These banking Credits are, for all practical purposes, the same as Money. They cannot, of course, be exported like money but for all internal purposes they produce identically the same effects as an equal amount of money. They are, in fact, Capital created out of Nothing What the amount of Banking Credits may be in England we have no means of knowing: for many banks in England publish no accounts. But in Scotland we have a complete account of banking statistics: and, by the official returns, it appears that in 1884 there were, in Scotland, £108,582,418 of Banking Credits maintained on a basis of £4,226,258 in cash: which was, for all practical purposes, an augmentation of £104,356,160 to the monetary resources of the country. It is usually estimated that the commerce of Scotland is about one-tenth part of the commerce of the whole kingdom. We may, therefore, estimate roughly that the total amount of Banking Credits in this country exceeds £1,000,000,000 4. Thus the student must carefully observe that in the technical language of commerce a "banker is a trader who issues his own Credit, in various forms, for Money and Debts. This species of business, no doubt, originated with the money changers: but yet money changing is not "banking." Nor are "bankers" money lenders in all cases whatever they issue nothing but their own Credit, which, however, is exchangeable for money. Exchange operations consist in dealing in specie and bills: dealings in bills are termed "Banking" operations. Mr. Norman even called drawing an ordinary bill a "banking expedient" On the Relation of a Banker to his Customer, as his Agent, or Trustee, or Bailee of Specie, and Banking Securities 5. Besides, however, the simplest and most ordinary relation between bankers and their customers, as exchangers of Money and Debts, bankers do undertake trusts, and enter into fiduciary relations with their customers. They receive sums of money, which are specifically directed by their customers to be appropriated to some special purpose, as well as securities, and other valuable property, such as Stock, Shares, &c., to receive the dividends, &c., on behalf of their customers; they receive Bills of Exchange on behalf of their customers, and collect them for their customers, in exactly the same manner as they do for themselves, and are answerable to them for any loss incurred through any negligence in not complying with the known usages of commerce. Bills of Exchange, Stock, Shares, Exchequer Bills, &c., are called Banking Securities In such cases as this, the property in these valuable securities does not pass to the banker; he is the mere Agent, Trustee, or Bailee of his customer, and he has to obey his specific instructions in each case, and if he appropriated them to his own use, it would be criminal. Moreover, in the event of his bankruptcy, the property in such things would, manifestly, not pass to his assignees 66 The temptation to a banker to use, for his own benefit, the valuable securities entrusted to his care, is so great in times of commercial pressure, that it has been enacted, by the Larceny Act, 24 & 25 Vict. (1861), c. 96, s. 75-" As to frauds by Agents, Bankers, or Factors.-75. Whosoever having been entrusted, either solely or jointly with any other person, as a Banker, Merchant, Broker, Attorney, or other Agent, with any Money, or Security for the payment of Money, with any direction in writing to apply, pay, or deliver such Money or Security, or any part thereof respectively, or the proceeds, or any part of the proceeds of such Security, for any purpose, or to any person specified in such direction, shall, in violation of good faith, and contrary to the terms of such direction, in any wise convert to his own use or benefit, or the use or benefit of any person other than the person by whom he shall have been so entrusted, such Money, Security, or Proceeds, or any part thereof respectively and whosoever having been entrusted, either solely or jointly with any other person, as a Banker, Merchant, Broker, Attorney, or other Agent, with any Chattel or valuable Security, or any Power of Attorney for the sale or transfer of any share or interest in any Public Stock or Fund, whether of the United Kingdom, or any part thereof, or of any Foreign State, or in any Stock or Fund of any Body Corporate, Company, or Society, for safe custody, or for any special purpose, without any authority to sell, negotiate, transfer, or pledge, shall, in violation of good faith, and contrary to the object or purpose for which such Chattel, Security, or Power of Attorney shall have been entrusted to him, sell, negotiate, transfer, pledge, or in any manner convert to his own use or benefit, or the use or benefit of any person other than the person by whom he should have been so entrusted, such Chattel or Security, or the proceeds of the same, or any part thereof, or the share or interest in the Stock or Fund to which such Power of Attorney shall relate, or any part thereof, shall be guilty of a misdemeanour, and, being convicted thereof, shall be liable at the discretion of the Court to be kept in penal servitude for any term not exceeding seven years, and not less than three years, or to be imprisoned for any term not exceeding two years, with or without hard labour, and with or without solitary confinement " On the Relation of the Banker to his Customer as Pawnee of Banking Securities 6. In the first of the relations between the banker and his customer above described, the banker was the absolute purchaser of the Money and Securities of his customer, so that he might do what he pleased with them; in the second he was merely his customer's agent, and it is highly penal for him to appropriate to his own use any of his customer's securities. A relation intermediate between these two frequently exists, in which securities are deposited by a customer with his banker; the absolute property in them remains with the customer: but he obtains a loan or advance of money from his banker on their security, which, when he pays off, the full property and possession of his securities reverts to himself. The banker thus becomes the Pawnee of his customer's securities, and while he is so, he acquires certain Rights over them, though not exactly a Property in them, and it is out of such cases as these that the most difficult and abstruse questions between bankers and their customers arise It has always been the custom that if a banker makes an advance, or a loan, to a customer, on the security of bills, &c., deposited with him, he has the right to re-pledge or sell so much of these securities as is necessary to satisfy his own claim. And this custom is expressly sanctioned in the last recited clause, which says that nothing in the clause shall restrain any banker "from selling, transferring, or otherwise disposing of, any Securities or Effects in his possession, upon which he shall have any Lien, Claim, or Demand, entitling him by law so to do, unless such Sale, Transfer, or other Disposal shall extend to a greater number or part of such Securities or Effects than shall be requisite for satisfying such Lien, Claim, or Demand " This principle has always been held to apply when a banker makes a loan on the pledge of these securities. It is also held to apply where a customer, having an ordinary account with his banker, has overdrawn it and become indebted to him: the banker has the right to retain all banking securities deposited with him by his customers until his debt is paid off 7. Questions of great nicety frequently occur between bankers and their customers, and, in the event of the bankruptcy of either or both of them, their assignees, respecting the property in bills placed by customers in the hands of their bankers for various purposes It is a very common practice for customers to place in the hands of their bankers the bills they receive for the purpose of collection This is very convenient for the customer. By placing these bills in the hands of his banker he frees himself from all anxiety and trouble regarding their safe custody or preservation for payment. The banker is bound, as his customer's agent, to present them for payment, and carry them to his customer's credit as soon as they are paid. And if he fails to do so, and any loss occurs through his neglect of the usages of trade, he is liable to his customer For the sake of convenience it is usual to note down the amount of such bills on the proper day, in the customer's account, in a column "short of " or before the column for cash. Hence these bills are said to be "entered short," and the banker is said to hold such bills "short" This entry is a mere memorandum to remind the banker that he has such bills to collect for his customer on a certain day. The sum is in no way placed to his customer's credit: and the bills so "held short are the exclusive property of the customer, which he is entitled to demand back at any time previous to his bankruptcy But in the case of the customer's bankruptcy the banker must not deliver up his "short bills" to him, as all his property has vested in his creditors As "short bills" are merely intrusted to the banker for the purpose of collection, if he appropriated them to his own use, by selling or pledging them, he would be indictable under the Larceny Act, 24 & 25 Vict. (1861), c. 96, s. 76 The course of dealing between bankers and their customers in such cases often creates perplexity The point to be ascertained is, whether at the time of the bankruptcy the relation between the banker and his customer was that of Principal and Agent, or that of Debtor and Creditor. That is, whether the property in the bills can be ascertained to have passed from the customer to his banker In some country banks it is the custom to enter the amount of such bills in the cash column, and to permit the customer to draw against the amount. But this is a matter of comity, and does not transfer the property in the bills to the banker. They are only held as collateral security against the advance, and are not discounted. The customer, or his assignees, are entitled to demand back the bills, in specie, if the account shows a credit balance without them Giles v. Perkins, 9 East, 12. Ex parte Dumas, 1 Atk., 233. 2 Ves., sen., 582. Ex parte Oursell, Amb., 297. Thompson v. Giles, 2 B. & C., 422. Ex parte Sargeant, 1 Rose, 153. Jombart v. Woollett, 2 My. & Cr., 389. Ex parte Bond, 1 M. D. & De G., 10. Ex parte Armitstead, 2 Gl. & J., 371. Ex parte Rowton, 17 Ves., 426. Ex parte Smith, Buck., 355. Ex parte Frere, Mont. & Mac., 263. Ex parte Sollers, 18 Ves., 229. Ex parte Pease, 19 Ves., 25. Ex parte Twogood, 19 Ves., 227. Ex parte Edwards, 2 M. D. & De G., 625. Zinck v. Walker, 2 W. Bla., 1154. Parke v. Eliason, 1 East, 544 But if the course of dealing shews that the customer intended the banker to consider and deal with the bills as his own property, they will not be recoverable Ex parte Oursell, Amb., 297. v. Hollingworth, 5 T. R., 218. Bent v. Puller, 5 T. R., 494. Tooke The bills cannot be held to have become the property of the banker unless the customer has an immediate Right of action |