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F E DE RA L RE S E R VE BANK OF RICHMOND APRI L 1966 _SL. . . 5 L X SL_ The Giro The Computer and Checkless Banking A speedy and efficient payments system is essential to the functioning of a modern economy. In the United States and England, as in most of the AngloAmerican world, most payments are made in cur rency and coin or by checks drawn on commercial banks. W hile this system has functioned remarkably well over the years, the growing volume of pay ments promises to create serious problems in the transportation and processing of checks. The cost to the public of operating the check clearing and col lection system is estimated at about $3.3 billion an nually, and this cost is almost certain to increase as the volume of payments increases. Moreover, while the check payments system is quite accurate, the growing cost and sometimes considerable delays in collecting checks impairs the usefulness of checkbook money as a medium of exchange. Some informed observers predict drastic changes in the payments system of the United States in the coming years. These changes would almost eliminate checks and greatly reduce the use of currency. In the payments system envisaged, the average United States citizen may pay his monthly bills to the doctor, the utility company, the mortgage company, and others, not by mailing checks to each of them but by instructing (perhaps by telephone) the bank holding his deposit account to transfer specified amounts from his account to the accounts of designated payees. He may receive his salary payment in the form of a notice from his bank that the amount has been added to his account. When his wife goes shopping, she may make payment by using a special telephone arrangement to instruct a bank’s computer to transfer the appropriate 2 amount from the family bank account to that of the store. These and even more dramatic changes in the pay ments system may result from combining modern electronic data processing techniques with the socalled “ giro transfer” system which has been used in some continental European countries for years but which has been largely untried in the United States. The giro system has characteristics that make it particularly suitable for the use of computers, although it does not require their use. In fact, the European systems operated effectively for many years without computers. A brief description of the giro transfer system may indicate some of the pos sibilities inherent in it. Nature of Giro Transfer Systems T h e giro sy s tem possesses a number of fundamental charac teristics in common with the check payments system. Basically it involves deposit balances held by indi viduals and businesses with some institution and systematic arrangements for the transfer of these balances from payer to payee. It differs from the checking system chiefly in the manner of effecting these transfers. Under the familiar checking system, the payer delivers to the payee a written order, i.e., a check, directing the institution holding his account to pay a certain sum of money at sight. The check may pass through numerous hands, and through two or more banks and/or a clearing house, before it is presented to the drawee bank. In the typical giro transaction, the payer delivers to the drawee institu tion an order directing it to transfer a specified sum from his account to that of the payee and to advise the payee of the transfer. Thus giro transfers are more direct and involve both less time and less paper handling than ordinary check transfers. Giro transfers are simplest when both the payer and the payee have accounts at the same institution. They can be made to work with comparable ef ficiency, however, where the payer and the payee use different institutions. Numerous institutions, for ex ample, may be members of a common giro system which incorporates arrangements for automatic trans fers between member institutions as well as for trans fers between the customers of these institutions. Such arrangements exist today in some European coun tries. It is reasonably clear that existing facilities for clearing checks between banks in this country could easily be converted into an effective giro system em bracing most, or even all, banks. A s they stand today, the giro systems abroad center around a variety of institutions. Some are operated by the postal service, some by central banks, and some by commercial banks. Others center around facilities provided by savings banks, by municipalities or by credit cooperatives. In some European coun tries, as many as four or five separate giro systems operate side by side. The postal giro is perhaps the most important of the giro systems found in the continental European countries. In many of these countries, commercial banks cater primarily to business and industrial ac counts and do not, as a rule, offer the special indi vidual checking account services so common in the United States. The postal services of these countries, with their numerous offices, quite naturally became involved in transfers between individuals, and the postal giro was largely an outgrowth of these cir cumstances. Postal giros offer nationwide coverage, but it should be noted in this connection that equally extensive coverage is possible, and in some countries already exists, under giros operated by systems of private commercial banks. Foreign giro systems provide an efficient, con venient, and inexpensive payments system not only for individuals but for many businesses as well. This method of payment is particularly attractive to in surance companies, public utilities, mail order houses, and other businesses regularly receiving large num bers of remittances. These organizations are saved much of the work and expense of handling and bank ing large quantities of checks and currency, and they may well receive credit for funds sooner than if checks were used. For those who must make regular remittances, such as mortgage payments or insurance premiums, it is frequently possible to arrange for INTEROFFICE TRANSFER IN THE JAPANESE POSTAL GIRO SYSTEM automatic transfer of specified amounts at regular intervals. Interoffice Transfers Giro systems usually have numerous offices scattered over wide geographical areas. This is particularly true of the postal sys tems. Accordingly, regional offices are usually maintained for centralized record keeping and for making interoffice transfers. The accompanying diagram, based on the Japanese postal transfer sys tem, shows how funds may be quickly transferred over considerable distances through the use of re gional transfer centers. In the Japanese system, all post offices handle transfer transactions, but 28 regional transfer offices maintain records of individual accounts and actually effect the transfers. A person desiring to open an account applies to any post office, pays a small fee, and upon approval by the regional transfer office an account is opened in his name at that regional of fice. He may make deposits to the account by filling out a form and paying in the amount (plus a fee) to a post office. The post office then sends a copy of the form to the regional office and the amount is credited to the individual’s account. The regional office then sends the owner a statement of account together writh the original deposit slip. The diagram illustrates how transfers are made between accounts held in different regional transfer offices. In the first step, the payer submits a regular payment order form to his post office, stating the amount of the payment and the name and account number of the payee. The post office forwards the payment order to the payer’s regional transfer office, which deducts the amount from his account, sends him a new statement of account, and forwards a pay ment advice to the payee’s regional office. The payee’s regional transfer office adds the amount to the account of the payee and sends him a copy of the payment advice form together with a new statement of his account. If time is an important consideration, the payer may request a telegraphic transfer. Commercial bank giro systems vary greatly, with particular organizations determined primarily by the size and structure of the banking system and by the degree of centralization desired. In most cases there are few problems involved in handling transfers be tween branches of a single bank, although the exact procedure may depend upon the organization and ac counting system of the bank. But methods of ef fecting transfers between offices of different banks are greatly influenced by the degree of centralization. The most highly centralized systems have common 4 central institutions that manage the entire giro service as well as the funds deposited in individual accounts. On the other hand, some systems have no central institution at all, and each branch receiving a giro order is responsible for making transfers to other banks and branches that may be involved. In these systems, transfers between banks may be settled through correspondent balances or through clearing house settlements. The organization of the Swedish Bank giro falls somewhere between these extremes. All commercial banks in Sweden contribute to a central giro in stitution located in Stockholm, but individual ac counts are kept at branch offices and sums deposited are administered by these offices. The central in stitution settles transactions between banks and main tains central offices, but it does not control the money it handles. There is a daily settlement between the central institution and each bank that is a member of the system. Charges for Giro Services Charges for giro services vary from country to country and from sys tem to system. The proposed charges for the British Post Office giro, which is now in the process of being established, are probably representative of charges by postal giro systems generally. In the British sys tem, there will be no charge for regular transfers of funds such as those described above. Deposits by an account holder to his own account will also be free, but deposits by non-account holders will involve a fee of about ten cents. Fees on withdrawals by account holders or on cash payments to third parties will depend upon the amounts involved, with pay ments over 50 pounds to cost about 28 cents. Postage to the giro will be free. Because many transactions are free and only nomi nal fees are charged on some others, income from charges is expected to cover only a relatively small part of the operating costs of the British system. Interest is not paid on deposits, however, and it is hoped that the investment of accumulated funds will provide sufficient income to cover the difference between charges and costs. Whether this hope will be realized will depend to a considerable extent upon the number of users of the system, the average size of the accounts, and the activity in the accounts. Electronic Data Processing A dv oca tes o f the development of a giro transfer system for the United States base their arguments chiefly on the grounds that this system possesses characteristics which make it particularly suitable for the use of electronic data processing equipment. Unlike check payments sys tems, transactions in the giro system take place en tirely within the individual bank, or if more than one bank is involved, entirely within the banking system. Thus, when a depositor instructs his bank to make payment to another giro account holder, his bank receives all the information needed to complete the transaction— the identification of both the payer and the payee, the amount to be paid, and the time at which payment is to be made. Proponents of the giro system maintain that the entire transfer process could be handled almost in stantaneously by computers. The payer's instruc tions to his bank could be fed into the bank’s com puter and if both the payer and payee are depositors of that bank the computer could perform all of the operations necessary to make the transfer, including the printing out of confirmation to the payer and ad vice of payment to the payee. If the payer and payee have accounts at different banks, the computer at the payer’s bank could perform the operations necessary for its records and transmit the information to the second bank’s computer, either directly or through a central institution, and settlement between the banks could be made as described above. Although the transition to a completely com puterized giro transfer system undoubtedly would not be without its pain and problems, the develop ment of such a system appears to be entirely within present technical capabilities. Banks already make extensive use of data processing equipment in their operations, and a push-button type of telephone has been developed which permits a customer to com municate directly with his bank’s computer. Some possible applications of equipment already available are described in a recent issue of the Bell Telephone Magazine. Making use of the push-but ton telephone, the housewife of the future may pay the family bills at any time of day or night simply by tapping out instructions to her bank's computer. She may ascertain her account balance by making inquiry of the computer and the information will be provided to her in spoken form. When shopping, she may use a card obtained from her bank which, when inserted in the store’s special telephone, will permit her to make payment by instructing the bank’s computer to transfer the proper amount to the store's account. Or she may obtain a credit card from her bank which would permit purchases to be charged to a convenience or instalment credit account at her bank, thereby eliminating the necessity of opening charge accounts at numerous establishments and car rying a large number of credit cards. A Giro System for the United States? kited checks, no checks returned for insufficient funds, and no float.” These are substantial bene fits indeed. Governor Mitchell believes that the adoption of some form of computerized giro system is inevitable and that it will occur much sooner than most ob servers expect. In any event, possibilities for signi ficant economies have been opened up by the rapid technological advances of recent years. These pos sibilities create a standing incentive for commercial Despite these apparent advantages, it is still questionable whether the United States will ever have a fully de veloped giro transfer system. Arguing against such a development is the absence of most of the con ditions that brought about the establishment of such systems in other countries. Commercial banks in this county have provided an efficient payments sys tem and, unlike those in some countries, they have actively sought the accounts of small depositors. Some elements of the giro system have already been adopted in this country. An increasing number of businesses are processing payrolls by instructing their computers to instruct their bank’s computers to reduce their accounts and to credit their employees’ bank accounts. Banks are already making limited use of the cards described above. The American Bankers Association has conducted seminars dealing with the possibilities of an automated payments sys tem and is sponsoring research efforts along the same lines. But the full development of the system envisaged would be a lengthy and costly process. The char acteristics of the special telephone which make it adaptable for communication with business machines would necessitate major modifications in telephone central offices before these could be made available to the general public. Costs of data processing equip ment would be substantial, not to mention the prob lems of obtaining competent personnel to operate this equipment. In addition, many serious technical problems doubtless would arise during the period of transition. Finally, the transition would inevitably encounter numerous obstacles posed by legal and customary technicalities involved in settling transac tions. But the ultimate benefits might more than offset these costs. In the words of George W . Mitchell, Member of the Board of Governors of the Federal Reserve System, “ In the modified giro system . . . there will be no check sorting and re-sorting, no shipment of checks from bank-to-bank or bank-tocustomer, no storage requirements for checks, no banks to make important changes in the payments services they offer to the public. 5 ctisloric 3zarpers QFernj Har Ferry, W est Virginia is located at a gap in the Blue Ri* Mountains where the Shenandoah and Potomac Rivers ' Founded in 1747 by Robert Harper, the town for mai. ears occupied a strategic position as a gateway to the r iern end of the Shenandoah Valley. ago A century P ;rs Ferry was a prosperous industrial center served Baltin~ both the Chesapeake and Ohio Canal and the Ohio Railroad. It was also the site of a U. S. / la* an<^ Armory. Har Ferry is probably best remembered as the site Johr >wn s Raid, a prelude to the Civil War. Brown, an ardf ■bolitionist who planned to liberate the slaves by violenc-^ an attack on Harpers Ferry in 1859. His plan was to e the arms stored in the U. S. Arsenal to equip his foil- s- He was captured, however, and amid great of popular excitement, was brought to trial, convicted, and hanged. Harpers Ferry was also an important military objective during the Civil W ar. Union forces held the town during most of the W ar, although it changed hands several times. Its capture by “ Stonewall” Jackson in September 1862 was decisive in the outcome of the great battle of Antietam. The town served the Union Army as a base for Sheridan’s devastating campaign through the Shenandoah Valley. When peace finally came, it lay in ruins. In 1944, Congress designated Harpers Ferry as a Na tional Monument. Eleven years later the Harpers Ferry National Historical Park Service began its task of recreating the physical condition of the town as it existed in the period from 1859 to 1865. The restoration, which will eventually include some 40 buildings, drew over 750,000 visitors in 1964. A n abundant water supply and easy access to the interior made H arpers Ferry a busy industrial-transportation center. O n A pril 18, 1861, the U S. A rsen al and shops were evacuated and burned. m John Brow n focused the nation’s attention on H arpers Ferry. T h e firk16 h ° use know n as “ John B row n ’s F o rt,” where B row n and his party made a last stand, was storm ed by U . S. M arines under the commJr Robert E . L ee on O ctob er 18, 1859. DISTRICT TRENDS IN MANUFACTURING EMPLOYMENT Nearly one fourth of the increase in the nation’s manufacturing employment since 1955 occurred in the Fifth Federal Reserve District, an area which has less than one tenth of the national population. Furthermore, nearly all of the increase in the Dis trict occurred in three states, which account for only 6 % of the country’s population. As a result the District economy has acquired a balance more com parable to that of other regions. Historically the economic structure of the District has involved relatively more farm workers and fewer nonfarm em ployees than were found in most other regions. But now nonfarm workers in general and factory em ployees in particular represent very nearly as large a fraction of total employment in the Fifth District as in the nation at large. Conditions Favorable to Growth T he reasons why factory employment grew faster in the Fifth District than elsewhere are too numerous to be ana lyzed adequately in a brief article. The causes, how ever, are associated mainly with long-run declines in the amount of labor needed on farms and are part and parcel of the process of economic growth. Some industries have expanded in the Fifth District at least partly because of the availability of materials such as lumber, cotton, or mineral resources. All District industries have benefited from ready access to large markets in the eastern half of the nation. The single most important factor continuing to at tract manufacturing businesses to the District, how ever, has been the availability of labor. The declining number of jobs in agriculture, associated chiefly with improvements in agricultural technology, has left many people available for other kinds of employment. Some migrated to the cities of the North and West. Others stayed and moved into jobs created by new industries and by the growth of existing firms. As a result of industrial growth, the number of growth patterns. More than half the District in crease occurred in North Carolina, with Virginia and South Carolina accounting for the rest. These three states, with 6% of the national population, accounted for 23% of the national increase in factory employ ment during the past ten years. Changes elsewhere were too small to have a significant effect on the total. Slight declines occurred in Maryland and W est V ir ginia and a small gain in the District of Columbia. Despite the large gains in factory employment, the fraction of total nonfarm workers employed in manu facturing declined between 1955 and 1965 in the na tion as a whole and in each state of the Fifth Dis trict. For the nation, factory workers now represent three tenths of all nonfarm employment. The fraction is four tenths in the Carolinas, a little over one fourth in Virginia and W est Virginia, and exactly one fourth in Maryland, where this ratio declined more than in any other part of the District. Employment and Productivity Because o f the close relationship between rising labor productivity EMPLOYMENT IN DURABLE GOODS INDUSTRIES Fifth District Furniture Prim ary and Fixtures M etal Industries Lumber and W ood Products Electrical Equipm ent Supplies and Stone, C la y , and G la ss Products Fabricated M etal Transportation Fifth District factory workers increased by more than Products Equipment M achinery a quarter of a million between 1955 and 1965, rising to more than 1.6 million. During the same period, O ther D urable Goods factory employment nationwide gained 1.1 million, reaching a total of 18 million. Within the Fifth Dis trict the various states showed widely dissimilar 8 Source: State Departm ents of Labor. and changing levels of employment, a measure of productivity for each of the principal Fifth District industries is charted at the top of page 10. The productivity chart covers the ten years from 1953 to 1963 because more recent data are not available. A brief explanation may aid interpretation. Value added by manufacture measures value actually created by an industry as distinct from value purchased from others. Value added eliminates pur chased value by deducting from the value of an in dustry’s finished output the cost of power, processed materials, and subassemblies supplied by others. Value added per man-hour (value added by manu facture divided by man-hours) provides a measure of labor productivity. Since price is the basis for de termining the value of finished products, value added as a measure of productivity should be adjusted for price changes to avoid distortion from changes in the price level when comparisons are made over a span of time. This adjustment wras not attempted here for two reasons: first, suitable indexes of wholesale prices are not available for all industry grou ps; and second, preliminary computations indicated that the adjustment would reduce the gains in productivity but would not materially change the general picture. Since the charts tell the basic story, the text that follows will touch only the highlights in particular industries. clearly apparent in the charts. Employment in the production of durable goods, representing a little over one third of the 1965 factory total, was relatively well distributed among the component industries with furniture at the top of the list. This relative balance among durable goods industries is, furthermore, a recent development brought about by substantial gains in most of the major groups partially offset by declines in only two. Am ong the nondurable goods industries, on the other hand, employment continues to show wide variations. In 1965 for instance, textile mills and apparel plants together made up nearly three fifths of the entire nondurable goods category and accounted for almost as many jobs as all durable goods industries combined. The breaks in the textile bars represent nearly a quarter of a million employees, more than the whole width of the employment scale. In striking contrast, to bacco manufacturers now operate with a work force one tenth the size of employment in textiles. Total value added in tobacco factories, however, is equivalent to 45% of value added in textile mills, with the result that tobacco manufacturing is near the top of the productivity chart and textile pro duction is near the bottom. A s with employment, so in the case of productivity, nondurable goods in dustries display wide variations while makers of durable goods show considerable uniformity. Industry Patterns G row th patterns vary as much among industries as among geographical areas, as is Tobacco M anufactures Durable Goods T he D istrict’s furniture industry between 1955 and 1965 added over 31,000 to its payrolls. This gain represented nearly half of the national increase and raised the District total to 90,000. North Carolina, with about three fifths of District furniture employment and a little more than one eighth of the national total, accounted for nearly one third of the national gain. Virginia, with one fourth of the District’s and one twentieth of the na tion’s furniture jobs, contributed more than one tenth of the national growth over the ten-year period. Measured by value added per man-hour, the furniture industry was not only low in labor productivity but made the smallest relative increase. Value added per man-hour rose less than one third between 1953 and 1963. Since furniture prices rose some 6 % in those ten years, a price adjustment applied to value added would reduce the ten-year gain in productivity of furniture workers to about one fourth. Rubber, Plastic, and Leather Products creases in employment occurred in electrical equip EMPLOYMENT IN NONDURABLE GOODS INDUSTRIES Fifth District Textile Mill Products Apparel and Related Products Food and Kindred Products Chem icals and Allied Products Printing and Publishin Paper and Allied Products Am ong the metal-using industries, the largest in ment, up 38,000 to a total of 72,000, and in ma Other N ondurable Goods chinery, up 29,000 to 57,000 in 1965. 50 100 Thous. Source: State Departm ents of Labor Despite the large gains, the District’s share of national employ ment in these categories remained under 4 % . A PRODUCTIVITY OF FACTORY LABOR Fifth District N ondurable Goods Durable Goods Prim ary M etal Electrical Equipm ent Supplies Transportation Industries Chem icals and Allied Products and Tobacco M anufactures Equipment Printing M etal Paper and Allied Products Products Rubber, Plastic, and Leather Products Stone, C la y , and G la ss Products Furniture and Fixtures Textile Mill Products Lumber and W ood Products A p parel and Related Products L l_ 0 Note: Source: 5 10 D ollars M easured by value added per man-hour. U. S. Departm ent of Commerce, Bureau of the Census. sharper contrast with national trends is found in primary metals, which employed 81,000 in the District in 1965 after an increase of more than 11.000 while the comparable national total decreased by 30,000. Primary metals led all District durable goods industries in productivity in 1963 following a ten-year rise of 70% , one of the largest. The largest increase in productivity was achieved by makers of transportation equipment, who met a grow ing demand while reducing employment by 9,000 in the District and 115,000 nationally. In the pro cess the productivity of labor considerably more than doubled. Nondurable Goods D istrict textile em ploym ent, 427.000 in 1965, exceeded the 1955 figure by 14,000 only because of an increase of nearly 16,000 last year. The number of textile jobs steadily diminished from 1955 through 1962 and remained below the 1955 level despite gains in 1963 and 1964. Declines continued in the national textile industry a year longer than in the District, and the gains that fol lowed in 1964 and 1965 raised the figure to 919,000, but this was still 130,000 under the 1955 level. As a result, the District’s share of national employment in textiles rose from 39% in 1955 to 46% last year. Most of the District’s textile workers are located in the Carolinas— one third in South Carolina and nearly three fifths in North Carolina— and except 10 Publishing Food and Kindred Products M achinery Fabricated and for a few in Maryland and W est Virginia, the rest are in Virginia. Larger Plants with Fewer Workers T h e ratio of capital to labor has increased sharply in recent years in many industries. Large, automated plants are being built to turn out more goods at lower cost. Some industries have shown a downtrend in the size of the work force needed to operate a given scale of plant, a trend which is one aspect of the sharp rises in labor productivity already noted. The typical Fifth District textile plant, for instance, em ployed about 270 workers ten years ago but now has around 230. W hile average work force dropped 15%, average output per plant rose more than one third. Virginia is the only District state in which number of workers per establishment has increased. In 1963, the latest year for these figures, South Carolina had the largest textile mills, employing on average 425 workers. Virginia plants averaged 355 and North Carolina mills averaged 184. The typical factory work force for all manufactur ing plants, however, 71 in 1963, has maintained an uptrend principally because of increases in apparel, food, chemicals, furniture, electrical equipment, stone, clay, and glass products, and machinery— in dustries in which economies have been gained by substantially increasing scale. THE FIFTH DISTRICT CHANGES IN BANKING STRUCTURE Banking is a dynamic business, and its rapid growth and change is very apparent in the Fifth Fed eral Reserve District. A t the beginning of 1965, there were 882 banks and 1,892 branches in the Dis trict. During the year, nine new banks were estab lished, but 30 were absorbed through merger for a net reduction of 21. The number of branches rose sharply, however, to 2,047 at the end of the year. The 30 merged banks were converted into branches, 128 new branches were opened, and only three of fices were closed, resulting in a net increase of 155 branches. W ith 21 fewer banks and 155 more branches, the total number of banking offices in the District increased by 134 to 2,908. Changes in banking structure varied widely from state to state, depending upon provisions of state banking laws, number of banks and branches already in existence, trends in business activity, and other factors. In general, however, the trends of recent years continued through 1965 for individual states as well as for the District as a whole. In the past three years, the greatest changes in District banking structure have occurred in V ir ginia. This apparently is the result of the 1962 amendment of the state’s banking laws, which per mits Virginia banks to branch on a statewide basis through merger. During the period 1962-1965, 65 mergers resulted in the conversion of banks to branches, and 177 new branches were established. W ith 26 new banks formed and one failure, there were 40 fewer banks but 238 more branches at the end of the three-year period. In 1965, three new banks were established in V ir ginia, and 18 absorbed by mergers, resulting in a net reduction of 15. Seventy-two branches were added, of which 54 were new branches and 18 were NUMBER OF COMMERCIAL BANKS AND BRANCHES Fifth District* 11 CHANGES IN NUMBER OF BANKS AND BRANCHES Fifth District* December 31, 1964 to December 31, 1965 D. C. Md. Va. W .V a . N. C. S. C. 15 152 133 Total A ll Com m ercial Banks 121 277 184 N ew bank organized 2 3 3 Mergers and absorptions 1 18 Num ber of banks, beginning of period 6 882 1 9 5 30 V oluntary liquidations and suspensions 15 Num ber of banks, end of period 262 122 + Net change 1 - 187 15 + 3 129 146 - 6 - 861 - 4 21 Branches and A d ditional O ffices Num ber of branches, beginning of period N ew branches established 84 369 486 711 242 1,892 4 24 54 21 25 128 1 18 6 5 30 1 2 3 737 270 2,047 B anks converted into branches Branches discontinued 88 Num ber of branches, end of period Net change Chang e in Banking O ffices 394 558 + 4 + 25 + 72 + 4 + 26 + 57 + 3 + 26 + 28 + 155 + 20 + 24 + 134 ‘ Including six W est V irg in ia counties which fa ll outside the Fifth District. Source: Board of Governors of the Federal Reserve System. converted from merged banks. The net result was a total of 57 new banking offices in the Old Dominion. Although statewide branch banking is permitted in South Carolina, the distribution of population and of economic activity provided little incentive for wide spread branching until recent years. Since 1960, however, branching activity has increased consider ably, and in 1965, more branches were established in South Carolina than in any other state in the Fifth District, except Virginia. Five merged banks were converted into branches, 25 new branches were established, and only two were discontinued, for a net increase of 28 branches. The total number of banks, however, declined by four as five were absorbed by merger while one new bank opened. Thus, there was a net increase of 24 banking offices. Maryland, which also permits statewide branch banking, gained 26 banking offices during the past year. There were two new banks and one merger which resulted in the conversion of a bank to a branch. W ith 24 new branches formed and no branches discontinued, there was a net increase of one bank and 25 branches. In North Carolina, w'hich has the largest number of banking offices in the District, the trend of recent years continued in 1965, but at a slower pace. Six banks were absorbed through mergers, and all of them were converted to branches. Twenty-one new branches were established and one discontinued, for a net increase of 26 branches and 20 banking of 12 fices. This compares with the addition of 35 banking offices in 1964, 57 in 1963, and 50 in 1962. North Carolina ended 1965 with a total of 883 banking of fices, compared with 820 in Virginia, 516 in M ary land, 399 in South Carolina, 187 in W est Virginia, and 103 in the District of Columbia. W est Virginia is unique in the Fifth District in that it prohibits branching entirely. There the three banks established in 1965 represent the entire change in the banking structure, raising the total number of banking offices from 184 to 187. There were no new banks opened in the District of Columbia in 1965, but four branches were added, bringing the total to 15 banks and 88 branches. Changes in the banking structure of the Fifth Dis trict in 1965 comprise a continuation of trends dating back to 1935, as shown in the chart. For the past 30 years, the number of banks has been very gradu ally declining, as mergers have outpaced the estab lishment of new banks, while the number of branches has grown at an increasing rate. It has been only ten years since branches became more numerous than banks, but they already outnumber banks two to one. Structural changes continue to provide more offices with fewer banks. PHOTO 6. & 7. CREDIT U. S. Departm ent of The Park Service. Interior, N ational
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