Colonial Despatches

With reference to your letter of the 19th Ult transmitting copy of a Bill presented to the Governor of British Columbia by the Legislative Council of that Colony entitled "An Ordinance for the regulation of Banks," I am directed by The Lords Commissioners of Her Majesty's Treasury to acquaint you for the information of Mr Secretary Cardwell that My Lords approve of the general principle of the proposed Ordinance.Their Their Lordships however doubt the expediency of the 8th and 9th Sections—the former giving a limited power to the Colonial Secretary or other Officer, of inspection of the books of the Company; and the latter imposing a penalty in case of refusal to allow such inspection.

It appears to My Lords that the exception made "of papers securities and documents relating to the current Accounts of the Customers of the Bank" would defeat the object in view. The exception is a proper one in itself, because no Bank could carry on business if the transactions of the Customers were subject to official supervision; but on the other hand as the insolvency of Banks generally arises from the insufficiency of its securities, and incautious dealings with individuals, a power of inspection which excludes the examination of Securities would not only be of no use; but would serve to deceive the public by giving a false Official guarantee for the sound condition of a Bank which might in reality be on the brink of insolvency.

My Lords are of opinion that the inspection should be confined to theexamination examination of the Stock of Coin and Bullion, power for which is generally given to Local Governments in Royal Charters for Colonial Banks.

For the rest, no better security can be given to the Public than is afforded by periodical publication of Assets and Liabilities, for the truthfulness of which the Managers of the Banks should be made legally responsible.

My Lords have only further to observe with reference to the 10th Section that the payment of Notes at the principal Establishment, as well as at the place of issue, is generally required, and although there may be difficulty in enforcingsuch such a Regulation in the case of British Columbia, My Lords think that there are no reasons for rendering the contrary practice imperative. They would suggest that instead of requiring that the notes "shall be made payable on demand at one place only within the Colony," they should be made payable at the place of issue only, unless they be made payable also at the Principal Establishment.