A Notable Circular

A circular notice, sent out at the beginning of 1906 by a bank whose established collection business in a small Ontario town was threatened by the rate-cutting activity of new-coming rivals, excited some comment at the hands of the financial journals. As the circular affords a good illustration of the state of the collection business in many places and of the feelings stirred up by the active competition it is reprinted:"Owing to the absurd abuse of banking privileges " and usages by some of our chartered banks in re-" ducing their collection rates to seven cents per item, " regardless of the amount, and the return without " charge of all unpaid items, we have decided to meet " this ridiculous method of doing business by collecting " at par for all chartered banks sending their collec-" tions to us at this point, and we will also pay, without " charge, all their drafts or certified cheques duly ad-" vised and crossed at this office."

It is to be feared that in too many instances the managers of the small country offices are influenced, when they permit themselves to be drawn into senseless cutting of collection rates, by a panicky terror lest their fellow-townspeople should think they are losing business to newer rivals. The newcomers think, upon opening, that as two or three men are there in the office, with little or nothing to do at first, they can afford to collect for other banks at par, if it is necessary to quote that rate to get the business. This course is wasting the shareholders' money. Such banks resemble the whist players, who play entirely for their own hands, without thinking at all of their partners.

How One Bank Made A Good Use Of Its Branches

It is possible to give an illustration of one of the benefits falling to a bank possessing numerous well-placed branches when those branches follow the policy of working free only for their own institution.

When the author was in Winnipeg in the early "nineties" there was one chartered bank that had the Canadian West particularly well covered with branches.

These branches charged nearly all the other banks the stiff rate of 1/4 per cent. for making collections. The consequence was, when the other banks received from their customers items on points where this bank was all alone, and those points were numerous, they had to face the fact that it would cost them 1/4 per cent. to get the items collected. To come out without loss, it was necessary to charge the customers 3/8 per cent. commission, besides discount at the regular rate. Naturally, the customers objected to paying such a high rate of commission, and the banks were forced either to adhere to their charge at the risk of antagonizing or losing good accounts, or else to take this part of their business at a loss.

The advantage derived by the parent office in Winnipeg of the branches making the 1/4 per cent. charge was obvious. As an inducement for desirable business men to bring in their accounts it could offer them a flat commission rate of 1/8 per cent., or par if necessary. There is no question but that one result of the policy was to throw into the Winnipeg office of the bank a great many valuable commercial accounts.