The Online Library of Liberty

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• Banking In the Latin Nations.
• Part I.: Banking In France.
• Chapter I.: Its Status Before the Revolution.
• Chapter II.: The Bank and “system” of Law.
• Chapter III.: The Discount Bank—la Caisse D’escompte.
• Chapter IV.: Assignats—the Basis of Their Issue.
• Chapter V.: The Bank of France.
• Chapter VI.: Banks and Bankers After the Revolution.
• Chapter VII.: Banking In the French Colonies.
• Part II.: Banking In Italy.
• Chapter I.: Primitive Banks.
• Chapter II.: Banking Under the Unification of the Kingdom.
• Chapter III.: Italian Co-operative Banks.
• Chapter IV.: The Bankers of Florence.
• Chapter V.: Banks and Bankers In Sicily.
• Part III.: Banking In Spain.
• Chapter I.: The Earliest Banks.
• Chapter II.: The Bank of Spain.
• Part IV.: Banking In Belgium.
• Part V.: Banking In Switzerland.
• Part VI.: Banking In Portugal, 1750 to 1891.
• Chapter I.: The First Great Banks.
• Chapter II.: The Bank of Portugal.
• Part VII.: National Bank of Roumania.
• Part VIII.: The Latin Monetary Union.
• Part IX.: Dynamics of Circulation.
• Part X.: The Banks of Alsace-lorraine After the Annexation. *
• Banking In Canada.
• Author’s Preface.
• Chapter I.: Currency Expedients.
• Chapter II.: 1817-1841. Banking Under Joint-stock Charters.
• Chapter III.: 1841-1867. Banking In Old Canada.
• Chapter IV.: Banking Under the Dominion.
• Chapter V.: Scope of Existing Laws.
• Chapter VI.: Land Banks—loan Companies.

PART IV.

BANKING IN BELGIUM.

THE BANK OF BELGIUM.

ITS EARLY VICISSITUDES.

THE National Bank of Belgium is of comparatively recent origin. It was founded under an act of May 5, 1850, the first article of which provided: “A bank which shall be known as the National Bank is established.” Its purpose was declared to be to regulate the issue of paper currency, and secure uniformity in the bank note circulation of Belgium.

Four banks had previously been in competition—the Société Générale, the Bank of Belgium, the Bank of Flanders, and the Bank of Liege. The last two were local institutions; the first two had charge of the Government service. The Société Générale, founded in the beginning of the century, was a powerful establishment, which, under the Dutch régime, attended to the collection of public revenues. In 1830, when Belgian independence was proclaimed, the new government could not dispense with the co-operation of the Société Générale. The latter, taking advantage of the circumstances, caused the State much embarrassment by refusing to agree to any supervision over its administration of public moneys. The Government, deciding to put an end to the vexation, authorized in 1835 a new bank of issue, and gave it the name of Bank of Belgium. The privilege of performing cash transactions for the State was taken away from the Société Générale and conferred upon it. The two banks did not get on well together. The Société Générale even endeavored to force the Bank of Belgium into bankruptcy, by suddenly demanding the redemption of a large amount of currency. This rivalry weakened and greatly embarrassed both, when the crisis of 1836 came on. Neither the Société Générale nor the Bank of Belgium had obtained the experience necessary for properly regulating the paper circulation. Both had done a large business in commercial and industrial transactions at long maturity. The public holding the notes of the Bank of Belgium took fright, and to avoid a suspension of payments the Bank was obliged to appeal to the Treasury for assistance. The years 1837, 1838, and 1839 were disastrous for the Belgian banks. The Société Générale was able to retrieve its position, but the Bank of Belgium was so distressed that, in 1842, it had to resign its function of State depository, which reverted to the Société Générale. The Government, however, did not forgive the Société Générale. It felt keenly the humiliation of being obliged to return to that institution after striving to do without its services, and devised a plan for a new bank of issue which it purposed carrying into execution at the earliest opportunity. In 1843, the concession of the Société Générale as a chartered company expired. The shareholders desired to prolong their agreement for twenty-five years, but the Government reserved the right to require changes in the regulations before the end of 1849. In 1848, the shock of the revolution that had just broken out in Paris was felt in Belgium, and the Société Générale suspended payments. The Government embraced this opportunity to carry out its project. At the beginning of 1849, the President of the Ministry demanded various reforms and modifications which, if accepted, would have compelled the Société Générale to wind up its affairs at the sacrifice of very important business. The Société Générale declined to preserve at such a price the right of issue, which was thereupon transferred to the new National Bank of Belgium.

The National Bank is not formally granted a monopoly of issue, but possesses it in practice. The law appears to permit the coexistence of several banks, prescribing that “no bank of issue can be established on shares except under the form of a stock company and by a statute.” Out of this proviso arises the monopoly of issue. M. Pirmez, referring to this subject in his report to the Chamber, said: “De facto, we have in Belgium only one bank of issue. De jure, liberty to create banks of issue is accorded to individuals, partnership concerns, and companies which have no stock on the market; but there is no such liberty for open and joint-stock companies. The latter owe their existence to law, which can enforce its own terms. By stipulating that banks of issue must be stock companies the Government reserves the right to grant or refuse authority to issue paper money.”

The Bank had a struggling beginning, and the support of the Government did not strengthen it much. To offset the somewhat dubious advantages bestowed, the State had imposed upon it exceedingly heavy burdens, which will be considered in detail under the head of the relations of the Bank with the Treasury. Moreover, the Bank had to contend against the antagonism of the Société Générale, which, with the experience of age, understood better the art of distributing credit. But it gradually obtained education, and its transactions grew. During the crises of 1857 and 1863, it rendered all the services naturally to be expected of a well-regulated bank of issue. The year 1870 was a time of trial for the Bank of Belgium, as for the Bank of France; and the difficulties in store for banks of issue having too intimate connection with the State received ample illustration. Belgium, contiguous to both France and Germany, was obliged to equip her army to assure respect for her neutrality, and became at the same time a market in which the two belligerent countries procured a part of the financial resources requisite for maintaining their armaments. The discounts of the Bank swelled rapidly, and, as always happens in troublous periods, the merchants and bankers made extraordinary calls, while the holders of bank notes, seized with apprehension, clamored for their redemption. The State itself had demanded the transfer to Antwerp of an amount in coin equal to the account current of the Treasury, and meantime had instructed its officers not to pay anything but paper to the Bank. The Minister of War went so far as to observe to the Chief of Corps that the military treasurers would do well to exchange the bank notes in their possession for gold and silver. As a matter of course, all these State performances intensified the fear of the public. The Bank had only one recourse for reassuring the people—to keep right on paying over the counter. In order to be able to do that, it raised the discount rate and placed restrictions upon the acceptance of commercial paper. These measures cost much both to commerce and the Bank, but payments were not suspended even for a day.

RENEWAL OF THE BANK’S CHARTER.

Upon emerging from this crisis the Bank moved for a reaffirmation of its charter, which, granted in 1850 for twenty-five years, was to run out in 1875. The negotiations with the Minister began in the first months of 1872, and they were speedily brought to conclusion. An act was framed extending the privilege for thirty years from 1873; but on very hard terms for the Bank, aggravating those of the 1850 contract, which had been considered sufficiently oppressive. The act was voted by the Chamber after much fulmination about monopoly and the unwisdom of giving over rights belonging to the State into the keeping of a private concern; which are always favorite themes when the subject of privileged banks is under debate. The law was promulgated May 20, 1872. Since that date, the history of the Bank of Belgium has had no very conspicuous aspects. There were bad days in 1873; and, more recently, the Bank has felt the effects of crises that have disturbed Europe, but it has never found itself in very serious straits.

ORGANIZATION OF THE BANK.

As has already been indicated, the Bank operates under no formal monopoly, but it has a substantial one, which will expire in 1903. The capital, which was fixed at 25,000,000 francs by the Act of May 5, 1850, was advanced to fifty millions by that of May 20, 1872. It comprises 50,000 shares of 1000 francs each. The shares provided for by the law of 1872 were allotted preferentially to the old shareholders, and were issued at 1100 francs, 1000 francs to go into the capital of the Bank and 100 francs into the reserve. The reserve is formed by a levy of fifteen per cent. on the net yearly profits above six per cent., and is intended to make good any losses that the Bank may suffer, and to complete, if necessary, the amount required for a 2½ per cent. half-yearly dividend to the shareholders. The capital and reserve are invested in consols; but that mode of investment is not obligatory. The Bank is prohibited from acquiring any real estate except what is strictly needful for its own business. The shares, of 1000 francs par value, 50,000 in number, are registered or to bearer, according to the preference of the holder. Changes from one form to the other are made free of charge. The Bank recognizes but one sole owner for each share. Dividends are payable every six months. The shareholders are liable only for the amount of their shares. They exercise their rights through the findings and decisions of the Shareholders’ Assembly.

The Shareholders’ Assembly represents the total body of shareholders. All persons owning at least ten shares are entitled to take part in its proceedings. Every member of the Assembly may be represented through the proxy of any other member of the Assembly. Ten shares entitle the owner to one vote. No person may cast more than five votes, either as a shareholder or a proxy. The ordinary meetings of the Assembly are held on the last Monday of February and the last Monday of August. Extraordinary meetings may be called upon the demand of the censors whenever the Council judges it useful to hold them. The February meeting receives the statement of transactions for the year, and certifies the balance-sheet. The August meeting selects persons to take the places of retiring members of the Council. Every proposition signed by five shareholders who are members of the Assembly is communicated to the Council ten days before the meeting and brought under deliberation. The regulations of the Bank cannot be modified except by General Assembly meetings called for the purpose.

MANAGEMENT OF THE BANK.

The management of the Bank is in the hands of a governor and six directors, who form the Administrative Council. A council of censors, consisting of seven members, acts as the body of comptrollers. The governor is nominated, suspended, or discharged by the King. He is appointed for five years, and may be reappointed indefinitely. His regular salary, fixed by the King, is paid by the Bank, which also provides him with a residence and furnishes it. He cannot be a member of the legislative body or draw a State pension. He presides in all councils and meetings, executes their decisions, and looks to the enforcement of the laws and regulations. He has the right to suspend the taking effect of decisions made by the Administrative Council, in order to submit them to the General Council, which he calls for urgent emergencies. It is his duty to suspend and denounce to the Government every act of the Council that is contrary to the statutes or adverse to the interests of the State. If the Government, having considered the conclusions reached by the governor, fails to come to a decision within a fortnight after his protest, the act can be carried out. The governor has the casting vote in meetings of the Administrative Council. He signs all documents making engagements for the Bank after they have received the signatures of the secretary and treasurer, or one director in lieu of either. He represents the Administrative Council in the courts, and also has authority over all the agents of the Bank, and can suspend them without reference to the Administrative Council. He must own fifty shares of the Bank’s stock, as security for his administration of the Bank. The King selects a vice-governor from among the directors, who acts instead of the governor in case of the latter’s absence, incapacity, or suspension. The General Assembly chooses the six directors, who must be Belgian citizens (native-born or naturalized), and reside in Brussels. They are appointed for six years, and may be re-elected. Each director must own at least twenty-five shares, and none of them can belong to the Administrative Council of any other bank. Besides their general functions, each is intrusted with the control of one department or more of the Bank, and has authority over the employees under him. Every director receives a salary of 6000 francs, and has a share in the profits. The director filling the office of vice-governor has an extra allowance of 3000 francs. The Administrative Council, consisting of the governor and directors, holds regular meetings three times a week, and special meetings whenever necessary. It considers all the concerns of the Bank, especially the rate on credits and advances, and discount affairs in general, and gives particular attention also to the purchasing of securities and to cases at law. Finally, it appoints and discharges the employees, and determines their salaries. In all matters it advises with the censors. The censors are named by the Shareholders’ Assembly for terms of three years. They retire in different years—three going out the first year, two the second, and two the third. Each censor must have ten shares. They get also a portion of the profits. The Censors’ Council meets at the call of the governor whenever the business makes it desirable, and at least once a month. It cannot adopt any decisions unless at least four members are present. It has control over all transactions, audits the books, and votes the budget of expenses prepared by the Administrative Council. It is responsible for all plans of modification affecting discounts and advances.

The governor, directors, and censors constitute the General Council, which meets on the last Saturday of each month. The General Council keeps under its cognizance the situation of the Bank, and acts on all questions submitted to it which relate to its laws and routine regulations. It apportions the divisions of profits, and passes upon everything affecting the production and issuance of the Bank’s notes. It selects a Discount Council from among the merchants, or old clients, which examines the paper presented for discount, and determines what to accept and what to reject. The State designates a Government Commissioner (whose salary the Bank pays), to exercise the functions of a comptroller, especially with regard to discounts and the note circulation. He has the right to look into the business condition of the Bank, and to inspect its books. In cases where he deems it proper, he has an advisory vote in the assemblies and councils.

BRANCHES, AGENCIES, AND BUREAUS.

Under the provisions of an act of July 17, 1872, the Bank has branches and discount offices in the principal cities of the provinces, and in other localities, where the usefulness of such establishments has become manifest. Article 3 of the same act obliges it to conduct agencies in all the principal judiciary districts, and in other places where the Government considers it convenient for the interests of the public and the Treasury to have them maintained. The branches are operated for the account and at the expense and risk of the Bank, under the general direction of three administrators, named by the Administrative Council. The officers and agents of the branches are nominated by the administrators, subject to the approval of the Administrative Council. The transactions of the branches are the same as those of the Bank, excepting that the former are under restrictions established by the General Council, with the sanction of the Minister of Finance. There is only one branch proper, that at Antwerp; but a great many agencies are in existence; which make advances on securities, lend cash services, open current accounts, issue trust orders, etc. The principal object of the agencies is the accommodation of the Treasury. The agents have also the character of State receivers and disbursers, and, consequently, are appointed by the King from a double list presented by the Administrative Council. They are also dismissible by the King; but the Bank may suspend them from office for the term of one month. Their salaries range from 5000 to 15,000 francs, according to class. The agents have power to choose their employees. Though dependent upon the State, the agents have extra-official relations with the officers of the Government. They keep regular accounts, which are inspected by the representatives of the Bank.

The Bank discounts only paper with three signatures. To perform its discount transactions, and bring them reach of all, it has adopted a most ingenious machinery, which, in many respects, might be advantageously imitated in other countries. Under the name of Comptoirs d’Escompte (Discount Bureaus), associations of persons are permitted by the General Council, which discount such paper as is specified by the regulations of the Bank, at rates and under conditions prescribed by the General Council. The paper admitted by the comptoirs is indorsed to the Bank direct. Each comptoir is held responsible; so that bad paper is returned to the bureau from which it emanated, and which has to make good the amount. The individuals associated in the comptoir receive a commission on paper that they discount, to remunerate them for their trouble and reward them for the risk they take. The commissions are determined by special arrangements. In general, the discount bureaus are located at the agencies of the Bank, the agents lending them half of their offices for their discount business and their bookkeeping.

TRANSACTIONS OF THE BANK.

The Bank discounts or buys commercial paper on Belgium and foreign countries, besides vouchers on the Belgian Treasury. Commercial paper must be for commercial business; must be made to order; must have three good signatures, and must not have longer than 100 days to run. The discount bureaus that vouch for the paper they accept can take paper with but two signatures. In Brussels and Antwerp, paper with two signatures is received, but under quite peculiar conditions. In place of the third signature, a warehouse receipt may be given, sufficient to cover the total of the debt. Besides ordinary commercial paper, the Bank discounts warehouse receipts with two signatures up to a fixed percentage of their value. If the warrant bears more than two signatures, or if the two signatures are of unquestionable character, the Administrative Council may increase the amount of the loan, or admit warrants which do not figure in the Bank’s regular list of those taken as collateral. The Bank makes periodical examinations to ascertain the condition of goods in storage and to see that storage fees are regularly paid. When a warehouse voucher is paid before maturity, the Bank makes allowance for the interest of the days it has to run. If the value of the merchandise given as collateral falls more than ten per cent. in market value, the Bank may ask for settlement or for increased collateral. The discount terms for commercial paper, both as to rate and period of maturity, apply equally to Treasury vouchers. But the Bank cannot carry more than 10,000,000 francs of Treasury vouchers at a time.

RATE OF DISCOUNT.

The Bank of Belgium has two rates of discount—one for accepted drafts, the other for non-accepted commercial paper. The rate applicable to non-accepted paper is one-half per cent. higher than that fixed for accepted drafts. The following comparison shows the Bank rate for a series of years:

The Bank is authorized to deal in gold and silver bullion and moneys at money rates, deducting refining charges, if any. The bullion must be accompanied by an assayer’s certificate acceptable to the Bank, and the seller is held responsible for the fineness shown in the certificate. Sellers have the right to redeem the bullion within eighteen days. The statement following shows the transactions in the precious metals from 1873 to 1890:

ADVANCES UPON COLLATERALS.

The Bank makes advances direct or for current account on deposits of Belgian national securities and other securities guaranteed by the State, within limits and at terms fixed periodically by the Administrative Council. The securities are not accepted for more than four-fifths of their current market value. Loans are made for ten days at least and four months at most. They may be taken up before maturity. In case of non-payment at maturity, the collateral is sold on the Bourse. No more than one extension of maturity is allowed unless specially authorized by the Council. The annual amounts of the Bank’s advances for a series of years compare as follows:

CURRENT ACCOUNTS.

The Bank opens current accounts on written applications addressed to the governor. The application must give surname, Christian name, profession, and domicile. The current accounts bear no interest but are carried without charge. The current account holders may make or receive payments, without charge by the Bank, at all the Bank’s agencies, and draw on their credits by cheques or transfers. The annual amounts of this kind of business transacted by the Bank are stated in the following figures:

COLLECTIONS FOR ACCOUNT-HOLDERS AND TRUST ORDERS.

The Bank undertakes for account-holders the collection of local paper, indorsed and deposited three days before maturity. A special service of the Bank of Belgium, which has had considerable development during the last few years, is that of “trust orders.” Any person, by simply paying in the amount at an agency or office of the Bank, may have an order, executed without commission, at any other designated agency or office. The Bank is thus called upon to perform, gratuitously, all transfers of money for the whole country. It accounts for its policy of executing trust orders without charge by explaining that it is compensated for these transactions by the lessened use of bank notes. The “trust order” system may some day, however, prove dangerous for the coin stock of the Bank, as will be pointed out later. From 1866 to 1894, these “trust orders” transactions have amounted to the following annual aggregates:

TRUST DEPOSITS.

The Bank takes deposits in trust. Deposits for joint account, or by persons not having free disposal of their property, are allowed only by special authority. The deposit is made in a locked metallic box, sealed by the depositor. The capacity of the box must not exceed ½ cubic metre, and each box counts as a separate place of deposit. This very rudimentary deposit system does not offer the facilities and advantages that the public finds in the French, German, and Austro-Hungarian banks; and the service of the Bank of Belgium in this departments is of minor importance.

COIN AND PAPER CIRCULATION.

Belgium has the same monetary policy as France—the double standard. Gold and silver are identical in current value, but the silver coinage, which was first limited in 1874, has been totally stopped, so that bimetallism, although prevailing nominally, is much attenuated practically. In common with Italy, Switzerland, and Greece, Belgium is associated with France in a monetary convention, called the Latin Union, which obligates the public officials of the five countries to accept on equal terms the coins struck by each of them, with the proviso that, at the expiration of the agreement, each nation will exchange the coins of the Union circulating within its dominions for an equal amount of its own coins circulating in the other States of the Union, and that half of the balance remaining after that adjustment shall be settled in gold or equivalent values, and the other half, not to exceed 200,000,000 francs, shall be restored through the channels of commerce and exchange.

These terms bear rather severely on Belgium, which, profiting by the low price of silver before the discontinuance of the coinage, issued large amounts of five-franc pieces that are to-day in extensive circulation in France. The Latin Union and the “trust order” system permit Belgium to send her five-franc coins into France at pleasure. When a Belgian debt is due in France the debtor draws an order at some agency payable at Tournay or Courtrai (frontier places in Belgium). There, coin is asked for, and forwarded to the branch of the Bank of France at Roubaix or Tourcoing. The transfer charge is very light, so that money leaves Belgium when the exchange is but 2 per 1000, under the circumstances explained. The rate would have to reach 4 to 5 per 1000 to make it a matter of advantage to transfer actual coin instead of using orders. Belgium is thus more exposed than any other country to a drainage of coin.

Article 35 of the regulations of the Bank of Belgium directs that it shall have a coin stock equal to one-third of the combined amount of its bank note circulation and other sight obligations, although the Minister of Finance may, at his discretion, set aside this requirement and authorize the Bank to operate below the one-third limit. The coin stock and the outstanding circulation of the Bank, from 1873 to 1894, has ranged as follows, the amounts being stated in millions and hundred thousands of francs:

The metallic stock carried is smaller, in proportion to the note circulation, than in most of the other great banks of Europe—smaller even than in the Bank of Spain—yet the notes of the Bank of Belgium suffer no depreciation. The reason for this favorable factor is, that the Bank possesses a great deal of foreign paper payable in gold or equivalent values that serves to render part of its coin productive. The following table gives the figures for the last five years of coin on hand, foreign paper, and note circulation:

The proportion of metallic or equivalent values reaches fifty per cent., and is therefore eminently satisfactory. The surplus of note circulation and the current accounts is protected by a most solid supply of commercial paper, and by capital, reserve, and high-class securities. The notes are taken by the State in payment. They are redeemed at sight at the Bank, and also by the provincial agents, although the latter may delay payments until they can procure the necessary funds. Belgium displays a tendency toward the single gold standard, as indicated by the composition of the coin stock of the Bank, shown in the following statement of the Bank’s coin on hand at the end of the business year:

The increasing preponderance of gold is due to the parsimony of the Bank in distributing the yellow metal. Likewise, the public is reluctant to give up gold, fearing that it may not come back.

The small amount of silver in the Bank of Belgium contrasted with the formidable aggregate in the Bank of France, is convincing proof that Belgium is not over-supplied with silver coin. Yet the five-franc piece is worth in Belgium as much as gold, for it is an article of export always accepted at face value in France. France, besides, is called upon to supply gold to Belgium when needed for gold payments. The embarrassments induced by the depreciation of silver will not be felt in Belgium until the day arrives for the dissolution of the monetary convention that joined her to France, and the French and Belgian coinages now in circulation are made independent of each other.

The figures below of average circulation according to note-denominations of the Bank of Belgium for the past five years show that, as in France, the 1000 and 100 franc bills are preferred, and that there is little request for the 500-franc note:

RELATIONS OF THE BANK WITH THE STATE.

The National Bank of Belgium, as we have already shown, was created chiefly with a view to serving the State as a depository. Its relations to the State are very comprehensive. It performs, without charge, cash services for the Government. It meets all the running expenses for material and for transferring and forwarding funds; and, in addition, it pays to the Treasury a yearly fee of 175,000 francs. This fee is taken by the State in recompense for the advantages that the Bank is supposed to derive from the handling of the Treasury’s money; which, as a matter of fact, is but a problematical advantage. The cash services for the State consist in receiving all amounts in money or equivalents paid in by the Department of Finance, discharging the general expenses of the State and provincial governments, and carrying credits for the Ministry of Finance. The accounts of receipts and payments are audited by Government agents and submitted for the approval of the Auditing Court.

Aside from its obligation to make public debt payments as they come due (which belongs to the regular cash service department), the Bank receives the consols intended for conversion into registered securities and delivers State securities on transfers and to bearer (unregistered bonds). It collects, if ordered to do so, the amounts on coupons of securities which it has in keeping, and also the amounts past due on consols registered at the Treasury for the account of the public departments. The disposable funds of the Treasury in excess of current needs are invested by the Bank upon its responsibility. These disposable funds are held to be the balance of the Treasury’s account current after deducting the drafts of the Bank plus five millions of francs. It has always been understood that the arrangement with the Bank to invest idle Government money is not intended to obtain from the Bank productive interest on sums temporarily unproductive on account current. The available Treasury funds are ordinarily invested in foreign paper. Belgium paper is selected for investment only in exceptional cases. This plan is designed to prevent the State from acting in opposition to the Bank. Whenever the Bank is persuaded to invest State funds in Belgian paper, it takes such paper out of its own supply; but the Bank has exclusive right to determine as to the convenience of the transaction. The profits and expenses of investment go entirely to the account of the State.

THE BANK’S SERVICE TO SAVINGS-BANKS.

The Bank attends gratuitously to services on account of the Caisse d’Epargne et de Retraite (Savings and Pension Institution), established under State authority by the Act of March 16, 1865. It invests the assets of the fund, maintains separate accounts, and does discounting for the Institution. At all the agencies of the Bank, deposits for the account of the Savings Institution are received and payments are made.

TAXES ON THE BANK.

Notwithstanding the numerous and burdensome services for the State, the Bank is heavily taxed. In the first place, it pays an annual fee of 175,000 francs to defray the expenses of the Treasury in the provinces. Then it is subjected to all the general taxes, particularly the license tax, to which are added municipal and provincial taxes. Its bank note circulation is taxed fifty centimes per thousand, with an extra one-fourth per cent. on all notes outstanding above 275,000,000 francs. Whenever the discount rate exceeds five per cent., the profits resulting from the difference between that figure and the rate in force go to the State. Lastly, if the profits of the Bank amount to more than six per cent. of the capital, the State takes one-fourth of the surplus.

PROFITS AND DIVIDENDS.

Thanks to Belgium’s density of population, the abundant means of easy communication, and the commercial activity of the country, the Bank prospers and yields substantial dividends to its shareholders, despite the crushing charges which the State lays upon it. The dividends are paid semi-annually. In calculating them, the general and running expenses of all kinds, the sinking fund, and the payments to the State are deducted from the gross profits. The net profits thus ascertained are distributed in the following manner: 1. The shareholders are given a dividend of three per cent. every six months. If the profits do not admit of a minimum dividend of two and one-half per cent., the deficit is made up out of the reserve, which, as far as practicable, is reconstructed from the profits of the ensuing half-year. 2. Fifteen per cent. of the surplus is applied to the reserve, and twenty-five per cent. is turned over to the State. The Administrative Council receives four per cent. of the profits in excess of five per cent. of the capital, and the censors receive one per cent. of such profits; but these allowances cannot be more than 80,000 francs for the Administrative Council and 17,500 francs for the censors. The remainder goes to the shareholders as a second dividend, after deducting an amount not to exceed twenty-five centimes per share, which is applied semi-annually to charitable purposes. The dividend of the first half-year is distributable on September 1st, and that of the second half-year on March 1st.

Sources of Bank’s Receipts.

The following table shows the receipts of the Bank from different sources:

BALANCE-SHEET.

At the end of each week, the Bank issues a balance-sheet showing its condition on the date of publication and that of the agencies, etc., on the preceding Thursday.

The metallic stock on hand of the assets includes both gold and silver, but the proportions of each are specified only once a year—in the annual statement of December 31st. The Bills receivable comprise Belgian and foreign paper. Practically, the foreign paper might be carried in the account of coin on hand, as is done in the Banks of Austro-Hungary and Italy; for this collateral is payable in gold or silver coin of the Latin Union, which is equivalent to gold. Paper out for collection in current account is a special account, representing paper having no more than three days to run, handed in by current account holders to the Bank for collection. The items, Public funds and Reserve securities stand for consols bought by the Bank for the use of its capital and reserves. They show that the Bank of Belgium, like the Bank of France, considers its capital and reserves as a guaranty, and carries them in securities instead of cash. Advances on Belgian funds gives the amount of loans in force on consols and other national securities. Often the item Advances on precious metals appears. Instead of selling gold and silver outright, the parties concerned prefer at times to speculate on the rise, and the Bank allows such proceedings. The account Buildings in use and furnishings gives the estimated value of the Bank building in Brussels, the branch concern in Antwerp, and the buildings of the agencies, with their furnishings. Guaranteed sureties or available securities are liabilities to the Bank for which it holds liens on collateral.

Turning to the liabilities of the Bank, we find the first item to be Capital, 50,000,000 francs. It has stood at that figure since 1872. The Bank notes in circulation constitute the principal indebtedness of the Bank of Belgium. The Current accounts are subdivided into: (1) Current account of the Public Treasury, which has already been explained. The sums embraced in this account generally about balance the debts that the Treasury has to settle at short terms; but there is a credit of 5,000,000 francs added. This surplus is in the custody of the Bank, and is separately itemized under Paper on hand for the Public Treasury. (2) Individual current accounts, representing the credits of the Bank’s customers on the day of publication of the statement. The remaining accounts of the statement are miscellaneous accounts in the assets and liabilities. Paper on hand for the Public Treasury is the amount of investments of the disposable funds of the State. This item represents only a deposit at the Bank, and is entered in the books only as a matter of reference. It is balanced in the liabilities by the item, Account of Public Treasury holdings. Deposits of public funds has reference to the consols sent to the Bank for registry under the head “Deposits in coin or public funds.” Voluntary deposits appear in the assets for their declared value. This item is offset in the liabilities by “Depositors.” The same applies to Holdings of the Savings and Pension Fund, for which the Bank of Belgium is the depository. Divers accounts, both in the assets and liabilities, include specially unimportant items.

Besides the weekly statements, the Administrative Council issues half-yearly balances on June 30th and December 31st, which are submitted to the Censors’ Council. At the February meeting, the shareholders receive a communication of the statement of transactions for the year, and also the report of the censors concerning their control of the institution.

CONCLUSION.

The National Bank of Belgium, under its organization, vouchsafes to the State extraordinary services. No other bank in the world assumes, gratuitously, equal responsibilities, or surrenders to the Government so large a portion of the profits. It has been very appositely described as an “acting State bank”; but it is a State agent of a peculiar kind, since it pays for the opportunity to perform duties. The too close union of the Bank and the State is a danger a priori. Attention has been called to the trouble provoked in 1870, when the balance of the Treasury account was most inopportunely withdrawn. On the other hand, it may well be considered whether Belgium, though a neutral nation, could, in the event of invasion by either warring Power, have enforced her neutrality. Would she not have been constrained to side with one or the other? In that event, would not the Power discriminated against have deemed itself justified in levying upon the public funds in the occupied territory? It is extremely doubtful whether the Bank, which is practically a fief of the State, would have been entitled to protection by the droit des gens. In 1870, the branches of the Bank of France were able to prove that they were attached to a private establishment, and accordingly the Germans showed full respect for their property. The Bank of Belgium, of course, belongs to shareholders; but it is the State depository, and on that ground the enemy might stop its operations and even seize its resources, awaiting the restoration of peace before giving an accounting. To conclude: Though, favored by exceptional national conditions, the Bank prospers despite the State’s exactions, it certainly pays for the privilege much more than it is worth and brings in. The Bank of Belgium is the truest type of State-harassed institutions.