§ 4.22 p.m.
§ LORD STRABOLGI rose to call attention to the position of British subjects with accounts in branches of British banks in France; and to move for Papers. The noble Lord said: My Lords, I have put this Motion on the Order Paper because it affects a great many deserving people who, through no fault of their own, are suffering inconvenience and indeed distress. I am glad to say that I am not affected myself, nor are any of my relations, by the failure of the branches of British banks in France to pay money. I have no personal interest in the matter whatsoever. But this is a matter of public interest. The position shortly is this. A great many British people had money in the French branches of the five big British banks, especially in Paris, but 968 also in one or two other French cities. They left France in a hurry and have been unable to draw any of that money in England. In one case which was brought to my notice, a man had £200 in francs at the Paris branch of Lloyds Bank. The English manager of that branch is back in England. The money was first paid into the Fleet Street branch of Lloyds Bank and was transferred by that branch to Paris for the convenience of their customer. Therefore it was only a book-keeping transaction. Nevertheless that man cannot get any of that money either in francs or in sterling. Lloyds Bank say they cannot do anything until the whole position has been cleared up and that the question whether France is to be regarded now as an enemy country is involved. In another case a much bigger sum was held by a lady at Barclays Bank. They say they are unable to do anything and advise waiting until the position is clarified.
§ Your Lordships will realise that this money was put into the French branches of British banks under the impression that they were reputable and stable branches of the great British banks in this country, and that there could be no question of payment being refused on demand on satisfactory proof of identity either in Britain or in France. That was obviously the impression of thousands of British depositors living in France. In some cases people had lived in France and banked there with British banks domiciled in France for a considerable time and all their savings are involved. In other cases people have securities lodged with these branches of British banks in France. There are also the cases of retired people—civil servants and others—who lived in France but drew pensions from this country through those French branches of British banks. They are also in difficulties. I am quite aware of the difficulties of the banks and I am not making any attack on them, but I think the Treasury—and here I address myself particularly to my noble and learned friend the Lord Chancellor—have a responsibility in this matter and ought to bring their machinery into action to see whether something cannot be done to help some of these deserving people.
§ I am well aware also that certain of the banks in France bearing the names of the five big banks in this country have been made into separate companies, and it may 969 be claimed that they are separate French companies and there is no responsibility or jurisdiction. I hope that will not be advanced as an excuse for keeping back this money. It really would be, if I may use such an expression in your Lordships' House, in the nature of a legal quibble. These British people put their money into these banks in France because of the names they bore, and because of their reputation in England. Where accounts like the one I quoted of the journalist are simply transferred from an English branch to a French branch that is only a book-keeping transaction, as your Lordships will know. Surely in that case the position in France will not be put forward as an excuse for not giving that man his money in this country. I addressed myself just now to my noble and learned friend on the Woolsack because under the Defence Regulations the Government now control all the banks. I do not know how visible that control has been, and I do not know whether it is only in theory or whether it is control in practice, but obviously the Government have the power to say that these poor people are not to be suffered to continue in poverty when they have money which really should be available.
§ I would also like to ask my noble and learned friend if he can answer this question. I gave him notice of the points I was going to raise, but I did not give him notice of this particular point. I presume that English banks or branches of English banks in France kept their securities and valuables in this country. If they did not I ask this question. In the three weeks which elapsed after the initial defeat which led to the final capitulation of the French Government, when it must have been known to His Majesty's Government that the situation in France was becoming increasingly difficult, were the British banks in France warned to transfer their valuables to this country? I hope that was done and that it was not overlooked in the general confusion. I should have thought that an elementary precaution which the banks would take.
§ There is the question of identification to be considered. A signature is not always enough. The person has to be identified in some way and I dare say the banks have to be careful. As I said at the beginning, I appreciate the difficulties 970 of the banks and I make no attack on them. It is, however, very unfortunate that these people should be in this very difficult situation through no fault of their own, and I do not think His Majesty's Government can escape all responsibility. I beg to move.
§ 4.30 p.m.
§ LORD WARDINGTON
My Lords, I am very glad that this question has been raised. It is one which has naturally caused the banks great concern, and they sympathise with their clients. I am myself interested both personally and professionally; and if the noble and learned Viscount on the Woolsack can give us any help, and point out any solution to the very obvious difficulties which confront both the banks and their clients, so far as these matters to which the noble Lord, Lord Strabolgi, has drawn attention are concerned, the banks will be only too pleased. I am doubtful whether my contribution to the discussion can really be helpful in that matter, but I hope that it may be considered to be helpful in so far as I can put before your Lordships some of the actual facts.
The English banks operating in France and in this country too are, of course, amenable to the laws of both countries, and the matter is not quite as simple as might appear to be the case from the way in which the noble Lord who moved this Motion has put it; there are very considerable difficulties both of a legal and of a practical nature. I will take the case which he mentioned, and of which I know something personally. Incidentally I may say that although he is obviously aware of the existence of subsidiary companies, and that the "Big Five," as they are called here, do not have branches of their own in France, the original mention of the matter rather suggested that the £200 to which reference was made was deposited in a branch of Lloyds Bank here and was transferred to a branch of Lloyds Bank in France merely by a book entry. That, of course, is not the case. What happened, I take it, was that the customer of Lloyds Bank (the parent company) asked that £200 should be spent in buying francs, and those francs were placed to the credit of this customer in the French bank of another company, a subsidiary company of Lloyds Bank here at home.
971 It is not merely a question of a book entry. It is quite true that the modern machinery of banking has enabled the transfer of money from one country to another to be conducted with the greatest facility and with the least amount of expense; but the transaction in question does in effect mean that £200 was paid in England, that it was sent over to France and turned into francs, and that the francs were paid into the account of the customer in France. It is one of the attributes of our excellent banking machinery that that rather complicated and expensive procedure can be done by correspondence and by the method of drawing on the account of the London office by the French office, without any expense, or with very little expense compared with that involved by the actual removal of the cash; but it must not deceive your Lordships into thinking that there is no movement. There is a very definite movement and transfer of funds from one country to another.
In this case, the customer obtained his francs in France in exchange for the £200 which he gave to the London branch. He wanted them, no doubt, for his own purposes, to pay debts in France. He may have been making a visit to France; he may have had some business operations or obligations of some kind for which he required the francs. Now, after the débâcle, and after the overrunning of France by Germany, he would be very glad if instead of having francs he had pounds. That is very natural. The same argument applies, of course, to a man who bought a house in France, or who had any other property in France; he would be very glad under present conditions to see it transferred to this country, but that, of course, is obviously impossible. With regard to the difficulties in this connection, under French law balances in France cannot be moved to this country. It may be said that in present conditions we should disregard French law. I do not know with what impunity that can be done. The main fact is, however, that the debt is due in Paris, not in London, and from a purely legal point of view the answer to a bank customer demanding money in London for the return of his deposit would be to say: "You must go to France, to Paris, and demand the francs there, and good 972 luck to you!" That would obviously be a heartless rejoinder, because we know, and he knows, that he cannot go to France, that if he did go to France he would be interned, and that if he did apply for the francs he would not be able to get them.
Another difficulty which the banks have in this matter is that they have no records over here of the accounts in France. So far as this is concerned, the position is a little different from that which obtains in the case of the Channel Islands, which we were discussing last week. In the case of the Channel Islands, the banks who had branches there took the precaution of having records of their accounts in the Channel Islands sent daily to the mainland, so that with a little trouble the accounts can be reconstituted, although obviously they cannot be absolutely up to date. In the case of France, however, the banks operating in France did take the precaution of having duplicate records as between branch and branch, but no-one ever supposed for a moment that the whole of France was going to be overrun, and that any town in France would be just as dangerous from this point of view as any other, so that records were never sent to England. The time taken in sending them to England, of course, would have been much greater, even if one had foreseen the total overrunning of the whole of France; and they would consequently not be nearly so up to date as it was possible to keep them in the case of the Channel Islands.
We have, therefore, no knowledge here in London that the amount which was standing to the credit of one of our customers at a given date is still there. There are, of course, questions of identity and so on, and they have all been gone into, but they are minor details. But in regard to the account itself, we have no knowledge, even though it may have been present in the bank three weeks ago, that it is there still. We have no possibility of communicating with France, and many things may have happened. If this were a business account, he may have had an agent who was entitled to draw on it and the account may have been very depleted in consequence, or entirely withdrawn. On the other hand, again, a garnishee order may have been imposed upon the balance for the payment of some 973 debt, rent or taxes. We have no knowledge that it is free, and it would obviously be very rash and unfair to expect the banks to make a payment in London when the money had possibly already been drawn in Paris.
But one always gets back to the fundamental point that this account, this debt, was due in France. It was a French debt, and it is impossible at the present time to pay a French debt unless you happen to have a certain sum in French franc notes in the till of the London branch. You might offer that sum in liquidation of the debt to your customer, but he would say: "Thank you for nothing; I don't want francs, they are no use to me; I cannot buy in England with francs; I want sterling." That is, of course, outside his legal right, and even if one did not want to insist on legal points, what value can be attached to so many francs at the present time? I had a letter from a friend the other day, a refugee from France, who got home after a lot of difficulties and trouble by Portugal; and he tells me that he had to give a thousand francs for a pound in order to change his money to get some sterling when he got into Portugal. That is an entirely artificial figure. I believe the Germans are trying to attach the franc to the mark, also at an artificial figure; and what value one can say attaches to a given number of francs at the present moment is quite beyond me.
I will refer to what on the face of it is rather a simple question: that is, the position if the deposit had been in sterling. A few customers have deposit accounts in sterling in French books. On the face of it that looks rather more easy to deal with, because it is the same currency as on this side; but there are various legal difficulties. Foreign currency in France is requisitioned by the French Government, as foreign currencies in this country are requisitioned here. Anybody who has dollars, or pesos, or anything else, has to declare them to the Government here and they may be called for at any time. If one regards this question from the angle of general principles, then if it is contended that debts due in France should be paid in London, the principle must be applied all round, not merely to banks but also to commercial concerns, not merely to customers of banks but also 974 to banks themselves. Banks would be entitled to say to their customer to whom they had given a loan in France: "You must pay in francs"; and he would reply with the answer that I have already given, that he cannot deliver francs in repayment of his loan, that he does not know the value of those francs in sterling; and he would consider it very hard if we were to try to force him to repay his loans under present conditions. This argument must apply both ways; it cannot be made to run in a one-way street only. Obviously, if a bank is not able to call in its assets, it cannot very well be called upon to pay its liabilities in the same currency.
With the best will in the world to find a way out of the present difficulties—and I do recognise the hardships of those people who have left property of any kind behind in France—I confess I do not see a solution. I only wish the Government could find one and could give us and our customers some help in this matter. We should be the first to welcome anything of the kind. Of course there is no question whatever of the reputation or stability of the banks concerned. The money is there in France waiting to be claimed, but it is in France and not here. That is the whole point of the difficulty.
We have now been discussing the question of cash balances, but the noble Lord, Lord Strabolgi, also referred to securities and asked what is the position in regard to them. Frankly we do not know, we can only guess. I saw a statement in the papers recently that Germany had commandeered all the securities and had placed a seal on all the private coffres forts of clients in banks. What they have done with them, whether they are merely trying to keep them under their control, I do not know. We in France took all the steps that we could to look after these securities and to treat them with as much care as if they were our own. They were moved about from place to place as the German advance proceeded, and where they are at the present moment I cannot tell, I do not know. Neither do I know what action the German controllers over France generally, both in the occupied and in the unoccupied territory, are taking. If they followed precedent I presume they would put a liquidator into what are from 975 their point of view enemy banks and collect the assets and pay off the liabilities, except to enemy debtors.
That is, I believe, the procedure we adopted in regard to German banks in 1914. We put a liquidator into the German banks here, we sold premises, we collected the purchase price, we collected the cash and other assets, and we paid off the creditors of those banks, with the exception of the German creditors, and they had to wait until the end of the war and the general settlement before they got their money back again. The customer of a German bank which was in England was in exactly the same position as an Italian customer of an Italian bank is at the present time. There again we have, I understand, put in liquidators, and we are going through exactly the same process as we adopted in 1914 with the German banks. Well, the case is very hard to the enemy creditor—in this particular case the Englishman, who is an enemy from the point of the Germans. We are seeking legal advice and counsel's opinion on many of these difficult points, but really it does seem to me that the conclusion of the whole matter is that the first thing we have to do is to win the war and then make the Germans disgorge many of their ill-gotten gains.
§ 4.51 p.m.
§ LORD JESSEL
My Lords, before the noble and learned Viscount on the Woolsack replies I should like to ask him a question. The Notice given by the noble Lord, Lord Strabolgi, was to call attention to the position of British subjects with accounts in branches of British banks in France. My concern is in regard to people who are left in France, who have got accounts there. How can they get any money to live? I am referring to people who have been obliged to stay in France, who cannot get away. Is it possible for them to get any money at any time, or will they have to starve? There must be hundreds of British people who have got accounts in France. I think the question of the noble Lord covers my question as well.
§ 4.52 p.m.
§ THE LORD CHANCELLOR (VISCOUNT SIMON)
My Lords, the noble Lord, Lord Wardington, began by saying he was glad this question had been raised 976 in your Lordships' House, and I think we are all grateful to Lord Wardington for the detailed information which he has been able to put before us. It is evident that this is a very hard case, and a very difficult case to handle. Lord Wardington has made it plain that it is not the big banks, those which are sometimes called the "Big Five," who are faced with this problem. We are considering the case of branches in France of separate companies which have been formed for carrying on a banking business abroad, but the head offices of those companies are themselves in this country. The question therefore at once arises whether the central bank here in London—the head office of the bank whose branches are in France—should be held responsible for the credit balances abroad, which are believed to exist—credit balances belonging to customers who have now come to England. That is the case put.
I am myself acutely conscious both of the hardship which such customers may be suffering and of the difficulty of answering the question. I do not think I should be justified at all in offering a view of my own, even if I had a clear and decided view. It is plainly a very difficult question between the customer and the bank, and I ought not to say anything—it is the last thing I would wish to do—which would prejudice the position of such a customer, if indeed anything said in your Lordships' House could do so. Nor, on the other hand, do I wish in any degree to make the position of the banks more difficult than it undoubtedly is. But, as the noble Lord, Lord Wardington, has pointed out, there are two or three plain considerations which it is well to develop, and even though we do not get a solution of the trouble, we shall probably consider it more intelligently and to better effect if we have these considerations in mind.
I cannot help feeling, and I think your Lordships generally will feel, that the hard situation we are considering of those customers of banks in France is really an illustration, but only an illustration, of the fearful hardship inflicted upon perfectly innocent people, such as English people who have been living in France, when a country like France is overrun by the enemy. It does not only apply to balances in banks. It applies to furniture, it applies to movable property, it applies to houses, it applies to all sorts 977 of things. The moment one has to contemplate the fearful consequences of a retreat from a great area of country by those who have been living peaceably within it, and the advance of a powerful enemy which puts no restraint upon its action, it is obvious at once that all sorts of private rights are put in jeopardy, of which no doubt these bank balances may be one. Then I think, too, it is extremely important to bear in mind that we are here dealing with accounts which are in France. Some of them are not necessarily credit balances in favour of the customer, for a bank's business does not consist merely in taking in the deposits of its customers. An equally important part of the bank's business is the advancing of money to those who are borrowing from it, and these banks, I imagine, have in their books both credit balances which stand in favour of the customer and the record of loans which have been advanced in France to their customers, many of them English people, which are just as much in jeopardy.
I find a very great difficulty also in knowing how any liability at the present time, if there be such a liability, could be measured. What is the relation at the present moment of francs to sterling? You may search the money columns of the newspapers in vain to find any quotation of what francs are worth in sterling, and it is quite certain, of course, that the debts which are causing so much anxiety to these unfortunate people are debts in francs, deposits made in francs, and if they ought to be paid they ought to be paid in francs. Those are very serious difficulties, and I do not myself think it would be possible to solve them unless it had been decided to take some appropriate legal action for the purpose of testing how the matter stands. My noble friend who initiated this discussion was good enough to give me some information on the points he was going to raise, and I think he informed me in that communication that there was a body of those who were affected who were consulting together with a view to seeing how they could best protect themselves. I must not for a moment be understood to be offering any advice on the subject, but it is quite plain that this is one of those very difficult questions—the question between those who are suffering and the foreign branches of these banks—which cannot be solved by any 978 other process except by a claim being made and the matter being decided.
I could not accept the view—I must with great respect on behalf of His Majesty's Government entirely refuse to accept the view—that this is a responsibility of His Majesty's Government. It is quite impossible to suppose that His Majesty's Government—that is to say, the British taxpayer—ought to be responsible for results, most unhappy results indeed, but results which are due to the onrush and invasion by Germany over the Continent of Europe. At this moment we are bound to treat, for the purposes of trading with the enemy, these areas thus occupied as enemy territory. Anybody who attempted to carry on business transactions with them would manifestly be taking steps which might assist the enemy, and it is therefore prohibited. That is the sense in which, as the noble Lord said, there was considerable control of the banks. That does not mean that His Majesty's Government are undertaking all the banking business of the country, but it does mean that there are regulations imposing considerable restrictions on operations which might assist the enemy.
I am afraid I am disposed to end with the conclusion which the noble Lord reached—that is to say, that the effectual remedy here is the remedy of defeating the Germans and securing the fruits of victory. I greatly fear there is no ingenious financial process by which we can save people, innocent as they are, who are the victims of invasion until that is achieved. My noble friend Lord Jessel put a parallel question about British people who have not left France or, at any rate, who have not come to this country and who, too, have been no doubt relying on getting themselves financed through financial institutions within the boundaries of France. The plain truth is that when the German invades a country one of the first things he does is to lay hold on the financial resources and mechanisms of that country. I hold in my hand—and I dare say my noble friend saw it in The Times two or three days ago—an account of the order which has been made under which the German Commissar entered into various French banking institutions and was apparently insisting on account being made to him of any valuables contained 979 therein. That creates a situation most distressing and deplorable, but I can see no hope, apart from banking altogether, in the interests of these poor people and of every other interest, than that, come what may, we will redress that situation by victory in the field. I wish very much it was possible to find an easier or more soothing solution, but I am convinced that these difficulties are really inherent in these terrific events that have happened. While we deeply sympathise with these people, and hope very much that the banks will find some method which they may think proper of helping, I do not think the Government themselves can be asked to undertake a burden of this sort when we in this country have to carry the whole burden of the war.
§ 5.5 p.m.
My Lords, I am very much tempted to press my demand for Papers and test your Lordships' feelings after the speeches of my noble friend Lord Wardington and my noble and learned friend on the Woolsack. I do not know which of them was the harder—the banker or the lawyer. I am quite sure that my noble friend Lord Wardington would have adorned the legal profession if he had chosen to enter it, and I am quite sure my noble and learned friend on the Woolsack would have made an excellent banker, especially after the speech we have just heard, with the exception of the closing sentence, which I, at any rate, take as advice to the bankers to find a way of relieving the serious cases. The people marooned in France are better off than those who have come here. They have the protection of the United States Consuls. They can have money sent to them, with the permission of the authorities here, in hard cases, which can be paid to them through the American Consuls; but British people who escaped and came over here have no redress, according to my noble friend Lord Wardington and the noble and learned Lord Chancellor—none whatever. These two distinguished members of their respective professions quite overlook the fact that an Englishman—say, a retired officer living in Paris, who had got a little business there—banked with Barclays or Lloyds in Paris instead of 980 going to the Banque de France or one of the other great French banks because of the name of Barclays or Lloyds. He thought his money would be absolutely safe, in the case of a catastrophe of this sort, that his funds would be all right because the funds of these banks are held in London, as of course they are. The credit of these great institutions is in Lombard Street.
The stability of Lloyds in Paris is nothing whatever except that it bears the name of Lloyds of Lombard Street. That is why such a retired officer banked with Lloyds in Paris.
§ LORD WARDINGTON
A retired officer can get his francs in Paris if he goes there and asks for them, as far as I know.
I must say that Lord Wardington has missed his vocation in life. He ought to have been a lawyer not a banker. This is really a serious matter. I should have asked the Lord Chancellor this question: Have we not frozen French credits in London? I understood that we had done so, as they have done in the United States. There will be funds, therefore, to assist the British people we have been discussing. I thank the Lord Chancellor for his sympathy with them, which we all feel, but surely they will not be placed in a worse position than the claimants on the Czecho-Slovakian banks? We froze Czecho-Slovakian credits, and in due course people with legitimate claims which they made good got compensation. Are these British subjects to be placed in a worse position? I wish to make this appeal to my noble friend Lord Wardington—surely the heads of the great banks must do something for these people where they can prove real title? It is all right to say, "You will get your money after we have won the war." They have to live in the meantime. Surely some ex gratia payment could be made in this case. I ask my noble friend to use his great influence in the City with the heads of these great English banks, and see that the people who trusted in them, as we all do, are treated with generosity and without any prejudice to the ultimate legal position. I do not propose to press my Motion.
§ LORD WARDINGTON
It will be understood that franc assets are held against franc liabilities. Equally, sterling assets are held against sterling liabilities. A great unfairness might conceivably be done if sterling assets held against sterling liabilities are applied to the payment of franc liabilities.
If I may make this rejoinder, I understand that the franc 982 is now sought to be pegged to the dollar. There must be some basis of calculation, and I only ask that something should be done for these people who are suffering great distress.
§ Motion for Papers, by leave, withdrawn.
§ House adjourned at ten minutes past five o'clock.