Britain: An official handbook > 1977

FINANCE
Overseas Banks
The Merchant
Banks
The Discount
Market
361
through most post offices in Britain. All accounts and transactions are main¬
tained by means of a computer complex at the National Giro Centre near
Liverpool. In March 1976, Giro had 500,000 accounts with deposits of over
£150 million. The number of weekly transactions had risen from i-6 million
in March 1969 to 4-8 million by March 1976 when the weekly turnover
was £700 million. In addition to its services to individuals Giro’s services to
commerce, industry and the public utilities include a facility whereby organi¬
sations with dispersed branches, depots and representatives can rapidly
channel receipts into their central accounting system. Over 120 local authori¬
ties as well as voluntary housing associations use Giro’s rent collection
services. Giro’s international services also provide money transfer facilities in
Europe linking over 16 million account holders in the European Com¬
munity and other countries in Western Europe. Giro has been authorised to
offer a wider range of facilities including personal loans and overdrafts, as
well as overdrafts for corporate customers. These new facilities are being
introduced’on a phased basis.
Altogether over 330 overseas banks are represented in London, about 240
directly and 90 indirectly through their holding of stakes in London con¬
sortium banks; of those directly represented, 57 are from the United States,
23 from Japan and 86 from Europe, of which 35 are from the European
Community. They provide a comprehensive banking service in many parts
of the world and engage in the financing of trade not only between Britain
and other countries but also between third countries.
The merchant banks have an influence on Britain’s financial affairs which is
much greater than their size in relation to other financial institutions might
suggest. Traditionally merchant banks have been primarily concerned with
acceptance credits1 and with the sponsoring of capital issues on behalf of their
customers. Today they have a widely diversified and complex range of activi¬
ties with an important role in international finance and the short-term capital
markets, the provision of expert advice and financial services to British
industrial companies especially where mergers, takeovers and other forms of
corporate reorganisation are involved, and in the management of investment
holdings, including trusts, pensions and other funds.
The Money or Discount Market is an institution which is unique to the City of
London. Its function in the monetary system is to provide a financial mecha¬
nism designed to promote an orderly flow of short-term funds. The market
consists of 11 discount houses, five money traders and two discount brokers,
all of which borrow money ‘at call’ or short notice and lend for somewhat
longer periods. They have recourse to the Bank of England as lender of last
resort and the Bank lends to the houses generally overnight or for seven days
at minimum lending rate, although it may charge a higher rate. Most of the
market’s borrowed funds come from the banks, which are thus provided
with a flexible means of earning a yield on surplus funds which they have at
any given time.
The assets of the discount houses mainly consist of Treasury and commer-
1 Acceptance credits are usually short-term (90 days) arrangements to finance exports
from, and imports to, Britain and other markets. The expression is derived from the
method of financing trade by which commercial bills are ‘accepted’ or guaranteed by
a merchant bank against documents, after which they may be discounted for cash by
a discount house.