In 1672,however,British banking faced a great crisis when Charles-II borrowed huge sums of money from the goldsmiths and later refused to pay them back!Therefore,a number of goldsmith-bankers formed themselves into a Corporation in 1695,known was the Bank of England. This bank lent £ 1,2000,000 at 8% interest to William-III,who in return,allowed a number of privileges to the bank,specially the right to issue Notes payable to bearer on demand up to the amount of this loan. This was known as 'fiduciary' issue,not covered by gold. This new bank became a very serious competitor to the comparatively smaller private banks run by the London goldsmiths.
By the year 1700,the Bank of England was not only issuing Notes but also conducting accounts for customers. Being a Joint Stock Bank by Charter, its Directors were conducting the business like that of Limited Companies. The Bank of England was the only Joint Stock Company which was given the monopoly of issuing Bank Notes, though the very successfully outside London and were receiving valuables and money for safe-keeping,and also issued Notes as many instances the business of banking overshadowed the original occupation and became the main one.
This was affecting the position of the Bank of England. Therefore by an Act passed in 1708, the privilege to issue Notes in England was withdrawn from Joint Stock Banks and confound to the private banks with not more than six partners. This compelled the private bankers in London to develop the business of accepting money on deposits repayable by cheques.
In his book 'Lombard Street' Bagehot says:"Upto 1813 or thereabout in England the main profit of Banks was derived from circulation (of notes) and for many years after that deposits were treated as very minor matters"
By the year 1700,the Bank of England was not only issuing Notes but also conducting accounts for customers. Being a Joint Stock Bank by Charter, its Directors were conducting the business like that of Limited Companies. The Bank of England was the only Joint Stock Company which was given the monopoly of issuing Bank Notes, though the very successfully outside London and were receiving valuables and money for safe-keeping,and also issued Notes as many instances the business of banking overshadowed the original occupation and became the main one.
This was affecting the position of the Bank of England. Therefore by an Act passed in 1708, the privilege to issue Notes in England was withdrawn from Joint Stock Banks and confound to the private banks with not more than six partners. This compelled the private bankers in London to develop the business of accepting money on deposits repayable by cheques.
In his book 'Lombard Street' Bagehot says:"Upto 1813 or thereabout in England the main profit of Banks was derived from circulation (of notes) and for many years after that deposits were treated as very minor matters"
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