Sect. X.—: The Bank of France,

Which is second only in magnitude and importance to the Bank of England, was originally founded in 1800, but was not placed on a solid and well defined basis till 1806. Her capital, which was originally fixed at 45,000,000 fr., was raised in the last mentioned year to 90,000,000 fr., divided into 90,000 shares or actions, of 1000 fr. each. Of these shares, 67,900 have passed into the hands of the public, the remaining 22,100 having been purchased up by the bank, out of her surplus profits, were subsequently cancelled. Hence her capital amounted, down to 1848, to 67,900,000 fr. (£2,716,000), with a reserve fund, first of 10,000,000 fr., and more recently of 12,980,750 fr. Since 1806 the bank has enjoyed the privilege of being the only institution in Paris entitled to issue notes payable on demand; and, as will be afterwards seen, she is now the only authorised issuer of such paper in France. Her charter and exclusive privileges have been prolonged and varied by laws passed at different periods; according to existing arrangements they are not terminable till 1897.

The bank has established, at different periods, between 1817 and 1856, offices or branches (succursales) in different parts of the country. They are managed nearly in the same way as the parent establishment; but their operations have been on a comparatively small scale. These are exclusive of the departmental banks united, as will be immediately seen, to the bank in 1848.

Notwithstanding the skill and caution with which her affairs have generally been conducted, the Revolution of 1848 brought the bank into a situation of extreme danger. She had to make large advances to the provisional government and the city of Paris. And these circumstances, combined with the distrust that was universally prevalent, occasioned so severe a drain upon her for gold, that to prevent the total exhaustion of her coffers, she was authorised, by a decree of the 16th March 1848, to suspend cash payments, her notes being at the same time made legal tender. But to prevent the abuse that might otherwise have taken place under the suspension, the maximum amount of her issues was fixed at 350 millions. She was then also authorised to reduce the value of her notes from 500 fr. to 200 and 100 fr.

Previously to 1848, joint-stock banks, on the model of that of Paris, and issuing notes, had been established in Lyons, Marseilles, Bordeaux, Rouen, and other large cities. And it was then determined that these banks should be incorporated with the Bank of France, and made branches of the latter. This was effected by decrees issued on the 27th April and 2d May 1848, by which the shareholders of the banks referred to (nine in number) were allowed, for every 1000 fr. nominal value of their shares, a share of 1000 fr. nominal value of the stock of the Bank of France. And, in consequence of this measure, 23,351 new shares, representing a capital of 23,351,000 fr., were added to the stock of the Bank of France, making the latter consist of 91,250,000 fr., divided into 91,250 shares. In 1851, the bank resumed, and has since continued specie payments.

The suppression of the local issues of the departmental banks was, no doubt, a judicious measure, and was indispensable, indeed, to secure the equal value of the paper circulating in different parts of the country. This, however, might have been effected by the mere stoppage of the issues of the departmental banks, without consolidating them with the Bank of France. The latter measure is one of which the policy is very questionable; and there are, as already seen, good grounds for thinking that the banking business of the departments would have been more likely to be well conducted by local associations, than by branches of the Bank of France.

Owing to the peculiar circumstances of the last few years, occasioned partly by the war with Russia, but more by the rage for speculation and the drain for silver to the east, the Bank of France has been exposed to considerable difficulties. And in the view of strengthening her position, and also, it may be presumed, of providing a loan for government, a law has been recently passed (9th June 1857), by which the capital of the bank has been doubled. Previously to this law, her capital amounted, as already seen, to 91,250 shares of 1000 fr. each; whereas it now consists of 182,500 shares of 1000 fr. each. The new shares were assigned to the existing proprietors at the rate of 1100 fr. per share, producing a total sum of 100,370,000 fr., of which 100 millions have been lent to government at 3 per cent. Hence the measure, though it has added to the credit and security of the bank, has not made any addition to the means directly at her disposal.

Down to the passing of this law, the bank could not raise the rate of interest on loans and discounts above six per cent. But this impolitic restriction is now removed, and the bank may charge any rate of interest which she reckons expedient, except upon advances to government, the maximum interest on which is limited to 3 per cent. The bank has been farther authorised to issue notes of the value of 50 fr., to make advances on railway shares, &c., and the charter has been extended to 1897.

The bank is obliged to open a compte courant for any one who requires it, and performs services, for those who have such accounts, similar to those performed for their customers by the banks in London. She does not charge any commission on current accounts, so that her only remuneration arises from the use of the money placed in her hands by the individuals whose payments she makes. It is probable, therefore, as has been alleged, that this part of her business is but little profitable. The bank also discounts bills with three signatures, at variable dates; but not having more than three months or ninety days to run. In 1855, the aggregate amount of these discounts in Paris and the departments, amounted to the very large sum of 3,262,000,000 frs., the interest being five per cent. till the 18th of October, and afterwards 6 per cent. Besides discounting bills, the bank makes advances on stocks and pledges of various kinds, and undertakes the care of valuable articles, such as plate, jewels, title-deeds, &c., at a charge of 1/8 per cent. on the value of the deposit, for every period of six months and under. Nothing can show more clearly the petty retail character of the trade of Paris, and generally of France, than the smallness of the value of the bills discounted by the bank. Thus, of 963,000 bills disounted in 1847, the average amount was only £55: 4s., and of these no fewer than 126,000 were for less than 200 frs. (£8), and 470,000 for less than 1000 frs. (£20), each! (Tooke and Newmarch On Prices, vi. 51.)

The administration of the bank is vested in a council of twenty-one members, viz., a governor and two subgovernors, nominated by the Emperor; and fifteen directors and three censors, nominated by the shareholders. The bank has a large surplus capital or rest. In 1855 and 1856 she divided no less than 200 and 272 fr. profits on each share; but these have much exceeded the dividends in any previous year. In 1848 the dividends only amounted to 75 frs. per share. In July 1856, the 1000 fr. share of bank-stock was worth 4075 frs.; in July 1857, it had sunk to 2880 frs. Her intimate connection with the government is decidedly the most objectionable feature in the constitution of the Bank of France.