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Chairman Eccles: This revised analysis of the reserve position of member banks does not differ in substance from the preliminary analysis submitted under date of August 1* It gives effect, however, to revisions in some of the underlying reports. J. E• Horbett B-1259 August 11, 19Ul (Revised) Confidential ANALYSIS OF RESERVE POSITIOF OF F3ÎBEB BANKS, TTBEK ENDED WEDNESDAY, JUNE 25* 1 9 U John B# Horbett, Assistant Chief, Division of Bank Operations Member bank excess reserves during the week ended June 25, 19^1 amounted to approximately 5*2 billions. If reserve requirements were increased to twice basic statutory requirements (the maximum allowable under present law) excess reserves would be reduced by approximately 1*2 billions. If the law were amended and requirements were increased to two and one-half times the present basic statutory requirements, excess reserves would be reduced by 3»k billions and would then amount to 1«8 billions. The summary figures by classes of M n k s are shorn in tho following tabic; Class of banks Reduction which would result if Excess requirements were increased t o — reserves 2"1/2 times basic on present Twiee basic requirements requirements basis (Mi.liions of dollars) All member banks—total 5,231 1,172 3»1J23 Central reserve city banks New York Chicago 2,202 ¿a 0 531 105 1,588 311 Reserve city banks 1*750 352 1,031 Country banks in places with a population o f — 100,000 or more 15*000-100,000 Under 15.000 230 326 313 hi 72 65 127 193 173 An analysis has boon made of the reserve position of individual member banks during the weak ended June 25, 19L&, and the results arc shown in the accompanying statements. The analysis is based on information supplied by the Federal Reserve Banks in response to the Boardfs telegram of July 11, One part shows the effect of an increase in reserve requirements to twice basic statutory requirements; the other shows the effect of an increase to two and one-half times basic statutory requirements. - 2 - 1. If reserve requirements were increased to twice basic statutory requirements— 26%, and IJ4& on demand deposits and 6% on time deposits— All but k3 member banks could meet such an increase in requirements either out of their present excess reserves or by converting up to one-half of their balances with other banks into reserve balances® The k3 banks would have an aggregate deficiency of $782,000 after converting one-half of their bank balances into reserve balances; 23 of them would each have a deficiency of $5#000 or lessf The largest of theso h3 banks had total assets of 27 millions* the second largost millions, and the third largest 6 millions. 35 of the b3 banks war0 country banks located in places with a population of less than 15$000. The average ratio of loans and investments to total assets of these 35 banks was compared with 61$ for all country banks and 62% for all member banks« Over one-haIf of these 35 banks were in the three eastern Federal Reserve districts« A statement listing these h3 banks and showing their loans, investments, deposits, etc«, on June 30 is attached» It will be observed that in nearly all cases the ratio of bank balances to deposits of these banks was considerably below that of the average bank. 1,1441 banks with reserve balances less than twice basic statutory requirements could meet such an increase by converting up to onehalf of their balances with other banks into reserve balances; their aggregate deficiencies before such conversion would be 67 millions. About three-fourths of the banks whose reserve balances were not sufficient to meet an increase to twice basic requirements would have sufficient reserves after converting not more than 10 per cent of their bank balances into reserve balances. There were a few banks, however, that would not have enough reserves even after converting all of their bank balances into reserve balances. The accompanying table distributes the member banks according to the percentage of bank balances that would have to be converted into reserve balances. B-1259 (Revised) - 3 DISTRIBUT IOF OF F W BER BANKS OF BANK BALANCES THAT WOULD RESERVE BALANCES TO MEET AN REQUIREMENTS TO TïïICE BASIC Class of banks All member banks Central roservo city banks: Now York Chicago Number of banks that v;ould have to convort Number tho following percentages of bank balances Total with into reserve balancesnumber sufficient of '0 11- 21Over 715131banks reserves or 20$ 5 0?» 7Qfo 1 OOfc. 10 3<$ less 6,5 5,065 1,105 216 2 3 2 li* 36 12 26 3^5 265 60 Country banks in places with a population o f — 100,000 or more 199 15,000-100,000 1,001 Under 15,000 U,956 138 733 3,895 219 779 Reserve city banks ACCORDING TO THE PERCENTAGE RIVE TO BE CONVERTED INTO INCREASE IN RESERVE REQUIREMENTS 8 b5 9 32 156 61 59 1 1 3 1 3 5 iff 3 7 Uk 17 19 1 2 2 6 lb 15 1 B-1259 (Revised) 2« If reserve requirements wore increased to two and one-half times basic statutory requirements — 257*9 and on demand deposits and 7-l/2% on time deposits— 26l member banks would have to provide additional reserves after converting one-half of their balances with other banks into reserve balances» These banks would have an aggregate deficiency of 180 millions after converting one-half of their bank balances into reserve balances» 2*977 banks with reserve balances less than two and one-half times basic statutory requirements could meet such an increase by converting up to one-half of their balances with other banks into reserve balances. 3 # 3 H banks— about half the total number of member banks—had reserve balances sufficient to meet an increase to two and onehalf times the basic statutory requirements. B-1259 (Revised)
@FedFRASER