Inevitably the shareholders of the Bank of England will dislike this great difference; more or less, they will always urge their directors to diminish (as far as possible) the unproductive reserve, and to augment as far as possible their own dividend.
His neighbours know him, and trust him because they know him.
‘ The diffusion of confidence through Lombard Street and the world is the object of the publication of the Bank accounts and of the Bank reserve.
It will be useful to know in what way this method has grown up. We now come to the much more important question of the adequacy of the sterling reserves. They have been used to re-discount with such banks as the London and Westminster millions of bills, and if they see that they are not likely to be able to re-discount those bills, they instantly protect themselves and do not discount them. Only our familiarity blinds us to the marvellous nature of the system.
But the bill-brokers were told not to expect the like again.
 paid in London for the delivery in India of the value in gold of a rupee. .
The English Government not only created this singular system, but it proceeded to impair it, and demoralise all the public opinion respecting it. Especially in money matters a man might fairly reason–‘If the Government is right in trusting the Bank of England with the great balance of the nation, I cannot be wrong in trusting it with my little balance. There seems little reason, therefore, for over–anxiety lest the Government be caught short of rupees. Their balance sheets are effective secrets–rigidly guarded. It can stop discounting, of course, at pleasure. The ill effects of it are to a certain extent counteracted, in the case of India, by a transference of these funds to London and a release of the accumulating currency in India through the sale of Council Bills. It is important, therefore, to remember that the Government now hold in India nearly £14,000,000 of unfunded debt repayable at short notice to 1,500,000 depositors. , and as these buy of E, F, &c. Act rendering Currency notes of Rs. Little effect is produced on the general trade of the country. Naturally such persons, when proceeding to form a company, make it upon the model of that which they have been used to see successful. The privileged opportunity of which we spoke is singularly conspicuous in such figures; it enables banks to pay much, which without it would not have paid much. I can imagine nothing better in theory or more successful in practice than private banks as they were in the beginning. The same reasons which make it desirable for a private person to keep a banker make it also desirable for every banker, as respects his reserve, to bank with another banker if he safely can.
The savings of a county with good land but no manufactures and no trade much exceed what can be safely lent in the county. The diminished use of the Clearing-house, in consequence of the panic, would intensify that panic. It will waste profits by over-provision against ordinary danger, and yet it may not always save the bank; for this provision is often likely enough to be insufficient against rare and unusual dangers.