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LOST OR MISLAID CHECKS.

The checks cannot be too carefully cared for. Accidental loss of checks has caused serious loss to banks in more than one instance that I know of. It is customary in many banks, in case of lost or mislaid checks, when balancing the pass books to insert a slip in place of the missing check, giving the date of the charge and the amount, and stating "check missing." This is a dangerous custom. In several instances within my recollection these depositors sued the banks, declaring they never gave any such checks, and the banks lost.

A teller, who had access to the check tills, and where the checks were not mutilated, would take a check from the tills, cash it for himself, and place it on his file, as the one before mentioned. After the charging up and distribution of the checks to the tills, he would again obtain the same check and tear it up. When the pass book was balanced of course there were missing checks which were explained by the slips. The robbery was eventually discovered, but not until several thousand dollars had been stolen.

ISSUE OF CHECKS IN DUPLICATE.

It quite often happens that a customer desires, for some reason best known to himself, to stop payment on a check, or a check may have been lost in the mail, and it has become necessary to issue a duplicate, in which case, of course, payment upon the original needs to be stopped. In cases of this kind a notice in writing should be given to the paying teller, and the individual ledger bookkeeper should also be notified that he may place the name and description of the check to be stopped upon a list to be kept before him for ref

In issuing a duplicate Check please mark DUPLICATE across the face.

Centre City Pa

MERCHANTS NATIONAL BANK

May 1, 1899

If not paid before

receipt of this notice, please stop payment of Our Original

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payable to. Brown, Smith Co

Check, No. 196

dated May 29 189 9

for $142.50

Signed,

Williams, Carr Co.

FIG. 98.

erence.

The names on these lists should always be arranged alphabetically, that they may be readily found.

One of the best forms for a stop payment notice is here shown in Fig. 98.

If these notices are printed in red ink it will be found an advantage, as making a greater contrast between the printing and black ink writing.

CHAPTER IV.

THE LOANS AND DISCOUNTS.

CARE IN MAKING LOANS.

It is part of the chief business of a bank to loan money. As a business institution it must make sufficient to pay its expenses, lay aside a certain surplus, which the law requires, especially with National banks, and if it wishes to continue in good favor with its stockholders, at least pay a fair rate of interest upon its capital stock. From the loaning of money is derived the chief part of this revenue. The National Banking Act under section 5136 defines the incidental powers of a National bank as follows:

"To exercise by its board of directors, or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits; by buying and selling exchange, coin and bullion; by loaning money on personal security; and by obtaining, issuing and circulating notes according to the provisions of this title."

As will be seen by this section the board of directors is considered the main, directing body in the bank. This is a wise provision, for in no one man is all wisdom and knowledge found. The principal business of a board of directors is supposed to be the selection of the paper upon which the loans are made, and in consequence of this it is very desirable that the board be made up of representative men from various branches of trade, manufactures, etc., who can thus by their varied knowledge and experience aid in the matter of standing and credits.

As the board of directors seldom meets more frequently than twice a week, and in small banks only once a week, the paper that is offered in the interim, or between boards, is usually acted upon by the President, Cashier, or a finance committee which meets every day. At the next meeting of the board, however, all the paper discounted during the interim should be presented to the board for its examination and action, and any real dissatisfaction over any loan

should result in the selling or disposing of that piece of paper as soon as practicable.

The first claim upon the bank for loans naturally belongs to its depositors, in proportion to the value of their respective deposit accounts. After their wants are satisfied any remaining surplus funds can be used to loan to outsiders, or for the purchase of paper from the note brokers. In relation to this last method of using the bank's available funds, I will state that an eminent judge in the United States court, in a case in which I was interested, ruled that it was illegal for a National bank to go into the market and buy paper; that such powers were not given to it by the National Banking Act. Technically speaking, this is no doubt true, but for many years custom has permitted the banks to use their available funds in this way, and a large proportion avail themselves of this means of employing their otherwise unused funds.

Before proceeding to discount paper, it is necessary for the board or proper officers to know what available resources the bank has for that purpose. This information is obtained from the daily statement book, a full description of which is to be found in the description of the general ledger in the preceding chapter. The note tickler, which will be described later on, should show what paper will be due upon any day, and by referring to this upon the day of meeting the board can see what funds can be reloaned, and thus keep the bank's money actively employed.

THE CREDIT DEPARTMENT.

One very necessary adjunct to the discounting department, especially in a large and busy bank, is a credit or information department, for it is exceedingly important, particularly when loaning upon the ordinary single-named time paper, that the standing of the proposed borrower be known. The standing or credit, as enquired into, should cover more ground than merely his present financial condition. His past history as far as possible should be obtained. His character should be learned, for if a dissipated man or one disposed to gamble or to plunge into risky speculations, he should be handled very cautiously and loans only made him upon sufficient collateral security. His manner of transacting his business should be learned, for carelessness in business is sure to bring its losses. If he is disposed to be tricky or dishonest in dealing, the bank had better have nothing to do with him.

To aid the officers and directors in coming to conclusions regarding the value of certain customers, and the probable line their accounts are entitled to, the use of the average book, as fully described, will be found of great service. If the bank is large enough to war

rant it, the use of an analysis department, as previously described, will be found invaluable.

It often occurs that special inquiries need to be made as to the standing of the proposed borrower. The use of commercial agency reports will be found helpful in a measure, and special reports from these agencies can be obtained, but not always as quickly as needed. Here is where the need of a credit department is to be found.

In every well-organized business, of any size, a careful consideration of credits before filling the orders is always made. If this be so in the mercantile and manufacturing world, it should be more carefully and thoroughly attended to in the financial world.

ers.

In small banks the discount clerk or the Cashier can attend to the duties, for in the small towns and cities, where all are acquainted with each other, the duties would be comparatively light, but it should not be overlooked upon the ground of acquaintance. In large cities, however, it will be found economy to have an experienced credit man in every bank, whose business it is to keep himself posted regarding the assignments, judgments, conveyances, mortgages, petitions in bankruptcy, etc., that may concern the bank's customHe should keep himself posted upon the conditions of trade. He should see all paper presented for discount, make a memorandum or record of it, and should at once set the proper inquiries on foot to be able to report upon the standing of the parties. These inquiries may be to the commercial agencies or to members of the trade. All information obtained should be properly recorded and filed so it can be referred to on a moment's notice. He should be promptly notified of all protests either of checks or notes, and make memoranda of the same. All statements from would-be borrowers should be taken charge of by him and properly filed and recorded.

STATEMENTS FROM BORROWERS.

It frequently becomes necessary for the bank to require a statement from a customer, and the question often arises as to the best form for such a statement. These statements are usually made up by the parties themselves upon blank paper, simply a very brief showing of assets and liabilities in aggregates. There is nothing to prevent their being manufactured to suit the desires of the parties presenting paper for discount, and it is very difficult to obtain any redress if it is proven that they are not true.

I give here in Fig. 99 the form that has been adopted by the New York State Bankers' Association, which is considered very complete.

As some banks may prefer a form not quite so extensive, I give here in Fig. 100 an excellent one that is in use by many well-managed institutions.

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