SPECIAL SERVICE DEPARTMENTS Gratuitous Services by Banks A bank, in its competitive effort to get and retain business and good-will, will perform many lines of service for which it charges no commission or fee and which are gratuitous in the sense that they are not done on a direct quid pro quo basis. The service may be one performed free of charge by many banks or may be an additional free service performed by a particular bank alone. The performance of the service may require the creation of a special department, or it may be performed incidentally in con nection with an existing department; for example, the industrial service department is a department specially created to advise and help customers with industrial and corporate affairs; whereas the bond department attends, as an incidental function, to the purchase of securities for customers. The department may be necessary to the officers in the execution of their general business, but it may perform also special services for present or prospec tive customers; for example, the customers' securities department is one created primarily for customers, but the credit department serves the officers first and clients second. Since the services are performed free of charge, the return which the bank gets must come from the general profits from the account or must be con sidered an investment in good-will and prestige. It is the purpose of this chapter to mention briefly some departments which per form free special services for customers or prospective customers.
The Customers' Securities Department Activities similar to those of the customers' securities depart ment are performed by bond houses, trust companies, and savings banks. It is legitimate for a commercial bank to undertake any service which does not involve it in risks and operations un suited to the fundamental principles of commercial banking, and the service of acting as custodian of its customers' securities is one such proper undertaking. The creation of a specialized department to perform this service is a natural outgrowth from the development of corporate securities' operations, particularly in banks near the stock exchanges.
The customer enjoys several advantages in employing such a bank to act as custodian of his securities rather than keeping them himself: I. The bank has special fire-proof, burglar-insured vaults in which the securities are kept.
2. Borrowing from the bank is much facilitated if the securi ties to be pledged as collateral are already in the possession of the bank, have been examined, approved as "good delivery" upon the stock exchange, and can be readily transferred from the customers' securities department to the loan department.
3. By having the securities near the exchange and in good delivery condition the customer can take advantage of a favor able market if he cares to sell; whereas a bank acting as selling agent hesitates to sell securities which it does not have on hand at time of sale since, if the customer lives at a distance, there are delays and charges for mail, express, and insurance, all of which may be increased if the securities when sent to the bank are not found in good shape and must be returned to the customer for substitutions or corrections.
4. The bank looks after the clipping and collection of coupons, protects the customer's interests in dividends and subscription rights, and relieves him from all annoyances connected with these matters.
5. Convenience is also served by using the department to hold securities under escrow, for syndicate accounts, for collateral to loans of government bonds, and for other purposes.
Internal Organization The internal organization of the customers' securities depart ment varies, of course, with the volume of business of the sort described which is done for customers. It has a window man who receives from and delivers to customers over the counter, under specific or standing instructions where payment is involved, and also without payment from anyone who may deposit securi ties with the bank for the account of a customer. Securities are also received through other departments: from the note teller, when received by the bank by registered mail or express; from the loan and bond departments; and from the foreign division. Another important clerk is the "street" man, who delivers securi ties to other institutions in the financial district for payment, transfer, registry, sale, substitution, loan, delivery, pledge, or other purpose, and collects securities from other institutions. The street man will ordinarily stay in his cage and make his deliveries and collections through subordinate messengers. The department also has bookkeepers and vault men.