It seems to me that Mr Webb exaggerates in rather a dangerous degree the reduction, through amalgamation, of the necessity which obliges a bank to keep a considerable reserve of cash. It is quite true that under normal circumstances cash withdrawn from one bank finds its way in due course to another, and that with regard to these mere “till money” transfers there might be a considerable reduction in the amount of cash required if all the banking of the country were in the hands of one business, so that what was withdrawn from one branch would be paid into another. But this fact would not alter the need which compels a bank to keep considerable reserves in cash in order to provide against the possibility of a run. A State bank, if the public takes it into its head that it prefers to have a larger proportion of currency in its own pocket rather than in its bank, may find itself pulled at for cash just as vigorously as a bank managed by private enterprise. This was shown in August, 1914, when very large sums were withdrawn from the Post Office Savings Bank during the crisis which then impelled many members of the public to hoard money, or compelled them to take it out of their banks because they did not find that the ordinary system of payment by cheques was working with its usual ease.
Moreover, Mr Webb’s point about what he calls disinterested management—that is to say, the management of banks by officers whose remuneration bears no relation to the profit made on each piece of business transacted—is one of the matters in which English banking seems likely at least to be modified. Sir Charles Addis, in the article already referred to, calls attention in a very striking passage to the efficiency of the administration of German and English banks, and makes a comparison between the remuneration given to the banking boards of the two countries. The passage is as follows:—