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Proceeding to the deposit accounts, we may say that these chiefly represent temporary investments on behalf of members of the community who have money in hand which they wish to keep readily available. In some cases they are of a more permanent character, being placed by customers who wish always to have funds available without the expense and delay involved by the realization of securities. The rates allowed upon them in London vary roughly in accordance with the Bank ráte and are usually 172 per cent below it. But it must be remembered that special arrangements are often made with the banks by customers who are prepared to place deposits for longer periods than the one week's notice which is always insisted on in theory, though very rarely enforced in practice. If a customer wished to remove deposit funds immediately, very few bankers would refuse to permit him to do so.

In the provinces the rates allowed to depositors do not fluctuate in accordance with Bank rate, but are kept much steadier. As a general rule their minimum is 21 per cent, probably because this is the amount allowed to depositors by the post-office savings bank, as was noted in an earlier part of this memorandum, so that the keenness with which modern banks compete for small depositors makes it necessary for them rarely to give less than this rate. Bankers, however, though by this custom they frequently give their depositors during periods of cheap money a higher rate than is apparently warranted by the quotations current in the London market, recoup themselves to some extent when money is dearer by the steadiness which they maintain in the rate allowed to country depositors. That is to say, in districts where 23 per cent

is the normal charge it will only be at times when Bank rate is exceptionally high that depositors will receive more than their usual allowance, so that at periods of comparatively dear money the bargain is to some extent on the side of the banker, though here again, as always, it must be remembered that he is liable to be squeezed by the stress of competition and the keenness of customers who are able to make use of it.

With regard to loans and discounts it need hardly be said that their nature is chiefly dictated by the form of business or industry in which the community for which the bank provides facilities is chiefly employed. The bills discounted vary from the promissory notes of customers for the purposes of temporary borrowing to the large trade acceptances of merchants, shipbuilders, etc. According to the nature of the community served, advances made by the bank will be largely against produce and commodities, or against marketable securities; owing to the greater convenience and simplicity in handling enjoyed by the latter class of collateral, loans against it are generally made on rather more favorable terms.

In the city of London, the business of which is chiefly finance, it follows that the business done by the banks chiefly consists in providing facilities for financial customers; the bills that they discount are largely those accepted by the great accepting houses or by themselves, or by the other banks, and the advances that they make are largely against marketable securities, or against the bills of exchange brought to them as collateral by the bill brokers and discount houses. The current rates for loans quoted in London may be said roughly to express

the price at which the bankers are prepared to make these advances to the bill brokers, and owing to the nature of the security and the standing of the borrower are habitually lower than those charged to any other class of customer.

A large business is also done by the banks in making advances to members of the stock exchange for financing the speculative commitments of the public. These advances are made from one account to another on the London Stock Exchange. The account is the term for the settlements which this body carries out twice in every month, and it thus follows that advances of this kind usually run for about a fortnight. Most of the bankers divide these advances into two classes; one, on which they charge a slightly higher rate, they make to their ordinary stock-exchange customers, the other, on slightly more favorable terms, is arranged with a few leading firms who act as money brokers between the banks and the rest of the stock exchange, borrowing in large amounts from the banks and making a small profit by relending to other members of the stock exchange whose standing and borrowing facilities are not quite so high as their own. Some of the banks, however, do not recognize this distinction, but consider themselves sufficiently well informed concerning the position of all their stock-exchange clients to make advances to them directly without the intervention of an intermediary.

As to the acceptances of the banks, they are largely entered into on behalf of their trade customers and, in so far as this is the case, are confined to bills against genuine produce moving into consumption. A com

mission of one-eighth to one-fourth of i per cent is generally charged by the bank for accepting the bills. Of late years, as has been noted above, the extent to which the banks have entered into the acceptance business has shown a considerable increase, and in the case of some of them the acceptance business done is less of a purely commercial character, involving the handling of a good deal of merely financial paper drawn against securities.

(B) SCOTCH ARRANGEMENTS.

In Scotland the arrangements between bankers and their customers are very similar to those prevalent in England, differences between them being a matter of degree rather than of essence. The cash credit system, which is usually pointed to as a characteristic feature of Scottish banking, has been described in an earlier part of this memorandum, and it was then pointed out that this system of allowing a customer to obtain credit with the assistance of the pledge of a friend is by no means unknown in England, and also that in the chief centers of Scotch banking activity the English system of lending chiefly against definite collateral security is now largely prevalent.

But in the matter of the rates charged there is an important difference between English and Scottish banking, which also has been noted above. It lies in the fact that. the Scottish banks form a combination which works together in complete harmony and unanimity. There is no possibility in Scotland for a customer who thinks that he might obtain a higher rate for a deposit or a lower rate for an advance to threaten his banker that he will go across the street to a competitor. The Scotch banks stand together and adhere to the rates on which they agree among

themselves as being equitable under the circumstances of the money market. The rates that they allow to depositors they usually regulate more or less in accordance with the London Bank rate, but their minimum is i per cent and their maximum is 4 per cent. They make no allowance on current accounts and nothing is allowed to depositors except on money which has remained in the hands of the bank for at least thirty days. The rates at which they will make advances or discount bills are equally definite and determined. They are arranged by the banks in accordance with what they consider to be fair from the rates current in the London discount market, but they do not necessarily fluctuate with London's movements, and when they are altered the alterations are by at least one-half of i per cent at a time. When it is remembered that the London discount markets fluctuate by sixteenths of 1 per cent it is at once apparent how successfully the Scottish bankers control the price of the commodity that they, deal in. But it must be remembered that the control which they exercise is modified to some extent by the competition of the London money market, since their big customers sometimes resent the hard and fast rules of the Scottish monetary system and go south of the Tweed for accommodation.

(C) ENGLISH BANKING ASSOCIATIONS.

The chief organizations or associations of banks other than clearing houses in England are the Institute of Bankers, the Central Association of Bankers, and the Association of English Country Bankers. Since the functions of these associations are being described by

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