Part 18

BA'NIM, John, an Irish novelist, dramatist, and poet, born in 1798, died 1842. His chief early work was a poem, _The Celt's Paradise_ (1821). Having settled in London, he made various contributions to magazines and to the stage; but his fame rests on his novels, particularly the _O'Hara Tales_, in which Irish life is admirably portrayed. In these, as in some of his other publications, his brother, Michael Banim (born 1796, died 1874), had an important share, if not an equal claim to praise. The two brothers have been justly called 'the first national novelists of Ireland'.

BANISHMENT. See _Exile_.

BAN'JARMASSIN, a district and town in the south-east of Borneo, under the government of the Dutch. The town is situated on an arm of the Banjar, about 14 miles above its mouth, in a marshy locality, the houses being built on piles, and many of them on rafts. Exports: pepper, benzoin, bezoar, ratans, dragon's-blood, birds'-nests, &c.; imports: rice, salt, sugar, opium, &c. Pop. 52,000, mostly Dyaks.

BAN'JO (a negro corruption of _bandore_; It. _pandora_, from Lat. _pandura_, a three-stringed instrument), the favourite musical instrument of the negroes of the Southern States of America. It is six-stringed, has a body like a tambourine and a neck like a guitar, and is played by stopping the strings with the fingers of the left hand and twitching or striking them with the fingers of the right. The upper or octave string, however, is never stopped. The banjo was introduced into England in 1846.

BANJOEMAS (b[.a]n'yoe-m[.a]s), a town in Java, near the centre of the island, well built and of commercial importance; it is 22 miles from the coast, and is the residence of a Dutch governor. Pop. 6500.

BANKING AND BANKS. Banks are establishments for the deposit, custody, and repayment on demand of money, and obtain the bulk of their profits from the investment of sums thus derived and not in immediate demand. The term is a derivative of the _banco_ or bench of the early Italian money-dealers, being analogous in its origin to the terms _trapez[=i]tai_ (_trapeza_, a bench or table) applied to the ancient Greek money-changers, and _mensarii_ (_mensa_, a table) applied to the public bankers of Rome.

In respect of constitution there is a broad division of banks into public and private; public banks including such establishments as are under any special state or municipal control or patronage, or whose capital is in the form of stock or shares which are bought and sold in the open market; private banks embracing those which are carried on by one or more individuals without special authority or charter and under the laws regulating ordinary trading companies. In respect of function three kinds of banks may be discriminated: (1) banks of deposit merely, receiving and returning money at the convenience of depositors; (2) banks of discount or loan, borrowing money on deposit and lending it in the discount of promissory notes, bills of exchange, and negotiable securities; (3) banks of circulation or issue, which give currency to promissory notes of their own, payable to bearer and serving as a medium of exchange within the sphere of their banking operations. The more highly-organized banks discharge all three functions, but all modern banks unite the two first. For the successful working of a banking establishment certain resources other than the deposits are of course necessary, and the capital paid up by shareholders on their shares and forming the substantial portion of their claim to public credit is held upon a different footing from the sums received from depositors. It is usually considered that for sound banking this capital should not be traded with for the purpose of making gain in the same way as the moneys deposited in the bank; and it is for the most part invested in Government or other securities subject to little fluctuation in value and readily convertible into money. But in any case prudence demands that a _reserve_ be kept sufficient to meet all probable requirements of customers in event of commercial crises or minor panics. The reserve of the banking department of the Bank of England is always in coin, or in notes against which an equivalent value of coin and bullion is lying in the issue department. In other English banks the reserve is usually kept partly in gold and partly in Government stocks and Bank of England notes; but it sometimes lies as a deposit in the Bank of England. The working capital proper of a bank is constituted by moneys on deposit, for which the bank may or may not pay interest; the advantages of security, of ease in the transmission of payments, &c., being regarded in the cases of banks little affected by competition as a sufficient return to the depositor. Thus the Bank of England pays no interest on deposits, while the contrary practice has prevailed in Scotland since 1729, where interest is paid on deposits although not on current accounts.

Of the methods of making profit upon the money of depositors, one of the most common is to advance it in the discounting of bills of exchange not having long periods (seldom more than three months with the Bank of England) to run; the banker receiving the amounts of the bills from the acceptors when the bills arrive at maturity. Loans or advances are also often made by bankers upon exchequer bills or other Government securities, on railway debentures or the stock of public companies of various kinds, as well as upon goods lying in public warehouses, the dock-warrant or certificate of ownership being transferred to the banker in security. In the case of a well-established credit they may be advanced upon notes of hand without other security. Money is less commonly advanced by bankers upon mortgages on land, in which the money loaned is almost invariably locked up for a number of years. To banks of issue a further source of profit is open in their note circulation, inasmuch as the bank is enabled to lend these notes, or promises to pay, as if they were so much money and to receive interest on the loan accordingly, as well as to make a profitable use of the money or property that may be received in exchange for its notes, so long as the latter remain in circulation. It is obvious, however, that this interest on its loaned notes may not run over a very extended period, in that the person to whom they are issued may at once return them to the bank to lie there as a deposit and so may actually draw interest on them from the bank of issue; or he may present them to be exchanged for coin, or by putting them at once into circulation may ensure a certain number speedily finding their way back through other hands or other banks to the establishment from which he received them. A considerable number of the notes issued will, however, be retained in circulation at the convenience of the public as a medium of exchange; and on this circulating portion a clear profit accrues. This rapid return of notes through other banks, &c., in exchange for portions of the reserve of the issuing bank, is one of the restraints upon an issue of notes in excess of the ability of the bank to meet them. In the United Kingdom a more obvious restraint upon an unlimited note issue, originating partly in a desire for greater security, partly in the belief that the note augmentation of the currency might lead to harmful economic results in its influence upon prices, is to be found in the Bank Acts of 1844 and 1845, which impose upon banks of issue the necessity of keeping an equivalent in gold for all notes issued beyond a certain fixed amount. The wisdom of these legal restrictions, which are not uniform throughout the kingdom, and the desirability of the acquisition and control by the State of the whole business of issue, are still matters of debate.

In specific relation to his customer the banker occupies the position of debtor to creditor, holding money which the customer may demand at any time in whole or in part by means of a cheque payable at sight on presentation during banking hours. For the refusal to cash a cheque from the erroneous supposition that he has no funds of his customer's in his hands, or for misleading statements respecting the position in which the bank stands, the banker is legally responsible. Moreover, the law regards him as bound to know his customer's signature, and the loss falls upon him in event of his cashing a forged cheque. In their relations to the community, the chief services rendered by banks are the following: By receiving deposits of money they are the means by which the surplus capital of one part of a country is transferred to another where it may be advantageously employed in stimulating industry; they enable vast and numerous money transactions to be carried on without the intervention of coin or notes at all, thus obviating trouble, risk, and expense. The mechanism by which the last of these benefits is secured is to be found in perfection in the London Clearing House.

The modern tendency of banks is towards amalgamation. The large English banking institutions have absorbed many of the smaller banks. They have also made working arrangements with Scotch and Irish banks and with similar institutions abroad.

The result of these amalgamations is to give control of immense financial resources to a smaller number of banks. In 1918 the Government appointed a Committee to inquire into the effect of such amalgamations and absorptions. The terms of reference were: "To consider and report to what extent, if at all, amalgamations between banks may affect prejudicially the interests of the industrial and mercantile community, and whether it is desirable that legislation should be introduced to prohibit such amalgamations or to provide safeguards under which they might continue to be permitted"; and the Committee reported: "That legislation be passed requiring that the prior approval of the Government must be obtained before any amalgamations are announced or carried into effect".

In order, however, that such legislation may not have the effect of producing secret amalgamations, the Committee decided that "all proposals for agreements which would alter the status of a bank as regards its separate entity and control, or for purchase by one bank of the shares of another bank, be also submitted for the prior approval of the Government before they are carried out".

Another development is the registration of the British Overseas Bank, Limited, with a nominal capital of L5,000,000. The principal object of this institution is to carry on general banking business in all parts of the world. Four banks--two English, one Scotch, and one having connections with South America--are financially interested in the Overseas Bank.

Banking operations on a considerable scale appear to have been conducted by the ancients, and recent excavations have proved that in the seventh century B.C. banking was practised at Bagdad by a firm of Egibi & Sons. Modern banking, however, must be regarded as having had an independent origin in the reviving civilization of the Middle Ages. In the twelfth century almost the whole trade of Europe was in the hands of the Italian cities, and it was in these that the need of bankers was first felt. The earliest public bank, that of Venice, established in 1171 and existing down to the dissolution of the Republic in 1797, was for some time a bank of deposit only, the Government being responsible for the deposits, and the whole capital being in effect a public loan. In the early periods of the operations of this bank deposits could not be withdrawn, but the depositor had a credit at the bank to the amount deposited, this credit being transferable to another person in place of money payment. Subsequently deposits were allowed to be withdrawn, the original system proving inconvenient outside the Venetian boundaries. It is, however, less from the Bank of Venice than from the Florentine bankers of the thirteenth and fourteenth centuries that modern banking specially dates, the magnitude of their operations being indicated by the fact that between 1430 and 1433, 76 bankers of Florence issued on loan nearly 5,000,000 gold florins. The Bank of St. George at Genoa also furnished a striking chapter in financial history. The important Bank of Amsterdam, taken by Adam Smith as a type of the older banks, was established in 1509, and owed its origin to the fluctuation and uncertainty induced by the clipped and worn currency. The object of the institution (established under guarantee of the city) was to give a certain and unquestionable value to a bill on Amsterdam; and for this purpose the various coins were received in deposit at the bank at their real value in standard coin, less a small charge for recoinage and expense of management. For the amount deposited a credit was opened on the books of the bank, by the transfer of which payments could be made, this so-called _bank money_ being of uniform value as representing money at the mint standard. It bore, therefore, an _agio_ or premium above the worn-coin currency, and it was legally compulsory to make all payments of 600 guilders and upwards in bank money. The deposits were supposed to remain in the coffers of the bank, but they were secretly traded with in the eighteenth century till the collapse of the bank in 1790. Banks of a similar character were established at Nuremberg and other towns, the most important being the Bank of Hamburg, founded in 1619. In England there was no corresponding institution, the London merchants being in the habit of lodging their money at the Mint in the Tower, until Charles I appropriated the whole of it (L200,000) in 1640. Thenceforth they lodged it with the goldsmiths, who began to do banking business in a small way, encouraging deposits by allowing interest for their use, lending money for short periods, discounting bills, &c. The bank-note was first invented and issued in 1690 by the Bank of Stockholm, founded by Palmstruck in 1688, and one of the most successful of banking establishments. About the same time the banks of England and Scotland began to take shape, opening up a new era in the financing of commerce and industry.

_Bank of England._--The Bank of England, the most important banking establishment in the world, was projected by William Paterson, who was afterwards the promoter of the disastrous Darien scheme. It was the first public bank in the United Kingdom, and was chartered in 1694 by an Act which, among other things, secured certain recompenses to such persons as should advance the sum of L1,500,000 towards carrying on the war against France. Subscribers to the loan became, under the Act, stockholders, to the amount of their respective subscriptions, in the capital stock of a corporation, denominated the _Governor and Company of the Bank of England_. The company thus formed advanced to the Government L1,200,000 at an interest of 8 per cent--the Government making an additional bonus or allowance to the bank of L4000 annually for the management of this loan (which, in fact, constituted the capital of the bank), and for settling the interest and making transfers, &c., among the various stockholders. This bank, like that of Venice, was thus originally an engine of the Government, and not a mere commercial establishment. Its capital has been added to from time to time, the original capital of L1,200,000 having increased to L14,553,000 in 1816, since which no further augmentation has taken place. There exists besides, however, a variable 'rest' of over L3,000,000. The charter of the bank was originally granted for eleven years certain, or till a year's notice after 1st Aug., 1705. It was subsequently renewed for various periods in 1697, 1708, 1713, 1742, 1764, 1781, 1800, 1833, and 1844, certain conditions which the bank had to fulfil being specified at each renewal. On this last occasion it was continued till twelve months' notice from 1855. At the same time the issue department of the bank was established as distinct from the general banking department, the sole business entrusted to the former being the issue of notes. By this arrangement the bank was authorized to issue notes to the value of L14,000,000 upon securities specially set apart, the most important of the securities being the sum of L11,015,100 due to the bank by the Government, together with so much of the coin and bullion then held by the bank as was not required by the banking department. The bank has since been permitted to increase its issue on securities to L18,450,000, but for every note that the issue department may issue beyond the total sum of L18,450,000 an equivalent amount of coin or bullion must be paid into the coffers of the bank. For its special privileges the bank has to pay to the Government an annual sum of L180,000, and the profit derived from the issue of notes beyond L14,000,000. The Bank of England notes are practically equivalent to gold. They are (like all English bank-notes) of the value of L5 and upwards, and are legal tender throughout England. Notes once issued by the bank and returned to it are not reissued but are destroyed--a system adopted in order to facilitate the keeping of an account of the numbers of the notes in circulation, and so prevent forgery. On 7th Aug., 1914, Government notes for L1, and ten shillings, were issued convertible into gold at the Bank of England.

In compliance also with the Bank Charter Act of 1844 the bank is compelled to publish a weekly account, of which the following is a specimen:--

_Dr_. ISSUE DEPARTMENT. Week ending 11th August, 1920 _Cr_.

Notes issued L139,980,460 | Government debt L11,015,100 | Other securities 7,434,900 | Gold coin and bullion 121,530,460 | Silver bullion --- ------------ | ------------ L139,980,460 | L139,980,460

_Dr_. BANKING DEPARTMENT _Cr_.

Capital L14,553,000 | Government securities L68,250,449 Rest 3,458,795 | Other securities 73,805,565 Public deposits 15,999,059 | Notes 14,452,665 Other deposits 124,018,988 | Gold and silver coin 1,537,092 Seven-day and other 15,929 | bills ------------ | ------------ L158,045,771 | L158,045,771

The total of the notes given out by the issue department is called the 'issue circulation', the portion of it in the hands of the public being the 'active circulation', and that still in the banking department being the 'note reserve'. This 'note reserve' represents really the amount of bullion in the issue department available for the use of the banking department. Of the other items in the account it may be noted that the proprietors' 'rest' is a varying surplus increased always by accumulated profits up to 5th April and 10th Oct., when the bank dividends are paid to the shareholders; and that the public deposits, which include sums lodged on account of the customs, inland revenue, &c., increase through revenue receipts until the dividend terms in January, April, July, and October. The other or private deposits comprise those of bankers, merchants, and other persons. An increase in these private deposits indicates an increase of monetary ease, while a decrease informs us that bankers, merchants, and traders have calls upon them for money. A better indication of the demand for money is furnished, however, by the advances on commercial securities, and it is by this and the condition of the reserve that the bank rate of discount is regulated. When the reserve is high and the advances moderate the discount rate is low, and it is raised according as the reserve falls and advances are more in request, especially during an adverse foreign exchange and drain of gold. Gold is thus restrained from going abroad, and its influx into the country is encouraged. In addition to the profit which the bank may make by ordinary banking business, by the Bank Act of 1892 and the Revenue Act of 1906, it receives an allowance for the management of the national debt, at the rate of L325 per million on 500 millions, and L100 per million on all debt above that sum. The annual sum is not to be less than L160,000. It also derives a profit from foreign gold coin and bullion brought to it, for which it pays L3, 17s. 9d., or 1-1/2d. per ounce less than the real value.

The management of the bank is in the hands of a governor, deputy-governor, and twenty-four directors, elected by stock-holders who have held L500 of stock for six months previous to the election. A director is required to hold L2000, a deputy-governor L3000, and a governor L4000 of the stock. The court or board of directors meets every Thursday, when the weekly account is presented. The Bank of England has branches in Liverpool, Manchester, Newcastle, Birmingham, Leeds, Hull, Bristol, Plymouth, and Portsmouth.

The other English banks consist of numerous joint-stock and private banks in London and the provinces, many of the provincial establishments of both kinds having the right to issue notes. Private banks in London with not more than six partners have never been prevented from issuing notes, but they could not profitably compete with the Bank of England. The maximum issues of the provincial banks are limited to a certain amount, against which they are not compelled to hold gold in reserve, and they have no power to issue against specie in excess of the fixed circulation. Their actual issues are considerably below this amount. No union can take place between a joint-stock bank and a private bank, or between two joint-stock banks of issue, without one of them losing its issue. Their total authorized circulation is about L2,958,900, but the actual circulation of these banks is now only about L1,200,000, being distributed among about eighteen private and about twenty joint-stock banks. The notes of these banks are payable in Bank of England paper. The greater number of joint-stock banks are of limited liability, though their liability in respect of their notes is unlimited. Some of them have a large number of branches. All the joint-stock banks allow interest on money deposited with them. The total paid-up capital and reserves of the English joint-stock banks is about L100,000,000.