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 delegated would vary with different banks, but all general managers would naturally desire to keep in their own hands the business of lending and investing their bank's monies, and of watching the course and development of the advances and investments.

In most of the banks there are from time to time propositions of a special nature submitted direct to the head office. They may refer to exceptionally large loans or exceptionally important investments. While they were under consideration there would naturally be a good deal of conferring between the directors and the general manager. The latter would have no inclination to commit the bank to a heavy extent without the authority and consent of the owners, and the former would not be disposed to carry through very important transactions unless their executive manager approved them.

But by far the greater number of applications for credits come in from the branches. The branch managers receive them from their customers and forward them to the general manager.

Applications For Credit

The banks have regular forms of application, which would-be borrowers and the branch managers are expected to fill in. The essential features of the application are as follows: The borrower must state how much he wants, what he wants it for, the security he will give, when he will repay, the rate of interest or discount. He must also give a full and satisfactory statement of his assets and liabilities, and give such information about his business and prospects as the bank requires. In return for what he expects to get from the bank the applicant undertakes, unless he be a very large borrower, to keep his whole account with the bank, circulate its notes and advance its interests as much as he conveniently can. Although this may not be incorporated in the form of words, it is nevertheless understood.

Then when the applicant has done, the branch manager begins. He must give his independent estimate as to what degree of reliance can be placed on the applicant's statement of position and his other statements. He must say how much he thinks the surplus claimed should be cut down, and give his version of the applicant's business ability and general character, his history, and the history and outcome of previous advances, if any, granted to him by the bank. Then he must recommend the granting of the credit, and say why he does so and why it would be to the advantage of the bank to grant it. (An application sent to the general manager not recommended by the branch manager would receive scant attention, and the sending of it probably be regarded as wasting the general manager's time.) Thus, only those applications which come strongly recommended are given consideration. One of the chief of the general manager's functions is the deciding as to which shall be accepted, which declined.

In doing this, he is aided materially by the fact that, in a large number of instances, he has at hand a record of the bank's dealings with the applicants for a number of years, and he will have formed an opinion as to how the various accounts affected by the credits should be handled. The standing and reputation of the branch manager sending in the application cuts no small figure. The recommendations and remarks of some managers will get a much more respectful consideration than is accorded to those of others.