Everybody's Guide to Money Matters / With a description of the various investments chiefly dealt in on the stock exchange, and the mode of dealing therein - of Exeter F.S.A. William Cotton

At the head of the joint-stock banks of London is the Bank of England, which, like the private banks, do not take deposits upon which interest is allowed, but rely upon the cash at their dis- posal in their customers' accounts for their profits. In all other respects their mode of transacting business is much the same as that of other joint-stock banks. Accounts may be opened by merchants and traders, and by private individuals of known respectability, and no par- ticular sum is required to be lodged upon open- ing the account. Formerly cheques were not allowed to be drawn for a less sum than £10, but now there is no restriction as to the amount. The profits of the bank are chiefly made by dis- counting bills of exchange, which is done to an enormous extent. A bill of exchange is an in- strument by which a party who is owed money by another party, and accords to him the benefit of delay in payment, for a fixed period, draws on him in a form of order to that effect.

For instance, the firm of Bullion & Co. have sold to John Robinson certain goods, which need not be specified, as the principle applies in all cases, whether it be bankers, merchants, or traders, and for all transactions where one party is indebted to another. The form drawn by Bullion & Co. on John Robinson, which requires to be stamped according to the amount, would be as follows:-

The acceptance of the obligation by John Robinson is written across the face of the docu- ment, and he makes it payable, as most bills are for convenience, at a London bank, pre- sumably the London agent of his own bankers at Liverpool. Payment becomes due three months after date, with three days of grace added according to custom. Probably Bullion & Co. would find this £500, if in cash, useful in their business, and supposing the parties to be of good repute, they can readily convert it by discounting this bill at their bankers or at a bill broker, who, deducting a small amount in the shape of discount, will hand over the balance to the firm, or carry it to the credit of his account. It is this discount that constitutes the profit to the banker, and the rate varies according to the value of money, whether it is plentiful or scarce.

The rate of discount is supposed to be regu- lated by the Bank of England, and the "bank rate," which is arbitrarily fixed by the directors, is moved up and down (sometimes for other reasons than the value of money), and is sup- posed to be the rate of discount for bills of the best description. It is found in practice, however, that when there is an abundance of money seek- ing employment, bills are discounted at lower rates.

The Bank of England make purchases and sales of British or Foreign securities, and divi- dends on stocks will be received and placed to account. Exchequer bills, bonds, railway deben- tures, or any other securities may be deposited, and the interest, when payable, will be received and placed to a customer's account free of charge. Cash boxes (contents unknown), plate chests, and deed and security boxes are also received for customers for safety, free of charge, and all other banking facilities conceded, as are given by the Blankshire Bank.

The other joint-stock banks of London trans- act their business in all respects in the same manner as the Bank of England. In addition they invite money on deposit, allowing interest on the same. Sums of money lodged on deposit, and they may be by persons who are not other- wise customers, are not carried to a customer's account, but, as in the case of the Blankshire Bank, are placed on a special form of receipt which is changed for a new one when the in- terest or any part of the principal is withdrawn. The rate of interest allowed by the Blankshire Bank, and by the country banks generally, is a fixed one, but that of the London banks is regulated by the value of money, and fluctuates from time to time, notice being given by adver- tisement in the London newspapers of any change in the rate. Deposits are received by the London bankers "at call," that is, payment may be required on demand; or at an arranged term of notice of repayment. The rate of in- terest on money at call is less than where notice is required, and the longer the period of notice the higher the rate of interest.

In Scotland there are no private banks, and in Ireland only two. The joint-stock banks are numerous, and their mode of business is practi- cally the same as in England, indeed the English system is founded on that practised by the Scotch many years before the joint-stock bank was general in England.

CHAPTER IV. INVESTMENTS.

GOING back to the parcel of securities which Miss Smith received from her lawyer, we will presume that they represent safe investments of various kinds. It will be prudent, however, to ask her banker to examine them to see if any, in his judgment, might be sold with advantage (either on account of doubtful character or ex- ceptionally high price), and the money invested elsewhere. This business the bank will transact for her; and in the matter of investment, in addition to using her own common sense as to the nature of the securities in which she should place her money, she should seek the advice of her banker, and rely very much upon his opinion.