The crisis of 1847 was brought on by the speculation in railway enterprise which had gone on since 1845. So little had the anxieties of the autumn been anticipated that the bank rate of discount was 3% on the 1st of January. It was raised to 3½% on the 14th and to 4% on the 21st. It became 5% on 8th April, 5½% on 5th August, 6% on 30th September and 8% on 25th October. This was the highest. It was lowered to 7% on 22nd November, on 2nd December to 6% and on 23rd December to 5%. An announcement was made on the 1st of October that no advances would be made on public securities. This was followed by general anxiety and alarm.

The reserve of the bank was rapidly reduced to a very low ebb.

Bank of England Reserve of Specie.

1847,

16th October

£3,070,000

"

23rd October

1,990,000

"

30th October

1,600,000

Meanwhile the anxiety and alarm prevailing were causing a general hoarding of coin and bank notes, and it really appeared not unlikely that the banking department of the Bank of England might be compelled to stop payment while there was more than £6,000,000 of specie in the issue department. The chancellor of the exchequer (Sir C. Wood, afterwards Lord Halifax) was urged by many deputations and remonstrances to relax the Bank Act, but he declined. At last, on the 22nd or 23rd of October, some of the leading city bankers had an interview with the prime minister (Lord John, afterwards Earl, Russell), and on their explaining the necessities of the position, the desired relaxation was given. The official letter (25th October) recommended "the directors of the Bank of England, in the present emergency, to enlarge the amount of their discounts and advances upon approved security." A high rate, 8%, was to be charged to keep these operations within reasonable limits; a bill of indemnity was promised if the arrangement led to a breach of the law. The extra profit derived was to be for the benefit of the public. The effect of the government letter in allaying the panic was complete.

The crisis of 1857 was the last occasion of an official inquiry. This is contained in the Report and Evidence of the Select Committee of the House of Commons on the Bank Acts (1857, 1858). The evidence given by Mr Sheffield Neave, the governor, and Mr Bonamy Dobree, deputy-governor of the bank in 1858, gives a vivid picture not only of what occurred, but of what might be expected to recur on such occasions. The wildest alarm prevailed, exchequer bills were scarcely saleable, and the bank itself sold £3,000,000 government securities at a considerable loss.

The extreme pressure was relaxed by the letter issued by the government on the 12th of November 1857, signed by Lord Palmerston, then premier, and Sir G. C. Lewis, which allowed a temporary relaxation of the Bank Act of 1844. The public alarm, however, was so great that it was not until the 21st of November that the severity of the pressure was in any way diminished. On the 20th of November the notes issued to the public on securities beyond the statutory limit (then £14,475,000) reached the sum of £928,000. By the next week the issue was almost down to the limit, and in the week following it was within the limit. On the 1st of January 1858 the bank rate was lowered to 8% and the anxiety gradually passed away. Had the treasury letter been issued earlier, the pressure might not have been so severe, and the governor of the bank expressed a strong opinion that, if it had been later, it would not have been sufficient. November 1857 was the only occasion when the limits of the Bank Act as to issue were actually passed.

During the crisis of May 1866 £4,000,000 left the bank on one day in notes and coin, and the reserve of the bank was reduced in the return of the 1st of June of that year to £415,000. The bank rate was raised to 10% and permission was given by the government to suspend the act. This, however, was not done. Tradition says that the bank asked the bankers, during the period of heaviest pressure of that terrible crisis—pressure more severe than anything that had taken place before or that has occurred since, to pay in every night the notes they had drawn out in the morning which were still in their tills at the close of the day, and that hence the legal limit was never exceeded. But it was not till the 6th of August that the rate was reduced to 8%.

The effect of the crisis of October 1890 was far less severe. This was due to the judgment and skill displayed by the governor (Mr Lidderdale) and the directors of the bank, who imported £3,000,000 in gold from Paris. The reserve in that year never dropped below £10,000,000, and before the end of November the anxiety had greatly passed away. "Caution prevailed, but not panic, and the distinction is a very clear one." (See arts. on "Crises," Dictionary of Political Economy, vol. i.)

The most important requirement of banking in the United Kingdom is still the establishment of an efficient specie reserve. The reserve in the banking department of the Bank of England averaged:—

£8,500,000 in 1845.

£11,600,000 in 1875.

8,400,000 in 1855.

15,100,000 in 1885.

8,000,000 in 1865.

29,900,000 in 1895.

£23,500,000 in 1906.