SAVINGS BANKS are institutions established by act of parliament, for the safe custody of small sums deposited by the industrious classes, and for the accumulation of such sums at compound interest. The origin of savings banks is comparatively recent. Attempts at instituting such banks were made, on a small scale, at various places in England towards the end of last century and the beginning of the present: attempts of a private and isolated nature, without the benevolent individuals by whom they were made entertaining any idea of the institution ever becoming general; and it was reserved for an individual yet living to have the honour of founding an institution which served as a model for such banks, and thus of conferring an unspeakable blessing on the operative classes. We refer to the Rev. Dr. Duncan, minister of Ruthwell in Dumfriesshire. In 1810 he established "the Parish Bank Friendly Society of Ruthwell;" and during the same year published a pamphlet on the subject, entitled "An Essay on the Nature and Advantages of Parish Banks." This pamphlet, in which the nature and advantages of these institutions are ably developed, had so great an effect, and the success of the Ruthwell institution had been so remarkable, that "Parish Banks," as Dr. Duncan called them, but which are now described as Savings Banks, speedily sprung up, not only in most of the principal towns and boroughs of Scotland, but in several remote parishes.
Savings banks in England and Ireland were first taken under the protection of government by the act of 57th Geo. III. cap. 62, passed in 1817; but the first act in support of these institutions in Scotland did not pass till two years afterwards. A savings bank in Scotland, established under the latter act, is an institution formed by any number of persons who may choose to unite for the purpose of receiving deposits of small sums, and who, upon enrolling their rules at the quarter-sessions, acquire the privilege of suing and being sued in the name of trustees. The money and effects of the institution are vested in the trustees, for behoof of the depositors. Receipts and other documents used by the bank are exempted from stamp-duties; and provision is made by the act for a summary mode of settling disputes that may arise between the trustees and depositors. These were all the advantages which the act conferred on savings banks in Scotland. Hence these institutions did not flourish; the aggregate sums deposited in them at the period (1835) when the privileges of the English system were extended to Scotland not being estimated higher than £100,000.
Various acts were meanwhile passed for the support of these institutions in England and Ireland; but all these statutes were consolidated in the existing English Savings Bank Act of 9th Geo. IV. cap. 92, passed in 1828, which was amended in a few particulars by the act of 3d Will. IV. cap. 14. These acts, as previously stated, were extended to Scotland in 1835.
By this statute the whole deposits may be invested in the Bank of England on account with the Commissioners for the Reduction of the National Debt, at the rate of £3. 16s. 0½d. per cent. of interest. The savings banks are thus enabled to give a comparatively high rate of interest, which is generally £3. 6s. 8d., or 3½ per cent. Each individual is allowed to deposit any sum from one shilling up to £20 in a year, and £150 in all, exclusive of interest; and, including interest, £200. The bank is obliged to allow compound interest; and this interest must be made up by law at the end of every year (20th November), and added to the amount belonging to each depositor, even though he does not appear to get his book balanced. The bank is also authorized to receive the funds of friendly societies without limitation, and of benevolent and charitable institutions to the amount of £500 in all. By this statute the whole funds are required to be invested with the Na-
tional Debt Commissioners, and nowhere else; and any part of these funds, when required, is repaid by the Bank of England, without regard to fluctuations in the value of the public stocks. It likewise requires security to be given by every person—the treasurer, the actuary, the cashier, the clerks, the office-keeper—intrusted with the receipt or custody of any sum of money belonging to a savings bank; while neither these functionaries, nor the managers or trustees, nor any person having a control or direction in the management, can become depositors in the bank, or derive, directly or indirectly, any benefit from the institution. Annual returns must be made to the National Debt Office, and likewise suspended in the office of the bank, and exhibited to depositors; the manager and trustees being thus directly responsible both to the government and to the public. In short, while the greatest facilities are afforded for the increase of the funds, every possible precaution has been taken to insure their safe custody, and the direct responsibility of the managers. Nay, so liberal is the system, that the annual general meeting is open by law to depositors of the amount of £10; but, practically speaking, every depositor who chooses is allowed to attend. Besides, the rules and regulations of every savings bank require to be approved by the Commissioners of the National Debt, and certified by the barrister-at-law appointed for the purpose, and enrolled at the quarter-sessions of the justices of the peace for the county in which the bank is situated. It may here be mentioned, that, to prevent an abuse of the institution, no person is allowed by law to be a depositor in two savings banks at the same time; and on joining a savings bank, every person is required to sign a declaration to that effect.
The act 2d and 3d Will. IV. enables depositors in savings banks, and others, to purchase government annuities, for life or for a given number of years, and either immediate or deferred. At present these annuities are limited to £20 a year. The money advanced is returned (but without interest), provided the contracting party does not live to the age at which the annuity is to become payable, or is unable to continue the monthly or annual instalments. The transactions under the act are to be carried on through the medium of savings banks, or by societies established for the purpose. But of this scheme, the classes for whose benefit it was intended have not availed themselves to any great extent.
Since their establishment in 1817, the increase of savings banks has been beyond all expectation. The total sum of money invested by these institutions in England, Wales, and Ireland, amounts at this moment (1841) to upwards of £22,000,000 sterling; while in Scotland, since 1835, when the English law on the subject was extended to that part of the united kingdom, the progress has also been very considerable; savings banks having been established in most of the principal towns; while, in many places, such institutions still exist, and are flourishing, under the meagre and defective statute of 1819. The National Security Savings Bank of Edinburgh was founded in April 1836; and on the 20th November 1841, after the lapse of only five years and a half, it had accumulated £221,816. 19s. 0d., including interest; while the aggregate number of depositors was no fewer than 19,130, of whom 16,149 had balances (including interest) in their favour not exceeding £20 each. Of this bank, 107 charitable societies, whose united deposits amounted to £5215. 1s. 2d., had availed themselves; and sixty-two friendly societies, whose gross deposits amounted to £216,585. 13s. 5d.
The object and principle of this great national institution cannot be too highly commended. In London, and many other parts of England, public banks do not receive small deposits, and upon none do they pay any interest. And even in Scotland, where the public banks allow interest on
deposits, they are not willing to open an account under L.10. But few poor persons are able to save so large a sum, except by a lengthened course of economy. The truth therefore is, that, until savings banks were established, the poor were everywhere without the means of securely and profitably investing those small sums which they are not unfrequently in a condition to save, and were consequently led, from the difficulty of disposing of them, to neglect opportunities of making savings, or, if they did make them, were tempted by the offer of high interest to lend them to persons of doubtful character and desperate fortune, by whom they were for the most part squandered. Under such circumstances, it is plain that nothing could be more important in the way of diffusing habits of forethought and economy among the labouring classes than the establishment of savings banks, where the smallest sums are placed in perfect safety, are accumulated at compound interest, and are paid, with their accumulations, the moment they are demanded by the depositors.
But, notwithstanding the soundness of these views, various objections have been stated against these institutions. To a few only of these objections can we at present allude.
It has, for example, been objected to savings banks that the money deposited in them being sent to London and invested in national stock, is withdrawn from the spot where it was saved, and that thereby that spot is impoverished in proportion to the amount of the sum thus transferred. This objection is more specious than solid. In the first place, nine tenths of the money invested in savings banks would not be saved at all, but spent as it is earned, if these institutions did not exist. The savings bank does not transmit to London money already saved. It causes money to be saved which otherwise would have been spent. It may be said to create money; and it is only the fund which it creates that it transmits to London and invests in national stock. But, in the second place, no man is obliged to put his money into a savings bank, and thus to send it to London; nor will he ever dream of doing so, if he can invest it more profitably at home. Profitable and safe investment is the sole object, and money is always sure to go where it can be most profitably employed. The circumstance of an individual putting his earnings into a savings bank, affords a proof that such a mode of investment is regarded by him as the most eligible. Besides, he will at once recall it from the savings bank, which he is entitled to do, if he find he can invest it elsewhere more profitably. The savings bank, therefore, is not merely the parent of saving, but its deposits embrace only those sums which cannot be otherwise so profitably employed. It withdraws no money from productive industry. It merely embraces funds which cannot otherwise be so favourably employed, or which might not have existed, or have been placed in improper hands, and lost to the individual.
But there is no objection, no general or national objection to money being sent to London. The money thus disposed of is invested by the National Debt Commissioners, as agents, in stock; which is the same thing as if it were directly invested in productive industry. These commissioners, for example, have bought stock with the twenty-two millions of money belonging to the savings banks throughout England, Wales, and Ireland; and when they so bought, other parties must necessarily have sold out. For any given amount of buying there must be an equal amount of selling. Now the money thus sold out will not lie idle, because money in a free country never lies idle, but will be invested in productive industry; and it is evidently the same thing for the country as if the twenty-two millions of the savings banks, instead of being converted into stock, had been at once employed in productive industry, as the money in the stocks which it displaced is so invested.
The only other objection of which we shall take notice
is the following; namely, that as the money of savings banks goes into the hands of government, the minister of the day may avail himself of it, and use it for public purposes; that the depositors have only government security; and that if a revolution should take place, the funds would all be lost.
These objections, however formidable in appearance, are in reality quite fanciful and untenable. It cannot, with any degree of truth, be said that the money of savings banks goes into the hands of government. The money is invested in the Bank of England, and the National Debt Commissioners are appointed by law to purchase national stock with it. Government does not touch a fraction of the funds. Such money no more goes into the hands of the minister of the day, than the funds of any corporate body or private individual who purchases stock. Parliament passed a law for the encouragement of savings banks, and for the safe custody and increase of their funds, which law, under certain conditions, provides that these funds may be sent through the Bank of England to the National Debt Commissioners; that these commissioners shall buy stock with them, or, in other words, invest them in government securities, and allow the depositors a certain rate of interest, or, at their option, to withdraw their funds in full, without reference to the existing state of the public securities. Now, these commissioners, when the money comes into their hands, must buy stock with it, and return proper vouchers to the savings banks. The commissioners have been exposed to much additional labour in consequence of the great spread of savings banks; but they cost these banks nothing; for though their duty is imperative, their services are gratuitous.
It is thus evident that the funds of savings banks neither go nor can go into the hands of government. The law provides the very reverse. As well might it be said that any funds invested in national stock has this destination. But though the government does not and dares not use one fraction of the funds of these institutions, it is undoubtedly security for the money. But can the world afford higher security than that of this intelligent, free, and wealthy nation? As to a revolution, the people of this country are too intelligent, and value too much the institutions under which they live, to render such an event at all probable; but even should a season of anarchy occur, the constitution has so much elasticity and solidity in it, that, under well-directed public intelligence, it would soon recover and right itself. Besides, in all civilized countries, as was recently proved in France and Belgium, a revolution generally respects private property. In this case, the funds of savings banks would certainly be as secure, indeed we should say a great deal more secure, than any other species of property whatever. Besides, the very circumstance of a large portion of the people, as the depositors in savings banks, having a deep interest in the stability of government, would make them constitutionally to resist, not wantonly to promote, civil commotion. "Every person," says Mr Todd Pratt, "who has vested his savings in the public funds, has a stake in the security of the country, proportioned not merely to the sum total of those savings, but to the value of that sum to himself, and will be deterred from compassing the disturbance of his native land by a personal motive, added to the influence of duty. He will feel the importance of public peace and public credit with that strong conviction which individual interest never fails to inspire; and in answer to the objections of those who would be jealous of the support thus obtained to the ruling powers, it should be observed, that he who possesses property in a country is not interested in the stability of the administration for the time being, but in the perpetual stability of universal order and good government."—(Hist. of Savings Banks, p. 21, ed. 1830.) (c. 1.)
of Forli. It contains 5100 inhabitants, mostly very poor, who are chiefly occupied in winding silk.