New-York tribune., 1903-02-12
ADOPTS RESERPE RULE
Clearing House association 1cts on
Trust Companies' Measure.

y
ing House Association the amendments proposed
last week to the constitution by the Clearing House
Committee. the most imp%I tant OK thsse amend
rnents imposing upon trust companies clearing
through member banks the obligation OF main
tanning certain cash reserves. we're unanimousIy
adopted The reasons impelIing the Clearing Hogss
Committee to recommend this aHeudmeut were
explained in detail in address to the Association
by J. Edward simmons. President OF the Fourth
National Bank. who is member Of the Committee.
Mr.. Simmons said IN part:
For many years the officerc Of banks 7ssocistet
in the New York Clearing Il2ujS nave & 'eI 5@S 9
community endangered by the iact tndL liI$s
arrI,t,1 On thS bIisinsss of banking without keen
ing being compelled by Law TO keep any any reseT.a
posts held by them. which deposits we're IsFseY
Beieynr that in time Of hnapcis stringencg ~
reserve required b. statute OF National ara Sd9
s .So a., h, dd 1s 6 the deposits with other fnan-
ciai institutions they felt that the bank reserves
might be found inadequate tor ths Pu5ERG}S@, ,tr
carries the reserves 6f All other Englsh hant bal
in recent years increased It's tTaaiSlosa. a. @ IL h1s'
They knew that the Bank of France kept quite a.
Circulation and that other European financial In
situtions found It necessary to keep PEI
total percentage OF reserves sept IN this metro
than gradually diminished a. has been the case.
in view Of the fact that other lnstitlt2nS. 10Y
posits 'n growing amounts without keeping any
cash reserve whatsoever against the same
The average amount Of deposits OF trust CON-
panfes whose exchanges made through the
Clearing House is about siff0e0o01. OF which lesS
than $6s oe090V are what termed BY them trust
or time deposits. These trust companies Keep
only trifing amount OF cash in their own Fai4'f
say about 81 100000 IN the aggregate, according 10
their last statement made To- the Manager Of tA9
Clearing House. They keep also on deposit WIN
the banks with which they have bank accounts
an average of about So. 0oo". against which ne
banks have to carry a reserve Of say. SI5f'''-'-
other trust companies In this city. whose Ft-
changes are not made through the Clearing House
have deposits aggregatins s26I.0"""" OF which
about sI22.oo0GoO arc called BY them trust d.
posits.'
ignoring the deposits kept by those trust COM
panies whose business is largely Of such charac-
ter as not TO reat ire the making of their exchanges
through the Clearing House. We find that II t''9
deposits held bv trust companies VINO 90
Dclear'-anrountins S has been said. 10 about
stl7 00o o,aif these deposits we're held BY banks
there would pc Kept cash reserve OF ab'4.
Sl1OO00,1n0 against the same. in addition % tA@
s235 C5oO10 now kept by the Clearing House BANKS
and the s200Oa.o0o Kept by the non-member banks.
thus increasing the total reserves on the present
average amount of deposits. which is SSfn''Ft't.
from $2J5 0Oovo0 $3.50. o0poDn. The fact H. how
ever that substantially no cash reserve Is Kept
anywhere as against these sil7,09hp OF trust com
panies' deposits. although at least 80 Per cent
thereof are payable on demand.
Another course OF business which has recently
arisen among makes 1t even more important
that bank reserves should be strengthened at every
possible point Western and ether out Of town
banks have Of late years inausurated practice os
1oaniug money on call directly in this city instead
of depositing surplus moneys with their Nev-IorS
correspondents. who would make loans based upon
these additional deposits The amount 0f moH'y
thus loaned by of town institutions directly
upon collateral security in this city has averaged
in favorable times fully the amount OF st5o"reo+"
At all periods Of financial strinsency most Of these
loans called and the money to pay the sam.
in whole or in part, has TO be shipped from EcN-
York. thus making sudden and large depIeu9n
from the bank reserves in this city, t,
ger to ali our commercial and financial Interest,"
ca for remedy. Which remsdy the c6mmtjee toIr
should be applied gradually and in manner and az
periods not seriously to offset the general bustn's
The amendments to the constitution. offered To-
therefore. that all non-member banks and institu
House shonfd furnish weekly reports to the man
ager Of their average deposits and loans; and pro
vide further that every non-mem mber iustituti'n
using the Clearing House mot bank required b.
own vaults a reserve sgainst it's average deposits
amounting after June l. lg5. to . per S cSnt 1
l. 1900 to at least 70 per cent Of its Deposit
served does not require from the trust conparie5
the percentage of reserve as the statutes re-
Clearing House will be obliged to keep. after June
l. 1904. in their own vaults reserve Of only ~, -
basis of their present deposits this reserve woGH
amount to SA),UUUOtt. ana 70 tlat extent tue IT,
sources of this city would be strengthened against
periods OF financial stringency and panic.
In other States such Illinois and lUf1aU~,
statutory measures have been taken. or are pro-
posed looking to a similar result the business
Of companies While it IS true that the huSl-
ness OF the New-York banks may have been <onl',
what unfa vorabiy affected by the growth of 5ud
competition of The trust companies doing substau-
TALLY purely banking business sun the @cto1
proposed by the Clearing House Association IS not
based on any narrow ground but wholly upon p
profound conviction that the trust companies WIN
from 300 500 H Of deposits. both thoss
clearing and those not clearing through the Clear
ing House. should keep adequate reserve ana
thereby contribute their part 10 the financial sta
bility and safety OF the general public.