banks in Edinburgh ?-I believe, almost universally, to deposit them with a Scotch bank.

"And they live upon the interest of what they so deposit, in the manner as persons here live upon their interest on stock?-Yes; they often look to the permanent capital with a view of leaving it at their death, taking the interest during their lives."1

"The deposit accounts are of two kinds: one kind from the commercial people, who have large sums that they wish to keep in a disposable form, waiting an opportunity of any investment which may occur. Of the operating deposits, there are others who keep the money until a favourable turn in the Stock Exchange enables them to invest it there. And there are others, respectable householders, who keep it for the purposes of their family expenditure. I reckon that these and the sums due upon them average one-half of the aggregate amount of a bank's deposits." 2

"Have you formed any estimate of the amount of deposits in all the banks in Scotland ?-I certainly have been at very great pains to get information upon the subject; and I am satisfied that the amount is considerably above twenty millions-I should say, twenty-five millions.3

From what class of persons are those deposits chiefly? -Generally from industrious tradesmen, small shopkeepers, varying from £10 to £500. The greatest number of deposits, and the greatest in their aggregate amount, are in small sums."

4

1 Commons' Report, p. 124.

2 Lords' Report, p. 183.

3 The amount at present deposited with the banks in Scotland, in permanent deposit and current accounts, is upwards of seventy-five millions (December, 1880).

Aş bearing upon this, we may observe that during the liquidation of

"Are there not, however, deposits from richer classes, and each of them to a much larger amount ?-Certainly, there are deposits from £1,000 to £20,000 and £30,000." 1

"In the spring of 1824, the banks in Scotland began, in some instances, to decline accepting deposits at all. In the autumn of 1824, the great banks made an express rule that they would not accept more than £5,000 from any one depositor. They allowed 2 per cent. on the first £3,000, and 2 per cent. upon the remainder of the £5,000, and above that they would not allow any interest. That was the general rule with the great banks at that period. There were many people who preferred leaving their money, though they received little or no interest, to taking it away. That commenced in 1825." 2

3. The system of deposits is advantageous to the country-by augmenting the amount of national capitalby increasing the demand for labour-by granting facilities to trade and commerce-and by removing the temptations to engage in hazardous speculations and foreign investments.

"This system was adopted before the middle of the last century. The rate of interest allowed since then has been regulated by the value of money, and has, of course, fluctuated considerably; but it has ever been such as to afford as high a return to the depositor as has been consistent with the reasonable profit, and of course the security of the bank. The effect of this system has been to encourage and to afford the means of the accumulation of capital among the lower, as well as the higher orders, by placing within the reach of all, a convenient, safe, and moderately profitable investment of money, and to offer an inducethe City of Glasgow Bank it was found that 45,000 depositors had de. posited on deposit or current account an average amount of £30 each. 2 Ibid. p. 158.

Lords' Report, p. 231.

ment to capitalists to retain their accumulations in Scotland, notwithstanding the opportunities or temptations which foreign investments might hold out.” 1

"The system of deposit accounts, I think, is a very great stimulus to the habits of industry and economy and frugality in Scotland. The whole surplus capital of the individual is thus rendered productive.

"Under the system on which you conduct your business, is not the money arising from those deposits issued out, to encourage the farther consumption of labour in the country? Yes.

“It would be a loss, then, to the country, if it was to be removed from the channel in which it is now placed, into this country, on Government debentures ?-It certainly would.

"Under this system, does not the poor workman gain immediate interest for his saving, whilst the saving is immediately employed through the bank in putting a farther portion of labour into motion ?-Precisely so. It is in this way that the wealth of those individuals is concentrated, and through the agency of the bank is brought to bear in carrying on the business of the country.”2

"Is there not an advantage to the public from the gathering of those small capitals together, forming part of the deposits of the bank, and so being sent out again in large sums, like other capitals, for the purpose of being applied to increase the powers of productive industry?— The Scotch banks form a sort of reservoir for receiving the small sums of capital scattered throughout the community, and then sending them forth into channels of trade, so as to promote the commerce, manufactures, and agriculture of the country." "

1 Lords' Report, p. 175.

3

3 Commons' Report, p. 203.

* Ibid. p. 283.

"Are you of opinion, that if the deposits with the banks of Scotland were considerably lessened, the banks could afford the same accommodation by discounts which they do at present?—I should think that is impossible, because it forms part of their capital. It would diminish the capital which is at present employed in that business, of which discounting forms a great part.

"Would not any such diminution of discount operate injuriously to the general trade of the country ?—The want of those discounts must diminish the trade of the country, inasmuch as the manufacturer or merchant receives his money at least three months sooner by discounting his bills, than he could possibly get payment of his account."

"The system of deposits forms a great part of the funds arising from our banking system. It is a great deposit of money which is given out to the trade of the country, for the profit of one per cent., for which the bank runs the risk of its business. If that great deposit were withdrawn, and could not be issued with the same degree of safety, I conceive the consequences would be a total derangement of the whole system, and ruin of our country.""

"If the banks are under the necessity of reducing the interest on deposit accounts, the depositors must look about them and find out on what security they can lend their money so as to obtain a higher rate of interest. It would certainly diminish the capital of the trading part of Scotland, inasmuch as the banks would not have it in their power to assist them in trading by discounting; but it might be lent on Government securities or landed property, and the temptation of a higher interest from individuals would, undoubtedly, be a temptation to manyand a temptation that could scarcely be resisted by those 1 Lords' Report, p. 266. 2 Ibid. p. 235.

whose income depends entirely upon the interest of that lent money-to lend it on personal and doubtful security.

"When the banks reduced their interest some time ago, a great part of the deposits was drawn out, to be invested in various different ways. And as the depositors did not get from the banks the interest on which they were depending, and did not choose to take a less interest, many of them went into schemes, which have turned out very ruinous to them. It has been one great cause of overspeculation, that the people did not get the interest they had been accustomed to from the banks. They, therefore, drew it out to invest it in joint-stock companies, lent it to builders, or other inferior securities, or became builders themselves." 1

4. The system of deposits is advantageous to the banks -by inducing every person to deposit his money in a bank -by furnishing the banks with capital to carry on their business-and by putting in circulation a large amount of their notes.

"The universal practice at Glasgow is, to pay into the bank with which the individual transacts his business, the whole of the notes he has in his possession, or nearly the whole, every day."

66

2

Unquestionably, the giving of interest upon deposits is an inducement to every person that has any surplus money in his hands, to place it in the hands of his banker. And in the same way in the case of cash accounts, every payment by the holder of a cash account into the bank, either diminishes the interest he has to pay to the bank, or if the account should turn in his favour, enables him to get interest from the bank, and that is a great inducement for every person to pay in daily into his banker's hands 1 Lords' Report, p. 250. 2 Commons' Report, p. 50.