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Last Updated: Monday, 6 June 2005, 23:06 GMT 00:06 UK
Banking's long revolution

By Peter Day
Presenter, BBC Radio 4 and BBC World Service

The transformation of banking in the last half-century has been one of the biggest changes in the world of business.

A red London bus in Regent Street
Banking was once part of a traditional world

I grew up in small towns in rural Lincolnshire.

It was the late 1950s and early 1960s, but it could have been the 19th century.

My father was a Midland Bank manager, and we lived over the shop, in freezing high-ceilinged bank houses with dozens of rooms and bells for the servants.

They had gone, but there next to the marketplace in the town centre we still had a secret walled garden, an orchard, a big asparagus bed, and stables where horses had been kept to take staff to sub-branches nearby.

The man who drove the staff van which replaced the horses did the garden in the afternoon when he got back from the villages.

High tea not IT

Every evening, my father would walk the 20 yards from the bank front door to ours, come in, sit down, and start the daily ritual of checking through the cheques.

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He'd thumb through every one of his customers' cleared cheques, sent overnight in the big branch postal packet from London.

He'd know every regular payment every customer made - and when there was a sudden irregularity.

Little had changed since Britain's national joint stock banks emerged in the mid 1800s.

Although national brand name banks replaced the hundreds of local ones (ours incorporated the Lincoln and Lindsey bank which used to issue its own notes) nothing disturbed the single-minded localness of banking and being a banker.

"They were giants," a distinguished customer later remarked to me of the Midland Bank managers of the 1960s in his home town, York.

It's a world we have lost.

Genteel past

My nostalgia has been provoked by a vivid new book - "Other People's Money" - by the Financial Times' former banking correspondent, David Lascelles.

It's published by the Institute of Financial Services (known in my father's day as the Institute of Bankers) to celebrate its 125th anniversary.

Canada Square, Canary Wharf, London
Modern banking is computerised and international

It charts the banking revolution of the past 50 years.

Among these upheavals was the disappearance of the local bank manager, who once stood on a social par with the doctor, the solicitor, and even the vicar.

There was nothing competitive about banking in the 1950s.

The advertising was genteel.

Midland's long-running seasonal ads celebrated what it called "Life's Simple Pleasures" (such as riding downhill on a bicycle or blackberrying) with never a mention of interest rates or cheque cashing out of hours.

But behind the scenes, banks were gearing up for growing post-war prosperity and meeting the needs of what were insultingly called "the great unbanked".

Modern marketing

The UK's High Street banks started marketing themselves in the late 1950s with personal loans, and then credit cards.

Competition on interest rates was ushered in by the Government White Paper on Competition on Credit Control in 1971, the same year as decimalisation.

Bank notes
Modern customers watch interest rates on savings and loans keenly

About this time, banks poured money into computerising their operations to abolish the need for the daily parcel of cleared cheques from head office.

But the banks tied the new machinery to their branch structure, prolonging town centre banks for another generation.

At the same time, banking was being professionalised. University graduates were being taken on for the first time as Old Etonians began to disappear from the boardrooms.

An Economist survey found 25% of the 220 clearing bank directors in 1961 had been at Eton - little changed from the 1930s.

Banks began to disclose the true extent of their profits and bad loans. Until well into the 1970s, this was considered too sensitive to be released to the public, who might worry their money was not safe.

Scaling up

High Street banks bought their way into the City of London, and the two cultures of branch banking and investment banking curdled and gnawed away at each other.

Many building societies seized the opportunity to turn themselves into banks.

And the bank manager, lord of the tiny world he surveyed, disappeared.

Banking became another branded supplier to the marketplace, driven by special offers and mechanised services.

It is now a hard-nosed international industry, with little sign of those once life-long customers (recruited at birth like those old Etonians).

These days customers follow the highest returns, and bankers refer to those who move their accounts for a quarter percent more as "interest rate tarts".

It's difficult to mourn the passing of the stodgy old bank manager, so respectful of local connections and reputations, and so conservative in his lending policy (the first woman manager was not appointed until 1958).

But branch banking was a series of local entrepreneurships of a kind many modern corporations would love to recreate, if they knew how.

Work in Progress is the title of this new exploration of the big trends upheaving the world of work as we steam further into the twenty-first century; and it is a work in progress, influenced and defined by my encounters as I report on trends in business and organisations all over the world.


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