MR. FISHER ON LIQUIDITY
First of the bank chairman to vouchsafe us his views, Mr. Edwin Fisher, of Barclays, explains that last year's moderat.: setback in published profits was due partly to increased pro- vision for taxation and partly to " the general conditions ruling." It is evident that last year the rival influences on banking policy—the necessity for liquidity and the wish to earn profits—were at times rather more difficult to reconcile than normally. Mr. Fisher left no room for doubt that the " primary consideration " is always liquidity and that, as a consequence, the board was led to reduce, to some extent, the bank's holding of securities and reinvest part of the money in the less remunerative but more readily realisable form of bills. The bill portfolio had thus been increased by over £4,000,000 to £54,594,153, including £30,455,000 of Treasury Bills, despite the cutting down in. the average amount of Treasury Bills offered at the weekly tenders.
Taking its four exceptionally liquid assets—cash, balances, &c., in course of collection, money at call and bills —Barclays is shown to have a ratio of such assets to its deposit liabilities of 34 to 38 per cent. at December 31st. Here is a measure of the extent to which safety-first principles are allowed to over-rule the profit-e.arning urge. There were times last year when, in order to strengthen the cash holding, the bank deemed it advisable to withdraw funds from the money market. That happened during the crisis period of September when foreign balances were being rapidly with- drawn from London. Mr. Fisher, true to banking tradition, regards such an occasional " fire drill " as a desirable opera- tion in that it proves that the system is working properly and that assets that are liquid in theory are equally liquid in practice. In his view, which will be shared by other bankers, Lombard Street came out of this test with credit.
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