ience and gain to trade to be secured by an extension of bank areas—all such factors, however, pulled their weight in what during 1918-9 offered to be a struggle for supremacy between the leading institutions. Probably the most naive reason advanced in justification for amalgamation was that of the chairman of one of the great banks, who said that “combination must come.” This was a new variant of the old petitio principii, “it is coming because it must come and it must come because it has come.” The remark, no doubt, truly reflected a sense of the inevitability of a further stage of evolution. Even so, to the most casual observer it would seem as if the voracious appetite of the supermen in banking had at last been satiated, for so great had been the absorptions that any further extension of the activities of the “big five” would of necessity be confined to the acquisition of the relatively unimportant private or merchant banks. In a word, amalgamation had spent itself by 1920, since any further fusion of the larger institutions would probably be regarded with suspicion by the general public.
As showing how the old private institutions have gone out of existence it may be said that out of 38 private banks which were doing business in 1891, there remained only four in 1921. The latest absorption up to the middle of 1921 was the acquisition in Feb. of that year of the business of Messrs. Fox, Fowler & Co., Somerset, by Lloyd's Bank. It was interesting as marking the passing of the last country bank which had the right to issue notes. Thus closed a remarkable chapter in English banking, for under the provisions of the Bank Charter Act of 1844, the right of issue lapsed on the amalgamation with Lloyd's Bank. Further, it marked the accomplishment of one of the principal aims of the Bank Act of 1844—that of reducing the private note issues of the country, for they now ceased altogether. In 1844 this note-issuing privilege was enjoyed by 207 private banks and 72 joint stock banks, and although the Bank of England was entitled to increase the fiduciary portion of its note circulation by two-thirds of the lapsed issues, the Bank had apparently not availed itself of the full privilege, for out of the maximum issue of £8,631,000 vested in the defunct banks, the Bank of England had only increased its fiduciary circulation by £7,551,000 of the lapsed issues.
Private banking, then, has found its resting place in the archives of the things that have been, and the lesser lights of English joint stock banks are not far behind. As a matter of fact the number of English joint stock banks was reduced from 106 in 1891 to 20 in 1921, and throughout the whole of the United Kingdom, including the Bank of England and the private banks, the number of banks had fallen from 111 in 1900 to 41 in 1921.
That the resources of the banks have not suffered by this process of absorption will presently be shown, for the question of resources is ah all-important one. In many respects large banks are certainly preferable, because with large resources they are in a position to make advances on a much more generous scale than the smaller concerns. Moreover, it was clearly desirable that the banks should be prepared to adapt themselves to the entirely new order of things in the financial world brought about by the war.
Actually, the public would not appear to have suffered from the fusion of the banks, for if we make a comparison of the figures of the English joint stock banks (the Scottish and Irish banks, except in a minor degree, were not much concerned with amalgamation), we find that there have been very large increases in capital and reserves; the ratio of total cash to demand liabilities has risen, and deposits show a striking increase. The ratio of paid-up capital and reserves to deposits has, however, fallen considerably, though the 1920 figures showed that the upward movement had recommenced. The following table will reveal the true position:—
English Joint Stock Banks
| Paid-up Capital and Reserves. |
Deposits. | Ratio of Paid-up Capital & Reserves to Deposits. |
Ratio of Cash in hand, at call & notice to Liabilities. | |
| 1890 | £ 67,826,000 | £ 368,663,000 | 18.4 | 18 |
| 1895 | 69,213,000 | 455,561,000 | 15.3 | 19.9 |
| 1900 | 78,847,000 | 586,726,000 | 13.4 | 20.7 |
| 1905 | 82,010,000 | 627,529,000 | 13.1 | 23.6 |
| 1910 | 80,946,000 | 720,687,000 | 11.2 | 23 |
| 1913 | 82,068,000 | 809,352,000 | 10.1 | 24.3 |
| 1914 | 81,904,000 | 895,561,000 | 9.1 | 27.6 |
| 1915 | 81,731,000 | 992,555,000 | 8.2 | 22.9 |
| 1916 | 81,089,000 | 1,154,877,000 | 7.1 | 28 |
| 1917 | 84,475,000 | 1,365,297,000 | 6.2 | 28 |
| 1918 | 92,901,000 | 1,583,412,000 | 5.8 | 27.6 |
| 1919 | 106,273,000 | 1,874,184,000 | 5.7 | 21.3 |
| 1920 | 128,154,000 | 1,961,527,000 | 6.5 | 20.4 |
That there is no foundation for the accusation, sometimes heard, that the country had suffered from the closing of branch banks, is apparent from the fact that in 1890, when the fever for amalgamation had not taken so large a hold on the bankers, there were 104 banks in existence in England and Wales with 2,203 branches; by the end of 1920, with only 20 banks functioning, the number of branches had grown to 7,257.
In Scotland and Ireland, where the banks have preferred to strengthen their position and spheres of influence more by working arrangements with other large institutions than by actual union, the number of branches show similar expansion. Scotland in 1890 had 10 banks with 975 branches; in 1920 with only eight banks she had open 1,283 branches. Curiously enough, the number of banks operating in Ireland has not changed since 1890; there were then nine banks with 456 branches; in 1920, with the same number of banks the number of branches had exactly doubled, the total being 912. The capital and reserves of the Scottish banks in 1890 was £14,755,000; cash in hand, at call, etc., £21,427,000, against deposits of £91,610,000. By the end of 1920 the capital and reserves had grown to £17,911,000, cash in hand and money at call to £72,974,000, and deposits to £279,228,000. The capital and reserves of the Irish banks in 1890 was £10,374,000, cash in hand and money at call £9,086,000, and deposits £38,521,000. In 1920 the totals were: capital and reserves, £12,899,000; cash in hand, etc., £46,698,000; deposits, £200,441,000.
Just how great has been the extension of banking in the United Kingdom may be gauged from the following table, which shows the aggregate liabilities and assets of the banks in the United Kingdom for the pre-war period, 1913-4, and for the post-war period, 1920-1 and the respective increases involved. The figures for the Bank of England are included:—
Liabilities
| 1913-4. | 1920-1. | Increase. | |
| Capital & Reserves | £ 131,629,000 | £ 179,979,000 | £ 48,350,000 |
| Undivided Profits | 6,705,000 | 8,858,000 | 2,153,000 |
| Deposits | 1,104,330,000 | 2,681,920,000 | 1,577,590,000 |
| Acceptances | 67,547,000 | 109,896,000 | 42,349,000 |
| Notes, Bills, etc. | 54,592,000 | 194,836,000 | 140,244,000 |
| £1,364,803,000 | £3,175,489,000 | £1,810,686,000 |
Assets
| 1913-4. | 1920-1. | Increase. | |
| Cash in hand, money at call, etc. | £ 328,559,000 | £ 708,622,000 | £ 380,063,000 |
| Investments | 222,690,000 | 771,191,000 | 548,501,000 |
| Discounts and advances | 735,104,000 | 1,561,337,000 | 826,233,000 |
| Premises and cover for Acceptances | 78,450,000 | 134,339,000 | 55,889,000 |
| £1,364,803,000 | £3,175,489,000 | £1,810,686,000 |
Increase in Deposits.—Apart from the capital and reserves, which show what, in the circumstances, must be considered for 1920-1 the satisfactory increase of £48,350,000, or 36.7% over the 1913-4 total, the first item which strikes one's attention here is the enormous increase in deposits, £1,577,590,000, or 142.8% over the 1913-4 figures. The increase in deposits was common to most, if not all, of the banks during the war period, and after. Various reasons have been assigned for it. Some bankers gravely asserted that many of the balances which went to swell their deposits represented money awaiting employment in trade, but however true that may have been during the trade slump of 1919-20, the true causes during the war were to be found in the inflation arising out of the Government's war finance; while immediately after the war, bankers were certainly too free with their advances.
Each advance had the effect of adding to the deposits of the same or of some other bank in the country, since when a person raises a loan with a bank the amount is nearly always credited to his current account. Obviously, then, an increase in bank loans and advances is concomitant with an increase in bank deposits, and as the Bankers’ Magazine pointed out in regard to the war period “bankers were able to extend their loans in this manner because a large proportion of the inflated deposits of the war period still remained with them as additional cash, notwithstanding the large sums which they invested in Treasury Bills or were prevailed upon to lock up in the various War Loans.” Undoubtedly, the increase in deposits was largely due to the immense creation of Government credits, which eventually
