BANKS AND THEIR
CUSTOMERS

BANKS
AND
THEIR CUSTOMERS

A PRACTICAL GUIDE FOR ALL WHO KEEP BANKING ACCOUNTS FROM THE CUSTOMERS’ POINT OF VIEW

BY
HENRY WARREN

AN ENTIRELY NEW AND ENLARGED EDITION
(THE EIGHTH)

With Introduction by a London Banker

Robert Sutton logo

LONDON

ROBERT SUTTON

43, THE EXCHANGE, SOUTHWARK STREET, S.E.

1908

Banks and their Customers

(SEVENTH EDITION)

By HENRY WARREN

The Pall Mall Gazette says:—

“Caustic and interesting.”

The Financial News says:—

“Contains a vast amount of useful information intelligently discussed. To educate the public on a technical subject calls for more than ordinary knowledge. It needs what Mr. Warren undoubtedly possesses, and that is a sound, practical understanding, and a thorough common-sense way of setting forth his knowledge in simple form. This our author succeeds admirably in doing.”

The Scotsman says:—

“Cannot be too strongly recommended.”

The Draper’s Record says:—

“Masterly.”

The Birmingham Daily Gazette says:—

“Invaluable.”

Investor’s Review says:—

“Much useful and accurate information about the habits of bankers in dealing with their customers. Especially we commend the chapter ‘How to Check Bankers’ Charges,’ which are often curiously arbitrary and capricious.”

The City Press says:—

“A caustic and forcible pen.”

The Bookman says:—

“The worth of the expert is proved. Mr. Warren on banking subjects enjoys our confidence and many editions.”

And The Glasgow Herald says:—

“Mr. Warren’s caustic criticisms of bankers and their peculiarities have been widely appreciated.”

INTRODUCTION

BY A LONDON BANKER

I confess that when a publisher asked me to write an introduction to Mr. Warren’s little book I experienced some surprise; because, in the past, he handled bankers rather roughly. Perhaps the audacity of the request appealed to me. At any rate, I consented to read the proof-sheets, and, finally, perhaps a trifle reluctantly, to stand sponsor for the work in a qualified sense. I do not agree with all he says, by any means.

Here is the eighth edition of a well-written, interesting guide for the customer, who has obviously found it useful. The book would not have obtained a market unless it were wanted. This must be granted. And I think that it was wanted even from the point of view of a banker.

The author in a short chapter tells us how and why the joint-stock bank came to dwell among us. Then he plunges into his subject—the Guide for the Customer. The chapter on the cheque and its various crossings is admirable. I only wish that the clients of my own bank would read every word of it, and save the time of our cashiers.

He who keeps his account in credit is told much that he ought to know; the depositor is shown how to check his interest; the borrower how to negotiate a loan or advance; and everybody is told the manner in which he may easily check the charges debited in his pass-book. Speaking for my own bank, I do not care who makes use of this clearly-put information. Let our clients obtain the book by all means. We shall then be spared the trouble of answering a host of stupid questions during the busiest parts of the year.

Touching upon “unclaimed balances,” I am of the opinion that the public can be very well trusted to look after its own interests; and after glancing through my own ledgers I think that these unclaimed sums would not amount, in the aggregate, to a really large figure. Most of these dormant balances are insignificant.

As to the pay of bank-men, I do not feel justified in expressing an opinion, beyond asserting that the wants of a bank-clerk are small. My advice to the customer is—“read the book.”

“CITY MANAGER.”

CONTENTS

CHAP. |  | PAGE
| Preface | v
I | Banking Evolution | 1
II | On the Choice of a Banker | 13
III | The Cheque and its Various Crossings | 19
IV | Credit-Account Customers | 38
V | Deposit-Receipt Customers | 45
VI | The Bank Rate in Relation to Bankers’ Charges | 61
VII | Loans and Advances in London | 68
VIII | Overdrafts in the Country | 75
IX | How to Check Bankers’ Charges | 89
X | Bills, Coupons, Foreign Drafts, etc. | 102
XI | Unclaimed Balances | 110
XII | Bank Shares | 117
XIII | The Pay of Bank-Clerks | 128

BANKS AND THEIR CUSTOMERS

CHAPTER I
BANKING EVOLUTION

We owe a great deal to the financial instinct of the Jew, who, having no country of his own, has developed an acquisitive mania for the goods of those people among whom he dwells, thanks to a progressive civilization of which he was the pioneer, in comparative safety; and, by an irony of fate, we are also indebted to him for a religion, which his more subtle mind rejects; yet, stranger still, it is a civilization based on commerce that keeps the whole world moderately sane, and tends to at least hold in check the latent savagery of the blind enthusiast who would still, but for her intervention, indulge in a bloody crusade against all who hold opposite opinions. A true civilization spells toleration; and though a creditor can scarcely hope to be popular with his debtors, he is at least entitled to the protection of the law of the land in which he lives.

The Jews, who are supposed to have come over to England about the time of the Conquest, gradually possessed themselves of the greater part of the coin of the country; and the early English kings constantly resorted to them for loans. As it was thought unchristian to charge usury or interest, the business of a money-lender was consequently held in abhorrence, with the result that the Jews monopolized the trade, and acquired immense fortunes by their dealings. Their wealth naturally excited the intense cupidity of their Christian neighbours, who, making a pretext of their so-called abominations, raided from time to time the Jewish quarters of the various towns, in the hopes of annexing the fabulous treasure in Jewry.

Under the ban of the Church, and detested by the people, the popular feeling against the usurers became so embittered that Edward I, under whose protection they lived, after having in vain attempted to persuade the Jews to accept Christianity, was compelled to banish them from England; and from 1290 to the time of the Commonwealth (a period of about 360 years) the prohibition remained in force. But the money-lender is a necessary evil; and after the departure of the Jews certain Italian merchants, known as Lombards, who had previously settled in England, immediately filled their place; and Lombard Street became as notorious for usury as had been the Jewry.

The Jew may be described as a money-lender, and the Lombard as a merchant-banker, though neither was a banker as the word is now understood. Both, however, lent money at high rates of interest. A banker, in the English sense of the word, is a middleman who borrows from one set of persons at a rate in order to lend to another set at a greater rate, the difference between the two rates being his margin of profit; and banking in this sense was not practised in England until quite the end of the first Charles’s reign, when certain goldsmiths, who were originally dealers in plate and in bullion, became private bankers. The first run upon them was made in 1667, when a Dutch fleet sailed up the Medway; and, later, in 1672 Charles II closed the Exchequer, refusing to pay the bankers either their principal or interest, with the result that failures were numerous.

We are now approaching a new banking era; and in 1694 the Bank of England, which was the first joint-stock bank established in the three kingdoms, was incorporated. The private bankers, instantly recognizing in her a formidable rival, were actively hostile; but all to no purpose; and in a very little while they grouped themselves round the Old Lady, who reduced their rates and kept them in order. Hoares and Childs were in being before the Bank; but the goldsmiths, long before the new movement was a brilliant success, had few direct descendants in London; and the majority of those private bankers who opposed the Act of 1833 belonged to another generation. At its inception the Bank did not enjoy a monopoly; but upon the renewal of its charter in 1708 it was granted the monopoly of joint-stock banking in England, while the partners in a private bank could not exceed six in number. This number was increased to ten in 1857.

Country banking developed slowly in England; and it was not until towards the close of the eighteenth century that private firms began to multiply in the provinces; but the Bank of England’s iniquitous monopoly kept them small and weak, and between 1792 and 1820 over one thousand private bankers came to grief, while the crisis of 1825 further thinned their ranks and almost emptied the vaults of the Bank of England, when it dawned upon the Government that the state of the money-market was distinctly rotten, and that it would remain so until the Bank’s monopoly disappeared. The result was the usual committee and the usual compromise.

The Act of 1826 allowed joint-stock banks of unlimited liability to be formed in England and to carry on business at a greater distance than sixty-five miles from London; but such institutions could not open an office in London. Neither could they issue notes at a place within sixty-five miles thereof, nor draw any bills on London for a less amount than £50. In 1833, however, they were allowed to make their bills and notes for less than £50 payable on demand at their London agents. The demand for these establishments was not at first considerable; and very few were formed until after five or six years of the passing of this Act; but in 1830 the railway movement began in earnest, and from 1833 to 1836 joint-stock banks were established throughout the country in considerable numbers. This sudden boom in banking companies could only have one result; and failures became so numerous that Sir Robert Peel, in 1844, passed his Joint-Stock Banking Act, which, being found worse than the disease itself, was repealed in 1857.

London, we have seen, contained only one banking corporation and numerous private bankers, who, forming a monopoly, were practically rich men’s banks; for they would only accept an account provided the balance was not reduced below a certain sum, while from 1813 to 1833 some twenty of them suspended payment; so stability was not one of their distinguishing characteristics. It soon became apparent that the Bank of England and the private bankers were quite unable to minister to the growing trade of the capital; and in 1833 joint-stock banks were allowed to be formed in London, but upon the distinct understanding that they were to be banks of deposit and not banks of issue. In other words, they could not issue their own notes, so were compelled to use those of the Bank of England. The first London joint-stock bank was the London and Westminster, whose prospectus was issued in 1833; but the shares were subscribed slowly, and the bank did not open its doors to the public until the March of the year following. Then came the London Joint-Stock Bank in 1836, and the Union Bank in 1839.

It is usual, in this little island, to hark back to the good old days, and then, with a sigh, to regret that the old order of things no longer exists; yet it must be confessed that the London private bankers were of no service whatsoever to the small man of business, whom they simply ignored. The joint-stock banks however, ministered to the wants of the small trader; and, by diving into the heart of the masses, proved that a large number of small balances are even more desirable than a small number of large accounts, whilst in the end they practically drove the private banker, handicapped as he was by the law of the land, out of the market, or, at least, reduced him to impotency. But the London joint-stock banks, in those early days, were not without their grievances; and both the private bankers and the Bank of England seized upon every pretext in order to harass them. Being merely common law partnerships, they did not come under the 1826 Act; and until the Act of 1844 they were not relieved from certain restrictions which need not be discussed here.

But the year of banking reform was, of course, 1844, when, fortunately for the trade of the country, the Bank of England was stripped of all its privileges except that relating to the issuing of notes. The Bank Charter Act of 1844 gave the Bank of England the monopoly of issuing notes in London and within sixty-five miles of it. No new bank of issue was to be formed, while a provincial bank, upon opening in London, forfeited its issue. The cheque, however, soon became more powerful than the note; and the larger provincial banking companies gladly made the sacrifice in order to establish themselves in the capital. The next step forward was when the joint-stock banks broke up the cabal of private bankers and were admitted to the Clearing House in 1854; though it is a little remarkable that, having posed as martyrs and vigorously denounced their oppressors, they should now take upon themselves to exclude certain companies which have as good a right as they to enter the sacred portals of the House; but the mote in one’s neighbour’s eye is always so much more apparent than the beam in one’s own.

By the Act of 1858 a joint-stock bank was allowed to limit the liability of its shareholders; but the Act, was not made compulsory; and though all the companies formed subsequently registered under this Act the members of those in existence prior thereto were liable for the debts of the company in which they held shares to their last shilling. Then came the failures of the West of England Bank and the City of Glasgow Bank in 1878; and shareholders in banks of unlimited liability, with the fate of the members of these two institutions before their eyes, began to weigh their responsibilities, with the result that many sold out at panic prices in haste and regretted at leisure. The more prudent, though they held their shares, began an agitation for reform, which gave birth to the Act of 1879. We need not discuss this Act; though it may just be said that every joint-stock bank in the three kingdoms which is not limited by its charter is now a bank of limited liability under the Companies Acts.

At this juncture, perhaps, a few words may be said with reference to the Bank of England, which, with a contempt for evidence that is truly British, the public is convinced cannot suspend payment; yet the Bank’s career has been decidedly checkered; and even after the passing of the Act of 1844 the Old Lady was only saved by the intervention of the Government in 1847, 1857 and 1866, while during the Baring crisis of 1890 she was compelled to borrow from the Bank of France; so, evidently, her system is not by any means a perfect one; but one does not expect perfection in finance. The perfect financial machine and the perfect man are alike impossibilities. As to the latter, did he exist, he would seem positively inhuman.

It need not be said that this sketch of the English banking movement is necessarily imperfect, if only because of the small space into which it is condensed; but the average reader certainly would not trouble to digest two hundred pages on the subject of banking evolution; so possibly it may prove acceptable in this form.

We have seen that the London private banker was a rich man’s banker; but it was otherwise with the country private banker, who was often of great assistance to the small trader, at whom the joint-stock banks will not now look unless he approaches them with his pockets stuffed with securities when anxious to overdraw his account. The maxim of the companies is: “Let the customers take all risks.” And if this rule is broken, then the case is an exceptional one. We need not discuss here whether or not this policy be essential to modern banking; but it is quite evident that the small man of business has lost a good friend in the old-fashioned country banker, whose place has not been taken by that person of peculiar views and training—the bank-manager or clerk-in-charge, whose urbanity must be more than painful to those would-be borrowers without security who ask for bread and are politely offered—a stone.

What we have to discover is why the country banker has been practically forced out of the market by the joint-stock system; and the reason is not difficult to explain. In the first place we know that, since 1857, the partners in a private bank have been limited to ten; consequently, however anxious a banker may have been to extend his system of branches and develop his business, the difficulty of insufficient capital presented itself; whereas his rivals, who can appeal to thousands of small investors, could, once having established their credit, easily obtain as much capital as they required. The private banker, therefore, ministered to the wants of a certain town, district, or county; but the joint-stock banks spread their tentacles throughout the length and breadth of England; and, like an octopus, eventually strangled him in a manner which will be explained.

In London and throughout the provinces there were numerous small firms of private bankers—small, that is to say, when contrasted with their joint-stock competitors. The banks in a manufacturing district or in a busy city would, especially during periods of active trade and rising prices, be called upon to advance large sums to their customers; but if a banker collected his deposits from a few branches within the district whence the demand arose, he would soon find himself unable to meet the requirements of his customers. But the joint-stock banks, which have branches in many counties, can pour their deposits into those centres where demand is active; and it is obvious that a small private banker cannot hope to compete successfully against the superior organization of the companies. With the private banker it soon became a question of restricting advances; and his customers, finding that they could not obtain all the accommodation they required, naturally applied to his rivals, who, if tangible securities were forthcoming, met their demands with ease.

The London and provincial banking companies, which farm both the agricultural and the manufacturing districts, by pouring their surplus capital into the London money-market, speedily obtained all the best business; and those private bankers who did not either amalgamate with, or adopt the system of, their successful rivals found themselves hopelessly out-distanced. Hence the triumph of joint-stock banking and the advent of the director and his humble, most obedient servant, the clerk-in-charge, who “manages” a country branch, but whose power, in reality, is of the smallest, all the applications for advances above a certain sum having to be submitted to the chief office, while he himself is powerless to act until he receives his instructions from headquarters.

This form of competition would be felt less in an agricultural county where the deposits a banker collects are greatly in excess of the demand made upon him for advances; but even there the private banker’s luck has deserted him; for the agricultural depression thinned the ranks of his best customers, and, of course, left him a legacy of bad debts. We should, therefore, expect to see the private bankers disappear from the great towns first, and, finally, from the agricultural centres. The law of the land has kept them small; and the tentacles of the joint-stock companies have almost exterminated a class of men who enjoyed the friendship and confidence of their clients to an extent that a clerk-in-charge upon a salary of from £200 to £500 a year can never even approach.

Though we live in an age of great machines, which, for reasons that will be explained later, can declare huge dividends, every now and again we hear of the inception of a new banking company. The new arrival, perhaps, waxes more than eloquent upon the large dividends paid by the existing companies, and then dwells enthusiastically upon the immense profits it hopes to earn; but can a small company ever establish its credit in face of the network of branches which now cover the land? The person who applies for its shares must certainly be of a most sanguine disposition.

It is the powers that be that always excite the keenest interest, doubtless because of the possibility that a knowledge of their habits and ways may prove of pecuniary benefit to the student; and this object has been kept well in view throughout the following chapters.

CHAPTER II
ON THE CHOICE OF A BANKER

There is an opinion which is very prevalent to the effect that, provided one’s account be an overdrawn one, it does not matter where it is kept; and, of course, if it were possible to find a nice, philanthropic banker who would allow one a big overdraft without even hinting at security, there would be much truth in the assertion; but in view of the existing relations between banker and client, the idea is both unfortunate and fallacious. We have seen how the large joint-stock banks, by developing their system of branches, literally smothered the private banker; and the smaller companies, which possess but few branches, are now being forced to amalgamate with the larger for the same reason. If, therefore, a man has a large advance from a small provincial banking company, it may occur that, just when he is anxious to discount more bills or to increase his overdraft, the bank will be unable to accommodate him; and it therefore follows that a large bank, whose resources are abundant, is as essential to the really great borrower as it is safer for the depositor.

A person whose account is in credit or who leaves money with a banker at interest naturally attaches the greater importance to the safety of his balance or principal; and, secondly, he endeavours to obtain as high a rate as possible; but he would not be so foolish as to sacrifice security to a high rate of interest; though, where the banks are equally well managed, he would select the one that offered him the higher rate or the cheaper facilities. Conversely, the person whose account is overdrawn would, other things being equal, choose the bank that offered to work his account the cheapest.

Now, a banker’s liabilities to the public are due on demand, and at short notice; and they would consist principally of “deposit and current accounts, and notes and drafts in circulation.” These, of course, will be found on the left-hand side of the balance-sheet. As the banker’s deposits may be demanded from him at any unlucky moment, it follows that he is compelled to hold a certain sum of cash (legal tender) in reserve; and the larger that sum, the safer are the customers’ balances. A person, therefore, who is looking for a safe banker, should see that the firm or company which he selects possesses at least from £12 to £18 in coin, bank-notes and cash with the Bank of England against each £100 it owes to the public. He will find the public liabilities on the left-hand side of the balance-sheet and the cash in hand on the right; and a proportion sum will soon give him his answer.

But a really strong, well-managed bank only advances to, and discounts bills of exchange for, its customers to such an extent as will enable it to hold from £45 to £50 in cash, money at call and investments to every £100 of its public indebtedness. Cash, of course, is its vital asset; and after cash comes Consols and other British Government securities in which, except at the very height of a panic, there is always a market. These are a bank’s so-called liquid assets; and it may just be added that when a bank mixes its cash and money at call and notice together, and an accommodating auditor declares that such a medley “exhibits a true and correct view of the state of the company’s affairs,” the bank is probably so weak in actual cash as to deem it wise not to publish the figures.

Money at call and short notice would represent advances to the bill-brokers and to the Stock Exchange; and though such loans could doubtless be easily called in during normal times, they would be difficult to collect when the money-market was in a turmoil. A greater part of the advances made to the Stock Exchange, though classed as liquid assets, are in reality loans in disguise; for if the banks were to suddenly ask the stockbrokers to redeem their pledged stocks and shares, those gentlemen would be hammered in clusters; and the shares, when flung upon the market to be sold at what they would fetch, would rapidly depreciate. It would certainly be interesting were the banks to specify the amount of their so-called short loans to the Stock Exchange; and, with a lively recollection of 1890, it is to be hoped that they are kept within bounds, as, upon that occasion, this class of advance hung like a mill-stone round their necks. Such liquid assets, it is to be feared, are more likely to sink the good ship than to save her in a storm.

Having ascertained the ratio per cent. of a bank’s cash in hand to its public liabilities, and glanced at the call-money, the list of investments should be carefully criticized. When a banking company describes its list thus: “Consols and other securities,” it may be taken for granted that its holding of Consols is a small one. This description, in fact, is taken from the balance-sheet of an English provincial banking company, which holds about £19 in cash, call-money and securities to each £100 it owes to its customers; and yet it can find people who are foolish enough to do business with it. Considered as a financial institution, it is practically bankrupt; yet its deposits amount to over £4,000,000. Fortunately, however, this institution is one of the few exceptions which are best avoided. Another very weak joint-stock bank describes its investments as consisting of “English Government and railway stocks.” Its cash and call-money are consolidated into one total; but, more remarkable still, an auditor actually has the impudence to declare that the balance-sheet “exhibits a true and correct view of the company’s affairs,” when, of course, it is not worth the paper upon which it is printed.

A well-managed bank, as a rule, states its holding of Consols distinctly, and, sometimes, the figures at which they have been taken. If it do not, then the value of its British Government securities is given separately. Next, it usually specifies its India Government Stock, and so on; and, finally, “other securities,” which, assumably, are of a non-liquid nature, are given last because they are of the least value from a banker’s point of view. Naturally, if a bank possess a gilt-edged list, it advertises the fact in its balance-sheet; and those companies which indulge in ambiguity are, in nine cases out of ten, the banks to avoid. For instance, you will not find any evasions of this nature in the balance-sheets of such powerful companies as the London and County Bank, the Union and Smiths, the London City and Midland, and other really first-rate institutions, for the simple reason that there is no occasion for them. As a rule, the clearer the balance-sheet, the stronger is the bank; and the sinners, consequently, are the smaller banks, which, situated in a manufacturing centre, are unable to collect sufficient working resources to finance their customers. Their ultimate fate, it need not be said, is amalgamation with a more powerful rival.

When choosing a banker, therefore, one should first ascertain that he has an abundant reserve of cash in hand, and, secondly, that his so-called liquid assets (his cash, call-money and securities) amount to from £45 to £50 against each £100 to which he is indebted to the public. And as to those private bankers who do not issue a balance-sheet, they are, in the first place, guilty of the sin of omission; and, in these days, when faith is not the predominant note, there seems but little inducement to buy a pig in a poke when a large banker’s balance-sheet may be had for the asking.

CHAPTER III
THE CHEQUE AND ITS VARIOUS CROSSINGS

A cheque is often described as a bill of exchange, drawn by a customer on his banker, for a sum certain in money, payable on demand. In these days, when the mere babe produces his cheque-book on the slightest provocation, it seems unnecessary to describe how a cheque should be drawn; though it may just be added that it must bear a stamp of one penny, and that the stamp may be either impressed or adhesive. A customer, therefore, can draw a cheque on his banker upon a sheet of notepaper; but he would be well advised, except under exceptional circumstances, to use the forms supplied to him.

Order or Bearer.

A cheque is payable either to “order” or to “bearer”; and, if the latter word be used, then it does not require indorsing, while should neither word be upon the document, the cheque is held to be an “order” one. Either the person to whom it is payable or the drawer may change a cheque from bearer to order; and this he would do by running his pen through the former word; but the drawer alone can alter an order cheque by writing the word “bearer” in full and initialling the alteration. If the cheque be signed by more than one drawer, then all should add their initials to any correction it may be desirable to make.

Date of a Cheque.

Any person who receives an undated cheque is entitled to fill in what he believes to be the correct date, and need not trouble to return it to the drawer for that purpose. He cannot, of course, make any alteration in the date, but should, in the event of a mistake on the drawer’s part, return it to him for correction, when he (the drawer) would make the desired alteration and write his initials against it. It is, perhaps, as well to remember that a certain class of debtors, who may be described as either “hard up” or “shady,” have their little peculiarities; and one of them is to post-date their cheques when they know that there is not sufficient money at the bank to meet them. Their object, of course, is to gain time; and should a payee, upon receiving such a cheque, have cause to think that he is dealing with one of these gentlemen, he might pay in the cheque to his own banker for collection, and write pretty plainly to the drawer, requesting him to call at his banker’s and put the cheque in order. Though a cheque be either post-dated, that is to say, dated so that it falls due after the day upon which it is drawn, or dated on a Sunday, the document is not invalidated thereby.

A Stale or Out-of-Date Cheque.

Most bankers would probably decline to pay a cheque which had been outstanding more than six months. The drawer, however, does not cease to be liable upon the instrument until six years after the date thereupon; though he may claim damages against the payee if he can prove that he has suffered loss through his delay.

Crossed Cheques.

Though this practice originated in the United Kingdom, the French banks have now adopted the idea, which is as simple as it is undoubtedly useful and protective to the customer. A cheque may be crossed either generally or specially—specially, that is to say, to some bank or to the account of an individual who keeps an account with a banker.

If a customer draw two parallel lines across the face of a cheque, thus, / /, he has instructed his banker not to give cash in exchange for it to the payee across his counter. It follows that a cheque so marked must be passed through a banking account. The words “& Co.” are sometimes written between the lines; but this addition is almost meaningless, the simple crossing being all that is required.

A person who draws two parallel lines across his cheque, gives the following instructions to his banker: “Do not pay cash over your counter in exchange for this cheque, which must reach you through a banker, and be paid to him alone.”

When, therefore, you wish a person to whom your cheque is made payable to go to your banker’s and draw the money, you will be careful not to cross it. Practice, somehow, always seems at war with theory, and it is not by any means an unusual occurrence for a lady, after having deliberately told her banker not to pay cash for her cheque to the presenter, to indignantly inquire why he did not disobey her behest and do so. A prudent teller seldom descends to either argument or explanation, but calmly accepts such reproof as one of the amenities of his calling, and resigns himself philosophically to the inevitable.

Not Negotiable Cheques.

This description is somewhat misleading, for a cheque crossed /not negotiable/ is in reality negotiable, though not so fully as is the one that has been discussed in the foregoing division. The distinction, however, is not difficult to grasp. Take a cheque with two parallel lines across the face simply. Now, if such a document be lost, and find its way into dishonest hands, a third party, who gives value in exchange for it, provided he have no guilty knowledge, has a good title against all the world, and can compel the drawer to pay him the sum for which it is made out.

For instance, A draws a cheque for £20 payable to B, and crosses it /& Co/. B, the payee, after having written his name on the back of the cheque, loses it. C picks it up and passes it on to D, who gives him cash or goods in exchange for it. As B has indorsed the cheque he will have to bear the loss, even though he has got A, the drawer, to stop payment of it at his banker’s.

But had the words “not negotiable” been added, D could not have enforced his claim, although he was a bonâ-fide holder for value. A “not negotiable” cheque warns any holder for value thus:—

“You must, if you part with either cash or goods in exchange for this document, be prepared to take all risks upon your own shoulders. The crossing hereon gives you due notice that you must act upon your own responsibility, and the law, therefore, affords you no protection.”

A business man cannot be too careful in dealing with a cheque thus marked; and unless he be well acquainted with the holder, he should decline to part with either cash or goods in exchange for it. One should never, even if one know that the drawer is a man of means, and that the signature upon the cheque is genuine, give value for it to a stranger, as there is always the danger of one’s having to make good the loss of any prior holder, who may have been defrauded, whilst if the payee cannot enforce his claim against the drawer, then a holder for value cannot.

A “not negotiable” cheque, in short, is analogous to an over-due bill. Any person who may deal with a a bill after its maturity does so upon the understanding, or, better, supposition, that he is acquainted with any flaw there may be in the title. He may not know of any; but the law holds that he does. It is precisely the same with a “not negotiable” cheque.

Cheques, which are crossed in the manner already described, are said to be crossed generally.

Cheques Crossed Specially.

A cheque is said to be crossed specially when one writes across the face of it, say:—

“A/C John Smith,
Provident Bank of London.”

One may name, in the crossing, any particular bank, and the banker upon whom the cheque is drawn will take care that it comes through the channel indicated thereupon. In the above illustration, for instance, your banker will see that the cheque has the name of the “Provident Bank of London” stamped upon it; and should he not find it there, then he would decline to pay the document.

Either the payee or the holder of an uncrossed cheque may cross it generally or specially; and if it be already crossed generally, then either can cross it specially, or add the words “not negotiable.”

How to Cancel a Crossing.

The drawer alone can do this by writing upon the cheque the words “pay cash,” and signing his name beneath them in full.

How to Indorse or Back a Cheque.

For all practical purposes one cannot do better than sign one’s name upon the back of a cheque exactly as the drawer has written it upon the face, with, of course, the omission of any courtesy title, such as Miss, Mr. or Esquire, which are merely there as a mark of civilization and progress. If one’s name be spelt incorrectly, then one should back the cheque just as it is drawn, and write one’s correct name underneath the misspelt signature. Further, do not bully the cashier if he make this request of you, for to do so is the sign of a weak mind.

A cheque payable to John Smith, Esq., or to Mr. John Smith, should be indorsed:—

“John Smith.”

Doctor John Smith may sign “J. Smith, M.D.”; and Colonel John Smith, “J. Smith, Colonel.” These embellishments, however, are as unnecessary as a flourish would be on the final h of Smith, and, in a busy age, the sarcastic person, like the law, regards them as superfluous. A Miss Mary Smith, who has married a Mr. John Brown, would indorse a cheque made payable to her in her maiden name:—

“Mary Brown, née Smith.”

If the cheque be made out to Mrs. John Brown, then she signs:—

“Mary Brown, wife of John Brown,”

or

“Mary Brown (Mrs. John Brown)” in brackets.

Certain ladies of a masterful temperament appear to entertain a strong objection to signing themselves “the wife of” such-and-such an individual, as though the designation smacks of an inferiority of which they are not conscious; and such susceptibilities may at least be soothed by placing the opprobrious term within brackets.

A cheque payable to Mrs. Brown or bearer would not, of course, require her name upon the back. But if it were to order, then she would indorse it either M. Brown or Mary Brown. When the drawer omits one’s initials, one should write one’s usual signature upon the back of the cheque; and though it is not necessary to sign christian names in full, even when they are so written upon the document, the capital letters must, of course, agree with those upon the face. A cheque drawn in favour of Messrs. Robinson is obviously payable to two or more persons of that name, so it may be indorsed: “A. & C. Robinson,” “Robinson & Son,” “Robinson Brothers,” or “Robinsons.” “Robinson and Nephew” would not, however, meet the case, for it by no means follows that the nephew is a Robinson. It is equally as probable that he may be a Smith or a Jones—or a somebody else. In practice, provided the cheque be for a small amount, the paying banker is seldom squeamish, but when a large sum is in question he naturally takes care that he is upon the safe side, for the good man is very human. Where a cheque is payable to two or more persons, who are not partners, then all should indorse.

A payee who is unable to write must make his mark or cross (the trade-mark of the illiterate) in the presence of a witness, who attests it thus:—

his
George  X  Brown.
mark

Witness:
Robert White,
55, High Street,
Birmingham.

When the payee (the person to whom a cheque is payable) writes his name upon the back of an “order” cheque the document is said to be indorsed in blank, and becomes in effect payable to bearer. He can, however, make it payable to another person by writing above his signature: “Pay Thomas Brown or order.” Thomas Brown must then indorse the cheque. Further, any holder may write this request above the indorser’s signature, thereby converting an indorsement in blank into a special indorsement.

A restrictive indorsement gives the indorsee no power to transfer his rights. Hence a cheque indorsed to “John Smith only” prevents further negotiation of the instrument. Where a cheque is payable to, say, John Smith for R. Jones, the payee simply has to write his own name on the back.

Should the name of a fictitious or non-existing person be inserted as payee in an order cheque, the document may be treated as payable to bearer. Cheques drawn to “cash,” “house,” etc., are so treated. It is usual, however, for the drawer to indorse them, just as he would a cheque payable to “self or order.”

Any executor or administrator can indorse a cheque made payable to a deceased person, but all trustees must sign. In practice, a banker usually guarantees or confirms these indorsements.

Finally it may be added that it is not illegal to indorse a cheque in pencil, though a banker would probably decline to honour it on the plea that it becomes fainter as time progresses. Again, too, an indorsement may be made on the face as well as upon the back of a cheque, but the customer, unless he be of a peculiarly combative temperament, merely wishes to know what is usual, and we are all aware of the accepted rule in this instance.

Agents and “Per Pro” Indorsements.

A signature by procuration indicates that the agent’s power to bind his principal may be, and probably is, limited. For instance, the agent may only have authority to indorse cheques and bills, and if he sign as either drawer or acceptor, he cannot bind his principal. Moreover, as a procuration signature operates as notice of his limitations, a holder has no claim upon his principal, as he should have protected himself by demanding to see the agent’s letter of authority.

A customer, when he wishes another person to draw cheques on his behalf, gives a letter of authority to his banker, and states therein exactly what his nominee or agent may do. The authority may only allow a certain person to sign cheques on his behalf up to, say, £100, and the banker would, of course, refuse any cheque drawn in excess of that sum. Most bankers keep printed forms of this description, and the customer, if he obtain one, can, by crossing out what the agent may not do, limit his power to any extent he thinks necessary. These letters need not be stamped, and, unless previously revoked, they continue in force until the bankruptcy, insanity, or death of the principal.

We can now see that dealing with an agent is not unattended by certain risks. The banker always protects himself by ascertaining that an agent really has authority when he signs the name of a client in the capacity of either drawer or indorser, but as he (the paying banker) is not liable upon either a forged or an unauthorized indorsement, per pro indorsements are universally accepted by the banks in the ordinary course of business. They are not, however, legally obliged to pass them, and a banker may demand to see an agent’s authority or insist upon having a confirmation of the indorsement.

An agent usually signs:—

“per pro (or p.p.) John Brown,
Robert Smith.”

It has been held that “p.p. Mr. John Brown, Robert Smith,” is a good discharge, but the foregoing method is the more general. There have also been decisions in favour of the prefixes “pro” and “for,” though most bankers refuse to pay cheques so indorsed. Procuration indorsements are not accepted on dividend-warrants.

A cheque payable to Brown’s Drapery Stores may be indorsed:—

“p.p. Brown’s Drapery Stores,
Thomas Brown, Proprietor.”

Again, should Thomas Brown receive a cheque, which, he knows, is intended for him, though made payable to Thomas Bright, he might sign upon the back: “p.p. T. Bright, Thomas Brown.” He can explain the reason for this to his own banker, but the paying banker will not question the indorsement. Cheques which are drawn in favour of an establishment one owns, or of a commodity one sells, can always be backed “per pro.”

A cheque to the order of a limited or unlimited company is generally indorsed per pro the company, and the signer should then state the position he occupies, whether director, secretary, manager or cashier, as in the following illustration:—

“p.p. The Hull Shipping Company, Limited,
Walter Wilson,
Manager.”

It is always advisable to sign for or on behalf of a company, and to state in what capacity one signs, so as to avoid a personal liability.

An agent who signs under a power of attorney, usually indorses: “Thomas Brown by his attorney William Smith.” It is as well to remember that a power of attorney often confines the agent’s power, as in the case of a letter of authority, within very narrow limits, and that the principal is only bound by its provisions.

Banker’s Liability on Forged Indorsements.

The paying banker is not liable upon a forged or unauthorized indorsement, but the collecting banker is in the case of uncrossed cheques, and, according to a recent decision by the House of Lords, may be upon crossed ones. If a banker credit his customer’s account with the amount of a crossed cheque after it has been cleared, he is protected by Section 82 of the Bills of Exchange Act; but should he credit his client’s account with the said cheque before he himself has collected it, then he ceases to be a mere agent, and becomes a holder for value, and, consequently, liable upon a forged indorsement. As it is usual, both in London and the provinces, to credit a customer’s account with cheques on the day that he pays them in, it follows that an employer, if his agent have indorsed crossed cheques without authority and placed them to an account in his own name, can recover their amount from his agent’s banker.

Banker’s Liability where Drawer’s Signature is Forged.

The banker is liable to a customer upon any forged cheque he debits to his account.

When a Cheque is Legally Paid.

A banker, having passed the cash across his counter, cannot legally demand it back again, and the presenter may please himself whether or not, if asked, he will return the money. The banker has no power to compel him.

Stopping Payment of a Cheque or Bill.

This must be done by the drawer or acceptor, as the case may be, and by him alone. He should write a note to his banker, giving an exact copy of the cheque or bill he wishes returned, and the banker will then mark his ledger and instruct the cashiers to refuse payment of the document, if presented. Should he pay the instrument in spite of the customer’s order to the contrary, he will have to make good any loss occasioned by his negligence.

Lost Cheques.

The payee or the holder who loses a cheque can, of course, give notice of his loss to the banker upon whom it is drawn, and the banker would doubtless question any presenter, but he, the payee or holder, must obtain an order from the drawer instructing his banker to stop payment. The drawer, though he cannot refuse such a request, may insist upon receiving security before he issues a fresh cheque. Further, if the drawer employ the customary means of communication, such as, for instance, sending his cheque through the post, or should the payee himself select a particular channel, then any loss falls upon the latter. A holder for value, however, provided the cheque be not tainted with forgery, and that it be not crossed “not negotiable,” can compel payment from the drawer, who must then fall back upon his indemnity should he have issued a duplicate cheque.

Sending Cheques through the Post.

When remitting cheques to one’s banker for the credit of one’s account it is advisable to write across the face of each: “A/C Payee, with —— Bank of London.” In the event of a cheque thus marked getting into dishonest hands no banker would care to collect it. Where the sender is the holder, and not the payee, he would, of course, cross the cheque “A/C John Jones,” etc.

As the paying banker is not liable on a forged indorsement, it is always desirable to receive an acknowledgment from the payee of a cheque posted to him. Should not this come to hand in proper time, then payment of the cheque might be stopped at the bank, and the stop removed when the receipt arrives. It is, perhaps, as well to remember, when sending a crossed cheque through the post, that the addition of the words “not negotiable” lessens the risk of both payee and drawer.

Paid Cheques.

These are the legal property of the drawer; but a banker is entitled to an acknowledgment from the customer before he surrenders them.

Providing for Cheques Specially.

A customer, whether his account be overdrawn or not, may pay in a certain sum to his credit, and request his banker to pay a particular cheque against it. The person who adopts this procedure is invariably somewhat “hard up”; and having issued cheques which, in the aggregate, amount to more than the balance at his credit, or which would, if presented, overdraw his account beyond the agreed sum, he is naturally nervous lest his banker should return one or two of them. Assuming that he has some half-dozen cheques in circulation, but is particularly anxious to pay one to John Smith, who has threatened to sell him up, for £30, and another for £40 to William James for rent, then he should pay £70 to his credit, and write across his paying-in slip: “To provide for my cheques of £30 to John Smith and £40 to W. James specially.” The banker, if he accept the slip, is bound to hold the money against the cheques in question.

Present your Cheques at Once.

A business man, in order to give himself every chance, will pay all cheques to the credit of his banking account upon the day he receives them from his customers. He has, in the legal sense, until the close of the first business-day following the day he gets the cheque, when, if he like, he can post it to his agent, who has the same time-allowance for presentment, provided the cheque be not drawn upon a bank in his own town. If he delay longer any loss incurred by the drawer through non-presentation will fall upon the payee’s shoulders. For instance, should the bank fail, the payee might be saddled with a bad debt through his delay.

A customer who has a doubtful cheque in his possession, and who is anxious to know whether the drawer has funds to meet it, can instruct his banker to forward the cheque in question direct to the drawer’s bankers, with the request that they telegraph back whether or not the cheque is paid. Or he may ask them to wire only in case of non-payment, and so save himself the expense of a telegram. Some companies, when they think a customer will stand it, charge 1s. for doing this; but one should decline to pay more than the price of the telegram, viz., 6d.

Returned and Dishonoured Cheques.

It does not follow that, because a banker returns a cheque, the money is not there to meet it, as, more often than not, a cheque is sent back for some irregularity in the indorsement, which can be at once put right. It is necessary, therefore, before jumping to conclusions, to carefully examine the words written upon the document. The following are the usual answers given by bankers, with their abbreviations:

“R/D” (refer to drawer). Such an answer clearly implies that the cheque has been dishonoured for lack of funds.

“Effects not cleared.” Here the client, assumably, has enough money to meet the cheque, but the banker has not yet cleared or realized the documents he has paid in, and the drawer’s credit is so poor that he will not honour his cheque until this has been done. A cheque thus marked is usually re-presented, but, obviously, the drawer is weak.

“N/S” (not sufficient). We gather from this that the drawer has some money standing to his credit, though not enough to meet the cheque.

“Words and figures differ” does not require an explanation, though, perhaps, it may be remembered that weak drawers have a trick of making mistakes in order to gain time. “Payment stopped,” “Post-dated,” “Incomplete,” “Another signature required,” “Indorsement irregular,” and other answers that might be given, are self-explanatory. Cheques returned for these reasons naturally do not reflect any discredit upon the drawers. Of course, a person with an open, charitable mind is free to make his own deductions.

Occasionally a banker returns a customer’s cheque when he is in funds. Such a mistake generally occurs through a credit having been posted to the wrong account, and as often as not the two customers are blessed with the same surname, though not with an equal amount of this world’s goods. Brown, for instance, is not an uncommon name, so we will assume that a credit of poor Brown’s has been posted to rich Brown’s account by mistake, and that the banker returns the former’s cheque for £50 marked “refer to drawer.” Now poor Mr. Brown has a good case against his banker, and should at once consult his solicitor, who will see that he gets compensation for the damage done to his credit. Most bank-directors, who are modest, retiring gentlemen, prefer to settle such a case privately, as it is not thought desirable to advertise the fact that a mistake of this nature, with their perfect system of book-keeping, is possible.

Drawer too Ill to Sign.

In the above instance the customer makes his mark, which is usually witnessed by his doctor. Sometimes he authorizes a person to draw cheques upon his account up to a certain sum, and cancels the authority upon his recovery.

Backing a Cheque for a Friend.

The man who backs a cheque in order to oblige a friend should remember that he makes himself responsible for its payment, and that should his friend have no money to meet it, he, the indorser, will be called upon to make good the loss. He does not merely vouch for the respectability of his friend, but he also guarantees that his cheque will be duly honoured upon presentation, which is quite another matter. One should, therefore, decline to back a cheque for a stranger upon any consideration.

CHAPTER IV
CREDIT-ACCOUNT CUSTOMERS

As by far the greater number of a bank’s customers keep their accounts in credit, we will begin this chapter by considering what average balance should entitle a person to have his account worked free of charge. In London, a man who opens a small account with a bank, and whose credit balance averages £100, will not be debited with any commission at the end of the quarter or half-year when the companies rule off their books, while in the suburbs an appreciably smaller balance is accepted, and, occasionally, interest is allowed there upon current-account balances, though one will have to press pretty hard for it. Competition is now so keen between bank and bank that it is sometimes possible to make very close terms.

In the country it is considered that an average balance of £50 upon a small account pays expenses. However, the bank-manager, who is as human as the gentleman who sells one a dog, seldom neglects to make a small charge upon these accounts when he considers that their owners will stand 10s. a year or so. Broadly speaking, you can please yourself whether you pay it or not. This class of business, of course, is absolutely safe; so the customer, if he cannot come to terms with the manager, is able to take his account to the cheapest market, always remembering that it is never wise to bank with a second-rate firm, whatever advantages may be offered.

Though a man keep a balance of £10,000 to his credit, he will not receive one penny in the shape of interest unless he ask for it, and, even after having arranged a rate, it is advisable to check the banker’s figures and ascertain that you are getting it, as, sometimes, they are apt to err in his favour, through small debits that have been deducted from the interest, and which, consequently, do not appear in your pass-book.

The following illustration, perhaps, will show how matters stand:—

A keeps an average balance of £150
B keeps an average balance of £600
C keeps an average balance of £5,000

The banker, if B and C are easy-going men, whose financial experience is small, will conduct their accounts on the same terms as he does A’s. He will, that is to say, work each account free of charge. But such treatment is evidently unfair, for if A’s account is worked free, then assuming that those of B and C give but little more trouble, each is entitled to some allowance upon his average balance. They should certainly endeavour to obtain it.

If the manager be interviewed, he may endeavour to convince either B or C, by a process of reasoning, which is more persuasive than scientific, that money is so cheap that, really, a high rate is out of the question. He will further explain that his directors, as a rule, do not make an allowance upon creditor current accounts; but should either just hint at removing his account, a rate will be instantly allowed, for competition among the banks for a large credit account is so active that the customer has only to be firm and fairly reasonable in his demands. The manager, of course, will endeavour to pay as little as possible. Of that we may be quite sure. The customer, on his side, should try to obtain the maximum rate, which is 1½ per cent. below Bank rate in London, and in the provinces the usual country rate.

Original sin, not being yet eradicated from our race, a bank-manager, who is endowed with his full share, sometimes endeavours to persuade a customer to transfer sums from his current account to deposit receipt, but it is always prudent to remember that his advice is not disinterested, and that he is acting “upon instructions.” Experience proves that, after a little while, a customer becomes tired of continually transferring sums from his running account to deposit, and then, when his account is getting low, paying the deposit-receipts to his credit. Finding the process a weariness to the flesh, he often ends by giving it up in disgust, when once again the wily banker is a gainer at his expense. By obtaining a rate of interest upon his daily current-account balances the customer is spared this trouble; and, if he fail to induce his banker to grant it, then when his account is in credit beyond a certain agreed sum, he should take care to get a deposit-receipt.

Bankers, like individuals, are the slaves of their environment, and in the Midlands and elsewhere, where it is usual to allow a rate on the daily balances, commission is also charged on the turn-over or sums debited. Interest upon the daily creditor balances is allowed at, say, 1½ per cent. below bank rate, and a commission of ⅛ per cent. is charged on the cheques a customer draws. The lower the rate of interest and the higher the commission rate, the more profitable, of course, is the account to the banker. The customer, therefore, when checking his banker’s charges and allowances, will take care that he is receiving the maximum rate of interest, and paying the minimum or lowest commission rate, which varies from ⅛ to ¹/₁₆ per cent., while it is sometimes possible to arrange for a reduced and merely nominal charge. A person, when he sees a “little interest” credited in his pass-book, is disposed to increase his balance, on the assumption that he is being allowed a rate; but before doing so he should certainly ascertain what the rate will be, for, upon examination, this allowance is occasionally found to appeal more strongly to one’s senses than to one’s critical acumen.

Having disposed of the paying average credit balances we can now discuss those accounts that have a large turn-over. A trader, for instance, who draws a considerable number of cheques during the course of a half-year, and whose balance is small, cannot expect his banker to work his account free of charge; but it is difficult to draw up a table showing what he ought to pay, for the simple reason that some bank-managers debit him with a rate which they think he will stand. A ¹/₁₆ per cent. commission, that is to say, 1s. 3d. upon each £100 he draws out by cheque, seems a very full rate; and as there is a good market for this class of account he should not disburse one penny more. The owner, who always has a balance on the right side, can, if he find his banker unreasonable, easily negotiate with his rivals, who are delighted to see fresh faces. Indeed, it is quite possible that he may succeed in getting his account worked free, or for a nominal fee of half a guinea or so, if the turn-over is not very large.

It is now time, perhaps, to give a brief sketch of the manner in which a manager charges his ledgers at the end of the quarter or half-year. As a rule he and the accountant go through the books together; and as there is no recognized scale by which the charges are regulated it follows that they consider the man as well as the nature of his account. The business of the manager is to make his branch pay; therefore, if you do not criticize your commission rate, you may rest assured that he will succeed brilliantly at your expense. Should he think that the customer lacks experience, and is not acquainted with the fact that competition between bank and bank for creditor accounts is active, then he charges him ⅛ per cent. When, on the other hand, he is aware that the client checks his expenses, caution is exercised; and if the manager decide to claim commission the sum debited will be extremely small.

After all, in the ordinary affairs of life one does not accept without question the price of the seller; and if a customer be so unwise as to think that a bank-manager has a higher sense of honour than his kind, then he must be prepared to take the natural consequences. For instance, D and E keep an average balance of £100 in their bankers’ hands, and the turn-over of each account is about £1,500 for the half-year. The manager, knowing that D is not critical, charges him ¹/₁₆ per cent. commission, or 18s. 9d. E, he asserts, is a most unpleasant man, who, when charged upon a previous occasion, threatened to remove his account unless the sum were given back to him; E, therefore, who is aware that competition is one of the factors that determine price, has his business done free.

A large trader or merchant, as a rule, does not allow his banker to have the use of a considerable amount of money free of interest; and those accounts that are from, say, £1,000 to £10,000 in credit, usually belong to women, who are not accustomed to the management of money. The manager, anxious to stand well with his directors, some of whom increase his salary if he add to the profits of his branch, does not, of course, suggest to these ladies the advisability of receiving interest upon at least a portion of their balances, but, on the contrary, being wise in his generation, endeavours, by resorting to those social amenities that raise him higher and higher in their estimation, to hide the awkward word from their view, while laughing in his sleeve at their excessive credulity.

The customer who keeps his account in credit should ask his banker: “What average balance must I maintain in order that your people will work my account free?” That sum ascertained, he can act upon the advice contained in this chapter.

CHAPTER V
DEPOSIT-RECEIPT CUSTOMERS

A deposit-receipt, which is not a negotiable instrument, cannot be transferred by one person to another. Where the receipt is issued in more than one name, instructions should be given to the banker as to whether, in the event of withdrawal, the note is to be signed by all or by any two or any one of the depositors. Should no instructions be given, then all must sign when a withdrawal is made, or when the interest is taken. These receipts, as a rule, are issued subject to either seven or fourteen days’ notice of withdrawal; but the notice, in practice, is not enforced, bankers merely writing it upon the note in order to protect themselves in the event of a run. Most banks, however, decline to pay interest unless the sum has remained in their possession for at least one month.

The large London banks, though they compete eagerly the one against the other for well-secured advances and loans, have closed up their ranks against the depositor, their practice being, both in London and the suburbs, to allow 1½ per cent. below Bank rate upon money left with them on deposit, every alteration in the rate being advertised in the leading papers. All one has to do, therefore, in order to ascertain the London rate for money on deposit-receipt is to deduct 1½ from the Bank of England rate which may be seen in the city-article of every newspaper. Whether or not certain banks offer special rates to favoured individuals is a matter of opinion; or, again, they may bid higher for large sums for fixed terms; but the small depositor may take it for granted that, with their rates on loans and advances reduced by competition among themselves, the banks are determined to keep down the deposit rate. In fact, the large London bankers have united for this very purpose, though it must be remembered that the agreement is not binding at the country branches of the London and provincial institutions.

A banker is a middleman who borrows from depositors at a rate in order that he may lend to others at a higher rate, the difference between the two rates being his margin of gross profit. A certain portion of his deposits, we know, he obtains in exchange for granting banking facilities, and upon the rest he allows a rate of interest, while he has to maintain a reserve of so-called cash and gilt-edged securities against the danger of sudden withdrawals and panics. At the moment the companies cannot control the advance rate, or fix from time to time a minimum rate for secured advances; but in London we see that they have succeeded in getting the depositor under their thumb, thereby, of course, increasing their profit margin at his expense. Their next move will probably be an attempt to corner the borrower against tangible securities, as has been successfully accomplished by the banks in Scotland. The number of English banks is rapidly decreasing through absorptions and amalgamations, so, in the end, it is more than probable that we shall see a monopoly, and that all the large banks will one day unite for the purpose of fixing, at each change of the Bank rate, their deposit rate, and, also, their lowest or minimum rate for secured advances.

In the provinces the banks, when loanable capital is cheap, are able to lend and to discount at higher rates than in London, so the country deposit rate never falls so low as that of London. Neither, however, does it advance so high when loanable capital is dear, because the provincial banks then find some difficulty in increasing their rates upon bills and loans proportionately. The following table will enable one to see the difference between the rate allowed in London and the country:—

Bank Rate. | London Deposit Rate, 1½ below Bank Rate. | Country Deposit Rate.
5 | 3½ | 3
4½ | 3 | 2½ to 3
4 | 2½ | 2 to 2½
3½ | 2 | 2
3 | 1½ | 1½ to 2
2½ | 1 | 1½
2 | ½ | 1½

In the country, we must remember, there is no combination or ring of bankers who meet to decide the rate, which, therefore, is not “fixed” from time to time on the basis of the Bank rate, though, of course, the country deposit rate moves up and down in sympathy with the Bank of England’s published rate of discount or official minimum, as it is called. There is, moreover, some competition for deposits in the country, but it is very slight; and, unless the banker think that a man may be useful, he seldom bids appreciably higher than his rivals for his money. The small private banker, it is true, may offer more interest, but a depositor should take care to examine his balance-sheet before he entrusts him with either his spare capital or his savings.

A few of the purely provincial joint-stock banks, whose branches are situated in a manufacturing centre, and which, in consequence, are never overburdened with working resources, offer higher rates than the great companies, but they are the weaker of their kind, and it is therefore questionable whether one should lend to them. In every probability one’s principal would be safe, but it would not be so safe as in the hands of the really large London and provincial institutions, whose reserves afford the customer a much better guarantee; consequently it is always wise to consider whether the additional risk, be it never so small, is worth taking for the slight increase in the rate.

Of course the country depositor will take care to inquire what rates the other large banks in his town are granting, so that he may judge whether his own banker is allowing him a fair rate. Again, if the amount of his deposit be, say, over £1,000, he can sometimes obtain a special rate; and he may rest quite assured that, if he do not interest himself in the matter, the bank-manager will allow him the lowest rate possible, for as there is not a fixed minimum it follows that some, more especially during certain conditions of the market, are obtaining better rates than others. A little pressure will occasionally induce the manager to quote, as he quaintly calls it, a “special” rate of interest, if he consider the customer’s name be worth keeping on his books. It may be added that some people, in order to minimize their risk, keep their current accounts with one banker and deposit with another.

We can now refer to the table of rates on page 48. The country rate, of course, is stated approximately, for we have seen that under certain conditions the customer may possibly obtain more. Glancing at the table, we find that when the bank rate is at 2, the London depositor receives ½ per cent. and the country depositor 1½. If the London customer deal with a London and provincial bank, it will obviously pay him better to deposit at one of the country branches. He should, therefore, if he consider that money is likely to be cheap for some considerable time, give notice in London and transfer his deposit to the country. If his banker object, he can deposit with any large, well-managed provincial bank. With the Bank rate at 2½ the move would pay him, but when it rises above these figures the rate is either equal or in his favour. A person who keeps two banking accounts, one in London and the other in the country, can make this move with the greatest of ease; and by transferring his deposit from the one to the other as the rate favours him, he may easily increase his interest. Conversely, with a high bank rate it may pay the country depositor to transfer his principal to London. There is no occasion to let the banker see the move.

In London and the great cities a large proportion of the deposits at interest, especially during periods of depression, would represent capital temporarily withdrawn from trade, and awaiting either more profitable investment or an increased demand and rising prices. It is this accumulation of idle capital that tempts the company-promoter from his lair, and sometimes results in a Stock Exchange boom, whilst it always produces an increased demand for the so-called gilt-edged variety of securities and a consequent rise in their price. The country depositor, however, even when he leaves fairly large sums at interest, is generally waiting to invest his money in house property, which will return him from 5 to 6 per cent., or to place it out on a first mortgage at from 3½ to 4 per cent. In the first instance, he is careful not to purchase old property that will swallow up much of his rent in repairs. Cautious by nature, he shakes his head dubiously at the glowing prospectus of the promoter, and refuses to believe in the high-toned and cunningly tuned leaflets with which the bucket-shops favour him, for he likes to see his investment, to feel it, to walk upon it. Paper does not satisfy his soul; he is not even without his suspicions of banker’s paper; but when he possesses house property, then all he has to fear is the Almighty and a bad earthquake, and he can sleep comfortably on those risks.

Country depositors consist largely of working men, clerks, artisans, small shopkeepers, dressmakers, women of slender means, and so on, together with the banks’ current-account customers. The huge aggregate of deposits is made up principally of small sums, so it is easy to keep down the rate, because the great majority are ignorant of the condition of the money-market, and hardly seem to be aware that the Post Office gives 2½ per cent. upon small sums left with it. The companies trade upon the ignorance of their depositors; and though a few of the better-informed customers withdraw their savings when the rate is extremely low, experience has taught the banks that the great bulk of them simply grumble and take what is offered.

Seeing that the deposits are spread over so great an area, and among men and women who have not sufficient business knowledge to invest their savings advantageously, the banks have been able to keep down rates without reducing their own resources; and the few who do withdraw their savings when the deposit rate is at 1½ per cent. are practically of small account when contrasted with the alternative policy the companies would have to adopt in order to retain them, for it obviously pays better to lose a few receipts than to raise the rate to 2 for the whole of the deposits. For instance, a bank would rather lose £100,000 by withdrawals when the rate is at 1½ than pay 2 per cent. on £5,000,000 for the purpose of preventing the drain, £25,000 being too large a premium to sacrifice for the purpose of retaining its connexion intact, when, perhaps, money is being employed in the London shortloan market at 1½ per cent. and under.

Again, very many of the country depositors look upon the deposit-receipt as an investment, and the banks, quite naturally, do not wish to inform them that even Consols are a more profitable one. Not so very many years ago the country minimum deposit rate was 2, and it was not without certain misgivings that it was reduced to 1½; but, as we have seen, the experiment proved safe, though the banks, given another long period of a 2 per cent. Bank rate, will hardly care to risk 1 per cent. in the provinces, as it seems pretty certain that, were the minimum further reduced, disgusted depositors would invest their savings either in the Post Office or the gilt-edged class of securities. Having once turned this stream of deposits into another channel, it is improbable that a higher rate would tempt them back again; and as the depositor is essential to the modern banking system, the provincial banks will think many times before they risk a rate below 1½, even when cheap capital is again reducing their dividends right and left.

A customer, before leaving his money with a banker, will be careful to inquire what rate he is to receive, and if the rate be not written upon the receipt, then he might pencil the answer he gets upon the back of the document. If there be three good banks in his town, and he has, say, £200 to deposit, there can be no harm in his going to all, and asking the highest rate each is allowing. John Jones, we will assume, holds a deposit-receipt for £200 dated 10th June and he takes it to the bank on 9th December following in order to draw the interest at the rate of 2 per cent. per annum. Between 10th June (excluding the first day) to 9th December (inclusive) there are 182 days, so the banker owes him 2 per cent. per annum on £200 for 182 days. Hence the following sum:—

200 × 2 × 182 | = £1 19s. 10d.

100 × 365

The cashier, therefore, pays John Jones £1 19s. 10d. in cash, and gives him a new receipt, dated 9th December, for £200. A depositor, as a rule, draws his interest twice a year. Some persons, however, leave their receipts from three to five years without disturbing them; and the bank-manager, always anxious to swell the profits of his branch, is careful, when they are presented, to make his calculations at simple interest instead of at compound. Deposit customers, therefore, even when they do not require the interest due to them, should present their receipts six months after date in order to have the interest added to the principal, when both bear interest together.

For instance, assuming that John Jones had not required his interest, then he would have taken a new note for £201 19s. 10d.; but Mr. Jones, who is acquainted with the internal economies of a bank, and who is also aware of the intense frugality of the agent, knows that the companies do not allow interest upon the odd shillings of a deposit-receipt; so, giving the cashier an additional twopence, he takes a fresh note for £202, and walks away very well satisfied with himself. Were he to omit taking this precaution each half-year, and to hold his receipt for, say, five years, then, when he took it in, he would merely get certain rates upon £200 for five years. The larger the principal the greater, of course, is the loss of interest to the depositor.

Should not the depositor reside in the neighbourhood he can, after the expiration of six months, write his name on the back of the note and send it through the post to his banker, with the request that a new receipt be returned to him for the amount of the principal and interest. In the event of his wishing to draw the interest, a banker will send him either a draft or postal orders for the amount due to him, as he may direct. Of course, if he at any time require part of the principal, he will state what amount, and give directions whether the interest is to be added to the new receipt for the balance or to be included with the sum he is withdrawing, while he will take care to write his name upon the back of the note before despatching it. When sending a receipt by a messenger it is usual to write a note to the banker, telling him just what one requires and requesting him to pay the bearer of the letter.

Where interest amounting to £2 and over is withdrawn, the deposit-receipt must have on the back a penny postage stamp, which the depositor should cancel by writing his name across it. This must be done upon each note when the depositor has a plurality of receipts. Where, however, the interest upon any one is less than £2, a stamp is unnecessary. Nor is it required when the depositor adds principal and interest together and takes a fresh note for the aggregate, but where principal and interest or principal or interest amounting to £2 or over is withdrawn, the receipt must bear a penny stamp.

We now come to the question of the seven or fourteen days’ notice on these receipts, and, as previously stated, the banker seldom or never enforces his claim, though, when notice is not given, he occasionally deducts fourteen days if the whole of the principal be withdrawn. When this is contemplated it is better, perhaps, to give the necessary notice, but the manager, should the customer protest against this deduction, generally gives way. Again, if the note be for £100, and the depositor withdraw £50, and take a new receipt for the balance, the banker may deduct a certain number of days from the term on £50 (the sum withdrawn without notice). The customer, by checking his interest, will discover this loss, which the teller, if he remonstrated with him, will obligingly make good. It is also as well to bear in mind that some banks have two rates.

The London depositor, we know, receives 1½ below Bank rate; so assuming that Mr. Jones, of Whitechapel, held a note for £200, dated 5th February, 1903, and took it to the bank to draw the interest on 5th July of the same year, he would want to know how much was due to him at the latter date. First, therefore, he must ascertain whether any changes were made in the Bank rate during the period in question; and upon inquiry he found that the “official minimum” was raised to 4 per cent. on 2nd October, 1902, and lowered to 3½ on 21st May following, and to 3 upon the 18th June next.

Now, from 5th February (exclusive) to 5th July (inclusive) there are 150 days. His banker, therefore, owed him:—

|  | Bank Rate was from
105 | days’ int. at 2½ p.c. p.a. on £200 | Feb. 5 to May 21 | 4 p.c.
28 | days’ int. at 2    p.c. p.a. on £200 | May 21 to June 18 | 3½ p.c.
17 | days’ int. at 1½ p.c. p.a. on £200 | June 18 to July 5 | 3 p.c.
150 | days

Here we get three rule-of-three sums, and, perhaps, it were as well to give a statement of the first, viz.:—

| 200 × 2½ × 105 | = | £1 | 8 | 9
| 100 × 365   
28 days at 2    p.c. per annum on £200 | = | 0 | 6 | 1½
17 days at 1½ p.c. per annum on £200 | = | 0 | 2 | 9½
Interest due |  | £1 | 17 | 8

Mr. Jones, of Whitechapel, then, should have received £1 17s. 8d. from his banker in cash and a fresh deposit-receipt, dated the 5th July, 1903, for £200. At each change of the bank rate the London depositor, when calculating his interest, must make a fresh sum, as in the above illustration, and so, too, must the country depositor when the fluctuation of the Bank of England rate is sufficiently wide to influence the rate of interest allowed in the provinces, though the latter must remember that he can only ascertain the rate by making inquiries of the bankers themselves or among those of his friends who deposit with them.

Adverting to the dates in the foregoing illustration, a few words of explanation are perhaps necessary, for it will be seen that under the heading “Bank rate was,” 21st May and 18th June, the days upon which the official minimum was changed, are placed opposite different rates. The Bank of England directors examine their weekly return or balance-sheet, which is made up to the close of business each Wednesday on the Thursday following, and in the afternoon of the latter day any change in the Bank’s rate of discount is announced. Of course, during abnormal times the rates may be changed on any day as the exigencies of the moment may direct; but, fortunately, though the money-market is subject to fits, its surface, as a rule, is seldom so violently perturbed as to call for drastic remedies, and we shall find that the dates in question were Thursdays. It follows, therefore, that these days opened with the bank rate at one figure and closed with it at another. Hence the anomaly to which attention has been drawn. The banker owed Mr. Jones, of Whitechapel, interest at 2½ per cent. from 5th February (exclusive) to 21st May (inclusive). On the 21st May, we know, the Bank rate was reduced from 4 to 3½ per cent.; so he owed him 2 per cent. on his principal from 21st May (exclusive) to 18th June (inclusive)—the date of the next change. Should not the reason of this be quite clear to any reader, if he remember that from 21st to 22nd May the Bank rate would have been one day at 3½ per cent. the difficulty will probably disappear.

From an investment point of view the deposit-receipt seems hardly worth consideration, because even Consols, over a period of five years, will return an appreciably higher yield; but when one is merely waiting for a suitable investment to turn up, or for a revival of trade, then the deposit-note exactly meets one’s requirements, for its only charm lies in the fact that the depositor gets back his principal intact. When the deposit rate is low trade is generally dull, and the prices of gilt-edged securities consequently move up. The depositor, therefore, when the rate is high should not be tempted to let his money remain with his banker for that reason alone, because he can then, as a rule, buy gilt-edged securities at cheaper figures, and, needless to say, the average return on his purchase-money will greatly exceed the average rate of interest on deposit. Conversely, if he buy the so-called gilt-edged variety of securities when interest is low, he is much more liable to a loss of capital should he want to realize them when trade is good and the rate of interest high. It follows that the man of business, who finds capital accumulating in his hands during periods of temporary depression, when interest, of course, is low, prefers taking a deposit-receipt for his idle capital, which he hopes to again use in his business directly markets improve, to purchasing, say, Consols at a time when demand has enhanced their price, and, consequently, added to his risk of loss upon realization.

Some banks, instead of issuing a deposit-receipt for money left at interest, give the depositor a pass-book, in which the sum he leaves is credited. Each time the depositor leaves new money he takes his book with him, and the cashier enters the amount therein to his credit, while he draws out his interest, or any part of the principal he may require, by cheque. As the banker rules off his deposit-ledgers half-yearly, and then adds the interest due to each customer to the principal, it follows that principal and interest, when the balance is brought forward, give a return to the customer, who by this method receives compound interest on his capital or savings. The advantages of this system are too obvious to call for explanation, but it may be added that, when a deposit customer is given a cheque-book, he should be careful not to operate too freely upon his account, as some bankers then transfer the balance to their current-account ledgers, their reason being that the account has ceased to be used for the purpose for which it was opened, and that, therefore, the depositor is no longer entitled to interest.

The chapter on “Unclaimed Balances” should prove especially interesting to depositors.

CHAPTER VI
THE BANK RATE IN RELATION TO BANKERS’ CHARGES

Very many persons who are out of touch with money-market problems fail to see why the Bank of England’s rate of discount should be in any way connected with a banker’s charges; and though, to those who have not studied the question, the swaying of the pendulum seems due to some occult influence, the forces that move it are both visible to the naked eye and capable of explanation. In the first place, the Bank of England keeps the cash reserves of all the banks in the United Kingdom, and, as a natural consequence, possesses the only large store of gold in the land. The other banks, which are dependent upon this accumulation, become nervous immediately the gold in the Bank’s vaults begins to leave the country in appreciable quantities, because, should not the Bank of England be able to meet their demands, they, too, will be unable to supply the requirements of their own customers.

We need not, in a small book of this description, enter into the mysteries of the foreign exchanges, or discuss internal and external drains of gold, but the Bank, in order to arrest a drain of gold outwards, raises its rate, when the other banking companies, equally anxious to stop the efflux, raise their rates too, with the result that borrowers, whether upon bills or securities, have to pay more. Conversely, when the Bank’s reserve is high and the political horizon unclouded this nervous feeling no longer exists. The Bank, we will assume, then lowers its rate, and the other banks follow suit, when the borrower pays less.

When speaking of the money-market, the London money-market is always implied, and here we encounter the bill-brokers to whom the banks advance their surplus funds. The banks, that is to say, finance their rivals, who make bills a speciality, and whose knowledge of bills of exchange is doubtless both extensive and peculiar. Seeing that the banks themselves discount trade-bills for their customers, the necessity of a middleman or bill-broker between the person who discounts a bill and the banker who supplies the capital is not very apparent, but the broker’s “turn,” when he re-discounts with the banks, is extremely small; so it is quite possible that were the banks to establish special departments to deal with this business, the slight increase in their rates would not compensate them sufficiently for the troubles of management. As, under this system, the brokers’ rate of discount is below that of the banks, it follows that all the bank-bills and most of the best trade-bills pass through the hands of the bill-brokers, while bills are also sent to them from all the great cities. The bankers, consequently, discount inferior paper at higher rates for their own customers.

But the Bank of England is a great bank of discount. Moreover, it pays a dividend like any other bank, and, as the bill-brokers are its rivals, it follows that it cannot afford to allow all the business to drift into their hands. When, therefore, the brokers’ rate (the market rate) is below its own, it either takes steps to make its own rate of discount, as the saying is, “effective,” or else it reduces its advertised rate of discount (the Bank rate). The Bank makes its rate representative or effective by selling Consols, and thereby reducing “bankers’ balances.” The banks in consequence have less to lend to the brokers, who are then bound to apply to the Bank of England, which compels them to discount their bills at its own terms, and the rate in the outside market, of course, advances.

We can see, therefore, that though the Bank rate is sometimes either above or below the market rate, it is necessarily never out of touch with it for any very considerable length of time; so now, perhaps, it will be understood why the banks allow 1½ below Bank rate on deposit; and their reason for basing their rate for loans and advances upon the Bank of England’s advertised rate of discount will also be apparent.

Of course, the demand for, and the supply of, loanable capital decides the rate of interest, and as demand and supply are never equal, the rate is always fluctuating, but we might just remember that our artificial banking system “influences” the rate from time to time. During periods of dull trade, when loanable capital accumulates in the hands of the banking companies, we should expect to see a low Bank rate, because, prices of commodities having fallen, people are less anxious to borrow, while fewer bills are on offer, and, the demand for those bills having increased proportionately, it follows that the holders can discount them at a cheap rate. But when business is brisk and the prices of commodities are rising, more bills are drawn, and as the fund with which they are discounted is not limitless, it follows that the increasing demand upon that fund sends up the rate. Bankers, consequently, who have also to meet the requirements of their current-account customers, are sometimes obliged to administer a salutary check to speculation by making the rate almost prohibitive in order to protect their reserves of cash, as if they then lent to all and sundry even Lombard Street would collapse.

Now the Bank of England, we have seen, holds the national reserve, as it were, and is, in consequence, the pillar upon which the money-market rests. Threadneedle Street (the Bank) is, therefore, the centre of the money-market (hence the description “central institution”) into which Lombard Street (the rest of the banks in the United Kingdom) pours its reserve and surplus cash. We might describe the Bank as the heart of the money-market, through which a stream of cash and credit-documents is continually flowing. The brokers (the outside market), who practically keep no reserves of cash, are largely financed by Lombard Street, which, however, calls in its advances to them during certain conditions of the market; and the bill-brokers are then compelled to fall back upon the Bank of England which holds the bankers’ reserves. In assisting the brokers the Bank is also supporting the credit of Lombard Street; so, clearly, the interests of each division are identical; and the closer and more friendly the relations between them the smoother will be the surface of the money-market.

But we have to consider the Bank rate in relation to bankers’ charges; and here another factor must be introduced, to wit, the nature of the securities deposited by the customer. The business man’s favourite investments are English railways, Corporation Stocks, Industrial Companies, and so on, whilst occasionally, endowed with imagination, and recognizing how erratically the earth dispenses her favours, the blessed uncertainty of mines appeals to his gambling instinct. As a rule, a banker’s loans and advances are not covered by Consols, because it would pay the borrower better to sell out and place the sum they realized to his credit. Advances against Consols would be made principally to stockbrokers and to speculators who had bought them largely in the hope of a rise in price.

Competition for an advance, which is covered by tangible securities, is keen both in London and the provinces, and competition, we must remember, tends to reduce the rate. Then, again, assuming that the Bank rate be 3 per cent., and that a banker suggests 4 per cent. on an advance covered by railway debentures, the customer may not see the force of maintaining a margin of 10 per cent. between the market-price of his stock for the protection of his banker, and paying him, say, ¾ per cent. more than his securities return on his purchase-money. As the customer’s loan or advance is well secured, and as the banker will only advance to the extent of 90 per cent. of the market-price on the condition aforesaid, he is only willing to pay Bank rate upon the sum he borrows.

We next have to consider the amount of pressure the customer can bring to bear on his banker, of whom his securities make him practically independent. He may, in the first place, threaten to remove his account unless his banker grant him a loan at 3½. Secondly, he may decide that it will pay him better to sell his debentures at the market-price. Again he may only require the loan for a few months or even weeks; and as, in his opinion, the debentures will probably appreciate in value, he may decide to pay 4 per cent. for a short period to either selling out or troubling to find a cheaper market. Obviously, the higher the Bank rate advances the less disposed is this class of customer to pay ½ per cent. above it; so, when the official minimum is at 5 and 6, he can often arrange for an advance at Bank rate or even at a ½ below it. On the other hand, the banker, when Bank rate is at 2 or 2½, generally refuses to lend at less than 3 per cent. per annum. The rate, therefore, upon a secured advance is influenced by the nature of the cover deposited as well as by the state of the money-market.

This description of the market is, of course, the veriest sketch, but, perhaps, it may possibly prove somewhat enlightening to those who have hitherto regarded this very simple subject as an exceptionally difficult one.

CHAPTER VII
LOANS AND ADVANCES IN LONDON

We are told that London banking is quite different to country banking, but it is a difference of degree rather than of kind, and in London, as in the provinces, the bank-manager has two rates—one for those who, taking him at his word, do not attempt to bate him down, and a second and lower rate for those persons who, knowing that he is of the City, and scenting instinctively a servant of the company, who is in possession of instructions, literally force his hand. A seller in a free market where competition is vigorous generally has at least two prices, though, of course, he only advertises one of them, and the banks, which are not one whit in advance of the commercial ethics of the times, base their rate upon expediency as well as upon the Bank of England’s rate of discount. In stating so human and obvious a fact one can only apologize for its intense triteness, and urge, in extenuation, the blind, unreasoning faith of some people in the modern bank-manager. Such faith may be beautiful, but, believe me, it is costly.

Mention has been made of the distinctions between country and London banking, and one of these appears to be the adoption of the “loan-account” system by the City banks, but “loan accounts” are not by any means unknown in the provinces, though the opening of them is exceptional. Moreover, though this system is greatly in evidence at the head-offices of the joint-stock banks, the farther one moves away from Lombard Street the less firmly is it established, and one finds in the books of the London branch banks a medley of the two systems. That is to say, some customers adopt the “loan-account,” and others pay a rate upon their daily debtor balances, together with a commission on the turn-over of their accounts.

When a “loan account” is opened by a customer, the banks do not charge a commission upon his current account, but, as we shall see, neither do they neglect to make amends for this omission. A customer, we will suppose, when the Bank rate is at 3 per cent. obtains a loan of £20,000 from his banker at Bank rate. He draws a cheque for this sum, which the banker debits to a “loan account” in his name, then places £20,000 to the credit of his current or running account. Now the interest at the rate of, say, 3 per cent. is calculated on the loan account, so if the customer’s average credit balance for the half-year amounts to about £4,000, then he has paid 3 per cent. per annum upon £4,000 which he has never used. In other words, he has given his banker something like £60 for working his account during the half-year. Further, some London banks charge a commission of ⅛ per cent. on the amount of the loan. This they add each half-year to his interest, which, in the present instance, would be debited in his current account pass-book thus: To Interest, £325. By carefully checking his banker’s charges he will make this discovery, and, of course, promptly demand that £25 be returned to him.

It can now be seen that the London bank-manager is as eager to snatch a commission as his country confrère, and, moreover, that he is not without his opportunities, which, when the client is considered safe, he seldom neglects. In other words, he does his duty like other honest folk whose misfortune it is to be employees; and he does not specify the ⅛ per cent. on £20,000 in the pass-book for the simple reason that he knows it is safer disguised as interest.

The customer naturally does not see why he should pay a rate upon £4,000 which he has not wanted, and which, in reality, the banker has not lent, though he has created credit in his own books to that extent by two simple entries on the debit and credit side of his ledgers. Assuming that no commission was charged on the loan, £60 a half-year seems a large sum to pay him for working an account, especially as most of his rivals will bid against him for a well-secured loan. The customer, therefore, should insist upon receiving the same rate upon his daily creditor current-account balances as he is paying upon his loan, and if he consider that his banker is entitled to a commission for working his account, then he can arrange for a fair nominal charge, but he may succeed in getting it worked free. Again, when his current account is largely in credit, he can transfer a certain sum therefrom to his loan account, and, by moving balances from the one to the other, as occasion may arise, save himself an appreciable sum in the shape of interest; but he may be too busy to adopt this course, and it is evident that the first suggestion, which is better adapted to his wants, will save him both time and money. Naturally the banker will object, but the client will make it his business to endeavour to overcome such opposition, which will be either strong or weak in proportion to the nature of his cover and the desirability of retaining his account.

We next come to the rate a borrower should pay upon a well-secured loan or advance, and here, again, we may touch upon a distinction between London and country banking. A banker, like any other dealer, adapts his business to his surroundings, but in a great city like London he is practically compelled to specialize more or less, and but little money is lent in the City upon mortgage, whereas overdrafts are granted freely in the country against the deeds of house property. Of course there are exceptions; and certain well-known firms, whose credit is beyond question, may not even be asked for any security when they borrow at certain times of the year, but they soon would be if the loan began to assume a permanent character; for though a banker may be willing to advance to an influential and reputable firm without cover just at those seasons when demand upon it is heaviest, he assumes that such assistance will only be required temporarily, and would instantly become nervous should it appear from his books that the firm was slower than usual in reducing the loan, whilst immediately he perceived that a certain amount of it threatened to take the form of a permanent advance he would ask for security.

The City banks are too busy to give much attention to the wants of the small man of business, and, broadly speaking, they require marketable securities before they will grant a loan or advance. The suburban manager, however, who is only on the edge of this struggling mass of humanity, views the smaller applicant with a kindlier eye, because the large borrower seldom approaches him, so in the suburbs one can borrow on mortgage just as one can in the country. Indeed, suburban banking approximates very closely to country banking, the one noticeable distinction being the deposit rate. The West-end banker, again, has his peculiarities, and it by no means follows that the rules and regulations of a bank’s head-office in the City are in complete harmony with those of one of its branches within a quarter of an hour’s walk of the seat of government. It is, therefore, impossible to define London banking, because London is vast, and the system eminently elastic and adaptable.

The following table will give one a fair idea of what rate should be paid upon a loan or advance, fully covered by securities which can be sold on the Stock Exchange practically at any moment:—

With Bank rate at 2    % Customer pays 2½ to 3    %
With Bank rate at 2½ % Customer pays 2½ to 3    %
With Bank rate at 3    % Customer pays 3    to 3½ %
With Bank rate at 3½ % Customer pays 3½ to 4    %
With Bank rate at 4    % Customer pays 4    to 4½ %
With Bank rate at 4½ % Customer pays 4½ to 5    %
With Bank rate at 5    % Customer pays 4½ to 5½ %
With Bank rate at 5½ % Customer pays 5    to 6    %
With Bank rate at 6    % Customer pays 5½ to 6    %

It must be distinctly understood that this table will only serve the purpose of a guide to what the rate ought to be, and that the customer can, if his credit be good, by bringing pressure to bear upon his banker, very probably make a closer bargain with him. For instance, with the Bank rate at 4½, a person whose securities and credit are beyond question might obtain a loan at ½ below Bank rate. He may further arrange that his rate shall be ½ per cent. below Bank rate, with a minimum to the banker of 3 or 3½. That is to say, his rate will never be less than 3 or 3½, and when the Bank rate is above 3½, then he pays ½ below it.

On the other hand, the customer who accepts the rate mentioned by the manager without question fares badly, for no dealer quotes his minimum rate first. He reserves that, as is usual in the highest financial circles, until last, and he finds it difficult to look pleased when it is forced from him, because his directors, if he quoted it too often, may come to the conclusion that his hand is losing its cunning. The client will have to do more than ask in order that he receive: he must use argument that is convincing. Knowing that certain bank-managers are running about the City in search of desirable accounts, just as are bill-brokers for first-class paper, he not unnaturally comes to the conclusion that he can find a cheaper market elsewhere, so, having exhausted the gentler modes of suasion, the client finally and reluctantly threatens to apply elsewhere, or reveals the fact that he has already done so, and with what result, when the manager, if he think him in earnest, quotes his very lowest rate, and asks him not to mention it outside. Where the loan is a small one, however, the directors will not trouble themselves greatly as to whether it either goes or remains.

The much-vaunted 1 per cent. above Bank rate is, of course, only paid by the small man, whose securities are not of the better class, and by the customer who has not studied the market. Some London banks, we know, charge a rate on the daily balances and a commission, but this is the ordinary country practice, so, in order to avoid reiteration, it has been thought desirable to discuss the method in the next chapter.

CHAPTER VIII
OVERDRAFTS IN THE COUNTRY

In the preceding chapter we discussed the “loan account” and its mysteries, and now we are brought face to face with the country practice of granting the customer a “limit.” The banker, we will assume, agrees that, upon his depositing certain securities, he may overdraw his current account to the extent of £1,500. This sum, then, is the client’s “limit” which he is not supposed to exceed, and if he draw a cheque that would, when presented for payment, overdraw his account beyond the agreed figures were the banker to honour it, the latter is entitled to return the document without notice. As a rule a bank reserves to itself the right of calling in a loan or advance at any moment, but in practice reasonable notice is always given.

Though the customer has arranged for a “limit” of, say, £1,500, it is quite possible that he will not overdraw his account to that extent; but at those seasons of the year when his outgoings are always in excess of his receipts the balance against him at the bank will draw closer to his limit. If, however, his business be in a healthy condition the corner will soon be turned; and as his payments in begin to exceed the cheques he draws, his indebtedness to the bank speedily sinks below the average. Each payment to his credit reduces his debit balance, and every cheque debited, of course, increases it, but as the banker charges him a rate upon the sum owing at the end of each day, it follows that the customer only pays interest upon the actual money he has borrowed—not upon the amount of the “limit” as does the London client upon the amount of his “loan.” This arrangement is much the fairer to the borrower, who, however, must take care that the banker do not charge him a high rate of commission upon his turn-over under it.

We can now consider the rate of interest a customer should pay on an advance which is more than covered by marketable securities that can be sold on the Stock Exchange at a moment’s notice. Most provincial towns, we know, are over-banked; and as each banker is the rival of the rest it follows that a person whose cover is tangible can, by playing off the one against the other, obtain very fine rates. But he may not care to adopt these tactics; still, as the method may appeal to some, it would be a pity not to dwell upon its possibilities, for it is often undoubtedly effective where argument fails. The would-be borrower of this class may be referred to the table of rates in Chapter VII, and to the remarks made concerning well-secured advances in London, as, competition for a secured overdraft being even more keen in the country, where tangible securities are less in evidence, he should experience little difficulty in coming to a similar arrangement with reference to the rate of interest.

For instance, suppose a man who possesses a good list of marketable stocks and shares wishes to borrow £5,000 from his banker, and calls upon the branch-manager, who at once expresses the opinion that his directors will have no hesitation in granting his request. They next discuss terms. The manager, who is a humble servant of the company, and who, moreover is anxious to pass the rest of his days in that honourable capacity, looks at his customer, thinking hard the while, and then, trusting his man lacks business experience, suggests 5 per cent. per annum on the overdraft and ⅛ per cent. on the turn-over. The turn-over of an account consists of the cheques, bills, etc., debited during the quarter or half-year, and the customer, therefore, is asked to pay a commission of 2s. 6d. upon each £100 debited in his pass-book. There is nothing very remarkable in this request on the part of a dealer in cash and credit who is selling his wares, and to express surprise is to display a lack of knowledge of business procedure, but to agree to his proposals would betoken a lamentable ignorance of the market.

Should the Bank rate be at 4 per cent. the customer would endeavour not to pay more, for his securities do not give him that return, and he has the option of selling them. And as to paying a rate on his turn-over, he knows that if he make application elsewhere he can probably find a banker who will forego that charge, so he either refuses to entertain it or else agrees to pay a merely nominal sum. With a higher Bank rate than 4, he will try to obtain his advance at ½ below the official minimum; and if the Bank rate be low, and loanable capital therefore cheap at the moment, he can suggest “½ per cent. below Bank rate with a minimum of 3½.” Here, again, reference may be made to the previous chapter. Of course, if there are only two banks in his town, and consequently but little competition, he will not find the manager so ready to listen to him, but he certainly should not pay more than Bank rate when it is above 3½, while he will remember that the manager’s advice, if he be so rash as to express an opinion, is not disinterested.

We next come to the customer whose “limit” is covered by marketable securities and deeds of house property or land. The banker will have the property valued by his own man, and then perhaps advance up to about two-thirds of the value placed upon it after the deeds have been examined by the bank’s solicitor and formally deposited, the customer, of course, paying all expenses. The securities, if they are a fairly good list, he will advance against to the extent of about 75 per cent. of their market value, thus leaving a margin of 25 per cent. in his favour to cover the risk of depreciation, for they take care of themselves—these bankers. The majority of advances in the provinces would be made against securities and deeds in varying proportions, and it is as well to remember that the larger the proportion of tangible securities the smaller should be the rate.

A banker, it need not be said, does not want to be bothered with a man, however good his securities, if he think that there is the probability of his having to call in the advance or to claim against his estate in the Bankruptcy Court; and though a customer cannot deposit marketable stocks and shares to the full extent of his advance, but is compelled to offer deeds and securities, as in our illustration, his credit is often so good that many other bankers in his town would readily listen to his proposals, and be only too glad to get his name on their books, perhaps even at a small sacrifice. Such a person can make a very close bargain with his banker, and would not, for instance, think of paying 5 per cent. when the Bank rate is at 3 or under. He would, in fact, especially if he were conducting a large business, probably be in a position to make as good terms as the man whose securities are wholly tangible.

The manager, of course, let the Bank rate be what it may, will endeavour to obtain from 4½ to 5 per cent. upon the overdraft of an account thus secured, and to charge a rate of from ¹/₁₆ to ⅛ per cent. upon the turn-over; but if the customer show fight, and losing the account may not be thought desirable, because of the local influence he possesses, then, rather than risk his applying elsewhere, the agent usually lowers his rates, for he naturally does not enjoy the thought that esteemed clients are perhaps paying little calls upon his rivals, and thereby advertising his own unpopularity. When the rate of commission is the bone of contention the customer’s first aim will be to pay no commission whatsoever, and to at least arrange for his advance at Bank rate with a minimum of 4 per cent. Probably he may do better with reference to his interest rate; and, if he finds that the manager holds out for commission, then he can agree to a nominal charge of from one to five guineas or so each half-year according to the volume of his business.

We now have to discuss the position of those persons who can only offer their banker the deeds of house property, land, and those other securities for which the market is a purely local, and, therefore, uncertain one. A banker, whose deposits are mostly payable at call and short notice, naturally prefers to advance against those securities that are quoted on a Stock Exchange, and does not care to lock up a large proportion of his resources in house property, etc., of which he cannot readily dispose in an emergency. But tangible securities are not always to be had for the asking; and, as he must employ his capital in order to pay a dividend, he is compelled to advance to a certain extent against, from his point of view, the less desirable securities such as houses and shares in some local company, though he always prefers to deal with the man who can deposit the more easily negotiable variety. Further, a prudent banker will only devote a certain amount (and that a relatively small amount) of his resources to advancing against the deeds of houses, land, and so on; and as the demand for overdrafts against this class of cover is always greatly in excess of the supply, it follows that those persons who borrow upon it have to pay high rates.

We have seen that the client who possesses tangible securities can, broadly speaking, make his own terms but it is otherwise with the man who wants an overdraft for business purposes against the deeds of a house he owns; and he it is who is compelled to pay 5 or 5½ per cent. per annum interest, be the Bank rate what it may, and ⅛ per cent. on the turn-over of his current account; for he will not find the competing banks anxious to secure his business by lowering their rates. Should his credit be good, and his business be considerable, he might succeed in reducing his commission rate to ¹/₁₆ or even ¹/₃₂ per cent., and, of course, he will make the attempt, but it would be unwise to more than wish him success in his endeavour. A really large tradesman, however, whose securities consist of this variety, will sometimes find a bank-manager anxious to secure his account, because he thinks he may influence others in his favour, and such a man will not pay high rates before he has at least sounded two or three managers of well-known banks and discovered that their terms are not more liberal. He may even find that he can get his account worked free of commission, or have the one he is paying appreciably reduced.

Again, a man can mortgage his property, but, as a rule, he prefers to obtain a “limit” on it from his banker, more especially if he intend gradually paying off the advance, as, should he borrow £500 on mortgage, he will have to pay a rate on that sum, but when he obtains a “limit” of £500, and his account is only £250 on the wrong side, he pays on the smaller amount only. As a rule, a solicitor acts as middleman between a mortgager and mortgagee; and the borrower might remember that solicitors, when advancing their clients’ money, or, indeed, when they act in any capacity, are quite as human as bank-managers, and that it is always advisable to higgle with them over the rate, which, of course, should be based on the value of loanable capital at the time. The deed usually stipulates for six months’ notice on either side.

A customer who is desirous of obtaining an advance upon property which already has a first mortgage upon it, will not find the banks either sympathetic or eager to assist him; though if his banker be “in” with him he will, of course, accept any additional security which is likely to lessen his risk or minimize his loss. In the usual course of his business second mortgages and equities of redemption are not thought desirable, and then, again, the law does not give a second mortgagee all the protection it might.

The current-account customer, who calls upon the bank-manager with the object of obtaining an overdraft against property, will generally be asked if his life is assured, and if he reply in the negative, he may be requested to assure to the extent of the “limit” the bank is ready to grant him, and to deposit the policy as collateral security with the deeds. Many men of small means assure their lives, and a banker, provided the office be a good one, will generally advance up to the surrender-value of the policy. This he ascertains by applying to the assurance company, which tells him at what figure they will commute it. The rates charged upon this class of security are high.

Where the customer’s overdraft is only partially secured, he must make the best terms he can for himself; and, as there is practically no competition for such an account, he will probably have to pay from 5 to 6 per cent. per annum interest and from ⅛ to ¼ per cent. on his turn-over. These are the maximum rates, which, no doubt, he will attempt to reduce, though with what success must remain problematical. The person who obtains an overdraft without security must, as a rule, give thanks, and pay up with a light heart, for should he apply elsewhere he would be received with open-mouthed astonishment. A good name in the banking world implies that its owner is worth some few thousands of pounds; and though, in the moral sense, its value is considered beyond price, directors, while appreciating it in the abstract, regret their inability to safely ensconce it within their safes, and therefore, as practical men, their powerlessness to advance against it unless backed by collateral securities.

Lastly, a few words may be said anent personal security. If you have a wealthy friend who is willing to sign a promissory note with you, or to guarantee your banker against loss up to a certain sum, an overdraft can soon be arranged; but such a request puts friendship to the severest test, and it may be extremely difficult to find your friend at home should he as much as suspect the reason of your visit.

We can see that competition is centred around the safe business, and that though those persons who possess tangible securities can make very close bargains, the less desirable is the cover from a banker’s point of view, other considerations being equal, the higher are the rates the customer will probably be asked to pay. The man who possesses the right class of securities should, therefore, take them to the cheapest market, and the owners of the less marketable varieties might remember that from 4½ to 5 per cent. per annum on the overdraft and ⅛ per cent. commission on the turn-over are very full rates, which may often be considerably reduced when the customer, whose credit is good, does a large and profitable business.

The only remaining subject for discussion is the relation that exists between the bank-manager and his directors, who confine his power to very narrow limits. The city-manager, for instance, at the head-office of a London joint-stock bank, might be empowered to grant loans to the extent of from £2,000 to £3,000 without first obtaining the consent of the board. Any application in excess of his “discretionary power,” as it is called, would have to be submitted to the directors, two or three of whom, during certain hours, are always in attendance each day, in order to deal with those requests for large loans where an immediate decision is essential, while a full board would probably sit twice a week. The board, of course, would be asked to confirm the decisions of the “daily” committee, and from time to time the loans granted by the city-manager would be subjected to criticism by that body.

At the metropolitan, suburban and country branches the “discretionary power” of the agent or manager would be based upon the amount of business transacted at the branch. In a small town of from 20,000 to 30,000 inhabitants a manager might have power to grant, when necessary, loans to the extent of £350 and under, without first obtaining the sanction of the board. All applications for advances in excess of his power would have to be immediately submitted to the head-office, accompanied by a letter, describing the nature of the security offered, and stating the desirability of obtaining or keeping, as the case may be, the account. This report, in every probability, would be addressed to the “advance department,” where it would be criticized by the officials before going into the board-room. Many questions would be asked with reference to the working of the applicant’s account, his annual turn-over, and so on. If he came to them from a rival bank then they would want to see his pass-book, and, were he already a customer, the manager would send a list of his daily balances and comment upon his means, habits, etc. Having satisfied themselves upon these points, the chief of the advance department reports to the general manager, who submits the application to the board. The process, it will be seen, is cumbersome and necessarily slow, for it often takes the machine as many days to give a decision as it does a private banker minutes.

The manager, evidently, has very little real power under this system, and, practically, the branches are managed from the head-office, the agent being a kind of clerk-in-charge, who reports to, and announces the decision of, his directors. Indeed, the rules and regulations are framed for this very purpose, and the banks make it part of their policy to effectually hold their managers in check, and to so arrange the work of an office that but little is left to their decision, while it is the duty of the accountant to instantly report any irregularity to the general managers. The average bank-manager, it must be remembered, has had neither a business nor a financial training, and it would therefore be extremely risky to give him a large field in which to make experiments. Of the two evils the boards of the banking companies choose by far the lesser, and, by allowing him a small “power,” they tether him like a donkey to a stake, thereby limiting his grass to the length of his rope.

In a large manufacturing city a manager’s discretionary power would not exceed £1,000 to £1,500, and in the smaller cities it would range from £500 to £1,000, while in the provincial towns it would be from £300 to £500, according to population. Each month the manager, as a rule, has to send to the head-office a report upon all accounts that are over his power, together with a separate one relating to bills discounted, and at least twice a year he must submit a long return of every overdrawn account on the books of the branch certified by the accountant and himself. The head-office, in short, watches him as a cat does a mouse, and criticizes those advances he himself is allowed to make severely should they not meet with the approval of those in authority.

Then, again, as though determined that his steps shall not stray from the beaten track, inspectors visit his branch four or five times during the course of a year, and, needless to say, the board thinks it neither necessary nor desirable to advise him of the day one will arrive. When the inspection is a short one the unwelcome visitor counts the cash, checks the bills and securities, just glances casually through the ledgers and then takes his departure, when the atmosphere seems lighter by his very absence, for exalted officials are a weariness to the flesh. But during a long inspection, which occurs about twice a year, the manager has to make a short report upon every overdrawn account in the books. This done, he gives his report to the inspector, who reads through his remarks and proceeds to criticize them. Having added a few words of his own, the visitor posts the bulky report to the advance department at the head-office, and, finally, it is laid upon the board-room table. Then the fun begins. The manager, after a few weeks of anxious suspense, receives a long list of caustic inquiries relating to certain overdrawn accounts which have failed to satisfy the board, together, perhaps, with imperative instructions to get such-and-such overdrafts reduced to certain figures at a given date. Sorely tried in temper, the poor agent sets about answering the questions put to him, and then, much against his will, he writes to certain clients whom he asks to give him a call.

Now, perhaps, the customers of the joint-stock banks will understand why they receive so many letters requesting them to keep their accounts at the agreed limit, or even to reduce or pay off the overdraft unless they can deposit either more desirable or additional security. At such a moment an irritable person is disposed to regret that “a company has neither a body to be kicked nor a soul to be damned.”

CHAPTER IX
HOW TO CHECK BANKERS’ CHARGES

Bankers make up their pass-books in two ways. When the customer is in account with the banker the cash he pays in appears on the right-hand side of his book, and the cheques he draws out on the left. The more general method, however, is to make the bank in account with the customer, when the debits and credits in the pass-book are an exact copy of the client’s own cash-book, whereas the entries in the bank’s ledger are reversed. The latter and more usual practice will be adopted in this chapter.

Customers often complain that they are unable to check their half-yearly charges, that they do not quite understand at what rates they have been charged; and as some bankers are most careful to add the interest and commission together, and then to enter the aggregate in the pass-book as “charges” simply, it is a little difficult to understand how they expect their clients to check their interest and commission. For instance, suppose a man is charged £5 2s. 6d., and that the banker writes in his pass-book:

By charges, £5 2s. 6d.

Here we have a puzzle that is more than Chinese in its intricacy and suggestiveness, for it is evident that unless the customer remembers that he has arranged to pay, say, 4 per cent. per annum interest and ⅛ per cent. commission, he will experience considerable difficulty in verifying the figures. As a matter of fact, the companies are not particularly anxious to enlighten him, for see how easily the client could have checked his charges were they specified thus:—

By interest at 4 per cent. | £4 | 2 | 0
By ⅛ per cent. commission on turn-over | 0 | 15 | 6
By postages | 0 | 5 | 0
| £5 | 2 | 6

Such a statement is almost beautiful in its simplicity, and the entry “postages” may, perhaps, give us some clue to the mystery, as it is evident that a manager, by debiting charges in one sum, is thereby enabled to hide certain debits such as “postages,” “telegrams,” “legal expenses,” “stamps,” and so on, at which, were they entered separately in the bank-book, the customer would probably strongly protest. And then, again, by adopting this method of darkness, those persons who leave everything to the agent never know their rates, and they are sometimes too timid to call and inquire, as though fearing that such a request would reflect upon the agent’s honour.

Certain banks have an account open in their ledgers called Law Charges or Sundry Charges, to which doubtful debits are posted in the names of various customers. At the end of each half-year these sums are credited to the account in question and included in the clients’ charges. When, for instance, a manager does not wish a person to know that he is paying a fee of £3 3s. to the bank’s solicitors for the examination by them of certain deeds which he has deposited as security, he will probably resort to this subterfuge.

We can now criticize the account of John Jones, who on the 31st December, 1902, owed his banker £500 2s. 6d., and examine the entries in his pass-book from that date to the 30th June, 1903, when his bankers rule off their books and calculate their charges. Assuming that Mr. Jones keeps proper books, he will have an account in his ledger, which, after making allowance for cheques drawn but not presented for payment, will agree with his pass-book in every particular. The following is a copy of his bank-book:—

The London and Cheatem Bank, Ltd., with Mr. John Jones.

Dr. | Cr.
1903. |  |  |  |  | 1902.
Jan. | 20. | To Cash | £300 | 1 | 6 | Dec. | 31. | By Balance | £500 | 2 | 6
|  |  |  |  |  | 1903.
Apl. | 22. | To Cash | 90 | 1 | 3 | Feb. | 15. | By Smith | 10 | 0 | 0
May | 15. | To Cash | 200 | 5 | 0 | Mar. | 31. | By Jones | 70 | 3 | 4
May | 18. | To Cash | 50 | 0 | 0 | Apl. | 22. | By Robinson | 8 | 0 | 6
May | 31. | To Cash | 9 | 0 | 0 | May | 26. | By Self | 5 | 10 | 0
June | 10. | To Cash | 100 | 0 | 0 | June | 5. | By Williams | 16 | 11 | 2
June | 28. | To Cash | 7 | 0 | 0 | June | 25. | By Brown | 7 | 2 | 3
June | 30. | To Interest | 0 | 3 | 2 | June | 30. | By Charges | 5 | 2 | 6
|  |  |  |  |  |  |  | By Balance | 133 | 18 | 8
|  |  | £756 | 10 | 11 |  |  |  | £756 | 10 | 11
June | 30. | To Balance | £133 | 18 | 8

Mr. Jones’ ledger, then, assuming that none of his cheques are outstanding, will show the same balance at the debit of “bank,” though, of course, the dates will not agree, as Mr. Jones credits the bank on the day that he draws a cheque, whereas the bank debits him on the day that it pays it. We can see that his banker paid a cheque to Smith on the 15th February. If John Jones drew the said cheque on the 12th, then he debited Smith’s account and credited the bank on the same day. But these entries, as we shall see in our next illustration, appear upon the opposite sides of the banker’s ledger.

Mr. Jones, whose securities are tangible, has arranged with the manager that he is to pay 4 per cent. per annum on the overdraft and ⅛ per cent. on his turn-over, and to receive 1½ per cent. on his daily credit balances. Having received his pass-book, he wishes to check his charges, and after making two or three attempts, he is convinced of the futility of his efforts, so renounces his task in despair. He has worked the figures out in his own way, which, though a little primitive, he generally finds answers pretty well, and, as his figures come to something like those entered in the pass-book, he supposes that it is all right. Perhaps the following copy of his account as it stands in the bank’s ledger may therefore prove both illuminating and instructive:—

Jones, John, General Dealer, 5, High Street, Exeter.

Date. | Particulars. | Dr. | Cr. | Dr. or Cr. | Balance. | Days. | Total. | Total.
1902. |  | £ | £ |  | £ |  | £ | £
Dec. | 31. | To Balance | 500 | 2 | 6 |  |  |  | Dr. | 500 | 2 | 6 | 20 | 10,000
1903. |  |  |  |  |  |  |  |
Jan. | 20. | By Cash |  |  |  | 300 | 1 | 6 | Dr. | 200 | 1 | 0 | 26 | 5,200
Feb. | 15. | To Smith | 10 | 0 | 0 |  |  |  | Dr. | 210 | 1 | 0 | 44 | 9,240
Mar. | 31. | To Jones | 70 | 3 | 4 |  |  |  | Dr. | 280 | 4 | 4 | 22 | 6,160
Apl. | 22. | By Cash |  |  |  | 90 | 1 | 3 |  |  |  |  |  |
|  | To Robinson | 8 | 0 | 6 |  |  |  | Dr. | 198 | 3 | 7 | 23 | 4,554
May | 15. | By Cash |  |  |  | 200 | 5 | 0 | Cr. | 2 | 1 | 5 | 3 |  | 6
May | 18. | By Cash |  |  |  | 50 | 0 | 0 | Cr. | 52 | 1 | 5 | 8 |  | 416
May | 26. | To Self | 5 | 10 | 0 |  |  |  | Cr. | 46 | 11 | 5 | 5 |  | 235
May | 31. | By Cash |  |  |  | 9 | 0 | 0 | Cr. | 55 | 11 | 5 | 5 |  | 280
June | 5. | To Williams | 16 | 11 | 2 |  |  |  | Cr. | 39 | 0 | 3 | 5 |  | 195
June | 10. | By Cash |  |  |  | 100 | 0 | 0 | Cr. | 139 | 0 | 3 | 15 |  | 2,085
June | 25. | To Brown | 7 | 2 | 3 |  |  |  | Cr. | 131 | 18 | 0 | 3 |  | 396
June | 28. | By Cash |  |  |  | 7 | 0 | 0 | Cr. | 138 | 18 | 0 | 2 | 2,268* | 278
June | 30. | By Interest |  |  |  | 0 | 3 | 2 | Cr. | 139 | 1 | 2 |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  | 181 | 37,422 | 3,891
|  | To Charges | 5 | 2 | 6 |  |  |  |  | 133 | 18 | 8 | 4 per cent. per ann. on |
|  | To Balance | 133 | 18 | 8 |  |  |  |  |  |  |  | £37,422 for 1 day | £4 | 2 | 0
|  |  | 756 | 10 | 11 | 756 | 10 | 11 |  |  |  |  | ⅛ per cent. on turn- |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  | over £617 | 0 | 15 | 6
June | 30 | By Balance |  |  |  | 133 | 18 | 8 | Cr. | 133 | 18 | 8 | Postages | 0 | 5 | 0
|  |  |  |  |  |  |  |  |  |  |  |  |  | £5 | 2 | 6
|  |  |  |  |  |  |  |  |  |  |  |  | Allowed— |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  | 1½ per cent. per ann. |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  | on £3,891 for 1 day | £0 | 3 | 2

Three days’ interest upon “cheques” paid to credit. 756 × 3.

Now everything should be as clear as the flowing brook to Mr. Jones. He should, in the first instance rule a sheet of paper in exactly the same manner as the specimen page of the banker’s ledger. He next carries the entries from his pass-book to the ruled sheet, taking care that each amount, whether debit or credit, is placed under its right date, and at the end of each day, or when the next date appears, he extends the balance, as in our illustration, for it is upon this balance that the bank either allows or charges him interest for one, two, or twenty days, as the case may be, at an agreed rate. He then multiplies this balance by the number of days, and carries the product into a “total” column, which he adds up at the end of the half-year. This done, the rest is a very simple business for anybody who can manage a rule-of-three sum.

The banker, we can see, brings forward the amount of Mr. Jones’ indebtedness on the 31st December when his books were ruled off. This opening entry, which amounts to £500 2s. 6d., is placed in the debit column of his ledger, and extended as a debit balance. Upon the morning of the 1st January, therefore, one day’s interest was owing on £500, but the next operation upon the account did not take place until 20th January; and as from 31st December (excluding the 31st and counting 1st January as one day) to 20th January (inclusive) there are twenty days, the customer owes twenty days’ interest upon £500. If we multiply 500 by 20, as in our form, and carry the product into “total” column, he then owes one day’s interest upon £10,000. The result, of course, is precisely the same; so a banker, in order to save a multiplicity of calculation, adopts this rule throughout, with the result that, at the end of the half-year, his client owes one day’s interest upon £37,422.

Bankers, when referring to the figures in the “total” columns, speak of them mysteriously as “decimals,” and the customer, upon hearing so ominous a word, jumps to the conclusion that bankers’ calculations are most difficult and involved, when, in reality, they are of the simplest nature imaginable. Evidently the product in question is the result of a simple multiplication sum; so why bankers should speak of extending the “decimals,” when there is none to be extended, must ever remain one of the enigmas of their trade.

As a rule, should the shillings in the balance column be ten or over, the banker, in making his calculations, calls them one pound, and when less than ten shillings he ignores them. On the 20th January, for instance, the shillings are excluded, but upon the 26th May £47 is the sum we have to multiply by five. Further, in arriving at the number of days between two dates, exclude the first date and include the second, or vice versa, but do not include both dates.

The second “total” column of our form is for creditor results, or, as bankers incorrectly call them, creditor decimals, the left-hand column being, of course, the debtor, and the right the creditor, just as though they were left-and right-hand pages of a cash-book. Having ascertained the number of days from date to date, we add them up, and next proceed to balance them. From 31st December, 1902, exclusive, to 30th June following, inclusive, there are 181 days, and, as those are the figures in our days’ column, we know that they are correct. Next we add up the “total” columns, and here great care is necessary, because it is impossible to balance the figures.

Dealing with the debit total first, we find that John Jones owes his banker one day’s interest at 4 per cent. per annum upon £37,422. Hence:—

37,422 × 4 × 1 | = £4 2s.

100 × 365

But Mr. Jones will make these figures £35,154, and the answer £3 17s. 1d., and upon asking for an explanation he will be told that he has been charged three days’ interest upon the cheques he paid to his credit during the half-year. The banker argues that his client receives credit for the cheques he pays in immediately, whereas he himself has to collect them through the “clearing,” and does not receive the money for two or three days. The argument is somewhat fallacious as to the length of time, but we need not discuss that minutely. Mr. Jones points out that he pays in cash and local cheques as well as cheques upon London and country bankers, and that, therefore, he cannot understand why the manager charges him three days’ interest upon the total sum paid to his credit during the half-year. He will, of course, decline to submit to this charge, and request the manager to refund him 4s. 11d. (three days’ interest upon £756 at 4 per cent. per annum).

With reference to the rate, the average Bank rate from 31st December to 30th June works out at £3 17s. 1d. While his account was overdrawn, however, the official minimum was at 4 the whole time, so the rate is a fair one, but this question has already been discussed in the previous chapter.

His banker owes him 1½ per cent. per annum upon his creditor balances, which are multiplied by the days and extended in our second “total” column. He has, therefore, to receive 1½ per cent. per annum upon £3,891 for one day. Hence:—

3,891 × 1½ × 1 | = 3s. 2d.

100 × 365

As this is the sum debited in the pass-book, Mr. Jones’ mind is at rest à propos of the correctness of the figures; but it will probably occur to him that the rate might be improved, for the fact that one is borrowing at 4 and lending at 1½ is not conducive to harmonious thinking.

Next, he checks the commission on his turn-over, which he makes £117. He pays ⅛ per cent., of course, upon the amount of the cheques credited in his pass-book during the half-year, and these come to the sum aforesaid. Hence:—

117 × 1 | = 2s. 11d.

100 × 8

But his banker has charged him ⅛ per cent. on £617. His glance falls upon the balance forward of £500 2s. 6d., and it at once occurs to him that the manager has charged him thereupon, that, in short, a mere banker’s opening entry has been included in his turn-over. Excited by this discovery, Mr. Jones calls upon his banker, and points out to him, with a touch of Celtic intensity, that he sees no earthly reason why he should pay 12s. 7d. simply because the bank has made an entry of its own in his pass-book. Moreover, with a keen eye for mathematics, he clearly demonstrates that he has already paid commission upon the various transactions which resulted in the said balance; so the manager, adjusting his spectacles, and praying Mr. Jones to moderate his language, allows that, in the hurry of business, a little mistake has occurred. A customer, when checking his charges, should see that he does not pay commission upon opening entries of this description, as, needless to say, they are merely there in order to enable the banker to balance his books, and bear no relation whatever to a client’s turn-over, though they are sometimes added to it.

Just referring to the rate of commission, ⅛ per cent. we know, seems too much, so Mr. Jones may be recommended to read Chapter VIII of this book.

Lastly, we come to the entry “Postages, 5s.” The manager, during the half-year, writes numerous letters to his customers, sends their pass-books to them through the post, and so on; therefore, in order to reduce his incidental expenses, he debits a few shillings to certain easy-going clients before the books are ruled off, and so as to prevent awkward questions being asked, he includes these small sums with “charges.” Mr. Jones, who has probably not received half a dozen letters from the bank during the half-year, will naturally refuse to pay this imposition.

Should a customer not have made arrangements with the manager as to the rates he is to pay, he would ask at what rates his account has been charged, and then proceed to check the banker’s figures in the manner indicated in these pages. Such an entry as “charges” has nothing better than its extreme vagueness to recommend it, and the client, when he finds this word in his pass-book, should, if he experience any difficulty in checking the figures, return it to the manager with the request that he will give him full particulars as to the rates of interest and commission, and also tell him the amount of any additional charge or charges, if there be any.

We can now make out a table of the amount Mr. Jones has to reclaim from his banker:—

Customer’s Calculations. |  | Banker’s Calculations.
4 per cent. per annum |  |  |  |  | 4 per cent. per annum |  |  |
on £35,154 | £3 | 17 | 1 |  | on £37,422 | 4 | 2 | 0
⅛ per cent. on £117 | 0 | 2 | 11 |  | ⅛ per cent. on £617 | 0 | 15 | 6
Postages, nil | 0 | 0 | 0 |  | Postages | 0 | 5 | 0
Balance to be refunded | 1 | 2 | 6 |  |  |  |  |
| £5 | 2 | 6 |  |  | £5 | 2 |  6

The commission on £617 is 15s. 5¹/₁₀d., but a banker would charge 15s. 6d. Mr. Jones, we can see, has been overcharged to the extent of £1 2s. 6d., and we may rest quite assured that he will not be easy in his mind until he has recovered this sum from his banker.

Sometimes a customer, when ruling off his own books, draws a cheque for, say, £600, and pays it to his credit at the bank. This would be a cross entry. But does he understand that this sum will be included in his turn-over, and that if he be charged ⅛ per cent. thereupon, he pays 15s. to his banker for making a couple of entries in his ledger? Again, if the manager charge him three days’ interest at 5 per cent. per annum upon the sums paid to his credit, he will pay another 5s. (about), and at this rate a cross entry of £600 would cost him 20s. The luxury, it must occur to him, is expensive; and as this illustration is not a figment of my imagination it is evident that everybody who keeps a banking account should understand how to check a banker’s charges.

It seems an act of supererogation to point out that the average account would contain very many more entries than the one under review, but if the reader will carefully follow these instructions he should find little difficulty in checking the charges in any bank-book. Where the account has been overdrawn during the entire quarter or half-year the first “total” column must be used. Our example is that of a mixed account, and both columns are required; but should the account be a creditor one, then the extensions are made in the second “total” column, and the banker, of course, will allow the customer a rate.

When checking the interest of a loan account it is advisable to obtain a separate pass-book from the banker, and not to take out the entries from the current-account pass-book wherein the interest is debited. Should it be found that the commission has been charged upon the amount of the loan, the customer would ask for an explanation, and in checking his interest he would proceed in exactly the same way as shown in our example.

Again, we have seen that some customers arrange that their rate shall be either Bank rate or ½ above it, as the case may be. Suppose that the Bank rate on the 22nd April were raised from 3 to 3½ per cent., and that it had stood at 3 from 31st December. The customer, who has agreed to pay his banker ½ above Bank rate, will then owe 3½ per cent. per annum on the sum or sums he has borrowed from 31st December to 22nd April. Applying this hypothesis to the account under review, we rule a line beneath the figures 6,160 in “total” column, and add up the column, which comes to 30,600. From 31st December (exclusive) to 22nd April (inclusive) there are 112 days (see page 59), and, as the figures in the days’ column give the same result, we know that they are correct. The customer, then, owes his banker one day’s interest at 3½ per cent. per annum upon £30,600. At each change of the Bank rate this process must be repeated; so instead of having one rule-of-three sum to work out, as in our illustration, there may perhaps be four or five of them.

Should the fortunate possessor of a large creditor account have arranged with his banker that he is to receive 1½ per cent. below Bank rate on his daily credit balances, then assuming that the balances on our form were creditor, the banker would owe 1½ per cent. per annum on £30,600 for one day. The customer, when calculating the amount due to him, would proceed in the same manner as indicated above, and he might remember that, in arriving at the number of days from one change of the Bank rate to another, he excludes the day from which he calculates and includes the date to which he calculates. The rest is easy.

CHAPTER X
BILLS, COUPONS, FOREIGN DRAFTS, ETC.

Discounted Bills.

The city-article of every morning paper contains a list of market discounts from which one can see at what rates the bill-brokers and discount-houses are taking the various classes of bills. Bank-bills would be paper either accepted or indorsed by the banks; and fine trade-bills or best trade-bills would be the acceptances of those firms whose credit is so good that the question of their paper not being paid at maturity is practically never considered. As the credit of the banks ranks highest it follows that bank-bills can be discounted at the finest rates. Again, less risk is run on a three months’ bill than upon one for four or six months. In other words, the position of an acceptor is less liable to change in three months than in six, therefore short bills are in greater favour; consequently, the rate upon a six months’ bill, other considerations being equal, will be higher than that upon one which has three months to run, though the difference, of course, will only be a fractional one.

The bill-brokers, we know, obtain most of the bank and the fine bills, but they are also dependent upon Lombard Street for the greater part of their resources; and as a bank, which owes huge sums on demand, likes to keep its assets as liquid as possible, it follows that bankers take short bills from the brokers in preference to those which are drawn for long terms, for the simple reason that should they think the outlook uncertain and deem it prudent to strengthen their reserves, the shorter bills will run off the more quickly, thereby providing them with additional cash. A three months’ bill, therefore, from a banker’s standpoint, is considered more desirable than one at six months’ date.

When trade is active and loanable capital dear market rates of discount will naturally be high, and the Bank rate, speaking broadly, is generally in touch with the market rate for three months’ bank-bills. Conversely, when trade is dull and the prices of commodities are falling, fewer bills will be on offer; but the fund with which they are discounted will be proportionately greater, consequently the market rates of discount will be low, as, also, will be the Bank rate. It must be remembered, however, that the Bank of England discounts bills for its own customers below its published rate—when its minimum is temporarily above the market rate; for were it not to adopt this course its customers would naturally discount their bills with the brokers.

As the bill-brokers are middlemen between Lombard Street and those merchants who have bills to sell it follows that the market rate of discount is always below the bankers’ rates, and that, therefore, holders of the better-class paper take it to the brokers, but this peculiarity has been mentioned in Chapter VI. It may, however, be added that the remittance of the best country bills to the London bill-brokers is a comparatively new movement, which the banks do not regard with favour. Competition between the brokers being keen, it is questionable whether the finest rates are quoted in the papers, for the merchants who have bills for sale will, of course, not neglect to higgle with the brokers, who, like the bankers themselves, certainly would not advertise their lowest rates.

The large discount-houses and brokers possess considerable capital, though it would look extremely small when contrasted with the short-loan fund, and they deposit certain approved securities with the banks against the money at call advanced to them; but the small bill-brokers are little better than runners for the banks with whom they re-discount their bills almost as soon as they are in their cases, and their capital would consist principally of a silk-hat and a bill-case. Certain brokers on the Stock Exchange, it may be added, stand in much the same relation to Lombard Street. Besides borrowing from the banks the bill-brokers also accept deposits from the public, basing their rate upon the Bank rate, and allowing a slightly higher rate than the London bankers.

The market for bills is a special market, into which the banks pour their surplus funds, so customers will be careful not to confuse the price of a bill with the price of a loan, though, of course, there is a close connexion between the two; for when loanable capital is dear discount rates too are high, and when the former is cheap the latter are low. The London customer, who discounts fine bills with his banker, will naturally take care that he does not pay a higher rate than the bill-brokers would charge him, and when he discounts second-rate trade-bills he will remember that competition is very keen, and that if his credit be good he can generally induce the manager to quote a fine rate.

Coming to provincial banking, we have seen that the large merchants and manufacturers remit some of their best trade-bills to London; but in the great cities, where the banks are numerous, the competition for good paper is considerable; and as the customer usually keeps his current account at the bank with which he discounts his bills, he can generally, if his account be worth retaining and his credit good, get his paper discounted at Bank rate, or even slightly under when the market rate is below it.

In the small country towns, however, the banks’ rates are higher, but then, of course, the paper they discount there is not of the same class; and a capitalist, be he a money-lender or a banker, raises his rate in proportion to the risk he runs, the one thinking a bill so doubtful that 100 per cent. will just tempt him to risk his principal, and the other drawing the line at about 7 per cent.

A, for instance, has an acceptance of C’s for £100, dated the 1st January and drawn for one month, so the bill, allowing the usual three days’ grace, will be due upon the 4th February. A takes this bill on the 5th January, to his banker, by whom it is discounted. From the 5th January exclusive, to the 4th February, inclusive, there are thirty days; and assuming that the discount rate be 5 per cent. per annum, and the rate of commission upon the amount of the bill ⅛ per cent., we get the following:—

| 100 × 5 × 30 | = | 8s. | 2d.
| 100 × 365
⅛ per cent. upon £100 | = | 2s. | 6d.
|  |  | 10s. | 8d.

A, therefore, has paid about 6½ per cent. per annum for the accommodation. The country banks, when they charge 5 per cent. per annum interest and ¼ per cent. commission upon short bills, obtain something like 8 per cent. per annum upon their capital; but, needless to say, the persons who pay these rates are either out of touch with the market or else their credit is so bad that they are glad to discount their bills with a banker upon almost any terms. And then, again, there is not much paper of this description under discount with the provincial banks.

Country customers, whose credit is above suspicion, make very close bargains when they take good trade-bills to the banks to be discounted, and seldom pay any commission upon the amount of the bill, though, of course, the manager will attempt to exact it if he think that his man will pay without protest. As previously stated the customer almost invariably discounts his bills with the banker with whom he keeps his current account, and he generally pays the same rate on his paper as he does upon his overdraft. Competition for desirable accounts being keen, it follows that a client who discounts largely can always bring pressure to bear upon the manager, should he consider that his rates are excessive and altogether out of touch with the market rates.

Coupons.

Many people leave their coupons with bankers for collection, and here, again, we get an example of making those pay who will. The usual rates are ⅛ per cent. commission on English and ¼ per cent. upon foreign and colonial coupons, but, as a matter of fact, certain managers keep a list of those persons who refuse to pay these charges, while they who do not protest, no matter how large a sum they may keep to their credit upon current account, are made to pay the ordinary rates. It is only fair that a person whose average credit balance does not exceed £50 should pay a rate; but when a man keeps from £250 to £500 and above on the right side, the banker can quite well afford to forego his charge.

Suppose a banker receives £40 from his London agent or through the coupon department of his head-office on account of coupons remitted for a customer. He deducts his charge of 2s., and, without informing the person for whom they have been collected, credits £39 18s. in his pass-book. The client, in five cases out of six, remains under the impression that he has received the market value for his coupons, whereas, had the manager credited the account with £40, and debited it with 2s. commission, the customer in every probability would have asked for an explanation.

The customer, by examining his pass-book, will soon discover whether a rate has been deducted, and if he consider that the balance he keeps at his credit amply repays the bank, then he can request that the commission be returned to him, and that his name be placed on the free list with those of other “conscientious objectors.” Where the face-value of the coupons is given in a foreign currency, he will, of course, have to discover the rate of exchange at which they were sold. Allowance, too, must be made for income-tax.

When purchasing stocks or shares through his banker the latter divides the commission with the broker, and it is perhaps advisable to see the broker’s note, as a zealous manager, anxious to augment the profits of his branch, and believing devoutly in the old-fashioned maxim “every little helps,” occasionally adds a small charge of his own. Should he do this, then he sends the customer a copy of the broker’s note instead of the note itself, and in the copy he has, it need not be said, added a small commission of his own to the broker’s. As a banker guarantees the customer against loss through the failure of either the broker or the jobber, purchasing shares through a bank has its advantages for the bona-fide investor; but the speculator, who may want to “carry over” from account to account, must deal with a member of the Stock Exchange.

Again, when buying foreign drafts through one’s banker inquiry should be made as to the rate of exchange, so that one can check his figures. In a small book of this description much must necessarily be omitted, but it may just be added that in these days the facilities bankers grant their customers range from taking charge of their plate and valuables to allowing them to have their letters addressed to the bank, while they will even pay their subscriptions for them. The difficulty is to say what they will not do, and some day, perhaps, we shall have their young men calling in the morning for orders with the baker.

CHAPTER XI
UNCLAIMED BALANCES

I would describe this banking custom as legal stealing.* Bankers, as well as other estimable persons, obtain their gleanings and their perquisites, which are credited to certain sundry accounts, such as “unclaimed dividends,” “unclaimed balances,” and so on. Those banks, too, that issue notes must profit to a certain extent by the paper that is lost and destroyed by the public; and though it is impossible to estimate the gain to the banks from these sources, their absolute silence on the subject seems to indicate perhaps more eloquently than statistics, that the fund thus derived must be considerable, even if it be not vast.

The Government is not prepared to promote legislation for the purpose of requiring the banks of the United Kingdom to make a return showing the sums of money in their hands in respect of dormant and obsolete accounts.—Vide Press, Feb. 1908.

Coming to the definition of an unclaimed balance, it must be confessed that it is somewhat difficult to explain exactly what an “unclaimed” balance is, for the simple reason that the banks, when an account becomes dormant, seldom make an effort to discover whether the owner be either dead or alive, or to whom the balance belongs. On the other hand, if they do not court inquiry, it cannot be said that they obstruct it. Neither, however, do they encourage it, nor assist the owner or claimant in any way, but content themselves with passively carrying forward the figures from half-year to half-year. The public may well be dissatisfied with this treatment, for it is quite apparent that were the banks to make it their business to discover the owners or claimants they would be successful in five cases out of six, and, further, the longer they nurse these so-called “unclaimed” balances, the greater is the probability that they will for ever retain them.

We will first discuss the position of the current-account customer in relation to this practice. As a rule, it is well known to the members of a deceased man or woman’s family where the banking account was kept; so inquiries are usually made, and the balance standing to the credit of the deceased ascertained. There are, however, exceptional cases. A man may have accounts with two different bankers and though one is known, the second may not be. If the pass-book relating to the second account be at the bank, the manager very probably will keep it there. Again, a person on a visit to a place may open a small temporary account at a bank there, and should he die suddenly the manager will not make any attempt to trace his representatives. When the pass-books which relate to these “unclaimed” balances are at the bank, some managers are most careful that they shall not go out again; and, in order to prevent their being sent through the post to the addresses on the ledgers, the books are generally placed in some out-of-the-way corner of the strong-room, there to await the coming of their owners. This is certainly a novel way of protecting the interests of one’s clients, though it doubtless has not the smallest claim to originality, and may not be completely unknown in other trades than that of banking.

Secondly, we come to the deposit-receipt or deposit-note; and it will readily be allowed that a small piece of paper of this description may easily be either lost or accidentally destroyed. It must be borne in mind, too, that the companies, in the event of a depositor’s death, do not take any steps to inform either his next-of-kin or his legal representatives that certain sums of money are standing to his credit in their deposit-ledgers, even when they are aware of his decease. Then, again, after a depositor’s death these documents are sometimes overlooked or inadvertently cast aside with other papers. Such sums, after a lapse of years, might go to swell a company’s unclaimed balances.

But it is a misnomer to speak of these sums as “unclaimed,” when it is obvious that they are simply “unpublished,” and that the banks, were they so inclined, could find the true owners of a large number of these balances in a very short space of time. In many instances they have good reason to think that the customers are dead, even when they possess no positive information to that effect; and as they have their addresses in the deposit-ledgers, all they have to do is to write a few letters of inquiry. However, the banks have the law on their side; and though they are obliged to answer any questions which may be made by a deceased’s representatives, they are not compelled to give information gratuitously, so they choose to remain silent, and insist upon the initiative being taken by interested persons.

Furthermore, a deceased depositor may have held three deposit-receipts. Should two of these be presented for payment by his executors, the manager need not inform them that there is a third sum standing to the credit of the deceased in the books of the bank; and he possibly will not. An interested person, therefore, should always inquire whether there be any other sums standing to the credit of the deceased, either on current account or deposit.

It need not be remarked that should the balance be a debit one the bank will speedily send in its claim, together with a note of sympathy to the widow, begging her to consider the company quite at her service. So hardened is a bank-manager that he will actually attend the funeral of an old and esteemed client whom he has been charging 5½ per cent. interest and ¼ per cent. commission for years. It is a bad sign when a limited liability company is represented at a funeral by an official; and should two bank-agents put in an appearance, one can only quote: “Where the carcass is, there will the vultures be gathered together.” Seeing that they are so eager to exhibit their respect for the rich dead, it may be considered somewhat surprising that they are not more sympathetic towards the poor living, and, also, that they do not publish their so-called unclaimed balances for the benefit of their customers’ descendants; but life is full of these little contradictions, and, after all, the acids and the sweets, judiciously blended, give a zest to existence.

Finally, some banks, we know, issue pass-books to their depositors instead of receipts. It sometimes happens that, at a depositor’s death, the book is with the banker. Unless, therefore, his own people chance to know that he had a deposit account, all traces of its existence are obliterated, for the banker, who has the book in his possession, is not compelled to give any notice. After the publication of one of my books my publisher received a letter from a lady complaining bitterly that a certain bank had treated a kinswoman of hers in this manner. Should the relations of a deceased man or woman have reason to suspect that money has been saved and placed somewhere, they should go to every bank in the town where the deceased resided and inquire whether any sums are standing to his credit in the books of the banks. Their application cannot be refused, and the result may possibly be somewhat surprising, while they will at least have the satisfaction of knowing that their kinsman’s savings are not being devoted by the banks to their own use.

As the law now stands, a deceased customer’s balance is, to a certain extent, at the mercy of his banker; but whether these unclaimed balances would in the aggregate amount to the huge total at which some people are disposed to estimate them is rather doubtful. That the law urgently requires amending cannot, however, for a moment be questioned, for persons whose own interests conflict with those of the public can seldom be trusted to judge impartially; and it is quite evident that directors, who are imbued with the commercial instinct, are not exceptions to the rule. The aggregate, no doubt, would be represented by a large sum, but the public, where money is concerned, generally looks pretty smartly after it, so one would imagine that this total would consist principally of numerous small balances, and that large windfalls must be few and far between.

These so-called “unclaimed” balances are, we have seen, in reality unpublished balances, and steps certainly ought to be taken to compel the joint-stock banks to advertise in certain London and local papers the names and last known addresses of those individuals in whose names sums of moneys, in excess of say £5, have been standing intact in their books for any period in excess of five years. The banks might also be made to hang a list of these names in a conspicuous part of their offices, so that those who are entitled to these sums should at least have an opportunity of claiming them. Were the companies compelled to adopt this course, we should hear very little more of unclaimed balances, for the thought of publicity would be distasteful to them, and they would immediately take steps to put themselves in communication with either the customers or their kinsfolk. One would think, too, that the Government had a better claim to these balances than the banks. Mr. Asquith, for instance, might find them useful as a basis for his old-age pension scheme!

Depositors, seeing how matters stand, should keep their receipts in some place where they cannot be overlooked; and in the event of a pass-book being received, a note should be made in a diary, or even in the “Family Bible,” to the effect that such a book is in existence; as, should it be at the bank at the time of a customer’s decease, we know that the manager may retain it, with the result that all trace of the money will be lost.

CHAPTER XII
BANK SHARES

There is not space in this chapter to deal exhaustively with the risks of shareholders, but it may be mentioned that, with the exception of the old chartered banks, the members or partners of every joint-stock bank in the United Kingdom were, prior to 1858, liable jointly and severally for the debts of the company. This Act, Statute 1858, c. 91, was not, however, compulsory; and although no bank of unlimited liability has since been formed, it was not until the passing in 1879, after the failure of the City of Glasgow Bank, of the Act 42 & 43 Victoria, c. 76, that all the unlimited banks eventually limited the liabilities of their members. Naturally, a person of considerable wealth would hesitate to risk his fortune by buying shares in an unlimited bank which perhaps returned him only 5 per cent. on his purchase-money; but this objection is not now applicable, though it must not be forgotten that the shareholder is liable for a certain known sum, part of which may be callable and the remainder reserved liability, or all of which may be reserved liability and callable only in the event of the company being wound up. Where notes are issued the members may also be liable for the circulation.

Now that the liability on bank shares is a certain sum that cannot be exceeded the investor is inclined to regard them favourably; and though a rich man, who can afford to take a certain amount of risk, may decide to hold a few bank shares among his other securities on account of their higher yield, this liability, be the risk of a bank coming to grief never so small, makes them a most undesirable investment for those persons the interest upon whose capital is just sufficient to supply their wants. Bank shares, in short, are rich men’s shares; but this fact was brought home to the public so forcibly during the Australian banking crisis of 1893 that it seems unnecessary to dwell upon a point which must be apparent to everybody. Besides, we all know that a man of small means cannot afford to incur a liability on bank shares any more than he can sign an accommodation bill, and it would be as foolish of him to accept the one responsibility as the other. Nor is he the class of shareholder to whom the depositor can look with confidence.

While allowing that the great majority of our banks are prudently managed, it must be granted that banking history is a remarkably stormy one, though it is equally true that the surface of the waters has been but little ruffled during recent years; still, the Baring crisis of 1890 is not yet ancient history; and seeing that the banks are intimately connected with the Stock Exchange, the bill-brokers and the commercial community, a person who predicts that a British bank will never again be in difficulties must be blessed by the Almighty with a most sanguine temperament, for such a prediction is altogether opposed to the weight of evidence adduced by the past, and though its fulfilment is eminently desirable, so peaceful a solution of the banking question seems highly improbable.

In Chapter II, on the choice of a banker, an attempt was made to show why a customer should select a strong institution whose working resources are plentiful, and whose reserve of liquid assets is large enough to enable it to meet a drain of deposits during a run or a panic. The shareholder who guarantees the customers of a bank against loss to a limited extent will naturally take care that he is a partner in a company which maintains an adequate reserve of cash and securities as an insurance fund against those accidents which are quite beyond the control of the most able board of directors. A shareholder, say, holds twenty-five shares in a bank. These shares are for £80 each, and the amount paid up upon each is £20. He, then, receives a dividend upon £500, and incurs a liability of £1,500. But he bought these £20 paid shares at such a price that they only yield him 4½ per cent., and he certainly cannot afford to run any great risk for such a return; so he therefore, before purchasing, took care that the bank held a large accumulation of cash and gilt-edged securities as a reserve fund against those banking risks for which he pledged £1,500 of his fortune. Every prudent man should take the same precaution.

The following illustrations, which are taken from the balance-sheets of two English joint-stock companies that need not be named, will clearly demonstrate that there are banks—and banks.

An English Provincial Bank.

Liabilities to the public upon current, deposit and other accounts are given in the balance-sheet as £4,200,000. The bank’s liquid assets are thus described:—

Ratio per cent.
of liquid assets
to public liabilities
of £4,200,000.

| £ |  | £ |
Cash in hand, at call and at |  |  |  |
short notice | 582,750 |  | 13·8 |
Consols and other securities | 172,170 |  | 4·1 |
| £754,920 |  | £17·9 |

This bank’s position might be described in one very short word. In the first place, it has neglected to state the amount of its cash in hand and with bankers at call separately, but has mixed it up with its loans at short notice. The only deduction to be made is that the bank possesses so little legal tender that it deems it prudent not to give the figures in its balance-sheet, but to inform the public that it holds £13·8 of cash in hand, at call and at short notice to each £100 of its public indebtedness. The second entry is equally vague. We are quaintly informed that this unique institution, which owes some millions on demand, is in possession of a certain amount of Consols, but the exact sum, and the price at which they are taken, have been left to our imagination, so the bank may be the proud possessor of either £100 or £1,000 of Consols; and goodness only knows what is meant by “other securities.” The second column of our form, however, shows us that this company held £4·1 of “Consols and other securities” to each £100 it owed to its customers. Then, with a touch of true comedy, the auditors tell us that the balance-sheet, in their opinion, exhibits a true and correct view of the state of the bank’s affairs. One’s very soul goes out to those auditors, and a longing seizes hold of one to pat them on the back and shout bravo! No doubt the statement is true and correct, but how strangely incomplete.

Of course there is a serious side to this question. The bank, we can see from the total in our ratio column, held only £17·9 of cash and certain securities in reserve against each £100 it owed to the public. Obviously it is trading on the reputation of its better-prepared rivals, who, should a determined run be made upon it, might feel disposed to save it; but during a crisis, when each company has to take care of itself, such a bank, were its depositors to become nervous, would be compelled to close its doors in a very few hours. Now, would any sane person buy the shares of this bank at a price which returns him about 4½ per cent. on his capital, and incur a liability in excess of the amount of his holding? One would say emphatically not; but it is a remarkable fact that people are to be found who will take this risk with a light heart. Surely they cannot understand the nature of the security they are buying.

A bank which is caught short of cash during a crisis must apply for assistance to the Bank of England, and the Bank, which at so critical a time is the only market for securities in existence, would, before making it an advance, demand to see its securities. This bank, we know, possesses a list of “Consols and other securities” which it values at £172,170; but if the Bank advanced £100,000 against them, which is highly improbable, how could it pay off even £500,000 of its deposits? It seems to me that it must go under. The usual fate of these weak provincial banks is amalgamation with the better managed and more powerful companies, but the danger is that a storm may sweep them out of existence before they drift into one or another of these havens of rest. Fortunately, the state of the bank in question is exceptional rather than representative, but it is unwise to jump to the conclusion that the shares of every English bank are a desirable investment.

Our second illustration deals with the balance-sheet of one of the large joint-stock banks whose liabilities on current, deposit and other accounts amounts to £26,652,300. The liquid assets held in reserve against this sum are:—

Ratio per cent.
of liquid assets
to public liabilities
of £26,652,300.

| £ |  | £ |
Cash in hand and at Bank of |  |  |  |
England | 4,009,622 |  | 15·0 |
Money at call and short notice | 6,876,195 |  | 25·8 |
£4,000,000 2½ Consols at 90; |  |  |  |
£500,000 Local Loans |  |  |  |
Stock at £100 | 4,100,000 |  | 15·4 |
| £14,985,817 |  | £56·2 |

Ambiguity is not the dominant note in this balance-sheet. We can see at a glance that the bank is well prepared to pay off a large proportion of its indebtedness on demand, for it holds £15 in cash against every £100 it owes. Money at call and notice (short loans to the bill-brokers and stockbrokers), which is much less liquid than cash, is stated separately, and its list of investments consists entirely of British Government securities. Moreover, we are told at what price they have been taken. The balance-sheet, though not perfect, is clear and informing; but a company that holds £4,000,000 of Consols at 90 would not be so foolish as to hide its financial light under a bushel; so when a bank modestly refers to “Consols and other securities” we may be quite sure that its holding of Consols is either remarkably small or else that its directors are exceedingly stupid. It is more probable, however, that they are astute gentlemen who reason that the luminosity of a farthing dip might call forth smiles of wonder and amazement were it allowed to shed its radiance and waste its fragrance outside the bushel.

The bank we are discussing, then, held £56·2 of cash, call money and gilt-edged securities in reserve against each £100 of its liabilities to the public; and such a bank, it need not be said, is splendidly prepared to protect the balances of its depositors and the interests of its members. As a matter of fact, the real interests of both are identical; for if a bank neglects to keep an adequate reserve of cash and securities it exposes its customers to the risk of loss and inconvenience through its stoppage during a run or a panic; as, should the bank suspend payment, the customers must either suspend too, or find another banker, while its shareholders might lose all their capital and also be called upon to make good any deficit. Obviously, then, the bank which holds £56 in liquid assets to each £100 it owes is the one with which to do business. The shares of this bank return about 4½ per cent. at the present market price; and seeing that the company has minimized the risks of its members its shares will be chosen in preference to those of the institution which has accumulated a somewhat doubtful reserve of liquid assets which works out at a ratio per cent. to its liabilities of only £17·9.

We next come to a banking company’s profits, which are a source of great annoyance and wonderment to certain people, who cannot understand how dividends of from 10 to 20 per cent. can be earned in the worst of times when everybody else is feeling the depression in trade acutely. The mystery is not very profound, for a banker’s business, of course, is only profitable so long as he can trade with the money of his depositors, and, as his own capital is usually small when compared with his deposits, it follows that a very small percentage on his working resources will return a high rate of interest upon his capital. Upon a certain amount of his deposits he allows a rate which is regulated by the Bank rate; and he charges a rate upon his loans and advances, the said rate being also more or less influenced by the Bank rate, the difference between the two rates representing his margin of gross profit. He regulates this margin by changing his deposit rate at each alteration of the Bank rate, but he also obtains money upon which he does not pay interest, and as that sum earns considerably more when the Bank rate is at 4 than when it is at 2½, it follows that his “free” money is largely responsible for the fluctuations of his dividends.

But a banker cannot trade with all his deposits. He has to keep a certain sum lying idle in his safes and tills, and with his London agents or the Bank of England. He further requires a good list of securities which can be either converted or pledged with the Bank of England should occasion arise, and such a list will not return him much more than 3 per cent. upon the sum devoted to that purpose. Then he employs a portion of his funds in the short-loan market, so he has only about 60 or 70 per cent. of his deposits to advance in the shape of loans, overdrafts and discounts to customers. In other words, a well-managed bank has to devote a large proportion of its resources to insuring its business.

Take the bank in our second illustration. Its paid-up capital amounts to £2,800,000, and its reserve fund to £1,600,000, so the shareholders’ funds come to £4,400,000. Deposits and other accounts are £26,652,300, making its total working resources £31,052,300. Now the net profit earned during the half-year was £207,869, so the bank cleared ·669 of a pound upon each £100 with which it was trading; and seeing that the trader expects to make 10 per cent. on his turn-over, it is pretty evident that bankers’ profits shrink into insignificance when compared with his. But the bank’s paid-up capital is only £2,800,000; and as £14,000 will pay 1 per cent. per annum for the half-year on that, this profit of £207,869 enables the bank to declare a dividend at the rate of 14 per cent. per annum, and to carry a large amount forward to the profit-and-loss account of the next half-year; yet it can hardly be said that its earnings on £31,000,000 are enormous; still, they look it when metamorphosed into a rate of 14 per cent. But this is only another illustration of how easily the crowd can be deceived by statistics.

It would be absurd to attempt in a short chapter to discuss the price of bank shares; but as the banking companies, unless they enjoy an exceptionally sheltered position, earn less during those periods of depression which from time to time overtake the trade of the country, it follows that their dividends, like their deposit rates, rise and fall with the Bank of England rate. Bank shares, therefore, can be bought cheaply when trade is bad and loanable capital cheap. As the so-called gilt-edged securities, during normal times, should then be dear, it often pays to sell out of the latter, invest in bank shares, and wait for the turning of the tide.

CHAPTER XIII
THE PAY OF BANK-CLERKS

It cannot be said that bank-directors, when considering the question of remuneration, err on the side of generosity; but nobody would dream of accusing them of that crime, and if the bank-clerk is not paid lavishly, his salary, as a rule, is appreciably above the wages paid for clerical labour in the open market. Nor can it be affirmed that the country private banker was one whit more generous than a board of directors. Indeed, the evidence points in quite an opposite direction, for the clerks of those firms which have been absorbed by the companies generally profited by the change; so it must be allowed that the joint-stock system has raised the standard of comfort of the bank-clerk. Certain of the London private bankers were more liberal, and others, again, had the commercial instinct strongly developed, but we shall see the salary scales of the joint-stock banks are not calculated to excite envy in the mind of the multitude, unless we except the unemployed and the hungry.

The following scale is that of a large London and provincial banking company:—

General managers | £1,500 | to | £2,000
Managers in a city | 500 | to | 1,500
Managers in towns of from 40,000 to 60,000 inhabitants | 350 | to | 500
Managers in small country towns | 250 | to | 350
Inspectors (with one guinea a day for travelling expenses) | 300 | to | 500
Accountants or chief-clerks | 160 | to | 210
Cashiers | 160 | to | 210
Clerks | 80 | to | 160
Apprentices | 30 | to | 50

At the head-office in London, where there is a special scale, the city-manager would receive from £1,000 to £1,500 a year, and the chiefs of departments from £300 to £1,000, according to the importance of the department, while the salaries of the ledger-clerks would be raised £10 each year until the maximum, £300, had been reached. The maximum for clerks is £180. At the metropolitan and suburban branches however, the salaries are the same as those set out in the foregoing list, and the managers would receive from £300 to £800 or so a year in proportion to the business done at the branch. Very few of the joint-stock banks would pay a higher scale of wages than this, and the great majority of them, especially the purely provincial companies, would pay considerably less, while the Scotch banks are niggardly in the extreme—a little national characteristic. It is on record that a clerk in a certain Scottish banking company, whose head-office is at Aberdeen, was receiving £30 a year at the end of five years’ service. In a fit of unaccountable generosity his salary was then raised to £50 per annum, but the recipient remarks that he showed his gratitude by promptly moving to London.

Adverting to our list, we can see that a youngster entering this bank at the age of, say, seventeen, gets £30 a year, out of which he has to pay certain subscriptions. At the age of twenty his salary would be increased to £80, and £10 at the end of each year’s service would be added until the maximum for clerks, £160, were reached. He would then be twenty-eight, and there he would have to wait for the bank to make him either a cashier or an accountant before he could proceed to the next step. A few men remain clerks all their lives, but the percentage would be a very small one, and in every probability the clerk might count upon being promoted at the age of thirty-three or thirty-four. With good luck, or should he chance to have a friend at “court,” he might gain this step at thirty.

Assuming that he were made a cashier at thirty-one, he would start with a salary of £170, and, rising £10 a year, would reach the maximum of this class, £210, when he was thirty-five years of age. The percentage of men who remain in this class all their lives is appreciable, and the average man probably would not get a small branch before he was forty-five or forty-eight. Of course, if he successfully accomplished some such feat as marrying the plain daughter of a general manager, or should he be distantly related to a director or a Lord Mayor, he might get a branch at forty. But the prizes are for the very few, and those men who do really well, after having managed a small branch to the satisfaction of the board, are sent to a larger office upon a salary of £400 a year rising to about £600. At this rate a clerk would be from forty-eight to fifty-two or three before his salary was £400 a year, and it must be remembered that these are the fortunate ones; so it is evident that the majority of clerks in a bank simply eke out an existence.

On the other hand, they are better paid than the average merchant and solicitor’s clerk, while their employment is constant, and, as a rule, they are entitled to a pension, should they survive the monotony of their surroundings, after having attained the age of sixty. Seeing that these young men are drawn from the same class as the merchant’s clerk, and that the demand for their berths is greatly in excess of the supply, it appears at first sight that £160 a year is a fair wage for a person whose principal accomplishments are a bold round hand and the ability to add up long columns of figures with accuracy and despatch. However, it seems improbable that a father, after having carefully considered the chances, will choose a banking career for a son who can pass examinations successfully.

Then, again, the average youngster has more chances in business; for while a few hundred pounds will establish him as a trader, as many thousands will not enable him to become a banker. The banks, so to speak, take their men right off the market, and give them a special training, which fits them for banking alone, but which, as a rule, totally unfits them for any other business; consequently, when a bank-clerk suddenly find himself flung back on the market, he at first usually feels as helpless as a bird which suddenly turned out of the cage in which it was bred, is compelled to sustain life after the manner of its kind. As the bank-clerk generally enters a bank for life, he has a right to expect that the shareholders and directors will at least recognize this fact, and, therefore, pay him a salary based, not only upon the market price of clerical labour, but also upon the assumption that he will pass his days in the service of a company in which he will always be a servant. In other words, as the directors practically hire these men for life, it is their duty to make their circumstances fairly easy, but this is an obligation which the majority of them quite fail to recognize.

The smaller banks have a much lower scale than that given in these pages; and certain of those companies which are pushing out small suburban tentacles in every direction pay the managers of these offices from £80 to £120 a year, and the clerks in proportion. Moreover, some boards have passed resolutions to the effect that no clerk in their service shall marry until his salary be such-and-such a sum; and it seems intolerable that a body of men, who are merely traders, be the resolution good or bad, should be allowed to interfere with the liberty of the subject in this arbitrary fashion. Mr. Punch’s advice is doubtless excellent; but who are these men, in their astounding consequence, to override the law of the land? The whole nation should indignantly protest against their impudence, for a mere trading company, whose only object is gain, is unfit to govern the sons of men. Possibly, if these banks were to publish their salary scales their sham philanthropy would be instantly apparent.

Perhaps a few illustrations of the relations between the banks and their clerks may prove interesting. I have in my mind the case of a man who sat by my side at a large branch bank in the North. From being a chief-clerk or accountant in the service, he had been reduced to £160 a year, and sent to the branch in question. The cost of living being expensive in a large city, he was compelled to send his children to the Board schools. In fact, he was so hard up that he wrote to the general managers telling them that he could not live on the salary, and asking them to increase it. He was told that, if he were not satisfied, he could take a year’s salary (I think it was) and go. The bank, however, ultimately succeeded in getting rid of him more cheaply. The man, who was a tailor’s tout and an insurance agent in his spare moments, did all in his power to add to his income; but at last he fell so low that he actually descended to taking money from the men’s coats. Then followed detection and dismissal.

Now, who was the more to blame, the clerk or the bank? The clerk had informed the directors that he could not live upon his salary, and the directors made him an impossible offer, for the man, who must have been getting on for fifty, had been in the service from a boy, and was therefore not worth thirty shillings a week outside. Knowing this, the offer of the directors was frankly brutal, and losing hope the clerk became a petty thief. My ethics may be somewhat shaky, but were I on my trial for a harp and a halo I would rather stand in the thief’s place than in that of those directors.

Another man in the same office, although single, could not acquire the art of living upon £160 a year, and after some few years of unsuccessful striving and vain endeavour, he was dismissed for drink and debt. He then became a traveller in the wine trade, and terminated his not uninteresting career by getting drunk on his samples. A third man, who was a married cashier, took two sovereigns from his till, intending to return them upon the following day, but his till-money was counted the very next morning by the accountant, who was probably suspicious, and the man had to go. Out of a staff of twenty-eight men, five, I think, were cashiered within five years; it seems to me that were a kinder spirit manifested by those in authority much of this misery and suffering might be spared.

For instance, in one service it is usual to send old men and others who, for some reason or another, have been reduced, to a large branch, where, after a few months have elapsed, they are given a small sum of money and quietly pushed into the street. This procedure is adopted because a man at a small branch is acquainted with the accounts of all the customers thereat, and might, should he be dismissed while there, hold forth in every public-house in the town; but the expedient is unspeakably mean, and surely a bank which counts its deposits by millions can afford to temper justice with mercy. The directors know the fate that awaits these men, more especially when they are past forty, and it is simply cruel to weed them out in this brutal fashion. To my mind it is little short of murder.

The system, of course, is bad. The banks place one man in authority and to that man they pay a good salary. He, in his turn, has to hold down the rest, with the result that we have already seen. At the branch in question the manager, who was an old man, received £1,500 a year, and the accountant, who was a man of about forty-two, got £300. The disparity between these two sums is most marked, for the accountant was quite as able a man as his chief, and if he were only worth £300 a year, then the manager was not worth more than £500 at the outside. Were a bank to pay each man a fair salary, and to reduce the manager’s rate of pay, it would increase its expenses considerably, but at the same time it would add to the efficiency of its staff, for most of the men are dissatisfied, and the work, as a rule, is not done willingly, while the directors are looked upon as task-masters. Nor is this at all surprising, for of sympathy they display but little, and their humanity is unquestionably not superior to that of the Zulu. I have weighed my words carefully, and am writing without the slightest heat, my only aim being to state my facts plainly, and I think that, if the facts are unchallenged, the deductions are as indisputable as they are discreditable to the directors and shareholders of certain of the joint-stock banks.

Butler & Tanner, The Selwood Printing Works, Frome, and London.

Transcriber's Note

A few minor typographical errors have been silently corrected.

Some ditto marks in lists and tables have been replaced with copies of the original text.