Consols and other securities 172,170 4·1 -------- ----- £754,920 £17·9 ======== ===== This bank’s position might be described in one very short word. In the first place, it has neglected to state the amount of its cash in hand and with bankers at call separately, but has mixed it up with its loans at short notice. The only deduction to be made is that the bank possesses so little legal tender that it deems it prudent not to give the figures in its balance-sheet, but to inform the public that it holds £13·8 of cash in hand, at call and at short notice to each £100 of its public indebtedness. The second entry is equally vague. We are quaintly informed that this unique institution, which owes some millions on demand, is in possession of a certain amount of Consols, but the exact sum, and the price at which they are taken, have been left to our imagination, so the bank may be the proud possessor of either £100 or £1,000 of Consols; and goodness only knows what is meant by “other securities.” The second column of our form, however, shows us that this company held £4·1 of “Consols and other securities” to each £100 it owed to its customers. Then, with a touch of true comedy, the auditors tell us that the balance-sheet, in their opinion, exhibits a true and correct view of the state of the bank’s affairs. One’s very soul goes out to those auditors, and a longing seizes hold of one to pat them on the back and shout bravo! No doubt the statement is true and correct, but how strangely incomplete. Of course there is a serious side to this question. The bank, we can see from the total in our ratio column, held only £17·9 of cash and certain securities in reserve against each £100 it owed to the public. Obviously it is trading on the reputation of its better-prepared rivals, who, should a determined run be made upon it, might feel disposed to save it; but during a crisis, when each company has to take care of itself, such a bank, were its depositors to become nervous, would be compelled to close its doors in a very few hours. Now, would any sane person buy the shares of this bank at a price which returns him about 4½ per cent. on his capital, and incur a liability in excess of the amount of his holding? One would say emphatically not; but it is a remarkable fact that people are to be found who will take this risk with a light heart. Surely they cannot understand the nature of the security they are buying.