Volume 2 - ElectricCanadian.com

1867 TO 1901 105As a guide for the future the new administration naturallygave the fullest consideration to the underlying reasons for thelosses which had been incurred. When a customer's borrowingshad grown out ofproportion to the amount ordinarilyrequired by other businesses of similar character and extent,and it was found that he could not reduce his indebtednesswithout crippling his operations, the bank had in the past beencareful to take mortgage security on his real property, butremained apparently more or less satisfied to have its fundslocked up in "bricks and mortar." The new administrationcame to the decision that unless the value of the fixed assetswas represented in the business either by capital or by mortgageloans, the account would henceforth be regarded asunsatisfactory, that those assets classed as readily availablemust bear a proper proportion to the floating indebtedness, andthat when a borrower's account had got out of hand to anextent which necessitated the taking of security on real estate,the proper course for the bank in the majority of cases was notthe taking of a mortgage, but either liquidation or the closingof the account. They determined that all customers requiringloans dependent directly upon their credit, and not upondefinite security of any kind, should not only supply thebank with their balance sheets, profit and loss accounts, andother similar information, but should also, so far as theseasonal conditions of their business would permit, liquidatetheir loans once in each year. Grave doubts were expressedas to the practicability of instituting any of these reforms, butstep by step the bank succeeded in placing its relations withits customers on this basis, and these principles are nowaccepted as the ordinary factors of safety in the conduct of thebank's business.One of the early acts of the new management was toobtain from the British American Bank Note Company adifferent design for the $10 note. The new notes proved veryunsatisfactory when placed in circulation, and early in 1888the decision was reached to issue an entirely new series.