E c.t. Among the functions of a bank is the important one of accepting and endorsing bills of exchange on behalf of its customers. A signature on a bill, whether as drawer, acceptor or endorser, makes the signer liable on the bill and bank accepts or endorses a bill for a customer on the understanding that he will meet the bill on the due date. If he fails to do so the bank is liable for the amount. A bank earns a commission for all such services. The total liabilities of Lloyds bank under these heads amounted to One hundred and twenty one million , seven hundred and sixty nine thousand , seven hundred and eighty four pounds sterling on the 31st of December , 1955. But the customers accommodated in these ways are also liable to the bank to an equal extent and so the two items appear also on the Assets side of the Balance sheet. It is to be noted that the bank’s assets are entered on the Assets of the balance sheet.It is to be noted that the bank’s assets are entered on the bank to an equal extent and so the two items appear also on the Assets side of the balance sheet. It should be understood that the bank’s assets are entered on the Assets side of the balance sheet in the order of their liquidity. The first item is therefore
Cash in Hand and with the Bank of England- This figure gives , but not detail , the cash resources of the bank . A simple circulation will show that the amount is approximately eight and half percent of the total deposits. After the first world war , the banks decided not to let this ratio fall below 10%. In practice it did but it was always artificially raised prior to the publication of any return in which figures appeared. This practice termed window dressing was dropped at the end of 1947, when banks agreed to work to a ratio of 8% and abandon window dressing techniques. It has been found in practice that this reserve of cash is quite adequate to meet normal short –notice claims upon the banks and to provide a reserve for contingencies. A large amount of the cash is in form of bank of England Notes.
Balances with and cheques in course of collection- This amount represents cheques passing through the clearing house which have not yet been paid by other banks on which they are drawn. It must be remembered that the other clearing banks will also have an asset in respect of cheques drawn on Lloyds Bank and not yet paid. The item includes also a sum in respect of the credit balances which Lloyd’s keeps with other banks.
Money At Call and Short Notice - This item is the total of the loans made to bill brokers and members of the stock exchange for short periods, ranging from overnight to fourteen days or more. The aggregate amount of money at call in the balance sheets of various banks constitutes the short –loan fund of the London money market.
Balances with Banks Abroad- All large banks keep accounts with their banking correspondents in foreign monetary centres in order to facilitate their foreign exchange operations , letters of credit , Circular Notes and Travelers’ Cheques issued by the banks to accommodate persons travelling Abroad or overseas, are drawn on these accounts.
British Government Treasury Bills- e.t.c. There are three types of bill of exchange which are discounted by the bank. Originally the very large amount of the treasury bills and the comparatively small amount of commercial bills should be noted.
Treasury Deposit Receipts- This item made its appearance early second world war -T.D.R’s as they are commonly called , were introduced because the government wished to borrow week by week the spare balances of the joint stock banks and there by limit the weekly issue of treasury bills and government borrowing through ways and means advances. These advances are made by the Bank of England to the treasury to cover temporary discrepancies between governmental receipts and disbursements. In practice T.D.R’s had the effect of filling to some extent the large gaps that were apt to arise between Exchequer payments and receipts. They were in units of five hundred thousand repayable after 154, 182 or 210 days. The rate interest was originally one and a half but late in 1945 this was reduced to 5/8%. Unlike treasury bills, T.D.R’s were not negotiable but they were subject to immediate repayment in an emergency. It was clearly understood that no such demand for repayment would be made unless absolutely necessary. No T.D.R’s have been issued since 1951 except there are modifications and there have been none outstanding since early in 1953.
Investments- Surplus funds of the bank are invested in securities issued by the British Government , short term securities such as Treasury bonds or longer -term securities such as 3-1/2% war loan, 4% Consols e.t.c and other securities guaranteed by the British Government. Securities issued by the Indian , Nigerian and colonial governments and by the British Municipalities are also held but to a much less extent than securities issued or guaranteed by the British government. Treasury carry interest at a fixed rate and are redeemable on a fixed date. The descriptions and the amounts of the investments held by the bank will be varied as prudent management may dictate or as opportunities for realizing profits may occur. Always , however safety of the capital will be the dominant consideration. At present time the tendency is for a greater proportion of these assets to consist of medium dated securities such as treasury bonds than formerly.
Loans and Advances- This item , shows the extent to which a bank assists its customers to carry on their businesses as or overdraft. The greater part almost certainly more than 70% of the item is supported by security deposited with the bank borrowers and the whole earns interest. The ordinary rate for bank loans is fixed at 2% above bank rate , but the actual rate charged will vary with the length of time for which the accommodation is required , the character of the security offered and other factors. At the present time it usually ranges from 4% to 6%.
Items In Transit- This item represents funds remitted as between Lloyd’s and other bankers that have not yet reached their destinations but exclusive of cheques in course of being cleared. The item may may be compared with the balance of a reconciliation statement which a cashier draws up to reconcile the bank pass-book or statement of account with his/her cash book.
Balance in Account with Subsidiary Companies- This is the amount standing to the credit of Lloyds’ holding of shares in other banks.
Lloyds and National Provincial Foreign Bank, ltd-This item represents shares in a foreign bank operating on the continent, founded jointly by Lloyd’s and the national Provincial Bank.
Other Assets and Accounts- Here the caption must suffice as no deaths are given.
Bank Premises-This is the book value of the bank premises after charging depreciation. No credit is taken for any appreciation in the value of the premises.
Liability For Acceptances-E.t.c These two items are the contra entries for the corresponding items on the Liabilities side.
No comments:
Post a Comment