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• A History of Banking In Great Britain;
• Chapter I.: Banking In England.
• Section I.: A Record of Beginnings.
• Section II.: Foundation of the Bank of England.
• Section III.: An Era of National Development.
• Section IV.: State of the Irish Currency.
• Section V.: Failure of Currency Reform—inflation and Reaction.
• Section VI.: The Committee On Banking of 1840.
• Section VII.: On the Bank Acts of 1844 and 1845.
• Section VIII.: Commercial Crises.
• Section IX.: Monetary Panics.
• Section X.: General Conclusion.
• Chapter II.: Banking In Scotland.
• Chapter III.: The Theory and Mechanism of Banking.
• Chapter IV.: Definitions of Economic Terms.
• Chapter V.: The Theory of Value.
• Section I.
• Section II.
• Section III.
• Chapter VI.: The Theory of Credit.
• Section I.
• Section II.
• Banking In Russia.
• Chapter I.: The Early Stages of Money and Credit.
• Section I.: Prefatory.
• Section II.: Introduction of Paper Money.
• Section III.: Financial Reconstruction Under Alexander II. And the Founding of the State Bank.
• Chapter II.: Methods and Operations of the State Bank.
• Chapter III.: Banking Vicissitudes From 1862 to 1875.
• Chapter IV.: The Eastern War Period.
• Chapter V.: Private Banks.
• Chapter VI.: The Bourse.
• Chapter VII.: The Precious Metals.
• Chapter VIII.: Foreign Exchanges.
• Chapter IX.: The Debt and Finances of Russia.
• History of Savings-banks In the United States.
• I.
• II.
• III.
• IV.
• V.

CHAPTER II.

METHODS AND OPERATIONS OF THE STATE BANK.

THE “Journal de St. Petersbourg” of August 20 (September 20) contains a report of the operations of the State Bank for the second half of the year 1860. As the document comprises no less than ninety quarto pages, we can here present only a brief condensation of its more important features.

The directors announce that, in publishing an account of the first half-year’s business of the Bank, they consider it advisable to enter into certain details touching not only the principles involved and the progress made by the Bank itself, but also the operations with which it was intrusted for account of the Treasury and those which it was authorized to undertake in order to stimulate trade and industry.

The business of the Bank is divided into two main categories. To the first belong all its operations for account of the State; to the second, its commercial transactions proper. The Bank having entered upon both in the middle of the year, and having taken over all the accounts of the existing branches and of the Bank of Commerce, as they respectively stood on July 1, 1860, the directors found it indispensable, both for the symmetry of the report and as furnishing a just basis of comparison with the business of preceding years, to place in this document, besides the detailed figures relating to the operations of the Bank, certain totals showing the transactions of the Bank itself and those of the branches.

Before entering into the details of these operations the directors furnish the following figures of the liquidation of the accounts of the former credit institutions. According to the balance-sheet of the Bank of Commerce, the State Bank took over on July 1, 1860, as liabilities:

On the other hand, the Bank received from the Bank of Commerce, as assets:

In addition to the accounts of the late Bank of Commerce, which it replaced, and its branches, the State Bank had to take over:

1. All the deposits held by the various credit institutions of the Empire.

2. All the accounts of the 4 per cent. Consolidated Loan for the cancellation of a corresponding proportion of the Treasury debt to the State Bank.

3. All the deposits converted into 5 per cent. bills of the State Bank.

4. The accounts of the Commission for the Issue of Bills of Credit, which now became a department of the State Bank.

5. All the loans made to the Treasury, or to public departments by the credit institutions, to be consolidated into a general account of the Treasury’s debt to the State Bank.

6. The capital stock of the Loan Bank, which the State Bank was to turn to the account of its capital and reserve.

During the second half of the year 1860, the State Bank had finished its settlement with the credit institutions of St. Petersburg only. As to the Commission for the Issue of Credit Bills, the R. 704,904,927 of those bills in circulation on the day of the consolidation of its accounts with those of the State Bank were carried to the debit of the latter, and these were carried to its credit, for account of the redemption fund, R. 92,533,777 in gold and silver, coin and bullion, and in public funds. The R. 612,371,149 forming the surplus of bills in circulation over the redemption fund were brought into the account as a non-interest-bearing debt of the Treasury. The credit bills issued in 1859 to strengthen the cash accounts of the credit institutions, and charged to them at that time, were stricken out of their accounts in 1860, as an offset against their loans to the Treasury, so that the latter became sole debtor to the full extent of credit bills in circulation. Since then, all the business of issuing, exchanging, and redeeming credit bills has become part of the duty of the State Bank.

The liquidation of the affairs of the Loan Bank and of the Lombard of St. Petersburg gave the following general results:

The State Bank entered on the debit side of its account:

To balance these amounts entered to the credit of the respective accounts, the State Bank received:

As the Bank of Commerce was creditor of the Loan Bank to the extent of R. 174,186,574 on account of deposits, interest included, when all the preceding amounts were transferred to the accounts of the State Bank, that claim of the latter against the Loan Bank was settled by the following items: R. 162,549,039 carried over to the liquidation account as above (No. 11); R. 4,000,000 owing by the Bank of Commerce to the Commission of credit bills in exchange for an equal amount deducted from the deposits of said Bank of Commerce with the Loan Bank; R. 5,285,653 of the interest-bearing funds of the latter transferred to the State Bank; and lastly, R. 2,351,881, being the interest due to the Bank of Commerce on its deposits for 1859; total, R. 174,186,574. Immediately after having finished that liquidation, the State Bank began to separate its commercial business from that transacted for the account of the Treasury; to this end it was necessary: (1) To set aside as capital stock, R. 15,000,000, and as a reserve fund, R. 1,000,000; (2) to carry to the credit of the Treasury all the amounts not belonging to the Bank; and (3) to hold the surplus as a security for such outstanding credits as were considered doubtful, and also to cover loans not sanctioned by the new regulations of the Bank.

That sum, carried to a temporary account, was not, however, altogether available, because it had to be used to secure doubtful credits and transactions not authorized by the new regulations, as well as several items of expense to be charged against the Reserve Fund and the profits of the Loan Bank, and the income of the Lombard. By order of the Minister of Finance, there was deducted from that total R. 14,975,835; namely, R. 12,000,000 to counterbalance an equal sum owing by the Treasury for credit bills; R. 1,601,727 for protested bills of exchange belonging to the Bank of Commerce, in order to close that account; R. 175,799 for loans on merchandise not paid to said bank at maturity; R. 1,174,500 for loans contrary to the regulations, but made in accordance with the orders of the Sovereign, and R. 23,809, surplus of expenses arising from loans on merchandise. As a result of these deductions, the amount remaining at the disposition of the Treasury on January 1, 1861, was R. 10,106,524.

The transactions which the Bank undertakes for account of the Treasury have reference to: (1) The credit bills; (2) the repayment of deposits, principal and interest; (3) the payment of coupons and the redemption of the 5 per cent. Bank bills; (4) various conversions into bonds of the 4 per cent. Consolidated Loan; (5) the collection of interest on loans to meet the above payments; (6) the accounts of the Treasury debt and of the Lombard loans.

1.Credit Bills.—On January 1, 1860, there were R. 678,211,187 of credit bills in circulation. During that year, R. 45,679,306 were issued, including R. 7,179,306 against deposits of specie; R. 10,913,924 were withdrawn from circulation, including R. 9,714,322 paid in specie. There were, therefore, R. 712,976,569 of credit bills in circulation on January 1, 1861.

On January 1, 1860, the fund for the redemption of credit bills amounted to R. 95,674,981. This, as has just been noted, was increased by R. 7,179,315 and decreased by R. 9,969,864 during the year, so that on January 1, 1861, it amounted to R. 92,884,431, of which R. 43,123,731 was in gold coin, R. 8,482,078 in gold bars, R. 32,729,198 in silver coin, and R. 8,549,424 in public funds. This redemption fund being deducted from the total of credit bills in circulation, the balance, amounting to R. 620,092,137, formed the non-interest-bearing debt of the Treasury. During that year 18,847,000 new credit bills were printed for an amount of R. 42,253,000; 7,757,315 old bills, aggregating R. 36,888,950 were burned. The Bank received from boards of finance and local treasuries R. 728,240 of copper coin, and from the national treasury R. 110,000 in subsidiary silver coin, to be exchanged for credit bills. On January 1, 1861, R. 38,876 of the former and R. 15,250 of the latter still remained in the hands of the Bank.

2.Deposits at interest; Deposits with former credit institutions and the Bank of Commerce.—On July 1, 1860, the sum total of deposits with the State Bank, including those received from the Bank of Commerce, the Loan Bank, the Lombard, and the balance of deposits after conversion into 5 per cent. bills of the Bank, amounted to R. 288,978,318. Of that amount, during the second half-year R. 97,058,000 were converted into bonds of the 4 per cent. Consolidated Loan and into 5 per cent. bills of the Bank. There remained on January 1, R. 191,920,318 of deposits originally made with various credit institutions of St. Petersburg, but for which the State Bank was now liable. Prior to 1860, the branches of the Bank of Commerce at Kiev and Odessa were the only ones receiving deposits on interest, and on January 1st of that year they had R. 33,683,084 of deposits. All the branches having then been authorized to accept such deposits, the receipts for 1860 were R. 16,568,711 by the branches in Moscow, Archangel, Kharkov, Kiev, Riga, Catherinebourg, and Odessa; the withdrawals were R. 20,307,436, so that there remained R. 29,944,359 in the branches of the State Bank on January 1, 1861.

3.Deposits with the State Bank.—In accordance with its regulations, the Bank receives interest deposits on certain conditions at rates of interest fixed by itself according to the state of business and the length of time for which the deposit is to remain. The acceptance of deposits under the new conditions began at the Bank at its opening, and later at its branch in Moscow. At the other branches it did not begin until 1861. In 1860, the Bank received deposits amounting to R. 29,982,319, of which R. 2,174,757 were withdrawn during the year; so that at the beginning of 1861 there was a balance of R. 27,807,561. That amount was made up as follows: deposits to be withdrawn at will and bearing three per cent. interest, R. 19,038,352; deposits for three to five years and yielding four per cent., R. 2,409,509; deposits for six to ten years and yielding four and a half per cent., R. 6,359,698.

The branch at Moscow received deposits aggregating R. 4,217,072, of which R. 44,030 was withdrawn during the year; balance on January 1, 1861, R. 4,173,042. Among those deposits appeared a certain number of bills of former credit institutions and even bills of the Lombard of Moscow and of several public charitable establishments. After settlement had been made with these establishments and with the Lombard, the Bank (on January 1st) was still their creditor for R. 667,359, and its Moscow branch for R. 545,012.

The old Bank of Commerce kept a special account for interest due but unclaimed by the depositors, on which account the State Bank was debited with R. 13,594,228; on the same account R. 3,115,924 was carried to its credit as profits of the Bank of Commerce. That account must henceforth change its form, and the amount of unclaimed interest accumulated to January 1, 1860 (the date at which the payment of compound interest was stopped), must be carried to the deposits account, when the liquidation of the transfer to the Bank of all the deposits of the other credit institutions is completed.

4.Five Per Cent. Bills of the State Bank.—Before the first of July the Bank of Commerce had converted into five per cent. bills of the State Bank deposits amounting to R. 91,223,545; together with those that were transferred to it for purposes of this conversion in the second half-year by the Loan Bank, the Lombard of St. Petersburg, and the branch at Odessa, the total amount of those deposits being R. 155,114,910. On January 1, 1860, the branches of the Bank of Commerce at Kiev and Odessa had R. 6,327,652 of deposits converted into five per cent. bills of the Bank, and the conversions made during the year were R. 3,785,166. While this conversion was proceeding, the Bank received in sundry small amounts R. 148,516, and repaid (R. 31,165 deposited anew being deducted) R. 1,134,862 to the depositors.

Up to January 1, 1861, the total value of the five per cent. bills of the State Bank exchanged against deposits on interest amounted to R. 276,578,500. During the second half-year, the Bank exchanged R. 10,740,200 of these bills for the same amount in bills of other denominations.

5.Bonds of the Consolidated Loan.—It is the duty of the Sinking Fund Commission to provide for the interest on these bonds, but the State Bank is intrusted with the collection of the amounts paid for them, with the conversion of the deposits of credit institutions into said bonds, and with the delivery of the bonds themselves. The total amount collected by the Bank from the Sinking Fund Commission, the Loan Bank, and the Lombard of St. Petersburg for these purposes and also for the continuation of the exchange until January 1, 1861, was R. 59,609,340. The total amount of deposits converted into these bonds must form a new debt registered in the ledger of the Public Debt, and must be deducted from the debt of the Treasury to the Bank. The latter, not having yet received the total amount of the subscriptions, had a claim of R. 109,313,487 upon that account on January 1, 1861.

6.Debt of the Treasury for Loans from Credit Institutions.—The Bank received from the Loan Bank and from the Lombard of St. Petersburg claims against the Treasury aggregating R. 262,510,589; it recovered in cash (R. 23,856,297) and by offsetting several accounts, R. 158,612,170, which leaves a balance of R. 103,898,418.

7.Long-Term Debts of Individuals and Corporations to the Old Credit Institutions.—The Lombard of St. Petersburg remains intrusted with the recovery of these debts for account of the State Bank, and they constitute a guarantee fund for the payment of its five per cent. bills. The total thus carried to its credit, both from the Loan Bank and the Lombard, amounted (unpaid arrears included) to R. 232,876,418. The Bank has recovered R. 1,492,671; balance due, R. 231,383,746.

8.Loans to Credit Institutions.—On July 1, 1860, claims against the credit institutions amounting to R. 4,014,121 were transferred to the State Bank; during the second half-year the Bank made further advances to them of R. 21,331,598; of that amount, R. 19,290,281 was settled by a balance of accounts, so that, on January 1, 1861, the claims of the Bank on that score amounted to R. 6,055,438.

9.Interest on Long-Term Loans.—As a fund for the payment of interest on deposits and on its five per cent. bills, and of certain expenses for account of the Treasury which formerly had to be deducted from the profits of the Loan Bank, the interest on all loans made by the credit institutions must be remitted to the Bank; but it is carried to the credit of the Treasury, on account of which the above-mentioned payments are made, and the balance, if any, goes to reduce its debt to the Bank. During the year 1860, the Bank received only interest on loans made by the credit institutions of St. Petersburg, although the payment of coupons of the five per cent. bills fell almost entirely upon it. The Bank will recover the remainder when it makes its final settlement with the credit institutions outside of St. Petersburg. The amount the Bank collected for interest during 1860 was R. 17,690,946, from which have been deducted R. 5,285,643, the interest due the Bank of Commerce from the Loan Bank at the time of the liquidation, and R. 238,702 for sundry expenses on Treasury account.

10.Interest Paid to Depositors.—During the second half of 1860, the State Bank paid to depositors interest amounting to R. 3,432,439; the Bank of Commerce had paid R. 13,817,673 during the first half of the year.

11.Payment of the Coupons of the Bank’s Five Per Cent. Bills.—The first coupon of these bills was due on November 1st; up to the end of the year R. 7,043,168 of these coupons was paid by the Bank or brought into its account for payments made by the branches and by local treasuries. Thus, coupons upon about R. 93,000,000 were not presented and will have to be paid during the succeeding year. This statement is not entirely accurate, however, because some coupons paid in 1860 in the provinces were brought into the account of the Bank at the beginning of 1861.

12.Collections for Treasury Account.—The doubtful debts having been deducted from the amounts carried to the credit of the Treasury, the latter is credited with all the collections since made by the Bank on debts of that kind. Up to January 1, 1861, those collections amounted to R. 21,167.

13.Profit and Loss Account of the Treasury.—According to the balancesheet of the Bank of January 1, 1861, the following items were carried to the credit of the profit and loss account of the Treasury:

The same account was debited as follows:

So that there was a surplus of R. 8,538,961 at the disposal of the Treasury. That amount cannot, however, be carried definitively to the credit of the Treasury for the following reasons: (1) A very considerable quantity of coupons of the five per cent. bills due in 1860 have not yet been presented by their holders; (2) several doubtful debts due the branches of the Bank have not been deducted from the amounts with which the Treasury was credited;* (3) certain expenses for account of the Treasury, to be charged against the reserve fund of the late Bank of Commerce, had not been settled at the close of 1860.

The directors proceed next to the commercial transactions of the Bank, taking them up in the following order:

1.Transfers of Cash Accounts.—When the State Bank began business its cash capital was represented by R. 3,629,947. The changes in the cash accounts during 1860 are presented as follows:

Furthermore, R. 368,355 was transferred from the account of the Bank to the account of trust deposits. On January 1, 1861, the cash on hand amounted to R. 10,104,891, or R. 6,475,143 more than on July 1, 1860, and R. 7,221,613 more than on January 1, 1860. The branches had cash on hand amounting to R. 9,265,666, or R. 2,484,225 more than on January 1, 1860. Thus the total business of the Bank and its branches represents R. 1,177,005,977.

2.Capital Appropriated to the Branches.—Of the fifteen millions of capital, R. 7,400,000 has been appropriated to the branches, in the following proportions: R. 4,000,000 for the branch at Moscow, R. 1,000,000 for the branch at Odessa, R. 550,000 each for the branches at Riga and Archangel, R. 500,000 for the branch at Kiev and a like amount for that at Catherinebourg, and R. 300,000 for the branch at Kharkov. In the year 1860, R. 500,000 was placed at the disposal of each of the temporary offices which the branches established during the fairs at Irbite, Rybinsk, Nijni-Novgorod, and Poltava.

3.Deposits in Trust.—The total of these deposits, in articles of gold and silver, in Treasury notes and cash (including those existing on January 1, 1860), amounted during the year to R. 801,541, of which R. 433,186 has been returned; so that, at the opening of the year 1861, there was a balance remaining of R. 368,355, which sum was subtracted from the cash account, in which manufactures of gold and silver appear for R. 56,355; the balance consists of Treasury notes. The acceptance in trust of interest-bearing securities not having begun until September 13, the Bank, up to January 1, 1861, had received but 8909 of such deposits, of a nominal value of R. 2,971,412. Of these, 331, valued at R. 76,950, were returned, leaving a balance of 8578 deposits, valued at R. 2,894,462, consisting mostly of public funds.

4.Deposits for Transfer.—Before the introduction of accounts current, which occurred shortly after the State Bank was established, the place now occupied by them was filled at the Bank of Commerce by deposits for transfer; these deposits were availed of both to transfer funds through the medium of the Bank and to secure the safe-keeping of Treasury notes under pretence of transfer. On July 1st the State Bank received from the Bank of Commerce R. 1,739,456 of those deposits, and before the opening of its accounts current this sum had been increased by R. 4,480,247. Repayments, transfers to the branches, the buying of transfer duties, and, finally, the transference of Treasury notes to accounts current have reduced that sum by R. 6,215,918. When accounts current were opened, the account of deposits for transfer was closed, and the balance carried to a new account under the name of:

5.Accounts of Sums Held in Trust.—This was debited with R. 3876. This sum, together with new deposits made since by individuals having no accounts current (withdrawals being deducted), leaves a balance on that score amounting on January 1, 1861, to R. 13,134.

6.Accounts Current of the State Bank.—These accounts, now introduced for the first time in Russia, furnishing, as they do, by the use of cheques, such great facilities for prompt payment and the safe-keeping of money, have increased with remarkable rapidity from the beginning. Not only individuals and corporations, but public departments also have taken advantage of the services of the Bank in this regard. On January 1, 1861, the number of accounts current was 133. Since the month of September, when the practice began, the Bank has received in accounts current R. 102,314,127, and has paid against cheques deposited with its branches and those turned into the Bank itself for transfer from one account to another, R. 72,000,936, so that on January 1, 1861, the Bank was debited in accounts current with R. 30,313,190, or R. 28,479,667 more than the deposits for transfer in the Bank of Commerce at the beginning of 1860.

7.Account of Transfers with the Branches.—During the second half of 1860, the branches were credited at the Bank with R. 44,031,160 arising from transfers (including their credit on July 1st), and debited on the same account with R. 26,678,505, leaving at the beginning of 1861 a balance to their credit of R. 17,352,655. The changes arising out of transfers between the Bank and its branches produced the following results during the first and second half respectively of the year 1860: During the second half-year, the transfers from the Bank to its branches, made by order of individuals, showed an increase, as compared with the first half-year, of R. 3,750,000, namely, R. 12,997,758, against R. 9,244,995; the transfers from the branches to St. Petersburg increased by R. 800,000, namely, R. 2,153,731, against R. 1,273,019; and, finally, the remittances in silver from the Bank to its branches to strengthen their cash accounts, decreased by nearly R. 9,500,000—that is, R. 11,277,250, against R. 20,734,750. These favorable results were attributed partly to the reduction of the rate of discount on transfers and partly to the increase in the cash resources of the branches arising from the interest deposits of individuals and from deposits by local treasuries of their unemployed funds for Treasury account. Another result of the reduction of the discount rate on transfers was an increase in the profits of the Bank from that source, notwithstanding the fact that no discount is charged on transfers made for the Treasury.

8.Transient Accounts.—For the regularity of its bookkeeping, the Bank opened an account in which are entered all sums received by mail until they are in regular course carried to the proper accounts, and also the sums ordered to be paid, but not yet actually delivered to the payee. For the second half-year that account showed R. 23,576,880 of receipts and R. 23,052,432 in disbursements.

9.Discount of Bills of Exchange.—According to its balance-sheet of January 1, 1860, the Bank of Commerce then had on hand R. 27,556,351 in bills of exchange, of which R. 13,459,371 were in the Bank itself and R. 14,096,980 in its branches. During the first half-year 8559 bills of exchange were discounted for R. 9,737,499.03; during the second half-year, 10,380 bills for R. 15,557,954.80, and coupons of 5 per cent. bills for R. 65,237.41. Total, R. 25,360,691.24. The eleven branches of the Bank discounted within the year 23,991 bills of exchange, aggregating R. 46,670,539. Thus the total was 42,930 bills, valued at R. 72,031,230; an increase of R. 24,402,950 over the transactions of 1859. Of the total of bills discounted (deduction being made of protested and duly honored bills, and of offsets for loans made by special order), the Bank and its branches had still in their portfolio on January 1, 1861, bills for R. 32,141,619, or R. 4,585,267 more than on January 1, 1860.

10.Protested Bills of Exchange.—The face value of the bills protested during the year (including bills for R. 2,400 on which extensions were granted by the branch at Catherinebourg) was R. 475,648; together with those brought forward from the preceding year, the sum total of due debts unpaid was R. 3,269,855, but this was reduced to R. 2,932,691 by the collections made during 1860. Of the protested bills of exchange belonging to the Bank of Commerce and its branches, accumulated since the year 1818, the sum of R. 2,899,362 was carried to the account of profits and balances put at the disposal of the Treasury, leaving on January 1, 1861, at the State Bank and its branches, R. 33,328 in protested bills of exchange; this amount was balanced by profits of the Bank at the closing of its profit and loss account of 1860.

11.Loans on Merchandise.—During the year, the Bank and its branches advanced on merchandise R. 5,583,154; the amount due at the end of the year was R. 3,020,358. Including amounts previously overdue, the holdings of the Bank on that class of loans, not paid at maturity, amounted, at the close of the year, to R. 1,211,760.

12.Loans on Deposits of Gold and of Receipts issued by the Managers of the Oural and the Altai Mines.—The total value of the loans made on these securities during 1860 was R. 6,311,387, and on January 1, 1861, there remained in the Bank and its branch at Catherinebourg, R. 4,334,642 of these pledges.

13.Loans on Deposits of Public Funds.—Of these loans there were issued during the year, R. 13,556,054, of which all but R. 23,371 was repaid at maturity. At the same date, the bank and its branches had out R. 6,747,889 of time loans made on this class of securities.

14.Loans on Railway Stocks and Bonds Guaranteed by the Government.—The total value of these loans was R. 10,512,452. On January 1, 1861, the Bank and its branches held notes aggregating R. 3,893,865 for time loans made on these collaterals; of those that fell due during the year R. 461,258 were not paid at maturity. That large proportion of unpaid engagements consisted principally of loans made upon the stocks of the Grand Railway Company, and especially upon those that were not fully paid up, for the reason that the Bank of Commerce had loaned on those securities 90c. on the rouble of their nominal value, with no special regard to their market price; and whenever an assessment was made on those shares they were abandoned to the Bank. The new regulations of the State Bank put an end to that difficulty.

15.Loans Contrary to the Regulations of the State Bank made before it came into existence.—The Bank of Commerce had made loans of this kind during the first half of 1860 and earlier, amounting to R. 3,000,000: R. 1,000,000 to the Bank of Finland, R. 1,650,000 to the Bank of the Nobility of Esthonia, and R. 350,000 to the Russo-American Company. Of these amounts, R. 1,950,000 had been repaid before July 1st, and R. 1,050,000 in bonds were delivered to the State Bank.

16.Loans made by order of the Sovereign.—The loans and offsets carried to that account in 1860 amounted to R. 1,229,780, of which R. 30,000 had been repaid, and R. 25,280 carried to the account of loans on merchandise security; balance at the end of the year, R. 1,174,500.

17.Account of Arrears and Deficits on Loans.—An amount of R. 25,586 remaining due on July 1, 1860, for loans on merchandise security has been deducted from the funds placed at the disposal of the Treasury. All doubtful debts and those made contrary to the regulations of the State Bank, and all the previous arrears, amounting together to R. 5,242,499, were either deducted from the balance-sheet of the Bank when its accounts were opened, or have been transferred by the branches to the Bank to be deducted in 1861.

18.Interest-bearing Securities Belonging to the Bank.—On January 1, 1860, the Bank of Commerce owned R. 7,843,639 in public funds, consisting almost entirely of perpetual six per cent. State bonds; the whole of this sum was delivered to the State Bank. At the time of the liquidation of the Loan Bank, the State Bank had also received R. 2,340,025 in bonds of this class. By order of the Minister of Finance, all these bonds were delivered to the Sinking Fund Commission against R. 5,100,000 deposited by the latter with the Loan Bank, and transferred to the State Bank, and R. 5,011,450 deducted from the account of the four per cent. Consolidated Loan. After these transactions, the Bank had only R. 72,214 in public funds. During the second half of 1860, there were left in possession of the Bank by borrowers R. 852,878 in stocks of the Grand Railway Company. This raises to R. 925,092 the value of the interest-bearing securities in its possession on January 1, 1861.

In addition to the transactions named above, the Bank had bought and sold interest-bearing public securities on commission. Thus it was intrusted (during the second half of 1860) with the sale of R. 14,000,000 of exchequer bills, out of the five series authorized to be issued; and it succeeded in disposing of nearly all of them, thanks to the great diversity of methods it adopted for the purpose. It made these bills so popular, in fact, that at the time of the last subscription opened by the Bank there was a demand for no less than R. 306,000,000. The Bank undertakes also, for a commission of 1/10 of one per cent., the sale and purchase of these five per cent. bills for the public.

In closing their report, the directors of the State Bank sum up as follows the profit and loss account of the Bank for the second half of 1860:

All the profits made by the Bank of Commerce up to July 1, 1860, including the interest on its funds deposited with the Loan Bank, were placed at the disposal of the Treasury. At the closing of the profit and loss account of the Bank its gross revenue for the second half of 1860 was found to be R. 1,333,715, including the net profits on the discount transactions of the temporary offices at Nijni-Novgorod, Rybinsk, and Poltava, amounting to R. 192,068. From that total was deducted R. 425,836, viz.: R. 92,794 for various expenses of the Bank and its temporary offices; R. 23,807 for protested bills of exchange and unpaid loans secured by public funds and stocks; and lastly R. 309,234 for that part of the interest on loans and discounts belonging to 1861. This leaves for the Bank itself a net profit of R. 907,878.

The net profits of the branches for the year 1860 amounted to R. 722,830, giving a total profit of R. 1,630,708, or a little over ten per cent. of the capital stock of the Bank. During the first half of 1860, the net profits of the Bank of Commerce had been R. 338,646, or R. 569,232 less than the profits of the second half-year.

[* ] The total of these debts, since transferred to the Bank to be carried to the debit of the Treasury in 1861, is R. 2,266,663.