Debating banking in Britain: The Colwyn committee, 1918

Abstract

By 1918 the British banking system had reached a degree of maturity and concentration, with a small number of large banks dominating the sector. Political concerns about the rise of financial power led to the appointment of the Colwyn Committee to investigate the amalgamations process, and consider the issue of concentration with reference to the role of banking in the economy. In this paper we explore this critical inflection point in British banking history and argue that the Committee's proceedings reveal that many current concerns about banking correspond to those of a century ago. We also argue that-contrary to some historical interpretation-the Committee did not unequivocally favour financial interests, but rather sought to stabilise organisational change in the sector, and introduce new restrictions on the freedom of banks in respect of amalgamation, as well as supervision and regulation.

Adam Smith and the Bankers: Retrospect and Prospect

“…That failure led to widespread adoption of limited liability by banks which, although it had been available for some years, had been largely resisted by banks. The concentration of the sector intensified so much so that by 1918 an official inquiry, known as The Colwyn Committee (more formally, the Treasury Committee on Banking Amalgamations), was set up to investigate the sector (Billings et al, 2021). And the advantage of joint stock banking did not appear to have led to a highly capitalised sector 38…”

“…The only academic economist on the Colwyn Committee was Herbert Foxwell. He is quoted in Billings et al (2021) observing… institutions of a certain size are ‘too large to let go’. It inspires the customers with confidence when a bank reaches a certain size; they say that whatever the state of things this bank will not be allowed to fall: a crash would carry the market away.…”

Making Commercial Law through Practice 1830–1970

“…135 Bank amalgamations which began in the 1880s culminated in 1918 in a domestic banking market dominated by five of the joint stock banks -Lloyds, Barclays, Midland, National Provincial and Westminsterall with extensive branch networks. 136 This combination of growth and amalgamation had transformed them into powerful financial institutions, which they remained for the rest of our period.…”

The defence of cosmopolitan capitalism by Sir Charles Addis, 1914-1919: A microhistorical study of a classical liberal banker in wartime

“…In addition to lavishing praise on Germany's institutions of bank governance and director compensation, Addis also commended the managers of the leading German banks for maintaining high capital ratios, a technical banking issue that had been discussed by the Colwyn Committee, which had been appointed in March 1918 to investigate bank amalgamation (Billings et al, 2019). The German banks' adequate cushions of capital reduced the probability that they would have to rely on the government or some other lender of last resort.…”