Do. -THE PROVISION OF THE CHEQUE CURRENCY
From the present point of view the essential fact is that the banker who supplies cheque currency, unlike the banker who issues notes, records his relations with each party using his currency in the form of an account, which is, or may be, the subject of a bargain between his customer and himself. The banker is immediately and always concerned that the cost of the work done in connexion with any current account should not exceed the net rate of interest on the average balance lodged with him; on the other hand, the customer, if he is a business man, is usually concerned that the interest on this average balance should not be more than a fair price for the work done by the banker in supplying him with the services of the cheque currency. The work done by the banker is considerable. He has to maintain reserves and premises, to examine and collect cheques on other banks paid in by his customers, to examine and pay those drawn on himself, to pass those transactions through an elaborate system of books, to provide a copy of the customer's account in the form of a passbook and to undertake a variety of miscellaneous services too numerous to state. Reducing these costs to some rough-andready measure, he examines his customers' accounts half-yearly or quarterly with a view to imposing his charges. From overdrawn accounts payment for work done is recovered by the imposition of a commission charge ; so, too, with an account whose average balance is insufficiently remunerative; accounts whose balances are adequate escape any charge; those whose balances are large in proportion to the work they involve may sometimes, as a result of a prior agreement, be allowed a small rate of interest. It must be recognized, however, that these are not the only considerations which determine the banker's charges; he is likely to consider the nature of his customer almost as carefully as the nature of the account. These uninteresting details are stated with the sole view of emphasizing the fact that every current account may be the subject of a bargain which, by determining the size of the average balance, the charge of a commission, or the allowance of interest, can ensure that the banker obtains in each case only a reasonable return for his services; in other words, that the cheque currency is supplied on terms which yield only a normal profit to the banker. It is no doubt the case that in
actual practice, owing to imperfect bargaining between banker and customer, the banks often obtain excessive profits from lodgments on current account; but increasing competition is undoubtedly reducing these profits, and consequently bringing the cost of the cheque currency into closer relation with the price at which in effect it is sold.