This form of competition would be felt less in an agricultural county where the deposits a banker collects are greatly in excess of the demand made upon him for advances; but even there the private banker’s luck has deserted him; for the agricultural depression thinned the ranks of his best customers, and, of course, left him a legacy of bad debts. We should, therefore, expect to see the private bankers disappear from the great towns first, and, finally, from the agricultural centres. The law of the land has kept them small; and the tentacles of the joint-stock companies have almost exterminated a class of men who enjoyed the friendship and confidence of their clients to an extent that a clerk-in-charge upon a salary of from £200 to £500 a year can never even approach.
Though we live in an age of great machines, which, for reasons that will be explained later, can declare huge dividends, every now and again we hear of the inception of a new banking company. The new arrival, perhaps, waxes more than eloquent upon the large dividends paid by the existing companies, and then dwells enthusiastically upon the immense profits it hopes to earn; but can a small company ever establish its credit in face of the network of branches which now cover the land? The person who applies for its shares must certainly be of a most sanguine disposition.
It is the powers that be that always excite the keenest interest, doubtless because of the possibility that a knowledge of their habits and ways may prove of pecuniary benefit to the student; and this object has been kept well in view throughout the following chapters.
CHAPTER II
ON THE CHOICE OF A BANKER
There is an opinion which is very prevalent to the effect that, provided one’s account be an overdrawn one, it does not matter where it is kept; and, of course, if it were possible to find a nice, philanthropic banker who would allow one a big overdraft without even hinting at security, there would be much truth in the assertion; but in view of the existing relations between banker and client, the idea is both unfortunate and fallacious. We have seen how the large joint-stock banks, by developing their system of branches, literally smothered the private banker; and the smaller companies, which possess but few branches, are now being forced to amalgamate with the larger for the same reason. If, therefore, a man has a large advance from a small provincial banking company, it may occur that, just when he is anxious to discount more bills or to increase his overdraft, the bank will be unable to accommodate him; and it therefore follows that a large bank, whose resources are abundant, is as essential to the really great borrower as it is safer for the depositor.
A person whose account is in credit or who leaves money with a banker at interest naturally attaches the greater importance to the safety of his balance or principal; and, secondly, he endeavours to obtain as high a rate as possible; but he would not be so foolish as to sacrifice security to a high rate of interest; though, where the banks are equally well managed, he would select the one that offered him the higher rate or the cheaper facilities. Conversely, the person whose account is overdrawn would, other things being equal, choose the bank that offered to work his account the cheapest.
Now, a banker’s liabilities to the public are due on demand, and at short notice; and they would consist principally of “deposit and current accounts, and notes and drafts in circulation.” These, of course, will be found on the left-hand side of the balance-sheet. As the banker’s deposits may be demanded from him at any unlucky moment, it follows that he is compelled to hold a certain sum of cash (legal tender) in reserve; and the larger that sum, the safer are the customers’ balances. A person, therefore, who is looking for a safe banker, should see that the firm or company which he selects possesses at least from £12 to £18 in coin, bank-notes and cash with the Bank of England against each £100 it owes to the public. He will find the public liabilities on the left-hand side of the balance-sheet and the cash in hand on the right; and a proportion sum will soon give him his answer.