Readings in Money and Banking Part 65

A. No; we seldom go in easy times, however, because there is no need of our doing so.

Q. Is there strong compet.i.tion between the important banks of Berlin or do they work more or less together?

A. Of course there is strong compet.i.tion between the large, important banks, but there is no lack of harmony, and they very frequently work together in syndicate operations. While it is the desire and endeavour of each bank to build up its business, it must be recognised that each inst.i.tution has more or less its own field of operation, which is in a measure respected by the other banks. As, for instance, the Deutsche Bank has done a very large volume of business with Turkey, and business emanating from that source is expected to and naturally does go to the Deutsche Bank, while another inst.i.tution may have been largely identified with Roumania, or another with some large local interest. We ourselves are recognised as representing the Krupp interest and have just recently formed a syndicate to finance one of their operations.

Q. Our understanding is that a merchant, a customer of yours, may arrange with you for a credit of, say, 100,000 marks, which may or may not be secured, and may draw a ninety-day bill upon you for that amount.

He may send that bill to the Deutsche Bank for discount. If the Deutsche Bank will discount it, they present it to you and you accept it. Will you kindly state why this custom prevails?

A. One reason is that it makes a bill which is acceptable at the Reichsbank and is a prime bill. We receive one-fourth of 1 per cent., or more, for our acceptance, and the Deutsche Bank, or any other bank discounting, invests its money at a rate for the period. It might be that we would prefer to give our customers a cash credit rather than to accept his bill, in which event we would so arrange.

Q. Then this practically enables you to sell your credit without using your cash?

A. Yes.

Q. We understand this is the usual custom in Germany.

A. Yes.

Q. Is it not a fact that in the last a.n.a.lysis the customer who uses the money usually pays more than the bank rate--that is, would it not cost him, in such a transaction to-day, say 5 or 6 per cent., while the bank rate is 4 per cent.?

A. Yes.

Q. Is it your endeavour to reach the small country towns?

A. No.

Q. In the United States we have brokers who handle commercial paper, and many of the banks purchase it to employ their surplus funds. In London we found discount houses whose sole business was to handle paper for sale to banks to employ their surplus funds. What corresponds to that agency in Berlin?

A. In Berlin there are two brokers who handle prime bills, but they are not an important factor.

Q. How do you employ your surplus funds?

A. We buy bills in the market or through these brokers.

Q. In employing your surplus funds do you buy any other bills than those which the Reichsbank would accept?

A. No.

Q. Would you consider the issue of taxed notes by the Reichsbank in a sense an evidence of an abnormal condition?

A. No: on the contrary, it is quite normal. Last year it happened twenty-five times.

Q. In times of trouble do the large banks, like your own, the Deutsche Bank, and Disconto, co-operate with the Reichsbank in an endeavour to prevent the exportation of gold?

A. Yes. Opinions are divided as to whether it is for the good of our country to do so or not. Last year, for instance, many people asked for gold. It was refused at first in some quarters; later we shipped freely.

Q. Are you members of the stock exchange?

A. All banks and bankers are members of the stock exchange.

Q. By virtue of their being banks?

A. Yes; they have to pay a tax for the exchange.

Q. Are the seats expensive?

A. No. You do not buy a seat. There is no limit to the number of people admitted. We have from twenty to thirty people go to execute our orders.

BANK DES BERLINER Ka.s.sEN-VEREINS

INTERVIEW WITH HERR HOPPENSTEDT[195]

Q. When was this bank organised?

A. In 1823, under the general companies act.

Q. What are its particular functions?

A. This bank might be called strictly a clearing bank. It clears transactions made on the stock exchange and also cheques on banks which do not clear through the Reichsbank Clearing House. As you know, our banks do a large stock exchange business. It is their custom to send to us all securities sold to others clearing through us with a list of the purchasers. We charge the purchasers the amounts due from them and credit the amounts received from them, balancing every night. The securities are delivered to the various purchasers. _Some settlements are made daily and others monthly._ A large volume of cheques and bills are also cleared. This is simply a clearing business.

Q. You show loans and discounts in your statement. What is the character of these?

A. We invest our funds in first-cla.s.s loans and prime bills.

Q. Is this bank owned by the other banks?

A. It is partly owned by other banks. There is also a commission of shareholders of the bank, among whom are the first banks of our city.

These are members of our board.

Q. Is it the custom for all banks which clear through you to have a balance in order to facilitate the payment of debits through clearing?

A. Yes.

FOOTNOTES:

[184] Adapted from Geh. Oberfinanzrat Waldemar Mueller, _The Organization of Credit and Banking Arrangements in Germany_; Max Wittner and Siegfried Wolff, _The Method of Payment by means of Bank-Account Transfers and the Use of Checks in Germany_. Publications of the National Monetary Commission, Senate Doc.u.ment No. 508, 61st Congress, _2nd Session_, pp. 117-271.

[185] In order to facilitate its giro business and reduce the friction to a minimum, the Reichsbank has special printed forms prepared for the various kinds of transactions, the use of which is made compulsory on the public. For a simple transfer of money from one customer to another, whether they be in the same town or in different places, the "red check"

is employed, which is filled out by the party making the transfer and handed in to the bank. It is not a check in the proper sense of the term, but is so called because the printed forms resemble checks and are put up in books in the same way as checks. The word "check" does not occur in the printed matter of the blank; neither is the instrument transferable. When a number of payments are made simultaneously the party making the transfers is furnished with a blanket form on which the names of the individual firms and the various sums are entered and which has to be accompanied by a red check covering the aggregate amount. For the so-called "great banks" of Berlin, some of which have a volume of transfer transactions amounting to as much as one hundred transfers for each bank per diem, there are blanket forms which are of a different colour for each bank. When cash is wanted the so-called "white check" is employed. This is a legally const.i.tuted check. There are special printed forms for the use of those who have no account with the Reichsbank.

[186] Banks of issue were formerly numerous in Germany. Gradually, however, nearly all of them renounced the privilege of issue, as the laws relating to banking made their existence as banks of issue more and more difficult. At the present time there are only 4 such banks besides the Reichsbank, viz.: the Bayerische Notenbank, the Wurttembergische Notenbank, the Sachsische Bank, and the Badische Bank.

[187] Adapted from Robert Franz, _The Statistical History of the German Banking System, 1888-1907_, Publications of the National Monetary Commission, Senate Doc.u.ment No. 508, 61st Congress, _2nd Session_, pp.

7-115.

[188] Adapted from C.R. Fay, _Co-operation at Home and Abroad_, pp.

42-51, 56. P.S. King and Son, London. 1908.