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PROVISION OF BORROWING FACILITIES. 



equalize the proceeds of debentures issued at various rates according 

 to the market ; to provide against the loss on repayment at par of 

 bonds issued below par ; also for the issue of lottery prizes and bonuses. 



Fimds. These are provided from capital, from accumulations of 

 profits, from Government loans or grants, from mortgage debentures, 

 from deposits, loans and bank notes. The first three 

 are comparatively unimportant as sources of funds though all 

 important as security ; e.g., the capital is usually only one-tenth 

 or one-twentieth of the amount of the debentures issued by the 

 society in the case of the German institutions and the Credit 

 Foncier of France, and in some, as in the Hungarian Boden 

 credit institutions, there is practically no capital, but only a reserve. 

 In the later commercial or mortgage banks the capital is a 

 real working capital, as in the Hypotheken mortgage bank of 

 Hungary where only one-tenth of the nominal and one-fifth 

 of the paid-up capital is used as a guarantee fund (reserve) for the 

 security of its debentures; so in Germany, the banks since 1860 

 use their share capital in mortgage operations, and with some which 

 have not obtained Government authority to issue debentures, this 

 capital is an important element in their working funds. Such banks 

 can deal only to a very limited extent in loans for long terms 

 repayable by annuities. In Belgium in 1890 the paid-up capital 

 of the four chief mortgage banks varied in actual fact from one-fourth 

 to one-twentieth of the debentures issued, and in Italy in the same 

 year the eight mortgage banks including the National bank had a 

 capital of 1,760,000, and debentures in circulation for 28,062,200. 

 As shown in describing the Credit Foncier of France, a certain 

 proportion of its capital, and even of its reserve is used in short-term 

 loans, but this is not its true use; it is a guarantee fund. 



Clientele. The oldest banks were formed on the principle that 

 only members might borrow : this is maintained to this day in the 

 Landschaften and is continued in all popular banks and mutual credit 

 societies. The question then is, who may become members ? In the 

 Old Landschaften only " nobles " could be members ; the banks? were 

 expressly founded for them, the "peasants" being disregarded. 

 Gradually, however, this restriction to some extent disappeared ; 

 peasants were admitted with restrictions to borrow, and the New 

 Landschaften generally admit them. But a restriction is found in the 

 minimum prescribed for loans ; in some cases loans may not be given 





