Interest Calculations
Depositors' Department
Depositors' Department
The Bank's first set of Regulations (1919) contained the following paragraph relating to the calculation of interest on Savings Accounts:
No interest will be allowed on any less sum than one pound or any fractional part of one pound. The interest shall be computed yearly up to the last day of the Bank year, and shall be placed to the credit of the depositor. The interest so credited shall become part of the principal, and shall carry interest in like manner as a deposit. If an account is closed before the last day of any Bank year, the interest due shall be paid with the principal.
This wording was used in future issues of the Bank's Regulations, but following the introduction of the 1932 Regulations, the published editions also contained a 'Note as to Computation of Interest' at the back of the booklet (therefore, not part of the Regulations) by way of clarification:
Money deposited after the first day of any month bears interest from the beginning of the month following that in which it is deposited; money withdrawn before the last day in any month ceases to bear interest from the beginning of the month in which the withdrawal is made.
This 'Note as to Computation of Interest' clarified the calculation method by making it clear that interest was calculated on monthly rests. No definition was given as to 'the month' but the Regulations specified that 'the bank year' was the year ending on the 31st day of March. The monthly rests were, therefore, on Calendar Months. This clarification note appears to have been introduced following a letter to the Birmingham Mail of February 16th 1931 (right).

House Purchase
The 1970 Regulations (in Regulation 36 - Interest on deposits), used the traditional wording used in all previous editions of the Regulations, but also incorporated the wording of the 'Note as to Computation of Interest'.
Prior to computerisation of the Bank's accounting system, the calculation of interest was performed manually, whether the branch records were maintained by hand or by machine. To assist clerks in making the calculations, printed Interest Charts were provided. The charts were reprinted whenever there was a change in the rate of interest paid, and new charts were introduced for new products, ie the No 2 Department and the No 3 (Investment) Department. The various Departments' charts were distinguished by colour coding (No 1: white; No 2; green; No 3: pink).
The Interest Charts were printed in sets of twelve - one for each month of the year. Each chart showed the amount of interest for various amounts of principal, for two periods. The two periods represented the number of months remaining in the Bank Year (ie up to the next March 31st):

    (a) counting from the current month;

    (b) counting from the next month.
Thus, in the first month of the Bank Year (April), the chart would have interest calculations for twelve months and eleven months. These two sets of figures were printed in two blocks, side by side. The left-hand side of the chart (containing the higher number of months) was known as 'The Withdrawal side of the chart' and the right-hand side was 'The Deposit side of the chart'. As an assistance to prevent using the wrong side of the chart, the printing of the figures was in black and red respectively.
Where the maintenance of the ledgers was performed by hand, interest calculations were made as the individual deposit or withdrawal was posted to the depositor's account. For a deposit made in April, therefore, 11 months' interest would be calculated by reference to the amount of the deposit and the relevant interest figure on the chart. The amount so calculated would then be inserted in the interest column of the ledger, alongside (and to the right) of the amount of the deposit; these two figures appearing below the amounts of principal and interest already standing to the credit of the depositor. If no further transactions were to occur on the account before March 31st, the total of the interest column would be added to the principal column as 'capitalised interest' at the year-end, and this would then become the new principal for the year commencing April 1st. A complete year's interest would then be inserted in the interest column, the value of which would only be adjusted as transactions occurred during the Bank Year, as previously described.
A withdrawal made in April, therefore, forfeited a whole year's interest. An exception to these methods was made in the case of deposits made on the first day of the month, and withdrawals made on the last day of the month. These exceptions ensured that the interest allowed to the depositor was in accordance with the 'Note as to Computation of Interest' - a deposit on the first day of the month earned interest from that day; a withdrawal on the last day of the month did not lose a whole month's interest. This 'concession' was not provided by Trustee Savings Banks, thus requiring a different calculation method to be adopted for the Birmingham Municipal Bank when it joined the TSB Computer Consortium.
Where the maintenance of ledgers was performed with the assistance of accounting machines, the interest calculations were still performed manually using the same charts. At these branches, the amount of interest to be credited or debited would be written on the transaction slip, to be 'picked up' by the machinist as the amount of the deposit or withdrawal was posted.
When the amount of interest was calculated for a transaction that included a fraction of a Pound, it was necessary to ensure that the impact of that fraction was taken into consideration. With a deposit, for example, if the fraction 'rounded up' the account principal to the next Pound, an extra Pound's interest was allowed.
House Purchase Department
In the case of advances on mortgage, the Bank's initial Regulations contained the following regarding Interest on Advances:
Interest on Advances shall be charged at the rate of one penny per pound per month on the balance outstanding, or such other rate as the Committee of management may from time to time determine, and which is in force at the time the advance is made.

'One penny per pound per month' (in pre-decimalisation currency, when there were 240 pence in a Pound) equalled an interest rate of 5%.
Later editions of the Regulations did not specify the current rate:
Interest on Advances shall be charged at such rate per pound per month on the balance outstanding as the Committee of Management may from time to time determinate, but in the case of an advance already made the rate of interest in force at the time the advance was made shall not be exceeded.
The method of calculation prescribed by the Regulations, ie calculated on a monthly basis on the current balance outstanding, was fairly unique to the Birmingham Municipal Bank. As described in the History of the House Purchase Department, the Bank adopted this method to follow the practice of the Bolton Co-operative Society. The majority of lending institutions calculated interest either annually or half-yearly, thus penalising the mortgagor by not giving immediate credit for payments made between calculations. The Bank's publicity in its early years emphasised this advantage, which could encourage mortgagors to make payments in excess of the minimum requirement, and thus produce an immediate benefit in the amount of interest payable:
Repayment of the advance can be made either by a fixed monthly instalment of principal together with interest charged on the diminishing monthly balance, known as the "reducing" method, or by a fixed monthly sum representing both principal and interest, known as the "equated" method. By adopting the "reducing" method of repayment, you effect a saving in interest and obtain an advantage when making payments in excess of the monthly instalment.
Interest calculations were made with the use of Interest Charts as described above. In the case of mortgages, however, calculations were made on the monthly anniversary of the advance, not when a repayment transaction was made. A system of index cards indicated which mortgage accounts were to be capitalised on a particular day of the month. Reference to the individual mortgage account established the current balance outstanding on the loan, and the Interest Chart provided the amount of that month's interest to be debited to the account.