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British Banking History Society

Birmingham Municipal Bank

This bank was unique in being the only one controlled by an English local authority. Birmingham was the birthplace of Lloyds and Midland banks, but the Municipal Bank was nearly stillborn.

The man behind the bank was Neville Chamberlain who was at that time Lord Mayor of Birmingham. He could see the advantages of having a municipally run and controlled savings bank for the workers then being paid relatively high wages due to the first world war and its need for high production. The idea was that regular saving should temper any desire to squander money.

Many battles were fought with the then Treasury, in fact it was almost a constant battle to get the bank established. After much discussion and debate the Royal Assent was given on 23 August 1916 for the founding of the infant bank as the Birmingham Corporation Savings Bank. However, the Act of Parliament placed severe limitations off municipal banks. These included allowing only authorities with populations of over a quarter of a million; only employed people could open an account; maximum of 200 per person; withdrawals on demand up to 1 only; National Debt Commissioners controlling the investments of the Fund and the Treasury controlling the earning capacity of funds. Perhaps the most limiting restriction of all was that the bank must be wound up within three months of the war ending. Neville Chamberlain was, however, gambling that the Treasury would not insist on the bank being wound up if it was successful, and thereby risk a public outcry.

The bank's original head office was inside a little office in a basement occupied by the Council's Water Department. A modest fifteen feet counter was erected and a space nine feet by five feet screened off. The first manager was J P Hilton, appointed on 18 September 1916. By 23 September 1916 stamp size coupons with a face value of 1 shilling had been issued. A card with twenty spaces was provided and when filled, the card was taken to the bank for 1 to be entered in the pass book.

There was also the fore-runner to ERNIE, of premium savings bond fame. This was a prize fund with donated prizes, the first being 100 from Neville Chamberlain's own pocket. He felt that the citizens of Birmingham would be encouraged to join the bank by the offer of a prize draw not financed out of the interest earned.

Neville Chamberlain realised the need for intensive marketing and more than one thousand meetings were held to publicise the new bank.

New denominations of coupons with values between 6d and 1 were introduced. Branches of the bank were at Austin Motor Co; Wolsley Motors; G.K.N; and at the gas works and tram depot.

In later life, Neville Chamberlain affectionately recorded that the founding of the bank was one of the achievements he was most proud of.

The bank later changed its name to Birmingham Municipal Bank and subsequently became part of the Trustee Savings Banks of England and Wales, and the bank was able to share the powers and privileges granted to the Trustee Savings Bank, and to provide a comprehensive banking service for local citizens.

In 1974, the Government accepted the recommendations of the Page Committee in regard to Trustee Savings Banks, which called for the re-organisation Bennett's Hill Office
of the Trustee Savings Bank movement, and the introduction of important new services for private customers. In the interests of the depositors of the Birmingham Municipal Bank, which as such, would not be empowered to operate the new services, the Birmingham City Council made the historic decision that on 31 March 1976, the Birmingham Municipal Bank would cease to operate as a Department of the Council, its place being taken on 1 April 1976 by the Birmingham Municipal Trustee Savings Bank, to which all assets and liabilities of the Birmingham Municipal Bank would be transferred. One of the main conditions associated with the Council's decision was that the Trustees of the new bank should be appointed by the City Council, thus ensuring a continuing link between the bank and the City.

The Trustees have also been authorised to investigate with the Trustee Savings Bank of the Midlands, which was formed with the amalgamation of the Coventry, Walsall and Wolverhampton banks, whether it would be in the further interests of the depositors to form one large unit serving a population of over three million in the Central Midlands area.

Whatever the developments in this direction, the bank has taken its place in a great movement, envisaged by Sir Henry Page as a "third force" in banking in this country, catering exclusively for the private customer.

At 31 March 1976, the last day of operation as a local authority department, the balances held by the Birmingham Municipal Bank totalled 138,986,629 (including contractual savings) in 791,000 accounts, and with 45,137 advances on mortgages having been made at this date.

Facilities offered by the bank included:

Savings Department No 1 - Interest at 4.5%
Savings Department No 2 - Interest at 4% with an Income Tax free allowance of 40 per annum (subject to conditions laid down by the Inland Revenue)
Investment Department No 3 - Two tiers of interest - 8% and 9.5%, according to period of notice for withdrawals
Current Accounts Department - No bank changes if the balance of the account does not fall below 50 in any charging period.
Mortgage Department - Advances may be made to established depositors in the No 1 department for the purchase of freehold or leasehold property.

Savings schemes in schools and places of employment are organised in conjunction with the local National Savings Committee and SAYE contributions and purchases of National Savings Securities may also be conducted through the bank.

The Bank's Head Office is in Broad Street, with a city office in Martineau Square. There are also branches throughout the city and surrounding area.

John Pursur and Derek Woodall

Click here for a picture of a Birmingham Municipal Bank cheque.

Copyright 2010 BBHS