The following table records the changes in the Bank of England rate from 1911 to 1920:—
| No. of changes. |
Highest. | Lowest. | Average. | |
| 1911 | 4 | 4½ | 3 | £3 9 4 |
| 1912 | 4 | 5 | 3 | 3 15 5 |
| 1913 | 2 | 5 | 4½ | 4 15 5 |
| 1914 | 8 | 10 | 3 | 4 0 9 |
| 1915 | None | 5 | 5 | 5 0 0 |
| 1916 | 1 | 6 | 5 | 5 9 3 |
| 1917 | 2 | 6 | 5 | 5 3 0 |
| 1918 | None | 5 | 5 | 5 0 0 |
| 1919 | 1 | 6 | 5 | 5 3 0 |
| 1920 | 1 | 7 | 6 | 6 14 4 |
A table may also be given showing (in thousands of pounds) the amounts presented through the London Bankers' Clearing House during the ten years ending in 1921:—
| Total Clearings. |
Country Cheque Clearing. |
Metropolitan Clearing. |
On Consols Settling Days. |
On Stock Exchange Account Days. | |
| 1911 | 14,613,877 | 1,221,420 | 796,386 | 678,652 | 2,218,700 |
| 1912 | 15,961,773 | 1,307,062 | 841,264 | 725,293 | 2,362,212 |
| 1913 | 16,436,404 | 1,389,481 | 855,648 | 781,892 | 2,082,031 |
| 1914 | 14,665,048 | 1,370,464 | 860,262 | [1]515,566 | [2]1,481,780 |
| 1915 | 13,407,725 | 1,567,571 | 929,064 | 589,654 | 1,025,775 |
| 1916 | 15,275,046 | 1,872,451 | 1,074,027 | 680,381 | 1,238,039 |
| 1917 | 19,121,196 | 2,244,190 | 1,177,478 | 881,824 | 1,521,194 |
| 1918 | 21,197,512 | 2,736,273 | 1,429,611 | 929,944 | 1,725,563 |
| 1919 | 28,415,382 | 3,386,768 | 1,813,929 | 1,296,734 | 2,316,366 |
| 1920 | 39,018,903 | 4,072,220 | 2,093,750 | 1,944,205 | 3,090,895 |
The Definition of a “Bank.”—One good result of the British banking amalgamations which the critics of the policy nearly always overlooked is the elimination of the weaker vessels. Even a cursory glance at the figures will convince the reader that amalgamations have given added stability to the British banks, and this cannot but be beneficial to the general public and to the commercial community. The amalgamated institutions, moreover, have been unconnected with any failures; indeed, many times they have been the means of averting bankruptcies and panics. They came through the backwash of the American financial panic of 1907-8 with a firmly established reputation for that conservatism which means strength, and just as they emerged from the black times of the Baring crisis years ago, so have they passed through the critical periods of the war years, 1914-8, with added lustre. In the monetary stringency that befell Europe on the outbreak of war, and brought many of the European bourses on the verge of disaster, it was borne upon the public what a useful function is performed by the great banks of the United Kingdom in averting banking crises and creating confidence in British financial methods.
It is true that between 1910 and 1921 there were one or two failures which brought disaster to many of the poorer folk. But these failures were not by “banks” in any proper sense of the word. One was the Charing Cross Bank, which failed in Oct. 1910. It was nothing more or less than a money-lending concern. When it closed its doors it brought ruin to a large number of poor people who, tempted by high rates of interest, had deposited their savings with the institution. Practically nothing was saved from the wreck brought about by the folly of a man, named A. W. Carpenter, who was the sole proprietor of the concern. Then there was the Birkbeck Bank, which went into liquidation on June 8 1911, mainly through its connexion with building society finance. In this instance, the consequences were not so disastrous, since, largely as the outcome of the assistance of the joint stock banks in the liquidation, the depositors were ultimately paid nearly in full. More recently, on Dec. 20 1920, history repeated itself, and the public was startled by the failure of Farrow's Bank, an institution carried on under the chairmanship of Mr. Thomas Farrow, who was sentenced to four years' penal servitude in connexion with the publication of false balance sheets of the so-called bank. The failure of this bank caused little surprise in banking circles, but, as usual, a large number of depositors of the small tradesman and artisan class were ruined by the failure. As with other institutions of this type, it was the same old story the public lured by high rates of interest offered on current accounts and small deposits. When the bank failed it had succeeded in obtaining from the public approximately £1,458,000 in current accounts and £2,679,000 short deposits, and up to July 1921 all that it had been possible to pay to the depositors was 2s. in the £, and there seemed no probability of anyone receiving more than 5s. in the £ in final settlement.
In each case the failures gave prominence to the necessity for limiting the use of the title “bank” to institutions that really are banks. It also emphasized the necessity for the great joint stock banks to encourage the small depositor, with the result that most of them now advertise their willingness to open small deposit accounts at rates of interest consistent with prudent banking.
Immediately following the failure of the Charing Cross Bank the question was raised—“What is a bank?” and there was a demand for a definite ruling on the subject. It is curious, but true, that no Act up to 1921 had ever said what was the meaning of the word “bank,” and what is still more curious, there was no decision of a Court of Law on this point. All the Bills of Exchange Act of 1882 says is—“A banker includes a body of persons whether incorporated or not, who carry on the business of banking”—a definition which has never had the slightest use in preventing scandals that have arisen in connexion with such concerns as the Charing Cross or Farrow's Bank. After the outcry in the press over the Charing Cross Bank failure in 1910 had died down, the subject was dropped, owing, it was said, to the difficulty of framing any satisfactory definition. The question was, however, raised again in 1911 on the amendment of the Money Lenders' Act, but with a similar result, and nothing useful was accomplished in the nature of preventive legislation. Then, in 1915, largely as the outcome of the banks' participation in the Government's War Loans, the question was again raised, and a small committee was got together by the late Lord Cunliffe to discuss the matter in anticipation of legislation. A report was made to the Bankers' Clearing House Committee, and the matter was continually discussed, off and on. The first definition proposed by the Clearing House Committee was this:—
“A Bank, as the term is understood in this country, may be broadly described as a firm or institution whose main business is to receive from the public monies on current account repayable on demand by cheque.”
The objection to this definition, it was considered, lay in the words “main business,” a general term which itself calls for explanation. It was urged that the main business of a bank is not in the receipt of money from the public, but in the relending of that money. Consequently, an alternative definition was proposed in the following terms:—
“The expression ‘bank’ means any persons who hold themselves out as carrying on the business of receiving from the public current account money which is to be repayable on demand by cheque, or who use the word ‘bank’ or any derivative of that word as part of the title or description under which they carry on business.”
What, however, was considered to be even a better definition was that given by the president of the Institute of Bankers, London, Dr. Walter Leaf, in his address to the Institute of Bankers in Nov. 1920, namely:—
“The expression ‘bank’ means any persons who receive from the public on current account money which is to be repayable on demand by cheque, or who use the word ‘bank’ or any derivative of that word as part of the title under which they carry on business.”
A good deal was said on the matter at the meeting in question, and most bankers present were in agreement with the president when he said that what actually was needed was a register of bankers which could be established without a hard and fast definition. Further, a tribunal should be set up with power to admit applicants or reject them from incorporation in the register on a wide view of all the circumstances of their business. This tribunal, it was argued, should be representative, not only of Government Departments, but of industry and commerce, as well as of existing banks. If such a register were set up no
