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FEDERAL RESERVE BOARD
1021
WASHINGTON
ADDRESS OPPICIAL CORRESPONDENCE TO
THE P'aDIERAL IU:SitRvE laOARD
October 29, 1923.
St. 3766
Str.WECTt
Reserve reqUirements of member and
nomnember state banks.
Dear Sir:
With reference to the hearings.J::>eihg conducted by the Joint Congressional Corrmittee to determine the reasons Why eligible state banl~s fail
to·join the Federal Reserve System, the Board is desirous of obtaining as
accurate inforrr1ation as it is practicable to collect showing Whether the
a.--:Dunt of reserve which the several classes of banks in each state would be
required to carry with the Federal reserve banks, if they became members of
the System, is larger or smaller than the reserves which they are now re~uired to carry under state laws.
It will be appreciated, therefore, if you will furnish the Board by
November 15, if practicable, with a statement showing the information outlined below for each class of banks 1 as defined by State law, in the following
states in your district:
In all cases where a state is loc.a.ted in two Federal reserve districts, the
Federal Reserve Agent in whose district the capital of the state is located
is being requested to furnish this information.
(l) Method of deter.mining deposit liabilities upon which reserves are
computed. This statement should ehow ea~~h class of deposit liabilities
against whic-h reserves are required to be carried, and each class of deductj.ons, if any, that may be ri1ade frotn g-oss deposits in the c:alculation of
.. ·net deposit liabilities on which reserves are con;puted. If possible, two
copies of the blartk forms used by each class of banks in corr,puting their deposit liabilities should be enciosed with your reply.
(2) A detailed ca1culation of the <leposit Uabili ty for a typical bank,
or group of banks, in each class and for ea.~h state 1 showing the total amount
and per c:ent of reserves required, the amount and per cent required to be.
carried in vault, the amount and per c.ent that may be held on deposit with
banks designated as approved reserve agents, arid the amount, per cent and
c~raeter of other funds or securities, if any, which the state law authorizes
to be counted a.s a part of the l_egally reqW.red reserve.
In addition to the legally required amounts, the statement should
Show for the banks selected the actual au~unts of cash carried in vault, the
amounts helq on deposit with approved reserve agents and with other banks,
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St. 3766
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and the amounts of reserve carried in other authorized ways. Care
should be taken to select as a.xamples banKs that are typical of their
class in the matter of reserves ~~rried. and in balances with banks other
than approved reserve agents. In case staterr1ents of typical non-merr~er
banks are not a.vailable it will be satisfactory for purposes of this report to use condition repol·ts sUbmitted by some of your pre~ent n1embers
at the time they n~a.de application for membership.
(3) A statement showing the net deposit liability and the amount of
reserve that these typical ban~s vvould be required to carry with the Federal reserve banks in case they became merr:bers of the Fed.eral Reserve System.
A comparison of the required reserve, as sho\m under questions 2 and 3,
should. show wl:urt!1er or net loss of interest on the reserve maintained with
the Federa.l reserve baru::s would be offset by interest on reserve funds released as a result of tbe banK~ JOining the system.
{4) To what extent, if any, have the present state bank members in the
various states in your district, upon ber.orning members of the systerr1, been
able to reduce the amount which as non-n.a:nber banks they had carried wi. th
city correspondents? In general has this amount been sufficient to .offset
the an-.ount that they are now required to carry with the reserve bank?
{5) To \'\hat extent, if any, have the present state bank members been
able, sinca JOilung the system, to reduce their cash in vault?
Very truly yours,
Walter L. Eddy,
Sel~retary.
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LETTER '10 ALL FEDE:;:-diL IESEINE AGENTS.
@FedFRASER