the Week of Proper 28 / Ordinary 33
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Bible Encyclopedias
Savings Banks
1911 Encyclopedia Britannica
or SAVINGS BANKS (Fr. caisses d'epargne; Ger. Sparkassen ), institutions for the purpose of receiving small deposits of money and investing them for the benefit of the depositors at compound interest. They originated in the latter part of the 18th century - a period marked by a great advance in the organization of provident habits in general (see Friendly Societies). They seem, however, to have been first suggested by Daniel Defoe in 1697. The earliest institution of the kind in Europe was one established at Brunswick in 1765; it was followed in 1778 by that of Hamburg, which still exists, in 1786 by one at Oldenburg, in 1790 by one at Loire, in 1792 by that of Basel, in 1794 by one at Geneva, which had but a short existence, and in 1796 by one at Kiel in Holstein. In Great Britain, in 1797, Jeremy Bentham revived Defoe's suggestion under the name of "Frugality Banks," and in 1799 the Rev. Joseph Smith put it in action at Wendover. This was followed in r80r by the addition of a savings bank to the friendly society which Mrs Priscilla Wakefield had established in 1798. Savings banks were shortly after established in London, Bath, Ruthwell in Dumfriesshire by the Rev. H. Duncan (1774-1846), Edinburgh, Kelso, Hawick, Southampton and many other places. By 1817 they had become numerous enough to claim the attention of the legislature, and many acts of parliament were passed from time to time for the management of these institutions in Great Britain, culminating in the establishment on a very broad basis of the Post Office savings banks (see Post And Postal Service). The promotion of thrift, at the end of the 18th century an experiment by a few far-seeing individuals, was by the 10th century almost universally adopted, and was regarded practically as an adjunct to the institutions of every civilized community. Friendly societies, co-operative societies, trade societies and other agencies are all based on this same principle.
The progress of savings banks and the large amount that the deposits have now reached are evidence of the general fitness of the organization for its purpose. So far as regards trustee savings banks, the provisions of the acts of 1817 are still to a great extent the same as those by which they are now regulated, though the law has been frequently amended in matters of detail. The acts relating to trustee savings banks are referred to as the Trustee Savings Banks Acts 1863 to 1904, a title given by s. 16 (2) of the act of 1904. They comprise the Trustee Savings Banks Act 1863 (26 & 27 Vict. c. 87), the Trustee Savings Banks Act 1887 (50 & 51 Vict. c. 47) and so much of the following acts as ap p lies to trustee savings banks: the Post Office Savings Bank Act 1863, the Savings Banks Act 1880, the Savings Banks Act 1887, the Savings Banks Act 1891, the Savings Banks Act 1893, and the Savings Banks Act 1904.
The main feature is the requirement that the whole of the funds should be invested with the government through the Commissioners for the Reduction of the National Debt. The local management of the banks has been left entirely to the trustees, who are precluded from receiving any remuneration for their services or making any profit. They are, however, required to furnish the commissioners with periodical returns of their transactions. This blending of private management with state control has had many advantages in knitting together class and class. A new savings bank requires for its establishment the consent of the National Debt Commissioners and the certificate of the registrar of friendly societies to its rules.
The legislation of 1817, among other inducements to thrift, offered that of a bounty to the savings bank depositor in the shape of a rate of interest in excess of that given to the ordinary public creditor, or - which is the same thing - in excess of that which could be earned by the investment of the deposits in the purchase of government stock. The interest offered in the first instance was 3d. per day, or £4, I Is. 3d. % per annum; and that rate continued to be granted until the passing of the Act of 1828 (9 Geo. IV. c. 92). That act reduced the rate of interest allowed to the trustees of savings banks to 22d. per day, or £3, 16s. old. per annum, and prohibited them from allowing more to their depositors than lid. per day, or £3, 8s. 54d. per annum, requiring them to pay the surplus, if any, into a separate fund held by the National Debt Commissioners, but bearing no interest. In 1844 the interest to trustees was further reduced to 2d. per day, or £3, 5s. %, the maximum to be allowed to depositors being fixed at £3, os. iod. In 1880 the interest to trustees was reduced to £3, and that to depositors to £2, 15s. and again in 1888 to £2, 15s. and £2, Kos. respectively.
The result of the bonus on thrift offered by the earlier statutes was a loss to the state, which ought to have been made good by an annual vote. Between 1817 and 1828 the difference between the interest credited and that earned amounted to £744,363; and this led to the reduction in the rate of interest effected by the act of the latter year. The deficiency, instead of being paid off, was allowed still to accumulate, and as the price of stock rose and the deposits increased fresh deficiencies arose, so that by 1844 the deficiency, which would have been II millions by the mere accumulation of interest on the previous £744,363, had become £3,179,930. The reduction of interest in 1844 was about enough to make the fund self-supporting, though savings banks are always liable to loss from the fact that deposits are in excess when the funds are high and withdrawals when they are low; but the past deficiency was still allowed to accumulate, although in 1863 nearly 2 millions was voted by parliament to make good part of the deficiency; from 1876 income deficiency was met annually as it arose, while in 1880 there was created to meet the capital deficiency a terminable annuity to expire in 1908, but which by the act of 1904 was extended to 1917.
The offer of a bonus on thrift was of necessity accompanied by provisions to guard against its being used by others than the classes it was intended to encourage. This was done by limiting the amount that each depositor should be permitted to pay in. The limit has been varied from time to time, but by the Savings Banks. Act 1891, s. I I (I), the maximum amount standing in the name of any depositor must not exceed £200, nor must interest be allowed on any sum in excess of that amount. By the act of 1893 the maximum deposit in any one year must not exceed £50, but a depositor may, not more than once, replace the amount of any withdrawal made in one entire sum in the course of a year. The replacement may be effected in one or more sums.
When a person comes with his first deposit to a savings bank he is required to sign a declaration, setting forth his name, address and occupation, that he desires to become a depositor on his own account, and that he has no money in any other savings bank.' If this declaration be not true, the deposits are liable to be forfeited; but it is to be feared that few depositors take the trouble to read what they are signing, or think much about the meaning of it. If the depositor cannot write, the actuary of the savings bank will usually ask him a few questions, such as his age, mother's maiden name, &c., which may tend to identify him, or defeat any attempt to personate him for the purpose of withdrawal.
Among the benefits conferred by the legislature upon depositors in savings banks has been that of exemption from the jurisdiction of the ordinary courts of law in cases of dispute with the trustees. By the Acts of 1817 disputes were to be settled by arbitration. By that of 1828 the barrister appointed to certify the rules of the savings banks was made umpire in case of difference of opinion between the arbitrators. By that of 1844 the arbitrators were abolished, and an original and final jurisdiction was conferred upon the barrister. By an Act of 1876 the functions of the barrister in this respect were conferred upon the registrar of friendly societies. This in effect made no change in the law, for the offices of barrister and registrar had been always held by the same persons. As early as 1832 it was determined in the case of Crisp v. Bunbury (8 Bing. 394) that the effect of these enactments is to oust the jurisdiction of all the superior courts of law and equity (see also Cardiff S.B. v. Aberdare District of Oddfellows, F. S. Rept., 1887, pt. A., p. 70). This jurisdiction has been highly beneficial to depositors in savings banks. The costs of the award are limited by treasury warrant to a few shillings, never exceeding £1. The procedure is simple and elastic, and the results are satisfactory. The central office, acting as registrar, determines law and fact, and adjusts all the equities of each case. Reference to the index to the registrar's decisions appended to the chief registrar's annual reports will show that many interesting questions of law have had to be determined with regard to so small a matter as the ownership of a savings bank deposit.
Many of the old trustee savings banks which were put on a systematic basis in 1817, have been absorbed by the Post Office, but while the total amount of their deposits increases, the number of their depositors remains about the same. In 1863 there were 622 of these banks carrying on operations with 1,558,000 depositors, and deposits amounting to £40,563,000. In 1889 the number of banks had decreased to 380, with 1,500,000 depositors, and £45,000,000 of deposits; while in 1905 they had still further decreased in number to 224, but the depositors had increased to 1,730,331, and their deposits to £5 2 ,7 2 3,435. The reason for this is that the smaller trustee savings banks, open often only once a week for a short time, cannot give such facilities as the Post Office, which is open every day Further than this, owing to the break-up of the Cardiff bank in 1886, and other smaller irregularities, a select committee of the House of Commons was appointed to inquire into these banks. By the recommendations of this committee, an independent and permanent inspection committee was appointed, which has carried on its work of inspection ever since, and reports annually to parliament. This action has rather tended to merge the smaller trustee savings banks in the Post Office. At the same time the large banks continue to do a great business, and have become in many ways similar to ordinary joint stock banks, affording to persons of smaller means daily facilities for saving.
Those who have studied the habits of thrift among the people have usually come to the conclusion that its development depends largely on the ready facilities which exist for its exercise. To this fact may perhaps be attributed the efforts that have been made in various directions for establishing some means of saving close to the places where wages are paid. To carry out this 1 By the Post Office Savings Bank (Public Trustee) Act 1908, the regulations as to declaration by a depositor and the prohibition of a depositor having more than one account do not apply to the public trustee.
idea, some of the large railway corporations have obtained powers in special acts of parliament to establish savings banks for those in their employment. The success of these banks has been great, though it has varied much, and it is difficult to trace any general rule of progress. Thirteen such institutions return their operations to the Registrar of Friendly Societies. The total amount held was, by the return for 1905, £5,5 1 3, 20 7 in 60,427 accounts. In these banks the interest paid, as well as the deposits, are really guaranteed by the whole assets of the companies. Further, in order to encourage thrift among their employes, the companies have formally agreed and bound themselves, by the provisions of their special acts, that the rate of interest paid shall be higher than can be obtained in the open market on the same security.
Other efforts have been made to establish savings banks at factories, to be open at the time wages are paid. One great difficulty, however, has been the objection many of those employed have to their employers knowing of their savings, and their fear lest it may affect their rate of pay. To get over this objection the plan has been tried of employing an outside agency to hold the savings bank. This has not been much more successful, as the suspicion that accounts may be looked at by employers is difficult to overcome. It is found that the most successful savings banks are those which are carried on as a business, where the transactions are so numerous that the individual feels that his own private account is not likely to become known.
Another class of savings bank which of late years has developed considerably, is the penny bank. These banks have a twofold object: one to provide facilities for putting by ex tremely small sums for those whose means are very y y limited, and the other to attract children in their earliest years so as to train them to habits of thrift and the realization of the importance and use of even quite small savings. Some form of penny bank now exists in nearly every district, and indeed in nearly every parish. No returns have been collected, but it may be safely said that there are tens of thousands in operation. Many of these penny banks are feeders to the Post Office, which gives them special advantages to invest in that institution. Not only is the gross amount of money thus taken large, but (what is more important) the habit of thrift and of husbanding resources is being taught to the young in all parts of the United Kingdom. This has been one cause of the large extension of the Post Office savings bank itself, and has no doubt led to considerable change in the habits of the people. In a few cases successful efforts have been made to establish permanently these penny banks on a commercial basis, as in the case of the Yorkshire Penny Bank, which has 858 branches, nearly 50o,000 depositors and deposits of nearly £16,000,000; and the National Penny Bank, which has 13 branches in London, most of them open from 9 in the morning till 9 at night, with 1 55,7 68 depositors, and over £2,000,000 in deposits. The establishment of penny banks in schools has been carried on for many years, and it is difficult to exaggerate the useful work they have done in inculcating habits of thrift in the children, and in adding depositors to the Post Office savings banks when the children start in life. In England and Wales there are over 7000 of these savings banks held in the various elementary schools inspected by the Education Department. The London County Council has done much to promote this movement by instituting penny banks in its various schools. Although the financial result is not large, the educational effect of these banks is considerable. It has been found that many children open accounts 4t outside penny banks in preference to going to those carried on at their own schools, but it is probable that the idea of so doing is often suggested by the school savings bank.
With a view of bringing the savings bank still nearer the door of the people, efforts have been made to establish collecting savings banks. In these the collector calls at fixed periods for the deposits. This scheme has grown out of the investigations of a committee of the Charity Organization Society, and is based on the idea, which undoubtedly is the fact, that many people will make contributions when the money is called for, who will not take the trouble to walk a few yards themselves to make the same deposit. That this is so is proved most conclusively by the Post Office life insurance experience, a branch of the Post Office which is scarcely used by the people, while at the same time collecting life insurance companies (which of course must charge a considerable extra premium for collecting) do business to the extent of millions. In most of these banks no interest is given, but facilities and encouragements are afforded for the transfer of each individual account to the Post Office as soon as it is large enough to earn interest.
Closely allied, though essentially different, are the very numerous sharing-out clubs which may be called temporary savings banks. These nearly all take a weekly subscription from their members, and, should any member die, his representative receives a certain sum, the balance left being divided at Christmas equally among the survivors, in proportion to the weekly subscriptions. Some of these clubs are registered, and at a rough estimate they number about 900, with some 120,000 members. The unregistered are, however, much more numerous, though no official information is to be had of them, and it is certain that hundreds of thousands of pounds are divided in this way each Christmas.
The attempt to induce sailors and soldiers to exercise habits of thrift by the establishments of naval savings banks under the act of 1866, and military savings banks under the act of 1859, should be mentioned. The amount in the naval savings bank is generally about f300,000. As might be expected the amount does not grow. This is accounted for by the fact that the depositors leave the service and draw out their savings. About £200,000 a year, however, goes in and out of the naval banks, and £80,000 in the army banks. This sum represents a good deal of self-denial, when the margin within which it is possible to save among sailors and soldiers is considered.
Closely allied to savings banks are a number of societies which need only be briefly referred to here. The largest of them are building societies under the Act of 1874, which are a very popular form of saving, especially in certain localities. The contributions to the shares of these societies, which are paid by instalments, differ but little from the periodical payments into savings banks; and although the money is not so readily repaid, notice and other forms having to be gone through, large numbers of persons pay in and draw out money, and receive the interest on the shares in much the same way as they do on deposits in savings banks without any idea of building or buying houses. In 1906 the receipts were £43,219,548 in the United Kingdom, and the accumulated capital more than £70,000,000, with a membership of 612,424. The action of industrial and provident societies regulated under the act of parliament of 1893, must also be mentioned with reference to that part of their business which is closely allied to savings banks. These societies are divided into three classes: - (a) ordinary co-operative societies; (b ) societies for carrying on various businesses, including loan and banking; (c ) land and building societies. Most of these societies, indirectly or directly, act as savings banks, and have had considerable influence in the growth of thrift in the United Kingdom. (See Friendly Societies.) In the co-operative societies the sales in 1905 amounted to more than £71,000,000, and the profits to over £5,000,000. These profits are divided in different ways among the members, and they form a saving fund of large dimensions. The societies for carrying on various businesses, such as working men's clubs, loan and banking organizations, registered under the 1893 act, numbered 286, with total receipts £2,020,569. These are not rapidly increasing, but they must be included as one exhibition of the savings of the people, and they are practically used as savings banks. The land and building societies under the act of 1893 are not the same as those above referred to, though their action as regards savings is similar. They are not under the act of 1874, but carry on a trade or business, including dealings of any kind in land. Their operations are slightly increasing. They received £336,424 from subscriptions and other sources, according to a return of 1905, and the value of the land and mortgages was £982,900. Two other classes of institutions should be referred to, the friendly and trade societies, which exist for special purposes, namely, to make provision in sickness, for death, for a want of employment, and to a limited extent for old age. They differ essentially from savings banks, as the subscriptions are parted with and cannot be withdrawn. But as the subscriptions are for certain definite needs, almost certain to be required by each member, which but for those societies would have to be provided for by direct savings in banks, they must be mentioned in treating of the subject as a whole. The amount held by the friendly societies is estimated at £5 0 ,459, 060, subscribed by 1 3,97 8 ,79 0 members.
It was once stated with truth that the national debt was held by a very small proportion of the population; but this is not so now. The various agencies which may be described as savings banks in different forms hold over £200,000,000, which is a considerable share of the national debt of Great Britain.
| State. | 1900-1901. | 1905-1906. | £ s. d. | £ s. d. | N. S. Wales.. . | 8 0 3 | to o 8 | Victoria. . | 8 o 6 | 10 6 io | Queensland. . | 7 15 2 | 8 7 6 | South Australia. . | 10 10 0 | 13 15 0 | West Australia | 8 I I 3 | 9193 | Tasmania . | 5 16 9 | 8 8 4 British ColoniesIn New South Wales there are both state and trustee institutions for savings purposes The Government Savings Bank was established in 1871 and the Savings Bank of New South Wales in 1832. In both, sums of one shilling and any multiple of that amount may be deposited. The Government Savings Bank does not allow interest on the excess of deposits exceeding £300 except in the case of charitable institutions, friendly societies and trade unions, while the Savings Bank of New South Wales does not allow interest on the excess of deposits over the sum of £200 made by any one individual, but allows the interest on the full deposit in the case of charitable institutions, or a legally established friendly or other society. The rate of interest in the Government Savings Bank is 3%, and in the Savings Bank of New South Wales 32%. The following table shows the growth of depositors and deposits: - The Savings Bank of New South Wales was originally administered by nine trustees, one of whom was vice-president, but by an act of 1902 the number may be extended up to eighteen. The funds of the institution, unlike those of the Government Savings Bank, can be applied to investments of a general nature, such as mortgages, government and municipal securities, &c. Victoria and South Australia have not developed the postal system, but show the largest amount per head of population of deposits. In trustee savings banks in Victoria the number of depositors in1900-1901was 393,026, in1905-1906466,752; the amount of deposits in the same years £9,662,006 and £11,764,179, showing an average amount per depositor of £24, us. 8d. and £25, 4s. id. In South Australia the total number of depositors in savings banks in1900-1901was 126,032, of this number 111,537 were depositors in trustee savings banks, having an amount of deposits standing to their credit of £3,782,575 out of a total of £3,795,631. The average amount per depositor was £30, 2s. 4d. In1905-1906there were 152,487 depositors with a total amount of deposits of £4,766,907, giving an average amount per head of £31, 5s. 3d. On the other hand, Queensland and West Australia rely almost exclusively on the post office system. In Queensland there were 81,025 depositors in 1900-1901, and 88,026 in 1905-1906. Deposits amounted to £3,896,170 in1900-1901and to £4,142,791 in 1905-1906, giving an average per depositor of £48, Is. 9d. and £47, Is. 3d. respectively. In Western Australia in1900-1901there were 39,318 depositors and in1905-190663,573. The deposits amounted to £1,618,359 in1900-1901and to £2,316,161 in 1905-1906, giving an average per depositor of £41, 3s. 3d. and £36, Ss. 8d. In Tasmania the amount of deposits (including those of two joint stock companies) was in1900-1901£1,009,097 and in1905-1906£ 1 ,33 2 ,54 6. The depositors numbered 42,509 and 50,731, giving an average per depositor of £23, 14s. 9d. and £26, 5s. 4d. The following table shows deposits per head of population: - In New Zealand there were in1900-1901212,436 post office depositors with an amount standing to their credit of £6,350,013 and in 1905-1906 276,066 depositors with deposits of £8,662,023. There are five savings banks in New Zealand not connected with the post office; in these the total amount standing to the credit of depositors in 1905-1906 was £1,111,931.
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