by the shareholders to such positions as fit persons to take charge of very large interests. I think the draughtsman has shown an utter want of confidence in directors and managers, and he has directed his attention specially to provisions designed particularly to secure shareholders, and he appears at times almost to forget the very existence of creditors, and seems to think that they have little or no interest in the concern. Then as to the points selected for our discussion, viz., the audit and balance-sheet. On the subject of audit I see that by Section 2 neither the directors nor officials are capable of being elected auditors. As Mr. Hankey very properly states in his letter, the only auditors of joint-stoek banks who are competent to deal properly with the accounts and the affairs of the concern are the directors. It is their business to look after the manager, and see that the affairs are well managed, by probing and examining the various transactions into which the concern has entered. By this clause depositors are rendered incapable of being elected auditors. I doubt very much whether any person could be a better auditor for a bank than one who has no other interest in the concern than being a depositor. Very many such shareholders and depositors could be found who would be much more useful as auditors than the gentlemen who are to be eligible under the clause I have read. Then I see by Clause 5 of the same section that every auditor is to have a list delivered to him of all books kept by the company, and that he is to have at all times admission to the books and accounts, and may examine the directors or other officials of the company upon them. Now, in the abstract there may appear nothing unreasonable in all this; but I do not like the words "examine the directors or other officials," it sounds very much like a police-court, and as if the draughtsman, entertaining the greatest suspicion of these parties, was desirous of having them examined on oath. Such a clause is fraught with the grossest injustice, and it will be perfectly impracticable. Were it to pass, I have little doubt but that the auditor would become the arbiter of the various transactions entered into by the managers and directors, who would daily have to take his opinion as to whether he approved of this, that, or the other transaction before entering into it. Then, by Clause 6, the auditors or auditor has to make a report of the particulars of any account examined by him, and this is to be read before the shareholders in general meeting. Why, such a clause as this strikes me as being a monstrous one, and we can hardly imagine that it could be seriously proposed in a public meeting of the shareholders of a bank, who come from all quarters, and are men of all classes in society, that the various accounts which have been the subject of inquiry by the auditors are to be reported upon. If such a regulation as this were carried out, it would ruin the business of any banking institution in the kingdom. It appears to me to be a most monstrous project. In fact, looking at the whole spirit of the Bill as it stands, these gentlemen would not be auditors, they would be inquisitors, and the best course we could adopt, and the only one we could adopt, would be to allow them to take their seat in the bank parlour, from one year's end to another, and let them manage the business. There would, however, be this little objection to such an arrangement-that we should have irresponsible men-men liable to be removed at the end of every twelve months. Are such men to be the directors, managers, and controllers of the large banking businesses, and to have the control of our large Joint Stock businesses? It strikes me also that if the auditors properly carried out the duties devolving upon them by the Act, Parliament must make them ubiquitous, for we know that many of our banks count their branches by tens, and in some cases by hundreds, and how the auditors are to look after the businesses of banks with so many branches I cannot conceive, unless an enormous expense is incurred. I think the proper course to follow out is that adopted by ali first-class concerns, which is to make one or two of the directors personally responsible as attesting the correctness of the balance-sheet; we then have it verified by the strictest investigation. This is practically already done. I can assert, speaking from personal knowledge, that the balance-sheets of Joint Stock Banks are not hurriedly prepared, nor are they issued without the details having been thoroughly inspected and examined into by some of the directors, although they do not actually sign the sheets. This brings me to the form of balancesheet scheduled by the Act and submitted for our adoption. In this I see little to which I can really take exception, unless it be that it is not sufficientiy ample, and on that point, recently, a conference of bank managers took place to consider the subject. A forin of balance-sheet was there submitted and approved, and I have very little doubt but that Government would substitute the modified balance-sheet, or would introduce in the one scheduled the particulars we desire. These alterations are very trifling. and we only by them suggest that a little more information should be given to the public, whilst we believe that our balance-sheets should be ample, and that every information should be afforded to the public which it is right should be given, and which can be given without exposing the interests of our customers. With regard to information as to a bank, it is extremely important that this should be accorded to depositors and shareholders, and no doubt all who well digest these balance-sheets will find whether the business of the banks are carefully managed. This being assured, our business must increase, and it will tend very much to improve the position of the banks whose accounts are already most carefully gone into and inspected. But I go further, and maybe I shall bring about a little dissension in this meeting in what I am about to say, when I urge that the questions of audit and balance-sheets ought not to be confined to Joint-Stock banks only: they may with advantage be extended to the private banks, particularly to those entitled to issue their own notes. We know these notes get into circulation in small country districts, and they are accepted by the inhabitants of the locality with the same confidence as though they were Bank of England notes. The inhabitants of the district look upon the houses A or B as though they were possessed of great wealth, as no doubt they were when the concerns were first started. By the death of one partner, or the retirement of another, the life-blood of these institutions may have been drained from them, and the consequence is that some of the houses are not so solid as when the banks were first started. The time will come, I think, when private banks must submit to an audit, and produce balance-sheets, as well as Joint Stock companies. Mr. BILLINGHURST (London and Westminster Bank): The only remark I desire to make relates to the points of Mr. Hankey's speech where he speaks of capital. He made some observations, both in regard to my own bank and also as to banks generally, which I certainly was very pleased to hear. The capital of the bank, no doubt, should remain intact, and should not be used for the purposes of the bank, as it ought to be kept as a reserve fund in case of need. Mr. Hankey, however, forgot in his remarks that some banks-not in this country, but abroad and in our colonies, where there was a great necessity for introducing capital,-that some of these banks had large capital and small deposits, and in these cases it strikes me that Mr. Hankey's remarks would not hold good. Mr. W. A. MICHAEL: I should like to make a few observations with special regard to the form of the balance-sheets issued by bankers. To my mind bankers are the best judges of the forms which are suited to their business. I have had a great deal to do with audits, and know the way in which they are conducted, and I quite agree with the remarks which have been made as to the little protection to be obtained from auditing. Personally I do not believe that there is the slighest protection afforded by audit, and certainly not by such an audit as is provided in this Bill. At the best of times the auditors are only able to give a true and correct account of the entries in the books of the bank. They make no inquiry, they take the figures they find in the books as correct; and at the most their statement can only be a true and correct summary of the accounts appearing and epitomized in the books. Such an audit is a mere book-keeping examination, and it is altogether valueless as conveying any information as to what the position of the bank is. If, however, so much importance is to be attached to the professional audit, the directors had better put the auditors on the board of management to let them manage the concern. To my mind the system will do a great deal more harm than it will do good, as it will induce the shareholders and the public to believe that an examination has taken place which never can take place, and, what is more, which never will take place. Therefore I think that, in the interest of the public and Joint Stock companies themselves, it will be infinitely better that auditing should under the circumstances be done away with altogether. The PRESIDENT: As no other gentleman is desirous of addressing the meeting, I think we should tender to Mr. Hankey our very best thanks for attending here this evening. I have also to announce that the Council have determined to offer two prizes-one of £20 and the second of £10-for the best essays on the progress and development of banking in the United Kingdom from 1800 to the present day. The details I will not trouble you with, as they will be found in the printed notices. Likewise I have to state that Mr. Palgrave, on June 19th, will read a paper on the three great banks of Europe, viz., the Bank of England, the Bank of France, and the Bank of Germany. Our list of original members will remain open until June 30th, when it will be closed. I hope that they who intend to join us will do so at once, so that we may make the Institute really worthy of the banking community. Mr. R. B. MARTIN (Treasurer): We ought not to separate without passing a vote of thanks to the president for the very excellent inaugural address he has delivered. With respect to the Bill, the provisions of which have been discussed this evening, all I can say is that the less we see of it the better. If a number of gentlemen interested in the profession were to be consulted on the subject, they would, I believe, take up the matter and frame rules and provisions for the conduct of banking business, and that very much better than can be accomplished by any of the legislative interference of gentlemen who have no concern in the profession, and whose lives and fortunes are not staked upon the prudence with which they manage their business. The work of bankers, unassuming as it was, had been going on week after week, and month after month, and they had been doing it far better and far more usefully for the trade of this great country than they could have done had any number of Bills been drawn up by gentlemen who sit at Westminster, and who do not understand the business. The PRESIDENT said:-I thank you very sincerely for the vote you have just passed. At the same time I do not altogether agree with some of the remarks of my friend, Mr. Martin, on the subject of this Bill, because one part of it is to enable companies to do that which they would wish to do, but which is now impossible. As you know, there are certain institutions registered as unlimited, and which desire under existing circumstances to become limited. This being, I cannot see why, with all proper notices and restraints-I do not see why they should be restricted from doing so. I think our legislation in regard to companies is in an unsatisfactory condition, having been made at a time when we did not properly understand the working of the unlimited liability principle. So far as that part of the Bill is concerned I therefore think that it deserves the greatest possible attention on our part. |