30. "Individual deposits" represent the amount due to individuals and corporations. The deposits are payable on demand.
31. "Demand certificates of deposit" are a special ized form of deposit not subject to check. They are used for remittances or for payments by travelers within the territory in which the bank is known. These certificates are particularly convenient for mak ing remittances to localities on which drafts are not obtainable.
32. A certified check is an ordinary , check drawn by a depositor, which has been certified by the cashier or other appropriate officer and which becomes a liability of the bank until it has been presented for payment. When the bank certifies a check, the amount is taken from the account of the depositor and placed in the certified check account. By this act it becomes a direct obligation of the bank, the same as a promissory note. If the holder of a check has it certi fied and the bank fails before it is presented for pay ment, he has no recourse against the original drawer. The holder, by having it certified instead of demand ing payment at the bank, throws the risk of non-pay ment upon himself. If the maker of the check has it certified, his liability for payment is the same as in the case of an ordinary, ,check.
33. "Cashier's checks" are checks drawn by the cashier upon his own bank in payment of expenses or other matters.
34. "Time certificates of deposit" are issued to those who have deposits with the bank for a stated period. A low rate of interest is paid by the bank on these deposits.
35. Time deposits are left for stated periods and are not subject to check.
36. Bonds borrowed have already been discussed in connection with bonds loaned. (Item 6.) 37. These are usually small expense items.
38. Letters of credit, acceptances and miscellaneous liabilities need no discussion here.
9. Interpretation of a bank the statement show that the bank is in sound condition? The most significant thing to be noted is the relation of reserves to deposits. A calculation of this ratio shows that the bank holds lawful money reserves con siderably in excess of the amount required by law. When this report was rendered, national banks in New York, as well as in other central reserve cities, were required to maintain 18 per cent reserves against demand deposits and a part of these had to be on deposit with the Federal Reserve bank of the district.
All national banks are required to carry a five per cent reserve against time deposits.
10. Bank statement not an infallible indication.— One point must be clearly understood, namely, that, while a statement will sometimes indicate weakness in a bank's condition, it can never be taken as absolute proof of the soundness of the institution. In the first place, the statement may be a deliberate misrepresen tation of the facts. Even if the statement is true, we must get back of it and into the operations of the bank before we can be sure of the bank's condition. For example, suppose that half the individual deposits be long to a few large depositors and that they should suddenly check them out. This operation alone would more than wipe out the entire reserves of the bank, and it would have to close its doors unless it could quickly dispose of some of its assets for lawful money. In panicky times the best of assets cannot be converted into lawful money without serious loss. Now, suppose a large loan has been made to one man who becomes unable to pay for some reason. Evi dently many contingencies, which will force the bank into an unsafe position, may arise and not be revealed in the statement.
11. Statement as an advertising medium.—At one time, bankers, like physicians, considered advertis ing to be a breach of professional ethics. The more progressive bankers today advertise in one way or an other. One of the most common methods of publicity is the circulation of bank statements among business men in the community. It is dignified and at the same time it attracts attention.
The Corn Exchange Bank of New York City issues periodically a condensed statement with the items ar ranged so as to be easily understood by the average depositor. It means a great deal more than a bald statement would to the ordinary man who sees it. Here is a copy of the bank's statement for November 1, 1916: