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History of the Birmingham Municipal Bank
Crossing Chamberlain Square one memorable day in the dark period of 1915, the Right Hon. Neville Chamberlain, M.P. (then Lord Mayor of the City), has told us that the thought of having a Municipal Bank first flashed across his mind. While it may have been, and probably was, the outcome of previous reflections on the subject, it was certain that the inspiration born that day accounts for his subsequent actions. It may be that the surroundings, named after his distinguished father, urged him on to do the big thing, for we must concede that it was a big thing to which he set his mind and devoted his energies.
 
The above paragraph is taken from a book by J P Hilton - the first General Manager of the Birmingham Municipal Bank. That book (published in 1927), entitled Britain's First Municipal Bank - The Romance of a Great Achievement, is a major source for this history of the Bank.

Mr Chamberlain's idea was formulated in response to persistent requests from the Government, for efforts to be made by local authorities to encourage the public to subscribe to funds that would assist with the successful prosecution of the War. But the existing Government schemes were of little appeal to the ordinary worker, who could only afford to save small sums from a weekly wage. A Municipal Bank was a possible way of encouraging such small savings by:
    - providing appeal, and a feeling of security, by its connection with the local authority;
    - creating the machinery for the collection of small contributions towards the War effort;
    - providing workers with the means to accumulate savings that would assist them during a period of industrial depression,
      which might follow the end of the War.

Appreciating the need to obtain a positive response from ordinary workers, Mr Chamberlain consulted local Trade Unionists, and initiated a series of meetings in order to advance his idea. An essential feature of the scheme was the deduction of savings weekly from wages by employers, in accordance with a resolution to be passed by the workers themselves.

Significant contributions were made at these meetings by Eldred Hallas and Joseph Gregory (secretaries of the Amalgamated Society of Gas, Municipal and General Workers) and John Beard (president of the Workers' Union). In addition to providing enthusiastic support, these gentlemen also made helpful suggestions. Eldred Hallas suggested a system of collecting deposits by means of coupons, which was subsequently adopted.

The next stage was the discussion of the scheme with prominent members of the City Council, leading bankers, and other financial experts. Constructive suggestions were forthcoming, particularly from C T Appleby (a Chartered Accountant and City Councillor) and Sir William Schooling, who had worked with the National War Savings Certificate scheme.

On April 4th 1916, Neville Chamberlain formally brought the scheme before the City Council for their approval. The scheme was that the Corporation would open a savings bank and receive deposits from employed persons, associations, or societies. Interest at the rate of 3.5% was to be allowed on deposits, and approximately 80% of the amounts received would be invested in Government securities. The method of savings was to be by deduction from wages - coupons representing the value of the deduction.

The Council approved the scheme and appointed a special committee to bring it into effect:
    - The Lord Mayor (Alderman Neville Chamberlain, JP)
    - Alderman J H Lloyd, JP
    - Alderman T O Williams
    - Councillor C T Appleby
    - Councillor J Beard
    - Councillor E Hallas

The scheme required the Corporation to obtain statutory powers, so Mr Chamberlain applied to Edwin Montagu (the Financial Secretary to the Treasury) to seek the support of the Chancellor of the Exchequer and the Government. Receiving that support, a Bill was introduced into the House of Commons on April 11th 1916.

This Bill authorised local authorities having a population of 50,000 or over to establish Municipal Savings Banks with the object of facilitating the investment of savings in securities issued for the purpose of the War. Unfortunately, the joint stock banks (fearing the competition) objected to the proposals, and the Government dropped the Bill.

Neville Chamberlain was not discouraged, and began discussions with representatives of the joint stock banks, and at the same time, renewed negotiations with the Treasury and the Local Government Board. The outcome was that a second Bill was introduced into the House of Commons on July 1st 1916. This Bill was more restrictive than the original scheme, requiring that:
    - it would only apply to local authorities with a population of 250,000 or over (ie 18 authorities);
    - deposits could only be accepted from employed persons;
    - a maximum limit of 200 of savings would apply to individual depositors;
    - investment of funds would be controlled by the National Debt Commissioners;
    - the earning capacity of the invested funds would be controlled by the Treasury;
    - withdrawals on demand would be limited to 1;
    - the Bank's life would be limited to three months after the termination of the War.

Progress of the Bill through Parliament was swift: second reading August 15th 1916; third reading on the following day; Royal Assent on August 23rd 1916.

Practical measures followed just as swiftly. Offices for the Birmingham Corporation Savings Bank were provided in a small portion of the service-laying section in the semi-basement of the City's Water Department - a counter five yards long is constructed, and a screened-off section of the office, measuring 9-feet by 5-feet is constructed. The National War Savings Committee agreed to supply the coupons, coupon cards, etc.  Mr J P Hilton was appointed as the new bank's manager on September 8th 1916, and took up his duties ten days later. By September 23rd, circulars had been sent to 2,350 employers. The City Council having approved the rules, the committee decided to open the Bank on September 29th 1916, and fixed the Hours of Business.

As a result of the Act's requirement that the Bank should be wound up three months after the end of the War, deposits ceased to be taken after October 31st 1919. Up to that date, deposits had amounted to 603,319, and 295,709 had been withdrawn. The number of depositors enrolled was 24,411. Such a degree of support for the concept of a Municipal Bank could not be ignored, and prior to the compulsory winding up of the temporary bank, steps were taken to replace it with a permanent institution.

On June 25th 1919 the Birmingham Corporation Bill began its journey through the legislative procedure, and received Royal Assent on August 15th 1919. In anticipation of the legislation being enacted, the City Council at their meeting of July 29th 1919, approved a set of draft rules and authorised the Bank Committee to take steps to start the Bank as soon as possible. On the regulations being issued by the Treasury on August 25th, the rules were approved by the Chief Registrar of Friendly Societies on August 27th, and by the Treasury on August 28th.

These amazingly quick examples of bureaucracy that could be achieved with a comparatively small Civil Service, were followed by equally fast action at a local level. On September 1st 1919, the Birmingham Municipal Bank opened for business with a Head Office and seventeen branches - six offices opened on a full-time daily basis, and the remaining twelve on a part-time basis. (See: Branch Openings by Year)

Of the 24,411 depositors in the Birmingham Corporation Savings Bank, 22,592 transferred their accounts to the new bank. The physical work required to action the transfers in the Bank's records was enormous. Each account in the temporary bank had to be ruled off, and a corresponding new account opened on a new ledger sheet. New passbooks and index cards were required to be completed for each account, and the depositors' signatures obtained. The Bank's staff worked day and night to get this huge task completed.

Although the Bank had come to fruition because of Neville Chamberlain's idea to encourage small savings that would benefit the war effort, one of the wartime Ministries (the Ministry of Reconstruction) had considered the practicability of "assisting any bodies or persons .... to build dwellings for the working-classes immediately after the war". That Ministry produced a report that recommended that larger Municipalities should be empowered to assist depositors to purchase houses for their own occupation. The report's authors believed "that the prospect of one day owning their homes would provide a strong motive for accumulating savings. In this way thrift would be stimulated, and more capital provided for housing".

Legislation to implement this recommendation was not introduced, but it was usefully cited when the Birmingham Corporation Bill of 1919 was examined by the Local Legislation Committee of the House of Commons. Consequently, the Act set up two departments within the Bank: the Depositors' Department and the House Purchase Department.

Statistics relating to the growth of these two departments (and the Bank generally) is given at Financials, and the unique history of the House Purchase Department is detailed in its own section of this website.
 
Details of the Bank's progress were reported both externally and internally by a series of Annual Reports.

The Birmingham Corporation Savings Bank relied on a system of Coupons to attract deposits. The new Bank had to decide whether to continue with this popular system, or abandon it in favour of cash transactions over branch counters. The opinion of employers (who effectively administered the issue of individual coupons to their workforce) was sought. The majority were averse to the coupon system, and on October 21st 1919, instructions were given to cease the issue of coupons.
 

Neville Chamberlain became the Chairman of the new Bank's first Committee of Management, which was appointed by the City Council at their meeting of November 9th 1918. However, Mr Chamberlain was elected the Member of Parliament for Ladywood at the General Election held on December 14th 1918, and subsequently served on the Committee as a co-opted non-Council member. Following his appointment as Chancellor of the Exchequer in 1923, Mr Chamberlain resigned from the Committee. In the period 1919 to 1927, J P Hilton corresponded with Neville Chamberlain on a variety of subjects.


In order that the Bank could expand on the basis of deposits and withdrawals being made in the usual way, it was decided that a network of branches would be set up in convenient parts of the city. The growth of this network is summarised in Yearly Summary of Number of Branches, and the individual stories of each branch is detailed at Branches.

The history of the BMB over the next twenty-five years, mainly consists of the growth of its branch network (to a total of 68 offices), and the growth of depositors' balances (to 67.743 million) against a background of economic turbulence. Innovations in this period included the introduction of Home Safes, a link-up with School Savings Banks, and the development of a system for the payment of Utility Accounts over Bank counters. Also during this period, the Bank moved its Head Office to a prestigious new building in Broad Street.

This period of branch growth under the leadership of the Bank's General Manager, J P Hilton, was interrupted by the Second World War. After the War, Mr Hilton was succeeded by Harold Carver, who supervised during the post-war period when depositors' balances increased to 85.892 million, in a period of generally low Interest Rates.

Mr Carver retired in 1956, and the position of General Manager was subsequently held by Messrs H J Sutherland; J W Raftery; S A Guy; B P Hayward; and J W Hoccom (see Senior Management).

These last five General Managers oversaw a period of continuous change and innovation, at an increasingly faster pace that reflected the greater financial sophistication that the country's population gradually acquired. The first change saw the Bank's only savings product (now to be known as Savings Department No 1) joined by a new facility with a tax concession on April 1st 1957 - Savings Department No 2 (see Account Types).

But it was not until June 14th 1960, that restrictive limits on the Bank's deposit levels were raised: the annual limit of 500 per No 1 Department depositor was suspended, and the aggregate limit increased from 3,000 to 5,000. In the No 2 Department the aggregate limit was increased from 1,000 to 2,000.

In the 1960s and 1970s, the following changes occurred:
1963: the Bank's limited Standing Order facility was extended as a national Credit Transfer Service was introduced;
1964: J W Raftery replaces H J Sutherland as General Manager (July 31st), but dies November 14th;
           S A Guy appointed as General Manager;
1965: Travellers' Cheques and Foreign Currency made available to depositors through an arrangement with Thomas Cook & Son Ltd;
1967: an Investment Department (No 3) was opened in order to be able to pay depositors a more competitive rate of interest;
1967: a centralised Current Accounts Department opened in order to provide depositors with a cheque book facility;
1969: cheque guarantee card facility provided for Current Account customers;
1969: Saturday opening of all banks discontinued;
1969: Save As You Earn Scheme (the Government's Contractual Savings Scheme) introduced;
1970: facility for depositors to make limited withdrawals at two branches in addition to the branch at which their account is kept;
1970: B P Hayward replaces S A Guy as General Manager (September);
1971: currency decimalisation (February 15th);
1972: the Bank joined the West Midlands and South Wales Computer Consortium of Trustee Savings Banks as an initial step
           towards the computerisation of the Bank's records;
1973: The report of the Page Committee to Review National Savings states that the Bank is closely comparable with a trustee savings bank;
1973: commencement of computerisation - branch-by-branch programme to transfer accounting methods to an On-Line-Real-Time system;
1974: second tier (paying a higher rate of interest) added to No 3 Department;
1974: a Foreign Till opens at Head Office branch;
1974: J W Hoccom replaces B P Hayward as General Manager (March 31st);
1975: negotiations with HM Treasury regarding the Bank becoming a Trustee Savings Bank;
1975: a scheme to sell 50-pence savings stamps by machine introduced at branches, public libraries etc:
1976: take on of all branches to computer accounting completed (March 19th);
1976: Birmingham Municipal Bank ceases (March 31st); 560 staff are transferred to the new bank;
1976: Birmingham Municipal Trustee Savings Bank commences (April 1st) following the passing of the
           National Exhibition Centre and Birmingham Municipal Bank Act 1976;
1976: negotiations begin with the Trustee Savings Bank of the Midlands (which was formed by the amalgamation of the three
           TSBs in Coventry, Walsall, and Wolverhampton) regarding the formation of one bank to service the whole of the West Midlands;
1977: Term Deposit investment facility introduced;
1977: personal loan and overdraft facilities introduced;
1978: a credit card facility (TSB Trustcard) made available to customers;
1979: Birmingham Municipal TSB amalgamates with TSB of the Midlands to form TSB of Birmingham and the Midlands (November 20th).
           The special relationship of the Bank with the City of Birmingham that has existed for sixty years, whereby the City Council appoints the
           Bank's Committee and Trustees, ceases.
 

Summary
The history of the Birmingham Municipal Bank over these sixty years can be split into three main periods:


Period 1 (General Manager: J P Hilton - 1919 to 1945)

Formation; Systemisation; Penetration.

The groundwork for the Bank's achievements was laid in this twenty-six year period when the initial accounting and procedural methods were formulated, against a background of a rapidly expanding branch network. Using caution to test the market in each area, and using a sensibly modest design, a large number of branches were established across the city in an era when people shopped daily in their own locality.


Period 2 (General Managers: H Carver and H J Sutherland - 1945 to 1964)

Regulation; Stagnation.

In this post-war period, the Bank's Regulations restricted deposits to 500 per annum, with an aggregate limit of 2,000 (3,000 from 1952), and only 30 withdrawals on demand. With increasing competition from building societies, and people's aspirations becoming wider, the Bank's simple savings products and uncompetitive interest rates, result in poor deposit balance growth.


Period 3 (General Managers: S A Guy, B P Hayward, and J W Hoccom - 1964 to 1979)

Diversification; Computerisation; Amalgamation.

With the ability to offer a wider range of products - particularly an Investment Department paying higher rates of interest, and Current Accounts providing money transmission services - the Bank is now able to compete more easily for customers. The Bank's aim to provide a fully comprehensive banking service for private individuals is improved further with the introduction of credit facilities that include credit cards, overdrafts and personal loans. In 1972, credit balances on customers' accounts exceed 100 million, and continue to grow at record rates over the next few years. Computerisation has released branch staff from many routine accounting, allowing for more opportunities to sell the Bank's services (assisted by the appointment of a permanent marketing team). At this time, interest rates are at record highs (from July 1973 to March 1977, Minimum Lending Rate is rarely below 10%); the BMB now has a large proportion of its assets in variable rate and short-term investments and is able to take maximum benefit from these rates as deposits increase significantly. Increased profit levels result in increased Reserves.


While the BMB was guaranteed by Birmingham Corporation, its level of Reserves was not a major issue. Becoming a TSB meant that the Bank had to have an adequate level of Reserves - a minimum ratio of Reserves to Deposits of 5% being desirable. This level was achieved in November 1976 (5.38%), and was 8.22% at the date of amalgamation with the TSB of the Midlands. Although diluted by the TSB of the Midlands' Reserve Ratio (4.98%), the combined Bank started life with a Ratio of 6.83%

 
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Trustee Savings Bank