The Bank, then, on 1st October last, held £44·6 in notes and specie in the Banking Department to meet each £100 it owed to its customers. Yet we say "as safe as the Bank of England," when, as a matter of fact, the Bank could not pay its debts on demand; and, paradoxical as it may seem, so the Bank is safe, because its credit is so good that no man in England would ever dream of questioning its stability, for, if he did, he would only be laughed at for his pains. Again, comparatively speaking, the Bank of England is certainly safer than its rivals, and when we consider, in so far as its customers are concerned, the huge amount of its capital and reserve, it is evident that it is by far the safest bank in the land for depositors, as the larger the capital of a bank the greater is the guarantee of the customer against loss.
We have seen that the notes and coin in the Banking Department work out at a ratio per cent. of 44·6 to deposits; but as notes are not legal tender by the Bank of England, its creditors can refuse to accept them in discharge of a debt. This £21,391,145 of notes might, however, have been exchanged for gold with the Issue Department at any moment, so that the Bank could have paid off 44·6 per cent. of its liabilities on the day in question—a huge proportion.
It may be objected that, as a certain portion of its gold is held in bars, which would have to be sent to the Mint for coinage, the Bank could not discharge its debts quite so rapidly, and the contention would be perfectly true. But, assuming this exchange were made, £12,226,185 in gold would remain in the Issue Department to meet £30,401,185 of notes in circulation. The Bank, of course, could not then pay one half of its notes were they presented; but such a demand is almost outside the bounds of probability. Still, it is one of those extremely remote possibilities which no prudent Board of Directors can afford to forget; and we may be quite sure that this fact has not been overlooked by the Bank, which can always protect its gold by raising its discount rate.
In the next chapter another view will be taken of the Bank of England's weekly balance sheet.
CHAPTER IV.
The Issue and Banking Departments Combined.
In the preceding chapter the Issue and Banking Departments of the Bank of England have been discussed separately. Strictly speaking they can, of course, only be so treated, as each division stands alone; yet the notes in the Banking Department undoubtedly form a connecting link between the two divisions, seeing that they make the one department by far the largest single creditor of the other. Therefore it is intended in this chapter to discuss the return as a whole, to place the totals in the Issue Department back in the Banking Department, and to ascertain the Bank's exact state of preparedness to meet all its liabilities. The following table will enable us to do this: