The Reichsbank
INTERVIEWS WITH HERR DR. VON GLASENAPP, VICE-PRESIDENT, AND HERR DR. VON LUMM, DIRECTOR, OF THE REICHSBANK[191]
Q. By whom are the shares of the Reichsbank owned?
A. It is all private ownership. The shares are held mostly in Germany and Holland, and distributed in small lots.
Q. Would the bank discount a bill drawn by one merchant and accepted by another?
A. Yes. The Reichsbank is not only a bank for banks, but for the commercial and industrial enterprises of the Empire.
Q. If a railroad finds it necessary to make improvements and wants to borrow money could they get money at the Reichsbank?
A. Only on collateral acceptable by the Reichsbank. The railroad would probably in such a case go to private banks to be financed.
Q. Assume that there is a manufacturer in Bremen, making well-known articles, which he ships to a merchant in Berlin and draws a bill against that merchant, would it be a satisfactory bill to the Reichsbank?
A. Yes; but in that instance also the merchant would probably go to the private bank, where he would get a better rate of discount.
Q. If there were a severe money stringency, would he still go to his bank?
A. Yes; that would probably be the case, and his bank might afterwards take his bills to the Reichsbank.
Q. What is the smallest bill the bank will discount?
A. We have no minimum. We discount bills as low as 10 marks.
Q. Upon what kind of a bill does the farmer secure an advance from the bank?
A. He sells his produce, draws a bill upon the purchaser, and takes the bill to the bank as any other man would do, or a bill might be drawn upon a farmer and accepted by him.
Q. When he borrows money in the spring with which to buy seeds, how does he secure the cash?
A. He goes to his own bank for that. There are co-operative societies for this purpose, which are a great factor in Germany.
Q. Will the manager of a branch of the Reichsbank renew a farmer's three months' bill if desired?
A. Yes; an exception is made for the farmer. Other bills are not renewed.
Q. The bank rate is 4 per cent. Does that mean 4 per cent. is charged on three months' bills?
A. The Reichsbank has only one rate of discount. There was a time when the Reichsbank did a similar business to that which the Bank of England does now, i. e., that they would purchase in the market prime bills at a more favourable rate, but in 1896 it was decided to have but one rate for everybody.
Q. Please state the reason for the change of policy.
A. The most important reason was that it was thought that a great central institution like the Reichsbank, with its tasks and duties to the whole of the community, ought not to make a distinction of any class, or make an exception in favour of any one. It is the policy of the bank to serve all alike.
Q. Is the Reichsbank disposed to favour every application for discount or loans if the character of the offering be satisfactory?
A. It is their duty to listen to every one who comes for accommodation, whether he has an account or not. The principle of the Reichsbank is not to serve a part of the community, but the whole. The Reichsbank is for everybody.
Q. Are your deposits subject to check?
A. The money is drawn against check. There are two kinds of check—white and pink. The white is for withdrawing cash over the counter, the pink for making transfers.
Q. Have you different classes of deposits?
A. No.
Q. Do you pay interest on your deposits?
A. The Reichsbank does not pay interest on money deposited with it. It receives money on deposit and for transfer. Most large houses keep an account with the Reichsbank. The Reichsbank does a large transfer business for them.
Q. Is it the custom for banks in Berlin and other important centres to carry balances in the Reichsbank as a part of their reserve?
A. It is the custom for the banks to keep a large part of their cash with the Reichsbank. They keep only a small amount of cash in their tills.
Q. Is that true of banks in other cities than Berlin?
A. Yes.
Q. Does the Reichsbank pay the same taxes that the other banks do? For instance, income tax and other taxes?
A. No; we are free from the government income tax, and the license fees, but we must pay the real-estate tax.
Q. What is the relation between this bank and other banks, such as the Deutsche and the Dresdner—that is, as to the character of business transacted? Are you not competitors?
A. It may be said that the Reichsbank is more restricted by law. At a private bank the rate of discount may be much cheaper than at the Reichsbank. The private banker knows his clients, and he may be willing to accept from them a bill that the Reichsbank would not and could not accept.
Q. Then there is to some extent competition?
A. Yes; but that competition is not large. It is not felt that the Reichsbank is a competitor of other banks, but it is a public institution. The Reichsbank has its official rate, which is higher than the private rate. A bank will take bills on its own account running three months or more and hold them, and in case of need will take bills running ten days or less to the Reichsbank for discount. The Reichsbank pays no interest and acts as agent for transfer of currency and credit to all parts of the Empire without charge.
Q. Has there been any feeling that your branches were supplanting the private local banks in small towns?
A. There may have been some instances where a banker may have been dissatisfied at the Reichsbank opening a branch in his locality, but as a rule the banks at such a place are quite pleased to have the Reichsbank open a branch in order that they may have the benefits of its facilities.
Q. The government deposits are received and treated exactly the same as the deposits of farmers?
A. Yes. The business for the Government and its departments is handled the same as for others, and no interest is paid on deposits. There is, however, one exception; every private institution is required to keep a minimum balance to its credit, but not so with the departments of the Government. The Empire keeps in the aggregate sufficient to compensate.
Q. Do you always charge a higher rate of discount for bills when you have a large amount of taxed notes outstanding?
A. No. On occasions the Reichsbank has not increased its rate of discount above 5 per cent. At times we have discounted even at 3 per cent., when we have had to pay a tax of 5 per cent.
Q. It has been suggested to us as a matter of policy in times of stress that it would be better for you to add the 5 per cent. tax to the rate of discount.
A. The Reichsbank must be considered in the first place as a public institution which has to take care of the public interest, and secondarily as a money-making institution.
Q. Is there any restriction as to the percentage of silver in your reserve?
A. No; but there is another law, the coinage act, by which the amount of silver coined depends upon the population. They do not coin more than 20 marks per capita.
Q. What steps do you take to increase your gold reserve or to protect it?
A. We always have a large amount of bills of exchange payable in foreign countries, payable in gold. We also increase the rate of discount. We consider that the latter measure is the only effective one. We also make advances without interest to importers for the time the gold is in transit; we do that even in times when the ordinary gold import point is not reached. Then we may raise our tariff for the purchase of foreign gold coins, as the Bank of England does.
Q. Do you take any steps to prevent exports of gold? We have been told that it is the habit of the Reichsbank, in case of large exports of gold from Germany, to suggest to the other banks that it is not agreeable to have the gold exported.
A. It has never been the case and never will be the case that any such suggestion has been made by the Reichsbank to anybody.
Königliche Seehandlung
(Royal Sea-Trade Society)
INTERVIEW WITH HERR GEH. OBERFINANZRAT LOTTNER, DIRECTOR OF THE ROYAL SEEHANDLUNG, PRUSSIAN STATE BANK[192]
Q. When was this bank organised?
A. In 1772.
Q. What is the capital of the bank?
A. One hundred million marks.
Q. By whom are the shares owned?
A. There are no shares; the capital is owned by the bank, which may be regarded as a juristic person, an independent legal subject.
Q. Who invested the money?
A. The money was originally invested by stockholders in the time of Frederick II, but afterwards the shareholders gave up their stock, for which they were paid. The shares were mostly owned by the King and by his associates, and they handed them over to the bank, so the capital is really owned by the bank itself. The proceeds in excess of all the expenses are paid to the Prussian State.
Q. Who is responsible for the conduct of the business?
A. The president.
Q. Has he associated with him directors?
A. No; he is personally responsible.
Q. By whom is the president appointed?
A. By the King of Prussia for life.
Q. What are the particular functions of the bank?
A. In the first place, it is an organisation to help the State of Prussia. The principal part of the business is to finance the loans of the State. It may undertake the loans alone, but as a rule it heads a syndicate of the large banks.
Q. Do you compete for deposits from merchants, manufacturing concerns, banks, etc., with the Deutsche Bank or the Dresdner Bank?
A. Yes, to some extent. It is not our intention to do so, but of course we practically compete in some ways. Our rates on deposits are less favorable than those of these banks.
Q. Do you take real estate mortgages?
A. No.
Q. You are known as the sea-trade (Seehandlung) society. Why is that?
A. Frederick the Great founded the Seehandlung to promote Prussian trade, especially the oversea trade. At one time this company had a salt monopoly and a wax monopoly. The salt which came into the different ports of Prussia and the wax which came from Poland were bought up by the Seehandlung. At one time the Seehandlung also had mills, spinning and weaving plants, iron foundries, and river steamers. We still own two industrial establishments, the flour mills in Bromberg and a linen spinnery in Landeshut in Silesia.
Q. A large percentage of your funds is loaned on the stock exchange?
A. Yes.
Q. And your discount business is comparatively insignificant?
A. Not insignificant, but small compared with our loans on the stock exchange.
Q. Do you receive promissory notes from customers?
A. No.
Q. Do you transact business of any other character than that heretofore mentioned?
A. We have a branch known as the Royal Loan Office, which lends money in small amounts upon the pledge of different kinds of goods as security. This was established in 1834. In 1906 we made 99,000 loans upon watches, jewels, clothing, etc., at an average of 31 marks per loan. Two-thirds of the borrowers are labourers; last year about 16 per cent. were widows and spinsters, also a few were mechanics—occasionally professional men—artists, actors, and the like. Our rate is very low, 12 per cent. for the year, which is low compared with the ordinary pawnshops. No other banks conduct a business of this class.