Interview with Mr. Charles Gow, General Manager of the London Joint Stock Bank, Limited
[157]Q. Your capital stock is £100 authorised, £15 paid?
A. Yes.
Q. Does your board pass upon a new stockholder?
A. Yes.
Q. Who really conducts the business of the bank?
A. The managers, who are appointed by the directors; that is to say, myself and all those belonging to me.
Q. Are most of your acceptances secured?
A. Every one.
Q. How are they secured, generally speaking?
A. They are secured in the great majority of cases by bills of exchange, by first-class securities with plenty of margin, even by cash in hand to a moderate extent, and to a very small extent by bills of lading for produce shipped. That is a very small item.
Q. Can you state the reason for accepting bills instead of furnishing the cash?
A. We accept those bills because it happens to be the custom of the particular banks to draw a long bill. The customer himself who buys cotton in Bombay, or wherever it may be, acts according to the custom there to draw a bill to a certain usance. Now, for instance, with regard to an inland bill, we would not give credit of that sort to a man in London, but wherever there is a regular course of business abroad to draw at long usance we comply with it.
Q. What is the character of your bills discounted?
A. Those are all marketable bills, trade bills; you know what they are; they are between the manufacturer and the man to whom he sells.
Q. You always require two names?
A. Always.
Q. What does the form of obligation by the borrowers upon collateral take?
A. Just the same form as your promissory note.
Q. You have branches, have you not?
A. We have about forty-odd branches all in London and close to London.
Q. You do not then endeavor to acquire a country business through your branches?
A. For this reason, that we commenced as a purely London bank, and we have so far kept to that original determination of not launching out into country business, because, as I say, it differs from the ordinary London business. Country business is not quite so liquid, and can not be.
Q. If you had an account of a man running, say, a hat store, his account was satisfactory in character and had been carried with you for several years, and he wanted to stock up on hats, there would be no way in which he could go to you and borrow the money with which to buy those goods unless it was through a guarantor?
A. No. He would go then to the wholesaler from whom he would buy the goods, and give that wholesaler his bill, and that bill would be a discountable article, and that is how the money would be raised.
Q. Do you ever allow overdrafts, as they do in Scotland?
A. They are not unheard of, but not a principle of our business. Overdraft is a principle of country banking.
Q. My observation leads me to believe that the banking situation in London is practically controlled by twelve or fourteen of what are known as the London joint-stock banks, through their offices and through their branches?
A. Yes; I think that is right. However, there are still independent banks in the country, and I doubt whether amalgamation will go very much farther than it has gone. You see, these amalgamated banks have already become so large that they begin to get a little unwieldy. Lloyds Bank is an enormous thing, with $350,000,000 of current and deposit accounts.
Q. Would you say that the public are better served through these branches than they were through the independent banks?
A. Some say that they are not so well served, that accommodations are curtailed now as compared with what they used to be, and that I can understand to some extent, because, working a very large concern from one centre, you see, fiats will go forth, "Cut that man's credit off," and not listen to taking a large view. They say, "I have enough of that kind of accommodation; I have 100 shipbuilders or shipowners; I am not going to give out more than a proportion of my money into that particular trade; therefore, I will not have any more," whereas the independent banks would be perhaps a little more accommodating.
Q. If I were to go to you to-day with a ninety-day trade bill, the acceptor known to you as good, and also with a loan secured by Pennsylvania Railroad bonds, my loan to mature in ninety days, what rate would you charge me on those separate items?
A. The bank rate to-day is 2-1/2 per cent. You are a good customer, and I should charge you 2-1/2 per cent. for discounting that trade bill, and I might charge you 3 per cent., or even perhaps 3-1/2 per cent. on the Pennsylvania Railroad collateral for this reason, that one is not as realisable as the other. When the bill becomes due it has to be paid, or I give it back to my customer, and say "Give me the money for that." I can not quite say the same to him about his collateral.
Q. What per cent. of earnings on your capital did you show last year?
A. Roughly, our net earnings were 20 per cent. It cost us 50 per cent. of our gross earnings to run the business.
Q. What taxes do you have to pay?
A. We pay income tax on all our earnings, and deduct from our gross profits. We are entitled to deduct, roughly speaking, our expenses, and then upon the remainder we have to pay the income tax, or whatever it is, at 1 shilling in the pound, for instance, now.
Q. Would you say that the Bank of England is a popular banking institution among other banks in England?
A. Yes, I should say so decidedly. Its popularity goes to this extent, that it is absolutely indispensable to them. Some of them may grumble at this proceeding or that proceeding, but they have one and all to own that the Bank of England is indispensable to them.
Q. As a matter of fact, if you had presented to the Bank of England last fall some bills which had been negotiated through you which appeared to be finance bills, do you not think they might have gently hinted that it was not agreeable to them to have you negotiate any more finance bills?
A. I may say they have that recourse, and they might say to me if I gave them any just cause for doing it, just the same as anybody else.
Q. In other words, the Bank of England has such a commanding position here among the financial institutions which control all the finances of Great Britain that they dominate it when they choose to?
A. When they choose.
Q. It is the custom of the bank to co-operate very cordially with the other banks, is it not?
A. Oh, yes; we are as free as free can be. There is very little conference, or anything of the kind; we are all pretty good friends all round.