Readings in Money and Banking Part 64

Q. Do you transact business of any other character than that heretofore mentioned?

A. We have a branch known as the Royal Loan Office, which lends money in small amounts upon the pledge of different kinds of goods as security.

This was established in 1834. In 1906 we made 99,000 loans upon watches, jewels, clothing, etc., at an average of 31 marks per loan. Two-thirds of the borrowers are labourers; last year about 16 per cent. were widows and spinsters, also a few were mechanics--occasionally professional men--artists, actors, and the like. Our rate is very low, 12 per cent.

for the year, which is low compared with the ordinary p.a.w.nshops. No other banks conduct a business of this cla.s.s.

DEUTSCHE BANK

INTERVIEWS WITH HERR PAUL MANKIEWITZ, DIRECTOR, AND HERR A. BLINZIG, ALTERNATE, OF THE DEUTSCHE BANK[193]

Q. When was your bank organised?

A. In the year 1870.

Q. How is your stock owned?

A. By a large number of shareholders. Our shareholders are princ.i.p.ally in Germany, but also in England, France, Austria, and elsewhere.

Q. What does the item "Shares in other banks," $19,000,000, represent?

A. This represents the purchase by us of practically the controlling interest in 13 independent banks in the Empire. We are represented upon each board and we are kept closely informed of the business. Our return is in the dividends.

Q. A large percentage of the stock exchange business is really handled through the incorporated banks, is it not?

A. Yes. We ourselves have fifty members on the stock exchange.

Q. You mean that the Deutsche Bank has fifty men, members of the stock exchange, who trade there on the floor?

A. Yes. There is quite a difference, however, in our method of handling the business from that followed in New York. We do not have the margin system. Most of our customers who do not pay in full pay at least for half the amount involved in the purchase.

Q. Are the clearing-house a.s.sociations important factors in the cities in Germany?

A. No. They are not a.s.sociations of importance or power, but merely pieces of machinery through which cheques are cleared.

Q. You all go to the Reichsbank to clear?

A. Yes; once a day. There are 14 clearing houses and 160 members in the Empire.

Q. What taxes do you have to pay?

A. We pay to the State 4 per cent. on our income remaining after deduction of 3-1/2 per cent. of our share capital, which is exempt, and to the city of Berlin 4 per cent. on our income. All banks pay on the same basis.

Q. Is there a limit to the amount of discretion given to the branch directors on first-cla.s.s bills?

A. Each of the main branches has a fixed capital arbitrarily set aside by the Deutsche Bank. They have a sum according to the importance of the branch, and they must do business according to it.

Q. The Reichsbank has branches everywhere?

A. Yes; in every place where there is sufficient business. It has about 500 branches. We transferred through the Reichsbank last year 21,000,000,000 marks. Our strength is the Reichsbank. Our branch in Bremen, for instance, wants money when cotton s.h.i.+pments start, and the money is transferred to them. The importers in Bremen sell the cotton to the large manufacturers. When they get the money the money comes back to us.

Q. In London the joint-stock banks usually pay interest at about 1-1/2 per cent. below the bank rate. In the country they have to pay more.

What is the custom here?

A. There is no strict rule. The bank rate is now 4 per cent. and we allow 1-1/2 per cent. on call money. In the interior our branches allow a little more. It is the same as in England.

Q. Does the bank rate influence your rate for discounts?

A. Yes; we are influenced. The bank rate is now 4 per cent. and our private discount rate is 2-1/2 per cent.

Q. If a mercantile customer came with a four months' bill satisfactory in character, what would be the rate to him?

A. We have no fixed rate. It depends upon the man and the bill.

Q. How do you invest your surplus funds when you have no demand from customers?

A. We buy bills in the open market, or accept offerings made to us from houses desiring to borrow.

DRESDNER BANK

INTERVIEWS WITH HERR SCHUSTER AND HERR NATHAN, DIRECTORS OF THE DRESDNER BANK[194]

Q. What is the date of your organisation?

A. 1872.

Q. In practice, you and all other banks endeavour to fully employ all available funds?

A. Yes; we only carry in the Reichsbank and other banks sufficient cash for the conduct of business.

Q. You regard your item "Bills discounted" as one of practical reserve?

A. Yes; it is immediately convertible into cash at the Reichsbank.

Q. Referring to the item "Shares in other banks," $6,662,753, do you control all banks in which you have any interest?

A. Yes; practically. We probably have not the majority of the stock in any bank; but our holdings are sufficiently large to give us control.

Q. Is the tendency toward bank consolidation? Are the smaller banks becoming more closely affiliated with the larger banks?

A. Yes; because it serves a mutual advantage. The smaller bank needs better facilities to take care of the increasing business. If a bank wants to increase its capital, and the shareholders do not care to subscribe for the increase, the new shares are frequently offered to us.

We look out for the business of these banks in the centres and give them partic.i.p.ations in some of our important undertakings.

Q. In Great Britain we found that banking interests were practically controlled by from 15 to 20 large banks. Does that condition prevail in Germany?

A. No; but the tendency is in that direction. One difference between the banks of England and Germany is this--in England the primary purpose of the banks seems to be to secure large earnings for their shareholders.

In Germany our banks are largely responsible for the development in the Empire, having fostered and built up its industries.

Q. Would it be any reflection upon a bank if it should go to the Reichsbank for discounts or loans in easy times?