The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1907-05-23
Rules of Banking

Following are some of the rules OF
banking with which the average Law.
| man is not familiar. The extracts are
from a booklet published by a Spokane,
Washington, bank and republished in
the Chicago Banker.
Overdrafts are probably not more
numerous here than there, but less may
be known of acceptable bank policies
in relation to them. The argument
will repay any banker for the reading.
NATURE OF AN OVERDRAFT.
An overdrawn check paid by a bank
is in the nature of an irregular loan for
which the drawer is liable to the bank.
Bankers, as rule, discountenance the
practice of allowing overdrafts and
favor the regularity of a loan by dis
count of the customers note, and plac-
ing the amount to his credit, to the ir-
regularity of an overdraft. 1t is in
fact the only safe course bank can
pursue in the case of corporation de-
positors. An officer of a corporation
may have authority to draw out its
funds on deposit by check, but his
authority may cease at that. Unless
he is authorized by resolution of its
board of directors to borrow, the bank
runs the risk of having the overdraft
repudiated by the corporation.
ALLOWANCE OF OVERDRAFT
SOMETIMES PROHIBITED BY
BANK DEPARTMENT.
Bank superintendent and other SUI
pervising officials of government eau
tion banks against allowing overdrafts,
and sometimes expressly prohibit them
Note the resolution adopted by the
banking board of one Of the States:
Whereas, The department views
with apprehension the growing tenden-
cy of the banks of the state to allow
overdrafts, and,
Whereas, In the opinion of the
board the practice is reprehensible and
contrary to the principles of good
banking business; now, therefore, be it
Resolved, That the banks of this |
state be ordered to discontinue the |
practice; that 'overdrafts' will here
after be regarded as undesirable as
sets; that the same banks be notified |
of this action and be furnished copy
of this resolution.
UNAUTHORIZED OVERDRAFTS
SOMETIMES PROHIBITED BY
LAW.
The resolution just quoted is an in
stance where the prohibition is aimed
at the bank. Sometimes the law is
aimed at the customer, making it a
crime to overdraw. Thus by a statute
in another state it was enacted that
"Any person who shall in payment
IF any debt, in whatsoever manner con-
!
or banking association, wherein such
person shall not have sufficient funds
IF credit for the payment of same, shall
De guilty of misdemeanor, and upon
thereof shall be fined not to
Exceed five thousand dollars, or impris-
nment in the county Jail not to exceed
|
,
PERSONAL LIABILITY OF BANK
OFFICERS ALLOWING OVER
DRAFTS.
A bank officer who pays an over
rawn check without express authority
) personally liable to his bank for any
oss. We quote from decision of the
supreme Court of California;:
'To make an overdraft was fraud
n law on the part of the drawer; to {
ay or authorize the payment was
raud in law on the part of the officer :
aging or authorizing payment. The
honey of the stakeholder was invested
nd of the depositors was deposited, to f
be end that the business should be +
as the bylaws prescribed; 7
nd where the president OR cashier went
eyond that, and loaned upon his or n
heir judgment, a violation of duty oc- Y
urred. - f
AND THEIR EFFECT s
ON BANK AND CUSTOMER. b
Aside from the law on the question,
ew customers understand why an ov-
rdraft is SO Objectionable to the av-
rage banker. Many think it simply