The Early Years
Set up a bank. Open it from 1.00 - 2.00 p.m. once a week. Do not allow customers to deposit more than £20 a year. Fine them if they do not deposit regularly… This may sound an unlikely business model, but it was precisely how many of the early savings banks operated. Unlike the commercial joint-stock banks, they were established ‘for the advantage of the labouring classes and the lower orders of society’. Their aim was to encourage ‘habits of industry, economy and sobriety among the poor and labouring population’.
Revd Henry Duncan
It is generally accepted that the savings bank movement began in Scotland, in May 1810. It was then that the Revd Henry Duncan first opened the doors to his parish bank in Ruthwell, Dumfriesshire.
He firmly believed that the poor should be encouraged to help themselves, by saving against times of ill health, unemployment and old age. Although there had been earlier savings schemes, such as Priscilla Wakefield’s Female Benefit Club in Tottenham, in 1798, Duncan's bank was different. What set it apart from the others was that it was run along business lines: it wasn’t reliant on donations from charitable benefactors.
The Ruthwell example was quickly followed elsewhere in Scotland. The idea also spread south of the border, into England and Wales. Here more than 80 savings banks had been set up by 1817.
In Scotland, savings banks could earn interest on their funds by depositing them with the joint-stock and chartered banks (Ruthwell Parish Bank placed its deposits with the British Linen Company Bank). This, however, was not the case in England and Wales. The situation was resolved in 1817, with the passing of Rose’s Act. This Act allowed the funds of English and Welsh savings banks to be deposited with the Government. The funds were held in an account at the Bank of England, administered by the National Debt Commissioners. In return, the banks received an attractive rate of interest, part of which was passed on to depositors. The Act made an immediate impact: by 1818, more than 465 savings banks had been opened across the UK.
Trustees and Customers
Although the early banks were run along business lines, they still relied heavily on the support of their trustees. These trustees, who gave their time voluntarily, oversaw the running of the bank. They were upstanding members of the local community, who often came from the ranks of the aristocracy, landed gentry or clergy.
The customer base was also very different from that of their commercial counterparts. The savings banks were aimed at the ‘industrious poor’. Consequently, many depositors were artisans, labourers, small farmers, and servants. They also attracted large numbers of women and children, unlike the high street banks.
Expansion of the trustee savings bank movement ground to a halt in the second half of the 19th century.
In 1861, the Post Office Savings Bank Act was passed. Within a year, some 2,500 Post Office savings banks had been established. Many were in direct competition with the existing TSBs; within ten years, more than 200 of these had been forced to close.
In 1886, the movement was rocked once again, this time by a major fraud. The actuary at Cardiff Savings Bank was found to have embezzled £30,000. This amounted to a massive 15% of total deposits. The Bank’s trustees handled the investigation poorly, and enraged depositors by refusing to repay the money in full. The crisis escalated, and savings banks across Britain came under intense scrutiny.
Co-operation and Collaboration
TSB Association members, c.1890
Following the Cardiff fraud, it became clear that a greater degree of co-operation among the banks was needed. Until now, individual savings banks had been run independently of one another; each was very much a local affair. The first step towards unity was taken in 1887, with the establishment of the Trustee Savings Bank Association. The Association had two aims: to protect the interests of depositors, and to increase co-operation among savings banks.
Wartime Savings & Branch Expansion
The savings bank movement continued to expand during the First World War. This was largely due to the Government’s campaign to boost savings, in support of the war effort. During both world wars, savings banks acted as agents for the sale of government stocks. War savings certificates and defence bonds proved popular with depositors too.
In 1947, a Mutual Assistance Scheme was established. This allowed the richer banks to lend money to poorer ones wanting to expand. Funds were also lent to set up new banks. Fifty-nine new offices were opened as a result.
During the next 35 years, savings banks continued to expand their branch network and merge with each other.
As a result of this consolidation, by the beginning of the 1970s the number of savings banks had been reduced to 73.
In 1971, the Government set up the Page Committee. Its remit was to review the workings of the remaining 73 savings banks. The ensuing TSB Act of 1976 was based on its recommendations. It allowed the savings banks to offer the same range of services as their commercial rivals for the first time.
The Act also created an entirely new regional structure. The 73 banks merged into 20 (later 16) regional institutions. These were overseen by the newly-created TSB Central Board. The Board took on the regulatory and supervisory powers previously exercised by the National Debt Commissioners and Inspection Committee.
Flotation and Beyond
Advert promoting the sale of shares in TSB, 1986
Taking advantage of their new freedoms, the TSBs expanded their facilities and services. But further reorganisation was needed to keep pace with growth. In 1983, the last 16 savings banks were merged into yet larger regional groupings: TSB England and Wales; TSB Scotland; TSB Northern Ireland; and TSB Channel Islands. Two years later saw the passing of another TSB Act. This permitted the group to restructure again, ahead of flotation on the London Stock Exchange. The flotation took place in 1986, and TSB Group plc was created.
However, expansion did not stop there. In 1987, a network of estate agencies was set up. Hill Samuel Bank and Target Life were also acquired.
Another significant milestone in the Group’s history was reached in 1995: it merged with Lloyds Bank to form Lloyds TSB Group. Both parties had their own particular strengths. Those of Lloyds Bank lay in mortgages and small business banking, while TSB’s were in savings and insurance. As a result, the new combined company became one of the largest forces in UK domestic banking.
The TSB brand reappeared on the high street in 2013, when more than 630 Lloyds TSB branches were brought together to form the new bank. This followed a European Commission ruling in 2009 which required the Group to divest part of its business.
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