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Rh found their way into the pockets of producers, traders and wage-earners, and so on, to the banks. However, by the summer of 1921 the rate of increase in both deposits and current accounts showed signs of slackening, and there appeared to be little doubt that, whenever trade started to revive, the deposits of all the banks would fall rapidly.

The increase in acceptances calls for little comment; it was falling steadily in 1921, and showed a decline of over £49,000,000 between 1920 and 1921.

Credit Facilities.—Discounts and advances gave the lie direct to the critics who averred that the assistance of the bankers to trade was not what it should be. Discounts and advances together showed the very satisfactory increase of £826,233,000, or nearly 112.4%, and it proved that even if the bankers were scrutinizing more carefully the applications for discounts and advances in 1921, they were giving very active assistance to the finance of trade and industry, so far as was compatible with the precautions they were bound to consider it wise to take in the interests of their depositors.

As a matter of fact, difficulties during the transitional period from war to peace were fully appreciated as long ago as 1916, when the Board of Trade appointed a committee to investigate the question of financial facilities for trade. Another committee was also appointed for similar reasons towards the end of 1917. The terms of reference to the latter body mainly consisted of (a) an inquiry into the financial needs of trade immediately after the war and the respect in which these needs would differ from the needs under normal conditions, (b) the provision of financial facilities to meet those needs. Briefly, the committee foresaw that there would be an increased demand for credit facilities during the reconstruction period, and that the character of the demand would differ from that of normal times in that it would consist of a greater demand for loans secured upon capital goods, compared with loans secured upon consumable goods. Further, the considered opinion of the committee on financial facilities in 1917 was, that to achieve the reconstruction of trade and industry on sound financial and economic lines, it would be necessary to reëstablish a sound financial basis by means of an effective gold standard; to check any undue expansion of credit, and to take steps to reduce to more normal proportions the inflation of credit due to the war. In the banking world a movement towards this end had been gradually shaping itself, though progress up to 1921 had necessarily been slow owing to the bursting of the bubble of trade inflation, labour troubles, and world-wide depression in trade during 1920.

That there would be some difficulty in providing the extended credit facilities which, it was foreseen, would be necessary, was recognized, and to meet this difficulty the committee of 1918 recommended, among other things, an increase in the capital of the banks, and the acceptance of deposits for longer periods at fixed rates of interest. They said:—

“To enable the banks to do more in the direction of granting long trade credits, we are also of opinion that it is desirable that bankers should make more widely known their willingness to accept deposits for long periods, at fixed rates of interest. We believe that, if they were encouraged to do so, a number of depositors would be willing to deposit their money at fixed rates of interest, for periods of from one to five years, without the right of withdrawal. The removal of the liability to withdrawal would thus enable the banks to grant loans for longer periods.”

To a limited extent, effect was given to these recommendations, and in 1921 the banks were all striving to meet the abnormal conditions with which they were faced.

The London branches of the colonial banks, of course, always favoured the taking of fixed deposits at a comparatively high rate of interest; but it is doubtful if the movement is destined to extend greatly among the London joint stock banks who are called upon to maintain greater liquid balances to meet withdrawals than are their colonial confrères.

One good thing towards the solution of the difficulty in providing adequate banking facilities for trade was that which arose out of the recommendations of the Board of Trade committee of 1916. As the result of the deliberations of that committee it was resolved to form a new bank to fill the gap which was said to exist between the home banks and the colonial and British-foreign

banks and banking houses. The new institution was called the British Trade Corporation. Its constitution and functions were laid down by the committee to be:—

(1) To have a capital of £10,000,000. The first issue to be from £2,500,000, upon which, in the first instance, only a small amount should be paid up, but which should all be called up within a reasonable time. A further issue to be made afterwards, if possible at a premium.

(2) It should not accept deposits at call or short notice.

(3) It should only open current accounts for parties who are proposing to make use of the overseas facilities which it would afford.

(4) It should have a foreign exchange department where special facilities might be afforded for dealing with bills in foreign currency.

(5) It should open a credit department for the issue of credits to parties at home and abroad.

(6) It should enter into banking agency arrangements with existing colonial or British-foreign banks wherever they could be concluded upon reasonable terms, and where such arrangements were made, it should undertake not to set up for a specified period its own branches or agencies. It should have power to set up branches or agencies where no British-foreign bank of importance exists.

(7) It should inaugurate an information bureau.

(8) It should endeavour not to interfere in any business for which banks and banking houses now provide facilities, and it should try to promote working transactions on joint account with other banks, and should invite other banks to submit to it new transactions which, owing to length of time, magnitude or other reasons, they are not prepared to undertake alone.

(9) Where desirable, it should cooperate with the merchant and manufacturer, and possibly accept risks upon joint account.

(10) It should become a centre for syndicate operations, availing itself of the special knowledge which it will possess through its information bureau.

The British Trade Corporation was designed to fill a gap in the financial machinery of the country and to supply needs which had been long felt by trade and industry. Apart from the assistance which it might be able to render in connexion with overseas contracts, the development of existing markets and the securing of new ones, its sphere of usefulness was a large one, and properly directed, it should prove of great value to the development of British trade, finance and industry.

Foreign Banking.—As a matter of interest in the trend of British banking it may be noted that all the large joint stock banks had entered by 1921 into more or less extended foreign relations. All had proper branches devoted entirely to the financing and developing of overseas trade, and foreign exchange operations formed a much more important part of the work of all London banks than had been the case before the war.

The ramifications of some of them were by 1921 very wide; Barclay's Bank, for instance, maintained a large foreign department in London and was also affiliated with the Anglo-Egyptian Bank. Lloyd's Bank, in company with the National Provincial Bank, had also its subsidiary in France under the title of Lloyd's & National Provincial Foreign Bank, Ltd. The London County Westminster & Parr's Bank had a subsidiary bank called the London County Westminster & Parr's Foreign Bank, Ltd., and both Lloyd's and the London County Westminster & Parr's Bank were closely concerned in forming (1917) the British Italian Corporation in England and the Compagnia Italo-Britannica in Italy. The London Joint City & Midland Bank had formed no branches abroad, the view being that it was better to refrain from competing with foreign banks in their own centres; further, that besides being able to maintain amicable relations with foreign banks, a greater security was afforded to domestic depositors where the bank's activities were restricted to the home country. Some of the other banks who appeared to support this view had joined together and participated largely in the establishment of a bank known as the British Overseas Bank, which was making steady progress in the particular branch of banking for which it catered.

Altogether, then, whatever may have been the failings of the British bankers up to 1910 in the provision of means for financing overseas trade, and in attending to the foreign exchange operations of their clients, there was in 1921 no lack of facilities for clients whose business called for operations in foreign and colonial currencies.

War Services.—A word remains to be said about the rise in the investment figures, which was a noteworthy feature of the aggregate balance sheets of the banks. The increase during the decade was £548,501,000, a little over 246%, and undoubtedly a large proportion of the investments in 1921 represented the bankers' subscriptions to the various war loans in which they had participated heavily. The banks' contribution to the Victory