ties. The Reserve Board has the right to define the character of the paper thus eligible for discount.

In its first regulations issued in November, 1914, defining eligible paper the Board included single-name paper, but

CHART SHOWING RELATIVE IMPORTANCE OF ONE-NAME
AND TWO-NAME PAPER.

Courtesy of The Annalist

urged close scrutiny of such paper to give assurance that it came within the spirit of the Act and that it was selfliquidating at maturity. Future regulations of the Reserve

Board and the growing use of trade acceptances may narrow the use of single-name paper, yet the ramifications of our financial and credit structure are such that this form of borrowing, especially for investment and speculative

STANDARD FORM OF STATEMENT FOR CORPORATIONS AS ADOPTED BY NEW YORK STATE BANKERS ASSOCIATION

FROM

ADDRESS

bo

TO NATIONAL BANK OF COMMERCE IN NEW YORK

WHICH YOU ARE TO

FOR THE PURPOSE OF PROCURING CREDIT FROM TIME TO TIME WITH YOU FOR OUR NEGOTIABLE PAPER OR OTHERWISE, WE FURNISH THE FOLLOWING AS A TRUE AND ACCURATE STATEMENT OF OUR FINANCIAL CONDITION ONL CONSIDER AS CONTINUING TO BE FULL AND ACCURATE UNTIL WE GIVE YOU WRITTEN NOTICE OF CHANGE

1020000

CONTINGENT LIABILITY: NOTES RECEIVABLE OF CUSTOMERS DISCOUNTED SOLD AND NOT INCLUDED IN ABBETS ENUMERATED ABOVE

OTHER CONTINGENT UABILITY

WE HAVE NOT PLEDGED on ASSIGNED ART OF THE ABOVE ACCOUNTS RECEIVABLE; OUR ASSIGNED ACCOUNTS RECEIVABLE AMOUNT TO

purposes, is likely to continue as an important factor in our financial system.

138. The credit department.-The credit department is one of the most recent, yet most important, in the organization of the modern commercial bank. In the large city bank having a great variety of customers and activities, it is indispensable, and even in the small country bank, credit information regarding its customers, carefully collected and filed for ready reference, is highly desirable. Formerly the cashier was supposed to be sufficiently informed upon the business standing and credit of all the bank's customers, but to-day the larger banks find it necessary to have highly organized credit departments in charge of a specialist whose chief or sole duty is to accumulate and make easily accessible credit information regarding all customers of the bank. Where loans are conservatively made on high-grade collateral security the question of credit is not so important, but in the case of the discount or purchase of commercial paper resting upon personal credit the financial responsibility and character of the borrower is a matter of first importance.

The credit man should keep complete records regarding mortgages, judgments, assignments, petitions in bankruptcy and like matters affecting the bank's customers. He should have available the financial history, the present standing, and the habits of life and character of every borrower. He should also keep posted on the general conditions of business. In aiding the lending authorities of the bank to determine whether credit shall be extended to a borrower and to what extent, the credit man should be able to present facts concerning the character of the business, its form of organization, its management and business methods, the extent of competition, the promptness with which bills are paid, the financial worth of the business, the extent of borrowing at other banks, business reputation among other people, etc.

The credit man obtains his information from various sources, the chief source being the statements of the cus

tomers themselves. The practice is growing of requiring borrowers to make a full statement of their affairs when they apply for a loan.1 Uniform blanks have been adopted by the bank associations of several states. Some banks require applicants to make oath to their statement. In some of the states laws have been passed making it a criminal offence to obtain loans on false or misleading statements. Sometimes the banks require the statement

to be certified by a public accountant. Separate forms are used for individual borrowers, for firms, for corporations, and for banks. Shorter forms are sometimes used when minute details are not deemed necessary.

These statements call for detailed information regarding the resources and liabilities of the applicant, including such typical assets as: cash, merchandise in both the raw and manufactured form, bills receivable, accounts receiv

1 Though the Federal Reserve Board has not as yet (March, 1917) prescribed any particular form of statement to accompany commercial paper offered for rediscount, most of the Federal reserve banks have developed forms which they recommend.

able, plant, machinery, equipment, real estate, franchises, treasury stock, etc.; and such liability items as bills payable, accounts payable, stocks, bonds, mortgages, depreciation, net worth, net earnings. The ratio of quick assets to the two important liability items-bills payable and open accounts-affords a rough basis for determining the commercial standing of the borrower. One dollar of indebtedness to a dollar and a half of quick assets is usually regarded as a safe proportion.

Other sources of information are the mercantile or credit agencies, the most important of which in this country are Dun's and Bradstreet's. It is the business of these credit agencies to collect and summarize credit information regarding all kinds of business concerns all over the country. Though the banks do not depend very largely upon these agency reports, they are valuable in suggesting credit information that might otherwise be overlooked. Such reports should always be supplemented by personal investigation.

The signed statements, agency reports, letters, memoranda, and credit information of all kinds are tabulated, analyzed, and filed in the credit department in readily available form. New statements are required from time to time as borrowers apply for new loans or as paper is offered for discount. In the case of regular borrowers banks may require statements only at regular intervals; for example, once, twice, or four times a year. In this way the banks will have after a time a series of statements from borrowers showing the changes in their business.

In the bank having a well-organized credit department every application for a loan or offer of commercial paper is referred to the credit man. After investigation he prepares for the loaning officers a condensed statement showing the essential facts affecting the applicant's credit. Upon the basis of these facts mainly is determined the granting or refusing of credit accommodations by the bank.