The midland journal. (Rising Sun, Md.) 1885-1947, 1932-01-01
CHAIN, GROUP AND
BRANCH BANKING
Bankers Commission Describes
Differences Among Various
Kinds of Multi-O Office
Banks.

THE Economic Policy Commission
Of the American Bankers Associa-
ton has made the following statement
on various types of banking systems
operating through more than one
Office:
1--WE find that there are recognized
in the banking world three types Of
multiple banking organizations, name
ly, chain bank systems, group bank
systems and branch bank systems.
They are alike solely in respect to
the fact that each embraces under
some form of common control or in
fluence two or more banking places,
but here the similarity stops since
there are essential differences in or
ganization and administration, espe-
cially as between branch banking and
the chain and group forms.
"Chain banking is recognized as
probably the least definite form Of
multiple banking organization. Cen
orally speaking, this term refers to
merely string of individual separate
ly chartered banks owned or con-
trolled through stock holdings by one
or more common individuals, some
times without public knowledge of the
common ownership. frequently the
controlled banks are not administered
as a coherent whole under the guild
ance of a central, publicly known head
office, but rather each bank is run as
a separate unit bank in accord with
the wishes of the dominant interest.
In some cases, however, there is a
central, publicly known control with
head Office that formally supervises
the operations of all the banks con-
trolled, and this is perhaps the more
desirable arrangement. 1t lacks, how
ever, the definite legal responsibility
that a corporate head organization
would have. Each bank in chain
system operates under it's own capital
and there is ordinarily no binding rela-
ton among members Of the string.
Group Responsibility
Group banking, on the other hand, is
a system in which, while the member
banks are separately chartered and
operate as individual units with their
own capital, control is exercised
through a publicly known corporate
organization under the direction of
responsible head Office. 1t openly
holds stock control of the member
banks and is morally and legally re-
sponsible as the chief stakeholder for
their administration and the statutory
share of their liabilities. An essential
feature is the fact that an Organiza-
ton Of this kind is publicly known,
which creates large degree of re-
sponsiveness to public opinion. This
is true because anything of an unde-
sirable nature developing in one mem
Der of the group would create public
distrust of the whole group. Therefore
it's sense of self-preservation as
group, if nothing else, tends to make
it enforce standards of conduct
throughout the members of the group
and to assume responsibilities for
them beyond what mere legal respon-
sibilities would bring about.
Branch banking is completely dis
tinct from the two foregoing forms OF
multiple organization in that it does
not consist of string, chain or group
Of Independent banks, for there is
only one chartered bank in branch or
ganization and the extensions from 1t
are all in the form of sub-offices with
out separate capital or corporate ex-
istence. For everything that is done
through these offices the bank itself
is just as responsible legally and in
every other sense Of the word as
though it were done over it's own coun-
tiers in its head Office"