Savings Banks

Democratic Banking.

Two other important war tendencies affecting savings banks must also be mentioned. Neither of these is connected with currency depreciation, but both show the way in which new and formidable competitors to the savings banks have come into existence. The first is the gradual democratisation of the ordinary banking system. Fifty years ago, only the rich had banking accounts, but to-day the use of the banks has spread not only to the middle-classes but also to some extent to the artisan classes. Many banks have opened special savings banks depart ments, and instances of this will be found in the main table ; but, in addition, in a large number of cases, people keep their savings on deposit at a bank and not in a special savings bank or savings bank account.

Next come the huge loans raised to finance the war. The belligerent governments had to draw upon the last penny of the nations' capital, and no sum was too small to escape their notice. In fact, most countries issued special forms of loans, designed to appeal to the small investor, who formed the main support of the savings banks. The outstanding example was the British war savings certificate. Sold at 15/6d., it rose to Li in five years, and to 26/– in ten years, and as no one could hold more than zoo, it was limited to the small man. The net equivalent rate of interest on these was over 5%, whereas the British post office savings bank and the Trustee savings banks (v. infra) only paid 21%. The greater appeal of the savings certificate is shown clearly by the fact that, at the end of 1925, 24/– was invested in cer tificates to every pound deposited at the savings banks.

Finally, the economic losses of the war were reflected in a post-war period of relatively high interest rates, while interest upon savings bank deposits remained unchanged. The disparity in England between the return from savings bank deposits and savings certificates has already been noted. The same applies to interest allowed on deposits by the joint-stock banks. This is two points below bank-rate, and since the war has consequently been as high as 5%, and has rarely been below 2%. During most of 1927, it was 21%. As deposits are accepted in sums as low as Li and are withdrawable at seven days' notice, the extent of the ordinary bank's competition with the savings bank will be apparent.

This completes the general survey of the post-war position, and will enable the table to be appreciated. The figures are taken from the League of Nations publication, "International Statistical Year-Book, 1926," published in England by Constable and Com pany, and so may be regarded as being derived from official sources. The writer wishes to place on record the great obligation

which he and many others are under to the League Statistical De partment for the wealth of information which they made available.

Great Britain.

Apart from deposits in the joint-stock and other banks and in building and co-operative societies, and invest ments in securities and property of all sorts and descriptions, British savings are held in three main forms, namely, deposits at the Trustee Savings Banks, the Post Office Savings Bank, and holdings of Savings Certificates. Trustee Savings Banks date from the beginning of the nineteenth century, or even earlier (see BANKS, HISTORY OF), while the Post Office Savings Bank dates from the middle of the nineteenth century. Savings Certificates, as explained above, were instituted during the war.

The following table shows changes in these three forms of sav ings, and in the proportion in which the total of savings is divided between them. Amounts are in millions of pounds.

The final comment on Great Britain must relate to the steady post-war growth in savings, despite bad trade and wide-spread unemployment. Even the coal stoppage of 1926, and its aggrava tion of an already serious economic and social situation did not cause more than a drop of five millions in total savings, while the Trustee Savings Banks actually improved their position.

In analysing this table, it should be noted that the Post Office pays 21% upon deposits, the Trustee Banks 21% upon deposits in the ordinary section, and a rather high rate (in 1927, this rate was raised from a maximum of 31% to one of 4%) on those in the special investment departments of the banks, while, from their institution during the war until March 1922, savings certificates were sold at 15/6d. per one pound certificate, repay able at Li five years, and at 26/— ten years after the date of purchase. The yield on the last, if held the full time, was about 51%, and this explains the growth in popularity of the savings certificate, as shown by the changes in the percentage columns. In March 1922, the purchase price was raised to 16/—, and in the autumn of 1923 the Io-year redemption price was reduced to 24/— corresponding to a yield of 44%. This rate was more consonant with those allowed by both classes of savings bank, and this explains why, since 1923, the three classes of savings increased proportionately, the percentages remaining unchanged.