It is exactly fifty years ago since the clergyman of a little town in
Bucks circulated among the poorer part of his parishioners a proposal,
which excited the ridicule of many and the apprehension of not a few.
“If any inhabitant of Wendover chooses,” said he, “to entrust me with
any amount of his savings, in sums of not less than twopence at a time,
I shall be happy to receive the money, and to repay the sum to him next
Christmas, with an addition of one-third upon the amount of his
deposit.” It was some time before the population of Wendover could be
brought to understand the value of the proposal; but it was still longer
before its universal application became appreciated. Five years elapsed
ere any similar institution rose into existence: then a “Charitable
Bank” was opened at Tottenham, by a lady named Priscilla Wakefield,
assisted by six gentlemen, who undertook from their private purses to
allow five per cent. interest on the deposits. Three years passed, and
another society upon the same principle was formed at Bath. After this,
the eyes of the public began to be opened; and by 1816, there were
established in England seventy different Savings’ Banks; whilst Wales
boasted of four, and Ireland of five. At present the number of Savings’
Banks in operation in Great Britain, is five hundred and eighty-four.
Those doing the largest amount of business are of course in London; and
some idea may be formed of the magnitude of their transactions, when it
is stated that the St. Martin’s Bank, near Trafalgar Square, alone, has
on its books at present, forty thousand depositors, whose investments
amount to upwards of a million and a quarter sterling. Since this
establishment was first commenced in 1816, it has opened one hundred and
seventy-three thousand accounts for nearly eight millions of money. The
bank which approaches the nearest to the St. Martin’s Bank in magnitude,
is the Bishopsgate Bank in Moorfields. That bank has three-quarters of a
million invested in it. The Bloomsbury Bank has half a million: the
Marylebone Bank about 300,000_l._ There are banks as large as the last,
at Newcastle, Nottingham, Norwich, Bristol, Hull, Devonport, Leeds, and
Birmingham. The Liverpool and Manchester Banks have deposits of half a
million each. In Exeter there is a bank with thirty-five thousand
depositors, and half a million of money.
This immense amount of business is done at no very great cost. For the
five hundred and eighty-four banks, there are altogether only eleven
hundred and forty paid officers. The salaries of these officers amount
to no more than seventy-five thousand pounds a year; and they manage the
business of more than a million of depositors, whose accounts exceed
twenty-eight millions sterling—a sum equal to the capital of the Bank of
England.
The mere fact of any institution having to deal with so enormous a
capital, renders it one of great importance commercially. But when it is
remembered that the vast aggregate is made up of small savings; and that
additions to, or withdrawals from it, furnish a clue to the fluctuations
between the prosperity and depression of the largest, most useful, and
least wealthy among us—the thews and sinews of the nation—the
administration and management of Savings’ Banks cannot be too jealously
watched.
Unhappily a painful interest has been lately imparted to the system by
the abstraction of large sums by certain local managers; and by the
discovery that to make these defalcations good, there exists no
government liability. Indeed by law (the act of 1844) even the Trustees
are not liable; but honour has always, as we shall see, proved with them
stronger than the statute. A clear understanding of the actual
connection of the State with Savings’ Banks is of vital importance, not
only to depositors, but to those who interest themselves in promoting
the banking system among the humbler classes; a system, which, it may be
safely affirmed, has hitherto proved of the utmost benefit not only to
the worldly prosperity, but to the morals of the working bees of our
Great Hive.
Savings’ Banks were first established from motives of benevolence. They
soon, however, came to involve such great responsibility that the
managers were anxious that the State should give them the benefit of its
support. The State was nothing loth, for it saw the advantage of having
such large amounts of money in possession. Accordingly, in 1817, there
was opened at the National Debt Office, a “Fund for the Banks for
Savings,” and an act was passed compelling the Trustees to pay in their
deposits to that Fund, receiving a debenture which bore interest at the
rate of 4_l._ 10_s._ per cent.
The Government, therefore, is only responsible for the money _after_ it
is paid to the National Debt Office: it is not accountable for
deficiencies arising in the course of Savings’ Bank transactions, or
from the embezzlement or mismanagement of local officers. Still
depositors are seldom defrauded; for when such defaults have happened,
the Trustees and Managers of the Bank concerned have stepped in to cover
the deficiencies, except in a case which occurred in Wales in 1824, and
in other instances subsequently in Ireland. In no one case, on the other
hand, has the Government ever rendered assistance to the value of a
farthing. Why, will be seen when the dealings between the local
authorities of these banks and the National Debt Office are explained.
They are simply as follows:—The accumulated deposits of each Savings’
Bank, are paid over to some neighbouring banker, or other person, who
acts gratuitously as treasurer. The treasurer pays the money, by check
or otherwise, to the National Debt Commissioners, who invest it in
Exchequer Bills or Stock. At the end of the year they allow an interest
upon the amount deposited. Out of this interest the Savings’ Banks
Trustees are authorised by law to pay interest to the depositors at the
rate of not less than 2_l._ 15_s._, nor more than 3_l._ 0_s._ 10_d._ per
cent. per annum. The Banks vary in the precise rate; the average rate of
interest afforded by all the Banks in the United Kingdom is 2_l._ 17_s._
6_d._ Thus 7_s._ 6_d._ per cent.—which constitutes the difference
between 2_l._ 17_s._ 6_d._ and the 3_l._ 5_s._—forms the fund out of
which is defrayed the charges of management.
In the majority of Banks, there is only one paid officer; but of course
the number varies according to the amount of business. The St. Martin’s
Bank is the most complete establishment of the kind, and consists of
sixteen persons. Some Banks have only one remunerated official. In every
case, the National Debt Commissioners have power to make such
regulations, under the Savings’ Bank Act, as enforce each paid officer
giving heavy security for his honesty.
It is of great consequence that the public should understand that the
defalcations which have of late caused some distrust in the stability of
Savings’ Banks, have not arisen from any defect of the great principles,
but only in the details, and from the abuses of the system. They have
happened chiefly in consequence of the culpably loose and irregular
conduct of the local managers; but partly from the carelessness or
ignorance of depositors. The chief manager of an Institution in
default—as in the latest case which has come before the public—has left
everything to the actuary or cashier, who did precisely as he pleased,
and he is blamable for laxity. On the other hand, most of the monies of
which depositors were plundered never passed through a Savings’ Bank at
all. They were paid to the Officers of the Banks at their own abodes,
and these officers never gave any account of them to the Managers. The
only way to stop this, is to make it criminal for any officer of a Bank
to receive the money of any depositor, at any other time or place than
at the Bank during the regular Bank hours. The fact is that there have
rarely, if ever, hitherto been any _genuine_ frauds upon Savings’ Banks.
The frauds have taken place upon irregular transactions out of doors.
Hence it is that the National Debt Commissioners repudiate all liability
to the depositors.
Against, however, the National Debt Office itself there is a very
serious charge. As we have stated, it is bound to invest, in the public
securities, the monies paid over to them by the Trustees and Treasurers
of Savings’ Banks. It appears, from parliamentary returns, that at
different periods the Commissioners have accumulated large sums of this
money, and dealt with it in different classes of securities; although
the necessities of Savings’ Banks did not require any such operations.
The result has been very unfortunate. The National Debt Commissioners
appear, by their accounts, to have less stock by _two millions_ of
money, than the capital paid to them ought to represent. This glaring
fact appears on the face of the public accounts. No explanation has ever
been given; no reasons have ever been assigned. The belief is, that the
operations by which the Savings’ Banks fund so seriously suffered, were
necessitated by the financial exigencies of government some years since.
They commenced in 1834 and continued down to 1843, when they were
discovered and checked by public opinion. As, then, for this amount the
Government is responsible, the nation will be, ultimately, obliged to
pay it up to the depositors.
But a calm review of these facts—startling as some of them are—should
not essentially affect the stability of Savings’ Banks, and alarm is
comparatively groundless. Firstly, the defalcations of officers are
generally made good by their sureties, or by the local trustees; and
secondly, the deficiency of two millions is not likely to be called for
so suddenly as to inconvenience the public purse.
It is now necessary to point out how—to glance at the opposite page of
the account—the law guards against frauds attempted _by_ the public upon
Savings’ Banks. The only way in which they could be so abused, would be
by attempts, on the part of the comparatively wealthy, to obtain a
higher rate of interest, for investments, than they could get elsewhere.
But an average interest, 2_l._ 17_s._ 6_d._ per cent. with a maximum of
3_l._ 0_s._ 10_d._, would seem a sufficient bar to such deposits. But in
order to guard against such a possibility, the law has enacted that no
one person shall be permitted to deposit more than 30_l._ in any one
year, or more than 150_l._ pounds in the whole; and if his principal and
interest together ever amounts to 200_l._, then the payment of all
further interest is stopped. These restrictions are effectual in
preserving Savings’ Banks to the sole object of savings—the savings of
the poor.
As regards actual frauds and attempts at fraud by the public, we have
been obliged with the experience of the St. Martin’s Bank, which very
probably speaks for that of all the Savings’ Banks in England:—“Since
this Bank was instituted, in 1816,” says our informant, “there have been
only five attempts at fraud, by forgery of depositors’ signatures, or
otherwise. In two of those five cases the forgery was detected and no
loss ensued. In the other three cases the Bank sustained the loss, which
amounted in the whole to less than 50_l._ Attempts at personation seldom
succeed,—nor are these always fraudulent; absent depositors are often
consenting parties, in order to save themselves the trouble of attending
personally. Such cases lead to dispute; but two such cases which have
occurred here are rather curious. In 1847 a man married a female
depositor, and induced her to withdraw the whole of her money (exceeding
100_l_), of which having possessed himself, he abandoned her.
Subsequently he deposited 90_l._., part of this money, in three
different Savings’ Banks, our own among the number. The wife having
stated her case to us, we took advantage of the law which prohibited him
from depositing in more than one Bank, and refused to allow him to
withdraw. The case was referred; and the barrister appointed by act of
Parliament to settle such questions awarded that, under the statute, the
deposits were forfeited to the Commissioners of the National Debt. The
Lords of the Treasury, upon the wife’s memorial, ordered the restitution
of the money to her, for her own separate use, free from her husband’s
control; and this arrangement we had the pleasure of carrying into
effect.—The other case was equally singular. In 1848 the Painters’ and
Glaziers’ Friendly Society had an account with us. They sought to eject
one of the trustees of their fund from the benefits of their Society, on
the ground that on the ‘10th of April’ he had acted as a Special
Constable, contrary to the rule prohibiting him from ‘voluntarily
entering Her Majesty’s service.’ The trustee protested to us, and we
objected to pay the Society’s money without his signature to the order.
Thereupon ‘the Painters and Glaziers’ caused the case to be referred,
and the barrister awarded that the funds should not be transferred or
withdrawn without the trustee’s consent.”
From the same quarter we ascertained, in reference to unclaimed money, a
remarkable circumstance. The amount of unclaimed deposits in the St.
Martin’s Place Bank has of late decreased instead of increased. In 1842
the Bank held 10,800_l._, which had been unclaimed for seven years. In
1849, although its business had so amazingly augmented, the amount which
had remained unclaimed for seven years was 9898_l._ or nearly 1000_l._
less. This is accounted for by the great pains taken to trace and summon
the depositors and their representatives. It certainly is remarkable
that out of transactions to the extent of more than eight and a half
millions of money, only 9900_l._ should remain unclaimed.
From what we have stated on this subject it will be seen that although
Savings’ Banks are not on a satisfactory footing as between the
Government and depositors, or as between the latter and the local
managers; yet, on the whole, the system is so well contrived, that no
good reason has lately been revealed for the public to withdraw their
confidence from them. The cure of the more glaring defects is now under
the consideration of Government, and this paper will be best concluded
by a sketch of the proposed remedy. The bill introduced by the
Chancellor of the Exchequer deals with all the defects we have pointed
out: perhaps it introduces some new ones, but these it will be purged of
probably in Committee. One of the chief evils is that exemption from
liability which was extended to trustees in 1844: and it is proposed,
for wilful or neglectful losses, to restore this liability. These
officers are now unpaid; and it is proposed to pay them, Government
being responsible for their acts, and having the privilege of
appointing. To prevent fraud, occasioned by the treasurer or actuary
receiving monies at his own house, it is intended that the treasurer
alone shall receive money, and that he shall attend at certain stated
times for that purpose. A local banker is to fill the office, who will
not be wholly unremunerated. For any other person than the treasurer to
receive money as a savings’ bank deposit, will be a misdemeanour. Daily
accounts are to be rendered to the Commissioners of the National Debt;
and those Commissioners will appoint auditors, who shall exercise a
constant revision of the accounts, subject to supervision by special
inspectors despatched at discretion. These arrangements will necessarily
entail greater expence, and to meet it, the rate of interest allowed to
depositors, is to be reduced to 2_l._ 15_s._, and deposits limited to
100_l._ Above that amount, Government will either hold the money without
interest, or, at the depositor’s option, invest it in the funds free of
charge.