Birmingham Gazette – June 16th 1924
The Birmingham Municipal Bank was so sharply criticised at the conference of building societies last week that the chairman of the Management Committee has felt it his duty to reply to the speech of Mr Enoch Hill. Councillor C T Appleby, speaking at the formal opening of a branch of this bank at Ladywood on Saturday evening, said the municipality was under a considerable debt of gratitude to managers of building societies in the early days of the bank for advice and assistance in the methods of keeping accounts and conducting business.
Objecting to the title, Mr Hill had declared that the Municipal Bank was not a bank, because it did not lend money to tradespeople and others. Well, a great many institutions described as banks, and rightly so, did not include in their privileges that of advancing money to tradesmen. There has recently been some agitation for legislation which would control the indiscriminate use of the term bank, but Mr Appleby suggested that the term very properly applied to the Birmingham Municipal Bank.
When referring to the deposits and the amount outstanding on mortgage as £3,000,000 and £200,000 respectively, and comparing these figures with the activities of the building societies, Mr Hill, proceeded Mr Appleby, overlooked the policy of the Committee of Management in limiting advances to persons purchasing small houses for their own occupation. They did not advance money for the purchase of blocks of houses or manufacturing premises, consequently they could never hope to compare, so far as figures were concerned, with the activities of the building societies.
Mr Hill has also referred to the rate of interest allowed depositors and the rate charged to borrowers. He apparently took the difference of 30s. per cent as representing the working expenses of the Municipal Bank and compared it with 16s. per cent representing the average working expenses of the building societies. If he had examined the published accounts of the bank for 1923 he would have found that the actual working expenses were considerably less than 20s. per cent. A point made by Mr Appleby was that the bank catered for depositors of small sums, but the cost of transaction was the same whether the amount was 1d. or over £100.
Discussing the terms of 3½ per cent charged to the Corporation for the loan of depositors’ money, Mr Hill had mentioned that but for these facilities the Corporation would have to borrow at from 4½ to 4¾ per cent. Mr Appleby thought the ratepayers of Halifax would be glad to borrow at 3½ per cent, because it helped to lower the rates.
A sum of £2,000,000 invested with the Corporation meant a penny off the Birmingham rates in 1924. What it would mean in rate reduction in 1926 or 1930 Mr Appleby would not venture to say. He, however, predicted that before another six years expired there would be a substantial reduction of the rates of the city from the very practice which Mr Hill condemned.
Rebutting an assertion that the Municipal Bank was conducted on Communistic lines, Mr Appleby said it existed for the purpose of conserving private property because it enabled people to become owners of their own houses. There was nothing Communistic in that.
Mr Hill had said that the Municipal Bank had an unfair advantage because its security was undoubted. That was not the fault of the bank. The underlying principle had been to establish a method by which the savings of everyone could be invested in an institution of undoubted security. Birmingham had attained that in its Municipal Bank, and Mr Appleby thought it rather unfortunate for the building societies that this point was raised by Mr Hill.
The Municipal Bank Committee had no desire to enter into undue competition neither did they do so. They had limited the amount which they were prepared to advance so as to limit the scope of their operations.
Dealing with a suggestion that the bank should advance money at a lower rate of interest and take an exceptional risk under the guarantee of the municipality, Mr Appleby said the rules of the bank prevented this being done, bur arrangements had been made in collaboration with the City Council’s Finance Committee under which the Corporation would make supplementary advances to persons without sufficient capital to pay the deposits required before the bank advanced money for the purchase of houses.
Mr Neville Chamberlain, MP, said the bank had been a marvellous success, and the best answer to Mr Hill was to be found in that gentleman’s own speech when he stated that the building society movement had not developed in Birmingham as in the cities of the north. The might be due to some fault of the part of Birmingham or to some fault on the part of the building societies. At any rate the Municipal Bank developed in Birmingham and met a need not met hitherto by the building societies. In Mr Chamberlain’s view there was plenty of room both for the building societies and for the Municipal Bank.
The City Mayoress (Miss Williams), who was accompanied by the Lord Mayor, formally opened the new building at Ladywood. It was stated that throughout the city there were 28 branches, in addition to the head office, and that 135,000 depositors had £4,400,000 standing to their credit.