BANK BOOK-KEEPING.

CHAPTER I.

BANKS AND THEIR MANAGEMENT.

I. A Commercial Bank is an institution designed to aid trade and commerce by offering to the public important services, which may be specified as follows:

First. By providing a place where money may be deposited, at times and in amounts to suit the convenience of the depositor.

Second. By permitting the money so deposited to be withdrawn upon a simple order, at such time and in such amounts as the depositor may find convenient, the canceled check when returned by the bank affording proof that the sum has been paid.

Third. By undertaking for its dealers the collection of commercial paper, such as bills or notes, mercantile drafts, bonds, coupons, etc.

Fourth. By issuing bankers' drafts, bills of exchange, and letters of credit, which facilitate the payment of debts at distant places without the actual transfer of funds, and affording people who travel a means of obtaining money in foreign lands, or at points distant from their homes, thus avoiding the risk and danger of carrying it about.

Fifth. By issuing certificates of deposit for money left with the bank, payable either on demand or at a specified time, and upon which interest may or may not be allowed, according to the terms of deposit.

Sixth. By tendering its superior facilities for the safe-keeping of money.

[In the early history of banking the safe-keeping of money was the principal service rendered the public, but recent devices, so generally in use in stores and offices for the safe-keeping of valuables of all kinds, have made this feature of the bank of secondary consideration.]

Seventh. By reducing risk and inconvenience in handling money, through the intervention of orders or checks, which can be cashed only upon proper endorsement.

2. The Business of Banking ranks among the chief activities of commerce in its service to the public, and holds a position as legitimate and honorable as that held by any mercantile pursuit.

The object of those who engage in banking is primarily that of gain; and this is sought, as in other kinds of business, through offering to the public what the public needs and will pay for. The banker establishes a secure place for the keeping of the money of the merchant and the manufacturer; pays it out on their order; attends to the collection of their notes, drafts, and checks, and serves as an agent for both borrower and lender.

3. Earnings.-The principal source of a bank's earnings is the discounting of business paper and the lending of money on proper security. Charges for collecting notes and drafts, interest upon bonds and returns from such securities as it holds, commissions for the payment of coupons, and premiums for the issuing of drafts to outsiders are also among the sources of income. The bank's outlay includes interest on deposits of banks and bankers, cost of collecting foreign items, taxes, repairs, salaries, and the ordinary office expenses.

The funds of a bank available for lending purposes accrue: (1) from the amounts paid in by the stockholders; (2) from accumulated surplus; and (3) from deposits of individual dealers, corporations, banks and bankers, less such amount as the law requires shall be set aside for the

payment of depositors and the redemption of outstanding notes. Let us suppose, for example, that at the beginning of the year the condition of the bank is as follows:

Assuming that it will keep on hand $150,000 as reserve fund, there remains $450,000, or threefourths of the total amount of cash in its possession, which it may lend, either to its depositors or to such other persons as can furnish security. If these loans were permitted to run for the entire year at a uniform rate of six per cent. allowing for current expenses, the condition of the bank would be as follows:

Deducting the expenses from the earnings we have as net gain $10,000, which, if the total earnings could be divided, would permit a dividend to stockholders of ten per cent.

This illustration shows how a bank can afford to receive money on deposit and hold the same subject to the order of the depositor, without direct remuneration.

4. Dealers or Customers are persons who have regular dealings with a bank by depositing therein their money and issuing against their account checks or orders. Transient customers, or patrons, are persons who use a bank for some specific service, such as the purchase of exchange, the collection of notes or checks, the issue of certificates of deposit, etc., but who are not regular dealers.

5. Officers. The officers of a bank are those chosen by the Board of Directors to superintend and direct its affairs. Usually, these are a President and Cashier. Many banks have also as active officers, Vice-President and Assistant Cashier. The necessity of these last named depends upon the location of the bank and the character and extent of its business.

6. The President presides at all meetings of the Board of Directors, and is the executive head of the bank. He furnishes such information concerning its transactions as may be desired by the directors. From him is expected to emanate the policy which will govern the bank in its operations, and upon him rests the responsibility for its success. He must be active and influential in attracting depositors, and equally alert in declining to discount beyond the limits of safety and prudence.

The general standing of a bank in the business world hinges largely upon the integrity and honor of its president. He should possess that happy equanimity of temperament which will save him from inconsiderate action, combined with a ready knowledge of character that will give him. the command of forces, both within and without the bank.

7. The Vice-President acts as the executive officer of the bank in the absence of the president. In some of the large banks in the large cities, the vice-president is a high-salaried officer, who not only shares responsibility with the president, but has greatly the direction of the running of the bank. In other cases he is chosen with a view to increasing the efficiency of the bank's service in a given direction, as the management of its credit department, country business, etc.

8. The Cashier is generally the executive officer of the bank. To him belongs the general supervision of various departments, and usually he employs the clerks and prescribes their duties. The correspondence of the bank is conducted in his name. He is appointed by the directors, and

BANKS AND THEIR MANAGEMENT

is directly responsible to them. He generally acts as Secretary of the Board of Directors, and as such he keeps a record of all business transacted at their meetings. His name, as well as that of the President, is required upon the certificates of stock. He signs the checks of the bank, which are issued for various purposes, draws drafts on correspondents, signs his name to bills of the bank which circulate as money. Upon him more directly devolves the task of building up the business, and making it profitable, and at the same time commending it to public favor.

9. The Assistant Cashier, where such officer is required, is generally responsible for the performance of specific duties, which would otherwise devolve upon the cashier. He is, in fact, what his name implies, an assistant to the cashier. He is appointed by the Board, and his official signature is recognized in everything, except in reports to the Comptroller of the Currency.

10. The Chief Clerk, in the absence of an active vice-president and an assistant cashier, has general management of the clerical work of the bank. He settles all matters not involving questions of policy which may be presented by the tellers or book-keepers, and sees that the routine machinery is kept in working order.

II. The Check Clerk prepares a list of the paid checks of dealers preparatory to their delivery to the ledger-keeper or dealers' book-keeper. In large banks there are usually a number of such clerks, divided into groups, each group performing a particular part of the work. Thus, -one group assorts and lists the checks which come from the clearing-house; another, the checks paid by the paying teller; and still another, those received in the deposits, and by the note teller for the payment of obligations held by the bank. Other clerks, known as "listing clerks," prepare lists of the exchanges which are to be sent to the clearing-house.

12. The Collection Clerk has charge of all the paper to be sent for collection or presentment at distant points. He sees that such paper is properly "timed," and that notices pertaining to collections are sent out properly and promptly. He examines the endorsements on paper passing through his hands, and keeps a record of a that is received, remitted, paid, dishonored and returned. He keeps the collection ticklers and collection registers, and is responsible for the safe-keeping of the notes, drafts or other items left for collection, and when such paper leaves his hands his records must show at once what disposition has been made of it.

13. The Country Book-keeper keeps the accounts of banks, bankers and depositors at distant places. He receives from all such the letters containing remittances and other items for credit to their accounts. He has charge of the bank and collection ledgers, calculates interest on accounts entitled thereto, and makes the proper entries thereof. He prepares the periodical statements, and compares his own books with the reconcilement sheets and statements of other banks. He must keep a close watch over the payment of checks and drafts drawn by this class of customers and report any case of overdraft.

14. The Dealers' Book-keeper has charge of the city dealers' accounts. The credits for such accounts appear on the credit books as made from deposit slips, and such items as come from the collection and discount departments. The charges against the accounts are made from debit books in which are listed the checks of dealers paid by the paying teller; those received in the deposits or from the clearing-house, certified checks from the certification-book, and unpaid cash items returned through the collection department, notes paid by the bank, etc. The dealers' passbooks come to him to be written up, and if he does not make up the voucher-lists of canceled checks for delivery to the dealers and balance such books himself, he will see that it is accurately and promptly done.

15. The Ledger. Keepers have charge of the balance ledgers, the number of which depends upon the extent of the business and subdivisions of the work. Ordinarily, there is a balance ledger for each ledger containing accounts of dealers, banks and bankers, both city and foreign, these ledgers being practically duplicates of the regular ledgers. The ledger-keeper must be so familiar with the accounts under his charge as to be able at once to advise the teller concerning any one

that may be inquired about, and to refuse any checks which would cause an overdraft. This is particularly true of city dealers' accounts, which may be questioned at any moment. Aggregates only are carried to these ledgers, the itemized records being made in the ledgers kept by the dealers' book-keepers.

16. The Discount Clerk keeps the record of paper offered for discount and of that discounted or purchased by the bank. He has in his possession the greater part of all the notes held by the bank, which often represent the principal part of the bank's resources. He has charge of the offering-book, the discount register, bill-books, discount ticklers, and discount ledgers. From the bill-books and discount ledgers are ascertained the average amount of a dealer's discounts and his liability as endorser of paper held by the bank.

17. The Note Teller usually has charge of all irregular business, but his real duty is to collect time paper on the day that it matures. He receives from the discount clerk the discounted notes, and from the collection clerk the notes that come through that department. Paper payable at the bank the note teller retains at his desk, and that payable at other banks or elsewhere in the city he sends out by messengers. He usually attends to all business with other banks in and out of the city. In some of the large banks this department is divided, giving the mail receipts and clearing-house items to the mail teller and exchange teller, respectively. He has general charge of the messengers or runners, and usually issues certificates of deposit.

18. The Receiving Teller receives funds as they are presented and credits them on the pass-book, or bank-book, as it is generally called, of the depositor. He must examine the endorsements on checks and other cash items brought to him, count the currency and coin, and thus critically go over the deposit tickets before entering the amount in the dealer's pass-book. The receiving teller must be thoroughly posted about counterfeit and spurious money, and is expected. to be able to detect a bad bank note the instant he sees it.

19. The Paying Teller is the principal person to whom is entrusted the funds of the bank. To a certain degree, he is the sole custodian, though generally the cashier shares in this responsibility. Chiefly, it is the duty of the paying teller to cash the checks of the depositors when presented at his counter. Checks are often presented, however, not for payment but for certification. In cashing dealers' checks or certifying them for payment great care and much experience are required. The teller must know that the signature is correct, that there is a sufficient amount to the dealer's credit, and that the person who offers the check is entitled to draw the money. In certifying checks it is not so necessary to examine the endorsement as it is when they are presented for payment, but it must be known that the signature is genuine. National banks are forbidden by law to overcertify the checks of their customers. The paying teller must make up his statement each day and prove his work before he leaves the bank.

20. The General Book-keeper is the custodian of the accounts and records that show the financial condition of the bank. Most of the data for his work come from the different departments, and in fact his books show a summary of the entire financial operations. He has charge of the general debit book, general credit book, stock ledger, transfer books, statement books, general balance ledger, and general ledger. From these books are prepared the statements required by law to be made from time to time for the information of the Comptroller of the Currency, or of the Banking Department of the State, as the case may be; the weekly report to the clearing-house; and such daily reports as may be required by the officers of the bank.

The general book-keeper must thoroughly understand the system of detail in use in all the ferent departments of the bank. He should possess a thorough knowledge of the principles of book-keeping, and his books and exhibits should be models, as to neatness and regularity. He should not be hampered with an unnecessary amount of detail work, but should take time to carefully scrutinize the general system of the bank, occasionally performing the duties of auditor in the different departments, thus furnishing additional safeguards, improving the service of the bank and satisfying all reasonable demands of the bank's customers, and of the public.