,,banks ,,and ,,their ,,customers ,,banks ,,and ,,their ,,customers ,a ,,practical ,,guide ,,for ,,all ,,who ,,keep ,,banking ,,accounts ,,from ,,the ,,customers' ,,point ,,of ,,view ,,by ,,henry ,,warren ,,an ,,entirely ,,new ,,and ,,enlarged ,,edition 7,,the ,,eighth7 ,,with ,,introduction ,,by ,a ,,london ,,banker ,illustration ,,london ,,robert ,,sutton #dc1 ,,the ,,exchange1 ,,southwark ,,street1 ,s4,e4 #aijh ,banks and their ,customers 7,,seventh ,,edition7 ,by ,,henry ,,warren ,the ,pall ,mall ,gazette says3-- 8,caustic and interesting40 ,the ,financial ,news says3-- 8,contains a vast amount of useful information intelligently discussed4 ,to educate the public on a technical subject calls for more than ordinary knowledge4 ,it needs what ,mr4 ,warren undoubtedly possesses1 and that is a sound1 practical understanding1 and a thorough common-sense way of setting forth his knowledge in simple form4 ,this our author succeeds admirably in doing40 ,the ,scotsman says3-- 8,cannot be too strongly recommended40 ,the ,draper's ,record says3-- 8,masterly40 ,the ,birmingham ,daily ,gazette says3-- 8,invaluable40 ,investor's ,review says3-- 8,much useful and accurate information about the habits of bankers in dealing with their customers4 ,especially we commend the chapter #8,how to ,check ,bankers' ,charges1' which are often curiously arbitrary and capricious40 ,the ,city ,press says3-- 8,a caustic and forcible pen40 ,the ,bookman says3-- 8,the worth of the expert is proved4 ,mr4 ,warren on banking subjects enjoys our confidence and many editions40 ,and ,the ,glasgow ,herald says3-- 8,mr4 ,warren's caustic criticisms of bankers and their peculiarities have been widely appreciated40 ,,introduction ,,by ,a ,,london ,,banker ,i confess that when a publisher asked me to write an introduction to ,mr4 ,warren's little book ,i experienced some surprise2 because1 in the past1 he handled bankers rather roughly4 ,perhaps the audacity of the request appealed to me4 ,at any rate1 ,i consented to read the proof-sheets1 and1 finally1 perhaps a trifle reluctantly1 to stand sponsor for the work in a qualified sense4 ,i do not agree with all he says1 by any means4 ,here is the eighth edition of a well-written1 interesting guide for the customer1 who has obviously found it useful4 ,the book would not have obtained a market unless it were wanted4 ,this must be granted4 ,and ,i think that it was wanted even from the point of view of a banker4 ,the author in a short chapter tells us how and why the joint-stock bank came to dwell among us4 ,then he plunges into his subject--the ,guide for the ,customer4 ,the chapter on the cheque and its various crossings is admirable4 ,i only wish that the clients of my own bank would read every word of it1 and save the time of our cashiers4 ,he who keeps his account in credit is told much that he ought to know2 the depositor is shown how to check his interest2 the borrower how to negotiate a loan or advance2 and everybody is told the manner in which he may easily check the charges debited in his pass-book4 ,speaking for my own bank1 ,i do not care who makes use of this clearly-put information4 ,let our clients obtain the book by all means4 ,we shall then be spared the trouble of answering a host of stupid questions during the busiest parts of the year4 ,touching upon 8unclaimed balances10 ,i am of the opinion that the public can be very well trusted to look after its own interests2 and after glancing through my own ledgers ,i think that these unclaimed sums would not amount1 in the aggregate1 to a really large figure4 ,most of these dormant balances are insignificant4 ,as to the pay of bank-men1 ,i do not feel justified in expressing an opinion1 beyond asserting that the wants of a bank-clerk are small4 ,my advice to the customer is--8read the book40 8,,city ,,manager40 ,,contents ,,chap4 ,,page ,,preface v ,i ,,banking ,,evolution #a ,,ii ,,on ,,the ,,choice ,,of ,a ,,banker #ac ,,iii ,,the ,,cheque ,,and ,,its ,,various ,,crossings #ai ,,iv ,,credit-,,account ,,customers #ch ,v ,,deposit-,,receipt ,,customers #de ,,vi ,,the ,,bank ,,rate ,,in ,,relation ,,to ,,bankers' ,,charges #fa ,,vii ,,loans ,,and ,,advances ,,in ,,london #fh ,,viii ,,overdrafts ,,in ,,the ,,country #ge ,,ix ,,how ,,to ,,check ,,bankers' ,,charges #hi ,x ,,bills1 ,,coupons1 ,,foreign ,,drafts1 ,,etc4 #ajb ,,xi ,,unclaimed ,,balances #aaj ,,xii ,,bank ,,shares #aag ,,xiii ,,the ,,pay ,,of ,,bank-,,clerks #abh ,,banks ,,and ,,their ,,customers ,,chapter ,i ,,banking ,,evolution ,we owe a great deal to the financial instinct of the ,jew1 who1 having no country of his own1 has developed an acquisitive mania for the goods of those people among whom he dwells1 thanks to a progressive civilization of which he was the pioneer1 in comparative safety2 and1 by an irony of fate1 we are also indebted to him for a religion1 which his more subtle mind rejects2 yet1 stranger still1 it is a civilization based on commerce that keeps the whole world moderately sane1 and tends to at least hold in check the latent savagery of the blind enthusiast who would still1 but for her intervention1 indulge in a bloody crusade against all who hold opposite opinions4 ,a true civilization spells toleration2 and though a creditor can scarcely hope to be popular with his debtors1 he is at least entitled to the protection of the law of the land in which he lives4 ,the ,jews1 who are supposed to have come over to ,england about the time of the ,conquest1 gradually possessed themselves of the greater part of the coin of the country2 and the early ,english kings constantly resorted to them for loans4 ,as it was thought unchristian to charge usury or interest1 the business of a money-lender was consequently held in abhorrence1 with the result that the ,jews monopolized the trade1 and acquired immense fortunes by their dealings4 ,their wealth naturally excited the intense cupidity of their ,christian neighbours1 who1 making a pretext of their so-called abominations1 raided from time to time the ,jewish quarters of the various towns1 in the hopes of annexing the fabulous treasure in ,jewry4 ,under the ban of the ,church1 and detested by the people1 the popular feeling against the usurers became so embittered that ,edward ,i1 under whose protection they lived1 after having in vain attempted to persuade the ,jews to accept ,christianity1 was compelled to banish them from ,england2 and from #abij to the time of the ,commonwealth 7a period of about #cfj years7 the prohibition remained in force4 ,but the money-lender is a necessary evil2 and after the departure of the ,jews certain ,italian merchants1 known as ,lombards1 who had previously settled in ,england1 immediately filled their place2 and ,lombard ,street became as notorious for usury as had been the ,jewry4 ,the ,jew may be described as a money-lender1 and the ,lombard as a merchant-banker1 though neither was a banker as the word is now understood4 ,both1 however1 lent money at high rates of interest4 ,a banker1 in the ,english sense of the word1 is a middleman who borrows from one set of persons at a rate in order to lend to another set at a greater rate1 the difference between the two rates being his margin of profit2 and banking in this sense was not practised in ,england until quite the end of the first ,charles's reign1 when certain goldsmiths1 who were originally dealers in plate and in bullion1 became private bankers4 ,the first run upon them was made in #affg1 when a ,dutch fleet sailed up the ,medway2 and1 later1 in #afgb ,charles ,,ii closed the ,exchequer1 refusing to pay the bankers either their principal or interest1 with the result that failures were numerous4 ,we are now approaching a new banking era2 and in #afid the ,bank of ,england1 which was the first joint-stock bank established in the three kingdoms1 was incorporated4 ,the private bankers1 instantly recognizing in her a formidable rival1 were actively hostile2 but all to no purpose2 and in a very little while they grouped themselves round the ,old ,lady1 who reduced their rates and kept them in order4 ,hoares and ,childs were in being before the ,bank2 but the goldsmiths1 long before the new movement was a brilliant success1 had few direct descendants in ,london2 and the majority of those private bankers who opposed the ,act of #ahcc belonged to another generation4 ,at its inception the ,bank did not enjoy a monopoly2 but upon the renewal of its charter in #agjh it was granted the monopoly of joint-stock banking in ,england1 while the partners in a private bank could not exceed six in number4 ,this number was increased to ten in #aheg4 ,country banking developed slowly in ,england2 and it was not until towards the close of the eighteenth century that private firms began to multiply in the provinces2 but the ,bank of ,england's iniquitous monopoly kept them small and weak1 and between #agib and #ahbj over one thousand private bankers came to grief1 while the crisis of #ahbe further thinned their ranks and almost emptied the vaults of the ,bank of ,england1 when it dawned upon the ,government that the state of the money-market was distinctly rotten1 and that it would remain so until the ,bank's monopoly disappeared4 ,the result was the usual committee and the usual compromise4 ,the ,act of #ahbf allowed joint-stock banks of unlimited liability to be formed in ,england and to carry on business at a greater distance than sixty-five miles from ,london2 but such institutions could not open an office in ,london4 ,neither could they issue notes at a place within sixty-five miles thereof1 nor draw any bills on ,london for a less amount than #ej4 ,in #ahcc1 however1 they were allowed to make their bills and notes for less than #ej payable on demand at their ,london agents4 ,the demand for these establishments was not at first considerable2 and very few were formed until after five or six years of the passing of this ,act2 but in #ahcj the railway movement began in earnest1 and from #ahcc to #ahcf joint-stock banks were established throughout the country in considerable numbers4 ,this sudden boom in banking companies could only have one result2 and failures became so numerous that ,sir ,robert ,peel1 in #ahdd1 passed his ,joint-,stock ,banking ,act1 which1 being found worse than the disease itself1 was repealed in #aheg4 ,london1 we have seen1 contained only one banking corporation and numerous private bankers1 who1 forming a monopoly1 were practically rich men's banks2 for they would only accept an account provided the balance was not reduced below a certain sum1 while from #ahac to #ahcc some twenty of them suspended payment2 so stability was not one of their distinguishing characteristics4 ,it soon became apparent that the ,bank of ,england and the private bankers were quite unable to minister to the growing trade of the capital2 and in #ahcc joint-stock banks were allowed to be formed in ,london1 but upon the distinct understanding that they were to be banks of deposit and not banks of issue4 ,in other words1 they could not issue their own notes1 so were compelled to use those of the ,bank of ,england4 ,the first ,london joint-stock bank was the ,london and ,westminster1 whose prospectus was issued in #ahcc2 but the shares were subscribed slowly1 and the bank did not open its doors to the public until the ,march of the year following4 ,then came the ,london ,joint-,stock ,bank in #ahcf1 and the ,union ,bank in #ahci4 ,it is usual1 in this little island1 to hark back to the good old days1 and then1 with a sigh1 to regret that the old order of things no longer exists2 yet it must be confessed that the ,london private bankers were of no service whatsoever to the small man of business1 whom they simply ignored4 ,the joint-stock banks however1 ministered to the wants of the small trader2 and1 by diving into the heart of the masses1 proved that a large number of small balances are even more desirable than a small number of large accounts1 whilst in the end they practically drove the private banker1 handicapped as he was by the law of the land1 out of the market1 or1 at least1 reduced him to impotency4 ,but the ,london joint-stock banks1 in those early days1 were not without their grievances2 and both the private bankers and the ,bank of ,england seized upon every pretext in order to harass them4 ,being merely common law partnerships1 they did not come under the #ahbf ,act2 and until the ,act of #ahdd they were not relieved from certain restrictions which need not be discussed here4 ,but the year of banking reform was1 of course1 #ahdd1 when1 fortunately for the trade of the country1 the ,bank of ,england was stripped of all its privileges except that relating to the issuing of notes4 ,the ,bank ,charter ,act of #ahdd gave the ,bank of ,england the monopoly of issuing notes in ,london and within sixty-five miles of it4 ,no new bank of issue was to be formed1 while a provincial bank1 upon opening in ,london1 forfeited its issue4 ,the cheque1 however1 soon became more powerful than the note2 and the larger provincial banking companies gladly made the sacrifice in order to establish themselves in the capital4 ,the next step forward was when the joint-stock banks broke up the cabal of private bankers and were admitted to the ,clearing ,house in #ahed2 though it is a little remarkable that1 having posed as martyrs and vigorously denounced their oppressors1 they should now take upon themselves to exclude certain companies which have as good a right as they to enter the sacred portals of the ,house2 but the mote in one's neighbour's eye is always so much more apparent than the beam in one's own4 ,by the ,act of #aheh a joint-stock bank was allowed to limit the liability of its shareholders2 but the ,act1 was not made compulsory2 and though all the companies formed subsequently registered under this ,act the members of those in existence prior thereto were liable for the debts of the company in which they held shares to their last shilling4 ,then came the failures of the ,west of ,england ,bank and the ,city of ,glasgow ,bank in #ahgh2 and shareholders in banks of unlimited liability1 with the fate of the members of these two institutions before their eyes1 began to weigh their responsibilities1 with the result that many sold out at panic prices in haste and regretted at leisure4 ,the more prudent1 though they held their shares1 began an agitation for reform1 which gave birth to the ,act of #ahgi4 ,we need not discuss this ,act2 though it may just be said that every joint-stock bank in the three kingdoms which is not limited by its charter is now a bank of limited liability under the ,companies ,acts4 ,at this juncture1 perhaps1 a few words may be said with reference to the ,bank of ,england1 which1 with a contempt for evidence that is truly ,british1 the public is convinced cannot suspend payment2 yet the ,bank's career has been decidedly checkered2 and even after the passing of the ,act of #ahdd the ,old ,lady was only saved by the intervention of the ,government in #ahdg1 #aheg and #ahff1 while during the ,baring crisis of #ahij she was compelled to borrow from the ,bank of ,france2 so1 evidently1 her system is not by any means a perfect one2 but one does not expect perfection in finance4 ,the perfect financial machine and the perfect man are alike impossibilities4 ,as to the latter1 did he exist1 he would seem positively inhuman4 ,it need not be said that this sketch of the ,english banking movement is necessarily imperfect1 if only because of the small space into which it is condensed2 but the average reader certainly would not trouble to digest two hundred pages on the subject of banking evolution2 so possibly it may prove acceptable in this form4 ,we have seen that the ,london private banker was a rich man's banker2 but it was otherwise with the country private banker1 who was often of great assistance to the small trader1 at whom the joint-stock banks will not now look unless he approaches them with his pockets stuffed with securities when anxious to overdraw his account4 ,the maxim of the companies is3 8,let the customers take all risks40 ,and if this rule is broken1 then the case is an exceptional one4 ,we need not discuss here whether or not this policy be essential to modern banking2 but it is quite evident that the small man of business has lost a good friend in the old-fashioned country banker1 whose place has not been taken by that person of peculiar views and training--the bank-manager or clerk-in-charge1 whose urbanity must be more than painful to those would-be borrowers without security who ask for bread and are politely offered--a stone4 ,what we have to discover is why the country banker has been practically forced out of the market by the joint-stock system2 and the reason is not difficult to explain4 ,in the first place we know that1 since #aheg1 the partners in a private bank have been limited to ten2 consequently1 however anxious a banker may have been to extend his system of branches and develop his business1 the difficulty of insufficient capital presented itself2 whereas his rivals1 who can appeal to thousands of small investors1 could1 once having established their credit1 easily obtain as much capital as they required4 ,the private banker1 therefore1 ministered to the wants of a certain town1 district1 or county2 but the joint-stock banks spread their tentacles throughout the length and breadth of ,england2 and1 like an octopus1 eventually strangled him in a manner which will be explained4 ,in ,london and throughout the provinces there were numerous small firms of private bankers--small1 that is to say1 when contrasted with their joint-stock competitors4 ,the banks in a manufacturing district or in a busy city would1 especially during periods of active trade and rising prices1 be called upon to advance large sums to their customers2 but if a banker collected his deposits from a few branches within the district whence the demand arose1 he would soon find himself unable to meet the requirements of his customers4 ,but the joint-stock banks1 which have branches in many counties1 can pour their deposits into those centres where demand is active2 and it is obvious that a small private banker cannot hope to compete successfully against the superior organization of the companies4 ,with the private banker it soon became a question of restricting advances2 and his customers1 finding that they could not obtain all the accommodation they required1 naturally applied to his rivals1 who1 if tangible securities were forthcoming1 met their demands with ease4 ,the ,london and provincial banking companies1 which farm both the agricultural and the manufacturing districts1 by pouring their surplus capital into the ,london money-market1 speedily obtained all the best business2 and those private bankers who did not either amalgamate with1 or adopt the system of1 their successful rivals found themselves hopelessly out-distanced4 ,hence the triumph of joint-stock banking and the advent of the director and his humble1 most obedient servant1 the clerk-in-charge1 who 8manages0 a country branch1 but whose power1 in reality1 is of the smallest1 all the applications for advances above a certain sum having to be submitted to the chief office1 while he himself is powerless to act until he receives his instructions from headquarters4 ,this form of competition would be felt less in an agricultural county where the deposits a banker collects are greatly in excess of the demand made upon him for advances2 but even there the private banker's luck has deserted him2 for the agricultural depression thinned the ranks of his best customers1 and1 of course1 left him a legacy of bad debts4 ,we should1 therefore1 expect to see the private bankers disappear from the great towns first1 and1 finally1 from the agricultural centres4 ,the law of the land has kept them small2 and the tentacles of the joint-stock companies have almost exterminated a class of men who enjoyed the friendship and confidence of their clients to an extent that a clerk-in-charge upon a salary of from #bjj to #ejj a year can never even approach4 ,though we live in an age of great machines1 which1 for reasons that will be explained later1 can declare huge dividends1 every now and again we hear of the inception of a new banking company4 ,the new arrival1 perhaps1 waxes more than eloquent upon the large dividends paid by the existing companies1 and then dwells enthusiastically upon the immense profits it hopes to earn2 but can a small company ever establish its credit in face of the network of branches which now cover the land8 ,the person who applies for its shares must certainly be of a most sanguine disposition4 ,it is the powers that be that always excite the keenest interest1 doubtless because of the possibility that a knowledge of their habits and ways may prove of pecuniary benefit to the student2 and this object has been kept well in view throughout the following chapters4 ,,chapter ,,ii ,,on ,,the ,,choice ,,of ,a ,,banker ,there is an opinion which is very prevalent to the effect that1 provided one's account be an overdrawn one1 it does not matter where it is kept2 and1 of course1 if it were possible to find a nice1 philanthropic banker who would allow one a big overdraft without even hinting at security1 there would be much truth in the assertion2 but in view of the existing relations between banker and client1 the idea is both unfortunate and fallacious4 ,we have seen how the large joint-stock banks1 by developing their system of branches1 literally smothered the private banker2 and the smaller companies1 which possess but few branches1 are now being forced to amalgamate with the larger for the same reason4 ,if1 therefore1 a man has a large advance from a small provincial banking company1 it may occur that1 just when he is anxious to discount more bills or to increase his overdraft1 the bank will be unable to accommodate him2 and it therefore follows that a large bank1 whose resources are abundant1 is as essential to the really great borrower as it is safer for the depositor4 ,a person whose account is in credit or who leaves money with a banker at interest naturally attaches the greater importance to the safety of his balance or principal2 and1 secondly1 he endeavours to obtain as high a rate as possible2 but he would not be so foolish as to sacrifice security to a high rate of interest2 though1 where the banks are equally well managed1 he would select the one that offered him the higher rate or the cheaper facilities4 ,conversely1 the person whose account is overdrawn would1 other things being equal1 choose the bank that offered to work his account the cheapest4 ,now1 a banker's liabilities to the public are due on demand1 and at short notice2 and they would consist principally of 8deposit and current accounts1 and notes and drafts in circulation40 ,these1 of course1 will be found on the left-hand side of the balance-sheet4 ,as the banker's deposits may be demanded from him at any unlucky moment1 it follows that he is compelled to hold a certain sum of cash 7legal tender7 in reserve2 and the larger that sum1 the safer are the customers' balances4 ,a person1 therefore1 who is looking for a safe banker1 should see that the firm or company which he selects possesses at least from #ab to #ah in coin1 bank-notes and cash with the ,bank of ,england against each #ajj it owes to the public4 ,he will find the public liabilities on the left-hand side of the balance-sheet and the cash in hand on the right2 and a proportion sum will soon give him his answer4 ,but a really strong1 well-managed bank only advances to1 and discounts bills of exchange for1 its customers to such an extent as will enable it to hold from #de to #ej in cash1 money at call and investments to every #ajj of its public indebtedness4 ,cash1 of course1 is its vital asset2 and after cash comes ,consols and other ,british ,government securities in which1 except at the very height of a panic1 there is always a market4 ,these are a bank's so-called liquid assets2 and it may just be added that when a bank mixes its cash and money at call and notice together1 and an accommodating auditor declares that such a medley 8exhibits a true and correct view of the state of the company's affairs10 the bank is probably so weak in actual cash as to deem it wise not to publish the figures4 ,money at call and short notice would represent advances to the bill-brokers and to the ,stock ,exchange2 and though such loans could doubtless be easily called in during normal times1 they would be difficult to collect when the money-market was in a turmoil4 ,a greater part of the advances made to the ,stock ,exchange1 though classed as liquid assets1 are in reality loans in disguise2 for if the banks were to suddenly ask the stockbrokers to redeem their pledged stocks and shares1 those gentlemen would be hammered in clusters2 and the shares1 when flung upon the market to be sold at what they would fetch1 would rapidly depreciate4 ,it would certainly be interesting were the banks to specify the amount of their so-called short loans to the ,stock ,exchange2 and1 with a lively recollection of #ahij1 it is to be hoped that they are kept within bounds1 as1 upon that occasion1 this class of advance hung like a mill-stone round their necks4 ,such liquid assets1 it is to be feared1 are more likely to sink the good ship than to save her in a storm4 ,having ascertained the ratio per cent4 of a bank's cash in hand to its public liabilities1 and glanced at the call-money1 the list of investments should be carefully criticized4 ,when a banking company describes its list thus3 8,consols and other securities10 it may be taken for granted that its holding of ,consols is a small one4 ,this description1 in fact1 is taken from the balance-sheet of an ,english provincial banking company1 which holds about #ai in cash1 call-money and securities to each #ajj it owes to its customers2 and yet it can find people who are foolish enough to do business with it4 ,considered as a financial institution1 it is practically bankrupt2 yet its deposits amount to over #d1jjj1jjj4 ,fortunately1 however1 this institution is one of the few exceptions which are best avoided4 ,another very weak joint-stock bank describes its investments as consisting of 8,english ,government and railway stocks40 ,its cash and call-money are consolidated into one total2 but1 more remarkable still1 an auditor actually has the impudence to declare that the balance-sheet 8exhibits a true and correct view of the company's affairs10 when1 of course1 it is not worth the paper upon which it is printed4 ,a well-managed bank1 as a rule1 states its holding of ,consols distinctly1 and1 sometimes1 the figures at which they have been taken4 ,if it do not1 then the value of its ,british ,government securities is given separately4 ,next1 it usually specifies its ,india ,government ,stock1 and so on2 and1 finally1 8other securities10 which1 assumably1 are of a non-liquid nature1 are given last because they are of the least value from a banker's point of view4 ,naturally1 if a bank possess a gilt-edged list1 it advertises the fact in its balance-sheet2 and those companies which indulge in ambiguity are1 in nine cases out of ten1 the banks to avoid4 ,for instance1 you will not find any evasions of this nature in the balance-sheets of such powerful companies as the ,london and ,county ,bank1 the ,union and ,smiths1 the ,london ,city and ,midland1 and other really first-rate institutions1 for the simple reason that there is no occasion for them4 ,as a rule1 the clearer the balance-sheet1 the stronger is the bank2 and the sinners1 consequently1 are the smaller banks1 which1 situated in a manufacturing centre1 are unable to collect sufficient working resources to finance their customers4 ,their ultimate fate1 it need not be said1 is amalgamation with a more powerful rival4 ,when choosing a banker1 therefore1 one should first ascertain that he has an abundant reserve of cash in hand1 and1 secondly1 that his so-called liquid assets 7his cash1 call-money and securities7 amount to from #de to #ej against each #ajj to which he is indebted to the public4 ,and as to those private bankers who do not issue a balance-sheet1 they are1 in the first place1 guilty of the sin of omission2 and1 in these days1 when faith is not the predominant note1 there seems but little inducement to buy a pig in a poke when a large banker's balance-sheet may be had for the asking4 ,,chapter ,,iii ,,the ,,cheque ,,and ,,its ,,various ,,crossings ,a cheque is often described as a bill of exchange1 drawn by a customer on his banker1 for a sum certain in money1 payable on demand4 ,in these days1 when the mere babe produces his cheque-book on the slightest provocation1 it seems unnecessary to describe how a cheque should be drawn2 though it may just be added that it must bear a stamp of one penny1 and that the stamp may be either impressed or adhesive4 ,a customer1 therefore1 can draw a cheque on his banker upon a sheet of notepaper2 but he would be well advised1 except under exceptional circumstances1 to use the forms supplied to him4 ,order or ,bearer4 ,a cheque is payable either to 8order0 or to 8bearer02 and1 if the latter word be used1 then it does not require indorsing1 while should neither word be upon the document1 the cheque is held to be an 8order0 one4 ,either the person to whom it is payable or the drawer may change a cheque from bearer to order2 and this he would do by running his pen through the former word2 but the drawer alone can alter an order cheque by writing the word 8bearer0 in full and initialling the alteration4 ,if the cheque be signed by more than one drawer1 then all should add their initials to any correction it may be desirable to make4 ,date of a ,cheque4 ,any person who receives an undated cheque is entitled to fill in what he believes to be the correct date1 and need not trouble to return it to the drawer for that purpose4 ,he cannot1 of course1 make any alteration in the date1 but should1 in the event of a mistake on the drawer's part1 return it to him for correction1 when he 7the drawer7 would make the desired alteration and write his initials against it4 ,it is1 perhaps1 as well to remember that a certain class of debtors1 who may be described as either 8hard up0 or 8shady10 have their little peculiarities2 and one of them is to post-date their cheques when they know that there is not sufficient money at the bank to meet them4 ,their object1 of course1 is to gain time2 and should a payee1 upon receiving such a cheque1 have cause to think that he is dealing with one of these gentlemen1 he might pay in the cheque to his own banker for collection1 and write pretty plainly to the drawer1 requesting him to call at his banker's and put the cheque in order4 ,though a cheque be either post-dated1 that is to say1 dated so that it falls due after the day upon which it is drawn1 or dated on a ,sunday1 the document is not invalidated thereby4 ,a ,stale or ,out-of-,date ,cheque4 ,most bankers would probably decline to pay a cheque which had been outstanding more than six months4 ,the drawer1 however1 does not cease to be liable upon the instrument until six years after the date thereupon2 though he may claim damages against the payee if he can prove that he has suffered loss through his delay4 ,crossed ,cheques4 ,though this practice originated in the ,united ,kingdom1 the ,french banks have now adopted the idea1 which is as simple as it is undoubtedly useful and protective to the customer4 ,a cheque may be crossed either generally or specially--specially1 that is to say1 to some bank or to the account of an individual who keeps an account with a banker4 ,if a customer draw two parallel lines across the face of a cheque1 thus1 _/ _/1 he has instructed his banker not to give cash in exchange for it to the payee across his counter4 ,it follows that a cheque so marked must be passed through a banking account4 ,the words 8 ,co40 are sometimes written between the lines2 but this addition is almost meaningless1 the simple crossing being all that is required4 ,a person who draws two parallel lines across his cheque1 gives the following instructions to his banker3 8,do not pay cash over your counter in exchange for this cheque1 which must reach you through a banker1 and be paid to him alone40 ,when1 therefore1 you wish a person to whom your cheque is made payable to go to your banker's and draw the money1 you will be careful not to cross it4 ,practice1 somehow1 always seems at war with theory1 and it is not by any means an unusual occurrence for a lady1 after having deliberately told her banker not to pay cash for her cheque to the presenter1 to indignantly inquire why he did not disobey her behest and do so4 ,a prudent teller seldom descends to either argument or explanation1 but calmly accepts such reproof as one of the amenities of his calling1 and resigns himself philosophically to the inevitable4 ,not ,negotiable ,cheques4 ,this description is somewhat misleading1 for a cheque crossed _/not negotiable_/ is in reality negotiable1 though not so fully as is the one that has been discussed in the foregoing division4 ,the distinction1 however1 is not difficult to grasp4 ,take a cheque with two parallel lines across the face simply4 ,now1 if such a document be lost1 and find its way into dishonest hands1 a third party1 who gives value in exchange for it1 provided he have no guilty knowledge1 has a good title against all the world1 and can compel the drawer to pay him the sum for which it is made out4 ,for instance1 ,a draws a cheque for #bj payable to ,b1 and crosses it _/ ,co_/4 ,b1 the payee1 after having written his name on the back of the cheque1 loses it4 ,c picks it up and passes it on to ,d1 who gives him cash or goods in exchange for it4 ,as ,b has indorsed the cheque he will have to bear the loss1 even though he has got ,a1 the drawer1 to stop payment of it at his banker's4 ,but had the words 8not negotiable0 been added1 ,d could not have enforced his claim1 although he was a bon-fide holder for value4 ,a 8not negotiable0 cheque warns any holder for value thus3-- 8,you must1 if you part with either cash or goods in exchange for this document1 be prepared to take all risks upon your own shoulders4 ,the crossing hereon gives you due notice that you must act upon your own responsibility1 and the law1 therefore1 affords you no protection40 ,a business man cannot be too careful in dealing with a cheque thus marked2 and unless he be well acquainted with the holder1 he should decline to part with either cash or goods in exchange for it4 ,one should never1 even if one know that the drawer is a man of means1 and that the signature upon the cheque is genuine1 give value for it to a stranger1 as there is always the danger of one's having to make good the loss of any prior holder1 who may have been defrauded1 whilst if the payee cannot enforce his claim against the drawer1 then a holder for value cannot4 ,a 8not negotiable0 cheque1 in short1 is analogous to an over-due bill4 ,any person who may deal with a a bill after its maturity does so upon the understanding1 or1 better1 supposition1 that he is acquainted with any flaw there may be in the title4 ,he may not know of any2 but the law holds that he does4 ,it is precisely the same with a 8not negotiable0 cheque4 ,cheques1 which are crossed in the manner already described1 are said to be crossed generally4 ,cheques ,crossed ,specially4 ,a cheque is said to be crossed specially when one writes across the face of it1 say3-- 8,a_/,c ,john ,smith1 ,provident ,bank of ,london40 ,one may name1 in the crossing1 any particular bank1 and the banker upon whom the cheque is drawn will take care that it comes through the channel indicated thereupon4 ,in the above illustration1 for instance1 your banker will see that the cheque has the name of the 8,provident ,bank of ,london0 stamped upon it2 and should he not find it there1 then he would decline to pay the document4 ,either the payee or the holder of an uncrossed cheque may cross it generally or specially2 and if it be already crossed generally1 then either can cross it specially1 or add the words 8not negotiable40 ,how to ,cancel a ,crossing4 ,the drawer alone can do this by writing upon the cheque the words 8pay cash10 and signing his name beneath them in full4 ,how to ,indorse or ,back a ,cheque4 ,for all practical purposes one cannot do better than sign one's name upon the back of a cheque exactly as the drawer has written it upon the face1 with1 of course1 the omission of any courtesy title1 such as ,miss1 ,mr4 or ,esquire1 which are merely there as a mark of civilization and progress4 ,if one's name be spelt incorrectly1 then one should back the cheque just as it is drawn1 and write one's correct name underneath the misspelt signature4 ,further1 do not bully the cashier if he make this request of you1 for to do so is the sign of a weak mind4 ,a cheque payable to ,john ,smith1 ,esq41 or to ,mr4 ,john ,smith1 should be indorsed3-- 8,john ,smith40 ,doctor ,john ,smith may sign 8,j4 ,smith1 ,m4,d402 and ,colonel ,john ,smith1 8,j4 ,smith1 ,colonel40 ,these embellishments1 however1 are as unnecessary as a flourish would be on the final h of ,smith1 and1 in a busy age1 the sarcastic person1 like the law1 regards them as superfluous4 ,a ,miss ,mary ,smith1 who has married a ,mr4 ,john ,brown1 would indorse a cheque made payable to her in her maiden name3-- 8,mary ,brown1 ne ,smith40 ,if the cheque be made out to ,mrs4 ,john ,brown1 then she signs3-- 8,mary ,brown1 wife of ,john ,brown10 or 8,mary ,brown 7,mrs4 ,john ,brown70 in brackets4 ,certain ladies of a masterful temperament appear to entertain a strong objection to signing themselves 8the wife of0 such-and-such an individual1 as though the designation smacks of an inferiority of which they are not conscious2 and such susceptibilities may at least be soothed by placing the opprobrious term within brackets4 ,a cheque payable to ,mrs4 ,brown or bearer would not1 of course1 require her name upon the back4 ,but if it were to order1 then she would indorse it either ,m4 ,brown or ,mary ,brown4 ,when the drawer omits one's initials1 one should write one's usual signature upon the back of the cheque2 and though it is not necessary to sign christian names in full1 even when they are so written upon the document1 the capital letters must1 of course1 agree with those upon the face4 ,a cheque drawn in favour of ,messrs4 ,robinson is obviously payable to two or more persons of that name1 so it may be indorsed3 8,a4 ,c4 ,robinson10 8,robinson ,son10 8,robinson ,brothers10 or 8,robinsons40 8,robinson and ,nephew0 would not1 however1 meet the case1 for it by no means follows that the nephew is a ,robinson4 ,it is equally as probable that he may be a ,smith or a ,jones--or a somebody else4 ,in practice1 provided the cheque be for a small amount1 the paying banker is seldom squeamish1 but when a large sum is in question he naturally takes care that he is upon the safe side1 for the good man is very human4 ,where a cheque is payable to two or more persons1 who are not partners1 then all should indorse4 ,a payee who is unable to write must make his mark or cross 7the trade-mark of the illiterate7 in the presence of a witness1 who attests it thus3-- his ,george ,x ,brown4 mark ,witness3 ,robert ,white1 #ee1 ,high ,street1 ,birmingham4 ,when the payee 7the person to whom a cheque is payable7 writes his name upon the back of an 8order0 cheque the document is said to be indorsed in blank1 and becomes in effect payable to bearer4 ,he can1 however1 make it payable to another person by writing above his signature3 8,pay ,thomas ,brown or order40 ,thomas ,brown must then indorse the cheque4 ,further1 any holder may write this request above the indorser's signature1 thereby converting an indorsement in blank into a special indorsement4 ,a restrictive indorsement gives the indorsee no power to transfer his rights4 ,hence a cheque indorsed to 8,john ,smith only0 prevents further negotiation of the instrument4 ,where a cheque is payable to1 say1 ,john ,smith for ,r4 ,jones1 the payee simply has to write his own name on the back4 ,should the name of a fictitious or non-existing person be inserted as payee in an order cheque1 the document may be treated as payable to bearer4 ,cheques drawn to 8cash10 8house10 etc41 are so treated4 ,it is usual1 however1 for the drawer to indorse them1 just as he would a cheque payable to 8self or order40 ,any executor or administrator can indorse a cheque made payable to a deceased person1 but all trustees must sign4 ,in practice1 a banker usually guarantees or confirms these indorsements4 ,finally it may be added that it is not illegal to indorse a cheque in pencil1 though a banker would probably decline to honour it on the plea that it becomes fainter as time progresses4 ,again1 too1 an indorsement may be made on the face as well as upon the back of a cheque1 but the customer1 unless he be of a peculiarly combative temperament1 merely wishes to know what is usual1 and we are all aware of the accepted rule in this instance4 ,agents and 8,per ,pro0 ,indorsements4 ,a signature by procuration indicates that the agent's power to bind his principal may be1 and probably is1 limited4 ,for instance1 the agent may only have authority to indorse cheques and bills1 and if he sign as either drawer or acceptor1 he cannot bind his principal4 ,moreover1 as a procuration signature operates as notice of his limitations1 a holder has no claim upon his principal1 as he should have protected himself by demanding to see the agent's letter of authority4 ,a customer1 when he wishes another person to draw cheques on his behalf1 gives a letter of authority to his banker1 and states therein exactly what his nominee or agent may do4 ,the authority may only allow a certain person to sign cheques on his behalf up to1 say1 #ajj1 and the banker would1 of course1 refuse any cheque drawn in excess of that sum4 ,most bankers keep printed forms of this description1 and the customer1 if he obtain one1 can1 by crossing out what the agent may not do1 limit his power to any extent he thinks necessary4 ,these letters need not be stamped1 and1 unless previously revoked1 they continue in force until the bankruptcy1 insanity1 or death of the principal4 ,we can now see that dealing with an agent is not unattended by certain risks4 ,the banker always protects himself by ascertaining that an agent really has authority when he signs the name of a client in the capacity of either drawer or indorser1 but as he 7the paying banker7 is not liable upon either a forged or an unauthorized indorsement1 per pro indorsements are universally accepted by the banks in the ordinary course of business4 ,they are not1 however1 legally obliged to pass them1 and a banker may demand to see an agent's authority or insist upon having a confirmation of the indorsement4 ,an agent usually signs3-- 8per pro 7or p4p47 ,john ,brown1 ,robert ,smith40 ,it has been held that 8p4p4 ,mr4 ,john ,brown1 ,robert ,smith10 is a good discharge1 but the foregoing method is the more general4 ,there have also been decisions in favour of the prefixes 8pro0 and 8for10 though most bankers refuse to pay cheques so indorsed4 ,procuration indorsements are not accepted on dividend-warrants4 ,a cheque payable to ,brown's ,drapery ,stores may be indorsed3-- 8p4p4 ,brown's ,drapery ,stores1 ,thomas ,brown1 ,proprietor40 ,again1 should ,thomas ,brown receive a cheque1 which1 he knows1 is intended for him1 though made payable to ,thomas ,bright1 he might sign upon the back3 8p4p4 ,t4 ,bright1 ,thomas ,brown40 ,he can explain the reason for this to his own banker1 but the paying banker will not question the indorsement4 ,cheques which are drawn in favour of an establishment one owns1 or of a commodity one sells1 can always be backed 8per pro40 ,a cheque to the order of a limited or unlimited company is generally indorsed per pro the company1 and the signer should then state the position he occupies1 whether director1 secretary1 manager or cashier1 as in the following illustration3-- 8p4p4 ,the ,hull ,shipping ,company1 ,limited1 ,walter ,wilson1 ,manager40 ,it is always advisable to sign for or on behalf of a company1 and to state in what capacity one signs1 so as to avoid a personal liability4 ,an agent who signs under a power of attorney1 usually indorses3 8,thomas ,brown by his attorney ,william ,smith40 ,it is as well to remember that a power of attorney often confines the agent's power1 as in the case of a letter of authority1 within very narrow limits1 and that the principal is only bound by its provisions4 ,banker's ,liability on ,forged ,indorsements4 ,the paying banker is not liable upon a forged or unauthorized indorsement1 but the collecting banker is in the case of uncrossed cheques1 and1 according to a recent decision by the ,house of ,lords1 may be upon crossed ones4 ,if a banker credit his customer's account with the amount of a crossed cheque after it has been cleared1 he is protected by ,section #hb of the ,bills of ,exchange ,act2 but should he credit his client's account with the said cheque before he himself has collected it1 then he ceases to be a mere agent1 and becomes a holder for value1 and1 consequently1 liable upon a forged indorsement4 ,as it is usual1 both in ,london and the provinces1 to credit a customer's account with cheques on the day that he pays them in1 it follows that an employer1 if his agent have indorsed crossed cheques without authority and placed them to an account in his own name1 can recover their amount from his agent's banker4 ,banker's ,liability where ,drawer's ,signature is ,forged4 ,the banker is liable to a customer upon any forged cheque he debits to his account4 ,when a ,cheque is ,legally ,paid4 ,a banker1 having passed the cash across his counter1 cannot legally demand it back again1 and the presenter may please himself whether or not1 if asked1 he will return the money4 ,the banker has no power to compel him4 ,stopping ,payment of a ,cheque or ,bill4 ,this must be done by the drawer or acceptor1 as the case may be1 and by him alone4 ,he should write a note to his banker1 giving an exact copy of the cheque or bill he wishes returned1 and the banker will then mark his ledger and instruct the cashiers to refuse payment of the document1 if presented4 ,should he pay the instrument in spite of the customer's order to the contrary1 he will have to make good any loss occasioned by his negligence4 ,lost ,cheques4 ,the payee or the holder who loses a cheque can1 of course1 give notice of his loss to the banker upon whom it is drawn1 and the banker would doubtless question any presenter1 but he1 the payee or holder1 must obtain an order from the drawer instructing his banker to stop payment4 ,the drawer1 though he cannot refuse such a request1 may insist upon receiving security before he issues a fresh cheque4 ,further1 if the drawer employ the customary means of communication1 such as1 for instance1 sending his cheque through the post1 or should the payee himself select a particular channel1 then any loss falls upon the latter4 ,a holder for value1 however1 provided the cheque be not tainted with forgery1 and that it be not crossed 8not negotiable10 can compel payment from the drawer1 who must then fall back upon his indemnity should he have issued a duplicate cheque4 ,sending ,cheques through the ,post4 ,when remitting cheques to one's banker for the credit of one's account it is advisable to write across the face of each3 8,a_/,c ,payee1 with ---- ,bank of ,london40 ,in the event of a cheque thus marked getting into dishonest hands no banker would care to collect it4 ,where the sender is the holder1 and not the payee1 he would1 of course1 cross the cheque 8,a_/,c ,john ,jones10 etc4 ,as the paying banker is not liable on a forged indorsement1 it is always desirable to receive an acknowledgment from the payee of a cheque posted to him4 ,should not this come to hand in proper time1 then payment of the cheque might be stopped at the bank1 and the stop removed when the receipt arrives4 ,it is1 perhaps1 as well to remember1 when sending a crossed cheque through the post1 that the addition of the words 8not negotiable0 lessens the risk of both payee and drawer4 ,paid ,cheques4 ,these are the legal property of the drawer2 but a banker is entitled to an acknowledgment from the customer before he surrenders them4 ,providing for ,cheques ,specially4 ,a customer1 whether his account be overdrawn or not1 may pay in a certain sum to his credit1 and request his banker to pay a particular cheque against it4 ,the person who adopts this procedure is invariably somewhat 8hard up02 and having issued cheques which1 in the aggregate1 amount to more than the balance at his credit1 or which would1 if presented1 overdraw his account beyond the agreed sum1 he is naturally nervous lest his banker should return one or two of them4 ,assuming that he has some half-dozen cheques in circulation1 but is particularly anxious to pay one to ,john ,smith1 who has threatened to sell him up1 for #cj1 and another for #dj to ,william ,james for rent1 then he should pay #gj to his credit1 and write across his paying-in slip3 8,to provide for my cheques of #cj to ,john ,smith and #dj to ,w4 ,james specially40 ,the banker1 if he accept the slip1 is bound to hold the money against the cheques in question4 ,present your ,cheques at ,once4 ,a business man1 in order to give himself every chance1 will pay all cheques to the credit of his banking account upon the day he receives them from his customers4 ,he has1 in the legal sense1 until the close of the first business-day following the day he gets the cheque1 when1 if he like1 he can post it to his agent1 who has the same time-allowance for presentment1 provided the cheque be not drawn upon a bank in his own town4 ,if he delay longer any loss incurred by the drawer through non-presentation will fall upon the payee's shoulders4 ,for instance1 should the bank fail1 the payee might be saddled with a bad debt through his delay4 ,a customer who has a doubtful cheque in his possession1 and who is anxious to know whether the drawer has funds to meet it1 can instruct his banker to forward the cheque in question direct to the drawer's bankers1 with the request that they telegraph back whether or not the cheque is paid4 ,or he may ask them to wire only in case of non-payment1 and so save himself the expense of a telegram4 ,some companies1 when they think a customer will stand it1 charge #as4 for doing this2 but one should decline to pay more than the price of the telegram1 viz41 #f;d4 ,returned and ,dishonoured ,cheques4 ,it does not follow that1 because a banker returns a cheque1 the money is not there to meet it1 as1 more often than not1 a cheque is sent back for some irregularity in the indorsement1 which can be at once put right4 ,it is necessary1 therefore1 before jumping to conclusions1 to carefully examine the words written upon the document4 ,the following are the usual answers given by bankers1 with their abbreviations3 8,r_/,d0 7refer to drawer74 ,such an answer clearly implies that the cheque has been dishonoured for lack of funds4 8,effects not cleared40 ,here the client1 assumably1 has enough money to meet the cheque1 but the banker has not yet cleared or realized the documents he has paid in1 and the drawer's credit is so poor that he will not honour his cheque until this has been done4 ,a cheque thus marked is usually re-presented1 but1 obviously1 the drawer is weak4 8,n_/,s0 7not sufficient74 ,we gather from this that the drawer has some money standing to his credit1 though not enough to meet the cheque4 8,words and figures differ0 does not require an explanation1 though1 perhaps1 it may be remembered that weak drawers have a trick of making mistakes in order to gain time4 8,payment stopped10 8,post-dated10 8,incomplete10 8,another signature required10 8,indorsement irregular10 and other answers that might be given1 are self-explanatory4 ,cheques returned for these reasons naturally do not reflect any discredit upon the drawers4 ,of course1 a person with an open1 charitable mind is free to make his own deductions4 ,occasionally a banker returns a customer's cheque when he is in funds4 ,such a mistake generally occurs through a credit having been posted to the wrong account1 and as often as not the two customers are blessed with the same surname1 though not with an equal amount of this world's goods4 ,brown1 for instance1 is not an uncommon name1 so we will assume that a credit of poor ,brown's has been posted to rich ,brown's account by mistake1 and that the banker returns the former's cheque for #ej marked 8refer to drawer40 ,now poor ,mr4 ,brown has a good case against his banker1 and should at once consult his solicitor1 who will see that he gets compensation for the damage done to his credit4 ,most bank-directors1 who are modest1 retiring gentlemen1 prefer to settle such a case privately1 as it is not thought desirable to advertise the fact that a mistake of this nature1 with their perfect system of book-keeping1 is possible4 ,drawer too ,ill to ,sign4 ,in the above instance the customer makes his mark1 which is usually witnessed by his doctor4 ,sometimes he authorizes a person to draw cheques upon his account up to a certain sum1 and cancels the authority upon his recovery4 ,backing a ,cheque for a ,friend4 ,the man who backs a cheque in order to oblige a friend should remember that he makes himself responsible for its payment1 and that should his friend have no money to meet it1 he1 the indorser1 will be called upon to make good the loss4 ,he does not merely vouch for the respectability of his friend1 but he also guarantees that his cheque will be duly honoured upon presentation1 which is quite another matter4 ,one should1 therefore1 decline to back a cheque for a stranger upon any consideration4 ,,chapter ,,iv ,,credit-,,account ,,customers ,as by far the greater number of a bank's customers keep their accounts in credit1 we will begin this chapter by considering what average balance should entitle a person to have his account worked free of charge4 ,in ,london1 a man who opens a small account with a bank1 and whose credit balance averages #ajj1 will not be debited with any commission at the end of the quarter or half-year when the companies rule off their books1 while in the suburbs an appreciably smaller balance is accepted1 and1 occasionally1 interest is allowed there upon current-account balances1 though one will have to press pretty hard for it4 ,competition is now so keen between bank and bank that it is sometimes possible to make very close terms4 ,in the country it is considered that an average balance of #ej upon a small account pays expenses4 ,however1 the bank-manager1 who is as human as the gentleman who sells one a dog1 seldom neglects to make a small charge upon these accounts when he considers that their owners will stand #ajs4 a year or so4 ,broadly speaking1 you can please yourself whether you pay it or not4 ,this class of business1 of course1 is absolutely safe2 so the customer1 if he cannot come to terms with the manager1 is able to take his account to the cheapest market1 always remembering that it is never wise to bank with a second-rate firm1 whatever advantages may be offered4 ,though a man keep a balance of #aj1jjj to his credit1 he will not receive one penny in the shape of interest unless he ask for it1 and1 even after having arranged a rate1 it is advisable to check the banker's figures and ascertain that you are getting it1 as1 sometimes1 they are apt to err in his favour1 through small debits that have been deducted from the interest1 and which1 consequently1 do not appear in your pass-book4 ,the following illustration1 perhaps1 will show how matters stand3-- ,a keeps an average balance of #aej ,b 0 0 0 0 #fjj ,c 0 0 0 0 #e1jjj ,the banker1 if ,b and ,c are easy-going men1 whose financial experience is small1 will conduct their accounts on the same terms as he does ,a's4 ,he will1 that is to say1 work each account free of charge4 ,but such treatment is evidently unfair1 for if ,a's account is worked free1 then assuming that those of ,b and ,c give but little more trouble1 each is entitled to some allowance upon his average balance4 ,they should certainly endeavour to obtain it4 ,if the manager be interviewed1 he may endeavour to convince either ,b or ,c1 by a process of reasoning1 which is more persuasive than scientific1 that money is so cheap that1 really1 a high rate is out of the question4 ,he will further explain that his directors1 as a rule1 do not make an allowance upon creditor current accounts2 but should either just hint at removing his account1 a rate will be instantly allowed1 for competition among the banks for a large credit account is so active that the customer has only to be firm and fairly reasonable in his demands4 ,the manager1 of course1 will endeavour to pay as little as possible4 ,of that we may be quite sure4 ,the customer1 on his side1 should try to obtain the maximum rate1 which is #a per cent4 below ,bank rate in ,london1 and in the provinces the usual country rate4 ,original sin1 not being yet eradicated from our race1 a bank-manager1 who is endowed with his full share1 sometimes endeavours to persuade a customer to transfer sums from his current account to deposit receipt1 but it is always prudent to remember that his advice is not disinterested1 and that he is acting 8upon instructions40 ,experience proves that1 after a little while1 a customer becomes tired of continually transferring sums from his running account to deposit1 and then1 when his account is getting low1 paying the deposit-receipts to his credit4 ,finding the process a weariness to the flesh1 he often ends by giving it up in disgust1 when once again the wily banker is a gainer at his expense4 ,by obtaining a rate of interest upon his daily current-account balances the customer is spared this trouble2 and1 if he fail to induce his banker to grant it1 then when his account is in credit beyond a certain agreed sum1 he should take care to get a deposit-receipt4 ,bankers1 like individuals1 are the slaves of their environment1 and in the ,midlands and elsewhere1 where it is usual to allow a rate on the daily balances1 commission is also charged on the turn-over or sums debited4 ,interest upon the daily creditor balances is allowed at1 say1 #a per cent4 below bank rate1 and a commission of per cent4 is charged on the cheques a customer draws4 ,the lower the rate of interest and the higher the commission rate1 the more profitable1 of course1 is the account to the banker4 ,the customer1 therefore1 when checking his banker's charges and allowances1 will take care that he is receiving the maximum rate of interest1 and paying the minimum or lowest commission rate1 which varies from to _/ per cent41 while it is sometimes possible to arrange for a reduced and merely nominal charge4 ,a person1 when he sees a 8little interest0 credited in his pass-book1 is disposed to increase his balance1 on the assumption that he is being allowed a rate2 but before doing so he should certainly ascertain what the rate will be1 for1 upon examination1 this allowance is occasionally found to appeal more strongly to one's senses than to one's critical acumen4 ,having disposed of the paying average credit balances we can now discuss those accounts that have a large turn-over4 ,a trader1 for instance1 who draws a considerable number of cheques during the course of a half-year1 and whose balance is small1 cannot expect his banker to work his account free of charge2 but it is difficult to draw up a table showing what he ought to pay1 for the simple reason that some bank-managers debit him with a rate which they think he will stand4 ,a _/ per cent4 commission1 that is to say1 #as4 #c;d4 upon each #ajj he draws out by cheque1 seems a very full rate2 and as there is a good market for this class of account he should not disburse one penny more4 ,the owner1 who always has a balance on the right side1 can1 if he find his banker unreasonable1 easily negotiate with his rivals1 who are delighted to see fresh faces4 ,indeed1 it is quite possible that he may succeed in getting his account worked free1 or for a nominal fee of half a guinea or so1 if the turn-over is not very large4 ,it is now time1 perhaps1 to give a brief sketch of the manner in which a manager charges his ledgers at the end of the quarter or half-year4 ,as a rule he and the accountant go through the books together2 and as there is no recognized scale by which the charges are regulated it follows that they consider the man as well as the nature of his account4 ,the business of the manager is to make his branch pay2 therefore1 if you do not criticize your commission rate1 you may rest assured that he will succeed brilliantly at your expense4 ,should he think that the customer lacks experience1 and is not acquainted with the fact that competition between bank and bank for creditor accounts is active1 then he charges him per cent4 ,when1 on the other hand1 he is aware that the client checks his expenses1 caution is exercised2 and if the manager decide to claim commission the sum debited will be extremely small4 ,after all1 in the ordinary affairs of life one does not accept without question the price of the seller2 and if a customer be so unwise as to think that a bank-manager has a higher sense of honour than his kind1 then he must be prepared to take the natural consequences4 ,for instance1 ,d and ,e keep an average balance of #ajj in their bankers' hands1 and the turn-over of each account is about #a1ejj for the half-year4 ,the manager1 knowing that ,d is not critical1 charges him _/ per cent4 commission1 or #ahs4 #i;d4 ,e1 he asserts1 is a most unpleasant man1 who1 when charged upon a previous occasion1 threatened to remove his account unless the sum were given back to him2 ,e1 therefore1 who is aware that competition is one of the factors that determine price1 has his business done free4 ,a large trader or merchant1 as a rule1 does not allow his banker to have the use of a considerable amount of money free of interest2 and those accounts that are from1 say1 #a1jjj to #aj1jjj in credit1 usually belong to women1 who are not accustomed to the management of money4 ,the manager1 anxious to stand well with his directors1 some of whom increase his salary if he add to the profits of his branch1 does not1 of course1 suggest to these ladies the advisability of receiving interest upon at least a portion of their balances1 but1 on the contrary1 being wise in his generation1 endeavours1 by resorting to those social amenities that raise him higher and higher in their estimation1 to hide the awkward word from their view1 while laughing in his sleeve at their excessive credulity4 ,the customer who keeps his account in credit should ask his banker3 8,what average balance must ,i maintain in order that your people will work my account free80 ,that sum ascertained1 he can act upon the advice contained in this chapter4 ,,chapter ,v ,,deposit-,,receipt ,,customers ,a deposit-receipt1 which is not a negotiable instrument1 cannot be transferred by one person to another4 ,where the receipt is issued in more than one name1 instructions should be given to the banker as to whether1 in the event of withdrawal1 the note is to be signed by all or by any two or any one of the depositors4 ,should no instructions be given1 then all must sign when a withdrawal is made1 or when the interest is taken4 ,these receipts1 as a rule1 are issued subject to either seven or fourteen days' notice of withdrawal2 but the notice1 in practice1 is not enforced1 bankers merely writing it upon the note in order to protect themselves in the event of a run4 ,most banks1 however1 decline to pay interest unless the sum has remained in their possession for at least one month4 ,the large ,london banks1 though they compete eagerly the one against the other for well-secured advances and loans1 have closed up their ranks against the depositor1 their practice being1 both in ,london and the suburbs1 to allow #a per cent4 below ,bank rate upon money left with them on deposit1 every alteration in the rate being advertised in the leading papers4 ,all one has to do1 therefore1 in order to ascertain the ,london rate for money on deposit-receipt is to deduct #a from the ,bank of ,england rate which may be seen in the city-article of every newspaper4 ,whether or not certain banks offer special rates to favoured individuals is a matter of opinion2 or1 again1 they may bid higher for large sums for fixed terms2 but the small depositor may take it for granted that1 with their rates on loans and advances reduced by competition among themselves1 the banks are determined to keep down the deposit rate4 ,in fact1 the large ,london bankers have united for this very purpose1 though it must be remembered that the agreement is not binding at the country branches of the ,london and provincial institutions4 ,a banker is a middleman who borrows from depositors at a rate in order that he may lend to others at a higher rate1 the difference between the two rates being his margin of gross profit4 ,a certain portion of his deposits1 we know1 he obtains in exchange for granting banking facilities1 and upon the rest he allows a rate of interest1 while he has to maintain a reserve of so-called cash and gilt-edged securities against the danger of sudden withdrawals and panics4 ,at the moment the companies cannot control the advance rate1 or fix from time to time a minimum rate for secured advances2 but in ,london we see that they have succeeded in getting the depositor under their thumb1 thereby1 of course1 increasing their profit margin at his expense4 ,their next move will probably be an attempt to corner the borrower against tangible securities1 as has been successfully accomplished by the banks in ,scotland4 ,the number of ,english banks is rapidly decreasing through absorptions and amalgamations1 so1 in the end1 it is more than probable that we shall see a monopoly1 and that all the large banks will one day unite for the purpose of fixing1 at each change of the ,bank rate1 their deposit rate1 and1 also1 their lowest or minimum rate for secured advances4 ,in the provinces the banks1 when loanable capital is cheap1 are able to lend and to discount at higher rates than in ,london1 so the country deposit rate never falls so low as that of ,london4 ,neither1 however1 does it advance so high when loanable capital is dear1 because the provincial banks then find some difficulty in increasing their rates upon bills and loans proportionately4 ,the following table will enable one to see the difference between the rate allowed in ,london and the country3-- ,london ,deposit ,rate1 ,bank ,rate4 #a below ,bank ,rate4 ,country ,deposit ,rate4 #e #c #c #d #c #b to #c #d #b #b to #b #c #b #b #c #a #a to #b #b #a #a #b #a ,in the country1 we must remember1 there is no combination or ring of bankers who meet to decide the rate1 which1 therefore1 is not 8fixed0 from time to time on the basis of the ,bank rate1 though1 of course1 the country deposit rate moves up and down in sympathy with the ,bank of ,england's published rate of discount or official minimum1 as it is called4 ,there is1 moreover1 some competition for deposits in the country1 but it is very slight2 and1 unless the banker think that a man may be useful1 he seldom bids appreciably higher than his rivals for his money4 ,the small private banker1 it is true1 may offer more interest1 but a depositor should take care to examine his balance-sheet before he entrusts him with either his spare capital or his savings4 ,a few of the purely provincial joint-stock banks1 whose branches are situated in a manufacturing centre1 and which1 in consequence1 are never overburdened with working resources1 offer higher rates than the great companies1 but they are the weaker of their kind1 and it is therefore questionable whether one should lend to them4 ,in every probability one's principal would be safe1 but it would not be so safe as in the hands of the really large ,london and provincial institutions1 whose reserves afford the customer a much better guarantee2 consequently it is always wise to consider whether the additional risk1 be it never so small1 is worth taking for the slight increase in the rate4 ,of course the country depositor will take care to inquire what rates the other large banks in his town are granting1 so that he may judge whether his own banker is allowing him a fair rate4 ,again1 if the amount of his deposit be1 say1 over #a1jjj1 he can sometimes obtain a special rate2 and he may rest quite assured that1 if he do not interest himself in the matter1 the bank-manager will allow him the lowest rate possible1 for as there is not a fixed minimum it follows that some1 more especially during certain conditions of the market1 are obtaining better rates than others4 ,a little pressure will occasionally induce the manager to quote1 as he quaintly calls it1 a 8special0 rate of interest1 if he consider the customer's name be worth keeping on his books4 ,it may be added that some people1 in order to minimize their risk1 keep their current accounts with one banker and deposit with another4 ,we can now refer to the table of rates on page #dh4 ,the country rate1 of course1 is stated approximately1 for we have seen that under certain conditions the customer may possibly obtain more4 ,glancing at the table1 we find that when the bank rate is at #b1 the ,london depositor receives per cent4 and the country depositor #a4 ,if the ,london customer deal with a ,london and provincial bank1 it will obviously pay him better to deposit at one of the country branches4 ,he should1 therefore1 if he consider that money is likely to be cheap for some considerable time1 give notice in ,london and transfer his deposit to the country4 ,if his banker object1 he can deposit with any large1 well-managed provincial bank4 ,with the ,bank rate at #b the move would pay him1 but when it rises above these figures the rate is either equal or in his favour4 ,a person who keeps two banking accounts1 one in ,london and the other in the country1 can make this move with the greatest of ease2 and by transferring his deposit from the one to the other as the rate favours him1 he may easily increase his interest4 ,conversely1 with a high bank rate it may pay the country depositor to transfer his principal to ,london4 ,there is no occasion to let the banker see the move4 ,in ,london and the great cities a large proportion of the deposits at interest1 especially during periods of depression1 would represent capital temporarily withdrawn from trade1 and awaiting either more profitable investment or an increased demand and rising prices4 ,it is this accumulation of idle capital that tempts the company-promoter from his lair1 and sometimes results in a ,stock ,exchange boom1 whilst it always produces an increased demand for the so-called gilt-edged variety of securities and a consequent rise in their price4 ,the country depositor1 however1 even when he leaves fairly large sums at interest1 is generally waiting to invest his money in house property1 which will return him from #e to #f per cent41 or to place it out on a first mortgage at from #c to #d per cent4 ,in the first instance1 he is careful not to purchase old property that will swallow up much of his rent in repairs4 ,cautious by nature1 he shakes his head dubiously at the glowing prospectus of the promoter1 and refuses to believe in the high-toned and cunningly tuned leaflets with which the bucket-shops favour him1 for he likes to see his investment1 to feel it1 to walk upon it4 ,paper does not satisfy his soul2 he is not even without his suspicions of banker's paper2 but when he possesses house property1 then all he has to fear is the ,almighty and a bad earthquake1 and he can sleep comfortably on those risks4 ,country depositors consist largely of working men1 clerks1 artisans1 small shopkeepers1 dressmakers1 women of slender means1 and so on1 together with the banks' current-account customers4 ,the huge aggregate of deposits is made up principally of small sums1 so it is easy to keep down the rate1 because the great majority are ignorant of the condition of the money-market1 and hardly seem to be aware that the ,post ,office gives #b per cent4 upon small sums left with it4 ,the companies trade upon the ignorance of their depositors2 and though a few of the better-informed customers withdraw their savings when the rate is extremely low1 experience has taught the banks that the great bulk of them simply grumble and take what is offered4 ,seeing that the deposits are spread over so great an area1 and among men and women who have not sufficient business knowledge to invest their savings advantageously1 the banks have been able to keep down rates without reducing their own resources2 and the few who do withdraw their savings when the deposit rate is at #a per cent4 are practically of small account when contrasted with the alternative policy the companies would have to adopt in order to retain them1 for it obviously pays better to lose a few receipts than to raise the rate to #b for the whole of the deposits4 ,for instance1 a bank would rather lose #ajj1jjj by withdrawals when the rate is at #a than pay #b per cent4 on #e1jjj1jjj for the purpose of preventing the drain1 #be1jjj being too large a premium to sacrifice for the purpose of retaining its connexion intact1 when1 perhaps1 money is being employed in the ,london shortloan market at #a per cent4 and under4 ,again1 very many of the country depositors look upon the deposit-receipt as an investment1 and the banks1 quite naturally1 do not wish to inform them that even ,consols are a more profitable one4 ,not so very many years ago the country minimum deposit rate was #b1 and it was not without certain misgivings that it was reduced to #a2 but1 as we have seen1 the experiment proved safe1 though the banks1 given another long period of a #b per cent4 ,bank rate1 will hardly care to risk #a per cent4 in the provinces1 as it seems pretty certain that1 were the minimum further reduced1 disgusted depositors would invest their savings either in the ,post ,office or the gilt-edged class of securities4 ,having once turned this stream of deposits into another channel1 it is improbable that a higher rate would tempt them back again2 and as the depositor is essential to the modern banking system1 the provincial banks will think many times before they risk a rate below #a1 even when cheap capital is again reducing their dividends right and left4 ,a customer1 before leaving his money with a banker1 will be careful to inquire what rate he is to receive1 and if the rate be not written upon the receipt1 then he might pencil the answer he gets upon the back of the document4 ,if there be three good banks in his town1 and he has1 say1 #bjj to deposit1 there can be no harm in his going to all1 and asking the highest rate each is allowing4 ,john ,jones1 we will assume1 holds a deposit-receipt for #bjj dated #ajth ,june and he takes it to the bank on #ith ,december following in order to draw the interest at the rate of #b per cent4 per annum4 ,between #ajth ,june 7excluding the first day7 to #ith ,december 7inclusive7 there are #ahb days1 so the banker owes him #b per cent4 per annum on #bjj for #ahb days4 ,hence the following sum3-- 7#bjj #b #ahb7_/7ajj #cfe7 #a #ais4 #aj;d4 ,the cashier1 therefore1 pays ,john ,jones #a #ais4 #aj;d4 in cash1 and gives him a new receipt1 dated #ith ,december1 for #bjj4 ,a depositor1 as a rule1 draws his interest twice a year4 ,some persons1 however1 leave their receipts from three to five years without disturbing them2 and the bank-manager1 always anxious to swell the profits of his branch1 is careful1 when they are presented1 to make his calculations at simple interest instead of at compound4 ,deposit customers1 therefore1 even when they do not require the interest due to them1 should present their receipts six months after date in order to have the interest added to the principal1 when both bear interest together4 ,for instance1 assuming that ,john ,jones had not required his interest1 then he would have taken a new note for #bja #ais4 #aj;d42 but ,mr4 ,jones1 who is acquainted with the internal economies of a bank1 and who is also aware of the intense frugality of the agent1 knows that the companies do not allow interest upon the odd shillings of a deposit-receipt2 so1 giving the cashier an additional twopence1 he takes a fresh note for #bjb1 and walks away very well satisfied with himself4 ,were he to omit taking this precaution each half-year1 and to hold his receipt for1 say1 five years1 then1 when he took it in1 he would merely get certain rates upon #bjj for five years4 ,the larger the principal the greater1 of course1 is the loss of interest to the depositor4 ,should not the depositor reside in the neighbourhood he can1 after the expiration of six months1 write his name on the back of the note and send it through the post to his banker1 with the request that a new receipt be returned to him for the amount of the principal and interest4 ,in the event of his wishing to draw the interest1 a banker will send him either a draft or postal orders for the amount due to him1 as he may direct4 ,of course1 if he at any time require part of the principal1 he will state what amount1 and give directions whether the interest is to be added to the new receipt for the balance or to be included with the sum he is withdrawing1 while he will take care to write his name upon the back of the note before despatching it4 ,when sending a receipt by a messenger it is usual to write a note to the banker1 telling him just what one requires and requesting him to pay the bearer of the letter4 ,where interest amounting to #b and over is withdrawn1 the deposit-receipt must have on the back a penny postage stamp1 which the depositor should cancel by writing his name across it4 ,this must be done upon each note when the depositor has a plurality of receipts4 ,where1 however1 the interest upon any one is less than #b1 a stamp is unnecessary4 ,nor is it required when the depositor adds principal and interest together and takes a fresh note for the aggregate1 but where principal and interest or principal or interest amounting to #b or over is withdrawn1 the receipt must bear a penny stamp4 ,we now come to the question of the seven or fourteen days' notice on these receipts1 and1 as previously stated1 the banker seldom or never enforces his claim1 though1 when notice is not given1 he occasionally deducts fourteen days if the whole of the principal be withdrawn4 ,when this is contemplated it is better1 perhaps1 to give the necessary notice1 but the manager1 should the customer protest against this deduction1 generally gives way4 ,again1 if the note be for #ajj1 and the depositor withdraw #ej1 and take a new receipt for the balance1 the banker may deduct a certain number of days from the term on #ej 7the sum withdrawn without notice74 ,the customer1 by checking his interest1 will discover this loss1 which the teller1 if he remonstrated with him1 will obligingly make good4 ,it is also as well to bear in mind that some banks have two rates4 ,the ,london depositor1 we know1 receives #a below ,bank rate2 so assuming that ,mr4 ,jones1 of ,whitechapel1 held a note for #bjj1 dated #eth ,february1 #aijc1 and took it to the bank to draw the interest on #eth ,july of the same year1 he would want to know how much was due to him at the latter date4 ,first1 therefore1 he must ascertain whether any changes were made in the ,bank rate during the period in question2 and upon inquiry he found that the 8official minimum0 was raised to #d per cent4 on #bnd ,october1 #aijb1 and lowered to #c on #bast ,may following1 and to #c upon the #ahth ,june next4 ,now1 from #eth ,february 7exclusive7 to #eth ,july 7inclusive7 there are #aej days4 ,his banker1 therefore1 owed him3-- ,bank ,rate was from #aje days' int4 at #b p4c4 p4a4 on #bjj ,feb4 #e to ,may #ba #d p4c4 #bh 0 0 #b 0 0 0 ,may #ba to ,june #ah #c p4c4 #ag 0 0 #a 0 0 0 ,june #ah to ,july #e #c p4c4 -------- #aej days ,here we get three rule-of-three sums1 and1 perhaps1 it were as well to give a statement of the first1 viz43-- 7#bjj #b #aje7_/7ajj #cfe7 #a #h #i #bh days at #b p4c4 per annum on #bjj #j #f #a #ag 0 0 #a 0 0 0 0 0 #j #b #i ------------- ,interest due #a #ag #h ,mr4 ,jones1 of ,whitechapel1 then1 should have received #a #ags4 #h;d4 from his banker in cash and a fresh deposit-receipt1 dated the #eth ,july1 #aijc1 for #bjj4 ,at each change of the bank rate the ,london depositor1 when calculating his interest1 must make a fresh sum1 as in the above illustration1 and so1 too1 must the country depositor when the fluctuation of the ,bank of ,england rate is sufficiently wide to influence the rate of interest allowed in the provinces1 though the latter must remember that he can only ascertain the rate by making inquiries of the bankers themselves or among those of his friends who deposit with them4 ,adverting to the dates in the foregoing illustration1 a few words of explanation are perhaps necessary1 for it will be seen that under the heading 8,bank rate was10 #bast ,may and #ahth ,june1 the days upon which the official minimum was changed1 are placed opposite different rates4 ,the ,bank of ,england directors examine their weekly return or balance-sheet1 which is made up to the close of business each ,wednesday on the ,thursday following1 and in the afternoon of the latter day any change in the ,bank's rate of discount is announced4 ,of course1 during abnormal times the rates may be changed on any day as the exigencies of the moment may direct2 but1 fortunately1 though the money-market is subject to fits1 its surface1 as a rule1 is seldom so violently perturbed as to call for drastic remedies1 and we shall find that the dates in question were ,thursdays4 ,it follows1 therefore1 that these days opened with the bank rate at one figure and closed with it at another4 ,hence the anomaly to which attention has been drawn4 ,the banker owed ,mr4 ,jones1 of ,whitechapel1 interest at #b per cent4 from #eth ,february 7exclusive7 to #bast ,may 7inclusive74 ,on the #bast ,may1 we know1 the ,bank rate was reduced from #d to #c per cent42 so he owed him #b per cent4 on his principal from #bast ,may 7exclusive7 to #ahth ,june 7inclusive7--the date of the next change4 ,should not the reason of this be quite clear to any reader1 if he remember that from #bast to #bbnd ,may the ,bank rate would have been one day at #c per cent4 the difficulty will probably disappear4 ,from an investment point of view the deposit-receipt seems hardly worth consideration1 because even ,consols1 over a period of five years1 will return an appreciably higher yield2 but when one is merely waiting for a suitable investment to turn up1 or for a revival of trade1 then the deposit-note exactly meets one's requirements1 for its only charm lies in the fact that the depositor gets back his principal intact4 ,when the deposit rate is low trade is generally dull1 and the prices of gilt-edged securities consequently move up4 ,the depositor1 therefore1 when the rate is high should not be tempted to let his money remain with his banker for that reason alone1 because he can then1 as a rule1 buy gilt-edged securities at cheaper figures1 and1 needless to say1 the average return on his purchase-money will greatly exceed the average rate of interest on deposit4 ,conversely1 if he buy the so-called gilt-edged variety of securities when interest is low1 he is much more liable to a loss of capital should he want to realize them when trade is good and the rate of interest high4 ,it follows that the man of business1 who finds capital accumulating in his hands during periods of temporary depression1 when interest1 of course1 is low1 prefers taking a deposit-receipt for his idle capital1 which he hopes to again use in his business directly markets improve1 to purchasing1 say1 ,consols at a time when demand has enhanced their price1 and1 consequently1 added to his risk of loss upon realization4 ,some banks1 instead of issuing a deposit-receipt for money left at interest1 give the depositor a pass-book1 in which the sum he leaves is credited4 ,each time the depositor leaves new money he takes his book with him1 and the cashier enters the amount therein to his credit1 while he draws out his interest1 or any part of the principal he may require1 by cheque4 ,as the banker rules off his deposit-ledgers half-yearly1 and then adds the interest due to each customer to the principal1 it follows that principal and interest1 when the balance is brought forward1 give a return to the customer1 who by this method receives compound interest on his capital or savings4 ,the advantages of this system are too obvious to call for explanation1 but it may be added that1 when a deposit customer is given a cheque-book1 he should be careful not to operate too freely upon his account1 as some bankers then transfer the balance to their current-account ledgers1 their reason being that the account has ceased to be used for the purpose for which it was opened1 and that1 therefore1 the depositor is no longer entitled to interest4 ,the chapter on 8,unclaimed ,balances0 should prove especially interesting to depositors4 ,,chapter ,,vi ,,the ,,bank ,,rate ,,in ,,relation ,,to ,,bankers' ,,charges ,very many persons who are out of touch with money-market problems fail to see why the ,bank of ,england's rate of discount should be in any way connected with a banker's charges2 and though1 to those who have not studied the question1 the swaying of the pendulum seems due to some occult influence1 the forces that move it are both visible to the naked eye and capable of explanation4 ,in the first place1 the ,bank of ,england keeps the cash reserves of all the banks in the ,united ,kingdom1 and1 as a natural consequence1 possesses the only large store of gold in the land4 ,the other banks1 which are dependent upon this accumulation1 become nervous immediately the gold in the ,bank's vaults begins to leave the country in appreciable quantities1 because1 should not the ,bank of ,england be able to meet their demands1 they1 too1 will be unable to supply the requirements of their own customers4 ,we need not1 in a small book of this description1 enter into the mysteries of the foreign exchanges1 or discuss internal and external drains of gold1 but the ,bank1 in order to arrest a drain of gold outwards1 raises its rate1 when the other banking companies1 equally anxious to stop the efflux1 raise their rates too1 with the result that borrowers1 whether upon bills or securities1 have to pay more4 ,conversely1 when the ,bank's reserve is high and the political horizon unclouded this nervous feeling no longer exists4 ,the ,bank1 we will assume1 then lowers its rate1 and the other banks follow suit1 when the borrower pays less4 ,when speaking of the money-market1 the ,london money-market is always implied1 and here we encounter the bill-brokers to whom the banks advance their surplus funds4 ,the banks1 that is to say1 finance their rivals1 who make bills a speciality1 and whose knowledge of bills of exchange is doubtless both extensive and peculiar4 ,seeing that the banks themselves discount trade-bills for their customers1 the necessity of a middleman or bill-broker between the person who discounts a bill and the banker who supplies the capital is not very apparent1 but the broker's 8turn10 when he re-discounts with the banks1 is extremely small2 so it is quite possible that were the banks to establish special departments to deal with this business1 the slight increase in their rates would not compensate them sufficiently for the troubles of management4 ,as1 under this system1 the brokers' rate of discount is below that of the banks1 it follows that all the bank-bills and most of the best trade-bills pass through the hands of the bill-brokers1 while bills are also sent to them from all the great cities4 ,the bankers1 consequently1 discount inferior paper at higher rates for their own customers4 ,but the ,bank of ,england is a great bank of discount4 ,moreover1 it pays a dividend like any other bank1 and1 as the bill-brokers are its rivals1 it follows that it cannot afford to allow all the business to drift into their hands4 ,when1 therefore1 the brokers' rate 7the market rate7 is below its own1 it either takes steps to make its own rate of discount1 as the saying is1 8effective10 or else it reduces its advertised rate of discount 7the ,bank rate74 ,the ,bank makes its rate representative or effective by selling ,consols1 and thereby reducing 8bankers' balances40 ,the banks in consequence have less to lend to the brokers1 who are then bound to apply to the ,bank of ,england1 which compels them to discount their bills at its own terms1 and the rate in the outside market1 of course1 advances4 ,we can see1 therefore1 that though the ,bank rate is sometimes either above or below the market rate1 it is necessarily never out of touch with it for any very considerable length of time2 so now1 perhaps1 it will be understood why the banks allow #a below ,bank rate on deposit2 and their reason for basing their rate for loans and advances upon the ,bank of ,england's advertised rate of discount will also be apparent4 ,of course1 the demand for1 and the supply of1 loanable capital decides the rate of interest1 and as demand and supply are never equal1 the rate is always fluctuating1 but we might just remember that our artificial banking system 8influences0 the rate from time to time4 ,during periods of dull trade1 when loanable capital accumulates in the hands of the banking companies1 we should expect to see a low ,bank rate1 because1 prices of commodities having fallen1 people are less anxious to borrow1 while fewer bills are on offer1 and1 the demand for those bills having increased proportionately1 it follows that the holders can discount them at a cheap rate4 ,but when business is brisk and the prices of commodities are rising1 more bills are drawn1 and as the fund with which they are discounted is not limitless1 it follows that the increasing demand upon that fund sends up the rate4 ,bankers1 consequently1 who have also to meet the requirements of their current-account customers1 are sometimes obliged to administer a salutary check to speculation by making the rate almost prohibitive in order to protect their reserves of cash1 as if they then lent to all and sundry even ,lombard ,street would collapse4 ,now the ,bank of ,england1 we have seen1 holds the national reserve1 as it were1 and is1 in consequence1 the pillar upon which the money-market rests4 ,threadneedle ,street 7the ,bank7 is1 therefore1 the centre of the money-market 7hence the description 8central institution07 into which ,lombard ,street 7the rest of the banks in the ,united ,kingdom7 pours its reserve and surplus cash4 ,we might describe the ,bank as the heart of the money-market1 through which a stream of cash and credit-documents is continually flowing4 ,the brokers 7the outside market71 who practically keep no reserves of cash1 are largely financed by ,lombard ,street1 which1 however1 calls in its advances to them during certain conditions of the market2 and the bill-brokers are then compelled to fall back upon the ,bank of ,england which holds the bankers' reserves4 ,in assisting the brokers the ,bank is also supporting the credit of ,lombard ,street2 so1 clearly1 the interests of each division are identical2 and the closer and more friendly the relations between them the smoother will be the surface of the money-market4 ,but we have to consider the ,bank rate in relation to bankers' charges2 and here another factor must be introduced1 to wit1 the nature of the securities deposited by the customer4 ,the business man's favourite investments are ,english railways1 ,corporation ,stocks1 ,industrial ,companies1 and so on1 whilst occasionally1 endowed with imagination1 and recognizing how erratically the earth dispenses her favours1 the blessed uncertainty of mines appeals to his gambling instinct4 ,as a rule1 a banker's loans and advances are not covered by ,consols1 because it would pay the borrower better to sell out and place the sum they realized to his credit4 ,advances against ,consols would be made principally to stockbrokers and to speculators who had bought them largely in the hope of a rise in price4 ,competition for an advance1 which is covered by tangible securities1 is keen both in ,london and the provinces1 and competition1 we must remember1 tends to reduce the rate4 ,then1 again1 assuming that the ,bank rate be #c per cent41 and that a banker suggests #d per cent4 on an advance covered by railway debentures1 the customer may not see the force of maintaining a margin of #aj per cent4 between the market-price of his stock for the protection of his banker1 and paying him1 say1 per cent4 more than his securities return on his purchase-money4 ,as the customer's loan or advance is well secured1 and as the banker will only advance to the extent of #ij per cent4 of the market-price on the condition aforesaid1 he is only willing to pay ,bank rate upon the sum he borrows4 ,we next have to consider the amount of pressure the customer can bring to bear on his banker1 of whom his securities make him practically independent4 ,he may1 in the first place1 threaten to remove his account unless his banker grant him a loan at #c4 ,secondly1 he may decide that it will pay him better to sell his debentures at the market-price4 ,again he may only require the loan for a few months or even weeks2 and as1 in his opinion1 the debentures will probably appreciate in value1 he may decide to pay #d per cent4 for a short period to either selling out or troubling to find a cheaper market4 ,obviously1 the higher the ,bank rate advances the less disposed is this class of customer to pay per cent4 above it2 so1 when the official minimum is at #e and #f1 he can often arrange for an advance at ,bank rate or even at a below it4 ,on the other hand1 the banker1 when ,bank rate is at #b or #b1 generally refuses to lend at less than #c per cent4 per annum4 ,the rate1 therefore1 upon a secured advance is influenced by the nature of the cover deposited as well as by the state of the money-market4 ,this description of the market is1 of course1 the veriest sketch1 but1 perhaps1 it may possibly prove somewhat enlightening to those who have hitherto regarded this very simple subject as an exceptionally difficult one4 ,,chapter ,,vii ,,loans ,,and ,,advances ,,in ,,london ,we are told that ,london banking is quite different to country banking1 but it is a difference of degree rather than of kind1 and in ,london1 as in the provinces1 the bank-manager has two rates--one for those who1 taking him at his word1 do not attempt to bate him down1 and a second and lower rate for those persons who1 knowing that he is of the ,city1 and scenting instinctively a servant of the company1 who is in possession of instructions1 literally force his hand4 ,a seller in a free market where competition is vigorous generally has at least two prices1 though1 of course1 he only advertises one of them1 and the banks1 which are not one whit in advance of the commercial ethics of the times1 base their rate upon expediency as well as upon the ,bank of ,england's rate of discount4 ,in stating so human and obvious a fact one can only apologize for its intense triteness1 and urge1 in extenuation1 the blind1 unreasoning faith of some people in the modern bank-manager4 ,such faith may be beautiful1 but1 believe me1 it is costly4 ,mention has been made of the distinctions between country and ,london banking1 and one of these appears to be the adoption of the 8loan-account0 system by the ,city banks1 but 8loan accounts0 are not by any means unknown in the provinces1 though the opening of them is exceptional4 ,moreover1 though this system is greatly in evidence at the head-offices of the joint-stock banks1 the farther one moves away from ,lombard ,street the less firmly is it established1 and one finds in the books of the ,london branch banks a medley of the two systems4 ,that is to say1 some customers adopt the 8loan-account10 and others pay a rate upon their daily debtor balances1 together with a commission on the turn-over of their accounts4 ,when a 8loan account0 is opened by a customer1 the banks do not charge a commission upon his current account1 but1 as we shall see1 neither do they neglect to make amends for this omission4 ,a customer1 we will suppose1 when the ,bank rate is at #c per cent4 obtains a loan of #bj1jjj from his banker at ,bank rate4 ,he draws a cheque for this sum1 which the banker debits to a 8loan account0 in his name1 then places #bj1jjj to the credit of his current or running account4 ,now the interest at the rate of1 say1 #c per cent4 is calculated on the loan account1 so if the customer's average credit balance for the half-year amounts to about #d1jjj1 then he has paid #c per cent4 per annum upon #d1jjj which he has never used4 ,in other words1 he has given his banker something like #fj for working his account during the half-year4 ,further1 some ,london banks charge a commission of per cent4 on the amount of the loan4 ,this they add each half-year to his interest1 which1 in the present instance1 would be debited in his current account pass-book thus3 ,to ,interest1 #cbe4 ,by carefully checking his banker's charges he will make this discovery1 and1 of course1 promptly demand that #be be returned to him4 ,it can now be seen that the ,london bank-manager is as eager to snatch a commission as his country confrre1 and1 moreover1 that he is not without his opportunities1 which1 when the client is considered safe1 he seldom neglects4 ,in other words1 he does his duty like other honest folk whose misfortune it is to be employees2 and he does not specify the per cent4 on #bj1jjj in the pass-book for the simple reason that he knows it is safer disguised as interest4 ,the customer naturally does not see why he should pay a rate upon #d1jjj which he has not wanted1 and which1 in reality1 the banker has not lent1 though he has created credit in his own books to that extent by two simple entries on the debit and credit side of his ledgers4 ,assuming that no commission was charged on the loan1 #fj a half-year seems a large sum to pay him for working an account1 especially as most of his rivals will bid against him for a well-secured loan4 ,the customer1 therefore1 should insist upon receiving the same rate upon his daily creditor current-account balances as he is paying upon his loan1 and if he consider that his banker is entitled to a commission for working his account1 then he can arrange for a fair nominal charge1 but he may succeed in getting it worked free4 ,again1 when his current account is largely in credit1 he can transfer a certain sum therefrom to his loan account1 and1 by moving balances from the one to the other1 as occasion may arise1 save himself an appreciable sum in the shape of interest2 but he may be too busy to adopt this course1 and it is evident that the first suggestion1 which is better adapted to his wants1 will save him both time and money4 ,naturally the banker will object1 but the client will make it his business to endeavour to overcome such opposition1 which will be either strong or weak in proportion to the nature of his cover and the desirability of retaining his account4 ,we next come to the rate a borrower should pay upon a well-secured loan or advance1 and here1 again1 we may touch upon a distinction between ,london and country banking4 ,a banker1 like any other dealer1 adapts his business to his surroundings1 but in a great city like ,london he is practically compelled to specialize more or less1 and but little money is lent in the ,city upon mortgage1 whereas overdrafts are granted freely in the country against the deeds of house property4 ,of course there are exceptions2 and certain well-known firms1 whose credit is beyond question1 may not even be asked for any security when they borrow at certain times of the year1 but they soon would be if the loan began to assume a permanent character2 for though a banker may be willing to advance to an influential and reputable firm without cover just at those seasons when demand upon it is heaviest1 he assumes that such assistance will only be required temporarily1 and would instantly become nervous should it appear from his books that the firm was slower than usual in reducing the loan1 whilst immediately he perceived that a certain amount of it threatened to take the form of a permanent advance he would ask for security4 ,the ,city banks are too busy to give much attention to the wants of the small man of business1 and1 broadly speaking1 they require marketable securities before they will grant a loan or advance4 ,the suburban manager1 however1 who is only on the edge of this struggling mass of humanity1 views the smaller applicant with a kindlier eye1 because the large borrower seldom approaches him1 so in the suburbs one can borrow on mortgage just as one can in the country4 ,indeed1 suburban banking approximates very closely to country banking1 the one noticeable distinction being the deposit rate4 ,the ,west-end banker1 again1 has his peculiarities1 and it by no means follows that the rules and regulations of a bank's head-office in the ,city are in complete harmony with those of one of its branches within a quarter of an hour's walk of the seat of government4 ,it is1 therefore1 impossible to define ,london banking1 because ,london is vast1 and the system eminently elastic and adaptable4 ,the following table will give one a fair idea of what rate should be paid upon a loan or advance1 fully covered by securities which can be sold on the ,stock ,exchange practically at any moment3-- ,with ,bank rate at #b ,customer pays #b to #c 0 0 #b 0 0 #b 0 #c 0 0 0 #c 0 0 #c 0 #c 0 0 0 #c 0 0 #c 0 #d 0 0 0 #d 0 0 #d 0 #d 0 0 0 #d 0 0 #d 0 #e 0 0 0 #e 0 0 #d 0 #e 0 0 0 #e 0 0 #e 0 #f 0 0 0 #f 0 0 #e 0 #f 0 ,it must be distinctly understood that this table will only serve the purpose of a guide to what the rate ought to be1 and that the customer can1 if his credit be good1 by bringing pressure to bear upon his banker1 very probably make a closer bargain with him4 ,for instance1 with the ,bank rate at #d1 a person whose securities and credit are beyond question might obtain a loan at below ,bank rate4 ,he may further arrange that his rate shall be per cent4 below ,bank rate1 with a minimum to the banker of #c or #c4 ,that is to say1 his rate will never be less than #c or #c1 and when the ,bank rate is above #c1 then he pays below it4 ,on the other hand1 the customer who accepts the rate mentioned by the manager without question fares badly1 for no dealer quotes his minimum rate first4 ,he reserves that1 as is usual in the highest financial circles1 until last1 and he finds it difficult to look pleased when it is forced from him1 because his directors1 if he quoted it too often1 may come to the conclusion that his hand is losing its cunning4 ,the client will have to do more than ask in order that he receive3 he must use argument that is convincing4 ,knowing that certain bank-managers are running about the ,city in search of desirable accounts1 just as are bill-brokers for first-class paper1 he not unnaturally comes to the conclusion that he can find a cheaper market elsewhere1 so1 having exhausted the gentler modes of suasion1 the client finally and reluctantly threatens to apply elsewhere1 or reveals the fact that he has already done so1 and with what result1 when the manager1 if he think him in earnest1 quotes his very lowest rate1 and asks him not to mention it outside4 ,where the loan is a small one1 however1 the directors will not trouble themselves greatly as to whether it either goes or remains4 ,the much-vaunted #a per cent4 above ,bank rate is1 of course1 only paid by the small man1 whose securities are not of the better class1 and by the customer who has not studied the market4 ,some ,london banks1 we know1 charge a rate on the daily balances and a commission1 but this is the ordinary country practice1 so1 in order to avoid reiteration1 it has been thought desirable to discuss the method in the next chapter4 ,,chapter ,,viii ,,overdrafts ,,in ,,the ,,country ,in the preceding chapter we discussed the 8loan account0 and its mysteries1 and now we are brought face to face with the country practice of granting the customer a 8limit40 ,the banker1 we will assume1 agrees that1 upon his depositing certain securities1 he may overdraw his current account to the extent of #a1ejj4 ,this sum1 then1 is the client's 8limit0 which he is not supposed to exceed1 and if he draw a cheque that would1 when presented for payment1 overdraw his account beyond the agreed figures were the banker to honour it1 the latter is entitled to return the document without notice4 ,as a rule a bank reserves to itself the right of calling in a loan or advance at any moment1 but in practice reasonable notice is always given4 ,though the customer has arranged for a 8limit0 of1 say1 #a1ejj1 it is quite possible that he will not overdraw his account to that extent2 but at those seasons of the year when his outgoings are always in excess of his receipts the balance against him at the bank will draw closer to his limit4 ,if1 however1 his business be in a healthy condition the corner will soon be turned2 and as his payments in begin to exceed the cheques he draws1 his indebtedness to the bank speedily sinks below the average4 ,each payment to his credit reduces his debit balance1 and every cheque debited1 of course1 increases it1 but as the banker charges him a rate upon the sum owing at the end of each day1 it follows that the customer only pays interest upon the actual money he has borrowed--not upon the amount of the 8limit0 as does the ,london client upon the amount of his 8loan40 ,this arrangement is much the fairer to the borrower1 who1 however1 must take care that the banker do not charge him a high rate of commission upon his turn-over under it4 ,we can now consider the rate of interest a customer should pay on an advance which is more than covered by marketable securities that can be sold on the ,stock ,exchange at a moment's notice4 ,most provincial towns1 we know1 are over-banked2 and as each banker is the rival of the rest it follows that a person whose cover is tangible can1 by playing off the one against the other1 obtain very fine rates4 ,but he may not care to adopt these tactics2 still1 as the method may appeal to some1 it would be a pity not to dwell upon its possibilities1 for it is often undoubtedly effective where argument fails4 ,the would-be borrower of this class may be referred to the table of rates in ,chapter ,,vii1 and to the remarks made concerning well-secured advances in ,london1 as1 competition for a secured overdraft being even more keen in the country1 where tangible securities are less in evidence1 he should experience little difficulty in coming to a similar arrangement with reference to the rate of interest4 ,for instance1 suppose a man who possesses a good list of marketable stocks and shares wishes to borrow #e1jjj from his banker1 and calls upon the branch-manager1 who at once expresses the opinion that his directors will have no hesitation in granting his request4 ,they next discuss terms4 ,the manager1 who is a humble servant of the company1 and who1 moreover is anxious to pass the rest of his days in that honourable capacity1 looks at his customer1 thinking hard the while1 and then1 trusting his man lacks business experience1 suggests #e per cent4 per annum on the overdraft and per cent4 on the turn-over4 ,the turn-over of an account consists of the cheques1 bills1 etc41 debited during the quarter or half-year1 and the customer1 therefore1 is asked to pay a commission of #bs4 #f;d4 upon each #ajj debited in his pass-book4 ,there is nothing very remarkable in this request on the part of a dealer in cash and credit who is selling his wares1 and to express surprise is to display a lack of knowledge of business procedure1 but to agree to his proposals would betoken a lamentable ignorance of the market4 ,should the ,bank rate be at #d per cent4 the customer would endeavour not to pay more1 for his securities do not give him that return1 and he has the option of selling them4 ,and as to paying a rate on his turn-over1 he knows that if he make application elsewhere he can probably find a banker who will forego that charge1 so he either refuses to entertain it or else agrees to pay a merely nominal sum4 ,with a higher ,bank rate than #d1 he will try to obtain his advance at below the official minimum2 and if the ,bank rate be low1 and loanable capital therefore cheap at the moment1 he can suggest 8 per cent4 below ,bank rate with a minimum of #c40 ,here1 again1 reference may be made to the previous chapter4 ,of course1 if there are only two banks in his town1 and consequently but little competition1 he will not find the manager so ready to listen to him1 but he certainly should not pay more than ,bank rate when it is above #c1 while he will remember that the manager's advice1 if he be so rash as to express an opinion1 is not disinterested4 ,we next come to the customer whose 8limit0 is covered by marketable securities and deeds of house property or land4 ,the banker will have the property valued by his own man1 and then perhaps advance up to about two-thirds of the value placed upon it after the deeds have been examined by the bank's solicitor and formally deposited1 the customer1 of course1 paying all expenses4 ,the securities1 if they are a fairly good list1 he will advance against to the extent of about #ge per cent4 of their market value1 thus leaving a margin of #be per cent4 in his favour to cover the risk of depreciation1 for they take care of themselves--these bankers4 ,the majority of advances in the provinces would be made against securities and deeds in varying proportions1 and it is as well to remember that the larger the proportion of tangible securities the smaller should be the rate4 ,a banker1 it need not be said1 does not want to be bothered with a man1 however good his securities1 if he think that there is the probability of his having to call in the advance or to claim against his estate in the ,bankruptcy ,court2 and though a customer cannot deposit marketable stocks and shares to the full extent of his advance1 but is compelled to offer deeds and securities1 as in our illustration1 his credit is often so good that many other bankers in his town would readily listen to his proposals1 and be only too glad to get his name on their books1 perhaps even at a small sacrifice4 ,such a person can make a very close bargain with his banker1 and would not1 for instance1 think of paying #e per cent4 when the ,bank rate is at #c or under4 ,he would1 in fact1 especially if he were conducting a large business1 probably be in a position to make as good terms as the man whose securities are wholly tangible4 ,the manager1 of course1 let the ,bank rate be what it may1 will endeavour to obtain from #d to #e per cent4 upon the overdraft of an account thus secured1 and to charge a rate of from _/ to per cent4 upon the turn-over2 but if the customer show fight1 and losing the account may not be thought desirable1 because of the local influence he possesses1 then1 rather than risk his applying elsewhere1 the agent usually lowers his rates1 for he naturally does not enjoy the thought that esteemed clients are perhaps paying little calls upon his rivals1 and thereby advertising his own unpopularity4 ,when the rate of commission is the bone of contention the customer's first aim will be to pay no commission whatsoever1 and to at least arrange for his advance at ,bank rate with a minimum of #d per cent4 ,probably he may do better with reference to his interest rate2 and1 if he finds that the manager holds out for commission1 then he can agree to a nominal charge of from one to five guineas or so each half-year according to the volume of his business4 ,we now have to discuss the position of those persons who can only offer their banker the deeds of house property1 land1 and those other securities for which the market is a purely local1 and1 therefore1 uncertain one4 ,a banker1 whose deposits are mostly payable at call and short notice1 naturally prefers to advance against those securities that are quoted on a ,stock ,exchange1 and does not care to lock up a large proportion of his resources in house property1 etc41 of which he cannot readily dispose in an emergency4 ,but tangible securities are not always to be had for the asking2 and1 as he must employ his capital in order to pay a dividend1 he is compelled to advance to a certain extent against1 from his point of view1 the less desirable securities such as houses and shares in some local company1 though he always prefers to deal with the man who can deposit the more easily negotiable variety4 ,further1 a prudent banker will only devote a certain amount 7and that a relatively small amount7 of his resources to advancing against the deeds of houses1 land1 and so on2 and as the demand for overdrafts against this class of cover is always greatly in excess of the supply1 it follows that those persons who borrow upon it have to pay high rates4 ,we have seen that the client who possesses tangible securities can1 broadly speaking1 make his own terms but it is otherwise with the man who wants an overdraft for business purposes against the deeds of a house he owns2 and he it is who is compelled to pay #e or #e per cent4 per annum interest1 be the ,bank rate what it may1 and per cent4 on the turn-over of his current account2 for he will not find the competing banks anxious to secure his business by lowering their rates4 ,should his credit be good1 and his business be considerable1 he might succeed in reducing his commission rate to _/ or even _/ per cent41 and1 of course1 he will make the attempt1 but it would be unwise to more than wish him success in his endeavour4 ,a really large tradesman1 however1 whose securities consist of this variety1 will sometimes find a bank-manager anxious to secure his account1 because he thinks he may influence others in his favour1 and such a man will not pay high rates before he has at least sounded two or three managers of well-known banks and discovered that their terms are not more liberal4 ,he may even find that he can get his account worked free of commission1 or have the one he is paying appreciably reduced4 ,again1 a man can mortgage his property1 but1 as a rule1 he prefers to obtain a 8limit0 on it from his banker1 more especially if he intend gradually paying off the advance1 as1 should he borrow #ejj on mortgage1 he will have to pay a rate on that sum1 but when he obtains a 8limit0 of #ejj1 and his account is only #bej on the wrong side1 he pays on the smaller amount only4 ,as a rule1 a solicitor acts as middleman between a mortgager and mortgagee2 and the borrower might remember that solicitors1 when advancing their clients' money1 or1 indeed1 when they act in any capacity1 are quite as human as bank-managers1 and that it is always advisable to higgle with them over the rate1 which1 of course1 should be based on the value of loanable capital at the time4 ,the deed usually stipulates for six months' notice on either side4 ,a customer who is desirous of obtaining an advance upon property which already has a first mortgage upon it1 will not find the banks either sympathetic or eager to assist him2 though if his banker be 8in0 with him he will1 of course1 accept any additional security which is likely to lessen his risk or minimize his loss4 ,in the usual course of his business second mortgages and equities of redemption are not thought desirable1 and then1 again1 the law does not give a second mortgagee all the protection it might4 ,the current-account customer1 who calls upon the bank-manager with the object of obtaining an overdraft against property1 will generally be asked if his life is assured1 and if he reply in the negative1 he may be requested to assure to the extent of the 8limit0 the bank is ready to grant him1 and to deposit the policy as collateral security with the deeds4 ,many men of small means assure their lives1 and a banker1 provided the office be a good one1 will generally advance up to the surrender-value of the policy4 ,this he ascertains by applying to the assurance company1 which tells him at what figure they will commute it4 ,the rates charged upon this class of security are high4 ,where the customer's overdraft is only partially secured1 he must make the best terms he can for himself2 and1 as there is practically no competition for such an account1 he will probably have to pay from #e to #f per cent4 per annum interest and from to per cent4 on his turn-over4 ,these are the maximum rates1 which1 no doubt1 he will attempt to reduce1 though with what success must remain problematical4 ,the person who obtains an overdraft without security must1 as a rule1 give thanks1 and pay up with a light heart1 for should he apply elsewhere he would be received with open-mouthed astonishment4 ,a good name in the banking world implies that its owner is worth some few thousands of pounds2 and though1 in the moral sense1 its value is considered beyond price1 directors1 while appreciating it in the abstract1 regret their inability to safely ensconce it within their safes1 and therefore1 as practical men1 their powerlessness to advance against it unless backed by collateral securities4 ,lastly1 a few words may be said anent personal security4 ,if you have a wealthy friend who is willing to sign a promissory note with you1 or to guarantee your banker against loss up to a certain sum1 an overdraft can soon be arranged2 but such a request puts friendship to the severest test1 and it may be extremely difficult to find your friend at home should he as much as suspect the reason of your visit4 ,we can see that competition is centred around the safe business1 and that though those persons who possess tangible securities can make very close bargains1 the less desirable is the cover from a banker's point of view1 other considerations being equal1 the higher are the rates the customer will probably be asked to pay4 ,the man who possesses the right class of securities should1 therefore1 take them to the cheapest market1 and the owners of the less marketable varieties might remember that from #d to #e per cent4 per annum on the overdraft and per cent4 commission on the turn-over are very full rates1 which may often be considerably reduced when the customer1 whose credit is good1 does a large and profitable business4 ,the only remaining subject for discussion is the relation that exists between the bank-manager and his directors1 who confine his power to very narrow limits4 ,the city-manager1 for instance1 at the head-office of a ,london joint-stock bank1 might be empowered to grant loans to the extent of from #b1jjj to #c1jjj without first obtaining the consent of the board4 ,any application in excess of his 8discretionary power10 as it is called1 would have to be submitted to the directors1 two or three of whom1 during certain hours1 are always in attendance each day1 in order to deal with those requests for large loans where an immediate decision is essential1 while a full board would probably sit twice a week4 ,the board1 of course1 would be asked to confirm the decisions of the 8daily0 committee1 and from time to time the loans granted by the city-manager would be subjected to criticism by that body4 ,at the metropolitan1 suburban and country branches the 8discretionary power0 of the agent or manager would be based upon the amount of business transacted at the branch4 ,in a small town of from #bj1jjj to #cj1jjj inhabitants a manager might have power to grant1 when necessary1 loans to the extent of #cej and under1 without first obtaining the sanction of the board4 ,all applications for advances in excess of his power would have to be immediately submitted to the head-office1 accompanied by a letter1 describing the nature of the security offered1 and stating the desirability of obtaining or keeping1 as the case may be1 the account4 ,this report1 in every probability1 would be addressed to the 8advance department10 where it would be criticized by the officials before going into the board-room4 ,many questions would be asked with reference to the working of the applicant's account1 his annual turn-over1 and so on4 ,if he came to them from a rival bank then they would want to see his pass-book1 and1 were he already a customer1 the manager would send a list of his daily balances and comment upon his means1 habits1 etc4 ,having satisfied themselves upon these points1 the chief of the advance department reports to the general manager1 who submits the application to the board4 ,the process1 it will be seen1 is cumbersome and necessarily slow1 for it often takes the machine as many days to give a decision as it does a private banker minutes4 ,the manager1 evidently1 has very little real power under this system1 and1 practically1 the branches are managed from the head-office1 the agent being a kind of clerk-in-charge1 who reports to1 and announces the decision of1 his directors4 ,indeed1 the rules and regulations are framed for this very purpose1 and the banks make it part of their policy to effectually hold their managers in check1 and to so arrange the work of an office that but little is left to their decision1 while it is the duty of the accountant to instantly report any irregularity to the general managers4 ,the average bank-manager1 it must be remembered1 has had neither a business nor a financial training1 and it would therefore be extremely risky to give him a large field in which to make experiments4 ,of the two evils the boards of the banking companies choose by far the lesser1 and1 by allowing him a small 8power10 they tether him like a donkey to a stake1 thereby limiting his grass to the length of his rope4 ,in a large manufacturing city a manager's discretionary power would not exceed #a1jjj to #a1ejj1 and in the smaller cities it would range from #ejj to #a1jjj1 while in the provincial towns it would be from #cjj to #ejj1 according to population4 ,each month the manager1 as a rule1 has to send to the head-office a report upon all accounts that are over his power1 together with a separate one relating to bills discounted1 and at least twice a year he must submit a long return of every overdrawn account on the books of the branch certified by the accountant and himself4 ,the head-office1 in short1 watches him as a cat does a mouse1 and criticizes those advances he himself is allowed to make severely should they not meet with the approval of those in authority4 ,then1 again1 as though determined that his steps shall not stray from the beaten track1 inspectors visit his branch four or five times during the course of a year1 and1 needless to say1 the board thinks it neither necessary nor desirable to advise him of the day one will arrive4 ,when the inspection is a short one the unwelcome visitor counts the cash1 checks the bills and securities1 just glances casually through the ledgers and then takes his departure1 when the atmosphere seems lighter by his very absence1 for exalted officials are a weariness to the flesh4 ,but during a long inspection1 which occurs about twice a year1 the manager has to make a short report upon every overdrawn account in the books4 ,this done1 he gives his report to the inspector1 who reads through his remarks and proceeds to criticize them4 ,having added a few words of his own1 the visitor posts the bulky report to the advance department at the head-office1 and1 finally1 it is laid upon the board-room table4 ,then the fun begins4 ,the manager1 after a few weeks of anxious suspense1 receives a long list of caustic inquiries relating to certain overdrawn accounts which have failed to satisfy the board1 together1 perhaps1 with imperative instructions to get such-and-such overdrafts reduced to certain figures at a given date4 ,sorely tried in temper1 the poor agent sets about answering the questions put to him1 and then1 much against his will1 he writes to certain clients whom he asks to give him a call4 ,now1 perhaps1 the customers of the joint-stock banks will understand why they receive so many letters requesting them to keep their accounts at the agreed limit1 or even to reduce or pay off the overdraft unless they can deposit either more desirable or additional security4 ,at such a moment an irritable person is disposed to regret that 8a company has neither a body to be kicked nor a soul to be damned40 ,,chapter ,,ix ,,how ,,to ,,check ,,bankers' ,,charges ,bankers make up their pass-books in two ways4 ,when the customer is in account with the banker the cash he pays in appears on the right-hand side of his book1 and the cheques he draws out on the left4 ,the more general method1 however1 is to make the bank in account with the customer1 when the debits and credits in the pass-book are an exact copy of the client's own cash-book1 whereas the entries in the bank's ledger are reversed4 ,the latter and more usual practice will be adopted in this chapter4 ,customers often complain that they are unable to check their half-yearly charges1 that they do not quite understand at what rates they have been charged2 and as some bankers are most careful to add the interest and commission together1 and then to enter the aggregate in the pass-book as 8charges0 simply1 it is a little difficult to understand how they expect their clients to check their interest and commission4 ,for instance1 suppose a man is charged #e #bs4 #f;d41 and that the banker writes in his pass-book3 ,by charges1 #e #bs4 #f;d4 ,here we have a puzzle that is more than ,chinese in its intricacy and suggestiveness1 for it is evident that unless the customer remembers that he has arranged to pay1 say1 #d per cent4 per annum interest and per cent4 commission1 he will experience considerable difficulty in verifying the figures4 ,as a matter of fact1 the companies are not particularly anxious to enlighten him1 for see how easily the client could have checked his charges were they specified thus3-- ,by interest at #d per cent4 #d #b #j 0 per cent4 commission on turn-over #j #ae #f 0 postages #j #e #j ------- #e #b #f ,such a statement is almost beautiful in its simplicity1 and the entry 8postages0 may1 perhaps1 give us some clue to the mystery1 as it is evident that a manager1 by debiting charges in one sum1 is thereby enabled to hide certain debits such as 8postages10 8telegrams10 8legal expenses10 8stamps10 and so on1 at which1 were they entered separately in the bank-book1 the customer would probably strongly protest4 ,and then1 again1 by adopting this method of darkness1 those persons who leave everything to the agent never know their rates1 and they are sometimes too timid to call and inquire1 as though fearing that such a request would reflect upon the agent's honour4 ,certain banks have an account open in their ledgers called ,law ,charges or ,sundry ,charges1 to which doubtful debits are posted in the names of various customers4 ,at the end of each half-year these sums are credited to the account in question and included in the clients' charges4 ,when1 for instance1 a manager does not wish a person to know that he is paying a fee of #c #cs4 to the bank's solicitors for the examination by them of certain deeds which he has deposited as security1 he will probably resort to this subterfuge4 ,we can now criticize the account of ,john ,jones1 who on the #cast ,december1 #aijb1 owed his banker #ejj #bs4 #f;d41 and examine the entries in his pass-book from that date to the #cjth ,june1 #aijc1 when his bankers rule off their books and calculate their charges4 ,assuming that ,mr4 ,jones keeps proper books1 he will have an account in his ledger1 which1 after making allowance for cheques drawn but not presented for payment1 will agree with his pass-book in every particular4 ,the following is a copy of his bank-book3-- ,,the ,,london ,,and ,,cheatem ,,bank1 ,,ltd41 with ,,mr4 ,,john ,,jones4 ---------------------------------------- ------------------------ ,dr4 ,cr4 ---------------------------------------- ------------------------ #aijc4 #aijb4 ,jan4 #bj4 ,to ,cash #cjj #a #f ,dec4 #ca4 ,by ,balance #ejj #b #f #aijc4 ,apl4 #bb4 0 ,cash #ij #a #c ,feb4 #ae4 0 ,smith #aj #j #j ,may #ae4 0 ,cash #bjj #e #j ,mar4 #ca4 0 ,jones #gj #c #d 0 #ah4 0 ,cash #ej #j #j ,apl4 #bb4 0 ,robinson #h #j #f 0 #ca4 0 ,cash #i #j #j ,may #bf4 0 ,self #e #aj #j ,june #aj4 0 ,cash #ajj #j #j ,june #e4 0 ,williams #af #aa #b 0 #bh4 0 ,cash #g #j #j 0 #be4 0 ,brown #g #b #c 0 #cj4 0 ,interest #j #c #b 0 #cj4 0 ,charges #e #b #f 0 ,balance #acc #ah #h ---------- ---------- #gef #aj #aa #gef #aj #aa ,june #cj4 0 ,balance #acc #ah #h ,mr4 ,jones' ledger1 then1 assuming that none of his cheques are outstanding1 will show the same balance at the debit of 8bank10 though1 of course1 the dates will not agree1 as ,mr4 ,jones credits the bank on the day that he draws a cheque1 whereas the bank debits him on the day that it pays it4 ,we can see that his banker paid a cheque to ,smith on the #aeth ,february4 ,if ,john ,jones drew the said cheque on the #abth1 then he debited ,smith's account and credited the bank on the same day4 ,but these entries1 as we shall see in our next illustration1 appear upon the opposite sides of the banker's ledger4 ,mr4 ,jones1 whose securities are tangible1 has arranged with the manager that he is to pay #d per cent4 per annum on the overdraft and per cent4 on his turn-over1 and to receive #a per cent4 on his daily credit balances4 ,having received his pass-book1 he wishes to check his charges1 and after making two or three attempts1 he is convinced of the futility of his efforts1 so renounces his task in despair4 ,he has worked the figures out in his own way1 which1 though a little primitive1 he generally finds answers pretty well1 and1 as his figures come to something like those entered in the pass-book1 he supposes that it is all right4 ,perhaps the following copy of his account as it stands in the bank's ledger may therefore prove both illuminating and instructive3-- ,,jones1 ,,john1 ,general ,dealer1 #e1 ,high ,street1 ,exeter4 ,dr4 ,date4 ,particulars4 ,dr4 ,cr4 or ,balance4 ,days4 ,total4 ,total4 ,cr4 ---------------------------------------- --------------------------------- #aijb4 ,dec4 #ca4 ,to ,balance #ejj #b #f ,dr4#ejj #b #f #bj #aj1jjj #aijc4 ,jan4 #bj4 ,by ,cash #cjj #a #f 0 #bjj #a #j #bf #e1bjj ,feb4 #ae4 ,to ,smith #aj #j #j 0 #baj #a #j #dd #i1bdj ,mar4 #ca4 0 ,jones #gj #c #d 0 #bhj #d #d #bb #f1afj ,apl4 #bb4 ,by ,cash #ij #a #c ,to ,robinson #h #j #f 0 #aih #c #g #bc #d1eed ,may #ae4 ,by ,cash #bjj #e #j;,cr4 #b #a #e #c #f 0 #ah4 0 0 #ej #j #j 0 #eb #a #e #h #daf 0 #bf4 ,to ,self #e #aj #j 0 #df #aa #e #e #bce 0 #ca4 ,by ,cash #i #j #j 0 #ee #aa #e #e #bhj ,june #e4 ,to ,williams #af #aa #b 0 #ci #j #c #e #aie 0 #aj4 ,by ,cash #ajj #j #j 0 #aci #j #c #ae #b1jhe 0 #be4 ,to ,brown #g #b #c 0 #aca #ah #j #c #cif 0 #bh4 ,by ,cash #g #j #j 0 #ach #ah #j #b #b1bfh;,a #bgh 0 #cj4 0 ,interest #j #c #b 0 #aci #a #b----------------------- #aha #cg1dbb #c1hia ,to ,charges #e #b #f #acc #ah #h #d per cent4 per ann4 0 ,balance #acc #ah #h on #cg1dbb for ------------------ #a day #d #b #j #gef #aj #aagef #aj #aa per cent4 on turn-over #fag #j #ae #f ,june #cj ,by ,balance #acc #ah #h;,cr4#acc #ah #h ,postages #j #e #j -------- #e #b #f ,allowed-- #a per cent4 per ann4 on #c1hia for #a day #j #c #b ---------------------------------------- ----------------------------------- ,a ,three days' interest upon 8cheques0 paid to credit4 #gef #c4 ,now everything should be as clear as the flowing brook to ,mr4 ,jones4 ,he should1 in the first instance rule a sheet of paper in exactly the same manner as the specimen page of the banker's ledger4 ,he next carries the entries from his pass-book to the ruled sheet1 taking care that each amount1 whether debit or credit1 is placed under its right date1 and at the end of each day1 or when the next date appears1 he extends the balance1 as in our illustration1 for it is upon this balance that the bank either allows or charges him interest for one1 two1 or twenty days1 as the case may be1 at an agreed rate4 ,he then multiplies this balance by the number of days1 and carries the product into a 8total0 column1 which he adds up at the end of the half-year4 ,this done1 the rest is a very simple business for anybody who can manage a rule-of-three sum4 ,the banker1 we can see1 brings forward the amount of ,mr4 ,jones' indebtedness on the #cast ,december when his books were ruled off4 ,this opening entry1 which amounts to #ejj #bs4 #f;d41 is placed in the debit column of his ledger1 and extended as a debit balance4 ,upon the morning of the #ast ,january1 therefore1 one day's interest was owing on #ejj1 but the next operation upon the account did not take place until #bjth ,january2 and as from #cast ,december 7excluding the #cast and counting #ast ,january as one day7 to #bjth ,january 7inclusive7 there are twenty days1 the customer owes twenty days' interest upon #ejj4 ,if we multiply #ejj by #bj1 as in our form1 and carry the product into 8total0 column1 he then owes one day's interest upon #aj1jjj4 ,the result1 of course1 is precisely the same2 so a banker1 in order to save a multiplicity of calculation1 adopts this rule throughout1 with the result that1 at the end of the half-year1 his client owes one day's interest upon #cg1dbb4 ,bankers1 when referring to the figures in the 8total0 columns1 speak of them mysteriously as 8decimals10 and the customer1 upon hearing so ominous a word1 jumps to the conclusion that bankers' calculations are most difficult and involved1 when1 in reality1 they are of the simplest nature imaginable4 ,evidently the product in question is the result of a simple multiplication sum2 so why bankers should speak of extending the 8decimals10 when there is none to be extended1 must ever remain one of the enigmas of their trade4 ,as a rule1 should the shillings in the balance column be ten or over1 the banker1 in making his calculations1 calls them one pound1 and when less than ten shillings he ignores them4 ,on the #bjth ,january1 for instance1 the shillings are excluded1 but upon the #bfth ,may #dg is the sum we have to multiply by five4 ,further1 in arriving at the number of days between two dates1 exclude the first date and include the second1 or vice versa1 but do not include both dates4 ,the second 8total0 column of our form is for creditor results1 or1 as bankers incorrectly call them1 creditor decimals1 the left-hand column being1 of course1 the debtor1 and the right the creditor1 just as though they were left-and right-hand pages of a cash-book4 ,having ascertained the number of days from date to date1 we add them up1 and next proceed to balance them4 ,from #cast ,december1 #aijb1 exclusive1 to #cjth ,june following1 inclusive1 there are #aha days1 and1 as those are the figures in our days' column1 we know that they are correct4 ,next we add up the 8total0 columns1 and here great care is necessary1 because it is impossible to balance the figures4 ,dealing with the debit total first1 we find that ,john ,jones owes his banker one day's interest at #d per cent4 per annum upon #cg1dbb4 ,hence3-- 7#cg1dbb #d #a7_/7ajj #cfe7 #d #bs4 ,but ,mr4 ,jones will make these figures #ce1aed1 and the answer #c #ags4 #a;d41 and upon asking for an explanation he will be told that he has been charged three days' interest upon the cheques he paid to his credit during the half-year4 ,the banker argues that his client receives credit for the cheques he pays in immediately1 whereas he himself has to collect them through the 8clearing10 and does not receive the money for two or three days4 ,the argument is somewhat fallacious as to the length of time1 but we need not discuss that minutely4 ,mr4 ,jones points out that he pays in cash and local cheques as well as cheques upon ,london and country bankers1 and that1 therefore1 he cannot understand why the manager charges him three days' interest upon the total sum paid to his credit during the half-year4 ,he will1 of course1 decline to submit to this charge1 and request the manager to refund him #ds4 #aa;d4 7three days' interest upon #gef at #d per cent4 per annum74 ,with reference to the rate1 the average ,bank rate from #cast ,december to #cjth ,june works out at #c #ags4 #a;d4 ,while his account was overdrawn1 however1 the official minimum was at #d the whole time1 so the rate is a fair one1 but this question has already been discussed in the previous chapter4 ,his banker owes him #a per cent4 per annum upon his creditor balances1 which are multiplied by the days and extended in our second 8total0 column4 ,he has1 therefore1 to receive #a per cent4 per annum upon #c1hia for one day4 ,hence3-- 7#c1hia #a #a7_/7ajj #cfe7 #cs4 #b;d4 ,as this is the sum debited in the pass-book1 ,mr4 ,jones' mind is at rest propos of the correctness of the figures2 but it will probably occur to him that the rate might be improved1 for the fact that one is borrowing at #d and lending at #a is not conducive to harmonious thinking4 ,next1 he checks the commission on his turn-over1 which he makes #aag4 ,he pays per cent41 of course1 upon the amount of the cheques credited in his pass-book during the half-year1 and these come to the sum aforesaid4 ,hence3-- 7#aag #a7_/7ajj #h7 #bs4 #aa;d4 ,but his banker has charged him per cent4 on #fag4 ,his glance falls upon the balance forward of #ejj #bs4 #f;d41 and it at once occurs to him that the manager has charged him thereupon1 that1 in short1 a mere banker's opening entry has been included in his turn-over4 ,excited by this discovery1 ,mr4 ,jones calls upon his banker1 and points out to him1 with a touch of ,celtic intensity1 that he sees no earthly reason why he should pay #abs4 #g;d4 simply because the bank has made an entry of its own in his pass-book4 ,moreover1 with a keen eye for mathematics1 he clearly demonstrates that he has already paid commission upon the various transactions which resulted in the said balance2 so the manager1 adjusting his spectacles1 and praying ,mr4 ,jones to moderate his language1 allows that1 in the hurry of business1 a little mistake has occurred4 ,a customer1 when checking his charges1 should see that he does not pay commission upon opening entries of this description1 as1 needless to say1 they are merely there in order to enable the banker to balance his books1 and bear no relation whatever to a client's turn-over1 though they are sometimes added to it4 ,just referring to the rate of commission1 per cent4 we know1 seems too much1 so ,mr4 ,jones may be recommended to read ,chapter ,,viii of this book4 ,lastly1 we come to the entry 8,postages1 #es40 ,the manager1 during the half-year1 writes numerous letters to his customers1 sends their pass-books to them through the post1 and so on2 therefore1 in order to reduce his incidental expenses1 he debits a few shillings to certain easy-going clients before the books are ruled off1 and so as to prevent awkward questions being asked1 he includes these small sums with 8charges40 ,mr4 ,jones1 who has probably not received half a dozen letters from the bank during the half-year1 will naturally refuse to pay this imposition4 ,should a customer not have made arrangements with the manager as to the rates he is to pay1 he would ask at what rates his account has been charged1 and then proceed to check the banker's figures in the manner indicated in these pages4 ,such an entry as 8charges0 has nothing better than its extreme vagueness to recommend it1 and the client1 when he finds this word in his pass-book1 should1 if he experience any difficulty in checking the figures1 return it to the manager with the request that he will give him full particulars as to the rates of interest and commission1 and also tell him the amount of any additional charge or charges1 if there be any4 ,we can now make out a table of the amount ,mr4 ,jones has to reclaim from his banker3-- ,customer's ,calculations4 ,banker's ,calculations4 #d per cent4 per annum #d per cent4 per annum on #ce1aed #c #ag #a on #cg1dbb #d #b #j per cent4 on #aag #j #b #aa per cent4 on #fag #j #ae #f ,postages1 nil #j #j #j ,postages #j #e #j ,balance to be refunded #a #b #f -------- -------- #e #b #f #e #b #f ,the commission on #fag is #aes4 #e_/;d41 but a banker would charge #aes4 #f;d4 ,mr4 ,jones1 we can see1 has been overcharged to the extent of #a #bs4 #f;d41 and we may rest quite assured that he will not be easy in his mind until he has recovered this sum from his banker4 ,sometimes a customer1 when ruling off his own books1 draws a cheque for1 say1 #fjj1 and pays it to his credit at the bank4 ,this would be a cross entry4 ,but does he understand that this sum will be included in his turn-over1 and that if he be charged per cent4 thereupon1 he pays #aes4 to his banker for making a couple of entries in his ledger8 ,again1 if the manager charge him three days' interest at #e per cent4 per annum upon the sums paid to his credit1 he will pay another #es4 7about71 and at this rate a cross entry of #fjj would cost him #bjs4 ,the luxury1 it must occur to him1 is expensive2 and as this illustration is not a figment of my imagination it is evident that everybody who keeps a banking account should understand how to check a banker's charges4 ,it seems an act of supererogation to point out that the average account would contain very many more entries than the one under review1 but if the reader will carefully follow these instructions he should find little difficulty in checking the charges in any bank-book4 ,where the account has been overdrawn during the entire quarter or half-year the first 8total0 column must be used4 ,our example is that of a mixed account1 and both columns are required2 but should the account be a creditor one1 then the extensions are made in the second 8total0 column1 and the banker1 of course1 will allow the customer a rate4 ,when checking the interest of a loan account it is advisable to obtain a separate pass-book from the banker1 and not to take out the entries from the current-account pass-book wherein the interest is debited4 ,should it be found that the commission has been charged upon the amount of the loan1 the customer would ask for an explanation1 and in checking his interest he would proceed in exactly the same way as shown in our example4 ,again1 we have seen that some customers arrange that their rate shall be either ,bank rate or above it1 as the case may be4 ,suppose that the ,bank rate on the #bbnd ,april were raised from #c to #c per cent41 and that it had stood at #c from #cast ,december4 ,the customer1 who has agreed to pay his banker above ,bank rate1 will then owe #c per cent4 per annum on the sum or sums he has borrowed from #cast ,december to #bbnd ,april4 ,applying this hypothesis to the account under review1 we rule a line beneath the figures #f1afj in 8total0 column1 and add up the column1 which comes to #cj1fjj4 ,from #cast ,december 7exclusive7 to #bbnd ,april 7inclusive7 there are #aab days 7see page #ei71 and1 as the figures in the days' column give the same result1 we know that they are correct4 ,the customer1 then1 owes his banker one day's interest at #c per cent4 per annum upon #cj1fjj4 ,at each change of the ,bank rate this process must be repeated2 so instead of having one rule-of-three sum to work out1 as in our illustration1 there may perhaps be four or five of them4 ,should the fortunate possessor of a large creditor account have arranged with his banker that he is to receive #a per cent4 below ,bank rate on his daily credit balances1 then assuming that the balances on our form were creditor1 the banker would owe #a per cent4 per annum on #cj1fjj for one day4 ,the customer1 when calculating the amount due to him1 would proceed in the same manner as indicated above1 and he might remember that1 in arriving at the number of days from one change of the ,bank rate to another1 he excludes the day from which he calculates and includes the date to which he calculates4 ,the rest is easy4 ,,chapter ,x ,,bills1 ,,coupons1 ,,foreign ,,drafts1 ,,etc4 ,discounted ,bills4 ,the city-article of every morning paper contains a list of market discounts from which one can see at what rates the bill-brokers and discount-houses are taking the various classes of bills4 ,bank-bills would be paper either accepted or indorsed by the banks2 and fine trade-bills or best trade-bills would be the acceptances of those firms whose credit is so good that the question of their paper not being paid at maturity is practically never considered4 ,as the credit of the banks ranks highest it follows that bank-bills can be discounted at the finest rates4 ,again1 less risk is run on a three months' bill than upon one for four or six months4 ,in other words1 the position of an acceptor is less liable to change in three months than in six1 therefore short bills are in greater favour2 consequently1 the rate upon a six months' bill1 other considerations being equal1 will be higher than that upon one which has three months to run1 though the difference1 of course1 will only be a fractional one4 ,the bill-brokers1 we know1 obtain most of the bank and the fine bills1 but they are also dependent upon ,lombard ,street for the greater part of their resources2 and as a bank1 which owes huge sums on demand1 likes to keep its assets as liquid as possible1 it follows that bankers take short bills from the brokers in preference to those which are drawn for long terms1 for the simple reason that should they think the outlook uncertain and deem it prudent to strengthen their reserves1 the shorter bills will run off the more quickly1 thereby providing them with additional cash4 ,a three months' bill1 therefore1 from a banker's standpoint1 is considered more desirable than one at six months' date4 ,when trade is active and loanable capital dear market rates of discount will naturally be high1 and the ,bank rate1 speaking broadly1 is generally in touch with the market rate for three months' bank-bills4 ,conversely1 when trade is dull and the prices of commodities are falling1 fewer bills will be on offer2 but the fund with which they are discounted will be proportionately greater1 consequently the market rates of discount will be low1 as1 also1 will be the ,bank rate4 ,it must be remembered1 however1 that the ,bank of ,england discounts bills for its own customers below its published rate--when its minimum is temporarily above the market rate2 for were it not to adopt this course its customers would naturally discount their bills with the brokers4 ,as the bill-brokers are middlemen between ,lombard ,street and those merchants who have bills to sell it follows that the market rate of discount is always below the bankers' rates1 and that1 therefore1 holders of the better-class paper take it to the brokers1 but this peculiarity has been mentioned in ,chapter ,,vi4 ,it may1 however1 be added that the remittance of the best country bills to the ,london bill-brokers is a comparatively new movement1 which the banks do not regard with favour4 ,competition between the brokers being keen1 it is questionable whether the finest rates are quoted in the papers1 for the merchants who have bills for sale will1 of course1 not neglect to higgle with the brokers1 who1 like the bankers themselves1 certainly would not advertise their lowest rates4 ,the large discount-houses and brokers possess considerable capital1 though it would look extremely small when contrasted with the short-loan fund1 and they deposit certain approved securities with the banks against the money at call advanced to them2 but the small bill-brokers are little better than runners for the banks with whom they re-discount their bills almost as soon as they are in their cases1 and their capital would consist principally of a silk-hat and a bill-case4 ,certain brokers on the ,stock ,exchange1 it may be added1 stand in much the same relation to ,lombard ,street4 ,besides borrowing from the banks the bill-brokers also accept deposits from the public1 basing their rate upon the ,bank rate1 and allowing a slightly higher rate than the ,london bankers4 ,the market for bills is a special market1 into which the banks pour their surplus funds1 so customers will be careful not to confuse the price of a bill with the price of a loan1 though1 of course1 there is a close connexion between the two2 for when loanable capital is dear discount rates too are high1 and when the former is cheap the latter are low4 ,the ,london customer1 who discounts fine bills with his banker1 will naturally take care that he does not pay a higher rate than the bill-brokers would charge him1 and when he discounts second-rate trade-bills he will remember that competition is very keen1 and that if his credit be good he can generally induce the manager to quote a fine rate4 ,coming to provincial banking1 we have seen that the large merchants and manufacturers remit some of their best trade-bills to ,london2 but in the great cities1 where the banks are numerous1 the competition for good paper is considerable2 and as the customer usually keeps his current account at the bank with which he discounts his bills1 he can generally1 if his account be worth retaining and his credit good1 get his paper discounted at ,bank rate1 or even slightly under when the market rate is below it4 ,in the small country towns1 however1 the banks' rates are higher1 but then1 of course1 the paper they discount there is not of the same class2 and a capitalist1 be he a money-lender or a banker1 raises his rate in proportion to the risk he runs1 the one thinking a bill so doubtful that #ajj per cent4 will just tempt him to risk his principal1 and the other drawing the line at about #g per cent4 ,a1 for instance1 has an acceptance of ,c's for #ajj1 dated the #ast ,january and drawn for one month1 so the bill1 allowing the usual three days' grace1 will be due upon the #dth ,february4 ,a takes this bill on the #eth ,january1 to his banker1 by whom it is discounted4 ,from the #eth ,january exclusive1 to the #dth ,february1 inclusive1 there are thirty days2 and assuming that the discount rate be #e per cent4 per annum1 and the rate of commission upon the amount of the bill per cent41 we get the following3-- #ajj #e #cj ------------ #hs4 #b;d4 #ajj #cfe per cent4 upon #ajj #bs4 #f;d4 -------- #ajs4 #h;d4 ,a1 therefore1 has paid about #f per cent4 per annum for the accommodation4 ,the country banks1 when they charge #e per cent4 per annum interest and per cent4 commission upon short bills1 obtain something like #h per cent4 per annum upon their capital2 but1 needless to say1 the persons who pay these rates are either out of touch with the market or else their credit is so bad that they are glad to discount their bills with a banker upon almost any terms4 ,and then1 again1 there is not much paper of this description under discount with the provincial banks4 ,country customers1 whose credit is above suspicion1 make very close bargains when they take good trade-bills to the banks to be discounted1 and seldom pay any commission upon the amount of the bill1 though1 of course1 the manager will attempt to exact it if he think that his man will pay without protest4 ,as previously stated the customer almost invariably discounts his bills with the banker with whom he keeps his current account1 and he generally pays the same rate on his paper as he does upon his overdraft4 ,competition for desirable accounts being keen1 it follows that a client who discounts largely can always bring pressure to bear upon the manager1 should he consider that his rates are excessive and altogether out of touch with the market rates4 ,coupons4 ,many people leave their coupons with bankers for collection1 and here1 again1 we get an example of making those pay who will4 ,the usual rates are per cent4 commission on ,english and per cent4 upon foreign and colonial coupons1 but1 as a matter of fact1 certain managers keep a list of those persons who refuse to pay these charges1 while they who do not protest1 no matter how large a sum they may keep to their credit upon current account1 are made to pay the ordinary rates4 ,it is only fair that a person whose average credit balance does not exceed #ej should pay a rate2 but when a man keeps from #bej to #ejj and above on the right side1 the banker can quite well afford to forego his charge4 ,suppose a banker receives #dj from his ,london agent or through the coupon department of his head-office on account of coupons remitted for a customer4 ,he deducts his charge of #bs41 and1 without informing the person for whom they have been collected1 credits #ci #ahs4 in his pass-book4 ,the client1 in five cases out of six1 remains under the impression that he has received the market value for his coupons1 whereas1 had the manager credited the account with #dj1 and debited it with #bs4 commission1 the customer in every probability would have asked for an explanation4 ,the customer1 by examining his pass-book1 will soon discover whether a rate has been deducted1 and if he consider that the balance he keeps at his credit amply repays the bank1 then he can request that the commission be returned to him1 and that his name be placed on the free list with those of other 8conscientious objectors40 ,where the face-value of the coupons is given in a foreign currency1 he will1 of course1 have to discover the rate of exchange at which they were sold4 ,allowance1 too1 must be made for income-tax4 ,when purchasing stocks or shares through his banker the latter divides the commission with the broker1 and it is perhaps advisable to see the broker's note1 as a zealous manager1 anxious to augment the profits of his branch1 and believing devoutly in the old-fashioned maxim 8every little helps10 occasionally adds a small charge of his own4 ,should he do this1 then he sends the customer a copy of the broker's note instead of the note itself1 and in the copy he has1 it need not be said1 added a small commission of his own to the broker's4 ,as a banker guarantees the customer against loss through the failure of either the broker or the jobber1 purchasing shares through a bank has its advantages for the bona-fide investor2 but the speculator1 who may want to 8carry over0 from account to account1 must deal with a member of the ,stock ,exchange4 ,again1 when buying foreign drafts through one's banker inquiry should be made as to the rate of exchange1 so that one can check his figures4 ,in a small book of this description much must necessarily be omitted1 but it may just be added that in these days the facilities bankers grant their customers range from taking charge of their plate and valuables to allowing them to have their letters addressed to the bank1 while they will even pay their subscriptions for them4 ,the difficulty is to say what they will not do1 and some day1 perhaps1 we shall have their young men calling in the morning for orders with the baker4 ,,chapter ,,xi ,,unclaimed ,,balances ,i would describe this banking custom as legal stealing4,b ,bankers1 as well as other estimable persons1 obtain their gleanings and their perquisites1 which are credited to certain sundry accounts1 such as 8unclaimed dividends10 8unclaimed balances10 and so on4 ,those banks1 too1 that issue notes must profit to a certain extent by the paper that is lost and destroyed by the public2 and though it is impossible to estimate the gain to the banks from these sources1 their absolute silence on the subject seems to indicate perhaps more eloquently than statistics1 that the fund thus derived must be considerable1 even if it be not vast4 ,b ,the ,government is not prepared to promote legislation for the purpose of requiring the banks of the ,united ,kingdom to make a return showing the sums of money in their hands in respect of dormant and obsolete accounts4--,vide ,press1 ,feb4 #aijh4 ,coming to the definition of an unclaimed balance1 it must be confessed that it is somewhat difficult to explain exactly what an 8unclaimed0 balance is1 for the simple reason that the banks1 when an account becomes dormant1 seldom make an effort to discover whether the owner be either dead or alive1 or to whom the balance belongs4 ,on the other hand1 if they do not court inquiry1 it cannot be said that they obstruct it4 ,neither1 however1 do they encourage it1 nor assist the owner or claimant in any way1 but content themselves with passively carrying forward the figures from half-year to half-year4 ,the public may well be dissatisfied with this treatment1 for it is quite apparent that were the banks to make it their business to discover the owners or claimants they would be successful in five cases out of six1 and1 further1 the longer they nurse these so-called 8unclaimed0 balances1 the greater is the probability that they will for ever retain them4 ,we will first discuss the position of the current-account customer in relation to this practice4 ,as a rule1 it is well known to the members of a deceased man or woman's family where the banking account was kept2 so inquiries are usually made1 and the balance standing to the credit of the deceased ascertained4 ,there are1 however1 exceptional cases4 ,a man may have accounts with two different bankers and though one is known1 the second may not be4 ,if the pass-book relating to the second account be at the bank1 the manager very probably will keep it there4 ,again1 a person on a visit to a place may open a small temporary account at a bank there1 and should he die suddenly the manager will not make any attempt to trace his representatives4 ,when the pass-books which relate to these 8unclaimed0 balances are at the bank1 some managers are most careful that they shall not go out again2 and1 in order to prevent their being sent through the post to the addresses on the ledgers1 the books are generally placed in some out-of-the-way corner of the strong-room1 there to await the coming of their owners4 ,this is certainly a novel way of protecting the interests of one's clients1 though it doubtless has not the smallest claim to originality1 and may not be completely unknown in other trades than that of banking4 ,secondly1 we come to the deposit-receipt or deposit-note2 and it will readily be allowed that a small piece of paper of this description may easily be either lost or accidentally destroyed4 ,it must be borne in mind1 too1 that the companies1 in the event of a depositor's death1 do not take any steps to inform either his next-of-kin or his legal representatives that certain sums of money are standing to his credit in their deposit-ledgers1 even when they are aware of his decease4 ,then1 again1 after a depositor's death these documents are sometimes overlooked or inadvertently cast aside with other papers4 ,such sums1 after a lapse of years1 might go to swell a company's unclaimed balances4 ,but it is a misnomer to speak of these sums as 8unclaimed10 when it is obvious that they are simply 8unpublished10 and that the banks1 were they so inclined1 could find the true owners of a large number of these balances in a very short space of time4 ,in many instances they have good reason to think that the customers are dead1 even when they possess no positive information to that effect2 and as they have their addresses in the deposit-ledgers1 all they have to do is to write a few letters of inquiry4 ,however1 the banks have the law on their side2 and though they are obliged to answer any questions which may be made by a deceased's representatives1 they are not compelled to give information gratuitously1 so they choose to remain silent1 and insist upon the initiative being taken by interested persons4 ,furthermore1 a deceased depositor may have held three deposit-receipts4 ,should two of these be presented for payment by his executors1 the manager need not inform them that there is a third sum standing to the credit of the deceased in the books of the bank2 and he possibly will not4 ,an interested person1 therefore1 should always inquire whether there be any other sums standing to the credit of the deceased1 either on current account or deposit4 ,it need not be remarked that should the balance be a debit one the bank will speedily send in its claim1 together with a note of sympathy to the widow1 begging her to consider the company quite at her service4 ,so hardened is a bank-manager that he will actually attend the funeral of an old and esteemed client whom he has been charging #e per cent4 interest and per cent4 commission for years4 ,it is a bad sign when a limited liability company is represented at a funeral by an official2 and should two bank-agents put in an appearance1 one can only quote3 8,where the carcass is1 there will the vultures be gathered together40 ,seeing that they are so eager to exhibit their respect for the rich dead1 it may be considered somewhat surprising that they are not more sympathetic towards the poor living1 and1 also1 that they do not publish their so-called unclaimed balances for the benefit of their customers' descendants2 but life is full of these little contradictions1 and1 after all1 the acids and the sweets1 judiciously blended1 give a zest to existence4 ,finally1 some banks1 we know1 issue pass-books to their depositors instead of receipts4 ,it sometimes happens that1 at a depositor's death1 the book is with the banker4 ,unless1 therefore1 his own people chance to know that he had a deposit account1 all traces of its existence are obliterated1 for the banker1 who has the book in his possession1 is not compelled to give any notice4 ,after the publication of one of my books my publisher received a letter from a lady complaining bitterly that a certain bank had treated a kinswoman of hers in this manner4 ,should the relations of a deceased man or woman have reason to suspect that money has been saved and placed somewhere1 they should go to every bank in the town where the deceased resided and inquire whether any sums are standing to his credit in the books of the banks4 ,their application cannot be refused1 and the result may possibly be somewhat surprising1 while they will at least have the satisfaction of knowing that their kinsman's savings are not being devoted by the banks to their own use4 ,as the law now stands1 a deceased customer's balance is1 to a certain extent1 at the mercy of his banker2 but whether these unclaimed balances would in the aggregate amount to the huge total at which some people are disposed to estimate them is rather doubtful4 ,that the law urgently requires amending cannot1 however1 for a moment be questioned1 for persons whose own interests conflict with those of the public can seldom be trusted to judge impartially2 and it is quite evident that directors1 who are imbued with the commercial instinct1 are not exceptions to the rule4 ,the aggregate1 no doubt1 would be represented by a large sum1 but the public1 where money is concerned1 generally looks pretty smartly after it1 so one would imagine that this total would consist principally of numerous small balances1 and that large windfalls must be few and far between4 ,these so-called 8unclaimed0 balances are1 we have seen1 in reality unpublished balances1 and steps certainly ought to be taken to compel the joint-stock banks to advertise in certain ,london and local papers the names and last known addresses of those individuals in whose names sums of moneys1 in excess of say #e1 have been standing intact in their books for any period in excess of five years4 ,the banks might also be made to hang a list of these names in a conspicuous part of their offices1 so that those who are entitled to these sums should at least have an opportunity of claiming them4 ,were the companies compelled to adopt this course1 we should hear very little more of unclaimed balances1 for the thought of publicity would be distasteful to them1 and they would immediately take steps to put themselves in communication with either the customers or their kinsfolk4 ,one would think1 too1 that the ,government had a better claim to these balances than the banks4 ,mr4 ,asquith1 for instance1 might find them useful as a basis for his old-age pension scheme6 ,depositors1 seeing how matters stand1 should keep their receipts in some place where they cannot be overlooked2 and in the event of a pass-book being received1 a note should be made in a diary1 or even in the 8,family ,bible10 to the effect that such a book is in existence2 as1 should it be at the bank at the time of a customer's decease1 we know that the manager may retain it1 with the result that all trace of the money will be lost4 ,,chapter ,,xii ,,bank ,,shares ,there is not space in this chapter to deal exhaustively with the risks of shareholders1 but it may be mentioned that1 with the exception of the old chartered banks1 the members or partners of every joint-stock bank in the ,united ,kingdom were1 prior to #aheh1 liable jointly and severally for the debts of the company4 ,this ,act1 ,statute #aheh1 c4 #ia1 was not1 however1 compulsory2 and although no bank of unlimited liability has since been formed1 it was not until the passing in #ahgi1 after the failure of the ,city of ,glasgow ,bank1 of the ,act #db #dc ,victoria1 c4 #gf1 that all the unlimited banks eventually limited the liabilities of their members4 ,naturally1 a person of considerable wealth would hesitate to risk his fortune by buying shares in an unlimited bank which perhaps returned him only #e per cent4 on his purchase-money2 but this objection is not now applicable1 though it must not be forgotten that the shareholder is liable for a certain known sum1 part of which may be callable and the remainder reserved liability1 or all of which may be reserved liability and callable only in the event of the company being wound up4 ,where notes are issued the members may also be liable for the circulation4 ,now that the liability on bank shares is a certain sum that cannot be exceeded the investor is inclined to regard them favourably2 and though a rich man1 who can afford to take a certain amount of risk1 may decide to hold a few bank shares among his other securities on account of their higher yield1 this liability1 be the risk of a bank coming to grief never so small1 makes them a most undesirable investment for those persons the interest upon whose capital is just sufficient to supply their wants4 ,bank shares1 in short1 are rich men's shares2 but this fact was brought home to the public so forcibly during the ,australian banking crisis of #ahic that it seems unnecessary to dwell upon a point which must be apparent to everybody4 ,besides1 we all know that a man of small means cannot afford to incur a liability on bank shares any more than he can sign an accommodation bill1 and it would be as foolish of him to accept the one responsibility as the other4 ,nor is he the class of shareholder to whom the depositor can look with confidence4 ,while allowing that the great majority of our banks are prudently managed1 it must be granted that banking history is a remarkably stormy one1 though it is equally true that the surface of the waters has been but little ruffled during recent years2 still1 the ,baring crisis of #ahij is not yet ancient history2 and seeing that the banks are intimately connected with the ,stock ,exchange1 the bill-brokers and the commercial community1 a person who predicts that a ,british bank will never again be in difficulties must be blessed by the ,almighty with a most sanguine temperament1 for such a prediction is altogether opposed to the weight of evidence adduced by the past1 and though its fulfilment is eminently desirable1 so peaceful a solution of the banking question seems highly improbable4 ,in ,chapter ,,ii1 on the choice of a banker1 an attempt was made to show why a customer should select a strong institution whose working resources are plentiful1 and whose reserve of liquid assets is large enough to enable it to meet a drain of deposits during a run or a panic4 ,the shareholder who guarantees the customers of a bank against loss to a limited extent will naturally take care that he is a partner in a company which maintains an adequate reserve of cash and securities as an insurance fund against those accidents which are quite beyond the control of the most able board of directors4 ,a shareholder1 say1 holds twenty-five shares in a bank4 ,these shares are for #hj each1 and the amount paid up upon each is #bj4 ,he1 then1 receives a dividend upon #ejj1 and incurs a liability of #a1ejj4 ,but he bought these #bj paid shares at such a price that they only yield him #d per cent41 and he certainly cannot afford to run any great risk for such a return2 so he therefore1 before purchasing1 took care that the bank held a large accumulation of cash and gilt-edged securities as a reserve fund against those banking risks for which he pledged #a1ejj of his fortune4 ,every prudent man should take the same precaution4 ,the following illustrations1 which are taken from the balance-sheets of two ,english joint-stock companies that need not be named1 will clearly demonstrate that there are banks--and banks4 ,an ,english ,provincial ,bank4 ,liabilities to the public upon current1 deposit and other accounts are given in the balance-sheet as #d1bjj1jjj4 ,the bank's liquid assets are thus described3-- ,ratio per cent4 of liquid assets to public liabilities of #d1bjj1jjj4 ,cash in hand1 at call and at short notice #ehb1gej #ach ,consols and other securities #agb1agj #da -------- ----- #ged1ibj #agi ,this bank's position might be described in one very short word4 ,in the first place1 it has neglected to state the amount of its cash in hand and with bankers at call separately1 but has mixed it up with its loans at short notice4 ,the only deduction to be made is that the bank possesses so little legal tender that it deems it prudent not to give the figures in its balance-sheet1 but to inform the public that it holds #ach of cash in hand1 at call and at short notice to each #ajj of its public indebtedness4 ,the second entry is equally vague4 ,we are quaintly informed that this unique institution1 which owes some millions on demand1 is in possession of a certain amount of ,consols1 but the exact sum1 and the price at which they are taken1 have been left to our imagination1 so the bank may be the proud possessor of either #ajj or #a1jjj of ,consols2 and goodness only knows what is meant by 8other securities40 ,the second column of our form1 however1 shows us that this company held #da of 8,consols and other securities0 to each #ajj it owed to its customers4 ,then1 with a touch of true comedy1 the auditors tell us that the balance-sheet1 in their opinion1 exhibits a true and correct view of the state of the bank's affairs4 ,one's very soul goes out to those auditors1 and a longing seizes hold of one to pat them on the back and shout bravo6 ,no doubt the statement is true and correct1 but how strangely incomplete4 ,of course there is a serious side to this question4 ,the bank1 we can see from the total in our ratio column1 held only #agi of cash and certain securities in reserve against each #ajj it owed to the public4 ,obviously it is trading on the reputation of its better-prepared rivals1 who1 should a determined run be made upon it1 might feel disposed to save it2 but during a crisis1 when each company has to take care of itself1 such a bank1 were its depositors to become nervous1 would be compelled to close its doors in a very few hours4 ,now1 would any sane person buy the shares of this bank at a price which returns him about #d per cent4 on his capital1 and incur a liability in excess of the amount of his holding8 ,one would say emphatically not2 but it is a remarkable fact that people are to be found who will take this risk with a light heart4 ,surely they cannot understand the nature of the security they are buying4 ,a bank which is caught short of cash during a crisis must apply for assistance to the ,bank of ,england1 and the ,bank1 which at so critical a time is the only market for securities in existence1 would1 before making it an advance1 demand to see its securities4 ,this bank1 we know1 possesses a list of 8,consols and other securities0 which it values at #agb1agj2 but if the ,bank advanced #ajj1jjj against them1 which is highly improbable1 how could it pay off even #ejj1jjj of its deposits8 ,it seems to me that it must go under4 ,the usual fate of these weak provincial banks is amalgamation with the better managed and more powerful companies1 but the danger is that a storm may sweep them out of existence before they drift into one or another of these havens of rest4 ,fortunately1 the state of the bank in question is exceptional rather than representative1 but it is unwise to jump to the conclusion that the shares of every ,english bank are a desirable investment4 ,our second illustration deals with the balance-sheet of one of the large joint-stock banks whose liabilities on current1 deposit and other accounts amounts to #bf1feb1cjj4 ,the liquid assets held in reserve against this sum are3-- ,ratio per cent4 of liquid assets to public liabilities of #bf1feb1cjj4 ,cash in hand and at ,bank of ,england #d1jji1fbb #aej ,money at call and short notice #f1hgf1aie #beh #d1jjj1jjj #b ,consols at #ij2 #ejj1jjj ,local ,loans ,stock at #ajj #d1ajj1jjj #aed ----------- ----- #ad1ihe1hag #efb ,ambiguity is not the dominant note in this balance-sheet4 ,we can see at a glance that the bank is well prepared to pay off a large proportion of its indebtedness on demand1 for it holds #ae in cash against every #ajj it owes4 ,money at call and notice 7short loans to the bill-brokers and stockbrokers71 which is much less liquid than cash1 is stated separately1 and its list of investments consists entirely of ,british ,government securities4 ,moreover1 we are told at what price they have been taken4 ,the balance-sheet1 though not perfect1 is clear and informing2 but a company that holds #d1jjj1jjj of ,consols at #ij would not be so foolish as to hide its financial light under a bushel2 so when a bank modestly refers to 8,consols and other securities0 we may be quite sure that its holding of ,consols is either remarkably small or else that its directors are exceedingly stupid4 ,it is more probable1 however1 that they are astute gentlemen who reason that the luminosity of a farthing dip might call forth smiles of wonder and amazement were it allowed to shed its radiance and waste its fragrance outside the bushel4 ,the bank we are discussing1 then1 held #efb of cash1 call money and gilt-edged securities in reserve against each #ajj of its liabilities to the public2 and such a bank1 it need not be said1 is splendidly prepared to protect the balances of its depositors and the interests of its members4 ,as a matter of fact1 the real interests of both are identical2 for if a bank neglects to keep an adequate reserve of cash and securities it exposes its customers to the risk of loss and inconvenience through its stoppage during a run or a panic2 as1 should the bank suspend payment1 the customers must either suspend too1 or find another banker1 while its shareholders might lose all their capital and also be called upon to make good any deficit4 ,obviously1 then1 the bank which holds #ef in liquid assets to each #ajj it owes is the one with which to do business4 ,the shares of this bank return about #d per cent4 at the present market price2 and seeing that the company has minimized the risks of its members its shares will be chosen in preference to those of the institution which has accumulated a somewhat doubtful reserve of liquid assets which works out at a ratio per cent4 to its liabilities of only #agi4 ,we next come to a banking company's profits1 which are a source of great annoyance and wonderment to certain people1 who cannot understand how dividends of from #aj to #bj per cent4 can be earned in the worst of times when everybody else is feeling the depression in trade acutely4 ,the mystery is not very profound1 for a banker's business1 of course1 is only profitable so long as he can trade with the money of his depositors1 and1 as his own capital is usually small when compared with his deposits1 it follows that a very small percentage on his working resources will return a high rate of interest upon his capital4 ,upon a certain amount of his deposits he allows a rate which is regulated by the ,bank rate2 and he charges a rate upon his loans and advances1 the said rate being also more or less influenced by the ,bank rate1 the difference between the two rates representing his margin of gross profit4 ,he regulates this margin by changing his deposit rate at each alteration of the ,bank rate1 but he also obtains money upon which he does not pay interest1 and as that sum earns considerably more when the ,bank rate is at #d than when it is at #b1 it follows that his 8free0 money is largely responsible for the fluctuations of his dividends4 ,but a banker cannot trade with all his deposits4 ,he has to keep a certain sum lying idle in his safes and tills1 and with his ,london agents or the ,bank of ,england4 ,he further requires a good list of securities which can be either converted or pledged with the ,bank of ,england should occasion arise1 and such a list will not return him much more than #c per cent4 upon the sum devoted to that purpose4 ,then he employs a portion of his funds in the short-loan market1 so he has only about #fj or #gj per cent4 of his deposits to advance in the shape of loans1 overdrafts and discounts to customers4 ,in other words1 a well-managed bank has to devote a large proportion of its resources to insuring its business4 ,take the bank in our second illustration4 ,its paid-up capital amounts to #b1hjj1jjj1 and its reserve fund to #a1fjj1jjj1 so the shareholders' funds come to #d1djj1jjj4 ,deposits and other accounts are #bf1feb1cjj1 making its total working resources #ca1jeb1cjj4 ,now the net profit earned during the half-year was #bjg1hfi1 so the bank cleared #ffi of a pound upon each #ajj with which it was trading2 and seeing that the trader expects to make #aj per cent4 on his turn-over1 it is pretty evident that bankers' profits shrink into insignificance when compared with his4 ,but the bank's paid-up capital is only #b1hjj1jjj2 and as #ad1jjj will pay #a per cent4 per annum for the half-year on that1 this profit of #bjg1hfi enables the bank to declare a dividend at the rate of #ad per cent4 per annum1 and to carry a large amount forward to the profit-and-loss account of the next half-year2 yet it can hardly be said that its earnings on #ca1jjj1jjj are enormous2 still1 they look it when metamorphosed into a rate of #ad per cent4 ,but this is only another illustration of how easily the crowd can be deceived by statistics4 ,it would be absurd to attempt in a short chapter to discuss the price of bank shares2 but as the banking companies1 unless they enjoy an exceptionally sheltered position1 earn less during those periods of depression which from time to time overtake the trade of the country1 it follows that their dividends1 like their deposit rates1 rise and fall with the ,bank of ,england rate4 ,bank shares1 therefore1 can be bought cheaply when trade is bad and loanable capital cheap4 ,as the so-called gilt-edged securities1 during normal times1 should then be dear1 it often pays to sell out of the latter1 invest in bank shares1 and wait for the turning of the tide4 ,,chapter ,,xiii ,,the ,,pay ,,of ,,bank-,,clerks ,it cannot be said that bank-directors1 when considering the question of remuneration1 err on the side of generosity2 but nobody would dream of accusing them of that crime1 and if the bank-clerk is not paid lavishly1 his salary1 as a rule1 is appreciably above the wages paid for clerical labour in the open market4 ,nor can it be affirmed that the country private banker was one whit more generous than a board of directors4 ,indeed1 the evidence points in quite an opposite direction1 for the clerks of those firms which have been absorbed by the companies generally profited by the change2 so it must be allowed that the joint-stock system has raised the standard of comfort of the bank-clerk4 ,certain of the ,london private bankers were more liberal1 and others1 again1 had the commercial instinct strongly developed1 but we shall see the salary scales of the joint-stock banks are not calculated to excite envy in the mind of the multitude1 unless we except the unemployed and the hungry4 ,the following scale is that of a large ,london and provincial banking company3-- ,general managers #a1ejj to #b1jjj ,managers in a city #ejj 0 #a1ejj ,managers in towns of from #dj1jjj to #fj1jjj inhabitants #cej 0 #ejj ,managers in small country towns #bej 0 #cej ,inspectors 7with one guinea a day for travelling expenses7 #cjj 0 #ejj ,accountants or chief-clerks #afj 0 #baj ,cashiers #afj 0 #baj ,clerks #hj 0 #afj ,apprentices #cj 0 #ej ,at the head-office in ,london1 where there is a special scale1 the city-manager would receive from #a1jjj to #a1ejj a year1 and the chiefs of departments from #cjj to #a1jjj1 according to the importance of the department1 while the salaries of the ledger-clerks would be raised #aj each year until the maximum1 #cjj1 had been reached4 ,the maximum for clerks is #ahj4 ,at the metropolitan and suburban branches however1 the salaries are the same as those set out in the foregoing list1 and the managers would receive from #cjj to #hjj or so a year in proportion to the business done at the branch4 ,very few of the joint-stock banks would pay a higher scale of wages than this1 and the great majority of them1 especially the purely provincial companies1 would pay considerably less1 while the ,scotch banks are niggardly in the extreme--a little national characteristic4 ,it is on record that a clerk in a certain ,scottish banking company1 whose head-office is at ,aberdeen1 was receiving #cj a year at the end of five years' service4 ,in a fit of unaccountable generosity his salary was then raised to #ej per annum1 but the recipient remarks that he showed his gratitude by promptly moving to ,london4 ,adverting to our list1 we can see that a youngster entering this bank at the age of1 say1 seventeen1 gets #cj a year1 out of which he has to pay certain subscriptions4 ,at the age of twenty his salary would be increased to #hj1 and #aj at the end of each year's service would be added until the maximum for clerks1 #afj1 were reached4 ,he would then be twenty-eight1 and there he would have to wait for the bank to make him either a cashier or an accountant before he could proceed to the next step4 ,a few men remain clerks all their lives1 but the percentage would be a very small one1 and in every probability the clerk might count upon being promoted at the age of thirty-three or thirty-four4 ,with good luck1 or should he chance to have a friend at 8court10 he might gain this step at thirty4 ,assuming that he were made a cashier at thirty-one1 he would start with a salary of #agj1 and1 rising #aj a year1 would reach the maximum of this class1 #baj1 when he was thirty-five years of age4 ,the percentage of men who remain in this class all their lives is appreciable1 and the average man probably would not get a small branch before he was forty-five or forty-eight4 ,of course1 if he successfully accomplished some such feat as marrying the plain daughter of a general manager1 or should he be distantly related to a director or a ,lord ,mayor1 he might get a branch at forty4 ,but the prizes are for the very few1 and those men who do really well1 after having managed a small branch to the satisfaction of the board1 are sent to a larger office upon a salary of #djj a year rising to about #fjj4 ,at this rate a clerk would be from forty-eight to fifty-two or three before his salary was #djj a year1 and it must be remembered that these are the fortunate ones2 so it is evident that the majority of clerks in a bank simply eke out an existence4 ,on the other hand1 they are better paid than the average merchant and solicitor's clerk1 while their employment is constant1 and1 as a rule1 they are entitled to a pension1 should they survive the monotony of their surroundings1 after having attained the age of sixty4 ,seeing that these young men are drawn from the same class as the merchant's clerk1 and that the demand for their berths is greatly in excess of the supply1 it appears at first sight that #afj a year is a fair wage for a person whose principal accomplishments are a bold round hand and the ability to add up long columns of figures with accuracy and despatch4 ,however1 it seems improbable that a father1 after having carefully considered the chances1 will choose a banking career for a son who can pass examinations successfully4 ,then1 again1 the average youngster has more chances in business2 for while a few hundred pounds will establish him as a trader1 as many thousands will not enable him to become a banker4 ,the banks1 so to speak1 take their men right off the market1 and give them a special training1 which fits them for banking alone1 but which1 as a rule1 totally unfits them for any other business2 consequently1 when a bank-clerk suddenly find himself flung back on the market1 he at first usually feels as helpless as a bird which suddenly turned out of the cage in which it was bred1 is compelled to sustain life after the manner of its kind4 ,as the bank-clerk generally enters a bank for life1 he has a right to expect that the shareholders and directors will at least recognize this fact1 and1 therefore1 pay him a salary based1 not only upon the market price of clerical labour1 but also upon the assumption that he will pass his days in the service of a company in which he will always be a servant4 ,in other words1 as the directors practically hire these men for life1 it is their duty to make their circumstances fairly easy1 but this is an obligation which the majority of them quite fail to recognize4 ,the smaller banks have a much lower scale than that given in these pages2 and certain of those companies which are pushing out small suburban tentacles in every direction pay the managers of these offices from #hj to #abj a year1 and the clerks in proportion4 ,moreover1 some boards have passed resolutions to the effect that no clerk in their service shall marry until his salary be such-and-such a sum2 and it seems intolerable that a body of men1 who are merely traders1 be the resolution good or bad1 should be allowed to interfere with the liberty of the subject in this arbitrary fashion4 ,mr4 ,punch's advice is doubtless excellent2 but who are these men1 in their astounding consequence1 to override the law of the land8 ,the whole nation should indignantly protest against their impudence1 for a mere trading company1 whose only object is gain1 is unfit to govern the sons of men4 ,possibly1 if these banks were to publish their salary scales their sham philanthropy would be instantly apparent4 ,perhaps a few illustrations of the relations between the banks and their clerks may prove interesting4 ,i have in my mind the case of a man who sat by my side at a large branch bank in the ,north4 ,from being a chief-clerk or accountant in the service1 he had been reduced to #afj a year1 and sent to the branch in question4 ,the cost of living being expensive in a large city1 he was compelled to send his children to the ,board schools4 ,in fact1 he was so hard up that he wrote to the general managers telling them that he could not live on the salary1 and asking them to increase it4 ,he was told that1 if he were not satisfied1 he could take a year's salary 7,i think it was7 and go4 ,the bank1 however1 ultimately succeeded in getting rid of him more cheaply4 ,the man1 who was a tailor's tout and an insurance agent in his spare moments1 did all in his power to add to his income2 but at last he fell so low that he actually descended to taking money from the men's coats4 ,then followed detection and dismissal4 ,now1 who was the more to blame1 the clerk or the bank8 ,the clerk had informed the directors that he could not live upon his salary1 and the directors made him an impossible offer1 for the man1 who must have been getting on for fifty1 had been in the service from a boy1 and was therefore not worth thirty shillings a week outside4 ,knowing this1 the offer of the directors was frankly brutal1 and losing hope the clerk became a petty thief4 ,my ethics may be somewhat shaky1 but were ,i on my trial for a harp and a halo ,i would rather stand in the thief's place than in that of those directors4 ,another man in the same office1 although single1 could not acquire the art of living upon #afj a year1 and after some few years of unsuccessful striving and vain endeavour1 he was dismissed for drink and debt4 ,he then became a traveller in the wine trade1 and terminated his not uninteresting career by getting drunk on his samples4 ,a third man1 who was a married cashier1 took two sovereigns from his till1 intending to return them upon the following day1 but his till-money was counted the very next morning by the accountant1 who was probably suspicious1 and the man had to go4 ,out of a staff of twenty-eight men1 five1 ,i think1 were cashiered within five years2 it seems to me that were a kinder spirit manifested by those in authority much of this misery and suffering might be spared4 ,for instance1 in one service it is usual to send old men and others who1 for some reason or another1 have been reduced1 to a large branch1 where1 after a few months have elapsed1 they are given a small sum of money and quietly pushed into the street4 ,this procedure is adopted because a man at a small branch is acquainted with the accounts of all the customers thereat1 and might1 should he be dismissed while there1 hold forth in every public-house in the town2 but the expedient is unspeakably mean1 and surely a bank which counts its deposits by millions can afford to temper justice with mercy4 ,the directors know the fate that awaits these men1 more especially when they are past forty1 and it is simply cruel to weed them out in this brutal fashion4 ,to my mind it is little short of murder4 ,the system1 of course1 is bad4 ,the banks place one man in authority and to that man they pay a good salary4 ,he1 in his turn1 has to hold down the rest1 with the result that we have already seen4 ,at the branch in question the manager1 who was an old man1 received #a1ejj a year1 and the accountant1 who was a man of about forty-two1 got #cjj4 ,the disparity between these two sums is most marked1 for the accountant was quite as able a man as his chief1 and if he were only worth #cjj a year1 then the manager was not worth more than #ejj at the outside4 ,were a bank to pay each man a fair salary1 and to reduce the manager's rate of pay1 it would increase its expenses considerably1 but at the same time it would add to the efficiency of its staff1 for most of the men are dissatisfied1 and the work1 as a rule1 is not done willingly1 while the directors are looked upon as task-masters4 ,nor is this at all surprising1 for of sympathy they display but little1 and their humanity is unquestionably not superior to that of the ,zulu4 ,i have weighed my words carefully1 and am writing without the slightest heat1 my only aim being to state my facts plainly1 and ,i think that1 if the facts are unchallenged1 the deductions are as indisputable as they are discreditable to the directors and shareholders of certain of the joint-stock banks4 ,butler ,tanner1 ,the ,selwood ,printing ,works1 ,frome1 and ,london4 ,transcriber's ,note ,bold and italic words in the original text have been marked in this version with equals signs and underscores respectively4 ,a few minor typographical errors have been silently corrected4