450,000; above that limit every note issued by it has to
be backed by bullion, and is actually backed by gold, though under
the Act one-fifth might be in silver. It was thus anticipated by the
framers of the Act that in future any credit required by industry
could only be granted by an increase in the gold held by the issuing
banks. If the Act had fulfilled the anticipations of the Parliament
which passed it, if English trade had grown to anything like the
extent which it has done since, it could only have done so by the
amassing of a mountain of gold, which would have lain in the vaults of
the Bank of England.

Fortunately, however, the banking community had at its disposal a
weapon of which it was already making considerable use, namely, the
system of issuing credit by means of banking deposits operated on by
cheques. Eight years before Peel's Act was passed two Joint Stock
Banks had been founded in London, although the Bank of England
note-issuing monopoly still made it impossible for any Joint Stock
Bank to issue notes in the London district. It is thus evident that
deposit banking was already well founded as a profitable business when
Peel, and Parliament behind him, thought that they could sufficiently
regulate the country's banking system so long as they controlled the
issue of notes by the Bank of England and other note-issuing banks. It
is perhaps fortunate that Parliament made this mistake, and so enabled
our banking machinery to develop by means of deposit banking, and so
to ignore the hard-and-fast regulations laid upon it by Peel's Act.
This, at least, is what has happened; only in times of acute crisis
have the strict regulations of Peel's Act caused any inconvenience,
and when that inconvenience arose the Act has been suspended by the
granting of a letter of indemnity from the Treasury to the Governor of
the Bank.

Under Peel's Act the present rather anomalous form of the Bank of
England's Weekly Return was also laid down. It shows, as all men know,
two separate statements; one of the Issue Department and the other of
the Banking Department. The Issue Department's statement shows the
notes issued as a liability, and on the assets side Government debt
and other securities (which are, in fact, also Government securities),
amounting to L18,450,000 as allowed by the Act, and a balance of gold.
The Banking Department's statement shows capital, "Rest" or reserve
fund, and deposits, public and other, among the