The important part played by British banks and insurance companies in promoting the com> mercial prosperity of the country can hardly be exaggerated, and the powerful influence' of these institutions is largely due to the immense credit which they command and are able to place at the service of trade and industry. It is, however, of interest to note that the number of individuals owning shares in British banks is very considerable and is constantly increasing, so that the prudent administration of bank resources is of direct benefit to a wide public. This aspect of prudence is well illustrated in the system by which banks make liberal allowances in their annual accounts for eventual depreciation of their investments or other assets, but enter no credit in the case of any appreciation of such assets. In this way the ten London clearing banks alone strengthened their hidden reserves by over £9,100,000 between 1934 and 1938, apart from investment profits which were carried direct to general reserves. A very conservative policy too is followed in the matter of dividends, and in 1938 the margin between net profits earlied and dividends distributed was more than 30 per cent. The same cautious policy is characteristic of British insurance administration. Besides allowing ample margin for contingencies, these companies annually underestimate their assets and overestimate their liabilities, thus strengthening both their financial position and their earning power. The gross profits, for instance, of thirty-two leading British insurance companies have increased by over 21 per cent. in the past three years.
Text read from the printed page and cleaned; old type leaves the occasional error.