GERMANY'S CREDIT BANKS.

Taranaki Daily News, 8 June 1917, Page 8

GERMANY'S CREDIT BANKS.

PROMOTERS OP WORLD-TRADE.

(By Frederic William Wile, late Berlin Correspondent of the. Daily Mail).

With his project for a British Trade Corporation Sir Albert Stanley has taken a splendid step in the direction of arming the Empire for the war after the war.

He lias struck at, the very root of Britain's future problem—to place her .business men on terms of equality with German rivals in competing for world trade. Englishmen are educated to believe that, the secret of German commercial success is to be found in two things —technical education and business organisation.

Little or no stress is placed on a third factor of almost paramount importance —viz., the generous and scientific support which trade enjoys at the bands of German banks. In England banks fulfil perfectly the traditional functions of such institutions. Their conservative practices, as Mr. G .is. Dibblee points out in "Germany's Economic Position" (Heinemann, Is), "help to make the financial security of the United Kingdom a world-asset of unequalled reputation." But compared' with aggressive aid which German banks extend to industry, the policy of Britain's great joint-stock octopuses is niggardly, obsolete, and of almost strangling influence on modern trade expansion."

.('GERMANY FIRST."

Banking' and commerce in Germany consider themselves natural allies. The financial system developed since the Franco-Prussian Afar of 1870-71 is based upon that broad, common-sense principle. Banks do not confine themselves to such stereotyped activities as acceptance of deposits, payment of interest, discounting of bills, transactions in exchange, and advances against sccuritiesj on super-safe margins. In Germany banks go into trade directly. They do so for two reasons: first, to secure profitable investment for their own funds, and, secondly, in order that national prosperity, of which industry has become .the bedrock, may bo maintained and, increased.

The result is that tbe bulk of German capital is invested where a nation's wealth belongs—at home. German money, of course, has been sunk, like a great deal of British money, in doubtful schemes in South America, the Far East, and other parts of the world, but it has always been the surplus ove? and above what was needed in Germany. "Partnership" is precisely the relation which prevails between banking and industry in Germany. It is, I take it, the system which the British Trade Corporation intends to introduce in this country. A concrete illustration will explain how the system works. Herr Schmidt and 'Herr Meyer own a process for a new grade of steel. Without introduction beyond the merit of their enterjiiise. ftey repair to the Deutsche Bank—or to any one of the great credit banks. They will bo received, let us say, by Herr Schultz, that particular member of the bank's board of directors who specialises in steel and iron afl'airs. lie is probably already. a director, as the (uank'd representative of eighteen or ',twenty different steel nnd iron companies Tho Deutsche Bank's directors sit on the! boards of nearly 100 industrial corpora-' tions.

Schmidt and Meytr will find—for it is the German way—that Herr Schultz, though a banker, is well posted on metallurgical matters. They discover that he knows all about steel processes and 'can discuss with them intelligently the merits claimed for the Schmidt-Meyer patents. He pronounces their .scheme good or bad—as the case may be. If good, Banker Schultz elaborates a preliminary scheme for building a works or expanding an inadequate plant. It is decided that £200,000 is required. "AH right," says the banker, "we'll form a company, allow you so-and-so much of the share capital for patents, goodwill, and managerial activities, a nd we'll retain the rest. Four of our own directors will join your board and supervise our interests. Your steel is much needed in the Silesian mining and machinery trades. We are strongly entrenched in both of those fields, and the SchmidtMeyer Stahlwerke Aktien-Gesellsehaft G. an. b. H. (School Works Company, Ltd.)' will get profitable orders. Leave that to .us." THE CREDIT BANKS. This is an example, duplicated every day on a larger or a lesser scale in Germany. Where Schmidt and Meyer get £200.000, the Hamburg-American Line, the North German Lloyd, Krupps, Thyssen, Stinnes, the "A.E.G." electrical works, the Bayer chemical companies, the Borsig locomotive people, and the countless other great German commercial undertakings get their millions. There are eight groat German credit banks, each marshalling large capital, reserves, and deposits. The following table conveys an idea of the strength of enemy credit banks:— Capital and Reserve. Deposits. £ ■£ Deutsche Hank .. 21,425,000 102,105,000 Disconto Gesellschaft 14,005,000 33,701.000 Drcsdner Bank .. 13,050.000 47.020,000 Darmstadter B'nk 0,000,000 30,384,000 Sehafl'bausenscherVerein \ 8,493,183 17,210,000 Brl'nr Handels Gesellschaft .. 7,225,000 M,541,000 Nattt Bank fur Deutschland .. 5,300,000 12,036,000 Commerz & Disconto Bank 4,950,000 1'j,788,000 Britain has not hesitated to borrow German systems in military and ceenomic fields. Knowing Sir Albert Stanley as well as I do, I am positive be will not shrink from adopting wholesale the meritorious features of German credit banks, While scrupulously guarding against their evils—chief among (/hem the fostering of Stock Exchange' speculation in the countless industrial securities in which the banks are interested. When England has a' bank or banks which identify themselves as effectively with tbe support of industry as German banks do, conditions will be created which will deprive tbe bogey of German trade competition of much of its danger.