Bankers’ balances form, as we shall see, the ultimate reserve on which our banking system rests. Hence the subject is one of great importance. Every “clearing” banker keeps a balance for the purpose of settling the difference which may arise with each day’s settlement at the Clearing House. In addition to this, they, as well as other London and country banks, maintain a large balance at the Bank of England for the purpose of meeting any sudden or extraordinary demands which may be made on them. This is done in place of keeping cash in their tills for the purpose, though of course a sufficient sum in ready cash is kept in hand to meet the ordinary daily requirements. In the case of those country banks which do not keep an account at the Bank of England, the custom is adopted of keeping a reserve balance with a London agent. This reserve swells the amount under the control of the latter, and consequently of the balance he deems it prudent to maintain with the Bank of England. Thus our system is so knitted together that a demand for cash, in whatever part of the country arising, has a prompt effect, to a less or greater degree, on the bankers’ balances at the Bank of England. From this can be seen the great importance of bankers’ balances, and the great responsibility thrown on the Bank of England of keeping itself strong enough to meet demands from all quarters. The system is certainly a peculiar one, that results in all banks keeping a large part of their surplus funds with another bank, and that not a State bank, though the banker of the State. It is an interesting fact that on many occasions since the passing of the Act in 1844 the “reserve,” or actual cash held by the Bank of England, has been less than the bankers’ balances alone. This custom of the reserves being held by a central bank has been, and is, the subject of much criticism, principally on the ground that a “one reserve system” is not a sufficient guard against disaster in time of crisis, and that it would be a much safer method were each bank to keep its own special reserve in cash against sudden need. The discussion of the subject during the last few years, combined with other circumstances, has led to some increase in the cash held by bankers in general, and several banks are understood to have commenced keeping a special reserve in cash, on a small scale. The whole subject is a very intricate one, and one that cannot be more than glanced at in the course of this small book.