Savings Banks and the National Giro

There are two major savings banks, the National Savings Bank which is operated by the Post Office on behalf of the Department for National Savings and the Trustee Savings Dank. Both banks provided deposit facilities for small savers and these are collected at 21 000 post offices (in the case of the NSB) and at 1 500 branches of the Trustees Saving Bank. The Trustees Savings Bank now provides a current ac­count service (i.e. payments may be made by cheque); the National Savings Bank does not provide such a service, but the National Giro provides money transmission services. All of the assets of the National Savings Bank and the greater part of the assets of the Trustees Savings Bank consist of government securities (i.e. loans to the government).

The National Giro is managed by the Post Office and commenced operations in 1968. Its aim is to provide a cheap, simple and quick money transmission service by making use of the existing network of post offices. All the records are kept, and the processing is carried out, at the computerised centre at Bootle. People holding giro accounts are provided with three basic services:

1. Transfers to other account holders. These are carried out by posting giro transfer forms to the computer centre. These transfers are free although there is a small charge for stationery.

2. Deposits. Deposits can be made in cash at any post office or by cheque. Deposits into one's own account arc tree, but a charge is made when people pay into some other person s account.

3. Payments. An account holder can draw-cash through post offices or can make payment to a non-account holder by means of a postal cheque. In each case, as long as the account is in credit, no charge is made for these services.

The giro system is not new, most western European countries have been such systems for many years. In the UK the system started slowly and losses were made in early years. It has since broadened its services to include deposit accounts, personal loans and limited overdraft facilities and cheque guarantee cards. It is now operating profitably and is widely used for local authority rent payments and for the payments of social security benefits.

Complete this paragraph using these words:

assets cash interest

liquid maturity reserve

Because a commercial bank can lend most of the money deposited with it to other borrowers, who in turn may lend it to another borrower, each sum of money deposited in a bank is multiplied several times. To ensure the safety of the banking system, central banks impose (1)........... requirements, obliging commercial banks to deposit a certain amount of money with the central bank at zero (2)........... Central banks in different countries also impose different "prudential ratios" on commercial banks. These are ratios between deposits and liquid (3)........... that are considered sufficient to meet demands for (4)............ (A bank's assets are its loans, which should, in theory, all be paid hack one day, and its liabilities are the customers' deposits, which can all be withdrawn one day.) For example, a bank's capital ratio is between its capital and reserves on the one hand, and its total assets on the other. The reserve asset ratio is between deposits with a (5)........... of under two years, called "eligible liabilities," and reserve assets, which include cash and assets that are (6)........... - i.e. quickly convertible into cash - such as reserve deposits held by the central bank, and securities such as treasury bills.

Study and discuss the information given in the text. The questions below it may be helpful to you.

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