the world of private banking

LONDON’S FIRSt ‘BIG BANG’? 69
appropriate floor level with, second, the arising net sum (positive or negative)
shown as a percentage of the presumed floor level for the relevant sub-period
(£4m. 1858–66; £6m. 1867–73; and £9m. 1874–83). Some confidence in this
transformation of the original data is given by negative proportional swings in
the calculated series only occurring either immediately after crises (possibly
indicating some initial, panic-induced overshooting of reserve requirements) or
during cyclical slumps when the accumulation of banking assets and liabilities
was adversely affected in the short term.
Clearly evident in figure 4.5 are proportional rises in bankers’ balances
induced by crisis – in first quarter 1858, during 1866 and 1873 and over 1878/9
following the City of Glasgow Bank crash. Also revealed are the proportional rises
in bankers’ balances that went with the economy’s cyclical expansion over the
mid-1860s and the early 1870s, although not during the different, less expansive
monetary environment that appears to have prevailed during the weak upswing
of the early 1880s following the City of Glasgow Bank crash. What is equally
displayed is the far-from-smooth nature of monetary expansion and contraction
throughout the entirety of the so-called ‘Great Victorian Boom’ (which is also
marked out in the time path of 3-month bank bills (figure 4.3)). In these terms, the
period was not one ‘Big Bang’ but a series of explosions, some minor, some major,
with a possible dampening of fluctuations only setting in by the early 1880s, to
suggest the onset of different conditions.
II
A new financial, possibly explosive, factor operative during the mid-Victorian
period was a consequence of the general coming of limited liability, in Acts passed
in 1855 and 1856. The availability of limited liability through the establishment of
limited joint-stock companies by the mere registration of memoranda of association
(each signed by a minimum of seven persons, who however individually needed
only to acquire just one share, on which no capital was required to be subscribed),
greatly changed business organization, at least potentially. However, this new
permissiveness came too late to have any significant general shaping effect upon
the mid-1850s cyclical upswing.
The possibility of establishing limited joint-stock companies was not a totally
radical departure in the case of banking. Promoters had been able to found jointstock
domestic banks, albeit with unlimited liability, since 1826, and by 1843 117
were in existence. However, speculative excesses over the mid-1830s, especially
during the first six months of 1836, had provoked the passage of regulating
legislation – Peel’s Joint Stock Banking Act of 1844. This measure so strictly
controlled further corporate bank formations that only 12 new institutions were