THE FOREIGN DISCOUNT DEPARTMENT Functions and Organization of the Foreign Discount Department The work of the foreign discount department is somewhat analogous to that of the discount department of the domestic division. It purchases or discounts foreign exchange items. These include documentary and clean bills of exchange, checks, and other written orders upon foreign countries for the payment of money. Items drawn in foreign currency are bought outright, but items drawn in dollars are merely discounted. The discount department of the domestic division discounts only dollar items having domestic drawees; the discounting of dollar drafts is, therefore, the particular function which is analogous in the two departments. The foreign discount department takes full charge of the item offered for purchase or discount and attends to all its requirements until the bank has been reimbursed for the funds advanced and the proper earnings have been credited to Discount account.
The work divides itself into four main lines: 1. Purchasing and discounting.
2. Remitting.
3. Settling.
4. Adjusting irregularities and misunderstandings.
These divisions may be operated separately or be combined in various ways; logically the first two combine, and the last two also combine to advantage. The clerks of the department in clude a window man, register clerk, checker, ticket clerk, check clerk, obligation bookkeeper, bookkeepers, claim clerk, open-item clerk, and correspondent clerk.
The rates of exchange at which the offerings drawn in foreign currency may be bought are determined by the traders, and so the foreign discount department is relieved of this phase of re sponsibility. But the determination of the rates on dollar drafts, the interest periods, the commission, exchange charges, stamp charges, and their calculation, are handled in this department. The department and section heads must, therefore, be versed in the practices of foreign trade, shipping, collections, and credit, and they must be expert in the details of the credit instruments used in international commerce. This is an earning department and its successful administration is essential to the income of the bank.
E xamination of the Item at the Window Most of the items received by the department are documen tary bills of exchange covering exports from the United States, and are received from exporters, manufacturers, and forwarding agents. The other items are miscellaneous and include bankers'
finance bills, merchants' bills drawn against earnings or credit balances carried with their foreign branches or agents, dividend warrants, warrants in payments of legacies or incomes, interest coupons, due bonds, foreign post-office orders, foreign army officers' warrants, etc.
Assume that the firm offering the item is of good standing, whose bills the bank discounts daily. The window man examines the letter of instructions accompanying the item to see that the item is accurately described therein. He then marks on the said letter the capital account against which the item is to be charged. Should the commodity covered by the exchange not be mentioned in the letter, he notes this information on it in general terms. If the letter does not state whether the discount charges are to be deducted from the face amount of the item or collected entirely from the drawee, this information is obtained from the draft itself and entered on the letter. The paying clerk follows these directions exactly. If no letter accompanies the item, the win dow man prepares a paper on which he notes the name of the firm offering the item, an accurate description of the item, and all the other facts just mentioned. The letter of instructions is then passed to the head of the department for review and directions.
Usually the set of documents accompanying an export bill is complete and consists of the bill of exchange, a full set of bills of lading, marine insurance certificate, consular invoice, merchan dise invoice, certificates of origin, and health certificate. Often times, however, the shipper will forward some or all of the docu ments direct to the customer, giving the bank a guaranty for their non-production, the purpose of this procedure being to make sure that at least one set of documents goes forward on the vessel carrying the merchandise, so that the consignee may be able to take immediate possession of his goods and avoid the possible payment of fines, storage charges, or premituns on withdrawal bonds.