Structure and Functions of an English bank
The English commercial banks have branches in all the major towns and a
similar structure and mode of working is common to them all. The owners are the
shareholders. At the outset they provide the necessary capital. They are all
organized on the joint stock principle and are registered public companies.
The Chairman and Board of Directors are elected by the ordinary
shareholders at the Annual General Meeting and are responsible for the efficient
management of the bank. The Board is concerned with the overall policy of the
bank and the major decisions which put that policy into effect.
The Board will appoint a Managing Director who is directly responsible to
them and a member of the Board. They will also appoint the most senior
executives who in turn appoint the rest of the clerical staff who will be responsible
in different-capacities for the day to day running of the bank.
The essence of a bank's activities is the collection of deposits through
current accounts and deposit accounts and the use of these funds to provide loans
or funds for investment. The current account is the one commonly held and is
drawn upon by cheques and standing orders. The deposit account is more in the
nature of a savings account. The pattern of investments which a bank decides upon
is crucial because, on the one hand, the bank must use the funds wisely to make a
profit and, on the other, funds must be available for depositors to withdraw when
they wish to do so.
At the end of each business year the Directors recommend and the Annual
General Meeting decides how much of the profit should be distributed to the
shareholders as dividend, and how much should be retained in the business. In
preparation for the Annual General Meeting, a bank publishes its Report and
Accounts. These must be sent every shareholder and are also available for anyone
with an interest in the affairs of the bank. From the published accounts share-
holders can easily determine the total profits the bank has earned and how much is
available for distribution.
