prima facie influenced by the respectability of his own customer, who is the drawer or indorser of the bill. He ought, however, to require specific information regarding the persons upon whom his customers are in the habit of drawing, and satisfy himself that they are likely to be genuine bills. And this vigilance should never be relaxed in any case whatever. We hold it to be utterly contrary to all sound banking to take bills merely on the supposed respectability of the customer. But we believe it to be far too common a practice to look merely to the customer's account. Customers begin by getting the character of being respectable they bring, perhaps, good bills at first-and keep good balances; and their bills are punctually met. This regularity and punctuality are very apt to throw a banker off his guard. He thinks his customer is a most respectable man, doing a good business; all the bills are taken to be trade bills. Byand-by the customer applies for an increased discount limit, on account of his flourishing business. The banker is only too happy to accommodate so promising a customer. His discounts swell, and his balances diminish, but his bills are still well met. However, the time comes, perhaps, when the banker thinks it prudent to contract his business generally, and this may be one of the accounts he may think it expedient to reduce; and then he makes the pleasant discovery that there are no such persons at all as the acceptors, and that the funds for meeting all these bills have been got from himself !

Such cases as these are not unlikely to happen when London houses supply small country tradesmen, and draw bills on them. When a man has established a good character, it is impossible to require information about every bill before it is discounted; but we do not hesitate to say, that it is of the first importance that a banker should be constantly probing his customers' accounts, and get information of the persons they draw upon. It was wittily said by some one (Lord Halifax, we believe) "that man in this world is saved chiefly by want of faith." This is eminently true of banking. A banker should have faith in no man. The amount of villainy and rascality which is practised by means of accommodation and fictitious and forged bills, would exceed belief, if such disclosures were made public. However, it is contrary to the policy of bankers to allow it to be known how

they are robbed and cheated. Their interest covers a multitude of sins. If criminals were prosecuted according to their merits, the calendar would swell up to a frightful extent. There is, probably, no class of society who see felonies committed so frequently as bankers, and are necessitated to let them go unrepressed and unpunished. The number of unconvicted felons that go about with impunity in the commercial world is something horrible; and there is reason to fear that such things are encouraged by the too easy faith reposed in their customers by bankers. If bankers were more vigilant in scrutinising their customers' accounts, many would have been cut short in a career of crime-of accumulated robberies, which generally terminate in disaster to the bank

As it is contrary to all sound principles of banking to discount bills solely on the customer's respectability, as appearing from his account, so any customer should be regarded with suspicion who is not ready and willing to communicate information to his banker about his affairs. If he will not candidly communicate the state of his affairs to his banker, how can he expect him to give him assistance in the day of trouble? Some customers, however, are mightily indignant if their banker will not discount their bills on the strength of their names without regard to the acceptor. But as such a practice is contrary to sound banking, so it will invariably be found that these are not desirable customers to have, and it would be well for a banker quietly to shake off his connection with them, as in the long run, they will probably bring him more loss than profit

Advances on Loan with Security

14. So much for discounting bills of exchange, which consists in buying debts, and not lending money. A banker, however, may not always be able to find a sufficient quantity of debts to buy, to absorb all his disposable credit, or he may not choose to employ it all in that manner; and some of his customers may want a temporary loan on security, who have no bills to sell. The banker takes his customer's promissory note for the sum payable at the date agreed upon, and also a deposit of the convertible security as collateral security. He does not advance

on the goods or security itself-that is the business of a pawnbroker-but on the personal obligation of his customer, and the securities are only to be resorted to in case of the failure of the customer to pay his debt. These convertible securities are chiefly public stock, Bank stock, India bonds, shares in all sorts of companies, railway, bank, insurance, &c., dock warrants, bills of lading. Whenever he takes any of these as collateral security, he ought to have a power of sale from his customer, in case he fails to discharge his obligation. These loans, though often they may be made to respectable customers, are not desirable advances for a banker to make, and he should be chary in encouraging them too much, for they frequently are demanded from the borrower having locked up too much of his funds in an unavailable form; consequently, there is much danger of the obligations not being paid at maturity, and then comes requests for renewals, and the banker is either driven to the unpleasant necessity of realising this security, or else having his temporary advance converted into a dead loan

Persons who seek for such advances habitually, are most probably speculating in joint stock companies' shares. They buy up shares on speculation, which they hope will advance in price; they then wish to pledge the shares they have already bought to purchase more: then perhaps, a turn in the market comes, and the value of the whole goes down rapidly; they are unable to pay their note, and the banker may have to realise the shares at a loss. During the railway mania of 1845, a number of banks, called exchange banks, were founded expressly on this principle of making advances on joint stock companies' shares, especially railway shares; but they have all been ruined, and some of them, we believe, suffered frightful losses from the great fall in the value of railway stock

The objection to such transactions in a banking point of view is that the promissory notes of these customers and their securities are not available to the banker in case he is pressed for money. Moreover, they are barren isolated transactions, which lead to nothing; whereas a discount account promotes commerce, and becomes more profitable as the business of the customer increases

There is also a very important point to be considered in the shares of many companies which are offered as collateral security,

that, by the deeds of the companies, no property in the shares passes, except by the registration of the name of the holder in their books. Now, while the customer is in good circumstances, there may be no danger; but if he becomes bankrupt, the banker is not entitled to retain the shares against the other creditors. If the bankrupt is the registered owner of the shares, his creditors are entitled to them, consequently, if the banker means to complete his security, he must have himself registered as the owner of the shares, and thereby become a partner in a multitude of joint stock companies, of whose condition he can know nothing. Then, perhaps, calls are made, and the banker finds that, instead of buying a security, he has bought a liability, and he must pay up the calls, or forfeit the shares

All such advances, therefore, should be made very sparingly, and only with such surplus cash as the banker may not be able to employ in buying good bills; and they should only be made to such persons as he believes to be perfectly safe without the deposit of the security. No banker would make such an advance if he really believed that he should be obliged to realise the security to repay himself, as such proceedings will always make a soreness between himself and his customer, who will be averse to seeing his property sold at a sacrifice, as he may call it

Advances on dock warrants, and other similar securities, are also liable to many similar objections, and should be very sparingly done, as they subject a banker to much trouble beyond the line of his proper business, and are indications of weakness in a customer. Many customers will expect to have loans upon leasehold or freehold property left as security, but these are the most objectionable of all as collateral securities. Many, if not the greater portion of leases, prohibit the tenant letting the property, without the written permission of the landlord, consequently, such leasehold property is no security at all to a banker. Freehold property is not exposed to this disadvantage, but the process of realisation is so uncertain, and long, and tedious, that it is perfectly unavailable to the banker in case of necessity. In fact, we believe the best rule in all cases of loans with collateral security (except in such instances as public stock) it to avoid, as much as possible, making them to any one who is not perfectly good without them

On Advances by way of Cash Credits and Overdrawn Accounts

15. We have, in Chap. VI. § 17, given a full account of the system of Cash Credits in Scotland, and of the prodigious advances in wealth which the country owes to it. But that system originated and owes its success entirely to the issue of £1 notes; and it would be almost destroyed by their suppression. When, therefore, it is seen in Scotland that it is entirely due to the £1 note system that the Banks are able to push their branches into the wildest and remotest parts of the country, they naturally resent and resist interference with it by persons who have no personal experience of its advantages

To a certain extent the system of Overdrawn Accounts serves the same purpose in the country districts of England: but only to a very limited extent. It is quite impossible to extend the same banking accommodation to the poorer and humbler class of customers by means of overdrawn accounts, where bankers can only deal with the money placed with them by their customers, as when they are able to coin their own money by the issue of £1 notes

The objections to Cash Credits and Overdrawn Accounts, in a banking point of view, are that in times of pressure it is all but impossible to call up the advances, and the securities are not realisable hence it is only where banks are of great solidity, and not liable to runs, that it is safe to carry out such a system on a large scale

The same objections apply to advances on mortgages, which are intended to last for years. Such transactions are, therefore, chiefly confined to country bankers and those at the West End of London, whose connections lie more with the landed than the mercantile interest, and who are not liable to such sudden demands for cash

On Investments in Public Securities

16. Besides these operations, all of which are founded upon personal liability—all of which contain personal obligations to pay fixed sums of money, and are, therefore, dealings in "Currency "