Dr. PROFIT AND LOSS ACCOUNT. Interim dividend for six months at 8 per cent. per annum, paid in July Income tax Balance Cr. Balance brought forward- from profit and loss account, 1877 Net profits for the year 1878, after making provision for bad and doubtful debts and rebate on bills, at 5 per cent. per I have examined and audited the above accounts, and find them correct. Liverpool, 10th January, 1879. PARES'S LEICESTERSHIRE BANKING COMPANY. Ar the forty-third general annual meeting of proprietors, held 5th February, 1879, William Evans Hutchinson, Esq., in the chair, the directors presented the following report: In presenting to the proprietors the forty-third annual report, the directors have the pleasure of stating that the position and prospects of the bank continue to be satisfactory. After payment of expenses and making ample provision for bad and doubtful debts, the net profits for the year 1878 amount to £46,307. 58. 10d., which sum, added to the balance of £5,236. 6s. 4d. brought forward from 1877, makes a total of £51,543. 128. 2d. to be dealt with by this meeting. The directors recommend the payment of the same dividend as last year, namely, £1 per share on the old shares and 8s. per share on the new shares (free of income-tax), being at the rate of 8 per cent. for the second half-year of 1878, and which, with the dividend of 6 per cent. for the first half-year, paid in August last, will make £14 per cent. for the year. They further recommend that £2,000 should be added to the reserve fund. The account will then stand as follows:-Dividend paid in August last £18,600; dividend now proposed £24,800; allowed for income-tax £900; added to the reserve fund £2,000; carried to profit and loss for 1879 £5,243. 12s. 2d.-£51,543. 12s. 2d. The reserve fund with the above addition will stand at £155,000, being one half the amount of the paid up capital of the bank, which remains the same as it was last year. The two directors who now retire by rotation are Edward Warner, Esq., and Arthur Malin Esq., and no other names having been proposed, these gentlemen are alone eligible for re-election at this meeting. Dr. Paid up capital Reserve fund Notes in circulation Balance-sheet, 31st December, 1878. Deposit and current accounts LIABILITIES. Balance of profit, 31st December, 1877 £5,236. 6s. 4d. profit for the year 1878 £46,307. 5s. 10d.; less dividend paid in August, 1878 £18,600. £310,000 0 0 153,000 0 0 46,695 0 0 1,048,992 8 3 32,943 12 2 £1,591,631 0 5 Cr. ASSETS. Cash at head office and branches, and with London agents Bills under discount Advances to customers on securities and current accounts £1,591,631 05 Resolved.-1. That the report of the directors be received and adopted, and that it be printed and a copy sent to each proprietor. 2. That Edward Warner, Esq., be re-elected a director. 3. That Arthur Malin, Esq., be re-elected a director. 4. That the best thanks of this meeting be given to the board of directors for their able and diligent attention to the interests of the company during the past year. 5. That the cordial thanks of the proprietors be presented to the officers of the company for their valuable services during the past year. 6. That the thanks of the meeting be given to the chairman for his able conduct in the chair this day. SOUTHPORT AND WEST LANCASHIRE BANKING COMPANY, LIMITED. THE directors have pleasure in presenting the following balance-sheet and statement of accounts up to the 31st December, 1878; showing that, after deducting expenses of management, rent, taxes, auditor's fees, rebate of bills not due, and after amply providing for bad and doubtful debts, there is-including £2,459. 58. 8d. brought from last account, and £6,780 premium on new issue of shares-an available balance of £18,057. 6s. 6d. Out of this sum an interim dividend amounting to £3,425. 11s. 8d. has been paid; and the remainder the directors propose to appropriate as follows, viz. :-To pay a dividend at the rate of 5 per cent. per annum, free of income-tax, amounting to £4,045. 16s. Od. ; to add £7,500 to reserve fund, making that fund £22,500; to make a reduction of £199. 38. 3d. on bank furniture account and of £250 on preliminary expenses account, and to carry forward the balance of £2,636. 15s. 7d. to next year. The directors have again to report the death of a co-director, Mr. John Bradbury. The have elected Mr. Samuel Boothroyd (Mayor of Southport), and Mr. William Sharp, of Manchester, as members of the board, and their election will have to be confirmed by the shareholders. Considerable progress has been made in the erection of the new bank premises, and already there have been applications for portions of the new buildings which will not be required for the purposes of the bank. The directors who retire by rotation are Mr. Ralph Fletcher and Mr. John H. Kearne, both of whom are recommended for re-election. Dr. Balance-sheet 31st December, 1878. Capital paid-up: 36,780 shares £4 per share paid Cr. Bills of exchange, credits, cash on hand and with bankers.. £414,379 6 2 10,946 0 10 706 13 2 £426,032 0 2 £3,425 11 8 14,631 14 10 Dr. PROFIT AND LOSS ACCOUNT. Interim dividend for six months ending 30th June, 1878 £18,057 6 6 Cr. Balance from 31st December, 1877.. Net profit for the year ending 31st December, 1878, including premium on new issue of shares £2,459 5 8 £15,598 0 10 £18,057 6 6 Communications. To the Editor of The Bankers' Magazine. THE AUDIT OF JOINT-STOCK BANKS. SIB,-If the banking laws of 1844-5, in regulating the note issues of bankers, had exercised some further control over their business, by audit or otherwise, the sad career which so many of them have been permitted to run during the last thirty years or more would not have been possible. It was no doubt the bad banking which had prevailed for a few years immediately preceding the passing of these Bank Acts that led to their enactment. And as Sir Robert Peel attributed the paramount power for good or evil which bankers possessed to their note issues, and not to their deposits, he legislated accordingly. The deposits, however, in his day even, though small in comparison to what they have since become, were notwithstanding, then as now, in exact proportion to their volume, the truly dangerous element in improper hands. In these early days of modest deposits therefore, it will be found that badly managed banks usually came to a standstill long before their whole capital was lost, the bank manager of that period, luckily for the shareholders, being as yet commonly more fool than knave. By the year 1847, however, things were very different. The first of the three great panics which occasioned the suspension of the Bank Act that then occurred, showed that a bank by this time in hands more skilful, or less scrupulous, could be made to go on as if nothing had happened, long after its whole capital had disappeared. The next crisis, of 1867, was, like that of 1847, the outcome of bad banking, only of a character greatly more aggravated, as the banking and other failures which then took place will testify. The worst of these failures were the Western Bank of Scotland, the Liverpool Borough Bank, and the Newcastle District Bank, the liabilities being nine, and five, and three millions respectively. Some of these banks would certainly have succumbed in 1847 to the fate which they had even then long provoked had the Bank of England not come to the rescue. The assistance so rendered, however, being unfortunately unaccompanied by any real change in the management, only made things go on from bad to worse, and the shareholders had thus to suffer far more in the end than if the doors had been closed ten years before. And yet the extent and value of the sound business which these banks severally possessed was really such as to have saved them if there had been, even at this the eleventh hour, that change of management here indicated. But though the managers and directors of these great banks had seemingly in every way from first to last a great deal more to answer for than most others, they were so fortunate notwithstanding as to get off scot-free. Indeed, except in the case of the Royal British Bank and the Leeds Banking Company, that appears to have been at this time the general result. And though no doubt these two comparatively obscure institutions went as far astray in every direction as they possibly could, their more limited sphere of action did not enable them to succeed in accomplishing a tithe of the evils that others did. Still in the case of that Leeds Banking Company it was seen that its manager, in his own particular walk, and considering his opportu nities, had distanced all competitors, small and great; inasmuch as his bank did not stop till all was lost, that is to say, the whole of the deposits, as well as the capital and reserve. The crisis of 1866, which proved fatal to Overend, Gurney and Co., Limited, with its eleven millions of liabilities, Barned and Co., Limited, the Bank of London, the Birmingham Banking Company, and numerous other credit and financial companies, did not, however, any more than its predecessors, bring down any concern that deserved to stand. Overend, Gurney and Co., and Barned and Co. were hopelessly insolvent long before they became limited liability companies, and the numerous and influential body of shareholders who thereupon joined them were therefore speedily doomed to make good all the terrible shortcomings of these long time bankrupt houses. Scores of other private firms similarly situated that might be named have from time to time got others to fill their shoes in like manner and with like results, though in no case so far had the end been so sudden or so dire as in that of Overend. The Limited Liability Act of 1862 may be said in this way to assist the schemer to despoil the good citizen by the hundred or thousand in order to keep, regardless of the cost, certain of the more abandoned of the people's heads above water for a time. If such transfers from a private to a limited company had, however, before completion been subject, in the interest of the public, to some such investigation by way of audit as a department of the Board of Trade might undertake or supervise, the public would have been safe. Some similar audit to this, that shall be made to apply also to all joint-stock banks, is what is wanted, because without it perfect confidence in these or in any other of our various credit institutions is not likely, after all that has happened, to be soon restored. Although by the Companies Act of 1862 the accounts of all limited liability companies, including limited banks, are subject to audit at stated times, practically such audits are found to be quite useless. All audits not independent of both directors and shareholders must ever be so, and it is a well-known fact that multitudes of companies, limited banks included, have from time to time been certified by such audit to be sound and solvent when they were, and to scandalous extent, the very reverse. Without the speedy introduction, therefore, of some better system of audit for checking, even in its incipient stages, the sort of banking that has been seen to prevail in Glasgow and elsewhere, the more responsible classes will hesitate to become shareholders of joint-stock banks, especially of such as are unlimited, and those who are so now will gradually retire so as to be beyond the reach of liabilities so overwhelming as those that are now seen, by the insolvency of the Glasgow Bank, to be possible. Good banks fairly conducted have nothing to fear from any competent audit. It would only be a check upon anything bad or wrong or dangerous where that exists, not upon the business of any of our well-conducted banks, small or great, where it certainly does not exist. Any qualified bank auditor could see almost at a glance as to this, because in his eyes there would be as much difference between good and bad banking as there is between right and wrong, although Mr. Murch and some other bank directors could not see it. Most banks will no doubt, therefore, cordially support such audit as the best and only proper remedy against the distrust with which, as matters stand, they are now everywhere so apt to be regarded. How can it be otherwise seeing that to make good the City of Glasgow Bank's deficiency of six millions, every one of its 1,300 shareholders will be completely ruined. Something, therefore, seems to be now demanded that shall render the repetition of that, or anything approaching it, utterly impossible. Everyone entitled to call himself a banker knows that there is nothing in the legitimate risks of banking to place in jeopardy any considerable portion of the shareholders' paid-up capital; and the manager who does so, therefore, with or without the authority of his directors, is not fit for his post, and should be made to retire. While there are still to be found everywhere in England, Scotland and Ireland bank managers who know their duty and do it, and would scorn to do otherwise, even though directors might approve, it is very pitiable to have to add that that is more than could be truly said of the managers of any of the banks that have failed anywhere in the United Kingdom during the last thirty or forty years. If another failure anything like that of the Glasgow Bank, or say, something as bad or even worse, were to happen and all that is possible if things remain as they are, such a financial crisis might ensue as would be likely to put an end to all banking, good or bad, for a time. There are, be it remembered, many banks in Scotland as well as England, whose liabilities on deposits are much greater than were those of the City of Glasgow Bank, and such a state of things is therefore possible, although it is to be hoped not very probable. If to raise the six millions which the shareholders of the City of Glasgow Bank have to make good, every single shareholder of that bank will be brought to ruin, how would it be, supposing another bank, with perhaps double the amount of deposits, were to go wrong. The share lists of most, if not all, of the other large banks of Scotland are stronger, some of them, no doubt, greatly stronger, that that of the City of Glasgow Bank. And although some of the London jointstock banks may certainly be so regarded also, it is well known that the richer and more influential classes in England do not, nearly to the same extent as in Scotland, become shareholders in joint-stock banks, the Bank |