Celebrating 200 years of history
May 10, 2010 marks the 200th anniversary of the world’s first savings bank – a movement which eventually led to the founding of ASB Community Trust.
The first savings bank was established by the Rev Henry Duncan in Ruthwell, Scotland, in a move to do something of real and lasting value for the under-privileged.
Rev Duncan believed deeply in the dignity of the ordinary working man. Wherever he saw injustice he worked and spoke against it.
He wanted a dignified alternative to poor relief and, in 1810, Dr. Henry Duncan opened the world's first savings bank, based on business principles and paying interest on its investors' modest savings.
At that time established banks required £10 to open an account, but in Ruthwell Parish Bank sixpence was enough. The deposits would be cooperatively owned and surplus funds used for community charitable projects and depositors’ long-term savings schemes.
The world’s first people’s bank quickly gained popularity. In the that first year, despite appalling poverty in the region, the total savings amounted to £151. Within five years there were savings banks throughout the United Kingdom; the following year they spread to Europe and the United States. Ten years later the UK total had reached over three million pounds. By 2002 there were 109 savings banks organisations in 92 countries.
Savings banks in New Zealand
The story of New Zealand’s savings banks began with the opening of a trustee savings bank in Wellington, in 1846. On 5 June 1847, the second savings bank was opened on Queen St, in Auckland. Auckland Savings Bank was also championed by a Scotsman, John Logan Campbell – one of the founding fathers of modern Auckland.
The bank only collected £166 in deposits in its first year, but it survived and by the early 1860’s the Auckland Savings Bank had 900 customers. At the turn of the new century it was transacting more than £1 million a year.
In line with the principles of savings banks worldwide, some of the surplus went back into the local community. In 1906 the Auckland Savings Bank gave £10,000 to help build the Seddon Memorial Technical College, in Auckland’s Wellesley Street. Today we know the technical college as AUT.
By the 1920s the Auckland Savings Bank was making substantial contributions to organisations still in existence today. Its single largest grant was £20,000 to the Auckland War Memorial Museum. Others to benefit from stable support were Plunket, the Jubilee Institute for the Blind, St John’s Ambulance Association and the Knox Home for the Incurables.
That support for the community continued through the years and in May 1988 ASB Community Trust began life as a separate entity from the commercial ASB Bank.
Winds of change
From its earliest days the savings bank had grown without any formal ownership structure. There were no proprietors or shareholders, rather a succession of presidents and trustees garnered from Auckland’s businessmen and public figures.
By the mid 1980s, almost 140 years after the first trustee bank opened its doors in New Zealand, just who owned the 12 Associated Trustee Savings Banks around the country was a moot point. While the Government could argue that its guarantee of savers’ deposits and appointment of directors conferred ownership rights, it was community money that had built up the reserves of capital held by each bank – in the case of Auckland Savings Bank, $1.2 billion.
Ownership required clarification because the incoming Labour Government was about to restructure not just the finance industry but the whole economy.
The Trustee Banks Restructuring Act 1988 eliminated government guarantees on trustee bank deposits and transformed the trustee banks into commercial trading banks competing on a level playing field.
Aware of the political unpopularity of appropriating the banks, the Government ceded ownership to the community, in the form of community trusts, but retained the right to appoint trustees. On the last day of May 1988, The ASB Bank Community Trust (now called the ASB Community Trust) was formed.
Sale of the banks
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At the time it was not believed that the banks had sufficient muscle to match the three existing trading banks already in the New Zealand market and the new trustees began negotiating the sale of their banks. Ten of the banks were sold to Westpac and ASB Bank Community Trust trustees sold 75% of their shares to the Commonwealth Bank of Australia. Only Taranaki Savings Bank remained in the hands of its Trustees, a situation that remains the same today.
In March 1989 The Commonwealth Bank of Australia paid $252 million for 45 million shares in the Auckland Savings Bank – 140% more than an independent valuation of their worth and reflecting CBA’s determination to enter the New Zealand Market.
With these assets, ASB Community Trust was able to increase its grants level from $1 million a year to $15 million.
On October 3, 2000, the remaining 25% shareholding in the Auckland Savings Bank Trust was sold to CBA for $560m. This lifted the Trust’s endowment value to around $1 billion, where it remains today.
Since that time the Trust has distributed grants worth $700 million to community groups throughout Auckland and Northland and, on 17 July 2006, the ASB Bank Community Trust was renamed ASB Community Trust.
This background article on ASB Community Trust’s history draws on the research of Jade Reidy, who authored Te Kaitiaki o te Pùtea, the History of the ASB Community Trust 1988-2000. If you want to read more about that history, and the history of philanthropy in the Auckland and Northland regions, please contact us for a free copy of the book.