Trust companies and boards of executors versus banks: Aspects of the battle for corporate trusteeship and trust business in South Africa up to 1940

Literature › Works

Anton Ehlers (2007). Trust companies and boards of executors versus banks: Aspects of the battle for corporate trusteeship and trust business in South Africa up to 1940. South African Journal of Economic History, 22 (September 2007).

Type	journal article
Scope	Economics and economic history of apartheid
Method	archival narrative
Period studied	1909–1941
Regions	Cape Province, Cape Town, Port Elizabeth, Union of South Africa
Themes	business and state, macro fiscal finance debt, politics ideology elections
Citation key	ehlers2007

Argument

Ehlers traces three rounds of conflict (1911-15, 1920, 1934-37) between the long-established trust companies and boards of executors and the Standard Bank and National Bank (later Barclays) over trust and estate business. The banks entered this field at the request of their clients and in line with overseas practice. They sheltered behind a banking cartel and promises of discretion. The trust lobby tried appeals to the banks, a Reserve Bank boycott, licence-fee litigation and nationalist 'foreign bank' arguments, and failed on every front. By 1941 banks treated estate work as a settled part of their business, and trust companies were eventually absorbed into the banking sector. The case illustrates the dominance of imperial-linked banks and the decline of rural Cape finance.

Evidence and method

Standard Bank Archives (general manager's letters to London, branch inspection reports), First National Bank and Barclays archive minute books, the Syfrets-held minute books of the Association of Trust Companies, Boland Bank archives, the 1939 Select Committee report, parliamentary debates, newspaper reports and secondary literature on banking history.

Place in the debates

• Afrikaner nationalism and economic empowerment versus imperial capital (see Finance, capital flight, the 1985 debt crisis and banking). Shows rural Afrikaans trust companies using a patriotic 'foreign bank' argument in the 1930s, but notes it never became their primary argument. The imperial banks nonetheless prevailed.

Findings

• Standard Bank's South African managers worried about alienating trust companies that were significant depositors, so they entered the estate business cautiously. (p. 4)

  indicated that 26 of these companies held average credit balances totalling £125 000 with the bank.

• The National Bank was Standard Bank's only rival of comparable size, with a branch network built through takeovers of regional banks. (p. 6)

  by 1915 had built up a system of 208 branches (compared to Standard Bank's 197) by taking over the Bank of the Orange Free State (1910), the Bank of Africa (1912), and the Natal Bank (1914).

• The Standard/National duopoly and banking cartel blunted the trust companies' attempt in 1920 to play one bank against the other. (p. 13)

  The cartelisation of South African banking that originated in the pre-First World War years and by 1920 was dominated by the Standard Bank/National Bank duopoly

• The National Bank answered the 1920 protest with a threat to push estate business aggressively. (p. 13)

  Further the Companies are already competing with the Banks and if they propose to extend this competition our policy regarding class business referred to will be entirely changed.

• Rural trust companies grew in number and took on an Afrikaans, nationalist character in the 1910s and early 1920s. (p. 15)

  In the period 1914-1922 trust company ranks were swelled by 26 new rural companies with a dominant Afrikaans character more prone to the influences of nationalist ideologies.

• The 1932 devaluation and the gold price rise shifted economic power from rural areas to the Witwatersrand, weakening the rural trust companies. (p. 14)

  The 1932 devaluation of the South African pound and the rise in the price of gold irrevocable shifted economic power from the rural to the urban areas like the Witwatersrand.

• Standard Bank's trust and estate holdings were already substantial by 1929. (p. 16)

  By 1929 the Standard Bank was already controlling trust funds and estates to the value of about £1 million.

• Bank nominations as executor grew rapidly in 27 rural branches located where trust companies were strong. (p. 19)

  While the 27 branches had had only one nomination of the bank to act as executor of an estate by 1930, by 1935 the total had increased to 26 and by 1942 it was 194.

• The Reserve Bank governor sided with the commercial banks and refused the trust companies' request for accounts. (p. 24)

  the Bank is not prepared to open such accounts for members of your association, as it is not convinced that the commercial banks are adopting an unreasonable attitude in the matter

• The state authorities refused to enforce trust-company licence fees against the banks. (p. 25)

  The Commissioner of Inland Revenue, however, decided that the banks were not liable for the payment of a trust company or board of executors licence.

• The 1941 Act, driven by the Law Societies, restricted advertising of estate services by banks and trusts alike. (p. 27)

  The 1941 act prohibited any form of recruitment or advertising or publicising that a person or institution such as a bank dealt with the liquidation and administration of estates.

• Banks' growing share of trust business undermined the independent survival of trust companies, which were absorbed into the banking sector. (p. 28)

  By capturing a significant and ever growing market share of the available trust business banks had significantly reduced the chances of trust companies surviving as independent financial institutions.

Evidence ledger

Sources used

Source	Kind	Period	How used
Standard Bank Archives (SBA), General Manager's Office (GMO) 3/1 series, General Manager–London Office (GM-LO) 'Ordinary' and 'Special' letters, 1909-1929	company records or reports	1909-1929	Documents Standard Bank's decision to enter trust and estate business, its fear of trust company reaction, and its replies to protests in 1911 and 1920.
SBA, GMO 3/2/1/13, GM-LO, Annual letter for the year ending 31.3.1938	company records or reports	1938	Gives the size of Standard Bank's branch network in 1938 (297 branches, 24 sub-branches, 59 agencies) as context for the growth of estate business.
SBA, INSP 1/1 series, Standard Bank branch inspection reports (27 rural branches, 1928-1945)	company records or reports	1928-1945	Traces the slow and then growing estate business and executor nominations of the banks in towns with local trust companies.
First National Bank Archives (FNBA), Minute Book National Bank of South Africa (NBSA), 1913-1917	company records or reports	1913-1917	Shows NBSA's 1915 board decisions to enter trust and estate business without a private bill.
FNBA, Minute book of Barclays Bank (DCO), Cape Local Board, 1930-31	company records or reports	1930-1931	Evidence that Barclays opened a separate trust division in Cape Town in August 1931.
Syfrets Archives (SA), Minute Book of the Association of Trust Companies (ATC), 1932-1942, 1961-62, with attached correspondence	employer association records	1920-1940 (also 1961-62)	Main source for the trust companies' 1934-1940 campaign against the banks, including correspondence with banks, the Reserve Bank, and government departments.
Boland Bank Archives (BBA), Minute Book African Mutual Trust, 1932-1939	company records or reports	1932-1939	Supports the claim that rural trust companies lobbied parliamentary support through shareholders and local representatives.
Union of South Africa, Debates of the House of Assembly, Fourth Session, Sixth Parliament, 12.2.1932	parliamentary debates	1932	Cited for lobbying of parliamentary support by rural trust companies.
S.C. 11-'39, Report of the Select Committee on the Attorney's Admission Amendment and Legal Practitioners' Fidelity Fund Bill, 1939	commission or official report	1939	Source for Barclays superintendent A. Heather's estimate of trust division income and for the association's letter to the government.
Syfrets Archives, Memorandum on Gekombineerde Wetsgenootskappe Wetsontwerp, 1939 (in Minute Book ATC 1937-39)	employer association records	1939	Source for the 'overcrowded state of the legal profession' and the competition with attorneys.
Government Gazette notices of liquidation and distribution accounts of deceased estates, 1937-1938 (as reported in ATC minutes)	legislation gazette	1937-1938	Counts of advertised estate accounts (Standard Bank 78 rising to 122; Barclays 144) used as indirect evidence of growth in bank estate business.
Licences Consolidation Act No 25 of 1925	legislation gazette	1925	Legal basis for the association's argument that banks doing estate business needed a trust company licence.
Act No 19 of 1941, Attorney's Admission Amendment and Legal Practitioners' Fidelity Fund Act	legislation gazette	1941	Establishes the legislative outcome restricting advertising and recruitment of estate business.
Author's doctoral dissertation on trust companies and boards of executors of Boland Bank (Ehlers 2002)	secondary literature compilation	to 1971	Source for the number and Afrikaans character of new rural trust companies founded 1914-1922 and for later amalgamations.
A. de V. Minnaar, 'South African White agriculture and the Great Depression, 1929-1934', DLitt et Phil thesis, Unisa, 1988	secondary literature compilation	1929-1934	Supports the claim of agricultural depression reducing rural incomes and increasing farmer insolvency.

New data

The author tabulated from Standard Bank inspection reports the number of executor nominations at 27 rural branches (1 by 1930, 26 by 1935, 194 by 1942) and counts of advertised estate accounts; this is a small ad hoc compilation not published as a dataset.

Inference

Quantification: Illustrative figures.

Archival narrative case study. It traces three episodes of conflict (1911-15, 1920, 1934-37) from bank and trust association minutes and correspondence, backed by a few counts from branch inspection reports and Gazette notices, and by comparison with American and British banking practice.

Key claims

Claim	Basis	Strength
Standard Bank (1911) and the National Bank (1915) entered trust and estate business cautiously, anticipating resentment from trust companies that were important bank clients. (p. 25)	SBA GMO General Manager–London letters; FNBA NBSA minute books.	Systematic data
Trust company protests in 1911 and 1920 failed, because the Standard Bank/National Bank cartel closed ranks and the NBSA threatened aggressive competition. (p. 35)	SBA GMO 'Special' 8.10.1920 correspondence; ATC minutes with attached 1920 letters; secondary literature on bank cartelisation.	Partial data
Bank estate business grew markedly through the 1930s, even in rural towns where trust companies were strong. (p. 40)	Counts of nominations drawn from 27 Standard Bank inspection reports; Gazette advertisements; Barclays trust division and income estimate.	Partial data
The 1934-37 campaign was intensified by agricultural depression, the shift of economic power to the urban areas after the 1932 devaluation, and rural Afrikaner nationalism. (p. 35)	Secondary literature (Minnaar, Jones, Verhoef) plus the author's own thesis.	Illustrative or anecdotal
State bodies (Reserve Bank, Commissioner of Inland Revenue, Justice, Cape Provincial Administration) declined to act against the banks, ending the trust companies' attempt to bar them. (p. 46)	Correspondence preserved in the ATC minute book.	Systematic data
The 1941 Act curtailed advertising and recruitment of estate business and ended the era of founding new public trust companies, while banks retained their position. (p. 48)	Act 19 of 1941 and Parkhurst's 1961 paper in ATC records.	Partial data
Banks' growing share of trust business led eventually to trust companies being absorbed into the banking sector (Boland Bank, BoE, Nedbank). (p. 49)	Author's thesis, Nedbank history, and Die Burger/Financial Mail reports.	Partial data

The author's caveats

The author notes that statistics showing the growth in banks' estate business are not readily available and relies on indirect evidence from inspection reports and Gazette notices.

Gaps in the evidence

The argument that banks captured a 'significant and ever growing market share' lacks systematic data on estate values, number of estates, or fees by institution type, which would be needed to measure market share. Trust company-side records (estates administered, income, accounts withdrawn) could test how far banks actually displaced trust companies. The 27-branch inspection sample is non-random and covers only Standard Bank, and the extrapolation to other branches is asserted. Such records and Master of the Supreme Court estate files exist in archives, but are not used.

Replicability: Data described but not public.