Charles MacCarthy Collins.

The history, law, and practice of banking. With an appendix of statutes online

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1




UNIVERSITY

OF CALIFORNIA

LOS ANGELES



SCHOOL OF LAW
LIBRARY



THE



HISTORY, LAW, AND PRACTICE



BANKING.



M ^ppcubix of StiitutCG.



BY

CHARLES M. COLLINS,

BARRISTER- AT-LAW,
FELLOW OF THE INSTITUTE OF BANKERS.

~TeY)i son Ckarlej M^acC^iwIv^



LONDON :

JAMES CORNISH & SONS, 297, HIGH HOLBORN, W.C.

LiVERroOL : 37, LORD STREET & 42, NORTH' JOHN STREET.

Dublin: iS, GRAFTON STREET.

1881.



fyy^



Tg^^ V>



?■?



PREFACE



Many works on the important subject of Banking have been
pubHshed, and are before the Public, — Theoretical works of
much interest to Economists, and Legal works written and
compiled for the Legal Profession : but generally speaking,
these are rather too abstruse, or too expensive to attract the
ordinary reader or the Bank Official.

The aim of the accompanying volume is to supply an ac-
knowledged deficiency, and to provide — in a form, simple, con-
cise and inexpensive, and divested as far as possible of techni-
calities of expression — information of a practical and interesting
description, useful and necessary, not only to Officers of Banks,
but to the public in general.

That the work may commend itself to junior officials, ex-
planatory details, otherwise unnecessary, have been incor-
porated with the text.

London, Km., 1881.



CONTENTS



PREFACE - - - - 111

PART I.

THE HISTORY AND PROGRESS OF BANKING.

CHAl-TER

I. THE EARLIEST RECORDS OF HANKING AND COINAGE 1 I

II. EARLY EUROPEAN BANKS - - - " '9

III. EARLY ENGLISH COINAGE - - - "34

IV. EARLY LONDON BANKERS - - - '39
V. THE BANK OF ENGLAND - - - "59

VI, ENGLISH PRIVATE AND JOINT STOCK BANKS - 67

VIL BANKING IN SCOTLAND - - - "7°

Vin. EARLY IRISH AND SCOTCH COINAGES - "77

IX. BANKING IN IRELAND EARLY DUBLIN BANKERS - 84

X. IRISH JOINT STOCK BANKS - - - - I02

XI. CONCLUSION - - - - - ^14

PART II.

THE LAW AND PRACTICE OF BANNING.

1. THE RELATIONS BETWEEN THE BANKER AND HIS

CUSTOMER - - - - - 123

II. DEPOSIT RECEIPTS - - - - - I 27

in. CURRENT ACCOUNT — CHEQUES - - "135

IV. CROSSED CHEQUES - - - - "15^

V. PRESENTATION, PAYMENT, AND DISHONOUR OF

CHEQUES - - - - - 161
VL PASSBOOK — OVERDRAWN CURRENT ACCOUNT — RIGHT

TO SUE ON CHEQUES - - - " ^ 75

VII. BILLS OF EXCHANGE AND PROMISSORY NOTES - 181



vi Contents.



CHAI'TliR I'AGK

Vin. PERSOXS INCAPACITATED TO HE PAR'flES TO A

BILL OK EXCHANGE - - - "197

IX. THE STAMP DUTIES - - . - 202

X. THE TRANSFER OF BILLS - - - " 213

XL PRESENTATION OF BILLS - - - - 2l6

XIL NOTING AND PROTESTING - - - 22 1

Xin. DISCOUNT — -REBATE BILLS FOR COLLECTION

FOREIGN BILLS, ETC. - - - - 229
XIV. bankers' DRAFTS AND POST BILLS — HEN CON-
FIDENTIAL REPORTS, ETC. - - - 23H
W. DEPOSITS AflAINST ADVANCES, AND FOR SAFE

CUSTODY . - . _ - 246

XVL BANK NOTES — L O. U. - - - - 253

XVII. SHARES AND SHAREHOLDERS - - " 271

XVIIl. THE BANKING ACT OF 1 879 DIRECTORS' DUTIES 280

XIX. THE STOCK EXCHANGE AND STOCK-BROKING - 285



A P P !•: N D I X.

Al'I'F.N'DIX'

h PRINCIPAL JOINT STOCK BANKS OF ENGLAND,
NUMBER OF THEIR BRANCHES, SUBSCRIBED
CAPITAL, PAID-UP CAPITAL, AND AUTHORISED
ISSUE - - - - - - lOl

\\. A TABLE OF THE NUMBER OF DAYS FROM ANV

DAY IN ONE MONTH TO THE SAME IN ANOTHER 307

111. MARRIED woman's ACCOUNT FORM OF LETTER

OF AUTHORITY TO BANKER FORM OF INDEM-
NITY ON REPAYMENT OF LOST DEPOSIT RECEIPT,
DRAFT, ETC. - - - - "309

W. TABLE IN TEN LANGUAGES OF CARDINAL NUMBERS
AND COMMERCIAL TERMS USED IX BILLS OF
EXCHANGE - - - - -31°

V. STATUTES - - - - "31-

INDEX - - - - - - 357



PART I.

THE HISTORY AND PROGRESS OF BANKING.



THE

HISTORY AND PROGRESS OF BANKING.



THE EARLIEST RECORDS OF BANKING AND COINAGE.

The trade of Banking is one of immemorial antiquity, and its
origin is beyond the range of authentic history. It was the
natural and necessary outgrowth of the commerce which arose
from, and grew with, civilization. Commerce is no more than
an exchanging of commodities ; and exchange created the
necessity for standards of value that would be generally re-
cognised. These were, at length, found in the precious metals,
which combined value with facility of carriage and transit. The
system of Bills of Exchange grew out of the exigencies of trade.
When a commercial community was founded, the inevitable
conditions of society being that some members of it were rich
and others poor, a trade in money was necessarily established,
the richer lent to the poorer for interest — the poorer hired
money and paid a wage for the use of it ; and thus arose
promises to pay and bonds. Commerce demanded a coinage,
and various countries having varying coinages, the trade of
money-changing was developed. It was requisite that a dealer
in money should have a safe and strong place to protect his

2 — 2



1 2 The History and Progress of Banking.

monies and securities against the predatory bands that flourished
with comparative impunity of old, when government was un-
settled and many held but a precarious tenure of wealth, land,
and even life. To those strongly-built places people brought
their gold and jewels and valuables and deposited them for
better security, paying a fee for the safe custody. Thus origi-
nated the system of deposits of money, which has so far
altered that the depositor is now paid for his deposit, instead
of paying for the privilege of depositing ; and from the custom
of depositing money grew the means of drawing it out ; hence
our modern Cheques and Banker's Drafts.

But the trade of Banking in its various phases — not only in
a primitive fashion, but even on a well-developed system and
advanced principles — can boast of an extraordinary antiquit)-.
The Jews in the infancy of the nation were a pastoral and
not a commercial people, though during Christian centuries the
greatest and the least of them have been addicted notoriously
to money-trading.

The early Biblical references to " pieces of silver" in Genesis,
do not, in the original, convey the idea of coins, but of weights
(shekels). The Mosaic "oblation to God" was half a shekel,
and a shekel is explained by Josephus as equal to four Athenian
drachmae, or of a value of two shillings and threepence of our
money. A coinage with the Jews, as with the Egyptians and
Assyrians, was a late institution, preceded by the long-retained
custom of treating the metals like other merchandise, exchange-
able by weight. The first Jewish coinage under authority was,
it is believed, struck by Simon the Maccabee, about the year
140 B.C.* It consisted of shekels and half shekels and had the

* "The earliest known genuine Hebrew coin is a unique specimen in
" copper, in the Cabinet du Roi, Paris, bearing on the obverse the sacred
" seven-branched palm-tree, and the letters forming ' Eliashib,' the name



The History and Progress of Banking. 13

pot of manna and Aaron's rod as devices. This coinage, more-
over, had its value signified upon it — "schekel Israel"— in Sa-
maritan characters. Simon's successors placed their own pro-
files upon the coins they issued.

But long anterior to the time when there were coins, lending
at interest, which seems — notwithstanding the agricultural and
pastoral life the nation led — to have been an instinct of the
race, was carried on to such a degree that it grew to be an evil,
against which Moses had to hurl Divine enactments. These
were to the effect that the Hebrew was not to lay " usury upon
" the poor ;" " and if thy Brother become poor, thou shalt not
" give him thy money upon usury," and so on — "because it is not
"just to make advantage of the misfortunes of one of thy own
" countrymen : it is thy gain if thou obtainest their gratitude."*
The application of these commands seems to have been confined
to loans given to relieve distress rather than to loans for the
purposes of trade, or by way of capital. The trade of money-
lending on usury was, however, recognised in the early Jewish
community; and though it was forbidden to be practised on " thy
" brothers who were poor," it was, nevertheless, permitted against
a stranger. " Unto a foj-eigner" runs the Divine command,
"thou mayest lend upon usury;" and Jeremiah (445 B.C.) there-
fore rebukes " the nobles and the rulers because they exacted

"of the high priest. This name furnishes no definite clue to the date, nor
"does that of Eleasar, on another coin of the same archaic type. Under
"the Seleucidce there is a copious sequence of Jewish coins, especially
"of those bearing the name of Simon. Many pieces have figured on their
"face the vessels and instruments of the sanctuary, the candlesticks, the
" trumpets, or the golden cup. The list here given closes with the tiny
" copper coin weighing about 25 grains, which most probably represents the
•'widow's mite [lepton, Mark xii. 41). It bears on the face an anchor, and
" on the reverse the Greek word chalkous." — Conder's Handbook to the
Bible.

* Josephus.



14 The History and Progress of Banking.

"usury every one from his brother." But though the trade of
money-lending was general, and partly permitted by the Mosaic
law, it seems to have fallen into disrepute. David condemns
it ; and Jeremiah significantly says — " I have neither lent on
" usury, nor have men lent to me -.yet every one of them doth airse
me" From the New Testament, however, it seems that trans-
actions corresponding to our deposits were usual, and that inte-
rest was allowed on money deposited. In the parable of the
Talents, in Matthew, the "wicked and slothful slave "is de-
nounced, his lord saying to him, " Thou oughtest therefore to
" have put my money to the Bankers, and at my coming I should
"have received my own with tisiiry" (Matt. xxv. 26); and in
Luke, " Why then gavest not thou my silver into the bank, that
" at my coming I might have received it with usury " (Luke xix.
23). But beyond this we have little certain knowledge regard-
ing the money dealings of the chosen people.

Amongst the ancient Brahmans* the law of loans and inte-
rest was fair and equitable, and regulated and settled by recog-
nised rules. A creditor was to be paid back in full, and the
debtors were to pay "as much interest as has been promised by
" themselves"; but some idea of the rates of interest is afforded
by the provision that the creditor " shall take in the direct order
"of the castes two, three, four or five in the hundred by the
"month (if no pledge has been given)." The rates here men-
tioned are very high ; but there was a limitation to the total
amount. The interest on gold was not to rise higher than
double the debt ; on grain, to threefold, etc. There is on this
subject an inexplicable provision that " on substances from
" which spirituous liquor is extracted, on cotton, thread, leather,
"weapons, bricks, and charcoal, the interest is unlimited."

* See The Instiiities of Vishnv. Vol. VII. of "The Sacred Books of
" the East." Edited by Max Miiller.



The History and Progress of Banking. 1 5

Double the debt was the ordinary increase, and was to be
exacted on all objects unspecified.

Coins were made in China, so long ago, it is said, as the
year 2250 B.C., but they cannot have been other than portions
of metal cast into a portable shape — squares, bars, spikes, or
rings — such as were all the earliest monies. Bank Notes, or
what would correspond to our Bank Notes, are said to have
originated also there, about 120 B.C. But there can be little
doubt that notes w^ere issued in China about 1000 a.d., first by
a private person and soon after by a duly constituted Joint
Stock Bank of Issue. Paper money, it is recorded, was in
existence in the dominions of the Mongol Prince, Mangu Khan,
in the 'year 1252, and — according to that unreliable historian.
Sir John Mandeville — the Emperor of Tartary, in 1322, manu-
factured paper and leather money to such an extent that gold
and silver fell into disuse. The inexpensiveness and the facility
of manufacturing the new circulating medium were such that it
was issued profusely, and the Emperor was enabled thereby to
spend "enow and outrageously." But, as was to be expected,
this reckless and unbounded circulation of an intrinsicall)
worthless and irredeemable mock money, led to the evils natu-
rally consequent on its depreciation to such an extent that it
was valueless. The paper and leather money got into just dis-
credit and disrepute, and seem to have disappeared altogether,
so that in 1668 a traveller could not find even a " recollection"
of them. The issue can scarcely be regarded in its late stages
in any other light than the act of an autocrat to enable him
to "despende outrageously."

The Chinese have, in Banking as in everything else, made
little or no progress for thousands of years. Though in the
world's infancy they were more advanced in the arts and
sciences than the white races, their exclusiveness and con-



1 6 The History and Progress of Banking.

servatism have been such, that the Chinese of to-day possess
no better system of Banking than their ancestors possessed
centuries ago; indeed, their system at present seems to
consist solely of issuing Bills and redeeming them ; and the
Japanese are even still more backward and primitive in Bank-
ing and Finance.

Abraham is said to have been " rich in silver and gold ;" but
as this statement refers to a period subsequent to his return
from Egypt, it has been surmised that he obtained his know-
ledge of the values of these metals from the Egyptians, but
strange to say, in Egypt, the cradle of civilization and com-
merce, there was no imperial coinage. Copper and silver and
gold were used, as elsewhere, to indicate values, but they were
manufactured into lumps, shaped sometimes like bricks, and, in
the case of gold and silver, generally in rings like the ancient
Irish money of ten centuries ago ; and they were valued by
weight like any other commodity of commercial merchandise.
It appears, to use the words of Sir John Lubbock, " almost
" inconceivable that a people who created the Sphynx and the
" Pyramids, the Temples of Ipsamboul and Karnac, should have
" been entirely ignorant of coins. Yet it is certain from the state-
" ments of Herodotus and the evidence from the monuments
" themselves that such was really the case." The first coinage of
money in Egypt with which we are acquainted was struck, not to
assist the Egyptians themselves in their commercial dealings,
but rather because the foreign merchants with whom they traded,
the Greeks and Phoenicians, demanded some value-medium
which would have a guarantee of its value apparent on it, and
would circulate for that value ; and the satrap Aryandis yielded
to the pressure, and thus the honour is with him of having been
the first who "struck" the precious metals into circulating
authorised coin.



The History mid Progress of Banking. 1 7

Turning to the great and ancient empires of Assyria and
Babylonia, we find that though they, equally with the Egyp-
tians, adhered for ages to the primitive blocks of copper and
ingots of silver and gold, and did not evolve an imperial coinage,
nevertheless they were possessed of a system of Banking un-
expectedly complete and well-developed. Indeed, their Bank-
ing practice was so complete, and affords such conclusive
evidence of the high stage of commercial knowledge to which
they had attained, that while we wonder at their advancement,
we wonder also at the fact that their neighbours were so back-
ward and primitive in their Banking. Before a coinage was
known, the great Banking House of Egibi and Company flour-
ished as State Bankers, it is said, for a period of 150 years at
least. Founded presumably in the reign of Sennacherib [b.c.
712], we trace it through five generations down to the reign of
Darius, and we are informed that it was the Great National
Bank of Babylon when Babylon was the greatest city on the
earth. From the clay tablets unearthed of late years in and
near Nineveh and Babylon, we obtain an insight into the social
life of those wonderful peoples, and gather revelations of an
astonishing progress from the records of their financial doings
and commercial arrangements. The excavations in this old
world have given us the originals of many most interesting
documents — if that word can be permitted as applied to baked
tablets. We have contracts of sales of slaves ; of sale and
transfer of lands, with maps and plans attached. We have
records of loans on lands and on house property. We have
evidences of loans of silver at fixed rates of interest on per-
sonal guaranty. "We have receipts and contracts of various
kinds.

The people among whom, 2,500 years ago, such usages were
common, must have been possessed of the highest aptitude for



1 8 The History and Progress of Banking.



commercial science ; and a classification of the Banking In-
struments in vogue with them — for which we are indebted to
M. Le Normant — reads rather as a description of Banking
extracted from a treatise written in the 19th century, than a
recital of the veritable contracts made and prepared by the
subjects of Sennacherib and of Darius the King. M. Le
Normant thus classifies these contracts. — i. Simple obligations.
2. Obligations with a penal clause in case of default (he quotes
one that had 79 days currency). 3. Obligations with a guarant)-
of a third party. 4. Obligations payable to a third party. 5.
Drafts drawn upon one place and payable at another. — Of the
latter he quotes the following, which dates between 500 B.C.
and 600 B.C. : — ■"■ Four minas fifteen shekels of silver (credit) of
" Ardu-Nana son of Yakin, upon Mardukabalussur son ot
" Mardukbalatirib in the town of Orchoe. Mardukbalatirib will
" pay in the month of tibil, four minas fifteen shekels of silver
" to Belabahddin, son of Sennaidour, the 14 arakh-samma in
"the 2nd year of Nabonidus, King of Babylon." This is a
perfect instrument. The date, the time of payment, the payee,
the amount, the drawer, and the draw^ee are specified, and
further, the parties are identified. These Drafts or Letters of
Credit were drawn on the fresh tablet, which was then baked
and thus became enduring and negotiable. Frequently the
payee's designation was omitted, whereby they became as drafts
l)ayable to bearer and freely transferable, for it is evident that
being hard and solid they could not be transferred by en-
dorsement. It is said that those Drafts must, when drawn,
have been notified to the drawee, and this step, being a pre-
cautionary device, seems to be a natural development Thus
it will be seen that in the time of " Nabonidus, King of Baby-
lon," and, extraordinary to contemplate, in a time when
there was no such thing as current coin, there were Letters-



The History and Progress of Bmtkiug. 19

of Credit, Letters of Cluaranty, Mortgages, and penal obli-
gations.*

The following is a translation, by Mr. T. G. Pinches, of one
of these tablets ; it seems to be a bond for money advanced for
twelve months by a member of the house of Egibi &: Son.

"i2| manas of silver from Iddin-Marduku son of Basa^
" son of Nur-Sini^ unto Itti-haladhi-Marduku and Nabii-imtsetig-
" udda^ sons of Ziri-ya, son of the priest of Gula. For a month,
" to (the amount of) i maneh i shekel of silver it increases unto
" them ; from the first day of the month Tebet the interest unto
" them increases. (In) the month Tisri the silver and its interest
" they give (back), their receipt they ask, and afterwards the bond
" (?). (Agreed in) the dwelling of Iddhi-Mardnku, the owner (of
"the money lent). Whoever, for the completion of the agree-
" ment, unto Iddin-Mardiiku his silver and his interest will pay,
" notice (?) the two (men) shall send up. Witnessing: Marduhi-
" irba, son of Basa, son of Shw-7iiqi-inagir. Gimillu, son of
'•'■ Nabu-iddmo, son of the priest of Gula. Itti-Nabibaluadu,
" the scribe, son of Mardukit-banai-sumay son of Belu-edhej-u^
" Babylon, month Kislev, day 25th, year ist [or i ith] Kambyses.
" King of Babylon ; in this day also Kyrus his father. King of
" Countries."

To the Lydians, the invention of coining gold and silver is
attributed, and the year 862 b.c. is fixed as the era of the in-
vention, and a poetic comment on the circumstance is found in
the fact that some 300 years after this period Croesus was King
of Lydia. But the coins of the period are not very elegant,
and beyond the coinage we have no record of any operations of
a banking nature.

But in Greece — the most illustrious portion of the Western

* A recent writer says, however, that these records may not be of a com-
mercial character.



20 The History and Progress of Banking.

world — Banking was undoubtedly carried on to a considerable
extent. Homer speaks of brass money (1184 B.C.), but the
term was applied to weights and not coins. The art of coining,
invented by the neighbouring Lydians, was soon acquired by the
Greeks — the first mint was that of ^4^gina — and was perfected to
such a degree, that the ancient Greek coins far surpassed any
modern coinage. The original method of coining consisted in
placing a given weight of metal, when softened, over a die upon
which a national symbol or sacred emblem was engraved, and
hammering it into the die till a good impression was obtained.
The early coins are therefore rude and battered, and show a
die impression on one side only, the other bearing the rough
irregular marks of the hammer. The earliest Greek coins are
of silver, whereas those of Lydia were of gold. The earliest
impressions are of a sacred character,- — symbols and emblems.
These were succeeded by representations of the deities. The
oldest Athenian coins bear an owl, the type of Athene, and this
was followed by a design of the head of the goddess. The
earlier Greek coins bore a letter, the initial of the town where
they were struck : monograms came later : the first coin upon
w^hich a king's name is discernible is one of Alexander I. of
Macedon. In the reign of PhiUp of Macedon the coinage had
attained perfection. The reverse was now equally artistic as
the obverse. The Medal of Syracuse with its head of Proserpine
is one of the oldest specimens of this perfect coining, and is
remarkably complete. This rapid development is not to be
wondered at. The nation who strove after the beautiful in all
things, who elevated beauty into a religion, and made human
beauty perfect in idealism, manufactured coins on the princijjles
of the highest art. On them we see the most lovely faces and
the most perfect models of beauty in the entire range of art.
Gods and goddesses, kings and heroes, lions and horses, mice,



The History and Progress of Banking. 21

bees, roses and ears of wheat, in supreme excellence of design,
find places on the old Hellenic coins. The Greeks deve-
loped rapidly also their system of Banking ; they changed
foreign money, they received money on deposit at interest ; they
granted loans. We learn this from Demosthenes, who himself
kept a banking account. The rate charged on loans is said to
have usually been 36 per cent, but this statement is doubtful.

Though those who engaged in the pursuit of Banking in
ancient Greece were generally of low origin, being freedmen or
aliens, yet they frequently rose to positions of great eminence,
and became wealthy members of the State. They therefore en-
joyed good credit and repute. One of the most eminent Bankers
in Ancient Greece was one Pasion, who, from being a manu-
mitted slave, became the greatest Banker of his time. Demos-
thenes and contemporary orators frequently make mention of him ;
we even get a glance at his business. He is said to have had
^2,6Si in deposit from his customers : to have lent ;^i2,i87
out at interest, and to have owned land worth ^4,875. If this
be so we are surprised at the statement that the business was
worth only ;^4oo sterling a year. The state was more than once
indebted to Pasion's financial support, and he was a man of
undoubted integrity, well known and trusted throughout Greece,
and enjoying the friendship of the great. So eminent was his
reputation and so undoubted his credit that his son Apollodorus
boasted that he could obtain money wherever he pleased,
because he was the son of Pasion.

The Greek Bankers were called Trapezitas from Trapeza, a
table (as the Roman were called Mensarii from mensa), because
they conducted their business at tables in the public streets and
in the temples. The Greeks were acquainted with letters of
credit, and knew a method of endorsement, for one Iceratus
drew in Athens a bill on his father in Pontus, which was



Online LibraryCharles MacCarthy CollinsThe history, law, and practice of banking. With an appendix of statutes → online text (page 1 of 29)