THE H.B. TRIBUNE. TUESDAY, FEB. 6th, 1917. BRITISH AND GERMAN BANKS

Hawke's Bay Tribune, Volume VI, Issue 348, 6 February 1917, Page 4

THE H.B. TRIBUNE. TUESDAY, FEB. 6th, 1917. BRITISH AND GERMAN BANKS

I t may be remembered that the I committee set up by the British Board of Trade to consider and report upon the best means of financing trade enterprises after the war, and more especially oversea contracts, recommended the establishment of a trade bank, which should accept long-term deposits and give long-term credits for foreign business. It was also suggested that the bank should cooperate. with merchant and manufacturer in the way of accepting risk on joint account, and, in effect, become the centre for syndicate operations, availing itself of the special knowledge gleaned through an extensive system of information bureaux. These recommendations, or rather the complaints against the British bankers’ policy which led up to the institution of the committee. induced a reply in defence from Mr. George H. Pownall, the president of the Institute of Bankers. which is made the subject of an article in an Australian exchange just to hand. Mr. PownaH’s views have admittedly a very conservative tinge, but it was considered just as well that the business public should hear them, and so learn what British banking really stands for, what it has accomplished, and also what an adoption of the German system involves. Mr. Pownarl points out that the complaint made against the British banker really is that he does not become a, merchant adventurer, promoter, contractor, a participator in commercial, industrial. or other development undertakings. The new proposals ask that he should substitute for a welltried system of banking another devised to meet the altogether dissimilar conditions of Germany—a country which appears to regard trade and commerce as acts of war, and shapes its policy, not for competition. but for conquest. The essential difference between the two systems is thus stated : In England bankers .are not traders, and it is not part of their business to become partners in any trading enterprise, home or foreign ; in Germany the financier is virtual master of the commercial and industrial work!. He endeavours to group each individual industry into a single great combine, and provides for the permanency of his control by securing the right of representation on the board of the combine. One sure result of the German system is the gradual elimination of small enterprises. On the other hand, money lent by the British banker is lent for a season or for a specific purpose, and while be takes the fair risk of his judgment, as to whether the trader is solvent and capable, be receives only a set rate of interest. He is not a trader, but merely a temporary lender of credit. The German banks, so called, and more especially the larger institutions. such as the Deutsche Bank, are’to a large extent shareholders and controllers of industrial and commercial concerns. and their solidity depends _ almost entirely noon the prosperity of the industries with which they are identified. The German system means practical control by the financial interest, and, even if it is expert control, the priva+e will of the controlled concern is gone. Mr. Pownall, it must be understood, is quite in favour of the establishment of development companies. which might introduce much new and good business to the Empire. and in the placing of shares in such the banks might- quite appropriately assist. But the business of these concerns must be kept wholly distinct from that of the banks. Doubts are, however, expressed as to whether this is enough, whether there should not be more intimate co-operation to secure that contracts abroad financed by British money should be executed by British industry. There is not, nor has there been, available anywhere else any store of credit similar to that contained in the deposits of the British banks. The banking system which has created, or allowed the growth, of the present huge deposits has given elasticity to British national finance anti largely enabled British enteiprise io embark ~D new trades. The deposits in the banks and the British holding of foieiun Stock Exchange securities have ptoved the two pivots of British war finance, and to that may be added tlm fact that the joint stock svsteni has enabled the creation ot many prosperous trading undertakings which otherwise would not have seen the light. Adventurous banking—and by that is understood the investment, cither at home ot abroad, for fairly long periods, or for permanent purposes, of money which is liable for repayment at call nr on short notice —is not. in Mr. Pownall’s view, banking. In fact it i- utterly alien io the English system. or. indeed, to any system which, involves dealing in depositsrepavable at short notice, lhe conclusions which Mr. Pownall has reached are summarised thus "No Government can help us. Direction by officials in trade matter- is in the nature of the ease useless. Trade must be made to pay, ami evert Government enterprise itainted bv the know.(edge that, in the last 'resort, the taxpayer, although be may not call the tune, still pays the piper. e want the intelligent ami concerted help of every niembt r of the community m keppmg the country prosperous hii--contented. 1 submit that English banking, both, home and ovei s._.i. has been, and is. admirably sum cient in fulfilling its special purpo e I am not aware of any sufficient evidence that it has failed to 1 t'p or that it has given any lesser help to trade than has been afforded by native banks to the traders of any other nation —Germany included. We are not German in mind oi method, and perhaps the greatest service that an 'institution’ for fi id ing ‘financial facilities for tra k can render to the country is to in troduce method in our dealing with our foreign business affairs, and to provide exact and practical ir.forformation as to what J s going on in the great world outside our

We want to wake up. or, perhaps, more correctly, we want to remain awake and to continue the alert use of our senses now that we have shaken off the lethargy of the sleep of over-confident prosperity.