BANK SUSPENDS PAYMENT.

Dominion, Volume 4, Issue 1151, 12 June 1911, Page 5

BANK SUSPENDS PAYMENT.

BESIEGED BY DEPOSITORS,

BIRKBECK INSTITUTION IN

DIFFICULTIES,

ASSISTANCE FREELY OFFERED.

By Telecraph-Frcss Associatlon-Copyrizin London, Juno 9.

The Birkbeck Bank, on which a run occurred a few months ago, is ceasing operations. Tho Birkbeck Building Society, with which the bank was associated, has issued a statement in which it is set out that the ordinary depreciation of securities held by the bank, including giltedged, represents a sum which does not warrant the continuance of tho society's banking business without reconstruction. An official, interviewed, said it was anticipated that creditors would receive 17s. or ISs. in the £\. He added that tho run on the bank in November last had led to the withdrawal of .£3,000,000, of which litflo had been returned. An immense crowd of depositors besieged tho bank building until late last night. The total balance-sheet showed the depositors number 03,000, and the shareholders 19.6GG. Current accounts aggregate £2,801,784, deposits £8,449,259, and deposit receipts £250,281. It is understood a recent selling of Consols emanated from the Birkbeck Bank, and the unfavourable'position of tho institution is attributed largely to investments in real estate and house property. Speculators are offering the depositors lGs. in tho pound. One speculator is in possession of £5000 in bank notes, and is doing business with the queue of anxious depositors. Many leading banks are assisting the Birkbeck Bank. OUTSIDE BANKS OFFER AID. (Rec. June 11, 5.5 p.m.) London, Jnno 10. A number of banks have offered to pay half the ' Birkbeck Bank's current and deposit accounts. TO PAY TEN SHILLINGS IN THE POUND. ADVANCE BY BANK OP ENGLAND. London, Juno 11. The Bank of England has advanced the necessary moneys to the Birkbeck Bank, which will reopen to-morrow. The bank will pay ten shillings in the pound. HOW THE CRISIS AROSE. The suspension of the Birkbeck Bank will not cause any serious financial trouble. The suspension is due nrst to the withdrawal of deposits through the run on tho bank' in November last, which resulted in the institution losing £3,000,000 in deposits, and secondly to the depreciation of gilt-edged securities of whicli this bank held over £8,000,000. The balancesheet of March 31, 1910, disclosed liabilities to depositors £10,784,321, of which £2,081,784 was for current accounts, £8,'119,259 for deposit acconnts, and £250,281 for deposit receipts. The run on tho Birkbeck Bank, which began on November 11, was occasioned by an anonymous letter worded as follows:— "Dear sir or madam,—Fur your personal information I beg yon to withdraw your deposit from the Birkbeck Bank, as I have heard on sound authority that the company are in very low' watei% and there may be a run on the bank any day. This has occurred through the failure of the Charing Cross Bank. There may be no cause for anxiety, but it is well to be on the safe side.— i'ours, A Friend." A reward was offered by the directors of tho bank for the identification of the writer, with a view to proceedings being taken, but ho was never discovered. The ruu ceased in a few days, as the bank was able to announce that it had received substantial financial assistance from tho Bank of England. The Birkbeck B,'.nk is an off-shoot of the Birkbeck Building Society, and both institutions have alv nys been of tho highest character. The management hai huut regarded as irreproachable. But the bank is not a trading bunk. It is a species of savings institute, receiving money from the public and investing it in public securities. Interest is allowed to current customers on their'minimnm monthly balances, and to depositors for fixed terms, tne latter receiving J pei cent, more than the former. It has probably done much better for its 93,000 depositors and curienl account customers than they could havo done with their sayings, and it has certainly during the aixty years of its existence been of great benefit. It is more than likely that the bank will not bo allowed tovgo under, but will be supported by tho more powerful banks in London. Tho stability of the bank depends upon whether the capital and guarantee fund (£250,000) are together sufficient to cover any possible decline in tho value of the securities. According to the latest official statement they are not, but gilt-edged securities are only temporarily under a cloud, and if the other banks guarantee tho Birkbeck there is no reason why it should not carry on business and recover its position.