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Manual Of Canadian Banking | by H. M. P. Eckardt



One of the strong points of the branch system of banking is that it brings all the offices operating under it, even the most remote and the smallest of them, into subjection to carefully devised codes of rules, ensuring reasonable uniformity of practice. The system also ensures expert and skilful guidance for the banking offices of every district, and the employment everywhere of the most modern and effective safeguards against fraud or dishonesty. This Manual essays to outline the methods and practices obtaining in Canada.

TitleManual Of Canadian Banking
AuthorH. M. P. Eckardt
PublisherMonetary Times
Year1914
Copyright1909, H. M. P. Eckardt
AmazonManual of Canadian Banking

Manual Of Canadian Banking

By

H. M. P. Eckardt

Author Of "A Rational Banking System."

Fifth Edition

Published By

Monetary Times

Montreal Toronto Winnipeg

Entered according to Act of the Parliament of Canada, in the year one thousand nine hundred and nine, by The Monetary Times Printing Co. of Canada, Ltd., at the Department of Agriculture.

-Preface
One of the strong points of the branch system of banking is that it brings all the offices operating under it, even the most remote and the smallest of them, into subjection to carefully devised codes...
-Introductory
In a country situated as Canada was, having the larger part of its banking business connected with the gathering of produce over wide areas, and the shipping of it over long distances, with a correspo...
-Chapter I
These remarks applied to the Canada of 1870 and previous years. There were then, as now, the two kinds of banks - the large concerns, with branches in different parts of the country, and the small ins...
-Part 2
Growth Of Financial Banking They undertake considerably more of what is called financial banking than they did formerly. Loans to Stock Exchange houses, investments in stocks and bonds have grown t...
-Part 3
Wide Distribution Of Control Besides the differences in the form of the banks in the two countries there are some sharp contrasts in the manner of their operation and control. A noticeable feature ...
-Chapter II. Organization Of A New Bank
The first general Bank Act was passed in 1870. Before that each bank had its special charter. Charters expired at various dates, and did not confer altogether uniform rights and privileges. For some y...
-Organization Of A New Bank. Part 2
First Steps In Organizing In the organization of the new bank, the first step is, of course, the promotion of the scheme. One or two persons conceive the idea that there is an opening. They succeed...
-Organization Of A New Bank. Part 3
Call For Payments On Stock If the entire $500,000 capital has been subscribed, it will be found, in all likelihood, that some hundreds of subscribers have taken the stock in lots of from one share ...
-Chapter III. Selection Of The Junior
Twenty years ago to enter the service of the best banks was not so easy as it is to-day. Though there was always a demand for junior clerks, it was by no means keen or insistent. Vacancies were to be ...
-Selection Of The Junior. Part 2
The General Manager's Eye Watchful There are numerous instances of boys of seventeen or eighteen starting at $200 a year, and in six or seven years rising to be accountants or managers of small rur...
-Selection Of The Junior. Part 3
Qualities Required In Juniors In their juniors, the banks want intelligence-solid rather than showy attainments being preferred. A good character, and respectability of family are always looked for...
-Selection Of The Junior. Part 4
Importance Of Arithmetic And Writing As for special studies, arithmetic looms large in banking work, and there is writing to do all day. The columns of figures that are to be added are long and wid...
-Chapter IV. The Junior's Post
When the junior has passed his examinations successfully and has been enrolled on the staff his moral standing remains to be investigated. Something of this can be learned at the time of application a...
-The Junior's Post. Part 2
Officers' Pension Funds Related to the systems of mutual guarantee are the pension systems now coming into vogue. In Canada, the banks for many years have recognized their responsibility in the mat...
-The Junior's Post. Part 3
Serving In A Country Branch As the small country offices do not employ messengers or porters the duties performed in the cities by those functionaries fall to the new junior. He is expected to brin...
-The Junior's Post. Part 4
How Collection Bills Are Handled When received, the bills from local customers are endorsed frequently in blank, and in a shape that would permit of their being negotiated by anyone obtaining posse...
-The Junior's Post. Part 5
Entries In The Collection Diary Those bills which the junior brings back Acceptance refused are marked off Returned in the collection register, and are then sent back to the parties from whom r...
-The Junior's Post. Part 6
Collecting And Accounting The matter of the actual collection of the bills and of the method of accounting for them, though not falling within the junior's duties, can be described here. The bills ...
-The Junior's Post. Part 7
Payments Received Over The Counter The bills, so far described, are the obligations of business men and others who operate current accounts. There are usually a number of notes and drafts each day,...
-The Junior's Post. Part 8
Crediting And Remitting Proceeds When bills are unpaid at maturity or refused acceptance on presentation, they are, as already explained, returned to the owners as soon as possible. When they are p...
-The Junior's Post. Part 9
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-co...
-The Junior's Post. Part 10
A Disgruntled Correspondent A manager in the service of one of the larger banks, who had been endeavoring to keep his collection business on a proper basis by charging regular rates to other banks,...
-Chapter V. The Cash Book
Another duty which falls frequently to the junior in a country branch is the writing of the cash-book, or day-book, as it is sometimes called. This book contains a record of all the vouchers and entri...
-The Cash Book. Part 2
Deposit Slips And Cheques On the deposit slip coming to him from the proper source, duly initialled by the teller, the ledger keeper is authorized to enter the amount as a credit in the account of ...
-The Cash Book. Part 3
Checking The Vouchers Early next morning, before the bank opens, the vouchers are to be checked with the cash book. There are several reasons why this should be done by the manager. In the first pl...
-The Cash Book. Part 4
Drawing And Recording Drafts After drawing it, on the form provided, the junior enters the particulars of the draft in the register, puts the number on the requisition slip, and hands book and draf...
-Chapter VI. The Ledger-Keeper's Post
The deposit ledger is one of the bulkiest and heaviest of the office books. It contains the full record of the active drawing accounts of the branch's customers. It is a matter of some skill to block ...
-The Ledger-Keeper's Post. Part 2
How Customers' Accounts Are Kept His first transactions probably will be with the teller, who, after taking over the bills for the day, hands those which are payable at the bank to the ledgerkeeper...
-The Ledger-Keeper's Post. Part 3
Why Balances Should Be Extended At Once A habit to be avoided is that of making entries in an account without at the same time extending its balance. The manager is liable at any time to present hi...
-The Ledger-Keeper's Post. Part 4
Allowing Overdrafts From time to time cheques will be presented for which there are not funds at credit. If paid, they create overdrafts, or increase the amount of overdrafts already existing. When...
-The Ledger-Keeper's Post. Part 5
Balancing The Ledger The regular balance days of the branch may come twice or four times a month. On each one of them a balance of the ledger is to be struck. Before proceeding to it, the ledger-ke...
-The Ledger-Keeper's Post. Part 6
Balancing Pass Books And Returning Vouchers The recital of the ledger-keeper's duties will be concluded with a description of the manner in which the customers' pass books are balanced and the canc...
-Chapter VII. The Savings Bank Ledger
The savings bank ledger is a book having an affinity with the current account ledger. The savings bank department, as at present constituted and run, is a comparatively recent development in Canadian ...
-The Savings Bank Ledger. Part 2
Use Of Deposit Receipts So, latterly, the deposit receipts have come to be used more exclusively for special deposits and for sums in excess of a certain fixed amount, $5,000 or, perhaps, $10,000. ...
-The Savings Bank Ledger. Part 3
Thin Line Between Current And Savings Account It is well known that competition has resulted in somewhat obscuring the line that should exist between current and savings accounts. The practice has ...
-The Savings Bank Ledger. Part 4
When Accounts Are Closed At every branch transacting a large savings bank business there are always a number of depositors who withdraw their balances and close their accounts from time to time. On...
-Chapter VIII. The Discounts
The next post to be considered is that of the discounts and collaterals. It is in the discounting of bills and notes that the banks find their main source of revenue; the department is, because of thi...
-The Discounts. Part 2
The Safe Way-Personal Delivery By Manager The only safe way of doing this business, and the way that the best bankers do it, is for the manager himself to deliver the bills accepted for discount to...
-The Discounts. Part 3
Calculating Proceeds Of Casual Bill Satisfied as to these points, the clerk may proceed with the calculations. The due date is the first essential. When found, it is plainly marked on the bill. If ...
-The Discounts. Part 4
Loan And Trade Bills Reference has been made to the entering of the bills in different classes. The discounts, like the collections, are divided into classes, but for a different reason. The bank w...
-The Discounts. Part 5
Checking The Discounts An officer is appointed to check the discount clerk in his recording of the bills in the register, and in his calculations of profits and of proceeds. After they are checked ...
-The Discounts. Part 6
Notices Of Maturity Another old-established custom is that of sending notices to the makers of bills a short time before maturity. This serves a double purpose. Firstly, it reminds the promissor of...
-The Discounts. Part 7
The Protest To hold them liable the bank must either have them formally notified on the 10th after the close of business that the bill is unpaid, and that it looks to them for payment, or it must g...
-Chapter IX. Collateral Notes
At some branches large advances are made on collateral notes. Customers whose business consists of the manufacture, or sale, of farm implements, pianos, organs, sewing machines, quite frequently borro...
-Collateral Notes. Part 2
Recording And Handling At branches where there are a great many collaterals it takes a good deal of watchfulness and care to keep the records and accounts clearly and properly, and there is room fo...
-Collateral Notes. Part 3
Collaterals At Maturity When the collaterals become due, the teller takes them over with the other bills, and follows the same process in collecting or effecting payment. The payment of a collatera...
-Collateral Notes. Part 4
Balancing The Ledger To balance the collateral ledger the balances shown in all the accounts are taken down and added. The total should agree with the balance shown at credit of collateral accounts...
-Chapter X. The Liability Ledger
Most business men borrowing regularly from banks do so on what are called lines of credit, or credits; that is, they arrange with their respective banks to take paper up to a certain maximum amount. F...
-The Liability Ledger. Part 2
Head Office Supervision Over Liabilities The liability ledger informs the manager and the other officials at the branch how the liability of each customer stands, and how it is tending. Over this d...
-The Liability Ledger. Part 3
General Liability Statements So far as the liabilities statements are concerned, the number of them dispatched, and the length of the intervals between, are matters which each bank arranges to suit...
-The Liability Ledger. Part 4
The Main Return The monthly or bi-monthly liability statement differs from the above described one only in its being a complete exhibition of the customers' liabilities. Every account exceeding the...
-Chapter XI. The Cash
After serving in turn as junior, ledger-keeper, and discount clerk, the bank officer's next promotion is likely to be to the teller's box, or the cash. As he rises to the higher posts, with increase o...
-The Cash. Part 2
Taking Over The Cash Before entering upon his duties the new teller must take over the cash. As soon as his predecessor has balanced for the day on which the transfer is to take place, he enters th...
-The Cash. Part 3
The Cage-Its Isolation As soon as he has access, the next day, to his compartment in the safe, the teller brings out his tin box containing the cash he needs to use; takes it into the teller's cage...
-The Cash. Part 4
Preparing For The Public On getting the cash out, the first thing is to arrange it in order convenient for handling through the day. The cash drawer will have a row of compartments for the till mon...
-The Cash. Part 5
Deposits By Other Banks Among the first customers with whom the teller has to deal are the clerks from the other banks, who will have deposits for the bank similar to that which the teller has just...
-Chapter XII. Teller And Customer
Methods Of Counting Cash By the time these things are done it will doubtless be approaching ten o'clock when the bank's doors are to be thrown open. It has already been mentioned that among the fir...
-Teller And Customer. Part 2
Customers' And Banks' Deposits The deposits of its individual customers, when they exceed the withdrawals by the same customers, quite often represent accessions of resources by the bank. The depos...
-Teller And Customer. Part 3
Why Endorsement Is Essential It is necessary thus to require the customer to endorse every cheque on another bank, whether payable to his order, payable to bearer, or however drawn. The endorsement...
-Teller And Customer. Part 4
Cash Receipts At Once Go Under Cover The cash contained in the deposits is sorted as quickly as possible into the place reserved for it in the cash drawer, the operation being used, if time allows,...
-Teller And Customer. Part 5
Cash Item Lists Though each of the remittances on points where the bank has a branch is in effect a debit for that branch, entries are economized by listing all items-cheques and bank drafts-receiv...
-Teller And Customer. Part 6
Value Of Small Deposits One of the main things to be borne in mind is that the bank derives the great bulk of its loanable resources from this class of its customers. The bank returns show that whi...
-Chapter XIII. The Bank's Business In Exchange
Regular and occasional customers, from time to time during the day, ask for drafts on other points in the country, or on points in the United States, Europe, or elsewhere. When the bank receives the m...
-The Bank's Business In Exchange. Part 2
Ultimate Payment In Settling Centres Another point to be borne in mind is that, no matter what branch may be drawn upon, payment will, in most cases, be made, ultimately, by a branch in one or othe...
-The Bank's Business In Exchange. Part 3
New York And Foreign Exchange When a customer desires to remit money to some place in the United States, the bank can meet him by giving him a draft on New York. As New York is the great settling a...
-The Bank's Business In Exchange. Part 4
At Discount On the other hand, it often happens that the Canadian banks find their balances in New York accumulate to unhandy proportions. This may happen through their getting payment in New York ...
-The Bank's Business In Exchange. Part 5
Sterling Exchange In sterling, the matter is somewhat different, and a customer may get over par, $4.86 2/3, for the London remittance he sells to the bank, or he may buy remittance from it at less...
-The Bank's Business In Exchange. Part 6
How London Account Is Operated As will have been foreseen, it is necessary for the bank to have an account with a London bank to enable it to carry on these and other operations in sterling exchang...
-Chapter XIV. Receiving And Paying
Some of the principal modes of receipts which the teller will be called on to handle have been discussed in the foregoing paragraphs. It is hardly necessary to mention more, but it should be said, whi...
-Receiving And Paying. Part 2
Guards Against Fraud There are two other principal means of protection against this class of fraud. One is the bank's custom of shifting its officers from one post to another; the other is inspecti...
-Receiving And Paying. Part 3
Certification In guarding the bank's interests the first thing is to be satisfied that the cheque is good. Is the drawer's signature genuine? Has he sufficient funds at his credit? These are matter...
-Receiving And Paying. Part 4
Furthering The Bank's Interests The matter of the identification and endorsement being settled, the next thing is to obtain for the bank all possible benefit from the transaction. The bank's intere...
-Receiving And Paying. Part 5
Rights Of Drawer And Payee Then, after thus looking after the interests of his bank, the teller has to give consideration to the drawer of the cheque and the payee. As the bank is acting as fiscal ...
-Chapter XV. The Accountant
Promotion from the teller's box will probably be to the post of accountant. As the accountant has the general supervision of the office, and as he frequently takes charge of the branch in the manager'...
-The Accountant. Part 2
Dual Control Of Treasury Cash One rule enforced by all well-regulated banks is that the treasury cash and other valuables of the branch shall be under the dual charge of manager and accountant, bot...
-The Accountant. Part 3
Checking And Supervising The accountant has to check and supervise a great deal of the work done in the office. As a matter of fact, his initials as chief checker-up are found in the majority of th...
-The Accountant. Part 4
Relieving The Manager The accountant will probably take most pleasure out of his capacity of manager's lieutenant. Few men can help feeling thrills of pleasure when, on the occasion of the manager'...
-Chapter XVI. The Statements. The Balance Sheet
As the statements for head office all pass through the accountant's hands, it will be proper to describe them while dealing with this post. The basic statement is the balance sheet. It may be requi...
-The Statements. The Balance Sheet. Part 2
Adjusting Differences When the first system is followed the branches adjust with each other the differences shown in their balances on any given day. This adjustment of the balances is quite an imp...
-The Statements. The Balance Sheet. Part 3
Discount And Other Statements Loans and discounts are another fruitful source of statements. Some of them have already been described. One, not previously mentioned, is the regular week-to-week ...
-Chapter XVII. Manager Of The Branch
Promotion to the managership may come in any one of several ways. It may come by regular succession, the accountant succeeding to the higher position at the same branch. He may be appointed manager of...
-Manager Of The Branch. Part 2
The Routine Except in the very small branches the manager has little to do with the routine work of the office. In the morning he opens the letters, and, after entering the items in the sundry cred...
-Manager Of The Branch. Part 3
Different Kinds Of Business - The Farmers In High Regard The kind of business the manager will be called on to transact will depend on the kind of a district in which his branch is located. The maj...
-Manager Of The Branch. Part 4
Manufacturers There will probably be some manufacturing industries in the neighborhood which will require to borrow by way of direct loans when stocked up with raw material. The bank may also be re...
-Chapter XVIII. Financing The Crops And The Mines
One of the admirable points about the Canadian banking system is its efficiency in handling the yearly harvests. Nearly every autumn the banking system of the United States displays weakness in the fa...
-Financing The Crops And The Mines. Part 2
Grain Accounts In Winnipeg To follow the process to the cities. There, it is a case of the big exporting and milling firms sending out large amounts of cash to many points at which they have elevat...
-Financing The Crops And The Mines. Part 3
In The Klondike In the Klondike, the practice is to buy gold dust as it is brought in, paying for it such a figure as would cover cost of shipment to the assay office in Seattle or San Francisco, a...
-Chapter XIX. Relations With Other Banks And With Head Office
One of the perplexing questions which a new manager may be called on to decide is that regarding his relations with other banks in town. Should he be friendly or hostile? It may very likely be that on...
-Relations With Other Banks And With Head Office. Part 2
Reporting Special Happenings The general manager wants to know how the branch is progressing. He can tell, roughly, how things are tending from his examination of the balance sheets. But any specia...
-Relations With Other Banks And With Head Office. Part 3
Transferring The Profits One of the operations about which correspondence with head office is necessary is that of transferring the profits. This is done at the end of every quarter, or at the end ...
-Relations With Other Banks And With Head Office. Part 4
Charges And Interest Paid Then with regard to the outgo, the two principal items are charges and interest paid. All expenses belonging to the term should be shown in charges account whether the mon...
-Chapter XX. Inspection Of The Branch
The various stages of the work at a country branch, from junior up to manager, having been outlined, it remains to describe what takes place during an inspection. It is to be remembered that the he...
-Inspection Of The Branch. Part 2
Balance Sheet The Basis Of Inspection To form the basis of his examination, the inspector immediately calls for a balance sheet. So the books have to be closed and all the closing entries, commonly...
-Inspection Of The Branch. Part 3
Verification Of Remitted Bills These remitted bills are to be verified. Clerks are set to work to make out verification slips. One of these slips is headed up for each correspondent, and on it are ...
-Inspection Of The Branch. Part 4
Of The Savings Bank Ledger The savings bank ledger was taken in exactly the same way, a letter-card notice being sent to every depositor whose name appeared on the ledger, stating the amount shown ...
-Inspection Of The Branch. Part 5
Verification Of Securities At branches where stocks and bonds are held as security for loans, or merely for safekeeping, the inspector gives careful attention to them. In the case of inscribed stoc...
-Chapter XXI. The City Branch
The description, just completed, of the routine and work of a country branch applies also, so far as general principles are concerned, to the city branch. But, of course, the work in a large city offi...
-The City Branch. Part 2
The Juniors Every city office has a number of juniors. They are being taken on all the time, trained as speedily as possible, and put into the several departments or sent out to the branches. Sp...
-The City Branch. Part 3
A Specimen Clearing To illustrate this, two examples are given of a clearing in which seven banks participate:- Bank A sends out to Bank B......... $10,236 14 ...
-The City Branch. Part 4
Striking The Balances To resume the description of the clearings. After all the sheets are balanced and the difference or balance which each bank has to pay, or receive, is arrived at, the sheets a...
-The City Branch. Part 5
Retiring The Worn Notes Then at the head offices there is the duty of looking after the worn and mutilated notes. A banknote may last from three to five years in fairly good condition. Each bank de...
-The City Branch. Part 6
City Discounts Larger With regard to the discounts at the city office, there will be, of course, larger accounts and larger transactions than are to be found in the country offices. The wholesalers...
-The City Branch. Part 7
The Loan Clerk's Duties The loan clerk at the bank watches the daily market fluctuations in stocks. He must see that the bank's margin of security is maintained in all cases. Thus, if Toronto Railw...
-Chapter XXII. The Head Office
It is important to remember that by head office is meant the executive office of the bank. Usually the head office building will contain the principal branch of the bank, as well as the executive offi...
-The Head Office. Part 2
How The Branches Are Watched In the department the records of all inspection reports are kept so that they can be quickly and easily referred to; also, the clerks follow up and investigate the disc...
-The Head Office. Part 3
The Circulation What a bank gains from its note circulation has already been referred to. The conditions relating thereto cannot, however, be fully understood by the reader unless he has a knowledg...
-The Head Office. Part 4
Combined Banks Guarantee Note Circulation In addition to this certainty of redemption within two months of the date of suspension provided by the Act, it also provides that the notes of a failed ba...
-The Head Office. Part 5
The Central Gold Reserves The Bank Act of 1913 made an important change in the ordinary issue power of the banks. Section 61, Subsection 3, says:Except as hereinafter provided,* the total amount ...
-The Head Office. Part 6
How The Profits Accumulate A good understanding of how the profits accumulate can be arrived at by taking as an illustration the discounting of a note or bill at any one of the branches. Let us say...
-The Head Office. Part 7
The Appropriations Suppose the occasion is the end of the fiscal year. There will be the appropriations to make. The loans and discounts at every branch are carefully valued. The general manager de...
-The Head Office. Part 8
Providing For The Dividend The dividend is provided for by debiting profit and loss account with the amount required to pay the dividend for the quarter or half year on the whole of the capital sto...
-The Head Office. Part 9
Paying The Dividend Next, let us suppose this same bank has declared a quarterly dividend of two per cent. on its stock payable 1st September to stockholders of record 15th August. In all advertise...
-Chapter XXIII. The General Manager's Department
The general manager's department may be described as the heart of the bank. It is the most interesting of all. The source from whence advancement and increases flow, and from whence loans and discount...
-The General Manager's Department. Part 2
Loans And Discounts In every large bank the general manager delegates some part of the work of his department to his lieutenant, whatever may be that officer's designation. The particular parts so ...
-The General Manager's Department. Part 3
Where Experience Counts The branch managers are often bitterly disappointed over the rejection by the general manager of strongly recommended applications for credits. The expert in the head office...
-The General Manager's Department. Part 4
Bond Investments Investments in bonds are not generally used as a means of employing temporary balances. Rather it is permanent funds that are put into them. It may be part of the rest or reserve f...
-The General Manager's Department. Part 5
The Foreign Loans And Balances It has been pointed out that cash reserves must form a fund apart from or outside the ordinary discounts. To be operated so as to cause no disturbance whatever to the...
-The General Manager's Department. Part 6
Placing The Men An important thing is the placing of the men. The managers and other officers are to be put in the positions to which their respective capacities fit them, as far as possible. So th...
-The General Manager's Department. Part 7
Co-Operation With Other Banks In addition to these matters, the general manager gives a part of his time to the shaping of the general course of the bank. Canada has recently seen how the banks' we...
-Chapter XXIV. The Board
A Director's Qualifications Regarding the directors, Section 19 of the Bank Act says: The stock, property, affairs and concerns of the bank shall be managed by a board of directors. It has alrea...
-The Board. Continued
How Incompetents May Be Removed If it happen that some of the stockholders get the belief that the board of directors is unfaithful or incompetent, and that the bank's safety or its well-being call...
-Chapter XXV. Liquidation Of Failed Banks
As the book opened with a description of the proceedings necessary in the organization of a new bank and its commencement in business, it will be concluded with a description of the process prescribed...
-Liquidation Of Failed Banks. Continued
How The Claims Rank The liquidator proceeds to realize the assets and to pay off the liabilities as rapidly as he can. There are three preferential claims. First of all comes the outstanding note c...









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