ISSUE AND BANKING DEPARTMENTS.
| £ | £ | ||
| Capital | 14,553,000 | Specie and Bullion | 35,842,414 |
| Rest or Reserve Fund | 3,816,736 | Government Debt | 11,015,100 |
| Notes in Circulation | 30,401,185 | Other Securities | 7,159,900 |
| Public Deposits | 10,025,973 | Government Securities | 15,826,080 |
| Other Deposits | 42,695,526 | Loans, Bills Discounted, Securities, etc. | 31,837,516 |
| Seven-Day Bills | 188,590 | ||
| ————— | ————— | ||
| £101,681,010 | £101,681,010 | ||
| =========== | =========== |
1st October, 1902.
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| Ratio % of Specie and Bullion to Liabilities. | Ratio % of Investments and Government Debt to Liabilities. | Total Liquid Assets. | Ratio % of Capital to Liabilities. | Ratio % of Rest to Liabilities. | Total Working Capital. | Ratio % of Loans, Bills, etc., to Liabilities. |
| ———————————————————————————————————————————— | ||||||
| 43·02 | 40·81 | 83·83 | 17·46 | 4·58 | 22·04 | 38·21 |
| ============================================================================== | ||||||
It may be urged that as the gold and securities in the Issue Department are mortgaged to the holders of Bank of England notes, they cannot be treated as ordinary assets, and that is true enough; but when we remember that upon the day in question the Banking Department could have exchanged notes to the value of £21,000,000 for gold, the objection loses much of its force.
However, assuming the Banking Department made the exchange, then specie to the extent of over £12,000,000 and the second and third items on the right-hand side of the balance sheet would be mortgaged to the holders of the notes in circulation, and the Bank, were it in need, could legally neither sell the securities nor apply the £12,000,000 in question to the liquidation of any other debt.
But, practically, there is small likelihood of the Bank of England being drained of specie by its notes, which have always been accepted without demur, even during the most troublous years of its history; and, while remembering that the notes in circulation are secured in the manner aforesaid, we may safely consider the Bank's state of preparedness to meet its total public indebtedness from the point of view that its liquid assets would be more than sufficient to discharge all probable demands made by both holders of notes and depositors.
On the 1st October last the Bank owed on its Notes in Circulation, Public and Other Deposits, and Bills, the huge sum of £83,311,274, which we will call its "Liabilities to the Public." Against this it held £35,842,414 in specie and bullion, which, a glance at the table shows, works out at a ratio per cent. of 43·02. The Bank had, then, £43·02 of the precious metals in hand to meet each £100 it owed to its customers. There is not another bank in the kingdom able to publish a balance sheet showing such a splendid proportion of cash in hand to liabilities—but we must also remember that there is not another bank in the country whose responsibilities are so great and so multifarious.
In the previous chapter it was shown that the Banking Department possessed £44·6 in notes and coin to meet each £100 of the public liabilities included therein, and, moreover, this would be the ratio given by the critics; but we now see that, when the two departments are united, the ratio only works out at £43·02. Strictly speaking, the larger ratio is correct; yet the smaller gives a much truer idea of the Bank's ability to pay off its creditors in cash on demand. Further, as the Bank cannot compel its customers to accept its own notes in discharge of a debt, the ratio £43·02 certainly gives one a more accurate impression of the Bank's position in relation to all its creditors.