This section is from the book "Money And Banking", by William A. Scott . Also available from Amazon: Money and Banking.
Since the chief reliance of a bank, beyond its actual reserve, must be placed upon the short-time business paper which it holds, it follows that the best security for its safety must be the honesty, wisdom, and discretion of its officers. Upon these rests the responsibility of selecting the bank's creditors. If these are reliable, if they always meet their obligations when they fall due, and if their business is sound, the bank will be safe, provided a proper proportion between the demand liabilities and cash reserve be maintained. What this proportion should be is a matter which, as we have shown, must be left to the discretion of bank officials.
In this connection it is interesting to note that the interest of bankers as a class is in the maintenance of sound rather than loose methods. To no group of business men is an unimpeachable reputation for financial soundness and reliability more vital. The banker's stock in trade is his credit. If that goes, his business is ruined. Under these circumstances he is like a retail merchant with no goods upon his shelves. He has nothing to sell. He is really much worse off than the merchant, since the latter can stock up his store with fresh goods which will tempt the public to buy, while the banker can rarely buy back his lost or shattered credit. There is no such thing in the market for sale, and if he ever recovers it, it will be by the slow process of a life of business integrity, thus convincing the public that he is worthy of confidence. In view of this fact, bankers are apt to be conservative and to constitute a check each upon the other.