Blackwood's Edinburgh Magazine, Volume 56, Number 350, December 1844. Various

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      "With respect to Scotland, it is to be remarked, that during the period from 1766 to 1797, when no small notes were by law issuable in England, the portion of the currency in Scotland in which payments under five pounds were made, continued to consist almost entirely of notes of £1 and £1, 1s.; and that no inconvenience is known to have resulted from this difference in the currency of the two countries. This circumstance, amongst others, tends to prove that uniformity, however desirable, is not indispensably necessary. It is also proved, by the evidence and by the documents, that the banks of Scotland, whether chartered or joint-stock companies or private establishments, have for more than a century exhibited a stability which the committee believe to be unexampled in the history of banking; that they supported themselves from 1797 to 1812 without any protection from the restriction by which the Bank of England and that of Ireland were relieved from cash payments; that there was little demand for gold during the late embarrassments in the circulation; and that, in the whole period of their establishment, there are not more than two or three instances of bankruptcy. As, during the whole of this period, a large portion of their issues consisted almost entirely of notes not exceeding £1 or £1, 1s., there is the strongest reason for concluding, that, as far as respects the banks of Scotland, the issue of paper of that description has been found compatible with the highest degree of solidity; and that there is not, therefore, while they are conducted upon their present system, sufficient ground for proposing any alteration, with the view of adding to a solidity which has been so long sufficiently established.

      "This solidity appears to derive a great support from the constant exchange of notes between the different banks, by which they become checks upon each other, and by which any over-issue is subject to immediate observation and correction.

      "There is also one part of the system, which is stated by all the witnesses (in the opinion of the committee very justly stated) to have had the best effects upon the people of Scotland, and particularly upon the middling and poorer classes of society, in producing and encouraging habits of frugality and industry. The practice referred to is that of cash-credits. Any person who applies to a bank for a cash-credit is called upon to produce two or more competent securities, who are jointly bound, and after a full enquiry into the character of the applicant, the nature of his business, and the sufficiency of his securities, he is allowed to open a credit, and to draw upon the bank for the whole of its amount, or for such part as his daily transactions may require. To the credit of this account he pays in such sums as he may not have occasion to use, and interest is charged or credited upon the daily balance, as the case may be. From the facility which these cash-credits give to all the small transactions of the country, and from the opportunities which they afford to persons who begin business with little or no capital but their character, to employ profitably the minutest products of their industry, it cannot be doubted that the most important advantages are derived to the whole community. The advantage to the banks who give those cash-credits arises from the call which they continually produce for the issue of their paper, and from the opportunity which they afford for the profitable employment of part of their deposits. The banks are indeed so sensible that, in order to make this part of their business advantageous and secure, it is necessary that their cash-credits should (as they express it) be frequently operated upon, that they refuse to continue them unless this implied condition be fulfilled. The total amount of their cash-credits is stated by one witness to be five millions, on which the average amount advanced by the banks may be one-third.

      "The manner in which the practice of deposits on receipt is conducted tends to produce the same desirable results. Sums to as low an amount as £10 (and in some instances lower) are taken by the banks from the depositor, who may claim them at demand. He receives an interest, usually about one per cent below the market rate. It is stated that these deposits are, to a great extent, left uncalled for from year to year, and that the depositors are in the habit of adding, at the end of each year, to the interest then accrued, the amount of their yearly savings; that the sums thus gradually accumulated belong chiefly to the labouring and industrious classes of the community; and that, when such accounts are closed, it is generally for the purpose of enabling the depositors either to purchase a house or to engage in business.

      "It is contended by all the persons engaged in banking in Scotland, that the issue of one-pound notes is essential to the continuance both of their cash-credits and of the branch banks established in the poorest and most remote districts. Whether the discontinuance of one-pound notes would necessarily operate to the full extent which they apprehend, in either of these respects, may perhaps admit of doubt; but the apprehensions entertained on this head, by the persons most immediately concerned, might, for a time at least, have nearly the same effect as the actual necessity; and there is strong reason to believe, that if the prohibition of one-pound notes should not ultimately overturn the whole system, it must for a considerable time materially affect it.

      "The directors of the Bank of England, who have been examined before the committee, have given it as their opinion, that a circulation of notes of £1 in Scotland or in Ireland would not produce any effects injurious to the metallic circulation of England, provided such notes be respectively confined within the boundary of their own country.

      "Notwithstanding the opinions which have been here detailed, the committee are, on the whole, so deeply impressed with the importance of a metallic circulation below £5 in England, not only for the benefit of England, but likewise for that of all the other parts of the empire, that if they were reduced to make an option between the establishment of such a metallic circulation in Scotland, or the abandonment of it in England, they would recommend the prohibition of small notes in Scotland. But they entertain a reasonable expectation, that legislative measures may be devised which will be effectual in preventing the introduction of Scotch paper into England; and unless such measures should in practice prove ineffectual, or unless some new circumstance should arise to derange the operations of the existing system in Scotland itself, or materially to affect the relations of trade and intercourse between Scotland and England, they are not disposed to recommend that the existing system of banking and currency in Scotland should be disturbed."