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 than par, provided the quotations are such as to enable the bank to allow him those rates and make its customary agreed-upon profit.

The fixing of the rates on transactions in sterling and in New York exchange, is one of the manager's functions. When the customers want drafts on London or on New York they should appear before the teller with their requisitions made out, and with the rates of exchange duly marked by the manager. In the case of a New York draft the teller must see that he gets the full amount of draft and commission, then enter the items on the credit side of his blotter and hand out the requisition so that the draft may be drawn. With a requisition for a sterling draft there will be more to do. It is to be drawn in pounds, shillings and pence.

Inside And Outside Rates

The requisition will be marked with two rates - an inside and outside rate. The inside rate represents the credit that must be given to the central branch that operates the London account; the outside rate represents the amount for which the customer is charged. The difference will be the profit made by the branch. A specimen requisition slip with the calculations made follows:Portsburg, April 10, 1912.

Wanted from the Bank of Canada Draft on London, England, on demand,

Henry Smith, Applicant Eighty pounds at 9 per cent., the inside rate = $387. 56. This is the amount to be credited to the central branch, to whose account the draft will be charged by the London bank. Eighty pounds at 9 1/4 per cent., the outside rate = $388.45. This is what the customer pays in. The difference, 89 cents, is the profit made by the branch.

The calculations are made by the aid of exchange tables. On his making them, and on their being checked by the accountant, the teller satisfies himself that he has received the proper amount from the customer, initials the requisition slip, and, after entering the items on the credit side of his blotter, passes it out for the draft to be drawn in accordance therewith.

When The Bank Buys Exchange

When the bank is buying the exchange, the items will come to the teller as deposits by customers, or cash will be paid for them over the counter. The rate of commission will be marked on each item. All that has to be done in the case of the New York drafts is to deduct the commission from the face and to pay over, or give credit for, the balance. Of course, it is necessary to see that they are formally drawn and properly endorsed.

In buying sterling exchange, there will be again two calculations to make-one amount, the lesser, being the amount paid to the customer; the other, and greater, being the amount at which the branch debits the item to the central branch. The difference is the profit made by the branch buying the item.