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Ink. A commodity which should be of interest to the Latin and Anglo-Saxon countries is the excellent Swedish writing and copying ink in contrast to the inferior ink generally obtained in these countries. Manufacturers are Barndngens Tekniska Fabrikers A.-B. and Linds Tekniska Fabriks A.-B., both in Stockholm, and V. Rosendahl, Filipstad.

Tanning Materials. Tanning extracts are manufactured both from Swedish and tropical plants and parts thereof containing tannic acid such as oakwood, oak and fir bark, catechu, quebracho and others. An export of no small importance takes place to neighbouring countries and to Esthonia, Germany, the Netherlands, Belgium, and others. Manufacturers and exporters are A.-B. Tannin, Vestervik, and Garfdmnes A.-B. Weibull, Landskrona.

Alf. Larson

Swedish Banking and Industry

The splendid development which Swedish business life as a whole has undergone since the turn of the century marks what is in several respects an entirely new epoch in our industrial enterprises. More modern methods of business, a more up-to-date organization, a more rapid adaptation to different situations on the market were distinctive features of this new epoch; and, as a consequence, latent forees were liberated which, as perhaps never before, brought with them a most potent prosperity in practically all departments of social life. The business conditions during the war with their exceptional possibilities of profit-making were a still more effective factor, but this period also marks the crest of the wave, after which the undertow has been severely felt.

One of the most marked phenomena during these decades is the transition to production on a really large scale which has been carried through by a number of Swedish industrial concerns. Even earlier, of course, a trend in this direction had been apparent but had never been so decided as now. One large concern after the other came into existence, combining several units within the same branch of business; and in consequence of this an economical and rational concentration was brought about as regards both production and sales.

It is against the background of, and parallel with, this course of development that we must regard the Swedish banking system, if we wish to understand the pre-conditions and the causes of the mighty transformation which that system has undergone, primarily in its outer contours but also in its inner technical organization. Down to the year 1904 — when the great bank-note reform was definitely carried through, giving a monopoly of note-issuing to the Bank of Sweden — we might characterize the Swedish banks as institutions which devoted themselves rather to financing commeree and agriculture than to supplying the needs of industry in the way of capital. The following years have brought with them a development in another direction, so decisive that one may now without hesitation regard the Swedish banks as belonging to the industryfinancing type. The final step in this direction was taken during the boom produced by the war conditions.

It is practically impossible to find in the published banking statistics any figures indicating the real magnitude of the credit or loans granted by the banks either to industry or to any other economic groups. It is only in the changes exhibited by different kinds of securities in relation to the advances made that it is possible with any great degree of probability to read the tendency which has made itself felt at different times in this respect. One department, however, that throws a good deal of light on the relations between the banks and industry is the floating of new issues of the debenture type by the banks. In this respect the Debenture Book of the Swedish Banking Association provides detailed material, although the figures before 1911 are somewhat incomplete. Moreover, in many cases it is difficult to determine whether an issue of debentures dated in one year, but not concluded till a later year, ought to be assigned to the issues of the one year or the other; and consequently the appended summary, which has been worked out privately, may possibly suffer from inaccuracy here and there. On the whole, however, it will probably be found sufficiently reliable to give an idea of the part our banks have played as providers of capital to industry.

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These figures show that practically all issues of industrial debentures were negotiated by some bank. Only very exceptionally— for instance, when the Stockholm Telephone Company issued a loan for 12,000,000 kronor in 1908 — has a concern considered itself to be in a position to place a loan on the market by direct sale of its bonds; and during 1921 and 1922 it seems that all industrial issues without exception were effected through banks. In the year 1921 was recorded the largest amount ever issued in the course of a single year; not less than 178-5 mill. kr. being placed, distributed over 15 different loans. The figures for 1922 are 57-2 mill. kr. for 11 different issues.

These quantitative figures, however, are not sufficient to enable one to understand the real significance to industry of debenture loans. This docs not appear until we learn how the funds borrowed have been used by the various concerns'. To show by means of figures the various purposes which the capital has served is not possible. On the whole it may be considered that the issues have been applied to new establishments, extensions and improvements, especially during the boom years 1908—1919. Ever since the end of the active period during and immediately after the war, the main object has been the funding of current bank credits or the conversion of older standing loans. There can be no doubt that the work which the banks have devoted to the financing of industry by means of debentures has proved no less valuable than successful, and it has inspired the investing public with complete confidence.

But several of the largest banks have shown considerable activity on behalf of industry not only in the issue of debentures but also in the issue of shares, in spite of the obstruckting provisions of the law in regard to the right of banks to own shares in other concerns.

According to an official enquiry only 16 banks in 1918 enjoyed the right to hold shares in other companies to an aggregate amount of barely 90 mill. kr. How little this meant for the Swedish share-market is shown by the fact that the legal right of all these 16 banks to purehase shares would not have sufficed to acquire more than a sixth of the Griingesberg Company's share-capital at the same time. In reality the right to hold shares was not exereised to a greater extent than about 37 mill. kr. out of the 90 mill. kr. permitted. Nevertheless, Sweden's two largest banking institutions have been in a position, with the resourees at their disposal, to do valuable work in the formation of new companies or in the rcconstitution of existing companies. Of the right to acquire shares mentioned above, an amount of 23-1 mill. kr. fell to the banking institution now known as the Svenska Handelsbanken, and 22-4 mill. kr. to Skandinaviska Kreditaktiebolagct.

The regulations in foree since 1921 regarding the right of banks to hold shares involve considerable new restrictions, including that one limiting the value of shareholdings to one tenth of the bank's paid-up capital and reserve funds combined.

The operations of the banks in the stock market, however, largely coincide with the activity which has been displayed by the issuing concerns associated with them. Although these concerns have, on the whole, proved a disappointment, and at the present moment seem to have exhausted their usefulness, the valuable work they have performed must not be under-estimated. If exceptional conditions had not enticed these institutions into making dealing and speculating in shares their main business, instead of founding companies and issuing shares, as originally intended, it is probable that they would have been able to continue their work. Most of these issuing concerns, however, were formed to meet an emergency and their success very largely depended on a continued improvement in business, to say nothing of a downward trend in the value of money. During the short period of prosperity the issuing companies never succeeded in acquiring that stability and solidity necessary to withstand the strain caused by the sudden reversal of the business situation. Nevertheless, it is possible to point out a long series of large and successful undertakings in Sweden which came into existence as a result of the co-operation of various issuing companies supported by the banks. As eloquent examples of this need only be mentioned here the amalgamations and consolidations effected in the match-industry, the hosiery and woollen industry, the printing trade etc., or the important enlargements of the works of the Varg6n Company, the Billerud Company, and others. As Sweden still lacks a bank strictly devoted to company promoting, it is not improbable that issuing companies, supported by banks, will be established in some form or other when conditions in business have regained sufficient steadiness and reliability.

It has already been pointed out that the official bank statistics throw little light on the relations between banking activity proper and industry. One can only »feel one's way», as it were, to an opinion on this matter by presenting various known factors of which some are stated below.

Since the beginning of the twentieth century both the Savings Banks statistics and the published figures with regard to the commereial banks show an increase in advances and credits on the security of mortgages on real property; an increase which represents a quadrupling of that part of the banks' collateral securities during the past twenty years. During this period the operations of mortgage-lending concerns have also extended. These movements in the sphere of mortgage loans have largely been due to the augmentation of values of real property, but also to the existence of new objects suitable as securities. It is a well known fact, however, that first mortages are wont to find their way into the hands of lenders who have concentrated their lending operations on long-period loans with a low amortization and low interest. For commereial banks, whose policy in this respect is just the opposite, this has meant a transference of firstmortgage loans in some degree to savings-banks, mortgage institutions and insurance companies, and this applies above all to government and other bond issues. For this reason one will have to take into account the fact that the commereial banks have largely emancipated themselves from long-time loans on real property. The reason why the mortgage loans of the commereial banks have none the less quadrupled is to be found in the livelier interest shown by the banks in the capital requirements of industry.

It must be regarded as obvious that neither agriculture nor commeree has been able to provide such new and important objects in the way of real property for lending purposes. Agriculture, of course, has of old been heavily burdened with mortgages which leave small margin for fresh loans, and in the trading companies the »premises» item forms a comparatively unimportant part of the total assets, while Swedish manufacturing concerns to a large extent have their highest and most important values in the form of real property. In banking cireles the opinion is held that nowadays loans distribute themselves over different groups of borrowers in the following proportions:—

One may be justified, therefore, in describing the Swedish commereial banks as primarily industry-financing institutions.

To this must be added the considerable advances which the banks make on the security of shares in companies. A substantial part of these loans are made direct to industrial concerns on the security of their holdings in foreign companies (auxiliary companies); but even that part which goes to private persons, trading firms or other borrowers involves fundamentally the banks' supporting those on whose shares the money has been lent. As in this connection industrial shares unquestionably play the largest part, the above fact emphasizes still more what has been maintained here.

The providing of industry with capital through the banks with which wc have dealt so far applies, generally speaking, to the financing of the companies' fixed assets and equipment. But the co-operation of the banks is also of the greatest importance in providing funds for the purehase of raw materials and for the sale of finished articles. To a large extent this activity falls within the sphere of trading operations; but in so far as the selling applies to Swedish goods, industry is always one of the parties which directly or indirectly profits by the banks acting as intermediary. The items on the balance-sheets of the banks which mainly contain working capital for industry are credit accounts, bills of exchange, and documentary credits. The importance of the credits is summed up in the conclusions stated above with regard to advances. From the bills of exchange it would be possible to draw likely conclusions as to how great a part is played by industrial bills, if one had access to figures relating to the number of re-discounted bills. In that case, indeed, it would have been possible to caleulate the average amount of a normal commereial bill and compare it with the average amount of all bills. The excess of the latter mean value over the former would largely be ascribable to bills representing advances to industry. In this connection it may be pointed out that the figures relating to foreign bills of exchange can undoubtedly be regarded as representing practically the entire sales effected by export industries.

For the rest, the figures of the foreign bill portfolio, as appearing in the monthly statements, represent only an insignificant fraction of the amounts which have actually been discounted by the banks, while the greater part is, as a general rule, immediately

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