PROPOSED LAW DEALING WITH THE ORGANISATION OF A Service of Cheques and Clearing of Accounts in the General Savings Bank laid before the Chamber of Representatives of Belgium at the sitting of Nov. 20th 1896
Reading edition
EXPLANATIONS[T]
Gentlemen,
The proposed law laid before the Chamber of Representatives, proposes to attach to our General Savings Bank, a service of which the great importance, the remarkable stability and singular capacity for development, has been proved by a trial conducted with vigilant carefulness during thirteen years in Austria and five in Hungary. In fact the chief part of the unfolding of a project of this kind consists in the setting forth of the results of foreign experience.
(This part of the explanation relating to Austrian experience is a summary of the preceding article, to which we refer our readers.)
Returning now to Belgium we cannot fail to recognise first of all that the institution of the General Savings Bank by the Act of March 16th 1865, is one of the important events of our economic evolution. History will justly connect the name of Frère-Orban with a work so perfectly balanced and bearing the imprint of a real constructive genius.
The solution given to the fundamental problem of the relations of the Savings Bank with the State, and of which the essential characteristics were:—making the Central Bank a distinct legal entity, whilst at the same time surrounding it with the guarantee of the State;—taking measures so that this State guarantee should not be to onerous,—and the constitution of a reserve fund,—the conception of the complex and diversified system of investing the capital in the best way to suit both the exigencies of its productivity and its disposal;—fixing the rates of interest and the periodic distribution of a portion of the reserve;—the accession of all classes of society to the Savings Bank and the admission of unlimited deposits;—the correctives brought to bear on these principles by the fixing of differential rates of interest according to the largeness of the deposits;—all these elements wisely co-ordinated, give to the work of the legislator of 1865, at once an original physiognomy and a true grandeur.
No one of the fundamental ideas of this edifice is attacked by the bill laid before the Chamber.
But this work is perfectible and it contains in its constitution even the principles of its perfectibility. In studying the functions of the Savings Bank, the conviction is soon arrived at that the authors of the Act of 1865, conceived them in the most general and simple form possible, leaving it to time to complete their work. Thus it is that the investments are above all things regarded and portioned out with the view of the possible eventual withdrawal of deposits.
The great peril which the makers of the law had before them, was that of not being able to satisfy a sudden and simultaneous demand for the repayment of the deposits. As to the various forms which these investments could take, they were thoroughly recognized and pointed out by the law-makers, but there were some which were only mentioned in their explanatory statement, but which must take a more and more important position.
This has occurred with regard to agricultural investments, which have awaited a complementary organic legislation. This again is the case with the investments in land, the importance of which in the economy of the Savings Bank, Frère-Orban had seen already in 1850, better than anyone, but which so far has lacked appropriate embodiment by which to give a real satisfaction to the needs of rural property.
The Acts of April 15th 1884 and June 21st 1894, with regard to agricultural credit, of August 9th 1889, with regard to working-class Dwellings, the bill of November 19th 1896, with regarded to landed credit only develop the thought contained in the institution of 1865.
The much-regretted Mahillon has profoundly said:
«It is indispensable in order to produce its whole useful effect, that the Savings Bank should be completed by distinct bodies which regulate its working. It is by this organic development that the fruitful character of the genius of our legislators will show itself.»
Our bill tends less to give a larger expansion to these original functions of the Savings Bank than to set free a new function which will carry we think according to the words of Mahillon, its useful effect to a still higher degree.
The Act of 1865 makes no preparation for this putting into motion the property of the depositors, but then neither its text, nor the spirit even of the institution excludes it. It has been seen at work in the examples of Austria and Hungary; such important innovations however require in themselves real legal sanction.
Thus it is that the two large classes of operations which the new service proposes to combine, imply the possibility for third parties to effect at all post offices payments in favour of depositors whose deposit-books will be kept centralized at the General Savings Bank.
To-day the deposits, like the withdrawals, although they can be effected at all the post offices, can only be so effected on presentation of the Savings Account-book, whether this is done by the holders themselves or by third parties in their names. The Annual Report of the Savings Bank on these operations gives the statistics of deposits effected by teachers on behalf of their pupils, by parents on behalf of their children, by masters on behalf of their workmen. Teachers, parents, workers, retain the account-books.
According to the proposed law depositors will be able to dispose of the free balance of their account by payment-cheques or clearing-cheques.
At present the holders of the account books cannot have recourse to the cheque, nor transfer any sum from their account to that of another on a simple demand addressed to the Savings Bank. Every transfer resolves itself into an act of cession which must be signified to the Bank by a judicial act or notified by a letter bearing the legalised signature of the ceder. The carrying out of these extra judicial formalities is evidently incompatible with what is required in a perfect organ of circulation.
The end in view is in fact to place at the disposition of the greatest number of depositors a permanent intermediary which will enable them to economise time to the utmost, to reduce risk and expense and to save money.
The postal administration by the extraordinary development of its invaluable public service in collecting bills and taking receipts, the importance of which has tripled in the last fifteen years, and by the aid which it has given to the Savings Bank in virtue of the Act of May 30th 1879, in the collection of deposits and in payment of withdrawals, has realized one part of the operations which the projected institution includes.
But it is necessary to attain a still higher degree of organisation taking the Savings Bank itself as the foundation on which to rest.
The point aimed at is how to place at the disposal of its depositors a regular and continuous service of account-keeping both individual and collective in character, and to co-ordinate in a permanent manner all the operations which it embraces; the point aimed at is how to assure to every depositor the power of causing regular collections to be made by the mediation of the Savings Bank and the post offices, the amount being carried to his or her account; the point aimed at, is how to effect these payments by the same intermediaries without running the slightest risk, without the least of these operations escaping an inflexible account-keeping, constantly kept before the depositor's eyes, and without there being any need for the depositors themselves directly and personally to handle the funds.
The centralization of the accounts of all the adherents makes it possible for the Savings Bank to obtain clear and definite results and to eliminate by means of the clearing of accounts the intermediary of money in an ever increasing number of transactions, for this service is by its natural evolution, by the rapid increase of the number of the adherents destined to preponderate.
Assuredly, the instruments of credit and of liquidation, of clearing and balancing, which more and more reduce the use of money, have in Belgium taken an already great importance at the National Bank, in the private banks, and in the Unions de Credit:—the credit given and received having, in a quarter of a century attained two thousand millions of francs at the National Bank alone;—the extent of the movement being shown by the large figures of the current accounts upon which it operates, and during the last three years the National Bank has sought to connect by a sort of clearing the other credit institutions.
But who can hide the fact that we have yet much progress to make, or how far we are behind certain nations such as England. We may judge of it by the collected statistics given very lately by M. Des Essarts in the Annals of the Statistical Society of Paris. The point to aim at is to make the more perfect means of liquidation penetrate more thoroughly into new soil and of bringing them into closer connection with the social organism. This is precisely the project now laid before the Chamber, by which it is proposed for this end to have recourse to an institution like the Savings Bank, the deposits in which rise to more than 450 millions of francs and are distributed in more than 1 million 100,000 bankbooks, and which has seen these deposits increase, in five years, more than 100 millions; and to bring this institution to help to accelerate the general evolution of the community in the fruitful direction of the gradual economising of the monetary instrument and its final elimination.
In looking into the official statistics we become convinced that the one most fixed idea of Frère-Orban is there definitely brought into operation; that of the common participation of all classes of society in the Savings Bank.
Out of 100,000 savings-books, if 50% be set on one side as children's books, it will be seen that the surplus may be divided into nearly equal proportions between the class of manual workers on the one hand, and on the other that of the shopkeepers, the heads of industrial or agricultural enterprises, officials military men, proprietors, stock holders and professional persons. If to this division according to the number of account-books be added, the classification of the account-books according to their total sum, the conviction is soon arrived at that it is to the members of the working-classes that the cheques and the clearing of cheques will directly render the least service. In effect, if one ought to attribute to the working-class all the account-books of 1 to 1,000 francs, their total importance would represent hardly a quarter of the sum total of the account-books of the Savings Bank. This point will be rendered more clear by the publication of the book of Messrs Hamande and Burny.
However, if putting the consideration of individuals on one side we consider the different forms of working class associations, the conviction is arrived at that, in the service of cheques and clearing they will have a valuable intermediary: the mutual aid societies, the cooperative societies, the professional unions themselves will find in this organ of circulation, the same help as the multitudinous associations of every kind connected with the Savings Bank of Vienna, the popular banks and the rural Savings Banks, specially carried on with a view to small industrial agricultural and commercial enterprises, and in a higher degree the unions de credit, will connect themselves by organic threads to the service of the Savings Bank; they will find in it a means of bringing their efforts to a common point.
It may be added that, to the leading idea of the monetary benefit, is, in our idea united that, of assuring to the workers in this great movement of association one of the indispensable organs to a general and truly democratic financial service and a powerful instrument of economic education, for it will accustom the working-class societies which connect themselves with it to the invaluable discipline of a strict and permanent bookkeeping.
The articles of the proposed law only reproduce the general conditions of this new institution as they result from experience.
The cheques and clearing service ought to have a distinct existence, its accounts being kept separate from those of the savings service, understanding the term savings in the sense which the law of 1865 has given to it.
The Austrian law of November 19th 1887, the complement of the law of May 28th 1882, has laid this down. This condition is bound up with the liberty and spontaneity which ought to characterise the association; nothing can oblige the depositors in the Savings Bank to give their adhesion to this service, to run the risks, small though they be, of these operations, to submit to the working out of its special conditions. Its utility ought to be freely appreciated and the Savings Bank will on the other hand have to fix the regulations which the adherents must satisfy.
Thus those affiliated to the service will not be necessarily confounded with the whole mass of the depositors in the Savings Bank. In carrying out this law it will be necessary to fix a minimum deposit enabling anyone to become a participant in the institution and to have an account; and until the withdrawal of the depositor he will not be able to dispose of this sum; this is the fundamental guarantee the Austrian law imposes and it is a legitimate one: the risks are in other respects insignificant; however it is wise to render this guarantee complete by the formation of a reserve fund; all those who adhere to the service will participate in it; the mode of its formation, and the amount will be fixed by subsequent ordinances. Thus the stability of the institution will be completely assured. Free to adhere to the service, the depositor ought to be free to withdraw from it, only the regulations will have if this occurs, to determine the consequences of withdrawal, from the point of view of responsibility.
The working of the system absolutely requires the complete centralisation of the accounts of the adherents.
The account-books ought to be preserved as well as the accounts kept at the central office of the Savings Bank. What enlargement will be required in number of persons employed must be left to the future. This centralisation is the absolute condition of the regularity of the entries, the certainty of the control and of the preservation against error and fraud; without it the transferring of the entries and of the clearing could not be carried out; by it alone the exact state of the balance of every adherent can be known at any moment; by it alone exact information can be had at each operation of the situation and consequently of the extent of the capital which can be disposed of. The secret of the way in which the surplus is employed will moreover be kept from the knowledge of outsiders.
Experience has proved that the central service of bookkeeping can, without any disturbance, be placed every day in relation with all the post-offices, and the accounts be kept to date notwithstanding the apparent inextricable complexity of all this correspondence and of all these various operations.
The instruments intended to facilitate the two classes of operations in which the Savings Bank and the Postal administration will intervene in the interest of the adherents:—the collection on behalf of the latter, the payments in or the payments in discharge are the object of special bye-laws. In this direction still, and in this direction especially we shall be able to learn from experience. Perfected instruments, as the Empfang Erlag Schein, the certificate of payment in and of deposit, the cheque-books of payment and of clearing with the ingenious measures taken to baffle every fraud have been well tried in Austria and Hungary and there would be no longer any peril in adopting them.
A metallic reserve sufficient to satisfy all immediate wants ought to be secured. Experience has proved that this condition is to be realized without difficulty.
The establishment of a service of cheques and clearing may lead to a more considerable flow of capital to the Savings Bank.
This has been the result in Vienna and has been in fact the very thing the Viennese legislation wished to bring about. But, on the one hand the investments continue without ceasing to increase: for example, the extent of the advances connected with agriculture and land which will be solicited of the Savings Bank or in which it will participate cannot be measured; on the other hand it is possible to exercise regulative and limiting action on the deposits in making a difference in the rates of interest given to depositors; it is possible to go the length of suppressing all interest; to this end special arrangements with reference to deposits belonging to the cheque and clearing service will be made in carrying out the law.
Such is the economy of a proposition in itself modest and simple, which we have no hesitation to submit to the Chamber. If we make an effort to conceive what in the future will be the evolution of an apparatus so marvellously flexible as the Savings Bank, we may fairly expect from a combination of the service of cheques and clearing with that of investments, of the association of special organs,—such as Mahillon speaks of,—with the central organism of the Bank, a powerful co-operation in the legitimate effort to eliminate metallic money from our circulating system. But without inquiring, now, what may occur in a future perhaps alas still remote, in only occupying ourselves with the production of present good, it has seemed to us in the general interest to solicit the Chamber to establish a service of which decisive experiences have fixed the essential conditions and shown the efficacy, and of which the link is as manifest with our democratic evolution as with the higher forms of credit and circulation.
FOOTNOTES:
PROPOSED LAW
Additions to the laws of March 16th 1865 instituting a General, Savings Bank, and of March 30th 1879, codifying the postal legislation.
Article 1.—The Savings Bank is authorised to organise, with the assistance of the postal administration, a service of cheques and of clearing in current accounts in the interest of those depositors who shall satisfy certain conditions in virtue of the present law.
Art. 2.—This service shall have a distinct and separate administration to that of the Savings Service; the bookkeeping operations to which it gives rise shall be centralised at the Savings Bank in Brussels.
Art. 3.—All participation in this service by the opening of a current account shall be voluntary; withdrawal shall always be possible.
Art. 4.—Royal decrees shall determine:
1. The general conditions of admission and particularly the minimum of deposit which shall be required of every adherent and which shall remain non-withdrawable so long as his participation in the service shall continue; the carrying out of his withdrawal;
2. The conditions and the forms under which the Savings Bank shall receive deposits of third parties and payments on account of adherents, either directly or by the intermediary of the postal administration;
3. The rules according to which the adherents shall be able to dispose of the free balance of their account, by means of cheques and clearings; the conditions and the forms of the cheques given out; the arrangements made to prevent errors and frauds; the intervention of the postal administration in the payments or repayments effected on account of the adherents;
4. The rules which will permit the accounts to be kept from day to day and to enable the account holders to know the condition of affairs in a regular manner;
5. The formation of a reserve sufficient to assure the regularity of the operations;
6. The rate of interest which shall be given to the funds placed in the cheque and clearing service;
7. The constitution of a reserve destined to cover the eventual losses of this service;
8. The fees for collection which shall be charged to the adherents.
H. Denis.
E. Vandervelde.
F. Fléchet.
L. Bertrand.
T. Niezette.