On October 20th 1930, the Committee instructed the Town Clerk and General Manager to place before the General Purposes Sub-Committee
particulars as to the position regarding the following matters:
(a) The limitation of deposits, and
(b) The establishment
of a Special Investment Department.
The Town Clerk accordingly prepared a report in conjunction with the General Manager, which
recommend that, so far as the limitation of deposits is concerned, the Town Clerk be instructed to make application to HM Treasury
for sanction to deposits being accepted up to £1,000 in any one year in place of the existing limitation of £500.
The Town Clerk
and General Manager were encouraged to make the application after being informed that notices had been seen in the Salop and Welshpool
Trustee Savings Bank stating that the minimum of £500 for deposits per year had been increased to £1,000, and the rate of interest
on deposits in the special investment department would be 4% as from November.
On the question of the establishment of a special
investment department, however, the Sub-Committee felt that having regard to the current position of the money market it would be
inadvisable to raise the matter with the Treasury at the present time, and they did not recommend that any action be taken at this
stage, and this recommendation was conveyed to Bank Committee on January 12th 1931.
Subsequently, the Town Clerk reported on
February 14th 1931, attaching a letter he had received from the Treasury dated February 6th.
February 14th 1931
Minute No
3954
Birmingham Municipal Bank Regulations, 1930.
Limit of Deposits.
Upon this minute I beg to report that I have duly made application
to the Lords' Commissioners of HM Treasury in the matter of the desired amendment of Regulation No 36 so as to enable the Bank to
accept deposits in an account up to £1,000 in any one year.
I have received a letter in reply from Mr Phillips, of the Treasury,
and submit a copy of that letter with this report. No doubt your Committee will wish the matter to be pressed further at a personal
interview at the Treasury, and I shall be glad to have your instructions.
Treasury Chambers,
Whitehall, SW1.
6th February, 1931.
Dear
Mr Wiltshire,
We have considered your official letter of the 23rd January 1931 proposing that the annual limit of deposits
in the Birmingham Municipal Bank should be increased from £500 to £1,000. We shall of course be happy to discuss the matter with representatives
of the Council at any convenient time during the week beginning the 16th February, if, on reading what follows, you think that this
would be useful.
As at present advised it is very unlikely that the Treasury would be able to modify the view which was expressed
in my letter of the 26th March, 1929, on a similar proposal. The limitation of annual deposits to £500 applies also to the Post Office
and Trustee Savings Banks and was confirmed by Parliament so recently as 1929. There are certain obvious objections from the point
of view of Savings Banks to allowing very large deposits since it is by no means so easy for them as for purely commercial concerns
to adjust rates of interest speedily to varying conditions, while they are weakened rather than strengthened by receiving large sums
at particular times which are likely to be withdrawn later. This seems to be generally recognised everywhere and by comparison with
the rules of Savings Banks in the Dominions and foreign countries even our present limit of £500 is extremely high.
I hardly
think that the recent increase in the limit for a Trustee Savings Bank Special Investment Depositor is in point, as this is of course
a total and not an annual limit.
Yours sincerely,
(sgd) F. PHILLIPS.
The Committee having considered the report and the letter,
were of the opinion that the Treasury should be urged to grant the desired concession, and it was therefore decided that the Chairman,
with the Town Clerk and General Manager, be authorised to interview representatives of the Treasury on the question. At the same meeting,
the Committee agreed to pay £500 towards the expenses incurred by the City Council in promoting the Birmingham Corporation (General
Powers) Act, 1929
On March 16th 1931, the Committee were informed that the Chairman, with the General Manager and the Deputy
Town Clerk, had interviewed Mr Phillips of the Treasury who had promised to bring the matter before the Financial Secretary to HM
Treasury and communicate the latter's views. Although the Minute relating to this topic was continued, no further reference was made
to the subject at a time when there was a run on the pound, which slid down from $5 to the $3.25 level, which may have persuaded the
Committee to drop the matter - a view reinforced when the rate of interest payable on deposits became a more important issue the following
year.
A special meeting of the Bank Committee was held on July 11th 1932 to discuss the position arising out of the Government's
decision to reduce the interest on War Loan from 5% to 3½% and the consequential effect of such reduction upon the Bank. The 5% War
Loan of 1917 was a huge bond issue to finance the cost of the War.
Regulation 39 (2) specified that "interest shall be allowed
on every complete pound deposited at the rate of three pounds ten shillings per centum per annum", while Clause (1) stated that the
rate of interest was subject to the approval of the Treasury.
After receiving the views of the City Treasurer upon the income
which the Bank may expect to receive from moneys placed with the Corporation at call the Committee arrived at the conclusion that
it would be necessary to reduce the interest allowed to depositors by ½%, and that the most appropriate time to give effect to this
change would be the date fixed for the Government Conversion of the War Loan, viz, 1st December 1932. Accordingly, it was decided
to seek the approval of the City Council at its meeting on July 26th, and the Town Clerk was instructed to obtain the approval of
the Treasury.
It was also decided that notices advising depositors of the projected change should be prepared, and that the General
Manager was instructed to arrange for printing and despatch in envelopes bearing a half-penny stamp.
The necessity to reduce
the rate of interest on deposits was a major blow to the Committee. Ever since the establishment of the Bank in 1919, and even during
the existence of the temporary Bank which preceded it, interest on deposits at the rate of 3½% had been paid, but the drop in the
yield of its investments made it impossible to maintain this rate. The irony of the situation was that the War Loan conversion
of 1932 was a scheme by Neville Chamberlain (then Chancellor of the Exchequer) to persuade investors to swap their 5% stock for a
3½% issue. Some 90% of the public accepted the deal, for patriotic reasons at a time of the Depression's national crisis, and the
Chancellor had succeeded in reducing his interest expenditure by £23 million.
The Bank's report to the City Council on July 26th
1932 stated that:
the Council will be aware that the Bank is limited in the matter of investments. Under the Regulations deposits
can be (1) invested in House Purchase or Allotment Purchase Mortgages; (2) placed on deposit with the Corporation at call; or (3)
invested in Government Securities maturing at a date not later than twenty years from the date of the investment. The Committee have
found it mutually advantageous to the Bank and to the City to place all available funds (apart from House Purchase and Allotment Purchase
Advances, and cash in hand to meet the exigencies of the Bank) with Corporation at call.
Your Committee have gone very carefully
into the matter with the Treasurer, and have come to the conclusion that the yield from avenues open for investment of Bank funds
will not now admit of a higher rate than 3 per cent being allowed on deposits, and they have therefore to recommend the Council to
approve of Bank Regulation No 39 (2) being amended (subject to the approval of HM Treasury and the Chief Registrar of Friendly Societies)
as follows:
"Interest shall be allowed on every complete pound deposited at the rate of three pounds per centum per annum."
It
is further proposed to bring such new rate into effect on and after the 1st December, 1932, which coincides with the date fixed by
the Government for the 3½ per cent Conversion Loan to supersede the 5 per cent War Loan.
The new Regulation also came into force on December 1st 1932 as the Birmingham Municipal Regulations, 1932.
As this minor text amendment was the only change to be made to the existing printed copies of the Regulations, an appropriately worded rubber stamp was applied adjacent to Regulation 39.
The rubber stamp was also placed in passbooks as they too quoted the interest rate. Thus depositors, having already received a direct communication, were comprehensively informed of the reduction in the rate of interest. No publicity was given to the fact in the Annual Reports for the period, though the 1933 accounts stated that the rate was 3%.
At this period in time, the method of
calculating interest came under scrutiny, probably following a letter to the Birmingham Mail from a depositor. Clarification
of the method was subsequently printed in passbooks and in the Regulations booklet.
The rate charged on Mortgages was reduced from 5% to 4½ % on February 18th 1935.
In October 1934, the Bank Committee considered extensive amendments to the Regulations (some 18 Regulations were listed)
as prepared by the Town Clerk, although these were generally of a minor nature, the proposed change to Regulation 39 (Interest on
deposits) was significant. The reduction in the rate of interest in 1932 had required a notification being posted to each depositor.
It was now proposed that the Regulation should have the following first paragraph:
Interest shall be allowed on every complete
pound deposited at such rate as the Committee of Management, with the approval of the Treasury, may determine. Such rate shall not
be varied by the Corporation except after giving three months' notice to depositors by exhibiting the same in every office of the
Bank and by publishing the same at least once in one or more local newspapers circulating in the areas of the Bank's operations.
The
new wording, therefore, did not quote a specific rate of interest and allowed that placing notices of a change in all branches (and
in local newspapers) was sufficient means of communication.
Two amendments were proposed for Regulation 32 (Pass Books). These
removed the requirement for depositors to produce their passbook at the Bank at least once a year (a totally impracticable condition,
and that
Each pass book shall be the property of the Corporation, and shall be delivered up as and when required by the Committee
of Management.
This was a step towards the Committee's objective of obtaining mutilated passbooks. The objective was to be reinforced
by adding the following to Regulation 33 (Lost Pass Books):
If, in the opinion of the Committee of Management, any pass book
has been tempered with or is in such condition as to render the issue of a new pass book desirable, the Committee of Management may,
if they think fit, require the surrender & cancellation of such book and issue the new book to the depositor and charge therefor
such sum (not exceeding ten shillings) as they may determine.
It was also proposed to add and the Trustee Savings Banks (Special
Investments) Act 1934 to Regulation 71 (Investment of Funds) presumably as part of the Committee's desire to have a Special Investment
Department.
The Town Clerk was instructed to circulate the draft revisions to the members of the Committee for further consideration
at a special meeting to be held on October 29th 1934, prior to submitting the amendments to the Treasury and Chief Registrar of Friendly
Societies for provisional approval prior to their submission being made formally by the City Council.
However, the special meeting
called for October 29th never took place and the subject did not arise again until the Finance & General Purposes Sub-Committee
reported on February 21st 1938:
Proposed Amendment of Regulations
Your Sub-Committee report that the Chairman, the Chairman
of the General Committee and the General Manager have discussed with the Town Clerk the proposal to amend the Regulations. After considering
his views, and learning that the Trustee Savings Banks and the Post Office Savings Banks are contemplating amendments to their powers
and Regulations, your Sub-Committee do not recommend any action being taken by the Bank at the present time.
A special committee
of the TSB Association had been set up to discuss the introduction of new services and to enable the Banks to keep up to date with
modern requirements. Apparently, a Bill was drafted but the threat of the Second World War caused abandonment - an attitude reflected
in the recommendation of the Finance & General Purposes Sub-Committee.
Future amendments of the Regulations were based on
the 1930 edition, as follows:
Birmingham Municipal Bank Regulations, 1941
Regulation 71 (Investment of Funds)
Investments
in Government Securities were limited by the 1930 Regulations to those maturing at a date not later than 20 years from the date of
investment. The only avenue open for such investments was 2½% National War Bonds, 1946/48. On the 1st January, 1941, however, the
Government introduced an issue of 3% Savings Bonds, 1955/65, which the Committee thought should be available to the Bank. An amendment
was agreed by the authorities to the final part of the Regulation with effect from April 1st 1941:
.... or invested in Government
Securities at a date not later than twenty thirty years from the date of investment.
Birmingham Municipal Bank (Procedure) Regulations,
1946
The Corporation's requirement (under Regulation 39 (1)) to give three months' notice to depositors to vary the rate of interest
on deposits was amended by the addition of a new Regulation, 39 (4), which required that any notice …. to be given …. may be given
by them by advertisement in a daily London newspaper, in a newspaper circulating in the district in which the Bank is situate, and
by displaying the same in some prominent position in the buildings in which the business of the Bank is carried on.
The Regulation
came into force on April 1st 1946.
Birmingham Municipal Bank Regulations, 1946
This set of Regulations also came into force
on April 1st 1946 and amended Regulation 36 (Limitation on the Amount of Annual Deposits and on Deposits in the Aggregate) and Regulation
39 (Interest on Deposits)
- imposed an annual limit of £500 on deposits;
- imposed
an aggregate limit of £2,000 on deposits;
- reduced the Rate of Interest on Deposits from 3% to 2¾% with effect
from July 1st 1946.
This rate of interest remained unchanged until April 1st 1965.
Birmingham Municipal Bank Regulations,
1947
Commencement Date: April 1st 1947
Regulations 36 (Limitation on the Amount of Annual Deposits and on Deposits in the
Aggregate) and 37 (Exceptions to Limitation of Deposits) were amended so as to define the way in which the limits imposed by
the 1946 Regulations would apply.
The principal effects were:
(a) To maintain the existing limits of £2,000 on aggregate deposits
and £500 on annual deposits, but restoring the proviso that a depositor may, not more than once in the same year, deposit money
to replace money previously withdrawn in one entire sum during that year.
(b) To define the conditions under which the limits
shall not prevent the making of certain classes of deposits.
(c) To define certain kinds of deposits which are to be ignored
in computing the amount of the account for the purpose of the annual or the aggregate limit.
(d) To define the classes of depositors
to whom limits may not apply, subject to the approval of the National Debt Commissioners.
Birmingham Municipal Bank Regulations,
1949
Commencement Date: March 9th 1949
By this amendment, Regulation 71 (Investment of Funds - that permitted investments
in Government Securities), was extended to allow investment in securities of the British Government or in securities guaranteed
as to principal and interest by the British Government.
Birmingham Municipal Bank Regulations, 1952
Commencement Date: March
11th 1952
Regulation 36 (Limitation on the Amount of Annual Deposits and on Deposits in the Aggregate)
The maximum limit
for Deposits was increased from £2,000 to £3,000