This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 436.— A bank holds business paper endorsed by and discounted for a customer who has assigned. The paper will probably all be paid, although the parties may ask some renewals. Should the bank treat its claim as fully secured, and not rank on the estate, or should it rank and put a value on the security?
The assignee might take the security over at an advance of 10 per cent. on the valuation, and this, while it might prove advantageous to the bank if the notes were not all good, would be the reverse if they were ultimately paid in full.
Answer.—The question involved is purely one of expediency. The bank should certainly get some dividend from the estate to hold as an indemnity against loss, although it would be bound to return it if the notes were ultimately paid in full by the promissors. Most banks would under the conditions described value their security at such an amount that if it were taken over by the assignee with ten per cent. added, their debt would be practically covered.