
    Bonds of Bank Employes
    October 3, 1934.
   Saylor, Deputy Attorney General,

You have asked to be advised (1) whether a banking institution incorporated under the Act of May 13, 1876, P. L. 161, must continue to provide bonds in favor of the Commonwealth on employes; (2) whether bonds required by section 513 of the Banking Code of May 15, 1933, P. L. 624, may be given in nominal amount if other bonds, sometimes known as bankers’ blanket bonds, insuring the institution against loss by embezzlement, theft, forgery, etc., are held by the institution; and (3) whether all officers’ and employes’ bonds must be conditioned upon the faithful performance of duties.

1. Section 18 of the Act of May 13,1876, P. L. 161, provided as follows:

“. . .. before the cashier, teller, book keeper or other persons necessary for executing the business of the corporation shall enter upon their duties, they shall each . . . enter into a bond to the commonwealth of Pennsylvania in such amount as the board of directors may require, conditioned for the proper and faithful performance of his duties, the security of which bonds shall be approved by the court of common pleas of the county in which the corporation is located, and recorded within thirty days thereafter in the office for recording deeds in such county; . .

Under the provisions of this law, a bond in favor of the Commonwealth was given by an employe to insure against any loss arising from the failure of the principal properly and faithfully to perform his duties.

This act was repealed by section 1602 of the Banking Code of 1933 and is no longer in effect.

It is our opinion that there is no requirement on any bank incorporated under the provisions of the Act of 1876 to secure from its cashiers, tellers, bookkeepers, or other employes bonds running in favor of the Commonwealth.

2. Section 513 of the Banking Code of 1933 provides:

“A. The officers and employes of every institution as well as any director or trustee of an incorporated institution who is authorized to receive payments of moneys, or to handle negotiable securities on behalf of such incorporated institution, shall, before entering upon the performance of their duties, furnish to it bonds in such amount as is specified, with such surety as is approved, in the case of an incorporated institution, by the directors or trustees, and in the case of a private bank, by the private banker or bankers. Such bond shall be conditioned upon the faithful performance of the duties of such officers, directors, trustees, or employes. The cost of such bonds may be paid by the institution.
“B. The department shall have the power to require any such officer, director, trustee, or employe, at any time during his term of office or employment, to furnish a bond in an amount greater than that required by the board of directors or trustees of the incorporated institution, or by the private banker or bankers, as the case may be, or it may require new or additional surety.”

This section, which applies to all banking institutions, was enacted in lieu of the provisions of section 18 of the Act of 1876, which applied only to banks. It calls for a bond given not only by a cashier, teller, or bookkeeper, but also by any employe, officer, or director who is authorized to receive payments of moneys or handle negotiable securities for the institution. It is given in favor of the institution and not in favor of the Commonwealth.

You have asked whether you must require a bank, a bank and trust company, or a trust company to secure such bonds in more than nominal amount if the institution holds other bonds amply safeguarding it against any loss due to embezzlement, theft, forgery, etc., by its officers, directors, and employes.

We are informed that many institutions hold what are known as bankers’ blanket bonds, insuring them against loss in substantial amount arising from defalcation or fraud on the part of the various individuals named therein. These individuals are not principals on these bonds; they do not execute them. The bonds are really in effect insurance policies.

Other institutions hold “name” or schedule bonds on which the employes, officers, or directors are principals and either individuals or corporations are sureties. These bonds do not provide that they are conditioned on the faithful performance of the duties of the various persons whose acts they concern. To include in the coverage given by the bond phraseology to that effect, the premium thereon would be increased materially in amount.

In our opinion, it is for the board of directors or trustees of the bank, bank and trust company, or trust company to determine in what amount it is necessary for the protection of the institution that a bond “conditioned upon the faithful performance of the duties” of its officers, directors, trustees or employes be given by them. If the institution holds other bonds safeguarding it against loss due to embezzlement, theft, forgery, etc., on the part of these individuals in such amount as the institution believes it necessary that it be protected against such acts, you need not require the institution to provide itself with a bond such as is exacted by the provisions of section 513, in other than a nominal amount. If, however, you do require a bond in larger amount, such bond must be conditioned on the faithful performance of the principal’s duties. There is nothing in the law making it your duty to require an institution to secure a bond or other obligation containing any other conditions or otherwise protecting the institution from acts of its officers, directors, or employes.

3. Where an institution secures additional bonds safeguarding it against embezzlement, theft, forgery, etc., by its officers and employes, it is not necessary that such bonds be conditioned upon the faithful performance of the duties of such individuals.

Summary

1. The Act of 1876 is no longer in effect, and there is no obligation on a bank created under its provisions to continue bonds on its employes in favor of the Commonwealth.

2. If bonds required by section 513 of the Banking Code of 1933 of officers, directors, trustees, or employes of an institution, who receive payments of moneys or handle securities are given in only nominal amount, it is within your discretion to require such bonds in additional amounts if you deem this safeguard necessary. In determining whether to do so, you may give consideration to the fact that other bonds not so conditioned are held by the institution amply protecting it against embezzlement, theft, forgery, etc., by such officers, directors, trustees, or employes.

3. All bonds given to institutions to safeguard them against illegal acts of officers and employes need not be conditioned upon the faithful performance of duties. Prom C. P. Addams, Harrisburg, Pa.  