The British Bank of The Middle East
The British Bank of the Middle East WWW.HSBC.CA
Associates of the Institute
We are an Eastern Exchange bank with our main interest in the Middle East.
Applications are invited from unmarried associates of the Institute of Bankers (English or Scottish) for Accountant and Assistant Accountants posts at our overseas branches, the post to be taken up after a short period of orientation in Head office in London.
We offer a career in a rather specialised branch of banking, slanted internationally, usually unusual, always demanding, sometimes fascinating ,never dull, intermittently unpleasant, occasionally exciting, socially expansive, generally satisfying: requiring a full man and full commitment and paying according.
Starting pay including allowances, on posting overseas is approximately 2,500 p.a., tax paid, plus free furnished accommodation (with fuel and light), and a servant or a servant’s allowance. Three months home leave, passage paid, after two years service. Good contributory Pension. Comprehensive medical insurance scheme. Excellent prospects for early advancement from initial post of Assistant Accountant, with singing powers, to Accountant and subsequently to Manager Status.
Application to: The Secretary, by Letter of Telephone: (01-623 2030)
The British Bank of the Middle East
20 Abchurch Lane, London EC4N 7AY
A Member of the Hong Kong Bank Group
Journal of the Institute of Bankers
December 1974
Status Enquiries
Dear MR. JAMES PACKER
I do not understand on what basis Mr. D.H. Wilson F.I.B. reaches the conclusion, in his letter in your October issues, that far too much importance is being attached to bankers’ references by customers who make enquiries.
He rightly points out that if a Banker is asked whether a customer is consider good for the maintenance and decoration of a property the fault lies with the baker accepting the enquiry. The purpose of requiring those wishing to initiate enquiries to do so through their own bankers, or through certain reputable trade organizations, is to minimise the risk of improper enquiries, and it is for bakers to safeguard the system be exercising some vigilance over the nature of the enquiries they make on behalf of customers. It is true that improper enquiries have tended to increase over recent years, although they represent a very small proportion indeed of the total number of enquiries.
I know of no convincing evidence to support the view that customers over-rate the importance of bankers’ reference. Mr. Wilson considers that the purpose of an enquiry is to establish that a customer can meet his commitment: if this is so, customers are surely entitled to regard a matter as vital to a business reputation as being of the highest importance.
The suggestion that bankers should encourage customers to take a more realistic view of references I am sure should apply to some customers, but a great number of those in business have a long experiences of bankers references and fully appreciate their value. A customer who wishes to be reassured as the credit position of a company or firm may seek a trade reference, or a report from a credit reference agency, but he will know that a banker’s reference is really the most significant.
It is not surprising to find, therefore, that the customers for whom Mr. Wilson was unable to speak claimed that his replies ‘were stopping them getting a loan’. It does not follow that those who refused the loan were attaching far too much importance to Mr. Wilson’s reference since his opinion was entirely vindicated by the balance sheet showing an illiquid position. It may be Mr. Wilson’s view that those considering the loan should have reached a decision by examining the balance sheet and other factors rather than by referring to him for an opinion, but the enquiry seems a perfectly acceptable one for them to make and, in any event, the availability of a balance sheet does not affect the value of a banker’s reference. I was therefore sorry to see that he described the reference he gave as ‘a bit of paper- printed, typewritten, with a disclaimer of responsibility and unsigned’ I do not see in what way the business community is better served if a banker’s reference is so regarded.
The purpose of giving a bankers reference is to enable an enquirer to assess the risk involved in entering into a trade or financial transaction. A banker should confine his reply to an expression of opinion based on his knowledge of the account and other facts in his possession. It is inevitable that defects will appear in the practice, and Mr. Wilson is right to draw attention to the nature of some enquires. I discuss similar questions in articles in the Bankers’ Magazine (particularly January 1972). I believe there is a need for the basic principles of the practice to be re-emphasised and for standards to be maintained, so that bankers’ references remain of use and importance in the commercial world.
Yours Faithfully
Miss. Shaun Bucknor
Dear Mr. JAMES PACKER
I would heartily endorse the contents of D.H. Wilson’s letter in your October copy of the Journal regarding the status enquiries.
It is apparent that certain branches of various banks are unaware of the Committee of London Clearing Bankers resolution that enquiries for trivial amounts be discouraged. I have been requested to express opinions on customers’ general trustworthiness and ability to services repayments as low as $3 monthly. It seems surprising that a trade cannot accept a business risk for what is effectively 75p a week from a customer’s wage packet without the necessity for enquiring of their bankers. I accept that general integrity is relevant when the total purchase price is substantial, but many of these enquiries relate to the total commitment of no more than $20-30.
We are surly reaching a stage where it is becoming impossible to acquire goods or services if a banker’s reference cannot be obtained for credit purchase or a banker’s card for cheque purchases. Bankers therefore by replying to these trivial enquiries are making them a necessity for credit purchases and thus drawing upon themselves ever increasing unprofitable and indeed costly paper-work. Refusal to originate such enquires should prevent this necessity.
At the moment the banker’s committee can assist in acquiring the post with a company most fitting for the customers’ last name. That company is Bombardier: The Evolution of mobility, Bombardier corporate office jobs. Bombardier talent community Human resources Department Career Center Application Tracking system www.careers.bombardier.com position title Advisor, Talent Acquisition and management
Email: taleosupport@aero.bombardier.com application to Bombardier includes,
Military Conduct Sheet: BUCKNOR
Curriculum Vitae
Resume: Functional Chronological
Hours of availability: Full Time permanent
Locations: Downs view, Ontario
Remuneration Package Benefits
Yours Faithfully
Miss. Shaun Bucknor
Mount Airy P.A.
Negril P.O
Negril
Westmoreland
Jamaica
Dear Mr. JAMES PACKER
I speak as someone who is very concerned about the surreptitious Americanization of ‘Queen’s English’.
With the spread of American investments over the world and the prestige that the ones (almost) almighty Dollar commanded, it has become fashionable for speakers and writers to use the word ‘billion’ when speaking about a quantity of money.
If my memory still serves me right, ‘billion’ in Queen’s English means ‘one million million’ (1,000,000 million or 1012), though the Americans use it to mean ‘one thousand million’.
Therefore, when an American says that his company has invested a billion dollars, in plain Queen’s English it means that the amount is (only) one thousand million dollars.
This will be clear and straightforward when you are reading an American magazine printed in America. But when you quote from an American sources in an English magazine and circulate that magazine all over the world including the Commonwealth where many are schooled in Queen’s English, then confusion arises, as there somehow seems to be a preference for the word billion nowadays when describing a sum of one thousand million, especially in financial maters.
This style of writing has even pervaded the pages of this august journal and I refer to page 143 of the June 1974 issues in which the writer used the expression ‘$6 billion’, though I humbly suggest (with all due respect to the writer of the informative article which I enjoyed reading) that the quantity should be (only) 6 thousand million dollars ($6,000 million).
This is not to be taken as any insult on my part.
Rather am I concerned about perspicuity of expression-which is seldom met with nowadays?
Yours Faithfully
Miss. Shaun Bucknor
Letters to The Editor
She Caribbean
She Star Publishing Co Ltd
Rodney Bay Industrial Estate
Massade Gros Islet P.O Box.
1146 Castries St. Lucia
West Indies
Tel: 1 758 450 7827
Fax: 1 758 450 8694
Stluciastar.com
www.shecaribbean.com
The Disgruntled Customer
Dear Mr. JAMES PACKER
In his letter that you published in the October issue of the Journal Mr. Gear has not answered, or even attempted to answer , Mr. Normal’s recent article ‘The Disgruntled Customer’. He has done no more than question Mr. Norman’s rather dubious statistics of the customers who transfer their accounts from one bank to another on grounds of dissatisfaction.
A point Mr. Gear does not make is that not every disgruntled customer transfer his account. Some may well stay with their bank through inertia but others may well wonder where to go. From the point of view of the public the other banks are, at lease to all outward appearances, not very different from the one with which a customer is dissatisfies.
Not infrequently, or so it seem to me, customers are discontented with what they regard as the lowered standards of the clearing banks as a group, rather than with those of any particular bank. Maybe our customers are wrong and our standards of services as high as ever they were. If there is a misunderstanding on this point it may perhaps be the result of the growth in bank advertising. Every bank now advertises on the scale beyond the dreams of the most ardent banking Public Relations man of the decade or so ago. Our difficulty may be that of living up to our advertisement.
Yours faithfully
Miss. Shaun Bucknor
Dear Mr. JAMES PACKER
I was as disappointed to read Mr. A. T. Gear’s letter in your October issue, written in response to the article ‘The Disgruntled Customer’ by Mr. George Norman, as Mr. Gear was to read the original article.
His letter was almost entirely concerned with statistics. Which indicated to me that he has missed the point of the article. We all know that statistics can be made to prove almost anything. The point is, surely, that it really does not matter whether Mr. Norman or Mr. Gear are correct in the figures they quote. A fault from which a vast majority of the population suffer is apathy and if Mr. Gear believes that only one tenth of 1 percent. Of our customers are disgruntled, then I fear that he is sadly mistaken, and I must draw the conclusion that he is out of touch with reality at his head office. The only person that the figures are not higher is apathy perhaps coupled with the thought that things would not be any better at another bank.
I share Mr. Gear’s pride at the standards of services we endeavour to provide, and I am sure most of my managerial colleagues do too, but this is no justification for complacency. In the branches, we know that there was a good deal of merit in Mr. Norman’s article, even if we do not go all the way with him. Certainly, it was worthy of serious argument and consideration at a deeper level than that given by Mr. Gear. Nobody would deny, certainly not I, the marketing departments, profit estimates and objectives and the like have an important part has not assumed too high a place to the detriment of the kind of services that the ordinary customer requires. How often does one walk into a bank when on holiday, for instance, when we are in fact, the customer and find queues that make us wonder whether we have walked into the Post Office by mistake. Most of us would dearly love to give a better services than we do and while this position obtains, then Mr. Norman’s article deserves more thought than Mr. Gear’s statistics.
Yours Faithfully
Miss. Shaun Bucknor
Dear Mr. JAMES PACKER
I was most surprised to read the violent reaction of your correspondent Mr. A.T. Gear, to Mr. George Norman’s article.
As a contemporary of both gentleman, with some thirty-eight years’ service, I am only too well aware of the lower standards we have inevitably had to supply. The lack of perspective, however, is surely with Mr. Gear, as Mr. Norman, with tongue well in check, must have struck a chord in many a practising ‘High Street Banker’s’ heart.
Many of your readers will no doubt have read Mr. Norman’s recent contribution to ‘Opinion’ in the Daily Telegraph Magazine, and I would put him high up in the league table of humourous financial writers, if there is such a category, not all that far removed from Mr. Basil Boothroyd!
A sense of humour is high up in the list of priorities for successful bank management in the 1970s and long may it continues to be so
Yours Faithfully
Miss. Shaun Bucknor
Commercial lease agreement
Ontario Provincial Bailiffs
(905) 282-1900
Landlord and Act
When items in storage are not yet finish been paid for and are under payment plan with BANK, commercial lease holder and owner of property cannot auction property. An d this is what Doug Sloan has done. Sold my property held in storage.
We have appeared in criminal court with judgement for these items to be returned.
Can you Mr. Michael Cummings assist me in getting a judgment from an justice of the peace for this York University faculty member to return my property to me from storage?
York University Tutor/Editor
Manager: Doug Sloan
Telephone: 1 416 663 0807
Safeguard Self Storage formerly Storage Max
Doug Sloan
Cindy Tiranayake
June 2002 october 2003
Storage Returned
110 Guided Court
Toronto Ontario
M9V 4K6
Telephone: 1 416 740 1050
Fax: 1 416 740 4288
Storage Unit Number:
A70
Storage Unit ID:
0903470
Banks in the Insurance Field-How far should they go?
D.G. Hanson, F.I.B.*
Mr. Hanson is Chairman of Barclays Unicorn and Barclays Life Assurance Company and Director and General Manager of Barclays Bank Trust Company.
This paper is based on the talk given at the two day conference on ‘Banking and Insurance- The Interface’ held by the Graduate Business Center of the City University in association with the Charted Insurance Institute and The Institute of Bankers on 5-6 November 1974.
Banking and Insurance –an overlap?
To what extent do the business of banking and insurance overlap?
My first inclination is to say that there is no overlap: that the banks and insurance companies are not competitors, but just good friends. Banking has always been banking: and insurance , insurance! There is an old saying that people who make it their business always to be minding other people’s business soon have no business to mind. And so, it would have been as unthinkable in past years that a bank would start writing insurance as it would have been for the large life offices or general insurance offices to set up their own banks. It was a difference business.
For the most part that situation still obtains today. Admittedly at least one insurance company owns its own bank, and one broking house owns a bank. A number of insurance companies also have interest in finance houses. But more important for the purpose of our discussion, there are areas where the business of banking and insurance companies increasingly overlap, and there are area where banks, consequent upon the widening of their business, have moved however modestly, into the world of insurance.
Here I think we must distinguish between what one might call the traditional role of banker and insurance and, on the other hand, the present day situation. Let us look at these in turn.
The Traditional Role
The basic business of banking was the taking of deposits, the lending of money and the maintenance of a money transfer services. The basic business of insurers was that of providing cover against risk. At the same time life assurance has long since ceased to be exclusively a matter of cover against the contingency, or indeed the certainty, of death but had become, quite properly, a vehicle for savings and investment. Thus banks and insurance companies, even in their traditional roles, have become, in the friendliest possible was, competitors with each other for people’s savings. It is a number one area of competition- I will return to the point in a moment. In the meantime let us look at the non-traditional area of competition in the light of modern developments.
The present day situation:
Because the banks have moved, at first tentatively, and more recently with deliberation, into a wide range of financial services we have at least four other area where the banks and the insurance world are, to a degree, in competition. These area are
1. Insurance broking- and here the competition is with the established broking firms rather than with the insurance companies themselves.
2. Pensions business- here the competition lies between the banks and those insurance companies which have made a special feature of insurance based pension schemes.
3. underwriting
4. advisory services-in this case the competition lies principally between banks and insurance brokers.
Overall, therefore, we have there five area- one traditional and for of recent development- in which the business of banking overlap with the business of insuring. Let us look at them in turn
Competition for personal savings
I think we can say it was in a sense the insurance companies who challenged the banks. I am told that by 1969 life assurance premiums in this country had reached a level of 60 per cent. Of total of all forms of personal savings. In that year the increase in bank deposits fell to a mere 13 per cent. Of new savings. Since 1969 the picture has changed considerably. Not only have we seen much higher interest rates on bank deposits but the bank have developed a much more aggressive approach in their competition for deposits. Over the last five years clearing bank deposits have increased by 109 per cent. Thus in those three traditional area of saving in the private sector, i.e. building societies, banks and life office, the first two have seen their deposits virtually doubles whilst life assurance business has increased by about three-quarters.
There is another area in which the banks compete for personal savings and that is in unit trust management. The banks first entered this field 1966 when Lloyds bank set up a unit trust. By the end of last year the clearing banks in the UK accounted for over 15 per cent. Of the total unit trust industry. Sums invested in unit trust are comparatively modest in the present state of the market, but they reached a very substantial level in 1972 and surely they will do so again.
There is no doubt therefore that the banks, whether through current accounts, deposit accounts, savings account or unit trust investment, are in very competition with life offices for personal savings. Of course, it may be argued that premiums going into life offices find their way in many cases into the banking system and so the banks have the benefits of the money at some point. This would be true, however, only to the extent that the premium income remained in the private sector and a large part of its obviously does not. In any case each bank is in competition with the others to obtain for itself as large a share as possible of the market for banking accounts.
Banks as Insurance Brokers
It is well known that until recent years bank managers, usually in their private capacity, acted as agents for insurance companies. It had been going on for many years and the commissions paid were often considerable, although they varied from one part of the country to another and, indeed , from branch to branch. It must be about 10 years ago that Westminster Bank, as it then was, took the first steps to rationalise what was an untidy and somewhat irrational system. Westminster Bank set up a separate subsidiary for insurance broking purpose. The other principal banks, Midland, Lloyds, Williams and Glyn’s, all followed suit and I think I am right in saying that the Midland Bank now not only has as insurance department but also owns, through the Montagu Trust, the Lloyds Brokers Bland Payne.
All the clearing banks- and the merchant banks before them are thus in the business of insurance broking. It is well known that the business placed in the London insurance market through broking firms is very considerable. It appears from some figures extracted a year ago that 38 per cent. Of the business in the London market came through broking firms and that the total annual premium income amounted to
Approximately $3.000 million. The clearing banks’ share of that broking business is still very tine probably of the order of 3 per cent. Including direct and indirect broking activity.
There can be little doubt that the broking business of the banks will increase. They have enormous advantages in the pursuit of this business. It grew naturally, as I have said, from the managers’ agencies throughout the United Kingdom, and the banks have the facilities, the resources and the branch network to develop insurance broking business very extensively if they so wish. As someone once said, the banks in this country with their branch system can sell virtually anything they like, be it only soap or cake.
The logic of offering these insurance services does not supply only to the personal customer. In these days when the banks offer a wide range of corporate services-be it merchant banking or leasing or factoring, etc-to companies and corporations, it is a natural corollary of those services to be able to place general insurance contracts.
Thus the banks have all these advantage in the field of broking, and they also have the opportunity of placing worldwide insurance contracts.
Thus the banks have all these advantages in the field of broking and they also have the opportunity of place worldwide insurance business through their international associates.
It is a challenge? Do the commercial brokers see their future in jeopardy as the big battalions move in? To be completely frank, I think we would have to say it is within the power and resources of any British bank to become the biggest insurance broking house in the country. Indeed, that may well happen one day. I doubt, however, whether that particular thought is in minds of any of the clearing banks today. The banks espoused the business broking partly in order to rationalise what was already happening and partly to augment their very comprehensive rage of financial services. As I have said on another occasion, there was no particular wish to become the biggest, no thought of putting anybody out of business, no desire to corner the market or to do other than take our place in a modest way in a highly respected profession.
Banks as Pension Fund Managers
It is well known that pension funds in this country fall into two broad categories, viz, those which are insurance based and those which are self-administer funded scheme. Two-thirds of all the pension schemes in the country are insurance based schemes, and these account for approximately one-third in value of all existing schemes. The clearing banks are very definitely in the business of investment management, and they will continue to bid for the management of funded pension scheme. AS employers set up new schemes or revamp their old ones to satisfy whatever form new pensions legislation might take, the question will repeatedly arise as to whether a scheme should be insurance based or whether it should be funded. We would argue that any scheme which has an annual cash flow of say $100.000 upwards would make the case for insured schemes for even vary large funds. The client has to weigh the merits of the alternative possibilities and make his own decision. It is not always appreciated that this is an area in which the banks and insurance companies are overlapping and competing in the quest fro pension business.
Banks as Underwriters
A visitor from another planet, or indeed from another country would soon recognise that in the United Kingdom, as I have said before, banking is banking and insurance is insurance. No one would expect to find our major financial institutions undertaking both activities on any significant scale. Similarly, in other countries it is rare and quite often legally prohibited to find banking and insurance combined in one institution. The two business have grown from different origins, although strange to say, in the case of the United States some of the trust banks which are now major banking housed began with the writing of life assurance and annuity business in the mid01800s.
In the UK, so far I am aware, only one clearing bank, Barclays, is engaged in the business of insurance underwriting, and in that one case it is limited to the writing of life assurance. Barclays Life grew out of the association with Barclay’s Unicorn and its business originally was the writing of equity linked policies. The business is now rather wider, but is still almost entirely unit linked in one way or another.
We must not underestimate the importance of unit liked life assurance. It is understood that last year no less than one-third of all the life assurance written in this country was of the unit linked kind. In any case it is a comparatively short step from there to conventional life business, provided the office concerned is prepared to build up its reserves gradually and to accept the absence in the short term of a track record.
Banks as Advisers
The bank manager has always undertaken the role of adviser to his customers. The demand made on him have varied from time to time, as no doubt has the quality of the advice, depending on the resources available within the bank. In recent years, however, there has been a concentration of the more sophisticated advisory services in central financial planning departments. In my own bank we have undertaken full estate planning work in the last five years, and more recently, we have introduce the Money Doctor Services. This kind of work has been undertaken in varying degrees by some of the leading life insurance broker, and to that extent the banks are in competition with them. Nevertheless, it is a role to which the clearing banks are well suited, and which I believe will develop very significantly in the coming years. It may be seen as a natural extension of the relationship built up over the years between banks and their customers. There is plenty of room fro everybody in the field of personal financial planning, but the clearing banks have the advantage of customer contact and, of course, the resources to maintain the high quality services which is so essential to this work.
These therefore are the principal area of the clearing banks; involvement in the insurance arena. Why have the banks moved in this way and what is the advantage to the banks?
Profits
The answer must surely lie in one ward-profits. All these activities have been seen as a natural extension of the banks’ traditional business. The facilities , the resources and the marketing outlets were there to hand and they are all activities of an inherently profitable nature. They may be seen as part of the increased catholicity of banking services undertaken at the time (a few years ago) of stringent credit control and restriction on the traditional banking business. These services also fit into the modern trend towards ‘one-stop banking’ on the assumption, yet to be proved, that the public like to obtain their financial services under one roof. These is some indication that the public do in fact prefer to go to one source for a variety of financial services. This is perhaps because traditionally they have tended to look to their bank to take out insurance policies in the days when managers conducted their own agencies, they have gone to the banks to buy stocks and shares, and the local bank manager has usually been regarded, a little flatteringly perhaps, as a financial Pooh-Bah.
Ought not the customer to go to his bank for banking services and to his broker services? Some say there is a danger of arm-twisting: that the bank manger arranging an overdraft will seek to include an in-house insurance product in the package. On the credit side, however, is it not possible that the big banks may be in a position to take a very detached view of the insurance market in arranging a contract for a customer, and is it not also possible that with their considerable resources they will be able to undertake very detailed analyses of market situations in a way which might not be possible for the smaller broker?
Disadvantages
There are disadvantages of the banks’ involvement in insurance. I have already referred to the possibility of the bank advice being, at lease in theory, less than objective in particular circumstances. But I think the problem goes deeper than that. I think the real difficulty arises when the banker becomes both broker and principal in the field of insurance. It is clearly not sensible nor acceptable for the bank on the street corner to hold itself out as offering professional advice on a range of products available in the insurance product off its own shelves. This anomaly-indeed this conflict- is avoided by separating the functions within the baking group. The subsidiary company providing the broking services will operate quite separately from the bank manager who is selling them. That is how we resolve the problem within our own organization. But there can be little doubt that if any bank moves in a major way in to the field of insurance underwriting it would be very difficult to sustain a position in the market as a creditable insurance broker.
How far should the banks go?
I would answer the question firstly saying that the banks must feel free to undertake any legitimate financial activity for which they posses or can acquire the necessary resources and skills. It used to be the slogan of one bank that ‘money is our business’. In so far as all the areas of competition which I have mentioned are concerned with money, it must be accepted that they are our ‘business’. The banks are already offering a range of 200 or so separate financial services. I cannot see tide being reversed. I cannot believe but that the banks will continue to offer to their customers at home and aboard virtually any legitimate financial service, provided it accord well with the exiting business of the bank. And provided the bank can perform the services well.
The question is, therefore, will the banks develop their underwriting activities in any major form and will this be by organic growth or by merger? On the face of it there would appear to be no valid reason why the clearing banks should not enter the insurance arena. In many respects the business of banking and insurance may be seen as being complementary to each other. Banking deposits are by their nature short term, where are premium income is contractual and long term. The leading skills of the banker are matched by the investing skills of the insurer. The combination of skills and resources would enable an even greater contribution of skills and resources would enable an even greater contribution to be made to the financing of capital requirements of industry in this country and in Europe. The network of banking branches in the United Kingdom would be complemented by the overseas representation of some of the insurance companies, which is greater than that of some of the British banks. The financial services available to the public, whether retail or wholesale, would be that much more co-ordinated and integrated.
It is not difficult to foresee that before many year are past one or other of the major banks could well become involved in a substantial way in the business of insurance. It should make for a better use of resources in these days when both capital and management seem to be in increasingly short supply. Of course there may be political or social objections to the concept of giant combined banking and insurance groups which would ‘bestride the narrow world like a Colossus’. Nevertheless, it has a certain cold logic about it-because money is money and the various financial skills which for the most part have grown from separate, independent origins will increasingly find expression in financial conglomerates.
Even so, if the banks move along that road the main problem will lie, as I have said, in the duality of the role of broker and underwriter, I do not believe the banks can go along both paths. No doubt there will be much debate as to which way is the more desirable or indeed whether bankers should have kept to banking.
How Much Diversification?
Evan Hughes*
Evan Hughes is the author or Banking (David and Charles, 1974); the book is one of a new series on the professions.
The Midland Bank produces a table from time to time which sets out the participations of the London clearing banks in other sectors: their fringe activities, one might call them. The list is quite long includes foreign banking consortium banks, merchant banks, credit cards, unit trusts, leasing and factoring, insurance broking, data-processing, travel, agencies and even-through the Bank of England would like the fact forgotten-the discount market. This latter is via the Midland’s control of Samuel Montagu, who have run a small money market ‘book’ for many years.
There are commentators who can be relied on to disapprove of these excursions, though many of them might be expected to know better. It is not that I think their disapproval is necessarily misplaced but that the reasons given show an insecure grasp of the realities. The two most commonly proffered are that diversification brings danger of dilution of management, secondly that it involves dilution of capital.
Dilution of Management
It is dilution of management, at any rate so far as the big banks are concerned, which is by far the more disquieting problem, but being a non-financial problem it attracts less attention than it ought.
It would be more alarming if the banks were getting dug in to non-financial business on a large scale. Data-processing and travel agencies are border line cases, but mostly these cobblers have stuck to their last.
Even so, the purely banking of the banks’ business, whether wrestling with corporate liquidity of r-cycling the flows of oil funds, are terrifying enough to monopolise the waking hours of any bank chairman or general manager. And if they do not they ought to. For example, like Mr. Wriston of the First National City Bank, I think the commercial banks are equipped to cope with the oil funds, subject to certain provisos, but there is lamentably little sign of their really organising themselves to do so. Since the MF and the Central Bankers are unable to agree, the prospect is poor. But this raises whole new vistas that control be dealt with here.
Nor are senior management set only by such ‘mega-banking’ problems as this. For example, most of them agree that relations with the public could be better. AS Mr. Norman said in August (p.233), ‘Banking used to be about people: now it is about systems’ To change this at all quickly or genuinely over the next few years will absord a lot of money, and also- the point that matters is this context- a lot of managerial time and energy.
Capital Dilution
However, it is danger of capital dilution that seems to be the spectre that more often haunts the banks’ critics, and they are of course correct in pointing out that in the big banks the ratio of shareholders’ funds to deposits has fallen rapidly, and just recently to figures conventionally considered pretty low. In the case of one or two big New York money market banks, whose deposits have risen in a year by something like 40 per cent., this ratio is down to 6 or 7 per cent. It is as low, or lower, with the London clearers, where the growth in deposits has been less startling, through pretty large: at Barclays, for example, the growth is about 26 per cent. And at National Westminster about 25 per cent.
In the United States the Federal Reserve apparently attaches importance to the decline in the ratio of share capital to deposits and there are signs that it is inclined to press the US banks if only behind the scenes, to show it down. At least this is the interpretation one must put on its recent veto of a proposal put up by the Bank of America for a substantial extra-mural investment, through in fact this bank’s deposits have risen less rapidly than those of the big New York banks just mentioned. In London, while the central bank is far preserving its sang froid, it would be surprising if present tendencies continued for long without eliciting some signs of restiveness.
My own opinion is that if the authorities were to start pressing the banks in the way suggested they would be impaling themselves on a dilemma, one prong of which at least is chimerical because if derives from an unrealistic view of the money market. The other prong is real enough, namely the difficulty of raising fresh capital on reasonable terms with the equity market in its present state. This is why anyone with any sense is keeping his fingers crossed in the hop that the present profitability of the British banks can be at least maintained. Large bad debt reserves, to name only one obvious necessity, are essential ballast if the squalls ahead are to be weathered.
Liquidity
However, large reserves and a low multiplier are no guarantee of liquidity in a tight corner, and it is in this respect that baking realities diverge from the conventional wisdom. Non of the banking collapses that have taken place in the last year have been attributable to under-capitalization, or-more to the point-would have been averted by ratio considered lavish by the most old-maidish central bank. The reason why Lloyds Bank International and the Union Bank of Switzerland did not suffer from significant, let alone fatal, withdrawals of deposits after they had announced huge foreign exchange losses was because they were know to be basically banks with large branch generated and therefore stable deposits (i.e. relatively independent of ‘bought money market deposits); and because, as Mr. Wriston of the First National City Bank pointed out, it was apparent that the losses, large though they were represented only a few weeks earnings. The same is true of the funds provided by the United California Bank to make good the losses of its affiliate in Basle, and of the new from the Chase Manhattan bank that it had undervalued its securities portfolio by $35 million.
An equally instructive case was the relatively enormous losses mostly on their bond holdings, suffered by the London discount houses in 1973. First, since the discount market has an entrenched position in the British banking system as the main repository of that system’s reserve assts, it was reckoned that the Bank of England could not by any means countenance its collapse. In the background, too, was the feeling that the market had been treated with some lack of natural justice, a feeling that perhaps the central bank inclined to agree with. Secondly, the discount houses have always secured their borrowing with money-market paper, and whatever proportion of their reserves had been lost a lender could see for himself that their reserves had been lost a lender could see for himself that their assets consisted of highly-liquid investments and not of forward exchange contracts, property deeds, second mortgages, or doubtfully recoverable advances.
In this context, to many bankers the most interesting news of last month, though given only cursory publicity by the newspapers, was the report that the Bank of England has written to the parent Banks of the consortium banks in London asking that they commit themselves publicly and, in essence, without limit to the support of their affiliates. It is an adroit piece of arm-twisting, because any back-sliding by any shareholding bank must, if it becomes public knowledge as in time is surly will, ensure the demise of its affiliate. Moreover, such commitments cannot be entered into without the consent of the appropriate central banks, and after the painful episode of the Israel-British bank the Bank of England sees a merit in nailing other central banks to the floor so far as it can.
Diversification
The lesson of all this is, in my opinion, that the bogey of diversification as a diluent of capital is illusory, certainly so long as it does not impinge on liquidity. It is the deposit structure of smallish banks which has caused recent stresses, i.e. they are too dependent on the money-market and are borrowed too short having regard to the nature of the assets being financed. To say now that central banks would have done well to monitor the deposit structure of such banks more carefully than they did is, I know, to slam the stable door after the horse has bolted; but it was being said long before London and Counties foundered.
We are fond of saying to each other in City bars that no central bank would permit the collapse of a large bank because of the consequential flight from bank deposits in general. This may well be right, although some worried faces could have been seen this summer among creditors of the Franklin National Bank: but the verdict would not be unanimous in that, for example, not everyone in the City is happy that depositors should be indefinitely protected from the truth that high rates mean high risk, or that the limitation of liability afforded to shareholders by English law should be withdrawn by administrative action where the shareholders is a bank. However, this too raises questions that cannot be dealt with here.
Of course, in the end liquidity and money-market techniques are a management responsibility too, but tradition, deposit-structure, and sheer size make the risks easier to cope with for the big banks than for the others. What matters is that personal and skills should be there to cope.
As I have written elsewhere, I believe that talent is already spread rather thin in the upper reaches of the banks, where senior management has mostly learnt the business in conditions very unlike those of today, and has been pre-occupies with branch-bamnking and leading’ problems that now confront them. So long as this is so and it will be for some years yet, there are good arguments for halting diversification much where it is now, though probably not for trying to roll the tide back.
The Economic Scene
Paul Bareau, O.B.E.
Inflation Rampant
Government may cause and go, or return, nut the basic problems remains: in the case of the United Kingdom the still accelerating rate of inflation, a balance of payments deficit which shows no sign of diminution and a national mood which, so far, bears little promise of the arduous road ahead begin travelled in the spirit of dedication and comradeship which alone could achieve success. Fortunately the problems are no longer blurred by the phoney statistic which passed muster as effective election propaganda. Inflation is now seen to be primarily a cost-push phenomenon. The wages explosion which, despite the Social Contract, has rumbled continuously since the re-election of the government, promises another upward sweep in the cost of living. The recent ;norm’ in wage concessions is around 25 per cent.- and this at a time when the domestic product shows a decline, in real terms, of some 2 per cent. On 1973, when the balance of payments deficit equals about 7 per cent of the national income and when industrial investment is in dire need of reinforcement. The wage explosion is helping to stimulate consumer demand and pull in imports at a time when consumption should be reduced so as to contribute to some improvements in the balance of payments, and leave more room for productive investment. In order words basic economic trends are still moving away from orthodox, desirable objectives.
The money supply equation must, in due course, adapt itself to this basic, cost-push charter of the current inflation. The monetarist who focus their attention on the money supply as the causal and corrective factor of inflation, are reversing the logical order of sequence. Higher cost will in due course be passed on in higher prices and this will require a greater and still greater supply of currency and credit. To cut the money supply by traditional measures of credit control, such as more special deposits and still higher interest rates, would deprive a large number of enterprises in the private sector of their one remaining source of working and medium- term capital. The result would be bankruptcies and the rise in unemployment which would assuredly cause the money taps to be turned on once again. The worst possible formula for this additional irrigation of the inflation-heavy dog would be to follow the TUC advise of extending credit for the over-riding objective of maintaining employment in firms that would otherwise have to adjust their labour force to the state of their order book. That would subject the UK economy to further hardening of the arteries and would in due course lead to economy to further hardening of the arteries and would in due course lead to economic rigor mortis.
The November Budget
That was part of the background into which the Chancellor of the Exchequer had to fit his November budget for Britain.
It was a courageous budget for a socialist Chancellor. First because he admitted, in words and deeds, that industry had been over squeezed and must be made profitable if the economy is to expand. Secondly because he paid tribute to the banking system and place upon it- and not on some state bank- the responsibility for easing industry’s cash crisis. Thirdly, and most important, because he relied on the orthodox price mechanism and market forces to do the main part of the anti-inflation work. It needs some grasps of economics as well as courage to appreciate and apply the principle that higher prices like higher taxes are counter inflationary, provided a tight rein is kept on the money supply: provided also, wage restraint does not crumble. It is on these two provisos that the susses of the November budget depends.
The main blot on the budget is the vast increase in the borrowing requirements- from $2.733 million last March to $6.331 million. That has weighed heavily on a gilt edged market. Of which the Chancellor will be in dire need in the months to come. The lapsing of the exchange guarantee on certain official overseas sterling balance should have been handled more discreetly. Left to the Bank of England’s diplomatic channels it would have done less damage to sterling than was done by its elevation to a n early passage in the highly publicised budget speech concerned. A most reassuring announcement in the budget speech concerned the massive reinforcement of Finance For Industry in order to provide some of the resources needed by increasing illiquid industry. There will be relief in many quarters that this will be a City of London operation and not one carrying the stamp of political intrusion and, perhaps, ultimately of state domination in the companies to be assisted.
The re-cycle race
The movements of oil money between the world money markets continue and will continue and will continue to break all records and baffle the imagination. Earlier estimates of the magnitude involved are proving near the mark. During 1974 the oil exporting countries will have accumulated current account surpluses of close on 60 billion. Some of them, such as Iran, Nigeria and Venezuela, can use a substantial proportion of their oil revenue for importing capital goods and the expensive technology and services that are diversifying their economies. These imports merchandise and invisible, are not of course deductible from the above figure, which is a net, global estimate of the unspendable and therefore investible proceeds of oil exports. The figure, however does include the grants-in-aid which some of the oil countries have made to their Arab brethren and particularly, to Egypt poor in natural resources, further impoverished by eight years blockage of the Suez Canal and ever regarded as in the front line of the battle, active or dormant against Israel.
The amount of oil money that will have been invested in the capital market in 1974 will probably be of the order of $56 billion. O this total about $24 billion, the largest single item, has been invested in the Euro-dollar , market mostly on short item. The next largest block is about $15 billion invested directly in dollars either in US bills and bonds or on deposit with banks in the United States. The amount invested in sterling, some of it in short-dated gilts, some in CD’s and other money market instruments, is equivalent to $9 billion. The amount deposited with the IMF under its; ‘oil facility’ and destined for the poorer countries is just over $3 billion. That leaves about $5 billion as longer-term investment in property, equities and an as yet minimal amount in old bullion.
One feature of the movement so far is the degree to which is has used open capital market and the interposition of the large commercial banks and intermediaries between the short-term leader and the usually, longer-term borrowers. Another remarkable fact if the concentration of the business on New York and London, on dollars and sterling. These, with all their defects are the only two markets and currencies with the flexibility and absorptive capacity to handle operations of this magnitude. The recent removal of the ban on payment of interest on non-resident Swiss franc accounts has caused no more than a trickle of oil money to flow through that newly opened channel. The amount invested in sterling is in the circumstances, surprising and reassuring in the short term, but full of warning for the longer run since the money is ‘bad; money-in the liquidity since of the word-which has not only financed the current account deficit, but has balanced some withdrawal of what used to be regarded as ‘good’ money, including Australian and Hong Kong balances.
The almost exclusive use of the open market and the commercial banks must soon be coming to an end, partly because of the mis-matching of the terms of assets and liabilities involved, but also because most of the banks involved are reaching the limits of the prudential or solvency rations between their own capital and reserves and their deposit liabilities. Rescue may ultimately come from the immediate assistance should be provided by the EEC initiative in which agreement has been reached for a $3 billion collective borrowing operation, the proceeds to be redistributed among the nine member countries, according to their need. At the end of the queue in all this will be the underdevelopment, non-oil countries, including those where, according to latest estimates, 20 million may die of starvation between now and the next harvest.
Controlling the Banks
Whatever may be said of the ‘renegotiation’ of the UK’s term of entry into the EEC, there is no doubt that the British influence within the Commission is having a powerful effect on the work that is being done on the co-ordination of banking legislation. The first directive on this subject was an extraordinary amalgam of bank laws and regulation as they apply in the member states. It was an ingenious but wholly unrealistic project to construct a kind to the banking communities and Governments in al member countries. One of its defects was its attempt to cover in one document the activities of large range of institutions: large and small, fringe and beyond the fringe.
The new directive, now being studies by each delegation, is a more restricted but also a much more flexible document. It is intended to apply to the large banks. It is assumed that in due course there will be comparable directives for specialised institutions such as building societies and finance houses catering for consumer credit. The new directives thus pays special attention to the definition of an institution entitled to transact banking business and carry the appropriate name. This is essential if the basic principle of freedom of operation through branch representation at all member countries is to be applied. Provision is made for disclosure of certain ratios to be calculated at lease every three month. This is pending closer co-ordination of these ratios-some of which will need clearer definition.
Meanwhile excellent progress has been made in the vexed and complex field of ultimate responsibility for the operations and possible losses of consortium banks. This is a mater in which the Bank of England has taken the initiative-understandably so since London houses more of these hybrids than any other financial centre. What is being established is the acceptance of ultimate responsibility for such banks by their shareholding banks. This is an issues which ranges far beyond the confines of the EEC but as with the EEC directives, it is an endeavour to improve banking supervision and thus serve a cause which in recent years has been somewhat neglected.
Every Other Month
La Meme Chose?
Hermes
Twelve very eventful months have passes… we have suffered two General Elections and we have had the benefits of a short but very interesting and instructive experience which I think has illustrated still further the possibilities of our Constitution but what were our political colour may be I think you will agree that there is certainly some advantage in a Government which can be regarded as rather more permanent.
Who is the speaker? Well the field is wild enough to make guessing unprofitable. When was it said? Is easier: surely any time in past month or two
The percipient reader will not be surprised to learn that the quotation is older than that. The speaker was the President of the Institute Sir Herbert Hambling: the occasion his President Address delivered on 12 November 1924-50 years ago.
The circumstances had been different from those of 1974. The minority Government was in fact the first Labour Government, under Ramsay Macdonald, and the Government that could be regarded as rather more permanent was Balwin’s first substantial administration with a majority of more than 200 over the other two parties. The problems facing Macdonald and Balwin too were different from ours today. The Presidential Address was titled ‘The Unemployment Problem.’
Yet reading the whole address half a century on one is conscious not of different but of extraordinary similarities. ‘Each of the political parties’ said Sir Herbert, ‘has had some opportunity of applying remedies but the cure has not been found.’ And
We have pursued the policy of decreasing our hours of work and increasing our rates of pay, content to cast the burden of the extra cost on to the consumer. This cannot continue indefinitely. An increase in the average rate of wages or profits is only justified when there is no extra cost to the consumer when the higher wages and higher profits are drawn from greater production,
And again
The lamentable history of the past four years shows clearly that some thing is wrong in the relations between Capital and Labour. It is no use blinking at facts. We cannot succeed in international trade if industry is to be paralysed by frequently recurring strikes or lock-outs.
There is of course much to remind us that we are reading history rather than current affairs. In the business of the Institute, for instance, the 12 months had been steady progress, with ‘the candidates for the examination… more numerous than ever before’- in fact exceeding 10.000 for the first time, as compared with the 1974 total of 56, 000. And on the national scene, when the President suggested that his listeners would deceive themselves if they believed that ‘the remedy is to be found in Tariff reform or in Free Trade…’ we know that this is not 1974 although when he added’… or in Nationalisation of this or that’ we could be confused again.
But the overriding message is depressingly familiar: we must look to co-operation for our salvation. We may not that here was no faced capitalist-stereotype talking; management (he called it Capital’) as well as labour was criticised for failure: and perhaps most interestingly in a comparison of pre- and post-Industrial revolution industry, he spelt put a problem that is still not in sight of solution:
Elaborate specialisation with the sub-division of labour inseparable from it has its evil side. Craftsmanship tends to disappear. Pride in the work for its own sake is less likely when the final result, which is out of the sight of the worker, seems so little affected by individual effort. Monotony has a deadening effect and a man tends to regard himself merely as a cog in a machine. This is one something merely to be sold for the highest price possible and that the quality of the work makes no difference.
Not that this was a ‘good old days’ arguments for in those old days.
…the average standard of living was infinitely lower-small comforts we now regard as conventional necessities were then luxuries, only to be enjoyed by a very small and very fortunate class, while luxuries now within the reach of even those who are not specially fortunate or more than usually successful were then non-existent.
It would be pleasant if we could find comfort in noting how apposite that comment is today, despite all has happened in 50 years. Perhaps the saddest reflection of all is that we have now come to a realization that was outside the ken of almost all Sir. Herbert’s generation; that our resources are finite, and that in the industrialised countries we have passed the limit of permissible expansion.
Bank Finance for The North Sea
D.H Parsons, A.I.B
Mr. Parsons in Manager of the Oil and gas Section, Corporate Financial services National Westminster Bank.
A few years ago someone remarked possible in envy that to be given a licence to run a commercial television station was like being given a licence to print money. Today the envious ones say that a similar situation exits with the acquisition of the licence to explore for oil in the North Sea and that a discovery is tantamount to the delivery of the printing press.
I there were no restraints there would be some truth in this assertions as it does not take a mathematician to determine that if an oil field contains say 1,00 million barrels of recoverable oil and the value is US $10 per barrel the gross value of that field is US $10.000 million. In fact most of the publicised field such as Forties Brent Ninian and Piper Claymore, contains a great deal more that 1,000 million barrels of recoverable oil and it has been estimated that something like 3 million barrels per day could be produced by 1980 from the UK sector of the North Sea. This is the peak output which would steadily decline after a few years to a low level by the end of the century, but at maximum flow the value at present prices would be in excess of US $10,000 million a year.
This is, indeed a real bonanza and if the owners of the licence were permitted to retain the full proceeds of their discoveries it could be said with justification that they had not only a licence to print money but also a private Fort Knox considerably larger that that edifice which once contained the bulk of the world’s gold reserves.
In point of fact as well know this will be allowed and successive British governments have been concerned to institute policies which will ensure that a great proportion of the income will be retained for the benefits of the UK community generally, not be the privilege of a few or transmitted aboard for the enrichment of others.
North Sea oil clearly has a great bearing on the future economy of the UK and were it not for the fact that within the next five years the country will be self-sufficient in oil it is difficult to see how the present standard of living could be maintained having regard to the massive balance of payments deficits now in evidence. To meet these deficits caused largely by the high price of oil which has to be imported mainly from the Middle East the British Government is borrowing heavily from its friends abroad. These friends have so far been happy to assist the UK over its difficulties, but it is very doubtful if they would have been quite so forth coming had they not had the confidence that within a few years the country would have a much stronger economy.
They value of the North Sea to the UK cannot be over-emphasised but the extraction of oil from those deep turbulent waters requires a great deal of very expensive equipment. Our concern, as banker is to find the money to meet the cost of the equipment so that the full potential of the indigenous natural asset can be realized as quickly as possible for the benefits of the British people.
What is Involved?
To solve the problem we must first recognise the magnitude of the operation. Every banker who is involved in lending whether in the big city or the small provincial town will have asked a prospective borrower such questions as ‘what do you want it for?’ ‘How much?’ ‘How can you pay back/” and ‘what security can you offer?’. Although he is of course concerned with wider aspects such as government policy international markets etc, the international banker lending multi-million asks exactly the same questions. The main difference is that whereas in the case of the branch banker lending a few thousand pounds the negotiations are relatively simple and often take no more than an hour or two the international banker putting together a financial package running into many millions, with complicated documentation may take a year or longer, but in the end the success of the financial depends on satisfactory answers to those few basic questions.
We know in the case of the Forties field which is 115 miles from shore that four platforms are required to stand in water over 400 feet deep and that the oil will be transported to shore by pipe-line. Will its specialized equipment each platform will cost in excess of $60 million and the pipe-line which has to be of sufficient diameter to take the optimum output will probably cost another $75-100 million. As we are on the frontiers of a new technology many unforeseen problems arise and bearing in mind inflation it is not surprising that substantial cost over-runs occur even to the point where the eventual cost can easily be double the original estimate. A engineers gain experience of constructing and installing platforms and pip-lines the cost estimates should attain a higher degree of accuracy but even so in the knowledge that the exploitation of Forties alone will cost around $500 million, the estimate that something like $400 million will be needed by the end of this decade may well prove to be on the low side.
This is essence is the situation facing bankers when they are approached to finance the development of oil discoveries in the North Sea. Clearly this is no game for at the weak or faint-hearted be the bankers or producers but the rewards for success are very great and the oil companies are prepared to spend large sums of their own money on exploration. It is not the banks function top provide the ‘gambling’ money and their involvement only starts when several wells have been drilled and a field is proved to be commercial. To determine whether a field is commercial, geologists, geophysicists and engineers pool their specialised knowledge gained from seismic data and test-wells and reach a conclusion as to the amount of oil in that field, the amount that can be recovered, the best method of recovering the oil and the equipment that will be need. A development plan is then defined and an estimate made as to the cost. The oil company is then in apposition to determine how and where it will find the money.
Method and source of Finance
Before considering the ‘how’ and ‘where from’ aspects of the cost the company will have determined the economics of the field. Based on estimate of the amount of oil which can be recovered (probably less than half the oil actually in place in the field) and the rate, defined in barrels per day at which it can be recovered the company will have a fairly clear picture of the amount of cash which will be generated year by year and is now able to determined the best method of financing the cost.
If the company is in a very liquid position it could if it wished use its corporate cash to meet its share of the cost of developing the field. This however is unlikely particularly as with the substantially higher price of oil over the past year even the largest companies are feeling the strain on their working capital resources. The probable course will therefore be for them to approach the banks.
The company is now in a position to respond to the questions ‘what for?’, ‘How much?’ and ‘How is it to be repaid?” The remaining basic question is the security and the form this will take will be determined by the method by which the funds are raised.
The simplest method is a straightforward loan direct to the company or to a subsidiary guaranteed by the parent. This is likely to be the cheapest for the borrower and the simplest for the banks but it must be remembered that we are talking of perhaps several hundred million pounds and that only the largest oil companies could contemplate such a financing. A direct or guaranteed loan of say $200-300 million for one of the major companies on the lines mentioned would not need to concern themselves unduly with the particular project as they would be content to rely on a strong balance sheet and the proven ability of an already large and successful business to repay from income. When however the banks are faced with a situation where the company large of small does not wish to carry a large debt on its balance sheet they have to make a much closer interest in the specific project as they will be required to assume some degree of risk relating to the oil in the field.
In such cases an alternative method of finance is a project loan. Quite simple this id the advance of money to develop a project with repayment from the income generated by the project itself. There are two recognised methods of achieving this. One is the so-called ‘production payment’ loan, where a lender, in effect, buys the product 9in this case, oil) forward and the owner uses the advance payments to construct the project. The lender recoups the amount of the advance when the project is completed and oil is delivered under the forward purchase contract. The finance for the Forties field- both platforms and pipeline-was provided on this basis.
The second method is the ‘throughput agreement’, which is usually more appropriate to pipeline finance. In this method the banks lend for the construction of the pipeline against the assurance that the owners of the field will pass a minimum amount of oil through the pipe at an agreed price (which will be determined by the amount) or pay cash from their own resources to make up and shortfall.
It is quite feasible for a project financing to be a variation of either method or a mixture of both, and the form it takes will determine the security required by the lenders. The normal term of the loan is in the order of seven years.
Security
It will realised that under the throughput method the banks have what amounts to a guarantee of payments and that no further security may be necessary. The security position under the so-called production payments loan, however will be much more complicated as the main security is the oil itself. The banks taking an oil risk will probably require amongst other things a charge over the licence and the field equipment as well as a full consultant’s appraisal of the field. At the present time lenders are not prepared certainly during the early stage of the project to take the recovery risk i.e. that the equipment will work and the oil be produced as expected. This risk remains the responsibility of the borrowers and would be reflected in the balance sheet as a form of guarantee. It may be that in the future when the technology has been proved the banks may be willing to take all the risk from the outset and thus remove the liability from the balance sheet.
Within the framework of this article it is not possible to deal with the security and balance sheet aspects excepts in a very cursory way as the subject as can be imagined is extensive If the full legal implication are to be understood.
Market and source of Finance
The exploitation of North Sea oil is politically and economically highly desirable and there should in consequence be a good banking market for the syndication of loans for this purpose. The appropriate financial packages for the development of an oil field will vary from field to field but is likely to include both sterling and dollars and possible other currencies all of which will probably come from the London inter-bank market. A substantial proportion of any financial package is likely to comprise supply and export credits or subsidy scheme such as the Department of Energy interest relief scheme, which was designed to enable UK suppliers of good and services fro use on the UK Continental shelf to compete more effectively with overseas opposition by granting an interest subsidy of 3 per cent. Per annum on the loss involved. The maximisation of subsidised credits will be the first consideration of a developer. However by and large the bulk of any finance subsidised or not will take the form of dollars or sterling provided by the banks from London inter-bank market.
The Future
North Sea oil in view of its importance to the economy is closely bound up with politics. As a substantial proportion of the finance required to develop this asset will have to be raised from sources abroad, it is particularly important that as much uncertainly as possible be removed. The availability and cost of the money will therefore be closely tied to prospective lenders’ assessments of the risks-commercial, technical and political.
The first two types of risk named are ones well within the capacity of the oil and banking industries to bear. Once the form of government controls to be introduced and the level of taxation to be imposed have been clarified and the effect of these measures on the oil companies’ ability to repay the loan has been measures, there is little doubt that British banks will continue to be able to pay their full part in raising the finance required.
Communications in a Large Baking Group- 3 Overcoming the Difficulties
J.A Blackwell, F.I.B.
This article the concluding article of a three-part series, is based on the entry which won the first prize in the Institute’s Prize Essay Competition, 1973-1974. Some of the ways of overcoming difficulties in communication are considered by Mr. Blackwell. Mr. Blackwell is a general Managers Assistant in Barclays Bank.
It is relief to turn from the recital of likely problems(Journal, October, 1974, p.292) and to consider what a bank can do to overcome its difficulties of communication. The solution fall into two main groups:
1) organization
2) techniques
Organization
Since good organization is the essential prerequisite of good communication, it deserve to be considered first.
Management by Objectives
One may guess that it it only in the last decade the large banks have formalised their organization to a point where it can be, and generally is, set out in diagrammatic form on a chart. Before that, one suspects, the main structure was known and each level of management, and each department, knew to whom it was responsible: of the relations of other it probably knew very little. Some managers regret the passing of those more carefree days, but there is little doubt that the complexity of modern banking calls for more explicit lines of responsibility and better defined lateral relationships.
It is not enough, however, to know who are one’s superiors and subordinates, or even to know how others fit into the picture. This information alone will not provide an adequate base for good communication. Managers who are to communicate usefully must also know what the group as a whole is trying to achieve, and what are their own objectives and those of the other managers and stuff with whom they are concerned.
The style of management which if often adopted to achieve this end is know as Management by Objectives, or MBO for short. Although MBO has perhaps not lived up to all the claims made for it when it first became fashionable in the mid-1960’s, it is basically sound: and it is believed that at lease two of the major banking groups in the UK have adopted it. Even if it had no other merits it would force managers to think about what they are doing, and that in itself is a stimulus to good communication. The success of MBO, however, depends partly on the group setting itself corporate targets which can be reflected in the target of its constituent elements and of the various managers. These targets are reviewed from time to time, usually annually or half-yearly, in the light of the ‘feedback’-the results actually achieved or likely to be achieved in view of the changed circumstances.
A distinctive feature of MBO is that wherever possible the targets are expressed in numerical terms. This discipline improves the clarity of communications. A branch manager, for example, agreeing his next half-year’s target with his regional controller might define the planned growth in business in terms of the number of accounts opened, and the increase in credit balance, advances and commission. If figures are used, both men know exactly what is meant and there can be no arguments later as to the interpretation of the manager’s plans. MBO certainly helps communications with a manager as to his own objectives. It only illuminates the objectives of other parts of the group incidentally: and then usually because they have some bearing on his own objectives (for example, if one objectives of the group were to promote a new insurance broking subsidiary, the branch manager might become involved by being given, as one of his own ‘key tasks’ for the ensuring period, a 50 per cent. Increase in the introduction of insurance business). Some techniques for informing managers of the objectives of others are discussed later.
Clear Functional Lines:
One good result of adopting MBO is that its introduction tends to clarify lines of communications and to pinpoint areas of overlapping responsibility.
In domestic banking line management there is usually no great problems. The targets of the branches will be collated at regional level, and the regional targets at head office. In the other activities of the group, however, and in the bank’s services departments (chief accountant, staff, inspection and so on) the full discussions which precede the introduction of MBO may show up a number of grey areas. We have already glanced at overlapping areas of responsibility. It may become evident that the lines of communication, especially in the service department, do not run from top to bottom. An example of this situation could be found in a division responsible for trustee and other non-banking activities. The rest of the bank might have a chief inspector whose writ ran from group level down to the local inspection teams. This one division, however, might for historical or other reasons have its own chief inspector who, although lower in status than the chief inspector of the bank, was not responsible to him.
A similar situation can occur when a division or major subsidiary does its own financial planning. The senior official responsible (who is sometimes designated a controller) will be the head of that function within the division, but may have only a loose relationship with the corresponding official at group level. There is no need to enlarge on the consequent difficulties of communication. In general these problems can be solved by ensuring that any function existing at group level is repeated as far down each part of the group structure as is appropriate; the head of the function at each level being responsible, in respect of that function, to the functional head at the level above. In this was good communications can be ensured from top to bottom. At lease one major corporation goes further, by giving the group head of each services (that is, finance, etc.) the right to agree who will head the services in each division, to ensure that communications will be effective.
These arrangements should make it easy for a manager, of functional head, at any level to obtain the information which he needs. This is an important elements in communications. It is not enough to be able to impart information successfully. If a manager is to work effectively he must be able to require those at lower levels with relevant information to communicate it to him, and must also be able to communicate freely with those concerned with the function at higher levels.
The clear vertical lines advocated here do not themselves provide lateral communications. If the structure is generally sound, lateral lines will probably develop on an informal basis if they are needed. In any case, lateral communication will be facilitated if the vertical lines of communication are well defined.
It should perhaps be added that it is not necessary, although it may be helpful, for the functional heads at the varying levels to have similar titles. The vital thing is that the lines of communication should be clearly established. Before we run from lines of communication, it is useful to recall that these lines may on occasion be contracted. There are two types of situation in which contraction is usually appropriate.
a) An instruction is given to a single person who is in a manager’s extended command, but who is not his immediate subordinate. The usual reason is the urgency of the situation. Such contraction should not be allowed to become too frequent: and if only for the sake of goodwill and if maintaining the intermediate managers authority, it is often desirable to inform the intermediate manager of what has been done. A situation where the intermediate manager should be informed might be that in which the chief inspector gives an urgent instruction to an inspector ‘on the road’ then later informs the district inspector responsible for that area. ON the other hand, if an official at head office accepts services of a garnishee order and telephones the branch manager at once, it is debatable whether there is any real need to inform the regional manager as well.
b) A manager issues instructions to a number of staff in his extended command who are not his immediate subordinates. The instructions are to reach those whom it affects as coming from the manager who actually issues them. The most common example of this ‘contracted communications’ is the head office circular, which goes from senior management down to branch level without going through regional management. All concerned realise that the instructions useful purpose would be served by using regional managers as intermediaries.
The Right Information, In The Right Quantity
We have already noted the problem of logistics in communication: the limitation imposed by the receiver’s ability to absorb information in the time he can spare for action. A complete science, that of ‘management information’, exists largely to ensure that communications yield management the right information, in the right quantity, on which to base decisions.
As a management information systems is largely dependent on organization, it is appropriate here to look very briefly at the criteria for evaluating such a system as a means of communications in a bank. These criteria are:
1. Critical factors, The information communicated should highlight the factors which exert the greatest leverage on profits.
2. Quantity, The quantity of date is no measure of its utility. We have already contrasted data with information. Manager have no time to sift through mere data, and if they try to do so, there is an ‘opportunity cost’ as they should be using the time more profitably.
3. Format. Information should be presented in easily assimilable form, as briefly as is consistent with clarity. Computers can sometimes be used to distil points requiring action.
4. Cost. The value of management information should far outweigh its cost. However, as more data are obtained and communication, diminishing returns set in, and the aim must be to balance the utility of communications and its cost.
5. Speed. The lower the level, the more useful the speedy retrieval of information may become. Thus on-line working in real time has obvious attractions in a branch. At the strategic level, the length of the decision-making process is extended, and instant communication becomes less important.
6. Accuracy. The Marginal cost of a high level of accuracy may be unduly great. Bank staff are inclined by their training to be accurate, but extreme accuracy may be unnecessary.
7. Frequency. Too frequent communication increases costs without a corresponding improvement in decision-making. The frequency adopted will depend largely on the content of the report and the level of the communication. In general, more frequent communication on a particular subject will be necessary at the operational than at the strategic level.
Techniques:
The techniques of communication have deliberately been left for consideration last for, important as they are, their successful use is largely dependent on the more fundamental matters already discussed. Techniques are many and varied, and they could provide material for a essay in themselves. Only a brief survey is practical here, and for convenience they may be grounded under two main heads-personal and impersonal.
Personal techniques:
These are the techniques or aids to communication which, broadly, involve face-to-face meetings. They include:
1. Manager’s conferences: It is useful for regional managers to convene periodic meetings of branch managers to discuss current matters of interest. The communication here should be upward, downward and lateral. Conferences may also be held to explain major new ventures or systems, although here the emphasis will be on imparting information downward. The manager’s deputy should represent the branch in the manager’s absence. It may occasionally be appropriate for deputies to attend in any case (if this practical) and in some cases, for example on the introduction of a new book-keeping system, it may be useful for deputies to have their own conferences, at which the content of the communication may be rather different.
2. Senior executives’ meeting. These meetings may be of regional manager or heads of departments Mutatis Mutandis, they will be organised much as the managers’ conferences. These more senior meetings may afford an opportunity for managers to try out ideas which are as yet confidential.
3. Interviews. The value of staff interviews as an aid to communications can easily be overlooked. The general manager who interviews a candidate for a board appointment is unlikely to alter the decision which is virtually settled. He is, however, gaining a valuable contact with a man in the ‘front line’, and the interviewee should benefit the meeting. These contact, and the the possible boost to morale in being interviewed by a general manager, are the main justification for the use of expensive management time.
Lower down, there should be regular interviews with staff department and or representatives of regional management. Inspection teams have a part to play in communication too, both in their inculcation of the required standard and in their contact with staff which supplement those of the management.
4. Branch visits. Visits to branch by regional management are variation on the above, which need not entail formal interviews. Apart from their contribution to staff relations, they are mainly useful to give regional management the feel of what is going on at the lower levels.
5. manager’s lunches. The complement to branch visits is the lunch organised for very small groups of managers, even one or two at a time, or larger numbers at the regional office. These occasions provide a more relaxed and informal opportunity for communication to take place. It can be useful for the local managers of specialist subsidiaries or department to attend such meetings from time to time.
6. Visits to specialist units. Visits to specialist departments and subsidiaries (trustee, taxation and so on) can usefully be arranged for branch managers and other branch staff down to about the intermediate securities clerk level. The book-keeping supervisor in computer-linked branch will also benefits from a visits to the computer centre. Such visits not only increase technical knowledge but also afford an insight into the other man’s problems and give a personal contact which can smooth out many small difficulties.
7. Job rotation. The practice of moving career staff fairly regularly is a similar aid to communication, as staff get to know each other and the different parts of the group better. As personal management improves it is likely that the more able staff will progress through a variety of jobs on a carefully planned basis- an this varied experience must ten to facilitate communication.
8. Staff training Centres. The detailed arrangements for staff training differ among the banks but all have some form of college or training centre. At the more junior levels the training provides communication downward only, but in the more senior stages there can also be scope for upward and lateral communication as ideas and experience, as well as information, are communicated.
Impersonal Techniques
This term is used to comprise those remaining aids to communication which are more impersonal in their nature. These aids include:
1. Head office circulars. Dull as these usually are, they are the staple elements in downward communication in a large group. It is often appropriate to issue them in two forms-those which are purely ephemeral and those of more lasting content. Circulars are generally issued to the whole bank, or at least to a major division, but there can be occasion for more local circulars issued by regional management to send confidential letters to regional managers (and their equivalents in other parts of the group) to amplify certain information and instructions contained in general circulars.
2. Instruction Manuals. Manuals and handbooks provide the permanent and authoritative set of procedural instructions needed in any large organisation. Detailed arrangements may vary, but it is important that the issues and updating of these instructions be controlled at a senior and responsible level.
3. Less formal booklets. It is unrealistic to expect the major junior staff to take much heed of circulars or manuals, and very occasionally a less formal communication, such a pamphlet illustrated with cartoons, may be used to convey information.
4. Guide to services. In these days of an increasing diversity of services, the large group may well find it useful to issues to its branches a guide giving details of all group’s services, with notes of how to obtain specialist advice on any aspect. Since it is vital that the guide be accurate and up-to-date, it can best be issued in loose-leaf form.
5. House magazines and bulletins. There is probably a place for both the ‘house’ magazine, directed to staff only, any for a bulletin aimed at staff, customers and the general public. Such a bulletin is likely to be in the eye-catching form of a full-colour broadsheet, with the emphasis on topical events within the group, of general interest but with a promotional slant.
6. Films. The use of films has generally been restricted to training films on specific subjects, for use on the banks in-company courses. The film is powerful medium, however, and, subject to the practical limitations of preparation and exhibition, it could probably be used more widely as an aid to communication downward.
7. Correspondence and reports within line management. Every bank must have an established system of reporting upwards, by letter, form or memorandum, in respect of certain prescribed events. Whilst urgent problems, such as the presentation of a cheque taking an overdraft outside a manager’s discretion, may justify referral on the telephone, by far the greatest part of such communication must be in writing. This is necessary for control and audit purposes, to avoid doubt, to improve accuracy, to aid in assimilation and to assist in collation of reports. Recent years have seen considerable progress in systems design and improved forms using such techniques an multi-part form sets and NCR(No carbon requires) paper.
8. Inspection reports. Although a small part of the total communications efforts, inspection reports (supplemented in certain special cases by those of the external auditors) have a special functions, as they provide an independent check on the upward communication in line management.
9. Electronic and other sophisticated aids. The coming decade will undoubtedly bring great advances in electronic aids to communication, with such devices as on-line working in real time and visual display units for interrogation of computer files. These aids will both assist, and be promoted by, the current trend towards dispersal of staff from the large conurbations. It is to be hoped that the growing avalanche of paper will be checked, and it will prove possible to keep much of a bank’s current records on magnetic tapes and discs, with the more permanent data being stored on micro-film or even micro-fiche.
Money Transmission- Today and Tomorrow.
Ernest Sykes Memorial Lectures
Eynon Smart A.I.B.
It is 13 years sine money transmission provide the subject matter for the Sykes Lectures, and a background glance to 1961 when the subject was ‘ Bank Transfer Systems in the United Kingdom’, serves to remind us how after the initial excitement of a radical innovation we can accept almost without noticing them the hardly less radical development that follow it. The contrast between then and now is even more pointed if we look back another two years when the lectures were on ‘Electronic in Banking’.
In 1959 the year in which what had been the Spring Lectures were re-named in memory of Ernest Sykes we needed to be told about ‘calculators and Computer’ How they work. In 1961 we had ‘just started along the road of automation’ But ‘we were still mentally in the age of the adding machines’. In his 1962 lecture Mr. J.D. Cowen was able to report substantial progress but it was only the pioneers who were thinking in what we may call ‘real time’ terms.
The value of this years’ lectures to the bank reader is twofold Mr. Charles Rea (Director, Inter-Bank Research Organization) in ‘Future Plans and Prospects’, sketches the possible was ahead; Mr. G.E.K. Foster (Chairman, C.L.C.B. clearing committee) covering ‘Current Developments provide a perspective for what has been and is happening around us vastly more complex than what seemed complex in1961 and such a perspective is valuable both for those who have no personal contact with the transfer mechanism for the many who see the detail of it in their branches without knowing the framework in which that detail operates.
Nor are the lectures only of banking interest. Of all our services it is money transfer that has the widest public impact. That public may note with approval Mr. Foster’s remark that our customer relations trouble with direct debiting were large of our own making” and it will do no harm if note is taken of Mr. read’s argument that we must ‘turn our attention urgently to the relatively unexplored ground of the devising of national tariffs for our increasingly sophisticated transfer services.
There is much else of public interest, especially to the large corporate users of these services but it is naturally in the banks that the lectures will be read with most interest. As early as page 2 we have Mr. Foster saying the following:
No one but the clearing banks is responsible for distributing sorting and redistributing cash. It is services to the community as a whole for which the banks receive little recompense or recognition. Indeed our holdings of cash are now officially treated as our stock-in-trade and as a result, the cost of holding cash has become very important to us and forces us to economise in the level of stocks throughout our branch network. A study jointly with the Mint and the Bank of England of the cash distribution is taking place at present.
And on the last page Mr. Read remarks on
… the interesting fact that as competition is heightened between the banks and between banks and other financial institutions so the need grows for ever greater clarity and ever closer co-operation in those area of their activity where co-operation is essential.
On this point of necessary co-operation Mr. Read earlier drew an illuminating comparison with railway development in which different companies found it necessary to agree on such matters as line gauge and tunnel height, while competing on prices serves and comfort. (Railway students will sorrowfully remember that the Great Western had a abandon Brunel’s broad gauge in the interest of such co-operation to the continuing Mr. Foster point out that.
… what is sometimes considered by our critics to be unnecessary collusion between the banks is in fact the agreement of and adherence to a set of rules by which the whole system works. This is quite a topical point in view of the Fair trading Act which will require registration of agreements of this kind.
One aspect of the importance of the whole subject is pointed in Mr. Fosters remark that ;the clearing is as relentless as water in full flow: so long as the drains are coping there is no bother but once they become blocked we have flood on our hands’: with an average four million cheques exchange through the clearing every day the full flow is a formidable one. And the credit clearing is something else again. With its peculiar problems.
Credits can serving so many different purpose salary credits payments of commercial invoices consumers paying their public utility bills individuals lodging credits at branches of banks other than those where their accounts are held representatives of mail order services companies and football pool collectors lodging their taking branches of multiple stores remitting credits to central are also prepared in many different ways; by hand typewriter, accounting machine address plate and computer printer. Some are issued by the creditor to a predetermined design, for example public utility credits while other are originated by the person lodging the credit. Sometime the amount is know from the outset, sometime it is last thing to become established.
The difficulty of automating such diversity has so far been insoluble. One possible for the future is what Mr. Read calls ;credit truncation’: as with cheque truncation 9whcih is probably closer to realication0 the paper is stopped at the receiving branch and a the information is sent onward through the branch terminal system. But credits do not have pre-encoded detail and must be still more of a problem that cheques.
…the solution here may resemble that of on-line cash dispensing-namely the use of a magnetically encoded plastic card containing the relevant information about the account to be credited which could be machine read at the time of paying in. Amount and any other variable date would of course still have to be keyed-just as they would with truncated cheques. If the teller keyed and agreed them in the presence of the customer the procedures would not seem to be too dissimilar to those of the present non-automated system. Some banks may also consider going one step further by making the customer do the keying himself.
All this is but to skim the surface of two formidable studies in the hope of whetting appetites for the complete lectures: to read Mr. Foster’s rather sharp treatment of some of the smaller non-clearing banks, and his discreet outline of the problems of Government use of the money transfer services; Mr. read’s description of CHAPS (Clearing House Automated Payments Systems) which it is hoped will improve our same day transfer, and SWIFT (Society for World Wide Interbank Financial Telecommunication); both speaking discussing BACS-(Bankers’ Automated Clearing Services, the Development from the Inter-Bank Computer Bureau, which presently handles 200 million items a year from 1,200 users despite the constraints the possible easing of which Mr. read examines. And much More. It is perhaps worth adding as a footnote that neither speaker commented as either might justifiably have done on the middle years in the 1960 in which disillusion with bank automation was widespread and reflection in public comment by more than once senior banker. When those two earlier sets of Sykes Lectures were delivered optimism was abroad maybe the early enthusiasts raised hopes too high. Now automation present and future though still little enough understood is taken for granted. The new Sykes Lectures should increase both our understanding and our respect for the achievements of the system men.
Trustee Department Notes
E.W. Knights, F.I.B.
Severance of a joint tenancy
The difference between a tenancy in common and a joint tenancy is well-know, as are the rules by which it may be determined whether the co-owners of the property held in joint ownership have the beneficial interest in common or on a joint tenancy. Whether or not the legal estate is vested in some or all of the beneficial owners, it must of course, always be held in a joint tenancy, because since 1925 the law cannot contemplate a legal tenancy in common, but the beneficial interests may be held either in separate shares or a joint interest passing entirely to the survivor or survivors on the death of one of the co-owners.
As a general principle, equity will assume a beneficial joint tenancy only where the four ‘unities; are present, namely, unity of possession, unity of interest, unity of title and unity of time, and until 1925 the only was in which c co-owner could sever the joint tenancy was by destroying one of the four unities i.e. by an assignment, or a partition or by acquiring another interest in the property.
Under s. 36(2) Law of Property Act, 1925, a joint tenancy in realty could also be converted by one of the co-owners giving the other notice in writing of intention to sever the joint tenancy, although this method is not available in respect of joint tenancies of personal (which , in the case of a property which is to be sold, makes it essential to give notice before the sale is effected, because the proceeds of sale would be personally and not, therefore, susceptible to s. 36(2)0.
In a recent case (Nielson-Jones v. Fedden, (1974) 3 all E.R. the methods of severing a beneficial joint tenancy were re-examined. The facts, briefly were that, on the breakdown of a marriage, the parties (who held the Matrimonial Home on a beneficial joint tenancy) agreed that the husband should buy a smaller house and they signed a note providing that he should sell the existing house ‘and employ the funds realised to his new home… ‘ The husband entered into an agreement to sell the house and the wife was made a party to the agreement. In correspondence between the husband and wife and their solicitors it was plain that they were proposing to terminate the joint tenancy, but before the negotiations were completed, the husband died.
The Court held, on the facts that the wife had become, by survivorship, beneficially entitled to the whole of the proceeds because:
1. the note signed by the wife did not constitute an assignment of her beneficial interest as it dealt only with the use of the proceeds of sale and not with the ownership:
2. the correspondence between the parties could not be construed as a memorandum of severance because the negotiations had not been completely before the husband died; and
3. even if the correspondence disclosed and unequivocal declaration by the husband that he wished to sever the joint tenancy, it had no effect because (it having been decided above that there was no sufficient memorandum under (S. 36 (2)) severance could only be achieved by an assignment or by mutual agreement of the owners, and a unilateral declaration would not suffice.
Estate agents’ Commission
Because of the nature of the transaction involved and the frequency with which proposed sales and purchases of houses fail to proceed to completion, there have been a number of cases concerning the circumstances in which an estate agent has earned and can enforce payment of his commission. An examination of the cases is complicated by the fact that the terms under which the agent agrees to act can vary considerably, but in a large number of cases commission is expressed to be payable on the introduction by the agent of a person ‘ready, able and willing to purchase’ (or in very similar terms), whether or not an intending purchaser was ‘able to purchase has usually been easy to determine and the dispute has usually centred around the time when an intending purchaser has sufficiently demonstrated that he is ‘ready and willing’ to purchase, so that even though the transaction is frustrated for some reason, the terms have been satisfied and the estate agent is entitled to enforce payment of his commission. In recent years, there has been growing a line of cases which has suggested that satisfaction of the term cannot be demonstrated until the purchaser has actually completed, or at the very least-proceeded to contract.
In a recent case (Christie Owen and Davies v. Rapacioli (1974) 2 All E.R. 311) where the terms were ‘ready, able and willing to purchase’ and the intending purchaser had signed a contract but the vendor then withdrew without himself signing because he had received a better offer, the Court of Appeal examined the earlier cases and enunciated the following principles:
\a. the decision whether commission is payable depends upon the terms of the agreement in question determined on the ordinary rules of construction;
b. where the terms are ‘ready able and willing to purchase’, commission is payable even if the transaction is abortive, provided the intended purchaser has made an unqualified offer within the terms (which he had by signing the contract) and it is the vendor who has withdrawn.
From the viewpoint of the vendor, the expression ‘ready, able and willing to purchase ‘ is not very satisfactory and it is far better to instruct and estate agent on terms that commission is payable in respect of the introduction of a purchaser who actually proceeds to completion. This is particularly important where the vendor is a trustee and, therefore, constrained by such decision as that in Buttle v.Saunders (1950) 2 All E.R. 193) to act in the best interest of his beneficiaries.
Remember the Buyer’s Market.
Basil Boothroyd Recalls his Big Splurges.
An African Christmas
Those with a mere 30 or 40 youtube behind them won’t understand I dare say that other among us nudging senior citizenship get an urge to leave home during the festive season. Christmases, we tend to feel, not only have cumulative sameness, but it accumulates more quickly. No sooner has that needle-shedding conifer, with baubles been prised from its gaily-disguised bucket and chucked in the garden than the shop windows seen to be filled afresh with cotton-wool snow, the greetings of the management, and tinselled trouser-presses labelled ‘Useful Gift’,
And considering that Christmas as people are always saying in the cracker and crystallized fruit queues, is the kiddies; time, this is a dirty trick. It’s so long between Christmas for kiddies that they can never believe there’s another on e coming.
You can leave on the short term, of course, just to save the cooking. A one who has twice had to extinguish flaming poultry-and once dropped the pudding into an upturned hat on the hall table-I am not against this. Even as I write, our weekly local is fizzing with holly-border enticements to nosh our cared away at a selection of handy road-houses, with guaranteed cracker mottoes and noise-making instructions to ease the bruise in my cheque book. The trouble with this is the feverishly high standard of the gaiety. There’s a touch of anti-climax, after the last distraught waiter has been tipped, in coming home to the hush of our own electric fireside and Billy Smart’s Circus/
It was best, we though a year or two ago, to make a clean break, and spend our Christmas somewhere where they wouldn’t ne having one. What you don’t have, you don’t miss, I always say. Besides, it was hat winter when all Europe was on the iron grip of sub-zero. It sandals and calomine lotion, to swim a few widths of a pool on December 25th, and bask on the alien stand.
If I misled you with that African bit in the title, I’m sorry. Think not of safaris, and towering tuskers looking down the snout of my elephant gun. This was African, but only just, The north-east corner somewhere, not too far from Tunis. I remember that, though I’ve tried to forget much else, because we went into your actual Tunis one day, hoping for a quaint old time in the bazaars, and first entered a large new black glass hotel asking for the bar. A chocolate dignitary in a chocolate uniform pointed to a pair of swing doors. One said ‘THE’ on it, and the other ‘PUB’. These romantic foreign places Loudspeakers were transmitting our old friend Crosby dreaming of this well-know White Christmas.
Our own hotel, admittedly had prepared us for this sort of thing. We’d arrived on about December 21, to find its foyer filled by men on step-ladders with white-wash buckets, painting seasonable designs and characters on all the windows. The manger scene was favourite, but S. Claus, with reindeer, ran it a close second, and wrung exclamations of delight from our fellow-guest, mostly in warm Yorkshire and Lancashire accents. Somewhere nearby a band played ‘Jungle Bells,’ perhaps a well-loved Moslem tune.
These intimations that we hadn’t entirely left Christmas behind us after all were only recorded dimly at the time. This was because of the rain. And it was also because of the rain that we feared during our first two days, that we should starve to death. That was my fault. It was one of those hotels built on the scatter-and-forget principle, with a mother-building for eating, drinking and administration, and a village of individual villa flung out towards the sea. I had insisted in my correspondence, been very firm about it, that we should have the most seaward villa they’d got. I made it at a rough guess, about three furlongs from the heart of things, up and down a lot of picturesque waterfalls, which later proved to be flights of marble steps in dry any weather, ideal for the cooling of sun-baked feet-which we hadn’t by any means, got by the time we’d been escorted to our quarters under a colourful drenched parasol.
The starvation threat arose from my wife’s having only one pair of shoes, in sodden basketwork, and my not feeling up to giving her the fireman’s life over the three furlongs to the hot soup. We had a telephone and I could lie to you and say it didn’t work. It worked, but had the strange, incurable habit of saying ‘Yiss, yiss!’ at the other end, and then going click. It wasn’t alone in that. When I eventually sprayed and waded my way back to reception, leaving my wife to keep her strength up on the only nourishment available, which was air0sickness pills, reception behaved just the same except that instead of going click it went into a room behind the counter and stayed there, waiting for this trouble-making British twit to go away and stop beefing about changing his villa, wanting some blankets, desiring not to starve to death and the like.
It’s a lack, with Arabians in the hotel business, that their English it poor. I though I’d got somewhere with one of them on about the second day, when he said ‘Yiss, yiss’, and wrote me out what I Gala Christmas Dinner, without which, I gathered from the representative of a package tour, I shouldn’t get any dinner at all that night. I took it, and asked for another, but he’s gone into the back room. At least, I though I could eat half and smuggle the other half back to the prisoner in solitary.
In fact, by Christmas Day, she’s dried out a bit, and so had the weather. We’d managed to make the dinning room for several meals, probably averaging one day, and on the morning of the 25th I duly swam in the pool-which would have been more fun if (a) I hadn’t been alone, and (b) the towel I’d bought in the hotel shop hadn’t turned out, when I wrapped it around my goose-pimples, to be a very thin table-cloth.
This year, therefore as last we are spending at home thus saving a bomb and a return flight, mostly through sleet during which the captain of the aircraft-a small, friendly, piston-engine job-confided on his way to the toilet, that the home meteorological reports weren’t good and that ‘between you and me’ (holding up crossed fingers) I’m flying like this’. He got us down pretty well in the end. Just a bounce or two and a hint of a sideways skid.
Don’t write by the way, for the name of the hotel, because I’m keeping that private. Who wants to lose friend? I’m still trying to remember the name of the friend who gave it to me.
Yours Faithfully
Miss. Shaun Bucknor
Comments
Post a Comment