FINANCING INDUSTRY. •
A comparison between British banking, consisting of a few strong units, and the Continental and American systems, where many individual units are operating, lends itself to an application of the above arguments. Their force is increased rather than diminished by another very important difference between the actual practice of bank- ing here and on the Continent. In this country, as else- where, one of the most important functions of the banker is the provision of finance for industry. British bankers, however, regard liquidity of assets as of more importance than do their Continental confreres, and they do not therefore supply the permanent capital - for industrial undertakings. Short advances, either in the form of an overdraft or a separate loan account, are made as a matter of ordinary business, but the British banker, in theory at least, reckons upon any credit granted being repaid in- course of time. Continental banking, taken as a whole, participates more directly in industry, in many cases actually contributing to the direction of enterprises, as,, well as supplying more or less permanent capital. Govern- ment encouragement, either through. the Central Bank or otherwise, is often a feature of this participation of bank- - Mg in industry. It should not be supposed that this ", industrial banking," as it is termed, is universally prac- tised on the Continent, but some of the best known insti- tutions on the Continent do actually participate in indus- try, and are specially designed for that purpose. It may be noted in passing that, in a sense, the present prolonged period of trade depression has resulted in British banks being more intimately concerned with indus- try than has been their custom. As already shown, ' bankers expect their loans to customers to be purely temporary, but repayment of bank loans contracted by, many industrial concerns before the depression set in has proved to be an impossibility: The credits granted 1-1i3.ve thus tended to become " frozen " to an extent which gives them an almost permanent character. These cir- cumstances, perhaps, have necessitated the bankers concerned taking a more direct interest in the conduct of the business of certain customers than ever they held before. The fact remains, however, that the credits were originally granted as temporary expedients, and that their long continuance is regarded as an abnormality by the customers no less than by the bankers themselves. On the Continent, as has already been shown, such a state of affairs would not be regarded as anything out of'- the ordinary ; but when, as is often the case, a relatively' small Continental bank is engaged largely in financing a single industry, the strain imposed when that industry becomes depressed is often a severe one. This seems to constitute the weakness of a combination of industrial banking with a banking system composed of small units. With such wide differences existing between British and overseas banking, it is not surprising that the question as to the suitability of our own banking " lay-out " has often arisen. As has been shown, the principal charac- teristics of the British commercial- banking system are a wide use of cheques, extreme centralization through the existence of a few very strong institutions, and the absence of direct participation in industry.
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