ABSTRACT
One fact that clearly marks off the Scottish banks from the English banks is that they issue their own bank notes. Traditionally the individual note issues were regarded as an important feature of Scottish banking, responsible for some of its most characteristic elements. This partly reflected the fact that before 1914 bank notes were a much more important medium of exchange in Scotland than in England, the £1 note taking the place occupied by the gold sovereign in the south. Today, while no one would regard the note issues as a major element in Scottish banking, they are nevertheless something more than a picturesque survival of a bygone banking age. For one thing they account for 13 per cent of the total of the Scottish banks’ note and deposit liabilities—a much higher proportion, incidentally, than at any time since Peel’s Bank Acts. But more than this they have effects on the asset structure and reserve practices of the banks from which flow a variety of secondary effects: on the money supply; on the branch system; on the profitability of Scottish banking. None of these effects is of immense importance; but neither, within the Scottish context, are they negligible. To examine them adequately, as well as to convey the factual background to the business of note issuing in Scotland, will occupy two chapters. The present chapter will stick, broadly, to facts: the regulations governing the issues, their practical operation by the banks, and a number of interesting statistical trends will all be examined. In the following chapter we shall analyse the effects of the note issues on those aspects of Scottish banking on which they impinge.
