Banjoemas (ba˙n´yö-ma˙s), a town in Java, near the centre of the island, well built and of commercial importance; it is 22 miles from the coast, and is the residence of a Dutch governor. Pop. 6500.
Banking and Banks. Banks are establishments for the deposit, custody, and repayment on demand of money, and obtain the bulk of their profits from the investment of sums thus derived and not in immediate demand. The term is a derivative of the banco or bench of the early Italian money-dealers, being analogous in its origin to the terms trapezītai (trapeza, a bench or table) applied to the ancient Greek money-changers, and mensarii (mensa, a table) applied to the public bankers of Rome.
In respect of constitution there is a broad division of banks into public and private; public banks including such establishments as are under any special state or municipal control or patronage, or whose capital is in the form of stock or shares which are bought and sold in the open market; private banks embracing those which are carried on by one or more individuals without special authority or charter and under the laws regulating ordinary trading companies. In respect of function three kinds of banks may be discriminated: (1) banks of deposit merely, receiving and returning money at the convenience of depositors; (2) banks of discount or loan, borrowing money on deposit and lending it in the discount of promissory notes, bills of exchange, and negotiable securities; (3) banks of circulation or issue, which give currency to promissory notes of their own, payable to bearer and serving as a medium of exchange within the sphere of their banking operations. The more highly-organized banks discharge all three functions, but all modern banks unite the two first. For the successful working of a banking establishment certain resources other than the deposits are of course necessary, and the capital paid up by shareholders on their shares and forming the substantial portion of their claim to public credit is held upon a different footing from the sums received from depositors. It is usually considered that for sound banking this capital should not be traded with for the purpose of making gain in the same way as the moneys deposited in the bank; and it is for the most part invested in Government or other securities
subject to little fluctuation in value and readily convertible into money. But in any case prudence demands that a reserve be kept sufficient to meet all probable requirements of customers in event of commercial crises or minor panics. The reserve of the banking department of the Bank of England is always in coin, or in notes against which an equivalent value of coin and bullion is lying in the issue department. In other English banks the reserve is usually kept partly in gold and partly in Government stocks and Bank of England notes; but it sometimes lies as a deposit in the Bank of England. The working capital proper of a bank is constituted by moneys on deposit, for which the bank may or may not pay interest; the advantages of security, of ease in the transmission of payments, &c., being regarded in the cases of banks little affected by competition as a sufficient return to the depositor. Thus the Bank of England pays no interest on deposits, while the contrary practice has prevailed in Scotland since 1729, where interest is paid on deposits although not on current accounts.
Of the methods of making profit upon the money of depositors, one of the most common is to advance it in the discounting of bills of exchange not having long periods (seldom more than three months with the Bank of England) to run; the banker receiving the amounts of the bills from the acceptors when the bills arrive at maturity. Loans or advances are also often made by bankers upon exchequer bills or other Government securities, on railway debentures or the stock of public companies of various kinds, as well as upon goods lying in public warehouses, the dock-warrant or certificate of ownership being transferred to the banker in security. In the case of a well-established credit they may be advanced upon notes of hand without other security. Money is less commonly advanced by bankers upon mortgages on land, in which the money loaned is almost invariably locked up for a number of years. To banks of issue a further source of profit is open in their note circulation, inasmuch as the bank is enabled to lend these notes, or promises to pay, as if they were so much money and to receive interest on the loan accordingly, as well as to make a profitable use of the money or property that may be received in exchange for its notes, so long as the latter remain in circulation. It is obvious, however, that this interest on its loaned notes may not run over a very extended period, in that the person to whom they are issued may at once return them to the bank to lie there as a deposit and so may actually draw interest on them from the bank of issue; or he may present them to be exchanged for coin, or by putting them at once into circulation may ensure a certain number speedily finding their way back through other hands or other banks to the establishment from which he received them. A considerable number of the notes issued will, however, be retained in circulation at the convenience of the public as a medium of exchange; and on this circulating portion a clear profit accrues. This rapid return of notes through other banks, &c., in exchange for portions of the reserve of the issuing bank, is one of the restraints upon an issue of notes in excess of the ability of the bank to meet them. In the United Kingdom a more obvious restraint upon an unlimited note issue, originating partly in a desire for greater security, partly in the belief that the note augmentation of the currency might lead to harmful economic results in its influence upon prices, is to be found in the Bank Acts of 1844 and 1845, which impose upon banks of issue the necessity of keeping an equivalent in gold for all notes issued beyond a certain fixed amount. The wisdom of these legal restrictions, which are not uniform throughout the kingdom, and the desirability of the acquisition and control by the State of the whole business of issue, are still matters of debate.
In specific relation to his customer the banker occupies the position of debtor to creditor, holding money which the customer may demand at any time in whole or in part by means of a cheque payable at sight on presentation during banking hours. For the refusal to cash a cheque from the erroneous supposition that he has no funds of his customer's in his hands, or for misleading statements respecting the position in which the bank stands, the banker is legally responsible. Moreover, the law regards him as bound to know his customer's signature, and the loss falls upon him in event of his cashing a forged cheque. In their relations to the community, the chief services rendered by banks are the following: By receiving deposits of money they are the means by which the surplus capital of one part of a country is transferred to another where it may be advantageously employed in stimulating industry; they enable vast and numerous money transactions to be carried on without the intervention of coin or notes at all, thus obviating trouble, risk, and expense. The mechanism by which the last of these benefits is secured is to be found in perfection in the London Clearing House.
The modern tendency of banks is towards amalgamation. The large English banking institutions have absorbed many of the smaller banks. They have also made working arrangements with Scotch and Irish banks and with similar institutions abroad.
The result of these amalgamations is to give control of immense financial resources to a smaller number of banks. In 1918 the
Government appointed a Committee to inquire into the effect of such amalgamations and absorptions. The terms of reference were: "To consider and report to what extent, if at all, amalgamations between banks may affect prejudicially the interests of the industrial and mercantile community, and whether it is desirable that legislation should be introduced to prohibit such amalgamations or to provide safeguards under which they might continue to be permitted"; and the Committee reported: "That legislation be passed requiring that the prior approval of the Government must be obtained before any amalgamations are announced or carried into effect".
In order, however, that such legislation may not have the effect of producing secret amalgamations, the Committee decided that "all proposals for agreements which would alter the status of a bank as regards its separate entity and control, or for purchase by one bank of the shares of another bank, be also submitted for the prior approval of the Government before they are carried out".