credit at another Office of the Bank in Scotland; the Stamp to be charged when a Draft is given Evasion of Charges for Bank Drafts.-In order to prevent parties from evading the charge for Bank Drafts, by lodging the amount temporarily in name of their Correspondents, with a view to its being drawn out at another Office, free of charge, the usual Commission should be exacted on all Deposit Receipts cashed at other Offices within ten days of their date VI. OTHER CHARGES 1. On Retiring Bills in London, 2s. 6d. per cent., with Interest due. The following modified charges may be made, at the option of each Bank, in the case of Customers having large transactions, viz.:-For the first £50,000 in any one year, 2s. 6d. per cent.; for the second £50,000 in any one year, 1s. 6d. per cent.; for the excess beyond £100,000 in any one year, 1s. per cent.Chargeable at the end of the year 2. On Drafts on Demand against Credits with English Provincial or Irish Correspondents, 3s. per cent., with Interest due. If against cash deposited without Interest, same Rate as for Drafts on London 3. On Drafts on Demand against Credits with London Correspondents. Same Commission as for Drafts on London 4. On Bills payable in England or Ireland, recalled before maturity, 2s. 6d. per cent. Bills recalled for non-acceptance only, discretionary 5. On Discounted Bills, or other Documents (except Cash Orders), payable in Scot and, returned dishonoured, 2s. 6d. per cent., with Interest due 6. On Discounted Bills, or other Documents (except Cash Orders), payable elsewhere, returned dishonoured, 5s. per cent., with Interest due 7. On Acceptances by the Bank, or their London Correspondents, of Foreign Bil, payable in London, if secured by a special Deposit of the amount, 5s. per cent., with Interest due; if on other Security, if not exceeding 3 months in currency, 10s. per cent., with Interest due; if exceeding 3 months in currency, 15s. per cent., with Interest due 8. On Bills or Documents on Bankers, payable in England or VOL. II. FF Ireland, lodged for Collection, 2s. 6d. per cent., whether paid or dishonoured 9. On Bills or Documents on Bankers, payable in Scotland, lodged for Collection, if paid, same Commission as on similar Documents discounted; if dishonoured, 1s. 3d. per cent. 10. On Bills or other Documents, payable abroad, lodged for Collection, 5s. per cent., in addition to charges incurred by Bank, whether paid or dishonoured 11. On Pay, Dividends, or Annuities drawn by London Correspondents, except for regular customers, 2s. 6d. per cent. Minimum, 1s.; maximum, 5s. 12. On Purchases of Government or other Stocks, in London, 38. per cent., with Interest due 13. On Transfers of Government or other Stocks, without purchase, discretionary, according to trouble and amount 14. On Powers of Attorney taken out, and Wills or Deaths proved for Transfer of Stock, etc., discretionary, according to trouble, but not less than 2s. 6d. each 15. Calls and Dividends of Joint-Stock Companies, any Commission to be discretionary, except as regards Dividends paid in London, on which not less than 1s. per cent. shall be charged. The aggregate amount required for the payment of each Dividend to be placed on a separate account, bearing no Interest 16. Payment in London against Shipping Documents, whether or not accompanied by a Draft on Demand, 2s. 6d. per cent. 17. Delivery in London of Shipping Documents, or Stock Transfers, on receipt of value, charge, if any, discretion ary 18. Delivery in Scotland of Documentary Bills, payable in London, or elsewhere in the United Kingdom, taken up under rebate, Commission to be at Rates for Drafts on London, or other place, as the case may be Note.-Bills and other Documents, not having more than five days to run, to be cashed by the Banks with each other, without charge. The usual Discount to be charged for the additional days on Bills of longer currency In all matters of Charges Berwick-on-Tweed to be treated as a Scotch town Questions as to the true meaning of any part of the Scale shall be decided at Meetings of the Banks to be held in Edinburgh On the Clearing System 20. We must now explain the mechanism of the Clearing System, which has been greatly misunderstood It is usually supposed that the Clearing System is an example of the great principle of Compensation, by which Debts are paid and extinguished by being exchanged or set-off against each other: as was the custom of merchants at a large number of continental fairs and in foreign treatises the Clearing House is usually termed Maison de Liquidation, or Compensation : This, however, is a great misconception: and an explanation of the mechanism of the Clearing House clearly illustrates the distinction between the two systems of Commercial and Banking Credit Commercial Credit is only created to last for a certain definite time, and is extinguished with the documents which embody it Banking Credit is not intended to be extinguished at any definite time and it is not generally extinguished with the documents which embody it. In many parts of the Continent it was the custom for merchants to make their bills payable only at the great fairs in various cities. In the meantime they circulated throughout the country, and performed all the functions of money. At these fairs the merchants met together and exchanged their acceptances: thus the paper documents and the debts were extinguished simultaneously, by the principle of Compensation, or Set-off. But by this device an enormous amount of commerce was carried on, and debts were extinguished without the payment of one sou in coin But the purpose and effect of the Clearing System are very different. When any number of the customers of the same bank have transactions among themselves, and give each other Cheques on their accounts, if the receivers of the Cheques do not draw out the money, but pay them into their own accounts, the Credits are simply transferred from one account to the other. The Cheque is extinguished: but the Credit is not extinguished; it is only transferred and the same Credit may be transferred any conceivable number of times from one account to another in the same bank, to the end of time, without ever being extinguished at all. In all such cases, therefore, the Cheque is a mere order of transfer and when the Credit is transferred from one account to the other, the document has effected its purpose, and is cancelled -but the Credit exists exactly as it did before So with a Bank Note. If a person holding a banker's notes pays them into his account, the Notes are extinguished but the Credit is not extinguished: the amount is entered to the customer's credit: he has exactly the same Right of action as before and the banker's liability remains the same. If a customer pays into his account the notes of another banker, the banker collects the notes and gives his customer credit for the amount. The Clearing System is a device by which all the banks which join in it are formed into one huge institution for the purpose of transferring Credits from one bank to another, just as Credits are transferred from one account to another in the same bank : Every banker has every morning claims against most, if not all, of his neighbours and of course they have claims against him. These claims are called Bankers' charges. Each banker having collected all the sums due to himself, re-adjusted the Credits to the different accounts. By this means it is evident that no Credits were cancelled or extinguished between the different banks: they were only re-adjusted among different customers' accounts: and this was done by the means of exchanging a vast amount of Bank Notes between the different bankers. Thus an immense amount of Notes were required to be kept out of circulation for no other purpose than to be dancing about from bank to bank to settle their accounts against each other. It was stated in evidence before the House of Commons, many years ago, that the London and Westminster Bank alone was obliged to keep £150,000 in Notes for this sole purpose. And if one bank alone, then comparatively in its infancy, was obliged to keep such a sum idle for this purpose, what would have been the sum necessary at the present time to be retained by all the different banks? It is certain that it would have absorbed at least half of the authorised circulation of the Bank of England To remedy this inconvenience an ingenious plan was devised, it is said, by the Banks at Naples, in the sixteenth century. The banks instituted a Central Chamber, to which each sent a clerk. These clerks then examined and stated their different claims against each other, and paid only the difference in Notes. By this means the different Credits were re-adjusted among the different customers' accounts just as easily as before and an immense amount of Notes were set free for the purpose of circulation and commerce and were, in fact, equivalent to so much increase of Capital to the banks and to the country : 21. The Banks in Edinburgh were the first in this country to adopt this plan. For a considerable time they used to do all they could to injure each other. They used sometimes to collect a large amount of each other's notes and present them suddenly for payment, in the hope of ruining their rivals. At last they became sensible that this undignified conduct was mutually injurious and they agreed that they should meet twice a week and adjust their respective claims: and that they should make no demand upon each other except at these times. This exchange is made alternately at the offices of the Bank of Scotland and the Royal Bank. The banks used formerly to settle their differences by ten days' drafts upon London. Subsequently to this, it was agreed that each bank should keep a fixed amount of Exchequer Bills, and the differences were paid by these Exchequer Bills. This plan, however, was discontinued in 1864, and the following rules, which are now in force, were settled in 1876 Rules to be observed at the Edinburgh Clearing House I. The Clearing House shall be opened every business day, except Saturday, at one o'clock, and closed at fifteen minutes past one, after which no documents shall be received. On Saturdays the Clearing House shall be opened at eleven o'clock, and closed at fifteen minutes past eleven II. The Clearing House shall not be opened on Bank Holidays. On half-holidays it shall be opened at ten o'clock, and closed at fifteen minutes past ten III. Each Bank shall be represented at the Clearing House by a competent clerk, who shall deliver and receive the documents referable to his Bank. An assistant clerk shall also attend when required, that there may be no delay in closing the clearing |