of Justice, while the county
courts continue to have jurisdiction in bankruptcy outside the London
district. When the court is satisfied as to the petition, a 'receiving
order' is issued to protect the debtor's estate by constituting the
official appointed by the Board of Trade receiver of the debtor's property,
and to stay the remedies of all creditors until the meeting of creditors.
The debtor must make out a full statement of his affairs, accounting as
best he can for his insolvency. The official receiver summons the meeting
of creditors, a summary of the debtor's affairs being sent to each creditor
with the notice of the meeting, which is also advertised in the _London
Gazette_. The creditors must send to the official receiver, one day before
the meeting, sworn proofs of their claims to enable them to vote. At the
meeting the creditors (unless the debtor's proposal for a composition or
scheme be entertained) pass a resolution adjudging the debtor bankrupt, and
appoint a trustee of the bankrupt's property, with a committee of
inspection selected from their own body to superintend the administration
of the bankrupt's property by the trustee, who divides the available
realized assets amongst all creditors who have sent sworn proofs of claims.
Rates, assessments, and taxes, and all wages or salary of a clerk, servant,
labourer, or workman during four months before the date of the receiving
order not exceeding L50 are paid in priority to all other debts. The
trustee is required to give satisfactory security to the Board of Trade, by
which his accounts are audited not less than twice in each year. All moneys
received by the trustee under the bankruptcy must be paid forthwith to an
account kept at the Bank of England by the Board of Trade, called the
'Bankruptcy Estates Account'. The debtor is bound to be publicly examined
upon oath in court, and any creditor who has tendered a proof, or his
representative, may take part in the examination. Until the debtor has
passed his public examination he cannot apply for an order of discharge,
and upon proof of misdemeanour the court refuses or suspends the discharge.
A discharged bankrupt is disqualified for five years from acting as member
of Parliament, justice of peace, alderman, overseer of the poor, county
councillor, or as a member of any school, highway, or burial board. An
undischarged bankrupt obtaining credit to the extent of L20 or upwards from
any person, without informing such person of his status, is guilty of a
misdemeanour. By the Act of 1883 the creditors may at the first meeting
resolve to entertain a proposal for a composition or scheme of arrangement
of the debtor's affairs, but the composition or scheme shall not be binding
on the creditors, unless confirmed at a second meeting by a majority in
number representing three-fourths in value of all the creditors who have
proved. The composition or scheme has then to be formally brought before
the court for approval, which may be refused. A composition or scheme may
be sanctioned by the court after the debtor's adjudication as a bankrupt,
and in this case the bankruptcy is annulled. Though imprisonment for debt
has been abolished, fraudulent bankrupts may be punished, and the conduct
of prosecutions for offences arising out of any bankruptcy proceeding falls
to the public prosecutor. The estates of persons dying insolvent may be
administered according to the law of bankruptcy. The Act of 1913 embodies
suggestions of the Bankruptcy Law Amendment Committee of 1906. Thus, the
Summary Jurisdiction Act can now be applied to offenders under the Debtors'
Act. Whereas previously conviction for such offences as failure to keep
proper accounts and concealment of debt could only be by trial before a
jury, they are punishable after summary trial before a stipendiary
magistrate or justice of the peace, the onus of proving innocence falling
on the debtor. A married woman, too, may be made bankrupt even if not
trading separately from her husband.
According to Scots law bankruptcy is notorious insolvency, that is, a
public acknowledgment of inability to discharge obligations. By a judicial
proceeding, called _sequestration_, authorized by the Court of Session or
sheriff court, on the petition of the debtor himself with the concurrence
of one creditor swearing to a debt of L50, two whose debts together amount
to L70, or of any number of creditors whose debts together amount to L100;
or on the petition of a creditor or creditors to the foregoing extent
without the concurrence of the debtor, if he has clearly shown himself to
be insolvent (or a _notour bankrupt_), the whole estates and effects of the
debtor, real and personal, are legally taken for behoof of the creditors.
The debtor's estate is then made over to a trustee chosen by the creditors,
the trustee being charged to bring the whole estate into the form of money,
with certain precautions, and to receive, investigate, and reject or admit
the claims of the creditors, subject to review of the Court of Session or
sheriff court by summary petition. The debtor, and all who can give
information as to the estate, must submit to public examination on oath
before the sheriff of the county, and the debtor may thereafter, or by
petition after six, twelve, or eighteen months from sequestration, be
discharged of all debts by the court with consent of the creditors or a
number of them, or at the expiry of two years without consent. These
proceedings may be partly superseded by 'composition' if such be assented
to by a majority in number and nine-tenths in value of creditors, or by a
majority in number and four-fifths in value of the creditors, according to
the period at which such arrangement may be proposed. They may also be
terminated by a deed of arrangement entered into between the bankrupt and a
majority in number and four-fifths in value of his creditors, approved of
by the court. Before a discharge is given there must be a report from the
trustee as to the conduct of the bankrupt, whether he has complied with the
provisions of the Act, whether his bankruptcy is culpable or not, &c.
Before the abolition of imprisonment for ordinary civil debts by Act passed
in 1880, an insolvent debtor often took advantage of a form of process by
which, on making a complete _cessio bonorum_, or surrender to his creditors
of all his property, he might obtain protection from imprisonment. Though
no person can now be imprisoned for ordinary debts, a creditor of a
_notour_ bankrupt may present a petition to the sheriff, praying him to
decern that the debtor assign over all his goods for behoof of his
creditors and that a trustee be appointed; and this proceeding is still
designated a process of _cessio bonorum_. The Act of 1880 also provides for
the better punishment of fraudulent debtors in Scotland. If the debtor's
liabilities exceed L200, the sheriff may award _sequestration_ of the
debtor's estate instead of _cessio bonorum_. There is no appeal from the
sheriff's decision with respect to discharge.
In Ireland there is a special code of bankruptcy contained in special Acts,
differing to some extent from the regulations prevailing both in England
and Scotland. Thus in Ireland it is not an offence for an undischarged
bankrupt to obtain credit to any amount without disclosing the fact of his
bankruptcy. All bankruptcy business comes before the court at Dublin,
Belfast, or Cork. Imprisonment for debt was abolished in 1872.
Official returns in Great Britain show a tendency towards a smaller number
of failures, but a larger amount of money is involved.
In the different British colonies the laws regulating bankruptcy naturally
differ, and the same is the case with the individual States of the American
Union, though Congress has the power of legislating for the whole country
in regard to this, and has oftener than once done so.--BIBLIOGRAPHY: H.
Goudy, _Treatise of the Law of Bankruptcy in Scotland_; Sir R. H. J.
Palgrave, _Dictionary of Political Economy_; E. T. Baldwin, _The Law of
Bankruptcy and Bills of Sale_; Sir R. L. V. Williams, _The Law and Practice
of Bankruptcy_; R. Ringwood, _The Principles of Bankruptcy_.