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• Banking In Germany.
• Chapter I.: Non-issuing Credit Institutions.
• Chapter II.: German Banks of Issue.
• History of Banking In Austria-hungary.
• Chapter I.: The Austrian National Bank.
• Chapter II.: Austrian Joint-stock Banks and Banking Associations.
• Chapter III.: Hungarian Joint-stock Banks and Private Credit Institutions.
• Appendix to Banking In Germany and Austria-hungary.
• II.: Statistics of Banking In Austria-hungary.
• Banking In the Netherlands.
• Introduction.
• Chapter I.: Era of Exchange Banks.
• Chapter II.: Period From 1814. Modern Dutch Banking.
• Chapter III.: Period 1814-1863. the Netherlands Bank.
• Chapter IV.: The Netherlands Bank, 1864 to 1895.
• Chapter V.: Banks of Issue In the Dutch Colonies.
• Chapter VI.: “cashiers,” Joint-stock Banks, and Private Bankers.
• Banking In the Scandinavian Nations.
• Part I.: Banking In Denmark.
• Chapter I.: History Previous to the National Bank.
• Chapter II.: The National Bank During the First Half of the Nineteenth Century.
• Chapter III.: Private Banks.
• Part II.: Banking In Sweden.
• Part III.: Banking In Norway.
• Banking and Money In Japan.
• Part I.: The Banking System.
• Chapter I.: Common Banks.
• Chapter II.: The National Banks.
• Chapter III.: The Yokohama Specie Bank. ( Shiokinginko. )
• Chapter IV.: The Bank of Japan. ( Nippon Ginko )
• Chapter V.: Land Mortgage Banks.
• Part II.: The Currency of Japan.
• Chapter I.: The Old Coinage System.
• Chapter II.: The New Coinage Period.
• Chapter III.: The Paper Currency.
• Chapter IV.: Readjustment of the Public Debt.
• Chapter V.: The Future Money Standard.
• Appendices.
• Appendix D.: National Debt In Japan. (from the “british Economic Association Journal” of June, 1895.)
• Banking, Currency and Land Tenure In the Chinese Empire.
• I.: China’s Currencies.
• II.: Chinese Banking: Ancient and Modern.
• III.: Land Tenure and Taxation In China.

PART I.

BANKING IN DENMARK.

CHAPTER I.

HISTORY PREVIOUS TO THE NATIONAL BANK.

THE COURANTBANK.

ARIGHT understanding of the development of Danish banking requires more or less acquaintance with its earliest origins, whose principal features we shall briefly describe.* The first Danish bank was founded in 1736, under the name of “Kjöbenhavns Assignations- Vexel- og Laanebank,”† which was generally called the Courantbank, or “Circulating Bank.” This was organized by a private joint-stock company, and the capital stock consisted of 1000 shares at 500 rix-dollars each. The Bank issued redeemable notes, which were accepted in payments at all public places of trade. As the directors’ right of issuing notes was unlimited. and as the manner of securing them was undefined, it soon happened that the rapidly rising demand for loans tempted the Bank to issue notes in excess of a judicious amount. As early as 1745 the notes failed to be redeemed, and the Bank, so prosperous at the start, had to resort to the extreme legal expedient of suspending payments. This first suspension of payments lasted only two years. But after 1747 the issue of notes again overstepped prudent bounds, and in 1757 the Bank was again authorized to suspend cash payments “for a short time.” The suspension, in fact, became permanent. Down to that time the smallest denomination of bank notes had been ten rix-dollars; but in 1762 the Bank was empowered to issue notes of one rix-dollar. The result of these arrangements was that the notes of the Courantbank degenerated into a compulsory legal tender, in the form of unredeemable paper currency. The Government had thus been highly helpful to the Bank, and the Bank returned the favor by making a great increase of loans to the State. In 1773 the State’s debt to the Bank was over 5,000,000 rix-dollars; the Bank’s capital stock was 600,000 rix-dollars; the circulation of notes, 5,700,000 rix-dollars, and the coin reserve only 83,500 rix-dollars. The Government then proposed to the Bank’s shareholders that it should buy in their shares, which proposition they accepted. So from 1773 forward, the Courantbank was a State bank. The note issue now rose to extravagant proportions. In 1774 it was 6,500,000 rix-dollars; in 1784, 15,200,000 rix-dollars (about 50,000,000 crowns), and the value of the notes fell to fifteen per cent. below par.

ATTEMPTS AT CURRENCY REFORM.

The year 1784 marks the beginning of a whole series of reforms in Danish statecraft, and it was also the Government’s intention to advise a remedy for the disturbed conditions of banking and currency. It was proposed that the State should cease to draw loans from the Bank, and that the notes should be made redeemable in silver. In order to realize this plan, a new loan was raised, but the outbreak of war in 1788 checked the entire scheme. Nevertheless, one part of the Danish dominion succeeded in reforming the demoralized currency. This was the ducal government of Schleswig-Holstein, which ordered the retirement of Courantbank notes, and the issue of “specie notes” in their stead, as affording better security. These and the new coins were to be the only public legal tender in the two duchies. The specie notes were issued by a new bank, separately organized for the duchies, and located in Altona. Through the raising of a loan payable in the current notes on very favorable terms for creditors, the people were delivered from the old Courant notes. The Specie Bank in Altona, which carried out the reform, was a State bank, managed with great energy and ability. It was authorized to transact a business in loans and discounts; and the discounts should be constantly covered by silver, in the ratio of five to nine, which regulation was strictly enforced.

While the two duchies were thus bravely reforming their currency, the financial situation in other parts of the realm was growing worse. It is true that an attempt was made on similar lines to reorganize the currency in the Danish and Norwegian kingdoms; but the attempt utterly failed. In 1791, a Danish-Norwegian specie bank was established in Copenhagen; and though a private enterprise, it was to be managed on the general plan of the bank in Altona. However, it might exchange specie notes not only for silver, but also for Courantbank notes at their market value. As will be anticipated, the latter provision had exceedingly unfortunate consequences. When the Specie Bank was opened, the Courantbank stopped giving out loans; and its operations should now be limited to the withdrawal and cashing of its own notes, to an annual amount of 750,000 standard rix-dollars. As a matter of fact, this was not done; for the Government, which had control over the issue of bank notes, kept continually putting the Courantbank notes in fresh circulation. That the rate of exchange for paper currency still continued pretty favorable, must be ascribed partly to good market conditions and partly to public ignorance of what was going on in financial and banking circles. But a grave crisis occurred in 1799. The large trade with foreign countries came to a sudden halt, and the demand for currency straightway declined. Things were made infinitely worse by the Government’s persistent issue of great quantities of Courant notes, while at the same time it borrowed over one-half of the Specie Bank’s coin reserve (in silver). The latter bank then soon became unable to redeem specie notes, which poured in copiously from the public market. So the specie notes began to fall, and the Specie Bank was promptly obliged to stop granting loans. At this point the Specie Bank’s utility practically ended, and it simply vegetated and languished until the Government, in 1813, assumed its assets and liabilities and released its shareholders from their commitments.

A NEW BANK AND WAR FINANCE.

In such circumstances, it was not without reason that the public urged, in 1799, the necessity of having a new credit institution. A concern which was organized under the name of “Deposit Bank” exerted no salutary influence. Quite contrary to the regulations which had been promulgated in 1791 respecting the disposition of Courant notes, these were extensively circulated by the Deposit Bank, both as loans for actual enterprises and in payment of maturing obligations, though not for starting new projects. There was a very naïve ordinance to the effect that the Courant notes which were circulated by the Deposit Bank should bear a special mark by which their later withdrawal might be the better controlled. In fact, they never were withdrawn. During such desperate conditions came the war of 1807-14, and in these years the manufacture of bank notes was of the utmost financial service to the Government. Whereas the amount of bank notes in 1807 reached the extraordinary sum of 27,000,000 rix-dollars (about 86,000,000 crowns), by the close of 1812 it had risen to 142,000,000 rix-dollars (about 454,000,000 crowns). The normal rate of exchange was 125 rix-dollars to 100 specie dollars, but under the depreciated currency it was 1760 to 100—that is, a specie dollar, instead of representing one and a quarter rix-dollars, represented from seventeen to eighteen rix-dollars.

NEW ROYAL BANK AND REPUDIATION.

For the sake of bringing the economic status to its feet again, a decree dated January 5, 1813, provided for the erection of a new “Royal Bank.” At the same time a new currency standard was introduced, under the name of the “Royal Bank standard.” According to this, two rix-dollars should equal one specie dollar. Both the Courantbank, the Specie Bank, and the Deposit Bank were abolished, and the new Royal Bank notes were to circulate alike in the kingdom and in the duchies. However, the most radical feature of the reform was the State’s recourse to a kind of bankruptcy, in that it declared its downright inability to redeem the Courant notes according to their original value. In this connection it must be borne in mind that the Courant notes were mainly in the hands of the people, who had received them at a lower value than was called for by redemption. The bankrupt proposition reduced the Courant notes to one-tenth of their nominal value, and the public debt was correspondingly diminished.

The Royal Bank’s original capital stock was procured by means of an imperative decree, which ordered that the Bank should have first mortgage rights on all real estate, at six per cent. of its value. This first mortgage right should precede all others, and the Bank’s claims or assessments, unless paid in silver by the parties concerned, should bear interest at six and a half per cent. in standard silver. The King, nevertheless, promised to relieve the land-owners of this new burden by granting them a rebatement of taxes, to the extent of five-sixths of the Bank’s assessments. The annual proceeds of the Bank’s assessments were to be applied partly toward the accumulation of a silver reserve, partly toward the retirement of bank notes until the outstanding circulation should be in proper proportion to the demands of trade. The Bank might issue notes to the amount of 46,000,000 rix-dollars, of which 27,000,000 should be applied to the redemption of the older notes; 4,000,000 to a loan fund; and 15,000,000 to a reserve fund for extraordinary State expenses. For this reserve fund there should also be an issue of 10,000,000 rix-dollars in non-redeemable silver bonds; for the interest and extinction of which the Bank should annually expend 600,000 rix-dollars in silver. Finally, the Royal Bank was to pay an annual sum of 350,000 rix-dollars for interest on such bonds as it issued on occasion of redeeming bank notes which circulated in the duchies. The 46,000,000 rix-dollars which the Bank issued in bank notes should circulate in Denmark, Norway, and the duchies. But the latter provinces, whose currency had been essentially reformed by the help of the Specie Bank in Altona, protested against any circulation of bank notes; and the concession was then allowed, that whilst notes should be allowed to circulate, yet silver might be insisted upon in payments (for the ducal countries). At the Peace of Kiel, in 1814, Norway was again separated from Denmark; and the whole issue of notes, except some 8,000,000 rix-dollars already issued in Norway, rested upon Denmark, to the amount of 38,000,000 rix-dollars (76,000,000 crowns). At the start, therefore, the new Royal Bank notes were very unsatisfactory currency. The rate of exchange in 1814 was from 550 to 600 rix-dollars to 100 specie dollars; the par value being 200 rix-dollars to 100 specie. The Royal Bank, as its name implies, was a State institution; but the Government, in order to increase public confidence in the new financial organization, promised that this recent bank should become a private institution, under a national board of trustees. It should operate under their administration, and the surplus which might accrue in course of time, should belong to the shareholders—especially to the mortgaged subscribers, or land-owners. Meanwhile, this promise was of little avail to improve the condition of the depreciated bank notes. Their first real improvement occurred when the war ceased in 1814, and with it the prevailing confusion in all economic spheres.

NEW NATIONAL BANK.

The pledge of transforming the Royal Bank into a private bank was fulfilled in 1818, by the grant of July 4th, providing that from August 1st of the same year, the Bank should be reorganized under the name of “National Bank,” and on the basis of a private joint-stock company. The National Bank’s capital stock was obtained like that of the Royal Bank; townspeople should contribute to the Bank six per cent. of their property, and this assessment should bear six and a half per cent. annual interest in silver till fully paid. Landed proprietors were to contribute one per cent. of their property; and in addition, they were to pay six and a half per cent. annual interest on five per cent. of their valuation, until all the Royal Bank notes (about 31,000,000 rix-dollars) were redeemed or covered with a corresponding coin reserve in silver. But the interest thus paid should be deducted from the proprietors’ land taxes; or, in other words, the State applied the required amount of these taxes to paying five-sixths of the land-owners’ original dues to the National Bank. By way of compensation, the land-owners should thenceforth be entitled to redeem only one per cent. of their original assessment, and they should likewise become shareholders to only one-sixth of that amount. The remaining five-sixths should be unredeemable on both sides. Forasmuch as the contributors assessed in the duchies were mainly unwilling to engage in this kind of contract with the Bank, they were permitted to pay outright that portion of the bank notes and bonded obligations which fell to the duchies; and so be released from attachments to the Bank. The total capital stock was nearly 8,000,000 rix-dollars, of which 1,600,000 had devolved upon the duchies. As it was also allowed to supplement the Bank’s assessments with cash payments in round sums, in order to realize a proportionate increase of capital stock, and as it later appeared that bank shares were a very profitable sort of property, the amount of stock was soon increased, by such payments, to a total of 13,500,000 rix-dollars (27,000,000 crowns); and this is its present status.

CHAPTER II.

THE NATIONAL BANK DURING THE FIRST HALF OF THE NINETEENTH CENTURY.

READJUSTMENT OF THE NOTE CIRCULATION.

THE National Bank, whose origin we have traced above, is the leading bank in Denmark. As we have seen, it is a private bank; nor is there any State bank in Denmark. The Bank’s administration, composed of four directors, is nevertheless under State supervision. One member of the administrative board is appointed by the Government; the others are chosen by the shareholders, through a committee of fifteen. It devolves upon the Ministry of Justice to see that the Bank statutes are strictly obeyed. The tasks of the new Bank were similar to those of the Royal Bank; especially, it was to restore order to the disturbed financial situation. The National Bank being vested with the monopoly of issuing notes for a period of ninety years (expiring in 1908), undertook the solution of its problem with all energy; but the difficulties were so serious that not until 1838, or after a score of years, did the directors succeed in bringing the bank notes up to par. The notes were not finally redeemable until 1845, when the outstanding issue was reduced to 16,500,000 rix-dollars. This amount was fixed by royal decree as a maximum limit; but as early as 1847, the limit was raised to 20,000,000 rix-dollars. At the same time, it was ruled that the lowest denomination of notes should be five rix-dollars, instead of one rix-dollar, the former lowest denomination. In 1854, the maximum limit of issue was again raised, and fixed at 24,000,000 rix-dollars. This increase was a proper consequence of the increased population and its growing prosperity; whereby there arose a greater demand for circulating media. On occasion of extraordinary demands for currency in 1859, it was ordained that there should be no further specification of a maximum note issue. On the other hand, all notes issued in excess of 13,500,000 rix-dollars should be fully covered in silver. The limit of unprotected notes was enlarged in 1877, when the line was drawn at 15,000,000 rix-dollars; and, as in the previous instances, the motive was a growing business pressure for circulation.

FUNDING OF THE BANK’S NOTES.

With reference to the funding of National Bank notes, the following facts deserve notice: In 1840, it was decreed that the realization, or redemption, fund should consist of silver, the same as half the security of the total outstanding issue of notes. At least one-half of this silver reserve should consist of coins current in Denmark; the other half might be made up of bullion and notes of the Hamburg Bank, though the amount of the latter currency should not exceed one-fourth of the total reserve fund. To protect that part of the note issue which was not covered in silver, the Bank should hold good and substantial securities on unencumbered property, to the amount of at least 150 per cent. of the given deficiency; but at no time should there be more than one-fourth of this amount in direct mortgage bonds on real estate. The war of 1848-49 occasioned considerable changes in the national economy, and it soon became evident that an exclusive silver standard could not be permanently adhered to for covering bank notes. It was therefore provided in 1849, that the Bank should hold a part of its reserve in sterling notes; that is, in a currency based on gold. Such notes, however, should constitute only one-fourth of the total coin reserve. It was furthermore ordained that foreign silver coins might be included in the coin reserve, according to their several values. The issue of notes to the sum of 4,000,000 rix-dollars in 1854 should be fully secured by silver coin, bullion, and good Hamburg or sterling bank notes. These regulations were in force until 1859; but when it was found that they impaired the Bank’s effectiveness, by depriving it of a necessary degree of elasticity, it was resolved to do away with one of the two main restrictions which limited the note issue. For the present, indeed, the minimum limit of unprotected notes should be the same as was ordained in 1854; whereas it was otherwise ordained that the limit hitherto prescribed for the total issue of notes should disappear, save that the overplus must be fully secured by coin or bullion. The further concession was granted in 1872, on occasion of Germany’s resolution to adopt a gold standard, that gold coin or bullion might be included in the coin reserve, as a substitute for silver bullion and foreign silver coin; provided the ratio of value be 15½ to 1, and that at least one-half of the coin reserve should still consist of silver.

THE BANK PUT ON THE GOLD BASIS.

This ordinance made it possible for the Bank to pave the way toward a gold standard, which was formally adopted in 1873, with the following statutory provisions:

The National Bank is authorized to issue as large an amount of bank notes as the demands of trade shall at any time require; provided (1) the Bank shall have in its possession a coin reserve equivalent to any circulation of notes in excess of 27,000,000* crowns; and this reserve shall at no time fall below three-eighths of the total circulation; (2) to secure that part of the note issue which is not covered by the coin reserve, the Bank shall hold good, substantial, and readily available assets, in the ratio of 150 crowns of assets to every 100 crowns of notes. These assets may include loans on securities, bills of exchange, public stocks and bonds, according to their market quotations, and mortgage bonds for direct loans on real estate; but the latter bonds shall not exceed the amount of 6,000,000 crowns.

The coin reserve shall strictly consist of: (a) Legal current coin according to its nominal value; and, when the issue of notes is 48,000,000 crowns or over, the amount of reserved current coin shall be at least 12,000,000 crowns, or at least one-fourth of the total issue of notes from 48,000,000 crowns upward. (b) Gold in bullion and foreign gold coin. (c) Silver bullion and foreign silver coin; but not to a greater amount than one-third of the coin reserve.

Finally, it was ordained, in 1886, that the National Bank’s non-interest-bearing claims on demand, credited with the Bank of Norway and the Royal Bank of Sweden, might be included in the National Bank’s coin reserve; provided that the similar accounts of those banks against the National Bank be deducted from the coin reserve. The Bank is obliged to buy gold of whoever offers it for sale, with the deduction of one-fourth per cent. for costs of coinage.

Having now traced the National Bank’s earliest history, and the development of the principles on which it is still conducted, we need not dwell with much circumstance upon its operations in the first half of this century. Until 1846 it was Denmark’s only bank, and as its capital stock for the most part consisted of property attachments which had to be gradually redeemed, it was seriously restricted in the exercise of those functions which lay outside the retirement of bank notes and the accumulation of a coin reserve. Only in the third decade of the century did the Bank begin to grant direct loans on real estate, and the sums thus loaned were long kept near the statutory limit. Loans on merchandise were first granted in the forties; but this branch of business never grew to be very extensive. Loans on securities assumed greater proportions, especially as the Bank shares rose in value and became an object of speculation. The discounting of bills increased largely, from the period (midway in the forties) when the national trade had recovered from its prostration at the beginning of the century. The following figures show the total extent of loans, by half-decades, to 1850:

CHAPTER III.

PRIVATE BANKS.

SURVEY OF BANKING SINCE 1850.

PRIVATE BANKS.

WE have already mentioned that, until 1846, there was only one bank in Denmark, namely, the National Bank; though this had founded two provincial branches in 1837 and 1844. As in relation to the vigorously growing commercial activity, the Bank had acquired ample available means, and yet operated rather sluggishly, on the whole, and so rendered but moderate service to trade; a few private banks were started, from 1846 forward, both in Copenhagen and in the provinces. The first of these private banks was the Discount Bank of Fyen (Fionia, or Funen), founded in 1846; and from 1854 to 1857, thirteen other provincial banks were established. Furthermore, two private banks were opened in Copenhagen in 1857—the Private Bank, and the Private Loan Bank of Copenhagen. The former had an original capital stock of 4,000,000 crowns; the latter, a capital of 1,000,000 crowns. Shortly after these banks were started, the great commercial crisis of 1857 became felt, even in Denmark. The private banks of Copenhagen almost wholly escaped disaster, but many provincial banks incurred heavy losses, from which they recovered only after several years. However, the effects of the crisis were so palpable in the period 1858-69, that people were afraid to engage in fresh operations of banking; and in those years only two new banks were started—the Industrial Bank, in Copenhagen (1862), and a provincial bank (1866). The Industrial Bank was designed to aid mechanics and manufacturers, and, in general, to promote industry. At first, this bank had a very inconsiderable capital stock; but in 1871 the stock was increased to 1,000,000 crowns.

Banking in Denmark took a great stride forward after 1870. An active market in the domain of trade and industry fostered fresh zeal for economic enterprises; occupation was provided for new financial organizations, and the old ones enlarged their business. Early in the seventies, four new banks were started in Copenhagen, namely: the Danish Labor Bank, the Loan Bank of 1873, the Farmers’ Bank, and the Commercial Bank. The two first named were of modest scope; and the Danish Labor Bank, as its name imported, had a special object and a limited province. The Loan Bank (Forskudsbanken) was at no time an extensive concern as such; and, in 1880, it was reconstructed as a loan and savings company for employees. But the Farmers’ and the Commercial Banks soon covered a wide business territory, and they still act a prominent part in the Danish mercantile world, both within and beyond the metropolis. The Farmers’ Bank was founded in 1871, though not opened for business till January, 1872. It operated as a mortgage and exchange bank. Its capital stock was 12,000,000 crowns, fully paid in by 1874. Its transactions, as above indicated, were, on the one hand, to develop agricultural credit by granting redeemable and unredeemable loans on real estate, and to transact a general banking business. As a mortgage bank, it issued mortgage bonds, the amount of which was not to exceed twelve times the capital stock. The Farmers’ Bank introduced the Scotch system of loans on personal security, given for one year at a time. This system, however, though adopted by nearly all the Danish banks, has never attained the same importance and complete application in Denmark as in Scotland and Sweden. A savings-bank was instituted as a separate department of the Farmers’ Bank, and has gradually grown into considerable magnitude. The Commercial Bank was organized in 1873, with an original capital stock of 16,000,000 crowns; but only 12,000,000 crowns were paid in. Both the Farmers’ and the Commercial Banks have started provincial branches.

The Private Bank, mentioned earlier, was founded in 1857, for the purpose of relieving the immediate need of a credit instrument that should be both expeditious and readily available. The National Bank, partly by reason of its peculiar constitution and fundamental object, and partly because of its rather unfortunate administration, was much hindered in its transactions. So it very soon became evident that the Private Bank had been opened at a most opportune time; for its deposits, within half a year from its inauguration, had reached the same amount as the capital stock. Some few years later, the deposits amounted to six times the capital stock, which was then doubled, in 1864. After a further increase, it amounted in 1871 to 12,000,000 crowns. In consequence of the good returns realized by the Bank, the new shares brought 140, or forty per cent. above par; and when the forty per cent. was added to the surplus fund, the latter rose to 2,000,000 crowns; which considerable sum was lost, however, in the following years. In the early seventies, the Bank engaged in various industrial undertakings, with high profits at the start (eleven per cent. in 1871); but certain railway constructions turned out so disastrously that the whole surplus fund, in 1874, was needed to retrieve the losses.

BANKS OUTSIDE COPENHAGEN.

During these years, not a few banks were founded outside Copenhagen. In addition to eleven branches of the Farmers’ and the Commercial Banks in provincial towns, no less than twenty-two independent provincial banks were established from 1870 to 1876. This prosperous period was followed by a very adverse experience for Danish banks midway in the same decade. The Industrial Bank suffered heavily, and was obliged, in 1877, to divert half its capital stock to cover the losses. At the same time, two provincial banks failed; and these events reacted so unfavorably on banking operations, that there was a decided lull in the business of starting new banks. Nevertheless, the National Bank and the Commercial Bank organized a few provincial branches. The decade beginning with 1880 witnessed greater activity in Danish banking. Five provincial banks were founded; and the Farmers’ Bank, in Copenhagen, doubled its capital stock (to 24,000,000 crowns, the present amount). Since 1890, some new provincial banks have been opened and some of the old ones have either ceased operating or else joined forces with new banks. To give the exact number of provincial banks in Denmark at present would be difficult, for the reason that many of the Danish financial organizations do both banking and savings-bank business, and it is not always easy to decide under which head to class them. At all events, it would not be correct to put the number so high as fifty. Two new metropolitan banks were started in 1895—the Exchange and Discount Bank of Copenhagen, with a capital stock of 2,000,000 crowns, and the Retail Traders’ Bank, with a capital of 250,000 crowns.

BANKING ACTIVITY DURING THE LATTER HALF OF THE CENTURY.

We have already shown that the National Bank is the only bank of issue in Denmark. The emission of bank notes has therefore at all times constituted that phase of the Bank’s utility which most invites public attention. Let us now consider a few principal features of the National Bank’s transactions, in their chronological order. It will be apparent from what has been said of the regulations touching the redemption of bank notes, that the proportion of unprotected notes grows less as the issue of notes increases. In the long course of time, this unprotected portion had best be measured per capita. We find it as follows, from 1849 to 1881:

The final increase is due to an exceptional year, 1877; the subsequent issue per individual constantly decreases. On the other hand, the aggregate issue of bank notes has gradually increased considerably. The legal maximum limit of 24,000,000 rix-dollars was repealed in 1859; though, as a matter of fact, it was observed until 1864, and even for several years from this date, it rarely exceeded 24,000,000 rix-dollars. Not till after 1868 was the issue of notes allowed to fluctuate exactly in accordance with the demands of trade; and all in all, it has had an upward course. In 1872, the minimum issue was 54,000,000 crowns; the maximum, 67,000,000 crowns. Thenceforward, the minimum was seldom below 60,000,000 crowns. The average issue, which pretty nearly reflects the annual demand for currency, was as follows, from 1867 to 1894:

The most significant portion of the foregoing increase belongs to the period 1872-76, as in those years there was also a general decline in the value of the currency. Making due allowance for fluctuations in current rates of value, we find that the increasing issue of bank notes has been fairly regular, and in proportion to two motive forces, growth of population and the expansion of trade. We subjoin a table of the amount of notes issued per capita:

In addition to this upward movement from year to year, we notice a pretty regular variation, from month to month, in any separate year. The monthly maximum occurs about the two pay terms, or in December and June; the amounts then fall, and the monthly minimum generally appears in February and August. We may illustrate by the following table:

The main reason for this monthly variation is that by far the heaviest sums of money are turned over in June and December; while it is also to be considered that the payment of wages and house-rent likewise occurs at regular terms, which somewhat precede the general pay terms. As these periodic increases in the circulation of bank notes are based on a legitimate demand for currency, it is obviously superfluous to increase the coin reserve in the same ratio. But the Bank’s charter is explicit on this very point; and so, at every pay term, the Bank is obliged to procure a considerable sum of coin or bullion, which is again sent away when the term has expired.

Let us next consider the National Bank’s transactions in borrowing or loans received. At the middle of the century, this part of its business was quite insignificant, and it was conducted from an irrational point of view. A fee was charged for keeping bank accounts; but in 1860 the National Bank began to open current accounts free to all parties, and not alone to the mercantile class. That the bank accounts rapidly grew to considerable volume will appear from the following survey of their average status at the annual settlements:

It will also be seen that the accounts greatly vary in different years. In the same way the total yearly transactions through bank accounts underwent large fluctuations. In 1860-61 the total was 79,000,000 crowns; about 325,000,000 crowns in 1870-71, some 600,000,000 crowns in 1880-81, and 650,000,000 crowns in 1890-91.

The Bank’s operations in granting loans have been subject to wide variations, both as to the extent and as to the nature of the loans. We subjoin a comparative statement:

Here we should bear in mind, however, that the amount held by the Bank in stocks and bonds, as also the amount of its accounts credit in foreign countries, has risen considerably. These items were as follows for the designated years:

As to any deductions that may be drawn from the preceding statistics, we shall simply remark that the National Bank, in all its operations, has been very decidedly affected by the continual opening of private banks in Copenhagen and the provinces. A true notion of financial affairs in Denmark may be best obtained by reviewing the activity of all the banks combined; and as a survey of this kind is greatly hindered by the mixed methods formerly used by the provincial banks in balancing their accounts, we shall still principally confine ourselves to the banks of Copenhagen; the more because the latter, by virtue of their magnitude, are absolutely foremost in importance.

In connection with the banks of Copenhagen, we should mention two large savings-banks, which partly engage in a general banking business; namely, the Savings-Bank of Copenhagen (Kjöbenhavns Sparekasse) and the Beehive (Bikuben). Their deposits, from 1870 to 1894, reached the following amounts:

We next present a statement of loans and other business for the banks of Copenhagen.

Perhaps a better and more perspicuous idea of the nature of this banking activity may be gained by combining our data, as follows (grouping columns three, four, five, and six under the single head of loans; and similarly combining columns seven and eight). The sums are stated in millions of crowns.

We now add a few remarks on discounts, as these are fixed by the leading Danish bank (the National Bank) for the best bills. In earlier times, the Bank deemed it a matter of the highest importance to keep the rate of discount as steady as possible, so that the course of business should not be disturbed by vacillations in the money market. Not until the beginning of the fifties was the truly rational plan adopted of allowing discounts to vary according to the law of supply and demand. Yet, prior to 1860, there were not many changes in the prevailing rate, which was generally four or five per cent.; but from 1861 to 1870 it was altered forty-six times, and ranged between three and seven per cent. From 1871 to 1880, it was altered forty-eight times, with an upward limit of six and a half per cent. Conditions were steadier from 1881 to 1890, and the rate was changed only twenty-three times, with a maximum of five per cent. Some brisk changes occurred in the early nineties, but the maximum rate did not exceed five per cent. These various alterations may be more fully illustrated by the following table:

To repeat once for all, there is only one bank of issue in Denmark; namely, the National Bank. By the grant of 1818, this was vested with the monopoly of issuing bank notes for a term of ninety years; but apart from this grant, there is no special Bank Act in Denmark, nor any particular legislation concerning bank shares. Every private individual and every jointstock association is, therefore, free to found banks; except that no such banks are allowed to issue notes. The legal status of Danish banks is thus perfectly simple and unequivocal; since outside the Bank charter of 1818, the principal features of which we have above sketched, there is no general definition of their status whatever.

[* ] See Marcus Rubin, 1807-14; Copenhagen, 1892. Also, Falbe Hansen and W. Scharling’s “Statistics of Denmark,” vol. in; Copenhagen, 1878.

[† ] Assignat, Exchange, and Loan Bank of Copenhagen.

[* ] In 1877, the limit of notes unprotected by coin or bullion was raised to 30,000,000 crowns, with the proviso that there should be set apart a special reserve fund of 3,000,000 crowns, to be used only in exceptional emergencies.