Readings in Money and Banking Part 56

Q. When you establish a branch in a small town, you generally find a local independent bank there. Can this local bank compete with you?

A. There are certain places where the private banks have kept on, but the tendency is for the private banker to disappear. We take small sums and have numerous branches. One great distinction is that the private bank is always in the hands of a family. A man who originally starts a private bank may be a good banker, financier, and business man, but it does not always follow that his son, who in all likelihood will inherit the business, will be capable of running it. Our joint-stock banks do not go from father to son, but are always under efficient management.

Q. What proportion of your own payments are made in gold?

A. A very small proportion. The people prefer notes.

Q. Do the French people h.o.a.rd money as much as formerly?

A. No; it is becoming more the custom to put money in the banks. Thirty years ago they kept the money at home.

COMPTOIR D'ESCOMPTE

INTERVIEW WITH M. ULLMANN, DIRECTOR OF THE COMPTOIR D'ESCOMPTE[179]

Q. One of the things that we have in mind is to inquire in regard to the character of the business done by your branches.

A. Yes. We are especially a discount bank and our customers are mostly commercial people engaged in commerce and industry, so that our princ.i.p.al business in our branch offices consists in discounting commercial paper, in making advances against securities, goods, or warehouse receipts, or sometimes giving blank credits to our customers for commercial requirements.

Q. Have you stock in other banks which you control?

A. We are interested in the Banque de l'Indo Chine, which is an issue bank in the French colonies, but we do not control it; we hold a certain amount of shares.

Q. Are there any other banks which you control?

A. No.

Q. You have not been in the habit of buying up other banks?

A. No. The system here is to establish agencies of our own; the Germans, on the contrary, control other banks in order to arrive at the same result, viz., to get as much influence as possible throughout the country. We try to come to the same result by establishing our own agencies.

Q. Is that true of the Credit Lyonnais?

A. The Credit Lyonnais and the Societe Generale have the same system.

Q. Is it usual for large banks in Paris to confine their underwriting operations to bond syndicates?

A. Yes; banks receiving deposits, such as the Credit Lyonnais and the Societe Generale, do not usually partic.i.p.ate in syndicate operations covering the _shares_ of industrial concerns; other banks, such as the Banque de Paris et des Pays-Bas, do so, but they are not deposit banks.

They have more liberty to engage their own capital in any enterprise.

Q. You are not restricted by law in doing any business you please?

A. No; it is only the custom and rules of our society.

Q. If there were a large industrial corporation in France which wanted to develop its business and issue bonds upon it, and if they were customers of yours of unquestioned financial standing, would you take their bonds and sell them?

A. Yes.

Q. But not their stock?

A. If they were a well-known concern we would sell their shares too; we have done so.

Q. Is there co-operation between the large banks?

A. We meet very often and often have common interests in business.

Q. Do you, in a sense, divide the field? I suppose you have a certain field in which you do business and other banks do not; Turkey, for instance?

A. Turkey is reserved for the Banque Ottomane.

Q. Take the electrical business, for instance.

A. As far as we are concerned we are connected with the Thomson-Houston; and it is natural if the Thomson-Houston and their friends have any business to do, that they deal with us.

Q. There is nothing in the law which restricts you to any cla.s.s of investment?

A. No.

Q. And nothing that requires you to keep any reserve; that is, any amount of cash as against your liabilities?

A. No.

Q. Is the Bank of France your princ.i.p.al reliance in case you need money?

Do you think it necessary to carry any additional reserve?

A. Under our French system we consider the commercial paper we keep in the portfolio a cash reserve, as we can rediscount it at the Bank of France. We know the Bank of France will discount these bills and thus enable us to convert the bills instantly into cash; this is the basis of the French banking system.

Q. Outside of Paris it happens that you have branches at many of the same places as the Bank of France; is there compet.i.tion between the branches of the Bank of France and your own branches?

A. No; the Bank of France does more rediscounting than discounting, and the Bank of France also has more conservative rules than the other banks. We may lend under the Bank of France rate, so our clients have an interest in keeping their accounts with us.

Q. You do not consider the Bank of France as an active compet.i.tor?

A. No; compet.i.tion is greater with the Credit Lyonnais and with the other private banks than with the Bank of France.

Q. You do considerable rediscounting of bills, I take it?

A. Yes.

Q. At a lower rate than the Bank of France?

A. Frequently.

Q. Is the development of branches a matter of recent times?

A. Yes; we began the system of establishing branches about twenty years ago.