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TDiratS AJSB CISTEIBOTIOK OF EXCESS EESERTES Excess reserves now mount to About $£,100*000*000* end are not l i k e l y to exceed $£,200,000,000 within the next few weafca. !Ehe following table shows the distribution o f reserves by classes of bonks and the e f f e c t o f en increase of 33 1 / 5 percent i n reserve requirements upon excess reserves f o r each class o f bank* DISTEIBUTICH 0? MBffllR BASE RESERVES January 20* 1937 (Amount8 i n m i l l i o n s of dollars} Reserves Required Sicess 33 1 / 3 perPercent Remaining o f cent i a ezcess required ereaee l a requireseats Central reserre c i t y banks: New Y o r k . , 2,703 599 1,911 424 792 135 637 141 155 34 6.1 6*0 Kesarire c i t y banks...., *2,155 *1,522 *es3 507 128 6.3 , *1,298 *?68 •530 256 273 £6.6 *4,625 *2,130 1,541 590 9.6 , A l l member b a n k s . , , . .• Estimated figures* D i s t r i b u t i o n by Individual banks The survey, recently completed by the Division o f Bank Operations, of the reserve position of individual member banks on January 13 Indicates that there was a substantial masher o f banks, 2*400 out of 6,400, wnich did not have reserves s u f f i c i e n t to meet an increase o f 33 1 / 3 percent i n require* msnts* She amount by ahich the reserves of these 2,400 banks Nhefel abort o f the requisite volume was #376,000,000. A l l but 197 o f these* however* could meet the increase by drawing upon not more than h a l f of t h e i r balance* with correspondents* these 197 banks tsould s t i l l have lacked $123,000*000 o f having s u f f i c i e n t reserves* Hie following table shows the number of banks o f each class that would have had i n s u f f i c i e n t reserves to meet t h t Increase* Number o f banks Classes of books Total With insufficient reserves With shortage a f t e r using 1 / 2 of bankers* balances Central reserve c i t y basks Hew York City Chleago 37 IS 17 8 12 1 Reserve c i t y bonks 334 173 16 5,983 8,237 163 6,56? 2,435 197 Country banks Total She following table saaaiarizes the amount of the shortage by classes o f bankaf with and without using t h e i r excess bankers* balances. Classes of banks Additional reserves required to aeet 33 l / 3 # increase i n requirements Obtainable from J Required a f t e r Total | use of 1 / 2 of bankers1 t bankers9 balances balances ( I n millions of dollars) Central reserve c i t y banks Bew Tork City Chicago 118 £9 18 £0 100 9 Seserre c i t y bank* 159 148 11 70 63 S 376 253 183 Country banks Total Of the 197 banks t h a t would have been short a f t e r using h a l f of t h e i r bankers* balances 163 were country banks, as compered with 130 that would hare, been deficient on the basis of a similar inquiry i n Hovember* but the aaount o f the deficiency for country banks would hare been wary small, only #2,350,000 i n both Horeasber and 3ESnuary* A l l but 16 reserve c i t y banks would hare been able to supply t h e i r needs from excess bankers9 balances, and the shortage at these would hare been $11,000*000, a somewhat smaller amount than i n Kore&ber- Most of the deficiency would have been i n Hew Yoik City* where 1? banks would hare been short by $118,000,000, compared with a abort age o f #122*000*000 at 22 bonks i n Horember* Tor these banks no allowance can be Bade f o r tha use o f balances due fross banks since Sew York City banks hold - 4 - only small working balances with other banks and theae hare not been Increased i n recent years* Hew York C i t y beaks would lose additional r e - serves through withdrawals from them of balances held f o r country banks and reserve c i t y banks* I n case of a further increase i n requirements, mamber banks outside of Sew York City would need to raiae about #260*000*000 o f additional r e serve funds, aa compared with a shortage of about $125*000,000 at the time of the increase l a s t sumer, Moat of t h i s amount would probably be obtained, aa before* by withdrawals from bankers9 balances* Less than half, o f these balances are held with Haw York C i t y banks* and some of the withdrawals w i l l be absorbed by reserve c i t y banks with adequate excess reserves, but a substantial portion of the withdrawals froa reserve c i t y banka w i l l be met i n turn by withdrawals frosa Hew York* As a consequence a large part of the additional reserve funds obtained from bankers4 balances w i l l i n the end come from Hew York* $200*000*000* fhese withdrawals say be aa much as Outside of Hew York City* borrowings should be negligible and sales o f assets unimportant i n amount* New York City banks would be subjected not only to an increase of one* t h i r d i n t h e i r present reserve requirements but also to a further loss of perhaps #200*000*000 o f reserves through the withdrawal of bankers* balances* Probably h a l f o f the withdrawals would come froa the £0 Sew York C i t y banks wLich* a f t e r the increase i n requirements* would s t i l l hare excess reserves o f more than #200*000*000* Xxceas reserves o f Hew Yoric City banks would probably not be e n t i r e l y absorbed* Individual Hew York C i t y banks t h a t would be short of reserves could edjust t h e i r position temporarily by purchasing Federal funds from banks that s t i l l had an excess or more permanently by the sale of assets to such banks* I n view of the public discussion of the p o s s i b i l i t y o f an increase i n requirements, i t i s l i k e l y that many of the banks that would have been deficient i n January w i l l by February have taken steps to build up t h e i r reserves, have some e f f e c t on money rates* Ihese adjustments would probably
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