18 
LAND &? WATER 
September 19, 1918 
Bank Amalgamations: By Hartley Withers 
As everybody knows, tlie banks of this country 
liavc lately been indulging in a debauch of amal- 
gamation. To many of us, the fact lias been 
incon\'enicntly brought homo by having to write 
a cumbrously long title on any envelopes that 
we now address to our bankers. So far, this is the only way 
in which the ordinary customer of the banks, who uses 
them to take care of his money and his securities and valu- 
ables, and to draw cheques on, has been affected by the 
process. The facihties of this kind that are offered have not 
been in any way diminished or made clearer. At the same 
time, he feels uneasy when the papers talk about banking 
monopoly and a money trust, and he feels that if this amal- 
gamation process goes much further there is a danger that 
his banker may be less obliging in the services that he 
renders in collecting coupons and dividends, and more critical 
concerning the smallness of the balance that he habitually 
keeps. To the traders and manufacturers, bill-brokers and 
stockbrokers, and other people who make use of banks for 
. the provision of credit, as well as for safe custody of mohey 
and securities, the danger seems to be still nearer and more 
acute. They have long been restive under the process of 
amalgamation, and their restiveness has lately increased 
very fast, as one amalgamation after another reduced the 
number of the principal English banks to five. Their alarm 
was sufficient to bring pressure to bear on the Government, 
even amid the stress o^ war, to appoint the inevitable com- 
mittee to report on the matter. The committee reported 
that in future amalgamations should require the sanction of 
a committee to be appointed for that purpose. And there 
the matter stands for the present. 
The whole subject was brought \>eioTe the footlights again 
when Sir Edward Holden, chairman of the London 
City and Midland Bank, addressed its shareholders at a 
meeting called ' to approve its amalgamation with the 
London Joint Stock Bank. This was. a union of the kind 
which has lately caused much shaking of heads in the City 
and in the industrial centres. As long as the great London 
concerns were absorbing, by amalgamation or purchase, the 
private and joint-stock country banks, there was not much 
opposition, except occasionally, when, as at Manchester 
some years before the war, local feeling and reluctance to 
submit to London management was strong enough to defeat 
attempts at this process. But when the big London banks 
began to amalgamate with one another, their critics accused 
them of a merely megalomaniac desire to show bloated 
balance-sheets, with sinister possibilities of a "Money Trust" 
in the background. Sir Edward, who has devoted much of 
the thousand horse-power energy that he has put into liis 
banking life to building up the City and Midland by amal- 
gamation, took the opportunity of his speech on this occasion 
to put the case for the system as it appears to him, its most 
determined champion and exponent. With that breadth of 
outlook which makes his speeches always illuminating, he 
traced the subject up to its origin and broadened it out into 
its world-wide international aspect. 
His argument, briefly summarised, came to this : That 
small banks cannot serve big customers ; that as English 
trade has grown, our banks have had to grow with it by 
amalgamation ; that after-war needs in the matter of recon- 
struction of industry on a peace basis will require the creation 
of .a large mass of credit, which he estimates at 300 millions 
sterling, and that big banks will be needed to carry out this 
gigantic task ; that the Gennan banks are amalgamating 
and consolidating and forming groups that control huge 
lumps of deposits, and that if we are to compete with them 
and restore London to its old position as a financial centre 
"we must meet them on a fair equality of size" ; that the 
talk about a money trust is all nonsense; and that the 
charge against the big banks that they do not give enough 
attention to the needs of the small customer who wants 
credit, is equally baseless. 
How far will these arguments satisfy the critics of the 
amalgamation process ? Up to a point, I think, if they 
are reasonable ; but by no means altogether. It is arith- 
metically obvious that small banks cannot meet the needs of 
big customers who may want to borrow amounts that -are 
greater than all the capital and reserves of the banks. But 
great as the movement has been in industry towards con- 
solidation into big battalions, it may be questioned whether 
the banks were not quite big enough before the recent 
epidemic of amalgamation, to do all that industry required 
in the matter of credit facilities. On this point the com- 
mittee appointed to inquire into the subject observed that 
great industrial combinations which required exceptional 
accommodation could get it, if necessary, by keeping two 
bank accounts instead of one. This remedy might produce 
some inconvenience, but it is clearly practicable, and might 
under certain circumstances be advantageous. As to the 
German example, German finance has not such an inspiring 
record that we need hold it up as an ideal to be followed. 
In patient attention to detail, and in hard work and- in readi- 
ness to do questionable business for a profit that was cut to 
the bone, German bankers were, before the wat, models of 
plodding energy. But, on the broad principles of their 
business they were so far from enlightenment that Berlin 
had never appreciated the fact that a financial centre that 
wants to play a part in world finance must be ready to pay 
gold on demand ; or if if appreciated the fact, it had not the 
courage to act on it. 
It is not size, but efficiency that makes a bank popular at 
home and abroad. Size counts, of course, especially with 
the unreasoning public — the sort of public that takes shares 
in a new company merely because its prospectus is adver- 
tised all over full pages of all the daily papers. But size 
will not do by itself, without good management and promi)t 
and elastic business methods. Is it likely that banks, blown 
out by amalgamation into the huge dimensions of to-day, 
can be as quick and elastic and adaptable as the smaller 
concerns that have composed them ? To the outsider it 
seems unlikely, but it is difficult to say at what point in size 
unwieldiness begins. That there is such a point, however, 
expert opinion testifies. Sir Charles Addis, manager of the 
Hong Kong and Shanghai Bank, and lately appointed a 
director of the Bank of England, threw light on this question 
in an article, in the Edinburgh of July last, on " Problems of 
British Banking." "The bigger the bank," he said, "the 
greater the danger that with the lapse of time it will become 
entrenched in a bed of vested interests, inimical to change, 
discountenancing the introduction of new ideas and dis- 
couraging the more efficient metlipds of young and vigorous 
competitors." If this is so — and Sir Charles' authority is 
weighty — most of Sir Edward's argument is left with little 
force. It is not mere size, but good banking, that we want 
from our bankers. We have had it, on the whole and within 
limits, in the past ; but if the bigger the bank, the greater 
the danger of senile ossification, it does not seem likely that 
we shall have the good, and still better, banking that we shall 
need in the future merely by rolling our banks up into greater 
and greater agglomerations. Sir Edward's contemptuous 
dismissal of the fear of a money trust will hardly allay it in 
the minds of those who feel it. He asserts — and no one will 
doubt his sincerity — that he would never be a party to a 
monetary ring. Competition has always been the breath of 
this doughty warrior's nostrils. But the fewer the banks, 
the greater is the possibility, and the day may come when 
milder counsels may prevail among those who control our 
banks ; and then, without any further amalgamations, 
merely by arrangements and agreements, the public might 
find that banking facilities were not so readily granted and 
were made more expensive. It is probable that enlightened 
self-interest will keep the bankers from committing this blunder, 
but the public is justified in being watchful and suspicious. 
And already the Socialists are crying out for nationalisa- 
tion of the banking business. In the article already quoted. 
Sir Charles Addis points out that the huge banks of to-day 
are "virtually Government-guaranteed institutions. . . . 
From Government guarantee to Government control is but 
a step, and but one step more to nationalisation. W^ are 
playing into the hands of Mr. Sidney Webb and the Socialists." 
Always on the spot, Mr. Sidney Webb — perhaps he and Sir 
Charles were writing at the same moment — produced an 
article in the July Contemporary, arguing, with all his usual 
adroitness and ingenuity', that banking monopoly was inevit- 
able as a process of economic evolution, and that the only 
way to save the public from its evils was to nationalise bank- 
ing and work the monopoly in the interests of the public. 
He devised a scheme for separating the more mechanical 
side of banking (its custody of deposits, etc.) from the more 
difficult question of making advances and granting credits, 
and proposed, as a start, to nationalise only the former. 
Whether such a separation could be worked is open to ques- 
tion. But there is little or no question about the last state 
of the poor old public with its banking conveniences in the 
hands of bureaucrats and provided as efficiently as, say, 
the telephone service. 
