This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 108.— A branch with considerable discount business has a much larger amount of deposits bearing interest. At the end of the year, therefore, the statements appear to show no profits. The surplus funds having been used by the bank generally, what would, in the present conditions of business, be a reasonable rate to allow the branch for them? Do any banks allow anything to such branches, and if not, how is their profitableness arrived at?
Answer.—We do not know whether any banks make actual entries for interest on capital supplied by branches, but we assume that the profitableness or otherwise of the branch is tested by computations in which full allowance is made for this.
At any rate, we think this should not be less than 4 per cent. nor more than 5 per cent., but the proper figure is a matter as to which opinions may well vary.