BANKING—BRITISH AND AMERICAN.

Auckland Star, Volume LXIII, Issue 58, 9 March 1932, Page 6

BANKING—BRITISH AND AMERICAN.

More than 4000 banks have closed in the United States within the last four years (says the "Christian Science Monitor"). In the same period none has closed in Great Britain. Perhaps the United States cannot take the English banking system and put it on like a coat. It may be that the tailoring is liardly fitted to the social and political contours of America. But it is certain that the system of the English can be studied with great profit to the United States. The distinguishing feature of the English banking system is its centralisation, its not more than ten banks with 8000 affiliated branches. The strength of one is the strength of the whole system in which it is associated. A member of a unified organism, each bank benefits by a huge flow of capital which supports the weak spots in the system. It is obvious every branch would have to incur loss simultaneously to cause any one bank to collapse. There is an unobtrusive common sense ill such a system. It is—vaguely, perhaps—like a family, the parent of which supports the members in times of stress, and no outsider needs know of vicissitudes within the house. Another feature of the English banking system that possesses the homely virtue of common sense is that the English bank is a bank. It fulfils the original function for which it was destined. It accepts deposits, pays interest, accommodates commerce, and invests, mostly in Government securities. It avoids locking up its funds in industrial enterprises, as it avoids speculative risks of all kinds. From business participation the English system has kept its distance, with the result that economic dislocations, of a more serious nature than those in the United States, have not visibly weakened any English bank. The management problem of the English banks is less serious than that in United States banking. Sound banks may have begotten sound bankers, or sound bankers "may have begotten sound banks. At all events, English traditions, laws and administrative practices have combined to produce a banker of solidity and integrity. The British laws give strong assurance that the high standards ascribed to the banker shall be observed by him in all of his transactions, for the slightest delinquency in bank management is dealt with in a severe and rapid manner. The American banks, on the other hand, arc the antithesis of the English banks in many respects. Instead of a few highly unified systems, there are in the United States thousands of independent bank units that must stand or fall on their own resources. Their record the last four years indicates there is room for improvement in the American system.