The Bank of England is the greatest bank of circulation in Europe.It was incorporated, in pursuance of an act of Parliament, by a charter under the Great Seal, dated the 27th of July, 1694.It at that time advanced to government the sum of one million two hundred thousand pounds, for an annuity of one hundred thousand pounds; or for L96,000 a year interest, at the rate of eight per cent, and L4000 a year for the expense of management.The credit of the new government, established by the Revolution, we may believe, must have been very low, when it was obliged to borrow at so high an interest.
In 1697 the bank was allowed to enlarge its capital stock by an engraftment of L1,001,171 10s.Its whole capital stock therefore, amounted at this time to L2,201,171 10s.This engraftment is said to have been for the support of public credit.In 1696, tallies had been at forty, and fifty, and sixty per cent discount, and bank notes at twenty per cent.During the great recoinage of the silver, which was going on at this time, the bank had thought proper to discontinue the payment of its notes, which necessarily occasioned their discredit.
In pursuance of the 7th Anne, c.7, the bank advanced and paid into the exchequer the sum of L400,000; ****** in all the sum of L1,600,000 which it had advanced upon its original annuity of L96,000 interest and L4000 for expense of management.In 1708, therefore, the credit of government was as good as that of private persons, since it could borrow at six per cent interest the common legal and market rate of those times.In pursuance of the same act, the bank cancelled exchequer bills to the amount of L1,775,027 17s.10 1/2d.at six per cent interest, and was at the same time allowed to take in subscriptions for doubling its capital.In 1708, therefore, the capital of the bank amounted to L4,402,343; and it had advanced to government the sum of L3,375,027 17s.10 1/2d.
By a call of fifteen per cent in 1709, there was paid in and made stock L656,204 Is.9d.; and by another of ten per cent in 1710, L501,448 12s.11d.In consequence of those two calls, therefore, the bank capital amounted to L5,559,995 14s.8d.
In pursuance of the 3rd George I, c.8, the bank delivered up two millions of exchequer bills to be cancelled.It had at this time, therefore, advanced to government 17s.10d.In pursuance of the 8th George 1, c.21, the bank purchased of the South Sea Company stock to the amount of 14,000,000; and in 1722, in consequence of the subscriptions which it had taken in for enabling it to make this purchase, its capital stock was increased by L3,400,000.At this time, therefore, the bank had advanced to the public L9,375,027 17s.10 1/2d.; and its capital stock amounted only to L8,959,995 14s.8d.It was upon this occasion that the sum which the bank had advanced to the public, and for which it received interest, began first to exceed its capital stock, or the sum for which it paid a dividend to the proprietors of bank stock; or, in other words, that the bank began to have an undivided capital, over and above its divided one.It has continued to have an undivided capital of the same kind ever since.In 1746, the bank had, upon different occasions, advanced to the public L11,686,800 and its divided capital had been raised by different calls and subscriptions to L10,780,000.
The state of those two sums has continued to be the same ever since.In pursuance of the 4th of George III, c.25, the bank agreed to pay to government for the renewal of its charter L110,000 without interest or repayment.This sum, therefore, did not increase either of those two other sums.
The dividend of the bank has varied according to the variations in the rate of the interest which it has, at different times, received for the money it had advanced to the public, as well as according to other circumstances.This rate of interest has gradually been reduced from eight to three per cent.For some years past the bank dividend has been at five and a half per cent.
The stability of the Bank of England is equal to that of the British government.All that it has advanced to the public must be lost before its creditors can sustain any loss.No other banking company in England can be established by act of Parliament, or can consist of more than six members.It acts, not only as an ordinary bank, but as a great engine of state.It receives and pays the greater part of the annuities which are due to the creditors of the public, it circulates exchequer bills, and it advances to government the annual amount of the land and malt taxes, which are frequently not paid up till some years thereafter.In those different operations, its duty to the public may sometimes have obliged it, without any fault of its directors, to overstock the circulation with paper money.It likewise discounts merchants' bills, and has, upon several different occasions, supported the credit of the principal houses, not only of England, but of Hamburg and Holland.Upon one occasion, in 1763, it is said to have advanced for this purpose, in one week, about L1,600,000, a great part of it in bullion.Ido not, however, pretend to warrant either the greatness of the sum, or the shortness of the time.Upon other occasions, this great company has been reduced to the necessity of paying in sixpences.