§ 1.—(1) Every trustee savings bank which carries on the business of making special investments shall so far as respects that business be subject to the control of the National Debt Commissioners and shall comply with any directions which may from time to time be given by the Commissioners with respect to that business.
§ If a bank to which any such directions are given neglects or refuses to comply therewith, the Commissioners may themselves take the necessary steps for giving effect thereto, and for that purpose may do all such things and exercise all such powers as may be done and exercised by the trustees, managers, and other officers of the bank.
§ (2) Without prejudice to the general power of control hereinbefore given to the Commissioners, the following provisions shall have effect with respect to the special investments business of a trustee savings bank:—
- (a) No money received for investment shall be invested, and no securities held on account of special investments shall be sold, except with the approval of the Commissioners:
- (b) No change shall be made in the rate of interest allowed to depositors in respect of special investments except with the approval of the Commissioners:
- (c) The amount to be expended by the bank for expenses of management on account of the special investments business shall not exceed such an amount as may be allowed by the Commissioners:
- (d) No money received for investment shall be invested except so as to become repayable not later than the expiration of one year, or, if the money is invested in Government securities, three years, from the date of the investment, or so as to be repayable on six months' or some shorter notice:
- (e) There shall be transmitted to the Commissioners, together with the statement required to be transmitted to them under Section fifty-five of the Trustee Savings Bank Act, 1863, a valuation of the securi-
1797 ties held by the bank on account of special investments, and for the purpose of the valuation the value of those securities shall be calculated according to the current market price at the date of the valuation, or, in the case of securities for which there is at that date no current market price, shall be taken to be such an amount as the Commissioners shall fix, having regard to the date of repayment of, and to the rate of interest payable in respect of, the securities.
§ Motion made, and Question proposed,
§ "That the Clause stand part of the Bill."
§ 7.0 p.m.
Sir HENRY DALZIEL
I desire to take this opportunity of putting a question to my hon. Friend in charge of the Bill, raising a point which is of some interest throughout Scotland at the present time, particularly in my own Constituency. The Committee are aware that in many towns throughout the country, particularly in Scotland, it is the habit of local trustee savings banks to lend to the local corporation, at a certain fixed rate of interest, loans extending for three, five, and seven years. The powers taken under this Bill are very considerable. For example, they give the power to the National Commissioners practically to veto any investment. I would like the hon. Gentleman to give us an assurance on behalf of the National Commissioners that there is nothing in this Bill which is going to interfere with the practice which has gone on so successfully in the past, and which is for the benefit not only of the local corporations, but of the whole community. There is a reasonable anxiety lest this Bill may give powers which will interfere with that practice, and I would like my hon. Friend to reassure the Committee on the point.
§ Mr. BALDWIN (Joint Financial Secretary to the Treasury)
I explained at some length on the Second Reading what the objects of this Bill are, and I can only repeat that the whole object is to safeguard the interests of the investors by trying to bring to an end the practice that has brought some of the trustee savings banks into trouble—that was the practice which some of them had got into of lending their money short and borrowing long. In those cases of lending to corporations and municipalities I can 1798 whole-heartedly assure my right hon. Friend that we have no desire to interfere with that practice, because the medium of the trustee savings bank, especially in small towns, is a very convenient medium for raising money. But we have to safeguard this point, that the banks cannot be allowed to let their money out in such a way that they cannot get it when they require it for the purpose of meeting the calls of their depositors. Perhaps my right hon. Friend is not aware of what I pointed out in Second Reading, namely, that the ordinary safeguard of banking— that is, a large proportion of liquid assets and the existence of uncalled capital— does not exist in the case of these trustee savings banks. We have gone as far as we can go in Sub-section (2), where we say that loans must be repayable at six months or some shorter notice, and if that rule is safeguarded there is no limit to the length of the loan. That is to say, that a municipality may borrow from one of these banks for a term it may be of five or seven years or even longer, provided that they make a definite arrangement with the trustee savings bank that the bank can call on its money at six months' notice
§ Mr. BALDWIN
Yes, six months' notice. The reason of that is this: If there were not such a Clause, and if the money were lent out, it would not be available within a reasonable term of time, and the banks might find themselves in exactly the same difficulties which have compelled us to come to their rescue by the introduction of a Clause of this kind. I would point out to my right hon. Friend that this Bill, as amongst the trustee savings banks themselves, is practically an agreed Bill. I can perfectly understand the natural anxiety to which he has given expression on the part of corporations and municipalities, lest in the future they should find it more difficult to borrow from these banks. But I cannot think that the introduction in their borrowings of some Clause of this kind which gives a right on six months' notice, would imperil their borrowing for this reason, that so long as the savings banks do lend money to corporations or municipalities, those loans must be the best loans from an interest-earning point of view they have, and it will be their interest to hold them as long as they can. It must be clear to my right hon. Friend that they would only exercise such powers as are conferred in paragraph (d) in cases 1799 of necessity. I hope that the explanation I have given will satisfy my right hon. Friend. It may not be all that his Friends desire, but I think we have done our best in the Bill to meet this point, which we recognise is a fair point. I do not think, after careful examination, that the Bill will prejudice the position of corporations or municipalities.
Sir H. DALZIEL
I recognise that my hon. Friend has gone some considerable way in order to reassure my friends' anxiety in this matter. But he has not quite disposed of the whole point. He spoke of the savings banks borrowing short and lending long, and that is the practice which he is anxious to avoid as far as possible. This is not a corporation point alone. In my own Constituency 25 per cent. of the whole population have an interest in the local savings bank, so that it is really the money of the community going through the savings bank as a medium to invest in their own local undertakings. I am sure the hon. Gentleman will agree that that is good local patriotism, and that it ought to be supported as far as possible. He has not given all I wish for, but I do not desire to detain the Committee now, and if he will be good enough not to take the Report stage to-night I would like to consult the representatives of both interests in Scotland, and if they are satisfied I shall, of course, offer no opposition to the further progress of the Bill.
§ Question put, and agreed to.
§ Clauses 2 (Establishment of Guarantee Fund, to Meet Deficiencies on Special Investments Accounts), 3 (Interest on Separate Surplus Fund), and 4( Interpretation) ordered to stand part of the Bill.