A History of Banks for Savings in Great Britain and Ireland

by William Lewins

[97] Hansard, vol. cxliv, p. 1292.

[98] A clause was added to the bill now introduced to prohibit the assumption of the title of “Savings Banks,” by institutions not established under the Savings Bank Acts.

[99] A few days after this, Sir George Lewis gave a pledge to Viscount Goderich that, if the bill passed, the Committee should be appointed to consider every question that Sir H. Willoughby had raised.

[100] The trustees of the principal Savings Banks again petitioned against the bill. The petition from the St. Martin's Place institution prayed “your honourable House to pause ere you pass such an Act as would assuredly compel your petitioners, and, in their view, all parties similarly situated, to resign the charge which they have hitherto had so much pleasure in fulfilling, and, as they may venture to assert, with entire satisfaction to the parties pecuniarily interested.” In their opinion “considerably more importance has been attached to the terms 'Government security,' and 'Government guarantee,' than the facts of the case would require.”

[101] Mr. Sikes said (2,628), “I believe that one great essential for the future progress and prosperity of Savings Banks would be the guarantee of the Government for every deposit duly made in the hours of business.” Mr. Wortley said (1,570) that he thought it a desirable thing, and also Government auditors or inspectors. Mr. Hope Nield (1,937) thought it “desirable decidedly, if it can be obtained without trammelling or destroying the operations of the banks.” Mr. Maitland “had no doubt whatever about it being a desirable thing, if it can be safely given” (2,153). Sir Alexander Spearman gave his opinion at greater length (4,368). “There will be no satisfactory amendment of the law unless the security of Government is given to depositors. I think it is impossible that the present state of things should be allowed to continue. The question has often been discussed, and depositors in many cases have believed that they had the security of Government, and found to their cost that they had not; complaints are constantly arising; applications are constantly made to know whether they have the security of Government or not. I think myself that depositors are entitled to have the real protection of a Government security, but I think also that it will be quite impossible to give this security without at the same time giving to the officers of Government a very different power of dealing with the management of Savings Banks. It would be idle to talk of the one without the other.” So weighty are the conclusions to which the Committee of Inquiry came on the subject of this guarantee that we present them here in extenso. “A very general impression prevails throughout the country that the Government is bound to make good a deficiency whenever a deficiency occurs; a claim accordingly has been made, in several instances, on Parliament to replace the money of depositors in cases of defalcation. This impression is not warranted by the laws which regulate Savings Banks. It is difficult, however, to maintain that Parliament, having released local trustees from their liability, should not be bound to provide some other guarantee for the money of depositors, who have no share themselves in the management of their bank. It appears to your Committee that an alternative ought to be given, and freely offered to the choice of trustees, either to secure the guarantee of Parliament upon such conditions as the commission shall prescribe, or themselves to undergo the same liability in regard to Savings Banks as was enacted by 9 Geo. IV. c. 92, s. 9. The able actuaries connected with various large banks, who have attended your Committee, have detailed various methods by which imposition and error may be rendered almost impossible in large establishments; but in the case of the smaller banks, where the funds are not adequate to provide a staff of paid officers, it will be for the Commission to see what arrangements they can make to check misconduct, and to afford to depositors, at least once a year, a certainty that their money has been duly lodged with the Government, for which purpose some valuable suggestions were made by several of the witnesses experienced in the practical management of banks. In one point all the witnesses concur; and your Committee must record their own opinion to the same effect, that the most effectual restraint upon malversation is to be found in the presence of a second party in every transaction where money is paid or received; and that a rule to this effect ought to be imperative in all banks, under a penalty on its infringement.”

[102] The Committee sat six days deliberating on their Report after all the witnesses had been examined. Draft reports were proposed by Mr. Ayrton, Sir Henry Willoughby, and the Chairman, the report ultimately carried, after a few emendations, being that by Mr. Estcourt.

[103] Sir Alexander Spearman, who clearly explained the facts to the Committee of 1858, also described the routine gone through when Savings Banks made investments with Government. They first certify the appointment of trustees; then, appoint an agent in London, generally a banker, through whose hands the money passes. When the trustees of a Savings Bank wish to invest, they send up a notice to their agent, who presents it at the National Debt Office, where an order is given to the Bank of England to receive the stipulated sum and place it to the account of the fund for the Banks for Savings. Next morning a receipt is sent from the Bank of England to the National Debt Office, and from thence to the trustees who remitted the money. A somewhat similar proceeding takes place on the trustees of any Savings Bank wishing to withdraw money. It is done through the agent, who gives the necessary notice of withdrawal. No money is paid or received at the National Debt Office, but at the Bank of England, the Commissioner simply keeping the accounts.

[104] “Suppose any bank should question the way in which their funds had been invested?”—“My answer would be,” said Sir A. Spearman (4,029), “that this was a matter which did not in the least concern them. I am not aware that the Act of Parliament in any shape or in any manner makes the Commissioners or their officers responsible in the slightest degree to the trustees of Savings Banks.” When asked if, “Supposing the money were used for financial purposes, or not invested at all, or invested so as to produce little interest, would Savings banks have a right to complain?” this witness answered, he “did not think so. What the Commissioners are responsible for is, to repay to the trustees of Savings Banks the amount received from them, together with the amount of interest due, whenever they call for it.” “They are responsible for that, and nothing more.”

[105] A little prior to this, Lord Monteagle had spoken at great length and with great animation on the same subject in the House of Lords. He then went the length of saying, that, “now the money was coveted not so much on account of inculcating the growth of provident habits, but that it should afford the Chancellor of the Exchequer a large capital, which might be sold, bought, exchanged, or invested in Exchequer bills, or in stock, at the will and pleasure of the financial minister; and, consequently, that he could thus be enabled, as he saw fit, to influence the Money-market to an extent which no individual or combination of capitalists could possibly either equal or counteract.” He added, that he could have no objection to the mere buying and selling of securities, so far as the Savings Banks were concerned; what he objected to was, that these transactions should be so carried on as to affect the value of the public securities and influence the Stock-Market—“rig the market,” as a member of the House of Commons said at the same time.

[106] Sir Francis Baring, Sir Charles Wood, Mr. Gladstone, Mr. Disraeli, and Sir George C. Lewis.