The nominal executives of a bank are the president and board of directors, who are responsible not only to the shareholders but to the government for the true and faithful administration of the bank's affairs. In practice, however, the actual work of administration has to be entrusted to the general manager and his staff. The work of the directors is rather of an advisory and supervisory nature. That this supervision, however, should not be of a perfunctory character is demanded in no uncertain terms, both by the Bank Act and by public opinion.
The president, as chairman of the board of directors, occupies the most prominent position in the bank, especially in the eyes of the public, and should always be a man who can command public attention and respect. In virtue of his position the president is obliged to devote more of his time to the affairs of the bank than his brother directors; upon him devolves the checking and signing of the bank returns and other official documents. Daily, in conjunction with the general manager, he must review the position and general policy of the bank.
Of recent years the public has demanded "directors who direct." No man should, therefore, accept a position on the board of a bank unless he is prepared not only to attend the meetings regularly, but also to take sufficient time to become acquainted with banking in general and the affairs of his own bank in particular. In other respects a director should be a man of outstanding qualifications, especially as regards character and influence in the community; he should also be a man of large business affairs and a good judge of men.
The principal duty of the directors at ordinary board meetings is to discuss with the general manager and authorize all credits and loans which exceed a certain amount. This amount or limit is set by the directors themselves, as it would be physically impossible for the board to deal with all the loans made by a bank. The majority of these can safely be left to the judgment of the general manager, leaving the large and important accounts for the careful consideration of the board.
There are, of course, some losses in small loans. But the supervision of the directors would not avert them, and the average is never high enough to be serious. It is the larger loans which call for the constant and careful attention of the directors. Experience shows that bank failures arise invariably from losses made by the failure of a small number of large accounts, and never from any trouble caused by the small accounts. The limit varies from $1,000, in a small bank, to $5,000 or $10,000 in a large bank. In setting the amount, the directors are guided by their opinion of and confidence in the general manager and his staff, as well as by the volume of applications calling for consideration.
Board meetings are held once a week and a financial statement of the affairs of the bank as well as a report on all important transactions that have taken place since the last meeting is placed before them. In some banks a list of the smaller loans authorized by the general manager during the week is submitted and initialed by the directors after reading. The duties and responsibilities of the president and directors are outlined in the Bank Act, to which reference is made in Chapter III (The Bank Act) (The Branch Staff), Part I of this Text.
The general manager occupies the most important position in the bank. To attain that rank a man must not only be a professional banker by training and instinct, but most possess other outstanding qualifications. His duties are numerous and the responsibility heavy. To assist the general manager in his work of supervision and control, there is a head office staff of highly trained men. If the bank is large, an assistant general manager is generally appointed to assist the general manager, and to a certain degree share some of the responsibility.
The following officers are generally found on the head office staff of a bank:
An assistant general manager
A superintendent of branches
A chief inspector and officers under him
A secretary and staff
A chief accountant and staff.
This officer, in conjunction with the inspection department, exercises a strict supervision over all branch loans, not only by a careful study of the branch returns, but also by examining and passing on all the applications for credit submitted by the branches. He prepares for the board of directors, with his recommendation, all applications for credit which are large or important enough to be brought before them, and assists the general manager in the disposition of the less important applications. Altho the greater part of the superintendent's work consists in dealing with the branch loans, he has many other duties to perform in connection with his position, and is in frequent consultation with the general manager regarding the policy and position of the bank. The office is a most important one and calls for special qualifications and training.
In a large bank with numerous branches, it would be physically impossible for one man to review the work of the whole bank in this manner, and many of the banks divide their branches into provinces or districts under the charge of district superintendents. As each of these officers has from fifty to one hundred branches to look after, the position of district or provincial superintendent is also an important one.
In a small bank the offices of superintendent of branches and chief inspector are often merged into one, and the work is conducted by the general manager and inspector. In the larger banks, however, the loans can only be comprehensively dealt with by a process of sifting and elimination, according to size and importance. All loans, irrespective of amount, are subject to constant supervision both in returns of the branch and by regular inspections. In the granting of these loans, however, conditions vary according to amount. Every branch manager is accorded a limit up to which he may lend without direct reference to the head office, the amount varying with the size and importance of the branch. For all amounts over this limit, the application, with full particulars and statements, must be sent to the superintendent of the district and a copy of the correspondence to the head office. The district superintendent in his turn has a limit to the amount he can authorize. If a prospective loan is larger than he can deal with, he writes to the head office, recommending the application or otherwise, the head office already being in possession of the particulars. At the head office the application is dealt with by the superintendent in the usual way, and either authorized forthwith by the general mana-ger or referred to the board.
As has been indicated, in some banks this office is combined with that of the superintendent, the work being so intimately connected. The chief inspector gives special attention to the auditing and inspection of the branches and sees that every branch is inspected at irregular intervals at least once a year. As a rule he personally conducts the inspection of the larger branches and supervises and directs the other inspectors in their examination of the rest of the branches. An inspection consists of two kinds of examinations, namely, verification and valuation. The first is called the audit or routine inspection, and consists of auditing and balancing the books of a branch and ascertaining the existence of all the assets called for by the books. Attention is also given to the general routine work of the office with a view to ascertaining if instructions from the head office are faithfully observed. This is the first stage of the inspection, and is made by routine inspectors or officers.
The second stage, or inspection proper, is made by a senior inspector and consists of a thoro analysis and valuation of the loans and other assets of the branch. This is not necessarily made at the same time as the audit, but the inspector visits the branch as soon as possible afterward and discusses every account exhaustively with the manager. On his return to the head office he embodies his criticisms in the official correspondence with the branch.
The chief inspector generally has in his charge all matters pertaining to bookkeeping methods, disposition of the junior staff, stationery forms, bank premises, furniture, etc. Of course he can delegate any of these to the care of one of the inspectors.
One of the most useful officers in the head office is an efficient secretary with initiative, tact and a good memory. The secretary forms the connecting link between the different departments, and thru his hands passes all the correspondence received or despatched by the head office. He is therefore in touch with any question that may be under discussion with any of the branches, and if possessed of a good memory is frequently able to refer the general manager or inspectors to similar instances that have occurred in the past at other branches. The secretary generally has charge of the bank advertising, and deals with all minor matters that do not fall within the province of the other departments.
The general diary of the bank is kept by the secretary, who sees that all the returns called for by the Bank Act are promptly dispatched, dividends and meetings duly advertised, and any court or legal business looked after by the officer appointed to appear.
This officer, tho seldom heard of by the public, fills a most important place in the bank, as he is required by the Bank Act to join with the president and general manager in certifying to the correctness of the returns made to the government. It is his duty to combine the branch balance sheets so as to show the position of the bank as a whole, and submit a true copy to the directors every week, to the government every month and to the shareholders every year. The stock ledger and transfer book are under his charge, as are also all special accounts such as the pension and guarantee funds of the bank.
It will be gathered from the above that not only is the general manager himself thoroly in touch with the affairs of the bank, but he has also a highly efficient staff about him, all able to make helpful suggestions and if necessary to take the initiative in any matter. Each has his own well-defined duties, vet is able to assume any other work if called upon, and all are imbued with one common aim, the well-being of the bank.
What are the principal duties of a bank director?
What are the duties of the superintendent of branches? How does he regulate loans made at the branches?
In what respects is the secretary one of the most useful officers of the head office?
What are the duties of the chief accountant?