Friday, August 24, 2012

Elementary Banking Essentials


A successful banker is composed of about one-fifth accountant, two-fifths lawyer, three-fifths political economist, and four-fifths gentleman and scholar – total ten-fifths – double size. Any smaller person may be a pawnbroker or promoter, but not a banker.”

George E. Allen

In 1918, J.F. Ebersole has published his textbook “Elementary Banking”. This textbook mainly explains the regulation and functioning of the financial instruments of that time, such as contracts, drafts and acceptances, promissory notes, and bills of laden.

In addition, the author has written a first chapter on elementary banking essentials in which he explains the general skills that he deems necessary for a banker to succeed in his career. It is quite interesting to read about those skills almost 100 years later. Some of them seem to be perfectly up to date, others could, in my view, not easily apply today.

In his book, the author continuously addresses himself to a messenger. This messenger is a person to which “all bank men will do well to study the work of such beginners and to learn of their problems”. In today's language, this would probably be a leader.

General characteristics

According to J.F. Ebersole, a banker ultimately needs to meet the following characteristics:

  • sufficient knowledge of commercial documents and banking practice;

  • best principles of personal conduct;

  • proper attitude or view of the own job.

This type of broad principles probably still applies today. However, we would rather say “You must develop your hard- and soft skills.” instead of the above language.

The messenger's first week

In his first week a messenger should develop

  • a desire to make the business men of the city like the bank”;

  • a desire to secure merited personal advancement in his own bank”;

  • a certain amount of definite information concerning adding machines and the duties of messengers on routes”.

All this in one week? Today, we probably need at least one week just to get the computer systems running. Very curious is the first point: Should the business mirror the bank or the bank mirror the business? After all, banking is a service industry and, as such, should provide services that its clients need.

Making a good impression

  • The first essential in making a good impression is cleanliness. A clean collar, with regular brushing of the clothes and shoes, is more important than the quality, style or expensiveness of one's attire. Customers consider smoking as questionable in a young man.” However, “so much of modern business is carried on over the telephone that the customers of a bank may very easily form their opinion of the bank from the way in which they are treated in a telephone conversation. The fact a person with whom you are talking over the telephone cannot see your face makes it especially important that your words be selected carefully and that your general attitude be that of persuasive kindliness.”

  • The second essential is courtesy and politeness. The essence of courtesy is to treat every individual with equal kindness and consideration.”

  • A third essential is never to give out any information concerning the affairs of the bank. Business men do not like to have their affairs known in great detail by their competitors or by other business men.”

In my view, all this still applies today. Only the clothing habits (in today's trading rooms) might have changed in the meantime. In addition, the banking secrecy is today thoroughly regulated in many jurisdictions.

General advice

  • A good banker should begin at the bottom in the banking business. (It is only by beginning at the bottom that a man can become familiar with all the details of the business.)”

The argument is comprehensible. However, I tend to think that many aspects of today's banking business are getting more and more complex. This means that you can probably study the bottom of your banking business the whole life without ever finishing such studies. It probably also depends on the business in question.

  • It is equally important to make good impression when collecting as when lending.”

In modern marketing language you write “Our firm emphasizes a long-term relationship with our clients.” The idea that a bank not only sticks by its clients in good times but also in difficult times should also apply today.

  • Employees who are working for banks are being watched every day to see if they are going to develop into men of character and capacity. Every day is a judgment day.”

Besides the language that seems a little bit declamatory, why should this only apply in the banking business?

  • The beginner in banking must not make the mistake of believing that his work is unimportant.”

This is good advice. Given the number of departments and people involved in many banking businesses, people obviously can sometimes wonder how their own work participates in the ultimate results.

  • The importance of the work must not be judged by the amount of the salary. As soon as [the messenger] is prepared for advancement his salary is increased.”

That seems a little bit idealistic doesn't it?

  • Punctuality (“The work of many may depend upon the work of one or two.”) and accuracy (“in order to avoid unnecessary labor for others who are compelled to balance with you”) are particularly important.

  • The beginner in banking should master routine, but should not let routine master him.”

I will definitely use this quote in one of my next power point presentations...

  • Messengers should understand that their time belongs to the bank from the time when they arrive in the morning until they leave at night.”

There was no Internet at that time!

  • Take nothing for granted. Investigate anything that you do not thoroughly understand.”

Today, I would put this advice definitely on top of the list. People much too often take things for granted, referring simply to a “standard market practice” instead of understanding what such practice is about. In addition, it often needs some courage to admit that you haven't understood something, just to discover later on that nobody actually understood it!

  • Above all else, it is necessary for the ambitious bank man to assume responsibility.” In the author's view, taking responsibility is necessary because it “prepares oneself for the job just above one's present job”, because it means that one “never relies on some superior officer to see that a thing is correct”, and because it helps learning “the art of concentration”.

This is definitely true still today.

  • The ambition to do better and greater things, however, must not lead to the mistake of neglecting routine work. Banking is a business of infinite detail, and accuracy and promptness in minor matters are essential to any complete and logical system of administration.”

I assume that nobody would question this principle today. The problem is, however, to apply it in practice. The advice reminds me the current discussions in the banking industry about how much effort, recognition, and remuneration to be put into back-office work.

Career development in banking

To advance in a banking career, the most important qualities are

  • honesty (“[Honesty] is an absolute requisite in getting people to entrust the bank.”) including truthfulness, sincerity, and an absence of every pretension to appear what on is not,

  • team play (“Unless each member of the team does his duty the whole team cannot win the game.”) which, according to Ebersole, includes “intelligent obedience and willingness to take orders”, and

  • development of individual capacity, including “the importance of clean living” (“The way to secure good health is to avoid late hours and to secure adequate exercise outside of banking hours.”) and the study of banking and the business world (“Knowledge is power.”).

If you are interested in Ebersole's book, you can download it here.


  • J.F. Ebersole, Elementary Banking