Coupons.
Many people leave their coupons with bankers for collection, and here, again, we get an example of making those pay who will. The usual rates are ⅛ per cent. commission on English and ¼ per cent. upon foreign and colonial coupons, but, as a matter of fact, certain managers keep a list of those persons who refuse to pay these charges, while they who do not protest, no matter how large a sum they may keep to their credit upon current account, are made to pay the ordinary rates. It is only fair that a person whose average credit balance does not exceed £50 should pay a rate; but when a man keeps from £250 to £500 and above on the right side, the banker can quite well afford to forego his charge.
Suppose a banker receives £40 from his London agent or through the coupon department of his head-office on account of coupons remitted for a customer. He deducts his charge of 2s., and, without informing the person for whom they have been collected, credits £39 18s. in his pass-book. The client, in five cases out of six, remains under the impression that he has received the market value for his coupons, whereas, had the manager credited the account with £40, and debited it with 2s. commission, the customer in every probability would have asked for an explanation.
The customer, by examining his pass-book, will soon discover whether a rate has been deducted, and if he consider that the balance he keeps at his credit amply repays the bank, then he can request that the commission be returned to him, and that his name be placed on the free list with those of other “conscientious objectors.” Where the face-value of the coupons is given in a foreign currency, he will, of course, have to discover the rate of exchange at which they were sold. Allowance, too, must be made for income-tax.
When purchasing stocks or shares through his banker the latter divides the commission with the broker, and it is perhaps advisable to see the broker’s note, as a zealous manager, anxious to augment the profits of his branch, and believing devoutly in the old-fashioned maxim “every little helps,” occasionally adds a small charge of his own. Should he do this, then he sends the customer a copy of the broker’s note instead of the note itself, and in the copy he has, it need not be said, added a small commission of his own to the broker’s. As a banker guarantees the customer against loss through the failure of either the broker or the jobber, purchasing shares through a bank has its advantages for the bona-fide investor; but the speculator, who may want to “carry over” from account to account, must deal with a member of the Stock Exchange.
Again, when buying foreign drafts through one’s banker inquiry should be made as to the rate of exchange, so that one can check his figures. In a small book of this description much must necessarily be omitted, but it may just be added that in these days the facilities bankers grant their customers range from taking charge of their plate and valuables to allowing them to have their letters addressed to the bank, while they will even pay their subscriptions for them. The difficulty is to say what they will not do, and some day, perhaps, we shall have their young men calling in the morning for orders with the baker.
CHAPTER XI
UNCLAIMED BALANCES
I would describe this banking custom as legal stealing.[*] Bankers, as well as other estimable persons, obtain their gleanings and their perquisites, which are credited to certain sundry accounts, such as “unclaimed dividends,” “unclaimed balances,” and so on. Those banks, too, that issue notes must profit to a certain extent by the paper that is lost and destroyed by the public; and though it is impossible to estimate the gain to the banks from these sources, their absolute silence on the subject seems to indicate perhaps more eloquently than statistics, that the fund thus derived must be considerable, even if it be not vast.
[*] The Government is not prepared to promote legislation for the purpose of requiring the banks of the United Kingdom to make a return showing the sums of money in their hands in respect of dormant and obsolete accounts.—Vide Press, Feb. 1908.
Coming to the definition of an unclaimed balance, it must be confessed that it is somewhat difficult to explain exactly what an “unclaimed” balance is, for the simple reason that the banks, when an account becomes dormant, seldom make an effort to discover whether the owner be either dead or alive, or to whom the balance belongs. On the other hand, if they do not court inquiry, it cannot be said that they obstruct it. Neither, however, do they encourage it, nor assist the owner or claimant in any way, but content themselves with passively carrying forward the figures from half-year to half-year. The public may well be dissatisfied with this treatment, for it is quite apparent that were the banks to make it their business to discover the owners or claimants they would be successful in five cases out of six, and, further, the longer they nurse these so-called “unclaimed” balances, the greater is the probability that they will for ever retain them.
We will first discuss the position of the current-account customer in relation to this practice. As a rule, it is well known to the members of a deceased man or woman’s family where the banking account was kept; so inquiries are usually made, and the balance standing to the credit of the deceased ascertained. There are, however, exceptional cases. A man may have accounts with two different bankers and though one is known, the second may not be. If the pass-book relating to the second account be at the bank, the manager very probably will keep it there. Again, a person on a visit to a place may open a small temporary account at a bank there, and should he die suddenly the manager will not make any attempt to trace his representatives. When the pass-books which relate to these “unclaimed” balances are at the bank, some managers are most careful that they shall not go out again; and, in order to prevent their being sent through the post to the addresses on the ledgers, the books are generally placed in some out-of-the-way corner of the strong-room, there to await the coming of their owners. This is certainly a novel way of protecting the interests of one’s clients, though it doubtless has not the smallest claim to originality, and may not be completely unknown in other trades than that of banking.
Secondly, we come to the deposit-receipt or deposit-note; and it will readily be allowed that a small piece of paper of this description may easily be either lost or accidentally destroyed. It must be borne in mind, too, that the companies, in the event of a depositor’s death, do not take any steps to inform either his next-of-kin or his legal representatives that certain sums of money are standing to his credit in their deposit-ledgers, even when they are aware of his decease. Then, again, after a depositor’s death these documents are sometimes overlooked or inadvertently cast aside with other papers. Such sums, after a lapse of years, might go to swell a company’s unclaimed balances.
But it is a misnomer to speak of these sums as “unclaimed,” when it is obvious that they are simply “unpublished,” and that the banks, were they so inclined, could find the true owners of a large number of these balances in a very short space of time. In many instances they have good reason to think that the customers are dead, even when they possess no positive information to that effect; and as they have their addresses in the deposit-ledgers, all they have to do is to write a few letters of inquiry. However, the banks have the law on their side; and though they are obliged to answer any questions which may be made by a deceased’s representatives, they are not compelled to give information gratuitously, so they choose to remain silent, and insist upon the initiative being taken by interested persons.
Furthermore, a deceased depositor may have held three deposit-receipts. Should two of these be presented for payment by his executors, the manager need not inform them that there is a third sum standing to the credit of the deceased in the books of the bank; and he possibly will not. An interested person, therefore, should always inquire whether there be any other sums standing to the credit of the deceased, either on current account or deposit.
It need not be remarked that should the balance be a debit one the bank will speedily send in its claim, together with a note of sympathy to the widow, begging her to consider the company quite at her service. So hardened is a bank-manager that he will actually attend the funeral of an old and esteemed client whom he has been charging 5½ per cent. interest and ¼ per cent. commission for years. It is a bad sign when a limited liability company is represented at a funeral by an official; and should two bank-agents put in an appearance, one can only quote: “Where the carcass is, there will the vultures be gathered together.” Seeing that they are so eager to exhibit their respect for the rich dead, it may be considered somewhat surprising that they are not more sympathetic towards the poor living, and, also, that they do not publish their so-called unclaimed balances for the benefit of their customers’ descendants; but life is full of these little contradictions, and, after all, the acids and the sweets, judiciously blended, give a zest to existence.
Finally, some banks, we know, issue pass-books to their depositors instead of receipts. It sometimes happens that, at a depositor’s death, the book is with the banker. Unless, therefore, his own people chance to know that he had a deposit account, all traces of its existence are obliterated, for the banker, who has the book in his possession, is not compelled to give any notice. After the publication of one of my books my publisher received a letter from a lady complaining bitterly that a certain bank had treated a kinswoman of hers in this manner. Should the relations of a deceased man or woman have reason to suspect that money has been saved and placed somewhere, they should go to every bank in the town where the deceased resided and inquire whether any sums are standing to his credit in the books of the banks. Their application cannot be refused, and the result may possibly be somewhat surprising, while they will at least have the satisfaction of knowing that their kinsman’s savings are not being devoted by the banks to their own use.
As the law now stands, a deceased customer’s balance is, to a certain extent, at the mercy of his banker; but whether these unclaimed balances would in the aggregate amount to the huge total at which some people are disposed to estimate them is rather doubtful. That the law urgently requires amending cannot, however, for a moment be questioned, for persons whose own interests conflict with those of the public can seldom be trusted to judge impartially; and it is quite evident that directors, who are imbued with the commercial instinct, are not exceptions to the rule. The aggregate, no doubt, would be represented by a large sum, but the public, where money is concerned, generally looks pretty smartly after it, so one would imagine that this total would consist principally of numerous small balances, and that large windfalls must be few and far between.
These so-called “unclaimed” balances are, we have seen, in reality unpublished balances, and steps certainly ought to be taken to compel the joint-stock banks to advertise in certain London and local papers the names and last known addresses of those individuals in whose names sums of moneys, in excess of say £5, have been standing intact in their books for any period in excess of five years. The banks might also be made to hang a list of these names in a conspicuous part of their offices, so that those who are entitled to these sums should at least have an opportunity of claiming them. Were the companies compelled to adopt this course, we should hear very little more of unclaimed balances, for the thought of publicity would be distasteful to them, and they would immediately take steps to put themselves in communication with either the customers or their kinsfolk. One would think, too, that the Government had a better claim to these balances than the banks. Mr. Asquith, for instance, might find them useful as a basis for his old-age pension scheme!
Depositors, seeing how matters stand, should keep their receipts in some place where they cannot be overlooked; and in the event of a pass-book being received, a note should be made in a diary, or even in the “Family Bible,” to the effect that such a book is in existence; as, should it be at the bank at the time of a customer’s decease, we know that the manager may retain it, with the result that all trace of the money will be lost.
CHAPTER XII
BANK SHARES
There is not space in this chapter to deal exhaustively with the risks of shareholders, but it may be mentioned that, with the exception of the old chartered banks, the members or partners of every joint-stock bank in the United Kingdom were, prior to 1858, liable jointly and severally for the debts of the company. This Act, Statute 1858, c. 91, was not, however, compulsory; and although no bank of unlimited liability has since been formed, it was not until the passing in 1879, after the failure of the City of Glasgow Bank, of the Act 42 & 43 Victoria, c. 76, that all the unlimited banks eventually limited the liabilities of their members. Naturally, a person of considerable wealth would hesitate to risk his fortune by buying shares in an unlimited bank which perhaps returned him only 5 per cent. on his purchase-money; but this objection is not now applicable, though it must not be forgotten that the shareholder is liable for a certain known sum, part of which may be callable and the remainder reserved liability, or all of which may be reserved liability and callable only in the event of the company being wound up. Where notes are issued the members may also be liable for the circulation.
Now that the liability on bank shares is a certain sum that cannot be exceeded the investor is inclined to regard them favourably; and though a rich man, who can afford to take a certain amount of risk, may decide to hold a few bank shares among his other securities on account of their higher yield, this liability, be the risk of a bank coming to grief never so small, makes them a most undesirable investment for those persons the interest upon whose capital is just sufficient to supply their wants. Bank shares, in short, are rich men’s shares; but this fact was brought home to the public so forcibly during the Australian banking crisis of 1893 that it seems unnecessary to dwell upon a point which must be apparent to everybody. Besides, we all know that a man of small means cannot afford to incur a liability on bank shares any more than he can sign an accommodation bill, and it would be as foolish of him to accept the one responsibility as the other. Nor is he the class of shareholder to whom the depositor can look with confidence.
While allowing that the great majority of our banks are prudently managed, it must be granted that banking history is a remarkably stormy one, though it is equally true that the surface of the waters has been but little ruffled during recent years; still, the Baring crisis of 1890 is not yet ancient history; and seeing that the banks are intimately connected with the Stock Exchange, the bill-brokers and the commercial community, a person who predicts that a British bank will never again be in difficulties must be blessed by the Almighty with a most sanguine temperament, for such a prediction is altogether opposed to the weight of evidence adduced by the past, and though its fulfilment is eminently desirable, so peaceful a solution of the banking question seems highly improbable.
In Chapter II, on the choice of a banker, an attempt was made to show why a customer should select a strong institution whose working resources are plentiful, and whose reserve of liquid assets is large enough to enable it to meet a drain of deposits during a run or a panic. The shareholder who guarantees the customers of a bank against loss to a limited extent will naturally take care that he is a partner in a company which maintains an adequate reserve of cash and securities as an insurance fund against those accidents which are quite beyond the control of the most able board of directors. A shareholder, say, holds twenty-five shares in a bank. These shares are for £80 each, and the amount paid up upon each is £20. He, then, receives a dividend upon £500, and incurs a liability of £1,500. But he bought these £20 paid shares at such a price that they only yield him 4½ per cent., and he certainly cannot afford to run any great risk for such a return; so he therefore, before purchasing, took care that the bank held a large accumulation of cash and gilt-edged securities as a reserve fund against those banking risks for which he pledged £1,500 of his fortune. Every prudent man should take the same precaution.
The following illustrations, which are taken from the balance-sheets of two English joint-stock companies that need not be named, will clearly demonstrate that there are banks—and banks.