Readings in Money and Banking Part 46

Q. What is the distinction between what are known as "prime bills" and other bills?

A. A "prime" bill we should define as a bill accepted by a London or provincial bank in first-cla.s.s credit or a merchant or merchant banker of the first cla.s.s whose business it is to grant credits.

Q. Do you discount any prime bills?

A. Yes.

Q. Do you discount to any considerable amount for individuals and merchants?

A. The bank discounts all approved bills offered to it by persons or firms having properly const.i.tuted accounts.

Q. Is it your custom to employ surplus funds in purchase of bills from discount houses?

A. No.

Q. Do you rediscount bills for the joint stock or other banks?

A. The bank is always prepared to rediscount for other banks at its official rate, and does a large business from time to time with the colonial and foreign exchange banks who are from the nature of their business always sellers of bills.

Q. Would you charge a merchant house having a good account with you the bank rate or the market rate for prime bills?

A. The market rate.

Q. To what extent does bank rate govern your discount and loan transactions?

A. The rates for discount and loan transactions at the bank usually approximate more or less closely to the bank rate.

Q. Do you at times discount bills for parties having no account with you?

A. No.

Q. Are a considerable number of your loans on call?

A. None.

Q. When and under what conditions is the bank rate changed?

A. The bank rate is raised with the object either of preventing gold from leaving the country, and lowered when it is completely out of touch with the market rate and circ.u.mstances do not render it necessary to induce the import of gold.

Q. Does the bank sometimes borrow money in the open market for the purpose of raising the market rate?

A. Yes.

Q. Do you sometimes sell consols for the same purpose?

A. Yes; on rare occasions.

INTERVIEW WITH SIR FELIX SCHUSTER, GOVERNOR OF THE UNION OF LONDON AND SMITH'S BANK LIMITED

[156]Q. Your bank is organised under the General Companies Acts as are all joint stock banks in England?

A. Yes.

Q. You are not under government supervision or examination?

A. No.

Q. The authorised par of your stock is 100, and 15 10_s._ have been paid on each?

A. Yes.

Q. Are your shares held by individuals and corporations?

A. By individuals, not by corporations. There are upwards of 8,600 different shareholders.

Q. In the transfer of shares, do you require the name of the transferee to be submitted and approved before the transfer is made?

A. Yes.

Q. That of course is in order to insure the responsibility of your stockholder?

A. This is in order to insure the responsibility of our stockholder, and to prevent one holder from securing too large a holding. Furthermore we give no single proprietor more than 20 votes, however large his holding may be. Every 10 shares carry one vote, so the holder of 200 shares has a maximum number of votes.

Q. Is that the usual custom with the joint-stock banks of England?

A. I am afraid I cannot answer offhand. I suppose it is so in some cases, but the practice varies.

Q. In London there is usually a difference between the rates charged on loans and bills in favor of bills, is there not?

A. Yes.

Q. Would you say that that difference is perhaps from one-half to 1 per cent. in favor of the bill?

A. It depends so very much on the circ.u.mstances of the moment that it is very difficult to generalise. At the present moment I would say a three months' bill is worth 1-7/8, and a three months' loan would be worth perhaps 3-1/2.

Q. Were most of your branches organised by you or were most of them other inst.i.tutions purchased by you?

A. Some of them were other inst.i.tutions; some of them were organised by us; most of them were those old banking firms which were carried on as private businesses and have since become branches of our bank.

Q. The tendency is for the consolidation of banking in Great Britain, is it not?

A. Yes.

Q. Very strongly in that direction?

A. Very strongly in that direction, yes.