As regards the items appearing on the credit side of the Issue Department’s weekly balance sheet, the Government Debt stands at the same figure as at the passing of the Act.
Other Securities have risen in accordance with the provisions of the Act, and are doubtless of a first-class character, although no information is vouchsafed to us as to the actual securities held.
The remaining item of Gold Coin and Bullion of course fluctuates with the amount of notes issued; the department is something like an automatic machine in this respect—you put in gold and take out notes, and you put in notes and gold comes out. The Issue Department is not only compelled to issue notes in exchange for sovereigns, but also for gold bullion—in bars or foreign coin—at the rate of £3 17s. 9d. per ounce of standard fineness. Any bullion the Bank acquires in this manner it is at liberty to send to the Mint and have converted into coin; but as a matter of fact, a large amount is retained in the form in which it is received, that is, in bar gold and foreign coin. If an export of gold is in progress the exporter can, of course, obtain five sovereigns for every £5 note he presents; but it frequently suits his purpose better to draw bar gold or foreign coin in exchange for his notes, and the Bank is at liberty to charge what it likes for so accommodating him. The price usually charged by the Bank for its bar gold is £3 17s. 10½d. per ounce, but if the demand is pressing it will raise its price to perhaps £3 17s. 11d. Above this figure it is not effectual to raise the price, or sovereigns would, in that event, be drawn and melted down. A similar course as regards sale is in vogue for dealing with foreign coins, and the Bank makes a small profit on such transactions.
BANKING DEPARTMENT
Turning now to the return of the Banking Department, the first item which appears is Proprietors’ Capital, which stands at the enormous figure of £14,553,000—enormous in itself, and enormous in comparison with the capitals of other and competing banks. From the original sum of £1,200,000 with which the Bank commenced business in 1694, the capital has gradually increased until it amounted to the present figure in 1816, since which year there has been no alteration.
The Rest in the Bank of England Return is an accumulation of undivided profits, and compares with the Reserve Funds of other banks. It now stands at about the same figure at which it stood in 1844; and it is never reduced below the sum of £3,000,000. The Bank has also a further reserve in the valuable asset of its premises in the City—the very finest site in London—no credit being taken for the value of this item.
Taking the Proprietors’ Capital and Rest together, we see that the Bank has a total working capital of about seventeen and a half millions, which is far above that of any other Bank, both in amount and in proportion to liabilities. This large capital forms, of course, an element of great strength, but the profit which is earned is so spread out on such a sum, that the actual dividend paid is small in comparison with that of many ordinary joint-stock banks. The dividend paid during the last ten years has averaged 9½ per cent., having been at the rate of 10 per cent. since the end of 1896. The price of Bank Stock has fluctuated between 311 and 367 during the same ten years.
Public Deposits include the balances of the Exchequer, Savings Banks, Commissioners of the National Debt, and Dividend Accounts. This is a very variable item, and its fluctuations at certain seasons of the year have a marked effect on the Money Market. On the 14th of January, 1903, Public Deposits stood at just over eight millions, and on the 25th March, 1903, at over sixteen millions, this increase being due to the collection of taxes at this season of the year, which gradually sweeps away a portion of the balance of other banks, and draws a large sum from the pockets of the people. The increase of the balance of Public Deposits reaches a maximum about the end of March, when the collection of taxes comes to an end.
This gradual accumulation of an extra sum of £8,000,000 in the hands of the Bank of England naturally affects the amount of money which other bankers have at their disposal for lending purposes, and money being thus scarcer, borrowers have to pay more for the use of it. Hence it follows that during this season of the year a tightening of the rates charged by bankers for accommodation is generally seen. After the end of the financial year on the 5th April, the Government generally commences to disperse its large balance by paying its various bills; and this disbursement, together with the dividends on public stock which are paid at the beginning of April, quickly alters the position; money becomes plentiful in the hands of ordinary bankers, and the rates charged for the use of it consequently fall away. From this time on to about the beginning of December, Public Deposits gradually decrease, although there is generally a slight rise at the end of each quarter, followed by a fresh fall immediately after the quarter, this movement being due to the payment of dividends.
Other Deposits include the balances of the ordinary customers of the Bank, both in London and the country, and also the balances kept by bankers with the Bank of England. The balances of the ordinary customers of the Bank are subject to the same conditions and fluctuations as are the balances of the customers of other banks, but the bankers’ balances are of another class. Every “clearing” bank must keep an account with the Bank of England, in accordance with the rules of the Clearing House, as will be explained later. Most other London bankers also keep an account there, as well as many country bankers. The aggregate of the bankers’ balances forms a large proportion of the “Other Deposits.” Up to the year 1877 the total of bankers’ balances was stated as a separate item in the Weekly Return, but this practice was discontinued at that time. In the year 1877—the last year of separate publication—these bankers’ balances averaged about nine and a half millions, but the amount has doubtless largely increased since that time.