We see, therefore, that a banker’s assets usually consist of the following six classes of investments:—
| I. | Cash in the till and balance with Bank of England(or London agent). | |
| II. | Money lent at call or short notice. | |
| III. | Investments— | |
| (a) Consols; | ||
| (b) securities guaranteed by the British Government; | ||
| (c) other securities. | ||
| IV. | Bills under discount. | |
| V. | Advances to customers. | |
| VI. | Premises and sundries. | |
The first three of these classes constitute what is known as a banker’s “liquid assets.”
Table Showing, in the case of Nine Representative Joint-Stock Banks, the Percentages of the Various Classes of Assets respectively to the Amount of Liabilities to the Public.
| Bank. | Cash and Bank Balance. | Call and Short Money. | Investments | Total of “Liquid Assets.” | Bills, Advances, Premises, and Sundries. | Total Assets. |
|---|---|---|---|---|---|---|
| A | 14·9 | 13·4 | 20·4 | 48·7 | 60 | 109 |
| B | 16·4 | 8·7 | 16·8 | 41·9 | 66 | 108 |
| C | 18·3 | 6·5 | 22·0 | 46·8 | 59 | 106 |
| D | 13·8 | 5·4 | 30·3 | 49·5 | 68 | 117 |
| E | 14·6 | 5·6 | 26·6 | 46·8 | 66 | 113 |
| F | 17·0 | 23·0 | 16·0 | 56·0 | 60 | 116 |
| G | 12·4 | 25·0 | 17·1 | 54·5 | 60 | 114 |
| H | 14·4 | 8·7 | 31·5 | 54·6 | 50 | 105 |
| I | 16·5 | 16·1 | 11·0 | 43·6 | 66 | 110 |
The averages of these percentages[2] respectively are as follows:—15·3, 12·6, 21·3, 49·2, 61·6, and 111.
On examining this table it will be noted that the proportions of funds invested in “liquid assets” do not vary materially with the different banks. When we examine, however, the separate classes of investments making up the total of “liquid assets,” we see that the case is different, and a wide divergence is shown. This is especially so in “call and short money,” where the proportions vary from 5·4 per cent, to 25 per cent, and in “investments,” where they vary from 11 per cent to 31·5 per cent.
The figures given are those of one particular day, and that a day on which, according to popular belief, some of the banks indulge in what has been called by the Press “window dressing”—that is, adjusting to a greater or less extent the amounts held in the respective classes of securities, with a view to the presentation of more impressive figures in the balance sheet to be published as at that day. Had we the actual daily records of the various banks at our disposal, it is not improbable that a greater variation would be shown in the items of “cash” and “call money”; but these figures are not available. It is true that most of the banks now publish monthly statements as to their position, and it is a noticeable fact that while some banks issue these monthly statements as on the close of business of the last day of each month, others vary the day on which the statements are made up; and it is open to conjecture that this variation of date is with the object of making a better showing.
It must not, however, be inferred that such a course as this (“window dressing”) is the usual one adopted by our banks; but it is a method of business which is possible, and which rumour has it is pursued in certain cases. This explains such remarks in the money articles as, “Money was in request to-day, owing to a large amount being called off the market by the banks for window-dressing purposes.”
As regards “call and short” money, it is possible that in time of actual panic a considerable portion of it would not be repaid when “called,” especially as regards the “short” money. It is generally believed, though not stated in any balance sheet, that a large part of this “short” money is not lent to the bill-brokers, but to the Stock Exchange—that is, to stock-brokers. Loans to the Stock Exchange are fixed from one account to the next (about a fortnight ahead), and are then supposed to be paid off if required. In time of difficulty, however, would—or rather could—this money be repaid by the various brokers to whom it is lent? Supposing a broker had a loan of £100,000 secured on American railroad shares, and a crisis suddenly developed, from where could the broker obtain the money to repay the advance if it were called in? He would not be able to sell the shares without serious loss, if at all; and he would have great difficulty at such a time to induce another banker to make him a fresh loan. In all probability the loan would not be repaid, however much the lending banker was desirous, or in need of regaining possession of his money.