Dresdner Bank
INTERVIEWS WITH HERR SCHUSTER AND HERR NATHAN, DIRECTORS OF THE DRESDNER BANK[194]
Q. What is the date of your organisation?
A. 1872.
Q. In practice, you and all other banks endeavour to fully employ all available funds?
A. Yes; we only carry in the Reichsbank and other banks sufficient cash for the conduct of business.
Q. You regard your item "Bills discounted" as one of practical reserve?
A. Yes; it is immediately convertible into cash at the Reichsbank.
Q. Referring to the item "Shares in other banks," $6,662,753, do you control all banks in which you have any interest?
A. Yes; practically. We probably have not the majority of the stock in any bank; but our holdings are sufficiently large to give us control.
Q. Is the tendency toward bank consolidation? Are the smaller banks becoming more closely affiliated with the larger banks?
A. Yes; because it serves a mutual advantage. The smaller bank needs better facilities to take care of the increasing business. If a bank wants to increase its capital, and the shareholders do not care to subscribe for the increase, the new shares are frequently offered to us. We look out for the business of these banks in the centres and give them participations in some of our important undertakings.
Q. In Great Britain we found that banking interests were practically controlled by from 15 to 20 large banks. Does that condition prevail in Germany?
A. No; but the tendency is in that direction. One difference between the banks of England and Germany is this—in England the primary purpose of the banks seems to be to secure large earnings for their shareholders. In Germany our banks are largely responsible for the development in the Empire, having fostered and built up its industries.
Q. Would it be any reflection upon a bank if it should go to the Reichsbank for discounts or loans in easy times?
A. No; we seldom go in easy times, however, because there is no need of our doing so.
Q. Is there strong competition between the important banks of Berlin or do they work more or less together?
A. Of course there is strong competition between the large, important banks, but there is no lack of harmony, and they very frequently work together in syndicate operations. While it is the desire and endeavour of each bank to build up its business, it must be recognised that each institution has more or less its own field of operation, which is in a measure respected by the other banks. As, for instance, the Deutsche Bank has done a very large volume of business with Turkey, and business emanating from that source is expected to and naturally does go to the Deutsche Bank, while another institution may have been largely identified with Roumania, or another with some large local interest. We ourselves are recognised as representing the Krupp interest and have just recently formed a syndicate to finance one of their operations.
Q. Our understanding is that a merchant, a customer of yours, may arrange with you for a credit of, say, 100,000 marks, which may or may not be secured, and may draw a ninety-day bill upon you for that amount. He may send that bill to the Deutsche Bank for discount. If the Deutsche Bank will discount it, they present it to you and you accept it. Will you kindly state why this custom prevails?
A. One reason is that it makes a bill which is acceptable at the Reichsbank and is a prime bill. We receive one-fourth of 1 per cent., or more, for our acceptance, and the Deutsche Bank, or any other bank discounting, invests its money at a rate for the period. It might be that we would prefer to give our customers a cash credit rather than to accept his bill, in which event we would so arrange.
Q. Then this practically enables you to sell your credit without using your cash?
A. Yes.
Q. We understand this is the usual custom in Germany.
A. Yes.
Q. Is it not a fact that in the last analysis the customer who uses the money usually pays more than the bank rate—that is, would it not cost him, in such a transaction to-day, say 5 or 6 per cent., while the bank rate is 4 per cent.?
A. Yes.
Q. Is it your endeavour to reach the small country towns?
A. No.
Q. In the United States we have brokers who handle commercial paper, and many of the banks purchase it to employ their surplus funds. In London we found discount houses whose sole business was to handle paper for sale to banks to employ their surplus funds. What corresponds to that agency in Berlin?
A. In Berlin there are two brokers who handle prime bills, but they are not an important factor.
Q. How do you employ your surplus funds?
A. We buy bills in the market or through these brokers.
Q. In employing your surplus funds do you buy any other bills than those which the Reichsbank would accept?
A. No.
Q. Would you consider the issue of taxed notes by the Reichsbank in a sense an evidence of an abnormal condition?
A. No: on the contrary, it is quite normal. Last year it happened twenty-five times.
Q. In times of trouble do the large banks, like your own, the Deutsche Bank, and Disconto, co-operate with the Reichsbank in an endeavour to prevent the exportation of gold?
A. Yes. Opinions are divided as to whether it is for the good of our country to do so or not. Last year, for instance, many people asked for gold. It was refused at first in some quarters; later we shipped freely.
Q. Are you members of the stock exchange?
A. All banks and bankers are members of the stock exchange.
Q. By virtue of their being banks?
A. Yes; they have to pay a tax for the exchange.
Q. Are the seats expensive?
A. No. You do not buy a seat. There is no limit to the number of people admitted. We have from twenty to thirty people go to execute our orders.