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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.

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:

[* ] 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.