In 1696, five
pound and ten pound short term bonds were sold to the public. Also
in that year was the first run on the bank. This occurred two days
after clipped money lost currency; people wanted the new recoined
money, but the Mint had not supplied the Bank with sufficient
supplies. Interest instead of cash was given for notes. Cash was
short for months. The Bank's credit was much shaken. It was then
given a monopoly so that its notes would not have competition.
Thereafter, its dividends were good - about 12% per year. Because
of its monopoly, its dividends were about 3% above the current
going rate of interest. About this time, Exchequer Bills, with
interest, were started by the Exchequer and circulated by the Bank
of England. They were frequently endorsed many times by successive
holders.
The Bank simply took over from the goldsmiths its main everyday
business of deposit; running cash note [cashier's note, specie
note, cash note], which was payable on demand and normally did not
bear interest; and drawn note [precursor to the check, but not on
special paper]. The Bank gradually convinced many of its clients
to use its "check" [cheque] paper when drawing. The check paper
was unique to the Bank and embellished with distinctive scroll
work to serve as an obstacle to fraud. Over time the running cash
note tended to be for round sums of at least twenty pounds and
multiples of five pounds.
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