In 1731, the rate was fixed at 4 per cent for twelve months, and 3 per cent for six months. In 1762, the Bank of Scotland and the Royal Bank advertised that the rates would be 5 per cent on money lodged for six months, and 4 per cent on money at call, But in the following year they gave notice that the deposits would be repaid, as the money could not be profitably employed. Mr. Boase's work, "A Century of Banking in Dundee," contains the annual balance-sheets of the Dundee Banking Company, from 1764 to 1864. From these documents a fair inference may be drawn as to the growth of the deposit business generally. For twenty-four years from the foundation of the bank, excepting once for partnership purposes, the item of deposits is altogether wanting. In 1788, it begins with a modest entry of £200 for "sundry accounts." For four years it does not again appear, but it is then suddenly inaugurated with the imposing sum of £35,944 for "money deposited," and thereafter year by year the amount rapidly rises. It is curious to observe the items on the other side of the account. The advances on cash accounts are in the earlier years much higher than the discounts; but as soon as the deposit money comes into play, there is a corresponding increase, not in the cash credits, but in the bills discounted. In 1791, the cash accounts are £41,000, and in 1792, £48,000; while the discounts for these years are £17,000, and £65,000, respectively. These figures point very clearly to the rapid increase in the wealth of the country, and to the prosperity of trade during the period.

In the year 1793, after a peace of ten years, foreign war again broke out. England was at the same time further disturbed by internal political difficulties. In the course of the year a commercial panic ensued, causing the failure of many English country banks. The effects of the disaster could not but be felt in the neighbouring country, but it was only to a small extent. Four private banks failed in Scotland, two in Edinburgh and two in Glasgow; but credit was soon re-established. In 1797, early in the year, the fear of foreign invasion led in Scotland, as in England, to a great demand for gold, though of short duration. Immediately after this occurrence the suspension of cash payments by the Bank of England took place. The announcement of this measure made a profound sensation in Scotland. All the banks intimated that they would for the present follow the same course. Crowds thronged their counters crying for gold, but by acting together and by giving relief in cases where it was required, they gradually overcame the pressure, and in three months their notes were taken as freely as before. Thereafter the notes were accepted universally throughout the country, and it does not appear that they ever suffered any depreciation during the long period when those of the Bank of England were in that position. They had not the quality of legal tender.

The effects of the suspension of cash payments having passed away in Scotland, banking enterprise in that country took a fresh start. In 1802, several new private banks were established in country towns. They were at first of small account, so small that the three public banks refused to receive their notes. Possibly this course of action on the part of the larger banks may have checked the further extension of the smaller concerns, for no others came into existence for a few years. It was not till 1809 that an addition was made to their number. In that year the Dundee Union Bank began business. It was more enterprising than any Scotch bank had been since the formation of the Bank of Scotland in 1696, for not only had it several branches in Scotland, but it opened an office in London. It existed independently till 1844, when it was merged in one of the larger institutions.

We have now reached a memorable stage in the history of Scottish banking. Hitherto the business had been divided between the three public banks doing business in Edinburgh and in a few of the larger towns, two joint-stock banks in Dundee, and a number of private banking-houses established all over the country. The three public banks appear to have acted as the bankers of many of the private banks, and the directors of the former were often partners of the latter. We are told that the people preferred to do business with the private bankers, the public institutions not being so popular, and being indeed imbued with the high Tory policy of the time. At this juncture an event took place which undoubtedly led to a radical change in the banking arrangements of the country, for immediately afterwards private banking began to decline, and year by year it continued to dwindle until it altogether disappeared. I refer to the foundation of the Commercial Bank of Scotland in the year 1810. Lord Cockburn, in the "Memorials of his Time," speaks of the old Edinburgh bankers of that day in terms of unmeasured contempt. He describes them as "the conspicuous sycophants of existing power. Not that they would discount a bad bill for a Tory, or refuse to discount a good one for a Whig; but their favours and their graciousness were all reserved for the right side;" and he adds, " A demand for a bank founded on more liberal principles was the natural result of this state of things, as soon as these principles had worked their way into any considerable portion of the community. Hence the origin of the Commercial, professing to be the bank of the citizens."

It was in these circumstances that the Commercial Bank was established. Happily, political feeling has long since disappeared from the practice of banking in Scotland; but whether there was reason for Lord Cockburn's pungent condemnation or not, the new bank did take a position in the popular estimation which the older institutions do not seem to have had at that time. The bank was

incorporated by a royal charter in 1831, its original constitution having been a deed of partnership. In the charter it is declared that nothing contained in these presents shall be construed as intended to limit the responsibility and the liability of the individual partners of the said corporation for the debts and engagements lawfully contracted by the said corporation, which responsibility and liability is to remain as valid and effectual as if these presents had not been granted, any law or practice to the contrary notwithstanding." The unlimited liability of the partners was thus expressly preserved, though they had been formed into a corporation. At its origin, the capital of the bank was declared to be £3,000,000, and of this sum £450,000 was called up. The subsequent history of its capital account is a record of singular prosperity. In 1829, the amount paid up was increased to £600,000 by a call upon the proprietors. In 1859, the amount was increased to £800,000 by a bonus taken from undivided profits; and a similar operation took place in 1864. The capital was thus raised to £1,000,000, its present amount, two-fifths having been contributed out of profits.

The promoters of the bank very soon began to extend its business over the country, and in nine years they had opened fourteen branches. The British Linen Company had in 1819 seventeen branches. The Bank of Scotland had thirteen, but the Royal Bank had only opened one branch, in pursuance of a policy which it adhered to for nearly forty years afterwards. This multiplication of places of business by the powerful joint-stock banks had its natural effect on the small local private banking-houses. After 1810 only two private banks were established in Scotland, while those which were already in existence soon felt the force of the new competition, and the weakest among them began to succumb to it.

The time was a chequered one in the commercial history of the country. After the peace of 1815, there was at first much distress among the classes that had been fostered by the lavish expenditure of the great war and by the artificial conditions which in many ways resulted from it. Several years of unexampled prosperity followed. In the speech from the Throne at the opening of the Session of 1825, it was said that the people were more thriving and contented than they had ever been before. But this prosperity had become inflated and the inevitable collapse was at hand. In a few months there occurred a commercial crisis and panic more disastrous than any that had previously taken place. Its effects told with peculiar severity on the country bankers of England, of whom eighty failed. It was but little felt in Scotland. The crisis of 1826 was further memorable in the history of banking in England. It brought about the suppression of £1 notes in that country, the emancipation of banking from the fetters by which it had hitherto been confined, and the establishment of many provincial joint-stock banks of

issue, which had been illegal in virtue of the Act of 1708. It is not, however, within our province to dwell upon these points, though it is necessary to mention them, as bearing upon the progress of events in Scotland.

There was no occasion for amendments of the law as affecting the privileges of any bank in that country, for the right to enter upon the business of banking, including the issue of notes of £1 and upwards, remained as of old perfectly free and open to all. Nevertheless, at the beginning of the session of 1826, the Prime Minister, Lord Liverpool, announced that it was the intention of the Government to bring in a measure for the suppression of £1 notes, not only in England but in Scotland. This intimation raised a great deal of patriotic opposition north of the Tweed, Sir Walter Scott penned his famous letters from "Malachi Malagrowther." The usual methods of parliamentary agitation were energetically employed. The Government yielded so far, and agreed that before further action the whole question should be referred to Select Committees of both Houses. These Committees reported against the proposals of the Government. The Lords' Committee said that the issue of £1 notes had, as far as the banks of Scotland were concerned, "been found compatible with the highest degree of solidity," and that there was no ground for making any alteration. The banking system was therefore left untouched, and for a time longer it enjoyed the condition of complete freedom which had always distinguished it. The result was a rapid development of the business, and its extension to remote districts and small places, which under the threatened restrictions could not have been carried out.

The next chapter of the history embraces the period ending with the year 1845, when the legislative arrangements still in force affecting the note issues were made. The salient feature in this period is the continued rise of the joint-stock banks and the decline of the private banking-houses. At the beginning of the year 1825 thirty-two banks existed in Scotland. Of these only four were properly speaking joint-stock banks; the others were private banks. A few nominally joint stock were really private houses, with a small partnership and without incorporation. At the close of the year 1845 the number of the joint-stock banks had been increased to nineteen, and all the private banks had disappeared. Some had failed, others had been wound up, and the remainder, chiefly houses which had a good business, had been amalgamated with the joint-stock banks. This tendency had existed at the beginning of the century; and as soon as the powerful incorporations having their headquarters in Edinburgh spread their branches over the country, the smalier banks began to decay and in less than fifty years not one remained. It was during this period that the Aberdeen Town and County Bank, the National Bank of Scotland, the North of Scotland Bank, the Clydesdale Bank, the Caledoniań

Bank, and the Union Bank of Scotland, were founded. These six institutions still exist; their origin and constitution are so well known that it seems quite unnecessary to trouble you with any detailed statement on the subject, similar to that which has been given in the case of the four older banks. In order to show as clearly as possible, from the materials at my command, the changes among the Scotch banks since 1800, I have appended a progressive statement of these changes over the period.

The period from 1826 to 1845 was marked by a still increasing growth of the national resources. Steam was working its marvellous effects in all branches of production, the hot blast had been invented and had created the iron trade, the great mineral wealth of the country had been ascertained, the Australian colonies had been founded, the first railways had been constructed, and the first oceansteamers had crossed the Atlantic. Scotland was not behind in the general advance. The banks of the country not only shared in the prosperity but contributed to it. Their system was well suited for effectually gathering in the money of the saving class from every corner of the land, and beneficially employing it in the centres of industry. They had collecting agents in the country districts and lending agents in the towns, devoted to their respective departments and in most cases doing them justice. Self interest was, as a matter of business, the first consideration; but these operations had also an important influence in improving the habits of the people and in developing the trade of the country.

Unfortunately the materials for a statistical history of Scottish banking do not exist, and few reliable figures bearing on the subject can be obtained, even for the comparatively recent period now under review. As regards the growth of the deposits between 1826 and 1845, all that can be said is that one of the parliamentary witnesses stated in the former year that he estimated the amount to be £20,000,000 or £21,000,000, and that in 1845 it had risen to £33,000,000. The latter is an authentic amount, having been officially given in to the Banks of Issue Committee in 1875. The note circulation was, in 1825, £3,309,000 In 1845 it was £3,087,000, a decrease which was probably produced by the spread of the practice of keeping bank accounts. The number of bank offices and branches was in 1819, 127, in 1830, 172, and in 1845, 396. In 26 years it had been more than trebled.

The Act

We now enter upon the most recent period of the history, beginning with 1845, when the legislation which now regulates the note issues of the country first came into operation. of 1845, which applies specially to Scotland, proceeds upon the same general principle as the English Act of 1844, and prohibits the issue of notes excepting in the case of those institutions which had previously exercised that right. But it differs from the English Act in some important points. In particular, the Bank of