Saving first principles

We’ve come a long way from the Rev. Henry Duncan’s noble idea 200 years ago – or perhaps not as far as you think.

Suddenly, you could open a bank account with only sixpence, an extraordinary revolution for the poor in the Dumfriesshire community of Ruthwell exactly 200 years ago. Until then, you’d needed more than thirty times as much – £10 – which meant that saving in any kind of bank was simply a closed option to just about everyone except the well-to-do.

What changed everything was the idea that the local minister, the Rev. Henry Duncan, put to his parishioners. On 10 May 1810, in the Society Room in Ruthwell, he proposed a parish bank to help the poorest save for times of hardship.

It was the birth of something big. By 1818, there were 465 savings banks in Britain, 40% of them in Scotland. The trustee savings bank movement was based on Duncan’s conviction that, despite the appalling poverty of the time, the answer did not lie in “degrading” subsidies for the poor which did nothing to encourage pride and independence.

Duncan believed that a savings bank could only succeed if it were self-supporting and based on business principles. With the backing of local landowners (who were doubtless delighted that the poor might no longer need their support!), he launched the Ruthwell Savings Bank.

Deposits, placed with the Linen Bank in Dumfries, earned 5% interest and Members received 4% on whole pounds. The surplus provided a charity fund, tiered interest for long-term savers and a sum for administering the bank. In fact, Duncan administered the bank himself and used the money due to him to build another school in the parish.

Within five years of opening that little bank, there were savings banks throughout the UK; the following year they spread to Europe and the United States. During that first year, the total savings amounted to £151. Ten years later, the UK total had reached over £3m.

By 1995, the English, Welsh and Scottish components of the movement had been absorbed as the merger between TSB and Lloyds Bank formed Lloyds TSB Group plc, one of the largest forces in domestic banking. And, at the turn of the century, there were already more than 100 organisations world-wide administering the affairs of savings banks in 92 countries.

The structures have changed, but many of the core principles endure. The annual World Thrift Day, marked every October, testifies to that. As Chris de Noose, Managing Director of the World Savings Bank Institute and the European Savings Bank Group puts it: “Setting aside small sums in a safe place allows people to guard against risks like illness, unemployment and other economic hardship.”

World Thrift Day was established to promote the importance of savings, and it’s now reckoned that, of some 1.4 billion accessible accounts existing at institutions across developing economies of the world with an explicit mission to foster access, some 1.1 billion are provided by savings banks.

And now, as the UK savings bank movement celebrates its bicentenary, the fallout from the turbulence in global financial services markets is again reinforcing the value of those thrifty first principles. And the last surviving independent one, Airdrie Savings Bank, celebrates its own 175th anniversary this year.

Not for the first time, its Trustees chose not to follow the herd into mergers and amalgamations but to remain stoutly independent – and to be today the subject of envious and admiring press analysis from all over the world.

“I think we’ve survived,” says General Manager, Jim Lindsay, “quite simply because we’ve stuck to our traditional banking approach in the way we deal with customers, the way we approach lending, assessing suitability and affordability for borrowing, and all the traditional approaches that are involved with solid, professionally-trained banking.

“We have concentrated on providing a first-class service to customers, primarily face-to-face with a welcoming and friendly approach.

“Thrift runs through everything we do. In the primary schools savings scheme we’ve run for decades, for instance, we are encouraging savings at an early age and keeping that habit into adulthood. So, while we now have all the most up to date money transmission services, the core element is still saving. And it’s growing year-on-year.

“While people now are talking about getting back to basics and restoring confidence and trust in financial services, our belief is that what we’re doing is what ordinary banking should look like. Our peers, interestingly, are now global with savings banks thriving in Europe and in the US, all operating on a mutual basis.

“So my Long View message is: First principles work, and our bank is looking forward to our next 175 years!”

Airdrie Savings Bank’s 175th anniversary has been marked by the publication of a commemorative book Airdrie Savings Bank – A History, by Professor Charles Munn OBE who was CIOBS Chief Executive from 1988-2007. Details on www.airdriesavingsbank.com

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