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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 V.

PRIVATE BANKS.

PRIVATE joint-stock or non-Government banks, as we have previously said, did not come into existence until 1865. The shares are legally fixed at R. 250 each, except in the case of the Bank of Kama-Volga, which has shares of R. 1000 as well as those of R. 250. The following, according to the “Bulletin de Statistique Financière,” is a schedule of all the stock companies as they existed on January 1, 1894:

The same official publication prints another collective table concerning all non-Governmental credit institutions engaged in short-term transactions. This table is so comprehensive that a summary of it must suffice. All of the joint-stock banks together had in January, 1894, a capital of R. 116,957,000, a general reserve of R. 32,000,000 (27½ per cent.), and a reserve for special purposes of R. 4,200,000. The Municipal banks had a capital of R. 28,400,000, a general reserve of R. 5,500,000, and a reserve for special purposes of R. 945,000. The Mutual Credit associations had a capital of R. 21,400,000, a general reserve of R. 4,400,000, and a special reserve of R. 1,666,000. Thus these various institutions had a total capital of R. 166,750,000, a general reserve of R. 42,000,000, and a special reserve of R. 6,800,000. Perpetual deposits, which, outside of the State Bank, are not found except in Communal banks, aggregated R. 13,100,000. Time deposits aggregated R. 203,100,000; of sight draft accounts there were R. 47,250,000, and in accounts current, R. 237,400,000. Deposits with the branches (for such banks as have branches) were R. 74,000,000; interest due to depositors, R. 6,600,000; profits, R. 10,300,000, of which R. 6,000,000 belonged to Share banks, R. 2,900,000 to Communal banks, and R. 1,400,000 to Mutual associations. On the credit side of their accounts were: Cash (including sums subject to cheque), R. 67,700,000; loans on securities and the precious metals, R. 83,200,000; discounts, R. 337,200,000; loans on pledge, R. 120,400,000; call loans (special accounts current), R. 191,300,000; loans on realty, R. 24,500,000 (of which R. 2,600,000 was on country property); loans to municipalities, R. 2,100,000; debts in default, nearly R. 7,000,000, of which more than R. 4,000,000 were held by the Municipal banks. The balance-sheet of all these associations shows a total of R. 1,092,169,000, the proportions being: R. 801,000,000 for the Share banks; R. 180,600,000 for the Municipal banks, and R. 160,600,000 for the Mutual Credit associations.

With reference specially to the stock banks, the information is more recent, coming down to January 1, 1895. Those of St. Petersburg, ten in number, had then a share capital of R. 83,237,000 (including the branch of the Crédit Lyonnais, with a capital of R. 16,000,000), a general reserve of R. 13,000,000, and a special reserve of R. 2,600,000. Their deposits subject to sight draft and accounts current aggregated R. 131,000,000, and their time deposits were R. 26,400,000. They had borrowed upon securities and in the form of rediscounts, R. 21,300,000. They had earned in the form of interest and commissions R. 14,250,000, and their total transactions represented R. 464,166,000. Among their assets were R. 14,100,000 in cash; R. 19,800,000 in accounts current (of which R. 17,500,000 were in the State Bank); R. 15,100,000 in Russian funds; R. 8,200,000 in other bonds; R. 2,900,000 in foreign drafts; R. 500,000 in single-name paper; R. 14,600,000 in loans on bonds; R. 5,500,000 in loans on merchandise; R. 128,100,000 in special accounts current, guaranteed; and R. 86,600,000 in paper bearing two signatures.

Moscow has only four stock banks, with a total capital of R. 19,000,000 and reserve funds of R. 8,000,000. Their total transactions aggregated R. 133,100,000. The city of Riga has three private banks; Warsaw and Kiev have two each, and there are eighteen in the other chief centers of the Empire. The total transactions of all the private banks in Russia, at the close of 1894, represented R. 887,788,000. Among their assets were included R. 100,600,000 in the hands of their correspondents, and of this amount R. 41,700,000 were over-drafts. Their expenses for the year were R. 8,000,000; the property belonging to the banks was valued at R. 7,700,000 (of which R. 6,900,000 was in real estate); the total of paper held for collection was R. 15,200,000; merchandise for sale, R. 305,000; cash on hand, R. 27,100,000; accounts current, R. 24,300,000; stocks and bonds, R. 61,000,000; drafts, R. 209,600,000; loans on collateral, R. 66,900,000; special accounts current, guaranteed, R. 198,100,000. On the debit side of the account we find R. 140,500,000 of share capital; R. 38,900,000 of reserve; deposits subject to cheque, R. 194,100,000; sight draft accounts, R. 14,000,000; time deposits, R. 112,300,000. The discounts and collateral loans by banks aggregated R. 44,700,000, and the interest and commissions collected were R. 27,700,000.

It is scarcely needful to cite at length the regulations of the class of banks just considered. Suffice it to say that these regulations, like those of all stock associations, must be approved by the Government. Latterly, this control has been extended to include even private banking firms and exchange offices. A decree adopted by the Imperial Council on June 3 (15), 1894, and promulgated on July 5 (17) of the same year, puts in force a series of restrictions, of which the principal are these: Anyone wishing to open a banking house or exchange office must make a formal declaration to that effect, specifying the particular kinds of transactions in which he or they wish to engage. This declaration is forwarded to the Minister of Finance, who may demand further information and explanations. The Minister may order examinations to be made of the books and business affairs of the establishment. After such an examination of a banking house, he may forbid it to sell lottery bonds on time, to borrow on collateral deposited with it a greater sum than it has loaned thereon, to accept deposits of any kind, or to open accounts current. Any banker guilty of having engaged in a transaction forbidden by the Minister is liable, for the first offence, to a fine of R. 100 to R. 1000; for a second offence, to a fine of R. 1000 to R. 3000, and, upon conviction of a third offence, he is to be fined R. 300 to R. 3000 and imprisoned for a term of from two to eight months, his establishment is to be closed and the offender is to be forbidden ever to open another bank.

This moralizing of speculation has been inspired by the best intentions. It has been elsewhere shown what results it had produced one year after the promulgation of the decree. (See chapter on the Bourse.)

MUTUAL CREDIT ASSOCIATIONS.

The origin of the first Mutual Credit association and its rapid development have already been described. Thirty years later (on January 1, 1895) their number was ninety-three, of which two were in St. Petersburg (one in the city and the other in the district) and one in Moscow. These three associations together had 10,494 members, of whom 6127 were in St. Petersburg. The capital cities of the provinces had forty-five Mutual associations, and the capital cities of the districts had the same number. The whole number of members was 56,629, of whom 2200 were in Moscow, 30,318 in the capitals of provinces, and 15,837 in the capitals of districts. Thus the total number of these associations, which were expected to produce such important results, does not exceed that of the branches of the State Bank, and it is rather interesting to note that only one of these associations, that of the capital of the district of Gomel, was established in 1894; all the others are at least ten years of age, and the greater part of them fifteen or twenty years, or more. The enthusiasm which followed upon the establishment of the original association in St. Petersburg has very greatly abated, if, indeed, it has not entirely died out. For this result there are two reasons. Faith in the creative force and earning power of mutuality has been impaired by several serious mistakes; and, secondly, the great amount of aid extended by the State has paralyzed the efforts hitherto made in the direction of self-help. The capital of the associations is R. 21,700,000; their reserve, R. 5,100,000, and their funds reserved for various special purposes, R. 1,700,000. Of this total of R. 28,500,000, St. Petersburg has R. 4,700,000; Moscow, R. 4,000,000; the capitals of provinces, R. 14,400,000, and the district capitals, R. 5,400,000. On January 1, 1895, all of these associations together had in ordinary accounts current, R. 41,800,000; in conditional accounts current, R. 8,000,000; in conditional deposits, R. 1,750,000, and in deposits repayable at a fixed time or on demand, R. 58,000,000. The debts of the associations aggregated R. 14,600,000; their profits, R. 6,100,000, and their total transactions, R. 169,100,000. They held deposits for safe-keeping amounting to R. 12,800,000. Included in their assets were R. 2,600,000 of available cash, R. 56,200,000 of paper bearing two signatures, R. 23,900,000 of bills drawn to order and guaranteed by deposits, R. 20,500,000 of loans on collateral, R. 31,100,000 in special accounts current (on call), and R. 5,900,000 of bonds and stocks. Their debts in default aggregated R. 1,600,000, their real property was valued at R. 2,500,000, their losses amounted to R. 57,600. As mentioned above, their paid-up capital was R. 28,500,000; the capital subscribed but not paid in was R. 187,775,100.

LAND CREDIT INSTITUTIONS.

Until the emancipation of the serfs in 1861, the land credit business of Russia was conducted under the auspices of the State Bank. The process then was quite simple, and no land registry system was required. The terms of credit were based on the number of serfs, or “male souls.” Of course, this unit of reckoning disappeared when emancipation was decreed, and the whole business came to an end. In order to secure outstanding debts, the amount which land-owners owed the Bank was deducted from the so-called “liberation fund,” and this altered debt was laid upon the emancipated serfs, who were to wipe it out in forty-nine years, with interest at five per cent., by an amortization rate of one per cent. yearly. Some of these charges are still current.

Then, for many years, the most varied plans were tried for supplying land-owners with credit. Direct help from the State was not considered; nor even State guaranty of interest. But there were tendencies along these lines. The Kingdom of Poland and the Baltic Provinces had long since made shift for themselves; for in those countries there were joint-stock land credit companies, whose mortgage bonds also found a ready sale abroad. It is true that the countries in question had a land registry system; and, be it added, they were in the habit of helping themselves. Such advantages were quite lacking in the Empire at large. To have drawn up land registry books would have consumed too much time; but there were at least efforts at self-help. Let us first mention the Joint-Stock Land Credit Company which was organized at St. Petersburg in 1866-7, under the directorship of the energetic Marshal, Count Bobrinsky (later, Minister of Public Works). The company was to issue five per cent. mortgage bonds, payable in coin, so as to be acceptable abroad. Loans, interest, and amortization dues were to be paid in coin, and amortization should be complete when the rates had amounted to 125 (it should be explained that in those days exchange was 20 to 25 per cent. below par). These feats were difficult; and the State stepped in, or rather it was adroitly drawn in, to help.

When Count Muravieff was appointed Governor-General of the so-called Western Provinces, in 1863, with headquarters at Vilna, one of the watchwords of the time was the “Russification,” or “Muscovization,” of that western region; and R. 5,000,000 was assigned for this object. But either the Russians were not pleased to settle in that Polish environment, or else the scheme dragged by reason of bureaucratic indolence; for, when Muravieff left his post at the end of 1866, the R. 5,000,000 were still intact. Under the triumphant banner of Count Peter Schuvaloff, then at the zenith of his power, the aristocratic party had again got breath, to the discomfiture of Muravieff and Milutin; so that Count Bobrinsky succeeded in anchoring the loose R. 5,000,000 as a State advance, free of interest, in behalf of his credit colony. It was argued that if the prostrate Russian proprietors were assisted to their feet again, they could transplant themselves to the western and southwestern provinces (Volhynia and Podolia), thereby obviating the necessity of replacing Polish nobility by promiscuous, unlineaged ragamuffins. Thanks to this contribution, the company was now presentable in the European money market; and Rothschild, with alacrity, engaged to place the mortgage bonds to the amount of R. 50,000,000, or even higher. Meanwhile, the provinces also bestirred themselves, and local companies were formed, which issued bonds at five, six, and seven per cent. One of the earliest and most substantial of these companies, that of Kherson, flourishes still. Besides the companies, joint-stock mortgage banks were organized; but all, with an exception to be treated below, were based on paper capital, so that their market generally remained local and restricted. Most of these banks are still in existence, having hitherto withstood the wrenching violence of political agitations; but they have in nearly all cases reduced interest on their bonds to five per cent., which reduction was facilitated by the favorable situation of State credit.

Central Land Credit Bank.—We now come to the exception referred to above. This was the Central Land Credit Bank, initiated in 1873 by capitalists of St. Petersburg, Berlin, and Vienna, with a capital stock of R. 5,000,000. This concern contained germs of decay in its very incipiency, for it originated just at the time of the financial crash in Vienna; nor did the founders enjoy the satisfaction of raising the shares even temporarily above par. This bank’s object was to buy up most of the six per cent. mortgage bonds issued by the local banks and replace them by five per cent. bonds payable in coin, which might be marketed abroad and make good the abatement of one per cent. The process continued until the war in the East, and for so long as the rate of exchange stood between eighty-five and ninety. Losses began in 1877, though at first they could be covered out of the reserve fund, as yet scarcely five years old. The loss for 1877 was R. 797,000; then it reached as much as R. 1,292,000 for single years, and showed a total of R. 10,997,000 from 1877 to 1893. This had reduced the capital stock of R. 15,000,000 to barely R. 4,000,000; though down to 1887 it was partly revived by State advances amounting to R. 4,100,000, which relief then ceased. Thanks to the State reinforcement, the capital stock was still as great as R. 7,400,000 at the beginning of 1894. The State has now transformed the R. 44,700,000 of outstanding mortgage bonds into three per cent. rentes; the bank is dissolved, and the shareholders receive the R. 7,400,000, or about equal to fifty per cent. of their stock.

The Pomestchik, or Proprietors of Large Estates.—No class had been more prompt to welcome the Eastern war, in 1877, than the great landed proprietors. In 1875, the paper rouble had risen to 90 per cent., the Imperial Bank had a considerable coin reserve, and Finance Minister Reutern entertained serious hopes of a speedy solution of the financial problem. But the export trade was imperiled; Odessa could no longer pay high prices for crops, when twenty francs brought only six roubles instead of eight. So a little war, with obligatory increase of paper currency exempt from extra tax, was the Pomestchik, or manorial, ideal; and it was shortly realized. The note circulation of the Bank of Russia rose from 715 to 1140 million roubles, and the rate of exchange fell all the more persistently because at the same time the Bank’s coin reserve had been materially reduced, and at the end of the war was only R. 120,000,000, or somewhat over ten per cent. of the circulation. Could the wholesale producer of grain wish anything better, especially as for full ten years after the war the rate of exchange kept sinking and sinking, and at last twenty francs brought not only eight, but even nine and ten roubles?

However, the sunny situation became gloomy with clouds. American harvests began to influence the grain market of Europe more and more perceptibly, and prices fell. Then, too, the Russian proprietor now had to pay 7½, 8, and even 9 paper roubles in interest and amortization rates on 100-rouble mortgage bonds, instead of 6 or 6½ roubles, as was the case before the war. (The bonds had been issued on a hard money basis.) This went against the grain in more ways than one; and the “poor” Pomestchik, or lords proprietors, pathetically exclaimed that the Eastern war, which they now said they had never approved, and the Nihilistic outrages, which they abominated, were ruining them and society. In other words, the State must assume their burden; as it gradually did. One step in this direction was the institution of the Bauernbank, or “Peasants’ Bank,” in 1882.

Peasants’ Bank.—There were wide complaints that the peasantry, in certain districts, had received too little land at the time of the emancipation in 1861; and in particular governments this was quite true. The general lot of the peasant class was therefore far from enviable; especially as the mir, or agricultural communes, by their periodical redistributions of land, prevented any properly individual ownership, with its promise of better farming. Moreover, the former serfs had come to hold the opinion that each new Czar ought to favor the peasantry by undertaking a fresh distribution of land; and this idea became so fixed in their minds that Alexander III., on the occasion of his coronation in May, 1883, invited six thousand peasant commune chiefs to Moscow, provided for their hospitable entertainment, and assured them, in a stately address, that their ideas, or the current rumors, in regard to his intentions were altogether erroneous. However, the Peasants’ Bank should liberally supply the rural population’s urgent needs of capital, and incidentally facilitate the sales of the large proprietors. The Peasants’ Bank, a strictly State institution, paid eighty per cent. of the price whenever there was a conveyance of land from the large proprietors to the peasants, and the latter paid, or failed to pay, the remaining twenty per cent. in cash. Of this, more anon. The acquisition of land might be either personal or collective and communal. Without entering into too many critical details, let it suffice to say that the defects of the plan, both at the start and now, some twelve years later, may be referred to the fundamental mistake of artificially raising the price of land at a time when American competition and other causes were bringing prices down. The peasants readily consented to pay what was asked without analyzing the market situation. At the most, they had to pay only one-fifth, and even this the seller would willingly throw off, as he generally had a pretty good bargain in the eighty per cent. paid by the State. The interest and amortization of the debt to the State should be discharged in 24½ or 34½ years. The results have been as follows:

By the end of 1893, 11,440 advances had been apportioned between 943,477 persons. In a word, the debts were mostly collective, and the mir, or communal system, still prevailed. The conveyances embraced 2,047,000 Russian dessiatines,* and the proceeds amounted to R. 89,600,000, of which the bank paid R. 70,333,000, and the remaining R. 19,250,000 were paid out of the buyers’ “own resources.” About R. 9,750,000 are bonded for 24½ years and R. 60,500,000 for 34½ years. The status of these debtors may be learned from the following official communication, which was published in connection with the “Act of Grace” on occasion of the Czar’s accession to the throne on November 26 (14), 1894:

“Since its institution, the Peasants’ Bank has loaned money at 5½ per cent. (without amortization or other charges), and has also issued bonds at this rate. Although since the end of last year the bank has converted its debt into 4½ per cent. bonds, and issued no more bonds at 5½ per cent., the annual payments of the bondholders could not be correspondingly canceled, since many of the latter were not in a position to meet their obligations. Their arrears increased, and they finally made over their land to the bank in default of payment. The bank is therefore subject to heavy losses, the extent of which may not be estimated even approximately, since the lands have not yet been sold. It was purposed to cover a part of the loss by fixing a higher rate of interest; but inasmuch as the imperial manifesto has decreed a reduction of interest by one per cent., the losses will fall upon the State.” At the close of 1894, the debt amounted to R. 63,016,796.

Other Mortgage-credit Associations.—We must return to the large estates and their banks. The Central Credit Bank, which was founded in 1873, soon succumbed, as we have seen, to adverse conditions of exchange, and its liquidation was to be completed by the end of 1895. Its older and greater companion, the Land Credit Company, had no shareholders. This, too, was paternally adopted by the State, which in 1885 assumed the guaranty of interest on the mortgage bonds, but at the same time reduced the rate from 5 to 4½ per cent. The amortization bonus (120 to 100) disappeared, as the new bonds were redeemed at par.

Titled Nobility Bank.—The Company was itself transmuted, in 1886, into a purely State “Aristocracy Bank,” and its plebeian patrons had to find other accommodations within five years, meanwhile paying one per cent. higher interest than the aristocracy. By January 1, 1889, after three years of activity, the bank had arrears to the amount of R. 4,900,000 on loans amounting to R. 170,000,000—that is, the arrears amounted to 46 per cent. of the annual charges. Advances in sums above R. 100,000 reached a total of 25 per cent.; in sums between R. 10,000 and R. 100,000, 66 per cent., and 9 per cent. for sums under R. 10,000. Manifestly, the State had done too little for its distinguished clients; but its omissions were made good by the ukase of October 30 (18), 1889, providing for the issue of a lottery loan of R. 80,000,000. As the lots of the two earlier issues (1864 and 1866) were quoted at 240, these new lots at 5 per cent. (though the rate was actually no more than 4¾ per cent., on account of a 5 per cent. tax on coupons) were offered at 215, payable within six months. The resultant enthusiasm was fairly unbounded; instead of 800,000 lots, over 26,000,000 were demanded, but the price soon fell, and payments were far from punctual.

The State Aristocracy, or Titled Nobility Bank was none the worse for these diversions. Most of the proceeds (R. 172,000,000) were turned over to the bank; and as it paid only three per cent. interest thereon, the interest on its own advances was forthwith reduced from 5 to 4½ per cent., with reactionary effect on all loans contracted within the preceding four years. After this, the bank paid R. 100 per bond, and not R. 98, as it had formerly done. The period of amortization was also lengthened from 48⅔ to 51¾ years for borrowers whose annual rate was ½ per cent.; from 367/10 to 38⅓ years where the rate was 1 per cent. At the same time, it was ruled that on and after May 1, 1890, the regulations of the bank should be strictly enforced. Events, however, ruled otherwise, for there came the famine of 1891; and the inaugural manifesto of 1894 granted the same grace to the noble debtors as to the peasants, both being equally brought low by debt and equally helpless to meet their obligations. A six months’ respite, or prorogation of debts, was allowed in case of estates forfeited to the Nobility Bank, as it was impracticable to sell them. An aristocracy bank may not sell estates to commoners, and there is nothing for it to do but exercise aristocratic patience toward its debtors. We summarize the condition of the bank’s affairs for 1893:

At the close of 1894, the claims of the Nobility Bank amounted to R. 468,000,000, of which about R. 117,000,000 had come over from the original institution and included loans to commoners. The Nobility Bank had by no means driven out private credit concerns, nor even seriously checked their activity. We shall proceed to illustrate this by official data, first remarking that the Nobility Bank simply facilitated the acquisition of debts, and (if we may make so bold), it disaccustomed people from the art of paying. The official data are as follows:

On January 1, 1895, the circulation of mortgage bonds was R. 1,530,000,000, including R. 87,600,000 payable in coin, and 7,200,000 German marks. Of the total circulation, R. 282,000,000 belonged to the Nobility Bank; R. 62,900,000 to the Peasants’ Bank, with interest reduced from 5½ to 4½ per cent.; and the remaining bonds, amounting to R. 1,185,100,000, were issued by private banks.

The latest returns of Other Land Companies show, in their latest published statements, the following amounts of mortgaged bonds outstanding:

The Bank of Kherson, a mutual liability company, R. 103,800,000; the ten joint-stock banks of Kharkov, Poltava, Tula, Moscow, Bessarabia, Samara, Kiev, Vilna, Yaroslavl, and Don have, unitedly, R. 506,100,000; five municipal credit companies, R. 374,700,000, distributed as follows: St. Petersburg, R. 179,900,000; Moscow, R. 125,500,000; Odessa, R. 56,200,000; Kiev, R. 10,100,000, and Cronstadt, R. 3,000,000; total, R. 374,700,000. Credit Company of the Kingdom of Poland, R. 117,500,000; Warsaw Credit Company, R. 41,600,000; four other Polish cities, R. 11,400,000; Esthonian Nobility Credit Company, R. 2,000,000 and 7,250,000 marks; Livonian Land Credit Company, R. 30,700,000; Courland Land Credit Company, R. 17,000,000 and R. 1,700,000 payable in coin; five Baltic cities, R. 29,000,000; City of Tiflis, R. 9,100,000, and two Nobility Banks of the Caucasus, R. 17,800,000. Leaving out of account the municipal banks, Peasants’ Bank, and the Polish institutions, we find that the total mortgage obligations on January 1, 1895, amounted to R. 1,164,500,000, against R. 654,400,000 on January 1, 1887; an increase of some R. 510,000,000, or nearly eighty per cent. in eight years. For the Nobility Bank alone there was an increase from R. 208,800,000 to R. 468,000,000, or nearly 124 per cent. In this instance, moreover, the value of the mortgaged property rose from 3070/100 to 3125/100 roubles per dessiatine; the total average increase being from 251/100 to 2612/100 roubles per dessiatine. In other words, the banks loaned more than before, although the decline in prices of crops would seem to have encouraged a contraction in the loan business. But it was necessary to compete effectually with the Nobility Bank; and thus the State subsidy stimulated running into debt. In May, 1894, the third, or socalled “third,” demand addressed to backward State debtors involved no less than nine per cent. of the aggregate estates mortgaged by the Nobility Bank. We have seen that a respite was granted in November, 1894.

The Land Credit banks cleared an annual average net profit of fifteen per cent. for the period 1888-92. The following are specimens of the dividends:

Kharkov, 13.8 per cent.; Poltava, 17.1 per cent.; Tula, 9.6 per cent.; Moscow, 16 per cent.; Bessarabia, 14.1 per cent.; Samara, 16.6 per cent.; Kiev, 19.4 per cent.; Vilna, 15.9 per cent.; Yaroslavl, 6.7 per cent., and Don, 14.8 per cent. The capital stock of these ten banks was R. 33,250,000 in 1888, R. 36,600,000 in 1892, and R. 41,600,000 at the close of 1894. Their net profits in 1894 were R. 7,580,687, or 18.2 per cent.

We have had occasion to speak of the Czar’s inaugural ukase, with its large concessions to debtors. The abatement of ½ per cent. annual interest to the nobles and peasants implies an inevitable expansion of the State budget; and this begins to assert itself in the case of the Nobility Bank whenever the loans increase by R. 42,000,000. The Nobility Bank was to assist in lightening the burdens of its customers, which office it discharged by paying on their account R. 212,000,000 to other banks, and loaning them 112 millions in cash. Meanwhile, had the debts on landed property decreased at private banks? They had increased by R. 217,000,000.

Before the emancipation of the serfs, the estates of aristocratic landowners, with a serf population of 5,000,000 “male souls,” were mortgaged to the amount of R. 328,000,000 to the State Bank. This amount was then converted, at the emancipation, into a bonded debt redeemable in forty-nine years by the liberated peasantry. The only land credit concerns regularly operative in Russia were those of Poland and the Baltic Provinces; and as late as 1869, the total mortgage debt was not above R. 117,000,000. In 1874, it was R. 335,000,000; R. 511,000,000 in 1879; R. 617,000,000 in 1884; R. 930,000,000 in 1889; and, as we have seen, some R. 1,530,000,000 in 1894. The liberation debt of the peasants is not included in the foregoing figures. On January 1, 1893, it amounted to R. 716,000,000, and after an abatement of R. 183,250,000, granted by the State on sundry occasions, it still amounts to more than R. 532,000,000. Under the item of emancipation, the State has paid the noble proprietors R. 572,000,000 in mortgage bonds, R. 6,000,000 in cash, and R. 316,000,000 in the way of canceled debts; a round total of R. 900,000,000. The arrears of the peasant communes for emancipation dues are locally as high at 300 per cent. of the annual charges; so it is no hard matter to understand the State’s frequent practice of canceling back accounts. The end is perhaps not yet.

According to a publication of Mr. Golubov, Secretary of the Committee of Land Mortgage Banks, the mortgage indebtedness for the period 1889-94, was as follows:

The average loan for each dessiatine of land was 24 roubles and 90 copecks in 1889; 26 roubles and 13 copecks for 1894.

SAVINGS-BANKS.

We come now to the Savings-Banks. A new law concerning them went into force on June 1 (13), 1895. Its main provisions are as follows: The State shall assume the responsibility for all sums deposited, and “these are not to be used toward defraying the general expenses of the State” (Art. 2). Deposits cannot be attached except by judicial order. The funds of savings-banks are to be turned over to the State Bank, which shall pay on them a rate of interest less by at least ½ of 1 per cent. than that paid upon sight draft accounts, but never less than ½ of 1 per cent. per annum. The funds are to be invested in State securities or in securities guaranteed by the State. The surplus is to be turned into a reserve fund until the latter amounts to ten per cent. of the deposits held on December 31st of the year last past. Such profits as may yet remain are to be carried to the credit of the Treasury as a budgetary receipt (Art. 9). On the other hand, if the profits are not sufficient to pay the interest due to depositors the State will make up the difference (Art. 10). The limit of interest-bearing specie deposits is R. 1000 for an individual and R. 3000 for a corporation. If this limit is passed, interest ceases on the whole of the specie deposit in that account. Notice is thereupon sent to the depositor, and if, at the end of a month, he has not reduced his deposit within the legal limit, the surplus will be invested in State securities for his account (Art. 35). The rate of interest paid to depositors is to be fixed from time to time by imperial decree (Art. 43). When any account has not been increased or drawn upon for thirty years it becomes the property of the savings-bank (Art. 52).

It is yet to be seen what measure of success these reforms may have. On January 1, 1894, the number of savings-banks under the management of the State Bank was eighty-six, and their deposits aggregated R. 287,500,000, of which R. 260,400,000 was in ordinary savings-banks, and R. 27,100,000 in “postal banks.” The provinces of St. Petersburg and Moscow appear in this total for R. 40,800,000 (14 1-5 per cent.); the five provinces of the north, for R. 13,500,000 (4.68 per cent.); the six provinces of the east, for R. 28,900,000 (10.05 per cent.); the seven provinces of the manufacturing districts of the interior, for R. 46,300,000 (16.11 per cent.); the nine provinces of the Terre Noire, for R. 48,900,000 (17.01 per cent.); Little Russia (three provinces), for R. 15,100,000 (5.24 per cent.); the three Baltic provinces, for R. 9,500,000 (3.31 per cent.); the six provinces of the northwest, for R. 14,900,000 (5.17 per cent.); the three provinces of the southwest, for R. 13,700,000 (4.76 per cent.), and the six provinces of the south, for R. 23,700,000 (8.14 per cent.). This makes for European Russia, properly so called, R. 255,300,000, or 88.67 per cent. of the whole. Of the 11⅓ per cent. remaining there were R. 8,750,000 in the ten provinces of the Vistula; R. 13,100,000 in Caucasia and Transcaucasia, and R. 10,333,000 in Asiatic Russia.

On April 1, 1894, the various social classes were represented among the depositors thus: Agriculture and trades closely allied with it, 241,636 depositors, representing R. 51,100,000; trades-people of the cities, 101,593 depositors, with R. 14,700,000; the mill and factory classes, 83,039 depositors, with R. 11,250,000; domestic servants, 125,959 depositors, with R. 19,800,000; the commercial classes, 123,250 depositors, with R. 20,900,000; soldiers, 72,302 depositors, with R. 12,100,000; Government employees, 95,949 depositors, with R. 21,100,000; personal servants, 119,992 depositors, with R. 22,300,000; all other classes, 281,476 depositors, with R. 61,600,000; and corporations, 112,025, with R. 35,200,000. There were altogether, therefore, on April 1, 1894, 1,357,221 depositors, with an aggregate of R. 270,050,000, or an average of R. 198.97.

The monthly savings-bank report of June 1, 1895, puts the number of these banks at 3,388, the number of depositors at 1,746,309, and the total deposits at R. 350,125,000. Between January 1st and June 1st of that year the savings-banks increased by 198, the depositors by 91,417, and the deposits by R. 14,600,000.

SMALL CREDIT INSTITUTIONS.

We turn now to the examination of a new species of credit institution of very recent origin. The “Messager Officiel” of June 17 (29), 1895, publishes the text of an order of the Council of State, approved by the Emperor on June 1st (13th), authorizing the establishment of institutions for “small credits,” in whose behalf the State Bank will open special credits for the formation of their capital. From the regulations drawn up for the management of these institutions, it appears that they are to be of the following classes: (1) Credit associations; (2) credit and savings associations; (3) commercial or savings banks of rural communes, of bailiwicks, or of Cossack villages (Stanitsas). The Commission, whose duty it was to draw up rules for these institutions, had before it the task of erecting, in the midst of the rural population, a type of credit establishment which should meet the wants of small tradesmen without demanding of them advances from their own resources. To this end, and also to avoid the defects which the practical working of existing credit and savings societies for the past thirty years has shown to exist in them, the new law establishes credit institutions whose working capital shall be furnished by the State Bank under the guaranty of all who share their benefits. Nevertheless, these socieities may, if they wish, be established upon a capital furnished by provincial councils (Zemstvos), or by individuals. If the capital is supplied by the State Bank, the direct management of the institution is with the Bank or its branches, whose agents superintend the business of the enterprise, the management of its affairs, the stockholders’ meetings, etc.; they have a right also to discharge or to prosecute such employees as may be guilty of neglect of duty or malfeasance in office. This same privilege belongs to representatives of provincial councils or agents of individuals who may have furnished the funds necessary for the establishment of one of the new credit institutions. The profits of these institutions are not to be paid out in dividends but are to be used to furnish a capital which shall belong to the institutions themselves.

[* ] One dessiatine = 1.0925 hectares, or 2.6997 acres.