WESTMINSTER BANK LIMITED

An Eventful Year

THE Annual General Meeting of Westminster Bank Limited will be held on February 16 at 41. Loth- bury, London. E.C.

The following are extracts from the statement by the Chairman. Mr. Duncan Stirling, which has been circulated with the report and accounts: The year 1965 was an eventful one in which the results of the exchange crisis of 1964 continued to dominate all other questions. Although the authorities again contrived to check the threat to our cur- rency with a skill and success that have deserved and won general applause. they themselves have been the first to warn against any complacency about the- achievement. The prospect of the balance of payments sustaining the value of the pound without the adventitious props of foreign credits is yet to come. The seriousness of our recurrent crises in past years lies not so much in each one by itself as in the chronic succession by which each of them cuts deeper than the last. Such a fundamental weak- ness is not to be cured by changing the value of the pound even if that were forced upon us.

Appropriately enough, therefore, another feature of the year was the effort to make a reality of the Incomes Policy by fulfilling the declarations of intent on which it was founded a year ago. The Government have fought hard to do this—but the battle is not yet won. In our state of very full em- ployment a scramble for labour by employers has had to face the notorious suspicion of an Incomes Policy on the part of some Trade Unions. The result has been the familiar twist to the vicious spiral—costs rising faster than productivity, leading straight back to the balance of payments problem. The process has gone on so long and gathered such impetus that we need not feel shocked that it has not been halted; but it might have been slowed down by now had not some extravagant wage claims been met by some generous awards.

The short term remedies relied on by the Govern- ment are well known and affect most phases of the national economy: stiffer control of foreign ex- change; taxation designed to cut consumption and the outflow of capital; restriction of building and development; postponement of some plans for social welfare. Alongside these we have had a high Bank Rate, the re-introduction of Special Deposits by banks with the Bank of England to freeze some of their lending capacity, and a renewed limitation on the level of bank advances.

These stringent measures, together with the im- port surcharge. make a formidable list and the wonder is that they had so little effect in the first half of the year. In the event consumer demand has remained high, but the slowdown in private investment is now becoming apparent and is likely to compromise-the required rate of increase in pro- duction. The paramount need to increase exports remains more urgent than ever, and happily some-

thing has been achieved in this; but the future will turn on our productivity. In the meantime the strength of sterling has been far greater than we were entitled to expect a year ago, and this at least relieves us from the critical conditions we then faced.

STAFFING PROBLEMS

The award by one of the "big five" of a salary increase of 5% was referred to the National Board for Prices and Incomes which criticised it. It must be said. however. that our first necessity if we are to remain in business, is to rccruit, train and retain an adequate staff, and that we have to do this in competition with others. In this there is no substitute for an attractive salary scale.

In the matter of staff negotiations we have for many decades dealt with our staff's own Guild. During the past year, discussions have been held to explore the possibility of setting up joint nego- tiating machinery between Clearing Banks and their staffs; but as these talks are not yet concluded, it would be premature to say more about them now.

Another matter affecting our staff, and our cus- tomers too. has been the proposal that banks should not open on Saturdays. There are conflicting points of view on this. but as the whole question is still under consideration it would be out of place to say more at this stage than that we will do whatever is possible to mitigate any inconvenience to our customers if our branches have to be closed on Saturdays.

CHANGES IN BANKING

The widening scope of banking and financial busi- ness has been generally recognised for some years. We have seen banks entering into hire purchase, domestic banking into international banking. Issu- ing Houses into deposit taking and insurance. mer- chant firms into finance and the converse. Our own investment in Mercantile Credit Ltd. is an instance of these developments, but our main activity in them has been in the international field.

At home these changes have aroused a keen bid- ding for money balances which were traditionally lodged with the banks. Apart from the diversion of money into Treasury Bills. this competition is mainly in two forms. One is the establishment by Local Authorities (and to a lesser extent by hire purchase companies) of what is virtually a new money market of their own. As these funds are almost wholly used for long term investment, their repayment can only come from new borrowings. The import for us is that in an emergency the banks are in the position of lenders of last resort to this new money market, as the Bank of England is to the Discount Market, but with the important difference that the banks have no control over the market's commitments.

Altogether the trend is towards a general liberalis-

ing of banking practice and a breaking down of old demarcations. Restrictive attitudes are no more appropriate in banking than in industry, and we have felt ready to take our share in today's more flexible order. We have therefore let it be known that we are at our customers' disposal for whatever services they may require and we can provide.

It is also in character with the times that we have bought at 27/6d. each 480,000 5/- shares in Diners' Club Ltd., being 40% of that Company's capital. Our connections throughout the country, our computer facilities and our experience, will con- tribute materially to the progressive business of Diners' Club Ltd.

1965 ACCOUNTS As already stated the strains in the national eco- nomy have involved a high Bank Rate and official resistance to the strong demand for advances; in spite. of this and the impressive array of other re- strictions, business was extremely active throughout the year. In the outcome therefore the Bank has had a good year and the profit declared is a record. The increase is mainly attributable to three factors: tt higher level of advances, higher interest rates (Bank Rate averaged £6.8.5d.% against £5.1.2d.% for 1964) and to a lower effective overall rate of taxation.

AUTOMATION In the general development of our business a spectacular feature has been the extension of our automation system. At present nearly 700,000 accounts at our three City Offices, at 175 branches in Greater London and beyond are now linked to computers. The system is to be extended in London and in the provinces during 1966.

We are not content, however, to see computers dealing only with accounting procedures; we are now entering a new phase by employing them as management tools. We have simultaneously em- barked on a service for our customers by setting up systems designed for their needs.

DECENTRALISATION

Another quite different event has been the decision to disperse the control of the provincial banking business from Head Office to nine District head- quarters. These will be at Bedford. Birmingham. Brighton. Bristol. Chelmsford. Maidstone, Man- chester, Reading and Sheffield. At each place there will be a District Manager in charge who will be in regular touch with the branches in his area and with Head Office. The new arrangements are already operating successfully at Bristol and have just been started at Sheffield.