Clearing Banks: Business

Abstract

The big household-name high street clearing banks — Barclays, National Westminster and others — have undergone a revolution every bit as radical as the stock market’s. It is not only their altered structures, such as through their international expansion and investment in stockbroking, that makes this so. The span and composition of their whole business has also changed in the latest phase of their thirty-year evolution from aloof élitist servants of a smallish minority to financial conglomerates fighting toughly for the custom of the majority. Even philosophies have grown different and old conventions been dropped in today’s more competitive atmosphere. ‘When I joined the bank, I was taught it was bad form to tout for business’, recalls a sixty-year-old top person. That seems incredible now.’ Today banks see nothing amiss in wooing customers away from their rivals’ books.

Distribute your loans rather than concentrate them in a few hands. Large loans to a single individual or firm, although sometimes proper and necessary, are generally injudicious, and frequently unsafe. Large borrowers are apt to control the bank.

From a letter of December 1863 written to United States national banks by Hugh McCulloch, then America’s Comptroller of the Currency and later Secretary to the Treasury. Extracts from the letter now hang in a Bank of England waiting room.

The old saying holds. Owe your banker £1000 and you are at his mercy; owe him £1 million and the position is reversed.

Lord Keynes.¹