BMB

In November 1926, the Chancellor of the Exchequer appointed a committee to consider whether it was
desirable to permit a further extension of Municipal Savings Banks, and if so, within what limits and
subject to what conditions, statutory or otherwise. In January 1928, the Report of this Departmental
Committee on Municipal Savings Banks was issued. Detailed comments on the report were produced by
the Bank's Committee and presented to the City Council on June 12th 1928. Those comments were as
follows:

An outstanding feature of the year has been the issue, in January last, of the report of the Committee on
Municipal Savings Banks set up by the Chancellor of the Exchequer, to which reference was made in
the last Annual Report of the Bank. It is gratifying to find in the Report that after a searching
examination into the constitution, working and achievements of the Bank, such eloquent testimony is
paid as the following:

Paragraph 29
The results achieved by the Bank are very remarkable and have considerably exceeded anticipations.
While it will appear from the later part of our report that care must be exercised in drawing inferences
from these results, there can be no doubt that, thanks to the enthusiasm and efficiency of its direction
and to the sentiment of civic pride to which it has appealed, the Bank has achieved a success of which
Birmingham is justly proud.

Paragraph 133
The question arises whether any alterations ought to be made in the present position of the
Birmingham Municipal Bank. It is clear from what we have said above that we should view with
serious misgivings the multiplication throughout the country of Banks organised on the lines of the
existing Birmingham Bank, and if the question of establishing such a Bank, either in Birmingham or
elsewhere, were now being raised for the first time, we should recommend against the granting of
Parliamentary powers on broad grounds of general banking and financial policy. But the Birmingham
Bank is undoubtedly rendering very real service to thrift in an area in which the pre-existing facilities
were less fully developed than in other parts of the country. Moreover it is now a living institution with
a vigorous individuality of its own; within a few years, thanks to the energy and ability devoted to its
service, it has come to hold a high place in the minds of a great number of the citizens. Such an
institution claims respect for itself, and even though we are not in agreement with the general policy
which brought it into being, we should be reluctant to contemplate its disturbance unless we felt that
there were real risk of embarrassment arising.

The Departmental Committee have not thought it desirable to make any specific recommendations in
regard to the Bank in the direction of either curtailing or controlling its operations, but they draw
attention to certain points as follows:

1 The regulations "appear to permit of certain operations which might possibly lead to something
analogous to a cheque system."

This observation is apparently directed to Regulation No. 49, which deals with the authority for
payment of moneys to a third party. The use to which this Regulation is put in Birmingham is to enable
depositors who are prevented from attending at the Bank personally, owing to illness or other causes,
to authorise another party to withdraw money for them on production of the pass book. This is a very
useful provision, which is common to all savings banks, and your Committee do not consider that any
importance attaches to the observation of the Departmental Committee on this point.

2 The regulations "do not expressly prevent depositors from opening more than one account."

While this may be so, your Committee have no knowledge of depositors having two accounts in the
Bank. The Post Office and the Trustee Savings Banks require depositors to make a declaration on
enrolment that they are not already depositors in one or other of the Banks concerned, but it has never
been the practice of the Municipal Bank to question prospective depositors in this manner. Moreover,
the requirement of such a declaration cannot act as an incentive to thrift, but rather tends to operate
adversely. The class of depositors for whom the Municipal Bank caters would be unlikely to open one
account at a branch near to their place of residence and another account at a more distant branch.
The Report admits that the business of the Birmingham Municipal Bank is "a genuine savings bank
business," and this should be a convincing answer to those who assert that the Bank has encroached
upon the preserves of the commercial banks.

3 The Report draws attention to the amount of money placed with the Corporation at call, but it is
admitted that "the theoretical objection to this course" has been met, to a large extent, by the
Corporation holding a considerable amount of Government securities, and the Departmental
Committee do not suggest that the arrangements need be disturbed. The hope is expressed that the
Corporation will retain the investments already held, and from time to time will acquire further readily
marketable Government securities.

This question of investing the funds is one which the Bank and Finance Committee have constantly
before them, and considerable care is exercised in dealing with investments. The present arrangements
are mutually satisfactory, and do not call for any change in policy.

4 The Departmental Committee apparently incline to the view that the Bank should keep in cash and
at its Bankers a balance of 5 per cent. of its deposits; that 40 per cent. or 45 per cent. should be placed
with the National Debt Commissioners for investment in short term securities, and that the Corporation
should have the use of the rest of the money for their own purpose or for housing advances.

The Council will remember the unsatisfactory experience in dealing with the National Debt
Commissioners in connection with the temporary war-time Bank, and your Committee feel they are
interpreting the opinion of the Council when they state that there can be no reversion to the practice of
allowing the National Debt Commissioners to act for them in the investment of Bank moneys. It must be
recognised that the Corporation, and not the Government, guarantee the Bank, and it is the
responsibility of your Committee to see that the funds are wisely invested. The successful manner in
which the investments have hitherto been arranged is a complete answer to the observations of the
Departmental Committee on this subject.

The Council will be pleased to learn that the Report confirms the statement so often made by your
Committee that the management expenses of the Bank are below those of other Savings Banks, and the
figures in the Report show that the average cost per transaction in the Birmingham Municipal Bank is
7·60d. as against 7·25d. in the Glasgow Trustee Bank, 11·85d. in the Aberdeen Trustee Bank, 10·39d.
in the Edinburgh Trustee Bank, 11·30d. in the Manchester Trustee Bank, 13·67d. in the Preston
Trustee Bank, 23·12d. in the Airdrie Trustee Bank. or 11·80d. taking all the Trustee Savings Banks
together. Some eighteen months ago certain newspapers gave much prominence to a widely circulated
memorandum prepared by the Actuaries of the Aberdeen Savings Bank, which sought to prove that the
working expenses of a Municipal Bank would be considerably higher than those of a Trustee Savings
Bank. Your Committee felt it necessary to issue a reply to such memorandum, and to emphasise the fact
that the expenses of the Bank were below those of Trustee Savings Banks.

(21/11/09)