£10,000,000 BANKING SCHEME

Dominion, Volume 10, Issue 2948, 7 December 1916, Page 5

£10,000,000 BANKING SCHEME

PROPOSED NEW INSTITUTION WITH ROYAL CHARTER TO FINANCE BRITISH TRADE AFTER WAR , One of the most important .schemes ever proposed in connection with the ( financing of British trado is embodied in tho report of Lord, Faringdon's Committee to the. Board of Trade. This committee was appointed recently to consider the best means'] of meeting the financial needs of British, firms after tho war, particularly with reference to the financing of large overseas contracts, and to prepare a detailed scheme for that purpose. Brieifly, the new proposal is that a huge institution, called the British Trade Bank, should' be constituted under Royal Charter, with a capital of ten millions sterling,, to fill ,tho gap between the home banks and -the colonial and British-foreign banking •houses, and to doyelop facilties not provided by the present systems. Cerman Banking Methods. In the early part of their report the 'committee makes clear tho essential 'difference between the British system 'of banking and tho so-called bankingof 'the big Gorman institutions. The '•British banker never forgets that ho is trading with other people's monoy. Ho iuust, at all costs, keep his resources as liquid as possible. On no account must there be a . "look-up," seeing that *:funds may bo withdrawn at call, or, at any rate, at short notice'. Consequently the usual practice; of British bankers in this country is to confine their adS'ances to a currency, not exceeding a •few months. I The big Gorman banks, on the other Tiand, work on a different principlo, unsound from the banker's point of view, jbut excellent from that of the trader. They have - very largo capital of their jown, and not only do they do legitimate banking business but tlioy look -up'their ifunds in all sorts and descriptions of x good, bad, or indifferent, in which they see, or think tlioy see, chances of profit. Thus, represents ,'tives of 'the German hanks appear on She boards of industrial companies,_ and , in many cases the entire control is. in the bands of the financial institution which provides the backing. Information Department. ; Thero is no idea in the committee's[scheme of copying tho German method. The scope of our joint stock banks is not to be enlarged. Nor would the new institution compete in any -way • with tour home banking houses. It would not accept deposits at call or short notice, and would only, open current accounts .for parties -who are proposing to.make use of tho overseas facilities which it would: afford. Th committee emphasises the'importance of the bank liaving a Foreign Exchange Department where special facilities might be afford-. ;ed for dealing "with bills in foreign currency, while a Credit Department Hvould be opened for the issue of credits to parties at home and abroad. The great eolonial and! Britishforeign. banks have done magnificent york for the British trader in the past, and the committee recommend that arrangements be made by. the new ibank for working in close conjunction with' these institutions. One of the most .important features. of. the 6oheme 'is ithe proposed establishment of a highly jorganised Information Department. •This would not necessarily deal only _ jwith sohemes in which' the new bank to take financial interests, but might be made a centre for investigation of projects on behalf of others, ;and a considerable revenue might he obtained thereby. Where desirable the bank might make advances foT the extension'of manufacturing plant, or perhaps for the co-ordination of certain works so as to Teduce the cost of production. It would assist these works to obtain orders abroad and give rea- . Bonable financial facilities for executing these orders. Tho special knowledge Iwliich. it would! possess through its 'Information Bureau would enable it to 'become a centre for'syndicate opera■tions similar to those undertaken in jtho the' big German institutions. I ; The committee.offers valuable suggestions in connection with' tho organisation and management of the new bank. 'It is thought desirable that tbo institution, without.coming under Government control, should receive as much iofficial recognition as possible. That this assistance should be accorded! to it seems a sine qua non, especially in ' the early stages. > As regards tho capital of £10,000,000, .'the • committee recommends that the .'first issue should be from £2,500,000 to <£5,000,000, on which, in the first instance, only a small amount should be paid up, but should, all be called up within a reasonabe time. It is not at 'all unlikely that a substantial proportion of the capital would he subscribed ■by the great banks themselves, seeing Hhat the new undertaking is not to be 'a competitor but' a comrade, establish|cd for the very purpose of providing •those wider facilities which British [bankers cannot grant, for tho reasons ~\vo have given.

' The committee conclude by urging that there should he no delay ha forming tho hauk, so that preliminaries may be completed before the war is over. In view of the certainty of strenuous ppst-war trade competition they point out how desirable it is that 'we should ascertain in adv&nco the requirements of foreign countries and tho whereabouts of raw materials for our industries.

It is a great scheme (says tho "Daily Chronicle"). Its details will havo to be thrashed out, and some of the committee's proposals may have to be modified or altered'. But with the broad principles nobody will be inclined to fjnarrel, least of all the British trader, Who owes a deep debt of gratitude to •Lord Faringdon and his colleagues for flie thorough and masterly way in which they have dealt with a question of vita!import to ouivfnture as a great Commercial nation.