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Trustee Savings Banks (Capital Development)

Volume 640: debated on Thursday 11 May 1961

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asked the Chancellor of the Exchequer what proposals he has for assisting the capital development of trustee savings banks.

Trustee Savings Banks have hitherto relied for their capital development mainly on surplus funds accumulated in the past periods when their income was generally in excess of the interest paid to depositors and management expenses; those banks with insufficient capital have borrowed on generous terms from other savings banks. But the sums available for lending in this way are limited, and my predecessor recognised that if branches were to be expanded and brought up to date, and if even only a modest number of new branches were to be opened, a new source of finance was required. He therefore agreed in principle that the rate of interest payable to the Banks on their deposits with the National Debt Office should be increased in order to build up a fund for capital development.The necessary arrangements for this have now been made, and I am proposing to increase the rate of interest paid to the Trustee Savings Banks by 1s. from£3 per cent. to£3 1s. per cent. for a limited period not exceeding five years, in order to set up once for all a capital fund from which the necessary Savings Banks development can be financed. The capital fund will be administered centrally by the Trustee Savings Banks Association under arrangements set out in the Fourth Mutual Assistance Scheme to which all Trustee Savings Banks have agreed. Loans from the fund will be free of interest and will be repayable over 10 years or 20 years depending on the purpose for which the loan is made. All capital development by Trustee Savings Banks will continue to require the approval of the National Debt Office. It is intended that the first credit to the capital fund, representing the sum raised by the additional 1s. per cent. per annum for the first half-year should be made on 21st November, 1961. This will require the interest to accrue from 21st May, 1961. A Treasury Order, raising the rate of interest from the latter date is being laid before Parliament.