The Wanganui Chronicle TUESDAY, JANUARY 22, 1935. THE BANK OF ENGLAND

Wanganui Chronicle, Volume 79, Issue 18, 22 January 1935, Page 6

The Wanganui Chronicle TUESDAY, JANUARY 22, 1935. THE BANK OF ENGLAND

Mr. Lloyd George meant when he said that "the Bank of England must be independent of the financier’s viewpoint and must be in closer touch with industry and commerce,” is by no means clear. The function of the Bank of England is to be a bankers’ bank. True, there are two divisions of the bank, the issue department and the banking department, but, taken as an institution it has maintained a central position in the financial market and exercised its influence for the benefit of the community as a whole. Its dividends have remained stationary for years, and there is no evidence that it has preferred the, interests of the shareholders over that, of the community. The share capital of the Bank of England is only £14,553,000, and accumulated profits amount to some £3,541.610 at the present moment. In its issue department it has a liability in regard to the note issue of £452,403,692, which is backed by £260,000,000 of Government securities and also by a gold holding ot £192,403,692. The providing of al2 per cent, dividend on its share capital, therefore, imposes a very light burden. In the banking department there is no less than £177,122,245 of assets, against which the chief liability is the deposits of bankers amounting to £108,738,416, on which no interest is paid. The bank’s position, therefore, is unique and differs considerably from that of an ordinary trading institution. The relatively small size of its profit-receiving capital, as compared with the funds entrusted to it, makes it possible for the Bank of England to pursue a policy intended to further the general wellbeing of the community from a financial standpoint. It has been recognised in. financial circles, however, that the peculiar circumstances which surrounded the growth of the staple industries of the North of England and the growth of the financial market known as “the City” in London, made for each developing independently of the other. It must be remembered that the large joint-stock banks which dominate commercial banking in England were all originally provincial banks, and that they moved to London during the last century. The Bank of England’s special function as a bankers’ bank developed slowly, and it was not until well into the middle of the last century that the present conception of its function prevailed. In the meantime, the established industries of the North had already made their own financial arrangements and were in no need of finance from London. London, therefore, became predominantly interested in the import and export trade of the United Kingdom and in the financing of foreign countries and the overseas Dominions. After the war period had passed, however, the dislocations had become considerable, and as a result, the facilities which “the City” could offer an investor who desired to place his money at the end of the earth, needed also to be provided to the investor who wished to interest himself in the staple domestic industries. The peculiar particular contribution of the Bank of England was the establishing of the Bankers’ Industrial Development Company. At the time of the formation of this company its objects were stated to be “to receive and consider schemes submitted by the basis industries of this country for the purpose of their rationalisation, either by industries or by regions. In the ease of schemes which may be approved, arrangements will be made for the provision in one way or another and through existing agencies of such monies as may seem to be essential.” Naturally in the circumstances the aims of the company hadto be stated in an clastic form, because the company had to proceed empirically, but the Bank of England has preserved its special function while attending to the needs of industries that were reorganising through the operation of subsidiary agencies. Jn view of this conscious effort to come nearer to industries proper, th, remarks of Mr. Lloyd George are by no means clear.