Soon after the Bank became operational, various anomalies and difficulties created by the Regulations became apparent. The first to
be identified were Regulations 4 (4) and 8.
Regulation 4 (4) stated "that the rules shall provide to the satisfaction of the
Chief Registrar of Friendly Societies for the examination and audit of the accounts of the Bank by a qualified accountant once at
least in every half year".
However, Regulation 17 (2) provided that "the interest shall be computed yearly up to the last day
of the Bank year", and the Bank considered it would be desirable to amend Regulation 4 (4) by deleting the word "half", so that it
would be brought. into conformity with Regulation 17 (2).
It was also felt that Regulation 8 should be amended, so as to permit
members of the Committee or of the Corporation to be depositors in the Bank and to receive interest on their accounts.
The decision
as to whether to pursue a change in these Regulations was delayed when the Committee learned that the Government was considering enacting
the Savings Banks Act, 1920. The Town Clerk was asked to investigate in case the provisions of this Act had a bearing on the Bank's
Regulations. In September 1921. the Treasury intimated their willingness to consider amendments to the Regulations, but no action
appears to have been taken at this time.
The Bank's interest in the proposed Savings Banks Act of 1920 was probably that it was
hoped that this would lead to the amendment of Regulation No 14 that restricted the amount standing to the credit of any depositor
to £500. In 1915, the restrictive pre-war limits on Savings Bank deposits had been swept away by a war-time regulation, and it was
hoped that the 1920 Act would make this position permanent or, at least, impose a more generous limit.
The Treasury had severe
reservations regarding unlimited amounts being deposited at call, and the 1920 Act provided that the existing abolition of all limits
would cease six months after the end of the First World War, and that the Treasury would then be given the power to impose a specific
limit. When the Treasury Order was issued it imposed an annual limit of £500, but no overall limit. These limits were not extended
to the BMB until the Bank's 1925 Regulations came into force as detailed by J P Hilton in Britain's First Municipal Savings Bank.
With
an average salary in 1920 of about £230, no saver was likely to be concerned with the £500 annual limit unless a lump sum was received
from a legacy or insurance policy. Savings Banks, however, welcomed larger balances to offset the many small balances.
In
the original (1919) Regulations, the Bank Committee had managed to persuade the Treasury that Trade Unions should be able to deposit
up to £2,000, rather than not be allowed to open an account at all. The new Regulations did not specify any limit for Trade Unions.
Although not specifically listed, it was assumed that Trade Unions would come within the definition of depositors in Regulation 37
(Exceptions to limitations of deposits) to whom a limit did not apply.
J P Hilton listed the other 1925 amendments as "withdrawals,
which can now be made on short notice, in case of emergency, where the amount required exceeds the amount payable on demand; improved
procedure in respect of nominations; alterations in procedure regarding accounts of deceased depositors; rate of interest on house-purchase
advances, which is now at the discretion of the committee; revised procedure in respect of house-purchase transactions; and other
minor matters".
The "other minor matters" included the changes required to the 1919 Regulations numbered 4 (4) and 8, as detailed
above. They also included the clarification that the annual extracted lists of depositors' balances was unique to each branch; to
make it clear that on the winding-up of the Bank, depositors would receive their balance plus interest; that the previously separate
Rules and Regulations be amalgamated; and that the Interpretation section of the Regulations stated that the expression "bank year"
meant the year ended March 31st.
In relation to withdrawals, a new Regulation (No 41) specified that "repayments of
deposits can only take place at the office where the account is kept". The following paragraph was also added: "For all sums over
thirty pounds repayable at head office or five pounds at a branch office, one week's notice should be given, but in cases of emergency
the Manager in his discretion may sanction a shorter period of notice."
The wording of the Regulations (Nos 52 to 63) regarding
Nominations was considerably expanded in order to improve the procedure. It is probable that the new wording used was more in line
with that used by other savings banks.
In regard to Mortgages, the Regulations were amended so that:
- the Bank Committee
had discretion to lend in excess of the basic 80% value/20-year term in special cases (Regulation 77. Extent of Advance to be made);
-
the property to be mortgaged to be valued (previously only if the Bank so decided) by a person appointed by the Committee and the
valuation fee to be paid by the depositor (Regulation 78. Valuation of Property);
- the interest rate chargeable was not now
specifically quoted, but still at the discretion of the Bank but "in the case of an advance already made the rate of interest in force
at the time the advance was made shall not be exceeded". (Regulation 82. Interest on advances);
- a new sentence was added to
Regulation 83 (Repayment of advance). "Payments shall be first appropriated in satisfaction of all interest which may be due, and
any surplus shall be applied in discharge of arrears of principal." The wording of the same Regulation was also expanded so as to
emphasise the mortgagor's rights to make advance payments or to pay off the entire advance before the end of the loan period;
-
in the case of a mortgage in arrears, the Committee were given the discretion to charge interest on the arrears at such rate as they
may decide (Regulation 84. Failure to make repayments);
- mortgaged property to be insured in the name of the depositor and the
Corporation (previously just the Corporation) or "in accordance with the provisions of the title deeds". (Regulation 85. Insurance);
In
addition, moreover, entirely new Regulations were added:
44. Withdrawals from joint accounts.
An application to withdraw money
deposited in the joint names of two or more persons shall be made by either or any of such persons upon a written authority from the
other or others, or by the survivor or survivors among such persons, shall be a good discharge to the Corporation for sums so paid.
In the absence of such authority the application shall be made and the receipt given by both or all such persons.
This Regulation
establishes the principle that joint accounts can be opened on the basis of withdrawals on any signature or all signatures.
45.
Withdrawals from trust accounts.
An application to withdraw money deposited in the name of one person as trustee for another person
shall be made jointly by all the persons named in the title of the account or by the survivor among such persons, and the receipt
of such persons or the survivor thereof shall be a good discharge to the Corporation for sums so paid.
The Committee of Management
may require proof of survivorship to their satisfaction.
93. Legal and other charges.
The Committee of Management may, if they
deem it advisable, charge the depositor with any legal or other charges or expenses which they may incur in connection with the mortgage
or the completion thereof.
Other Regulations that were amended were:
Regulation 29. Friendly Societies and Trade Unions
(greater detail of the procedure on opening such an account, eg: need to lodge a copy of the Society's or Union's rules);
Regulation
32. Pass books (removal of references to a charge for a passbook, and of requirement to issue each new depositor with a copy of the
rules. Provision for deposits to be entered in a pass book at a later date when original deposit is made on the depositor's behalf
by his employer);
Regulation 34. Postal Transactions (added that a prescribed form be used and that the transaction
to be at the depositor's expense);
Regulation 90. Depositor in arrear (refers to a "depositor being in arrear with such an amount as
represents the total of three monthly instalments of principal" instead of "three months in arrear with his repayments").
Much
of the above changes were of a minor or administrative nature. The Bank Committee had hoped to obtain a number of other changes and
were in conference with representatives of the Treasury by many letter and meetings. On March 21st 1924, a Treasury official
wrote to the Bank as follows:
I have laid before the Lords Commissioners of His Majesty's Treasury your letter of the 13th ultimo
submitting a draft of new Regulations which it is proposed should take the place of the existing Regulations and Rules under which
the Birmingham Municipal Bank is conducted.
1. My Lords regret to find that the
draft Regulations contain certain provisions which They have already informed the Corporation by Their letters of 6th July and 19th
August 1922 that They are unable to accept.
2. They must ask that these provisions
should be deleted. For instance Regulation 6 (d) imports a new object of the Bank. Part 3 of the Corporation's Act of 1919 authorises
the Corporation to establish and maintain a Savings Bank and to establish a Housing Department of that Bank. They would remind the
Corporation that the deputation that attended here on the 15th June, 1922, put forward the suggestion that the powers of the Bank
should extend to "the receipt and payment of moneys on behalf of the Corporation" and that you have already been informed that My
Lords are advised that a Regulation in that sense would be ultra vires. I am to add that My Lords have communicated with the Ministry
of Health on this matter.
3. Again as regards the investment of funds My Lords
are not prepared to depart from the view expressed in the letter from this Department of the 6th July, 1922. The Regulation on this
subject should provide:
(a) that deposits with the Corporation shall be at call;
(b) that the securities in which the Corporation
may invest without the specific consent of this Department shall be limited to British Government securities with a definite maturity
date and unexpired currency of not more than 5 years.
4. Nor can My Lords agree
to the omission from the Regulations of a provision such as that contained in No 25 of the existing Regulations.
Moreover the
draft Regulations contain other provisions which were rejected after full consideration in 1919.
5. The Regulations contain various provisions relating to deposits by County Court Registrars. My Lords do not consider that any public
convenience would be served by the provision of facilities for such deposits. You will remember that a provision to this effect at
one time found place in the Corporation's Bill of 1922 and was withdrawn.
6. Regulation 71 in its present form provides for the alteration, etc, of Regulations only on the initiative of the Corporation. The
initiative conferred on this Department by the Act must be preserved.
I am to request that the draft may be revised on these
points and that copies may then be forwarded for further consideration both to Their Lordships and to the Chief Registrar.
7.
My Lords will be prepared to consider the amalgamation of the Regulations and the Rules. There is, however, a distinction between
existing Regulations and the existing Rules in that the approval of the Chief Registrar of Friendly Societies is, by virtue of Regulation
4, required to any Rules that may be made. My Lords consider it necessary that the requirement of his approval shall be preserved.
There
are many minor points in the draft which will require consideration and amendment and My Lords will be glad to consider these with
the Corporation when the major amendments indicated above have been made. On receiving the redraft They will ask a representative
of the Corporation to confer with Their officers on these points.
As can be seen from this letter, the Bank had repeatedly pursued
some amendments to the Regulations. One of these much pursued objectives was to enable the Bank to collect the payment of Rate bills.
The Bank Committee sought the permission of the Treasury to perform this service on the basis that it was necessary to do so because
the Overseers (who issued the Rate demands for the Poor Law boards) were a separate local authority. The Treasury had always held
the view that the Bank was not legally able to deal with "the receipt and payment of moneys on behalf of the Corporation", despite
the fact that the payment of bills issued by the Corporation's Water, Electric Supply, and Gas Departments had been taken from 1922
onwards.
The Treasury, therefore, would not allow the introduction of the proposed Regulation sub-clause 6 (d): "to act as directed by the Corporation in the receipt or payment of any moneys due to or payable by the Corporation or the Overseers of the Poor of the Parishes of Birmingham and Handsworth". This decision of the Treasury was made despite the fact that the Bank had the support of Neville Chamberlain who, as Minister of Health, was responsible for the Poor Law.
On reflecting on the Treasury's attitude to the Bank's requests for amendments to the Regulations, Neville Chamberlain may have recalled his words to his sister Hilda when he was negotiating with the Treasury to establish the Birmingham Corporation Savings Bank in 1916:
I feel somehow that we shall get this thing through, but what is one to say of the Treasury who make no attempt whatever to overcome opposition.
The rate was
a tax on property levied in each parish, collected under the Poor Laws, and was used to provide poor relief. It was absorbed into
the general rates of local taxation in Birmingham in March 1927. Prior to that date it was necessary for payment of these bills to
be done through depositors' accounts, rather than over the counter. In 1929, Neville Chamberlain initiated a Local Government Act
to abolish the Poor Law boards entirely.
In regard to the investment of funds, the Bank Committee would have preferred more
flexibility than the Treasury was inclined to grant (investments in any British Government Security with a definite maturity date,
rather than with a maximum maturity date of five years) - the Treasury being particularly concerned with liquidity, and the Committee
was forced to concede this requested change of Regulation 16. At March 31st 1924, the Bank held 88.7% of its Assets in "Cash" or "At
Call with Corporation".
Regulation 25 required the Bank to produce an abstract of depositors' accounts - a major task that involved
considerable manual labour, but as this was an essential part of the system to assure depositors that their account was correctly
recorded, it is difficult to see that the Treasury or the Chief Registrar of Friendly Societies would allow its deletion. However,
the Bank Committee considered these requirements unnecessary in view of another regulation which required that an annual report and
financial statement with other information should be exhibited for the information of depositors, with every depositor being entitled
to receive a printed copy.
As J P Hilton commented in his history of the Bank, "it is strange to the lay mind, that a High Court
Judge can direct .... that moneys awarded to children of a deceased workman should be paid into the Bank, but a County Court Judge,
who deals with many cases of compensation, has ... no such authority". Although the 1920s was a period of new regulations and orders
relating to Factory Law in an effort to reduce industrial accidents, the multitude of factories in Birmingham would have resulted
in many compensation payments. The recipients of the payments would most likely be Bank depositors, and the Bank would have welcomed
the substantial lump sums. But the relevant legislation mandated the Post Office Savings Bank as the recipient Bank - and its
funds were placed with the Government.
The Treasury's reference to Regulation 71 relates to the fact that only the Treasury could
"alter or rescind ... existing Regulations" on recommendations made by the Committee of Management. The Bank (naturally) would have
preferred to amend its Regulations without such oversight - an unlikely proposition - as it was considered that the provision of the
1919 Act, empowering the Treasury to prescribe Regulations for the control of the Bank, was unsatisfactory, it being felt that the
powers conferred upon the Bank by the Regulations should not be interfered with except on the initiative of the Corporation.
The
changes agreed by the Treasury that in due course became the Birmingham Municipal Bank Regulations, 1925, were initiated by the Bank
Committee. However, the Treasury did originate an amendment to Regulation 20 (3) (b). But the Committee were of opinion that the addition
of the words "of a deceased depositor", suggested by HM Treasury, at the end of the sub-clause should be omitted in order that it
should be perfectly clear that a depositor who is an executor may open an account in the Bank in respect of his executorship, irrespective
of whether the deceased person for whom he acts was a depositor in the Bank or not. The General Manager was able to state that a case
in point had arisen where a depositor desired to open an account as an executor under the will of a person who was not a depositor
in the Bank. In this case, the Committee's view prevailed.
The Treasury, and the Chief Registrar of Friendly Societies, agreed that the Regulations and Rules could be amalgamated. The Birmingham Municipal Bank Regulations, 1925, came into force on April 1st 1925 and were published with an index to its 93 regulations.
The next set of Regulations to be approved were the Birmingham Municipal
Bank Regulations, 1928. The only change from the previous Regulations was a minor change to Regulation No 3, and the need for the
change arose from a report by the Bank's Finance Sub-Committee on December 19th 1927:
Deposits by Societies registered under
the Friendly Societies Act, 1896.
Your Sub-Committee report that a question of interpretation of the Regulations of the Bank
has arisen in connection with an application from the Handsworth Belgrave Club to make deposits of moneys. The rules of the Handsworth
Belgrave Club, which is a working men's club registered under the Friendly Societies Act, 1896, did not in their terms permit
of deposits being made with the Municipal Bank, and upon the Chief Registrar of Friendly Societies being asked to agree to an amendment
of the rules of the Club it was pointed out that the Regulations of the Municipal Bank did not enable the Bank to receive deposits
from Societies or organisations registered under the Friendly Societies Act, 1896, except in the case of a Friendly Society, and that
the Handsworth Belgrave Club was not registered as a Friendly Society, but as a working men's club.
Your Sub-Committee are advised
that, in order to deal with such cases as the one referred to above, it will be necessary to amend the Bank Regulations, which amendments
appear unobjectionable to the Chief Registrar of Friendly Societies who also states that he cannot see what objection the Treasury
could take thereto.
Your Sub-Committee therefore recommend that steps be taken by the Town Clerk to secure the provisional approval
of the Lords Commissioners of HM Treasury to the necessary amendment of the regulations prior to the Committee submitting a report
to the City Council in order that the amendments may be formally made.
Subsequently, the Town Clerk reported on February 15th
1928:
I have duly made application to the Lords Commissioners of HM Treasury for their provisional approval to the necessary
amendments to enable the Bank to receive deposits from all societies or organisations registered under the Friendly Societies Act,
1896. I am now informed that the Lords Commissioners will be prepared to approve such alterations in the Regulations as are necessary.
These alterations would be most simply effected by an alteration to Rule 3, which contains the definition of friendly society. The
present definition is as follows:
"The expression 'friendly society' means a friendly society legally registered in the manner
required by the Acts in force relating to friendly societies and includes a registered branch."
The alteration desired would
be reached by omitting the word "friendly" before the word "society" so that the definition would run:
"The expression 'friendly
society' means a society legally registered in the manner required by the Acts in force relating to friendly societies and includes
a registered branch."
It will, I think, be desirable that the new regulations should be supplemented to the Municipal Bank Regulations, 1925, and would suitably take the form of the draft submitted with this report.