Peel to Rogers (Permanent Under-Secretary)

With reference to your letter of the 19th Ult
transmitting copy of a Bill presented to the Governor of
British Columbia by the Legislative Council of that Colony
entitled "An Ordinance for the regulation of Banks," I
am directed by The Lords Commissioners of Her Majesty's
Treasury to acquaint you for the information of Mr
Secretary Cardwell that My Lords approve of the general
principle of the proposed Ordinance. Their Lordships
however doubt the expediency of the 8th and 9th
Sections—the former giving a limited power to the
Colonial Secretary or other Officer, of inspection of the
books of the Company; and the latter imposing a penalty
in case of refusal to allow such inspection.

It appears to My Lords that the exception made "of
papers securities and documents relating to the current
Accounts of the Customers of the Bank" would defeat the
object in view. The exception is a proper one in itself,
because no Bank could carry on business if the transactions
of the Customers were subject to official supervision; but
on the other hand as the insolvency of Banks generally
arises from the insufficiency of its securities, and
incautious dealings with individuals, a power of inspection
which excludes the examination of Securities would not
only be of no use; but would serve to deceive the public
by giving a false Official guarantee for the sound condition
of a Bank which might in reality be on the brink of insolvency.

My Lords are of opinion that the inspection should
be confined to the examination of the Stock of Coin and
Bullion, power for which is generally given to Local Governments
in Royal Charters for Colonial Banks.

For the rest, no better security can be given to the
Public than is afforded by periodical publication of Assets
and Liabilities, for the truthfulness of which the Managers
of the Banks should be made legally responsible.

My Lords have only further to observe with reference to
the 10th Section that the payment of Notes at the
principal Establishment, as well as at the place of issue, is
generally required, and although there may be difficulty in
enforcing such a Regulation in the case of British Columbia,
My Lords think that there are no reasons for rendering the
contrary practice imperative. They would suggest that
instead of requiring that the notes "shall be made payable
on demand at one place only within the Colony," they should
be made payable at the place of issue only, unless they be
made payable also at the Principal Establishment.