1. General Definition Of A Bank

The functions of a bank or trust company have been defined in many different ways, but all arrive at the same general conclusions. Charles F. Dunbar, in his "Chapters in the Theory and History of Banking," gives the following definition of a bank:

A bank may be described, in general terms, as an establishment which makes to individuals such advances of money or other means of payment as may be required and safely made, and to which individuals entrust money or the means of payment, when not required by them for use. In other words, the business of a bank is said to be to lend or discount, and to hold deposits. With these two functions is often combined a third, that of issuing bank notes, or the bank's own promises to pay, for use in general circulation as a substitute for money.

Horace White, in his "Money and Banking," thus defines a bank:

An institution where deposits of money are received and paid, where credit is manufactured and extended to borrowers, and where the exchange of property is facilitated. Having first acquired the confidence of the community, the bank extends its credit by purchasing interest-bearing securities, mainly business men's notes, payable at a fixed time and giving the sellers the right to draw checks upon itself payable at sight. The amounts thus authorized to be drawn are termed deposits, the bank being liable for them in the same way as for actual money deposited. ......Bank notes are the bank's promises to pay money to the bearer on demand.

Gilbart says:

A banker is a dealer in capital, or, more properly, a dealer in money. He is an intermediary between the borrower and the lender. By this means he draws into active operations those small sums of money which were previously unproductive in the hands of private individuals, and at the same time furnishes accommodation to those who have need of additional capital to carry on their business.

The matter is summed up most explicitly in the Banking Law of the State of New York as follows:

The term bank, when used in this chapter means any monied corporation authorized by law to issue bills, notes or other evidences of debt for circulation as money, or to receive deposits of money and commercial paper and to make loans thereon, and to discount bills, notes or other commercial paper, and to buy and sell gold and silver bullion or foreign coins or bills of exchange.

2. Individual Or Private Banker

An individual or private banker is one who receives the funds of individuals or corporations and invests them for their account. Private bankers usually underwrite or purchase outright new issues of bonds or stock and dispose of them to their clients. They frequently allow the owners of money deposited with them to draw against the funds on deposit. This is never a very important part of their business, the money entrusted to their care usually being left for investment.

There is a distinction between an individual banker and a private banker which has been clearly established by the courts. An individual banker is one who has received authority from the banking department to engage in business subject to its inspection and supervision. A private banker is one engaged in banking, without having secured any special privileges or authority from the state.