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The former Australian Competition and Consumer Commission chairman Professor Allan Fels, commenting on the revelations about banking behaviour in the Royal Commission, has said
“… it’s now out there in public that this behaviour has been going on, widespread, shocking, unconscionable … It’s worse than I thought, more systemic, more unconscionable.”
Jeff Morris, the whistleblower on Commonwealth Bank activities, recently in receipt of $700 million dollar fine for ‘dodgy’ behaviour, sees it arising in part from the
“untrammelled greed of management fuelled by out-of-control bonus schemes based on Key Performance Indicators”.
Such are things today, but I want to take you to a happier banking time which was motivated not by profit but by philanthropy; to the time of the Penny Bank. “A penny saved is a penny gained” was a slogan used in NSW to promote the formation of Penny Banks and to encourage the poor to bank very small sums.
Where did the idea of Penny Banks originate and what was their purpose?
The Penny Bank (PB) in origin seems to have several stands to its DNA. In 1861 J D Langley, himself a banker and future bishop of the Church of England in Australia, drew attention to Priscilla Wakefield in Tottenham as the founder of the PB. In 1798, she founded the first ‘frugality bank’ in England to help those on low incomes to save money. Members paid, according to age, a monthly sum which would give them a pension after they were 60 years old and money if they were sick. In this function, it was more like a Friendly Society than a bank for it was a form of superannuation, the benefit of which was only available to its beneficiary at a certain date.
In 1808, a society was formed in Bath for the purpose of receiving the savings of industrious and respectable servants upon which interest of four per cent was paid. The management of the scheme was undertaken by a committee of eight, four of whom were ladies. PBs, which were open to all and where funds could be drawn at any stage, was a Scottish innovation being formed in West Calder by its minister the Rev John Muckersey in 1807 and then a short time later by the Rev Henry Duncan of Ruthwell in Dumfriesshire in 1810. Such banks, however, did not become commonplace in Scotland until decades later in the 1860s.
The aim of the PB was to encourage the less well-off to save very small sums ‘to encourage and foster habits of regularity and frugal economy’ and place them with the PB. In turn, this money would be deposited by the Trustees of the PB in a Savings Bank which would pay interest that was passed on to the PB depositor. The PB was necessary as the Savings Banks normally would only accept a minimum deposit of one shilling. Initially, the first NSW PB did not pay interest as it was intended only to ‘be a poor man’s purse to save his pence until they became shilling and pounds’ upon which time they could place their funds in a savings bank. It was considered, quite correctly, that calculating interest would be a significant burden on the administrators and so this initial PB was promoted as a ‘Safety Bank’ and not a ‘Savings’ Bank’. This was soon to change and PBs did pay interest. Depositors were encouraged to become a PB member as
You will have the advantage of feeling you are doing your duty to your family and yourself, and that you are placing your money where it will be safe, until sickness or old age, or some other cause compels you to ask for it again.
The first PBs in the colonies of Australia were at Unley in South Australia (1858), Dalby in Queensland (1859), Liverpool in New South Wales (1859), Geelong in Victoria (1862) and Launceston in Tasmania (1862). The way the PBs were organised was outlined in a newspaper article encouraging their formation: