23. A Large City Bank Of Discount Having Branches

Branch banking has not developed very much in this country except in the city of New York, where trust companies and banks organized under the state laws are allowed to have branches. There is much to be said in favor of branch banking. It is the common-sense application of the modern idea of concentration. We may expect an extension of the principle rather than any curtailment. It is not our purpose to discuss branch banking as a system, but to explain some of the methods of accomplishing the work. Branch managers are held to varying degrees of responsibility. In some cases the manager is simply an agent to receive deposits and cash checks, having no books or records and making no loans. The degree of responsibility increases from this stage to one where he is a vice-president and director of the bank and is given as wide a latitude in his loans as the president exercises in the main office. It is unusual for a branch manager to be responsible for capital investment, though capital investment is sometimes divided among the branches. Where the responsibilities imposed on managers are small, the expense of maintaining the branch is correspondingly low. As a natural result, the worries of the officers at the main office are increased. Where the managers are held responsible for the success of their branch they should be allowed as much interest on the excess funds on deposit at the main office as they could realize on good investments if they had absolute control of these funds. On the contrary, if a branch manager can loan more than he has on deposit, and draws on the main office, he should pay the main office an equal rate.

The usual branch manager is expected to do four things:

1st. To attract and accumulate deposits.

2nd. To master the credits of his own customers.

3rd. To build up an efficient clerical staff.

4th. To keep expenses at a minimum.

Whatever degree of authority is given to the branch managers, the accounting methods should be alike in every particular in all branches. No material change should be permitted in one branch unless it is adopted in all.

Each branch should keep a general ledger and send a daily statement to the main office. These statements should then be summarized by the auditor. From this summary, he prepares the general statement for the officers. A sample summary book is shown in Figure 2 on page 25. The deposits owing between branches and main office will cancel each other if every item credited on the books of the main office to the branches has been charged to the account of the main office on the books of the branches and vice versa. This is not possible, however, and the differences must be accounted for as items in transit from or to branches. The main office usually has a large credit on its books in favor of the branches. This should be entered as "Items in transit to branches" under the liabilities, in black. The statements from the branches will show amounts due from the main office as an asset. These should be entered opposite this liability in red ink and the net amount only, carried to the total column. If the black figures exceed the red it will appear as a liability. If the red figures exceed the black the net amount should be shown on the asset side.

One distinct advantage of branch banking is in the collection of foreign and local non-clearing items.. All foreign items should be sent to the main office and by them sent to the various correspondent banks for collection and remittance or credit. If there are many branches, well distributed, the collection of local items will be facilitated by establishing zones and sending all items in a certain zone to the branch in that zone for collection.

Summary Of Daily Statements

Note:-a, black ink; b, red ink.

Figure 2. Summary Of Daily Statements 25.

The organization of the staff will need to be much more clearly defined than in a bank without branches. Some one officer should have control of the branches and all questions of importance should be referred to him. The paying teller at the head office should be entrusted with sufficient authority to order transfers of money so that each branch may always be sufficiently supplied.