True, it would have been a great national calamity to have had the Bank of England note inconvertible for ever so short a time; but it is doubtful whether it would have materially affected its value. But who can picture the consequences of a suspension of the banking department? And would the most extreme supporter of the Act of 1844 advocate pushing matters to such a length as to insist that the Bank of England should commit a practical act of bankruptcy for the sake of locking up certain millions of bullion in its cellars for the benefit of one class'of its creditors, that being the especial class who did not want it?

It is generally assumed, as a matter of course, that the securities and bullion in the issue department are the absolute property of the holders of notes; this does not appear to be stated in the Act; certainly it has not been judicially decided to be so, and in all probability never will be.

The point is only alluded to here for the sake of mentioning a practical anomaly, if the above view be correct; that whilst in the event of the bankruptcy of a bank of issue the note-holder has no priority over the rest of the creditors, should such a misfortune happen to the Bank of England, the note-holders would be fully secured.

The answer probably lies in the fact that Bank of England notes are, whilst country notes are not, a legal tender.

It is a matter of great controversy whether the Bank of England is bound to consider anything beyond its own interests; whether it is any part of its duty to keep a larger reserve than is requisite for its own needs. It has even been proposed that the restrictions on the issue should be removed, and instead a sliding scale of discount should be adopted to vary with the amount of reserve. If such a scale could be worked, which it assuredly could not, it would be eminently unjust; but the fatal objection to it is that the Bank has not the command of the money market. The Directors cannot fix the rate in the open market, and under such a rule the Bank rate would be constantly above or below the market. It must also be remembered that a foreign drain of bullion and a domestic drain require totally different treatment, the latter being generally of a special and temporary character.

Till within a comparatively recent time it has been supposed on all hands that the Irish and Scotch banks of issue were precluded from carrying on business in England. Now, however, a great difference of opinion exists on the subject, and several Scotch banks have opened offices in the North of England and also in London. The National Bank of Scotland led the way in London, the Bank of Scotland followed suit, and the Royal Bank, who were by their charter prohibited from transacting business out of Scotland, have now obtained an Act of Parliament releasing them from this disability and joined the invaders.

The representatives of the Scotch banks say that the change in the course of business in the north has of late years tempted their customers to open accounts in London, and that the instinct of self-defence caused them to offer the facilities that would otherwise have been obtained through the existing banks in the metropolis.

The London bankers, and the provincial bankers in the northern counties of England, who are at present chiefly affected, say that banks of issue in Scotland are prevented by existing laws from carrying on business in England. It is also contended on their behalf, and with much truth, that inasmuch as English bankers, though not legally, are practically excluded from Scotland, it is not just that Scotch banks should be allowed to come to England. It is, therefore, demanded that, if the law as it now stands will not prevent such unfair competition, fresh legislation may be resorted to for the purpose.

The reasons why the English banks are unable to carry on business in Scotland are, as already mentioned, rather practical than legal. There the only legal tender is gold, but by long habit the Scotch have come to prefer the £1 notes as the circulating medium. If, therefore, an English bank crossed the border, as the Act of 1845 would prevent their issuing their own notes, they would either be obliged to obtain notes for ' till' purposes from the other banks, who naturally would not be anxious to assist their rivals, or they would have only gold to offer, which would be unacceptable to the Scotch public.

The Scotch position is that by the Act of 1826 all restrictions to the opening of branches of Scotch banks in England beyond the sixty-five miles' radius were removed, and that they could then issue notes in England, even the small ones. That in 1828 their power to issue £1 notes in England ceased, but that up to 1833 they could still have issued notes of £5 and upwards. That by the Act of 1833 they were permitted to establish themselves in London, but that if they availed themselves of this privilege the right of issue in England beyond the sixty-five miles' radius would lapse.

In the early part of 1875 Mr. Goschen, one of the members of Parliament for the City of London, brought in a bill in the interest of the English bankers by which it was proposed that English banks of issue should be restricted to the provinces in England, Scotch banks of issue to Scotland, and Irish banks of issue to Ireland. This bill was not passed, but was shelved pending the report of a select committee which sat during the whole of the session of 1875, took a large amount of evidence, and recommended their reappointment in 1876, which for some reason or other did not take place.

The Scotch banks gave a sort of undertaking to the Chancellor of the Exchequer (Sir Stafford Northcote) that they would open no more branches either in London or the provinces until the question was legally settled.

It can hardly be denied that the English bankers have a grievance. Upon what principle can it be required that the National Provincial Bank of England should lose their issue on commencing business in London, whilst the Bank of Scotland, under exactly similar circumstances, retain theirs ? Nor is there much force in the argument that it would be unjust to England to deprive its commerce of the use of the Scotch surplus capital. In the first place it may be taken for granted that if the Scotch banks cannot employ their funds in Scotland these funds will find their way to England through the bill brokers or London agents even if Scotch banks are excluded; and secondly, the English banks may safely be trusted to supply any quantity of capital that trade may require. Nor is there any danger that the absence of competition will lead to undue rates being charged for accommodation. Any practical banker knows well that the tendency is rather in the opposite direction.

It is to be hoped that a favorable occasion may shortly present itself for the consideration of the question by Government, and in the interests of all parties that a satisfactory settlement may be arrived at. It is generally agreed that it was the intention of the framers of the Bank Acts that the English, Scotch, and Irish banks should be restricted to their own countries; that being the case justice requires that if an advantage accrues to the Scotch and Irish banks or the public through an oversight, some compensation should be made to the English banks. So far as any expression of opinion has emanated from the Government, it indicates the existence of an intention of settling this matter by the introduction of a larger measure for dealing with the paper currency of the United Kingdom.