Commercial banks are an essential part of the machinery by which the agriculture, industry, and commerce of a country are carried on, and their proper conduct is, therefore, a matter of public concern. On this account they have long been subjects of legislation and of public supervision and control. The methods evolved for safeguarding the public against abuses and unsound practices differ considerably among different nations and to some extent among the different states of the United States, and could only be adequately explained by a history of banking in each nation. Only the more important and most widely used of them will be described here. (_a_) _Capital and Surplus Requirements and Double Liability of Stockholders._--A very common, indeed, almost universal, legal requirement is that before beginning business the proprietors of a commercial bank shall contribute a fund to be known as the _capital stock_, and that an additional fund, usually called the _surplus_, shall afterwards be set aside from profits. These funds are required to be maintained intact, so long as the bank continues in business, and to be used for the payment of losses in case of failure or liquidation for any reason. In this country it is also customary to hold the proprietors legally liable in case of failure for an assessment equal to the amount of their capital stock. In foreign countries it is a common practice to have the subscribed considerably in excess of the paid-in capital, the balance being subject to call by the directors at any time, and being available for the payment of losses in case of failure. These funds serve not only as a protection against loss to the customers of a bank in case of failure, but also as a restraining influence on the managers in the everyday conduct of the bank's affairs. They constitute the proprietors' stake in the business, what they are likely to lose if the management is imprudent, dishonest, or inefficient. The absence of such funds would put a premium on rashness and speculation and tempt into the business the unscrupulous and the unfit. In the determination of the size of capital and surplus funds and of the amount of the liability of stockholders for subscriptions in case of failure, no well-founded principles have been developed for the guidance of legislators. They should be great enough to cover prospective losses and to induce conservatism, honesty, and efficiency in management, and not so great as to prevent the free flow of an adequate amount of capital into the business. Unfortunately, the statistics of losses in cases of failure are not a sufficient guide. In some cases they bear a large proportion to the volume of business transacted and in others a very small one, and the number of cases available are too small to give much value to averages. The amount necessary to secure the best possible management is also purely problematical.