I have been digging through some family archives and came across an old bank passbook belonging to my great grandfather, William Booth. He lived in Perthville in the central west of NSW. His account was with the Bank of New South Wales, Bathurst branch.
Pasted inside the front cover is a statement of the account keeping fees. I was born after decimalisation, so 5/- was not immediately meaningful to me. It turns out that the semi-annual fee is five shillings. To complicate matters further, the first transaction in the passbook is dated 1903, so these are British shillings. Australia did not introduce its own currency until 1910.
Having worked out that much, I was interested to compare 1903 account keeping fees to account keeping fees today. So, the next step was to convert five 1903 British shillings into present day Australian dollars. The website Measuring Worth comes in handy for this purpose. The site’s banner features the following quote from Adam Smith’s The Wealth of Nations (1776).
The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it… But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated… Every commodity, besides, is more frequently exchanged for, and thereby compared with, other commodities than with labour.
With that in mind, it provides a range of present day values for five 1903 shillings. Well, almost present day: their data series extend to 2011, so in 2011 terms five shillings is worth any one of the following
| £22.00 | using the retail price index |
| £26.00 | using the GDP deflator |
| £86.80 | using the average earnings |
| £134.00 | using the per capita GDP |
| £200.00 | using the share of GDP |
Back in the day of William Booth, account keeping involved someone manually reconciling three columns of pounds, shillings and pence. These days the process is computer-assisted, so a retail price adjustment may be more appropriate than average earnings or any of the other measures.With UK inflation running at 2.6% over 2012, I can tweak £22.00 to £22.57. Using the current exchange rate, that amounts to A$33.33. Strictly speaking, even though Australia used British pounds in 1903, I should use an Australian retail index, but as Measuring Worth only has US, UK, Japanese and Chinese conversions at the moment, I will stick with the British approach.
So, Mr Booth was paying just over $5 per month in service fees for his banking. The Bank of New South Wales has since become Westpac. According to the Westpac website, the monthly service fee for the “Westpac Choice” transaction account is $5. Fees at other banks would be very similar. So, perhaps surprisingly, account keeping fees seem to have changed very little over the last 110 years!
Given the level of automation in banking today, it would be reasonable to expect that fees would be lower than they are today. Certainly if the five shillings were adjusted based on average wages, the cost of Mr Booth’s account keeping would be more like $20 per month. Not only that, like every other bank, Westpac also offers a basic account option with zero account keeping fees. I am sure that would not have been an option in 1903.
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Sorry, what’s surprising about the bank not passing on to the consumer the benefits of over a century of technological and productivity gains?
Oh well, at least airfares have come down since 1903.
@dan don’t get me started on air travel…there is some good material in the archives on that topic too!
Dear Sean, a very nice discovery and piece of analysis.
But while these fees might have stayed constant in real terms, I bet the commercial banks in 1903 didn’t have access the Committed Liquidity Facility that is being provided to the banks today by the government.
This “facility” is corporate welfare at its “best”. Amazing. Maybe that is why they haven’t jacked the “account keeping fees” in real terms.
best wishes
bill
@Bill without wanting to deny that banks derive many benefits from their role as regulated authorised deposit-taking institutions, I don’t think that the committed liquidity facility (CLF) arrangements are quite the boondoggle that recent media commentary suggests. Australian regulators have fallen into line with the international regulatory community and will introduce new liquidity rules from 2015. These new rules will mean that banks have to hold much higher levels of “high quality liquid assets” (HQLA). The rules as to what constitute HGLA are quite stringent. The challenge for Australian banks is that the main source of HQLA are Commonwealth and State Government bonds. Each of the four majors will have liquidity requirements of the order of $100b but the total volume of Government bonds on issue is only around $400b, much of which is already held by superannuation funds or offshore investors. So, our regulator is essentially introducing the requirement for banks to hold assets which simply do not exist. The CLF was developed as a solution to this problem. The RBA already lends money to banks, taking bonds as collateral as part of their normal market operations (“repo”). The CLF formalises this arrangement. In return for taking an ongoing fee, the RBA will provide a commitment to banks to provide repo funding to banks. Once the commitment is in place, the CLF will count as HQLA. Meanwhile, the regulator, APRA, is telling all the banks that they have to demonstrate that they are doing everything they possibly can to ensure that they never have to rely on the CLF. So, it’s all a rather silly game to dress up existing arrangements as compliance with new regulatory rules. From the point of view of taxpayers, I’d actually argue it’s a positive, as banks will effectively be paying the RBA for a service that the RBA already provides but does not charge for.
Very nice !
The costs of offering at call accounts in 1910 are likely to have been quite substantial and labour intensive. It would be interesting to know if the product was a loss leader at the time to attract customers for more profitable business.
I wonder if depositors were restricted to withdrawing money from their ‘home’ branch to prevent someone travelling from branch to branch withdrawing funds before the ‘news’ of the withdrawals traveled by pigeon to the home branch?
Or was the passbook considered a sufficient record of the balance to allow withdrawals from other branches in the network.
Probably the latter as my fading recollection of my own passbooks were that they were almost like a passport in terms of watermarks and security devices. Possibly to reduce the temptation to ‘forge’ a passbook to allow multiple withdrawals.
Presumably other branches would inform the home branch of withdrawals and if something did not stack up the home branch would investigate a discrepancy between the passbook and their records.
No wonder the banks once employed armies of clerks!
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In that era withdrawing from the account at a different branch would have been quite complicated, and I think would have been prearranged so signatures were available at the non home branch. It is easy to forget that much of what we take for granted, like internet banking, direct debit and being able to take money out of machine anywhere from the local pub to an airport on the other side of the world is all relatively new. Plus I do it with a Commonwealth Bank fee free account, which I know costs me through a lousy interest rate but it isn’t a lot of money.
I bet they didn’t have transaction limits or a per-transaction fee like our ATM fees… Though I imagine there were other restrictions.
Consumer inertia accounts for a lot of what the big four get away with. There are very compelling accounts available if you’re willing to shop around. I’m continually amazed more people don’t have ING Direct’s account: no feed, no ATM fees for withdrawals of at least $200 and they even give you $0.50 if you get $200 cash with an EFTPOS transaction.
Clearly there’s plenty of fat in the economics to allow them to do this!
I have now uploaded a photo of the account holder at his butter factory.
In a similar vein, I look at a UK mortgage payment book from 1946 http://wanderingdanny.com/oxford/2013/02/john-edward-aston-practical-chimney-sweep/
Oh dear, we could be related. My family was originally from Rockley, near the Bathurst area. I don’t think there are any Booth connections though. Boothman though.