What’s happened to the Bankers'
They’ve thrown out the silk hats and the wire cages. They’ve loosened up on loans. They’ve even hired press agents. They’re competing like used-car salesmen in buildings that look like supermarkets. Here’s the tale of a minor revolution in a very unradical business
A SHORT time ago a grim-faced man stepped from a taxi at Windsor Station in Montreal fifteen minutes before the Chicago train was due. Suddenly he stiffened like a pointing bird dog. He had recognized a familiar figure standing at the gate through which the incoming Chicago passengers would soon move. A look of dismay on the newcomer’s face was quickly replaced ; by one of cunning. He glanced at the ARRIVALS board and found that the train would be a few minutes late.
In another instant he was in a taxi careening to Montreal West, the second to last station at which the train would stop before reaching the Windsor terminus. He threw a bill to the driver, raced to the platform and swung aboard the train just as it began to move. Hurrying through .the cars ho soon came upon the Chicago passenger hêTOjus seeking.
There was a handclasp and a hur^y^t'eonversation. He told the visitor he had a llh^btiï^Éé engaged for him; any hotel reservations the Chicagoan had made could be cancelled. He also panted out that it would be more convenient to gèt éff the train at Westmount, the next stop, than to go on to Windsor Station and fight the crowds mjd¿own
Montreal. At Westmount they left The
man at the gate in Windsor when»
the last of the Chicago passongers*”file;$ paid him, that the man he had hoped wL'.Jpneetî1' hod... been a bd ucted by a ri val.
The men who went to meet tne ¿jjpn were not spies in the pay of foreign powers. They were representatives of two of our charted« banks. The man on the train was not carrying guided-missile blueprints for sale to the highest, bifbler. He was from a large U. S. company kboofc io build a Canadian plant. All the bank representatives wanted
was first chance to secure the firm's banking business in Canada. The episode bad a cloak-anddagger flavor, but was not unique.
This kind of competition for new business is only one of the ways in. chartered banks
have charged their-methods in r ecent years. Most of the mraaR>miUioh .people who keep their five billion döliars kt ? da Vings in the banks’ forty-one hundred^harnaches; don’t even know about it.
But àrèiiér? changes are apparent. Modern bank interiors have changed from gloomy, forbidding pfap&stM Which employees lurked behind iron bars Und frosted -glass barriers to bright cheerful spots where customer and employee face each other aero«» blond maple counters. The change in exterior design is just as radical. New bank buildings no lhwger look like mausoleums but like ultra-modern dhain stores, with less masonry and more plate glass. Gone are the massive pillars, the classical stone carvings, wrought-iron and studded doors.
Thinking has changed since the Royal visit in 1939 when buildings on a Vancouver street on the Royal route were being given an exterior cleaning by sand. A bank on the street agreed to the treatment only under pressure, after arguing that its coating of grime gave it an appearance of age and stability and should be left intact.
It was in Vancouver, eleven years later, that the first drive-in bank in Canada was built by the Bank of Montreal. Other banks have followed suit in
other cities; now there are a dozen drive-ins seattereckacross the country, and more are planned. 4 íf.’U psàfi* oP banks’ policy of making things easier for the customer to do business. At a drive-in die sweeps into a curved driveway and stops opposite ‘a feller who is behind a sheet of bullet-proof glass. They talk over an inter-communication system. Without leaving his car the customer puts his money and passbook (or his cheque for a withdrawal) in a two-way drawer which the teller shoves out to him. The drawer is pulled in and the teller records the transaction. The customer thus does his banking on the run.
In other ways too the banker’s bid for the depositor’s dollar has become as forthright as that of any other business. Until a few years ago bank advertising was as austere as a calling card; now it’s competing for eye appeal with ads by brewers and car manufacturers. Under the National Housing Act the banks are lending money to home builders; not so long ago this would have been considered much too risky. Bank employees are more adequately paid and their working conditions are better.
The banks are not only cuddling up to the public with bright offices, pens that don’t scratch, catchy advertising and winning smiles. Since 1944 they have increased the interest paid depositors from one and a half to two percent and have lowered the maximum rate on loans from seven percent to six. And they have made small loans easier to get. At the close of 1954 the chartered banks had $683 millions on the books in loans of less than $500 to people for their personal needs, other than business. Of that amount more than half -$352 millions—
was granted without
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What's Happened to the Bankers?
CONTINUED FROM PAGE 17
the borrower having to put up securities or persuade a friend to endorse his note. As recently as 1947 only $133 millions in bank loans were thus unsecured.
The banks are loosening up in large business loans too. Last year the Imperial Bank of Canada let Gunnar Mines Ltd. have $5,500,000 for a mining development, the first loan of the kind ever granted in Canada.
But Canadian banks have probably changed most of all in the way they compete with one another. When the Bank of Toronto and the Dominion Bank were recently merged, thus becoming the fourth largest bank in Canada (The Royal Bank of Canada, the Bank of Montreal and the Canadian Bank of Commerce are ahead of the field), a joint statement by the two banks said in part: “The bank’s larger coverage will create greater competition in Canadian banking and should result in better service to business and to the public.”
A spirit of friendliness usually shows in the bank’s dealings with depositors but not when banks start competing for the accounts of new firms opening in Canada, for building sites for new branches and to get in on the ground floor of newly developed areas of Canada. F. G. Cleminson of the Toronto-Dominion Bank says, “It’s a dog fight. No other business in Canada is as fiercely competitive as banking.”
When the Tip-Off Comes
Every bank exchanges correspondence with banks in various parts of the world, so when some U. S., British or German manufacturer is thinking about establishing a Canadian plant he will mention it to his banker who in turn will tip off a bank in Canada. The prospect may also mention his plans to a member of his board of trade or chamber of commerce; boards of trade and chambers of commerce in Canada soon hear of it and a Canadian bank will be told. British and European manufacturers often make their preliminary enquiries about Canada at Canada House in London, or at the offices maintained in London by the B. C. or Ontario governments. The banks have friends at those places too —and also at the European offices of the CPR and CNR.
With all these stems of the financial grapevine throbbing with such information, two or three or more banks usually know when an outside businessman is about to take a look at Canada. When he or his representative arrives in Canada, the banks try to grab him, keep him away from rivals, get him started with an account. If all this involves a bit of skullduggery, it’s merely a part of the business. Even outmanoeuvred rivals understand, because they figure it will be their turn next.
Every bank has its business-development department where enterprising men plot ways to beat other banks to new business. This writer was cheerfully regaled by employees of several banks with stories of how coups have been engineered. No names are ever mentioned, not even bank names, but the stories are repeated in such faithful detail that it’s hard to believe they’re not true.
Take the case of the British oil company that was said to be interested in ■re Alberta fields. When several Canadian banks heard of this their contact
men were quickly alerted. The representatives of three banks were on hand when a plane carrying a deputation of two British businessmen arrived at the Edmonton air port. The bankers were jockeying for position when they saw their quarry swept from their clutches by a fourth bank representative who had got on the plane at Montreal and cemented his relations with the two Britons all the way across the country. He got their business.
A foreign investor coming to Hamilton two years ago was met by a bank representative and escorted to the hotel suite the visitor had reserved. As they entered the door the banker noticed a slip of paper fall to the floor. It was a phone message. And he recognized the number as that of a rival bank. He bent down smartly, gathered up the message and put it in his pocket. Then he did some quick thinking. If other banks were that hot on the trail, the visitor had to be moved, quickly and secretly.
He strode to the window and said: “Not much of a view—just another city street; and it may be noisy. I would be very glad if you would be our guest at the General Brock in Niagara Falls. We have a suite for you there, looking out on the Falls. It’s less than forty miles from here by an excellent highway, so you could come into Hamilton each day. You’ve never seen the Falls? Then that settles it. Here, let me call for a boy to get your things. No, I’ll take care of this cancellation. You just make yourself comfortable in the car.” After settling with the hotel he made a phone call to the General Brock and to his immense relief was able to get a suite looking at the Falls.
To bankers nowadays, getting in on the ground floor means literally getting there first with a new branch to serve a residential or business community, and this means hot competition for bank sites.
“There was a time when we acted like gentlemen about building banks,” one banker said recently. “When a rival put up a sign saying that he would build on such and such a site we would respect the notice and leave that area to him. But not now.” In recent years any bank advertising its intentions in this way would be apt to find a cluster of rival bank branches around itall fighting for the business the original builder hoped to get himself.
An example of this rivalry was seen at Oakville, Ont., in 1953 when the Canadian Bank of Commerce was budding a branch in a new district created by the coming of the big Ford Motor Co. plant. A signboard on the lot said the opening would be in early October. Across the street a block of stores was going up. As time went on, the Commerce people grew uneasy about one of the stores—the one directly across from their new branch. They asked the builders what it was; they said a grocery store. As the block neared completion, the store across the road was looking less and less like a grocery store and more and more like a bank.
Then the local paper innocently announced that the Bank of Montreal would open in the new block of shops during the first week in September. This happened in July.
The day after the news was out the Bank of Commerce wheeled one of its trailers onto a lot beside its partly completed building. According to the Bank Act, any bank premises must be permanent; the trailer would not do as it stood. But bankers are resourceful. Commerce officials took the wheels off the trailer and set it on a cement-block foundation. They wired it and put in running water.
While these frantic preparations
were going on, the Bank of Montreal was feverishly trying to get enough furnishings and other equipment into its new premises to open for business. Day and night the race went on. Crowds gathered. As each new piece of equipment arrived for either bank, cheers went up. Floodlights lit the scene of battle. The Bank of Commerce opened in its trailer at 10.35 the next morning. The Bank of Montreal opened at eleven.
Tn the new towns in the north the scramble for business is just as keen as in older towns like Oakville which are burgeoning because of giant new industries.
Banking on the frontier isn’t new. In the Yukon banks were doing business in tents in 1898. But today such services are much more common because of the banks’ race to keep up with mining development. Imperial Bank of Canada representatives reached Seven Islands, Que., in the winter of 1949 without even a tent. They rented floor space in a barber shop to start business; now Imperial has a staff of eighteen in a new building of its own, catering to business from the Labrador iron fields. From another new branch at Shefferville, Que., Imperial sends a snowmobile into nearby mining camps.
The Bank of Montreal was first into Kitimat in northwest B. C. One man started out from Vancouver in December 1951 by boat. He was equipped with safe, counters, stationery, money, and everything to start a branch bank. The rigors of mid-winter travel forced him to leave most of his supplies at points along the way; but he arrived at the prefabricated building which was to be the new branch (minus water, heat or electricity the day he got there) with the money, a handful of pens and a case of ink. He opened for business the next day.
Is Banking Dull?
Three years ago last December the Canadian Bank of Commerce opened in Uranium City, Sask. One clerk, with the usual supplies for branch banking, started from Fort »Smith in a twoseater plane. Clerk and pilot took off on a Monday and were not heard of again until the next Friday. They had been forced down by bad weather on Monday and spent the night in sleeping bags in twenty-below-zero weather. Tuesday morning it cleared, but the battery had died.
Rations were running low on Friday when a rescue plane spotted the helpless craft. J. Evans, the clerk, later observed: “When I first went into the bank a friend remarked pityingly, ‘You’re in for a pretty dull life.’ ”
Banks have opened branches in all kinds of cabins, sheds and other flimsy structures in the north, usually with only one or two clerks to guard the money. But the only northern bank robbery so far reported was at Kemano, in the Alcan country of B. C., where a camp worker broke into the new branch of the Royal Bank of Canada.
But it was not to steal money. The culprit was thirsty and was after the clerk’s bottle of after-shave lotion. He confessed when he sobered up and offered to pay for the lotion.
What’s the reason for all the changes in Canadian banking in the last few years? Why are the banks streamlining their methods, shedding their austerity and competing so strenuously with one another. Maybe the answer is to be found in a recent statement by James Muir, chairman and president of the Royal Bank of Canada, who said: “It cannot be denied that the cold, formal and unimaginative attitude of previous generations of bankers did much to antagonize many people and make most
feel ill at ease in their dealings with the banks. Enlightenment is the whole story. We have had to learn that we are here to serve the many, and that without the many we couldn’t survive. It is our policy today to let everyone know we need their good will and can provide valuable services in return.”
The antagonism Muir speaks of was most apparent during the Thirties. Besides an indifference to public good will in those days, the banks had a psychological strike against them because they had nothing but money. People could peer into the tellers’ cages and see it— stacks of it. And more in the vaults—piles of tight little bundles of tens, twenties and even fifties and hundreds. Although he realized that it was not the bank’s money, a man couldn’t help having bitter thoughts on seeing such wealth while he was drawing out the last ten bucks that stood between him and hunger.
The CCF had many sympathetic ears when it made the chartered banks one of its chief whipping boys in the early Thirties. J. S. Woodsworth, then leader of the CCF, called the banks
“financial pirates who tyrannize the Canadian people.” The Liberal Opposition during the Bennett Government was willing to join in the chorus.
“The chartered banks are ruthless in their policies,” roared Ian Mackenzie, the Liberal member from Vancouver Centre. His colleague from Parry Sound, Ont., Arthur Slaght, cried, “The banks hold a monopoly which is almost a racket in the lending of money.”
The CCF blamed banks for the boom-and-bust cycles, charging that banks loosened credit to the danger point during good times and prolonged depressions by withholding credit in bad times. Nationalization of the banks
was an early CCF war cry. It is still officially a plank in the party’s platform, but during the past three or four years it has not been emphasized.
While the CCF was swinging freely in the 1930s at anything resembling a chartered bank, the Alberta Social Credit government of William Aberhart was also threatening to land a blow.
In 1937 Aberhart decided the banks would have to help provide some of the social security he had promised the îople. The Bank Taxation Act, issed by the legislature, proposed to ry a half-of-one-percent tax on the iks’ total paid-up capital and a tax , one percent on all reserves and
undivided profits. The “take” would have been more than two million dollars— thirty times as much as the banks were then paying in taxes in Alberta. Aberhart’s “Tax the banks; it costs them nothing!” rang through the foothills.
The banks fought back and late in 1937 the Supreme Court of Canada ruled the Alberta act was unconstitutional. When Alberta carried the fight to the judicial committee of the Privy Council the Supreme Court’s decision was upheld.
But all this skirmishing, and the criticism from the CCF, convinced the banks that if their ledgers were in good shape their public relations was bad. In the Thirties the Bank of Montreal and the Royal Bank of Canada began to take a bigger interest in this phase of their business. The Bank of Montreal hired a Montreal newspaperman, Munro Brown, and the Royal pepped up its advertising with an advertisingagency executive, J. C. Nelson.
Then the Canadian Bankers’ Association hired Vernon Knowles from the Toronto Star at $20,000 a year to advise all chartered banks on how to get along better with the public.
One of the first things he did was to tell the banks to get those astronomical figures off their windows — Reserves, so many millions; Capital, so many millions. Such a display would not win a man who wasn’t sure where last month’s rent was coming from. Knowles also cautioned against having too much money in plain view in the banks. Tellers didn’t need great piles of bills at their elbows; the money could be kept under the counter, and people would not feel the bank was flaunting its wealth.
To one bank president he said: “Your banks are like Dickensian counting houses. They are gloomy and forbidding. All that grillwork and frosted glass is not as protective as you think, it impresses no one and offends many. Your furnishings should be such that customer and clerk can reach out and shake hands.” Knowles also urged all banks to follow the lead of the Royal and Montreal and engage professional advertising men. It took a few years, but eventually they all fell in line.
By 1945 the banks were spending $400,000 a year on advertising. In 1950 the Canadian Bank of Commerce dumbfounded not only its rivals but all national advertisers by offering Canadian writers one thousand dollars for a six-hundred-word fiction story. The stories chosen were published in magazine advertising space paid for by the bank. The bank’s only identification was its signature at the bottom of the page.
Last year the banks spent two millions on advertising. Some ads have been mildly startling. One shows a small boy gleefully attacking a large piece of cake. It’s the Imperial Bank of Canada saying that you can have your cake and eat it too, if you maintain a savings account. Under the words “Pink or Blue” an expectant mother is seen tying the last little frill to a basinette. It’s the Royal pointing out that the new baby is bound to mean extra expenses—parents ought to prepare by opening a savings account.
Other banks are running similar ads, all of which would have caused a banker of the previous generation to throw a fit on his deep-piled rug. It doesn’t mean that the banks have renounced dignity. As J. C. Nelson of the Royal says, “The banks are still dignified—but their standard of dignity has changed.”
The banks have taken other steps to encourage savings. The Bank of Nova Scotia last year devised a combination of savings and life insurance. Anyone
between six and forty-six may open a savings account, setting a fifty-months goal of frojn one hundred to a thousand dollars to be deposited in monthly installments of between two and twenty dollars. The regular two-percent interest is paid and if the depositor dies before fifty months are up, the Canada Life Assurance Co., by arrangement with the bank, pays the beneficiary the full amount of the target sum.
The reason banks strive to promote saving is simple--that’s the money they lend. The b^nks pay two percent to get it and receive up to six percent for lending it out. (In certain cases of personal loans made without normal bankable security the interest rate is higher at one major bank, at least.) Many people think bankers can lend unlimited amounts of such money but they can’t. The federal Bank Act makes them withhold at least eight percent of depositors’ money in banknotes and deposits with the Bank of Canada^—the government’s bank. Actually, the banks withhold ten percent —to meet their depositors’ withdrawal demands.
Besides this ten percent, earning nothing, the hanks invest in short-term government securities which often earn little more than the two-percent interest paid depositors. Right now, there are $5,200 millions in Canadian bank accounts. And the banks have out on loan $4,232 millions. The inspector general of banks, working under the minister of finance, receives complete statements each month from each chartered bank showing what is happening to depositors’ money. His auditors visit each bank at least once a year to make a personal check.
Who Pays for the Gold Leaf?
The spread between the depositors’ two percent and the banks’ six percent isn’t all gravy for the banks. It costs about one and a half percent to run the hanks; that’s everything from wages to gold leaf for the head-office ceiling. And all loans don’t bring the maximum six percent. According to amount and risk, the rate can be anywhere between four and a half percent arid six.
A breakdown of bank-loan distribution in July last year showed that of $4,182 millions then outstanding, industry had borrowed $1,001 millions, personal loans amounted to $663 millions, retailers had been granted $629 millions, grain dealers and exporters $382 millions, governments of all levels $204 millions, farmers $333 millions, contractors $188 millions. Hospitals, school boards, churches, public utilities, mining, forest and fishing enterprises, and more than thirty other borrowers had accounted for the rest.
Another loan category came into the picture last year with the passage of the National Housing Act (1954). This act replaced a former NHA, passed in 1944, under which mortgage companies and other conventional mortgagees had loaned money for new housing, backed by the Central Mortgage and Housing Corporation, a crown corporation. The new act gave this function to the banks. Although such lending was then withdrawn from other lending organizations, as far as crown guarantees were concerned, the field is still open to them if they wish to make loans without government backing. Few mortgage companies are doing this. They prefer the conventional mortgage business—loans on buildings already in existence.
Under the 1954 National Housing Act chartered banks may lend a proshome builder a maximum of ble in monthly install$1,000 borfrom
the time the loan is granted. Those are the bare bones of the deal. When the act was first suggested the banks were balky. Canadian banks had never made loans on real estate and they didn’t want to start.
The government insisted and the bankers’ public-relations counselors reminded them that there was a lot of good will to be gained by helping the family man. On April 1 last year the Bank of Montreal granted the first loan for home building to a North Vancouver couple, Mr. and Mrs. Bob Logan. Since then the Canadian banks have made 2,800 similar loans.
In recent years the banks have also been looking more kindly on their employees. At one time four hundred dollars a year was starting salary for a junior bank clerk in Canada. A teller or accountant could hope for fifteen hundred after ten or fifteen years. The relationship between manager and staff was something like that of the seigneur and field worker. In some banks an employee had to have the manager’s consent to get married.
Now, a bank employee can get married any time he likes, and tell the manager about it afterwards. He doesn’t have to put on his jacket before entering the manager’s office and he may even call him by his first name.
Starting salaries for a high-school graduate range from $1,500 in small centres to $1,700 in cities. There is a yearly increase, on merit, that will give a youth as much as $3,200 in the cities after five years, and $3,000 in other areas. A branch managership brings from $5,000 to $10,000 a year plus free living quarters. Sixty percent of all bank employees are women. Few try to make a career of it, so the male employees are competing against only forty percent of the staff for advancement. From junior clerk to branch manager in twelve years is not beyond a good man’s chances.
Besides higher wages there are sickness and accident benefits, pensions, sick leave and holidays with pay and some banks pay extra for overtime. Some pay part of a clerk’s club fees if he belongs to a recreational or cultural group.
It was once a rule (though not always enforced) that a teller victimized by a forger or bad-cheque artist had to make good from his own funds. That rule no longer applies. Such cases are decided on individually; if the bank is satisfied the teller took all prescribed precautions before handing over the money, the bank assumes the loss. If it is found that the clerk was negligent he may he asked to make up the amount— if he can pay. If it is a large amount the bank will pay it, but the clerk’s advancement may be blocked.
Clerks are not expected to defend their cash with guns. Firearms have been removed from the banks, except perhaps for a revolver in the manager’s office. The banks have decided it is better to let the bandit have his loot than place employees in a position where they feel obliged to duel with gunmen, and perhaps catch customers in the cross fire. Instead of guns, all branches—even in small communities— can register an alarm in the nearest police station merely by the teller pressing his foot on a pedal below the counter.
For clerk and customer alike the banks seem willing to do anything to show that your best friend is your banker. Some day they may even do something about that man ahead of you who dumps a bale of cheques and a couple of small ledgers on the teller’s counter, launching her on a twentyminute auditing job, when all you want is to cash a five-dollar cheque and get back to the office ahead of the boss. ★