The Birmingham age-herald., 1915-06-10
MAKE PUBLIC RULES
 ID GOVERN BANKS
 IN RESERVE SYSTEM
Seek to Establish Only Such Reasonable Standards of Admission as Necessary
 to Protect the System

Washington. June s.-Rules and regula- tions to govern the membership of state banks and trust companies in the federal reserve system were made public today by the federal reserve board. In an nouncing the regulations, under which the right is reserved to exercise judgment and discretion in considering each indi- vidual application. the board said:
 Approaching fully that the strength of the federal reserve system is to be measured by the quality and character of its members rather than by their num- ber the federal reserve board is prepared to use the broad discretionary power vested in it by the federal reserve act to bring about the coordination of the dif- ferent types of banking institutions on basis of equity and practica bility. The board has sought, in the regulations gov erning the admission of state banks and trust companies, to establish only such reasonable standards of admission as will be generally recognized is necessary to protect the federal reserve system and the national banks whose membership in the system is obligatory against the admission of any bank which would be a source of weakness, rather than of strength and to prescribe such regula- tions governing their conduct as will in- sure a reasonable conformity to funda- mental principles demand essential to the success of the new banking system.
 What Banks Are Eligible
 1ot ,a1< pli ipil han nl< 6 and trust companies incorporated under state laws, having paid up capital of $25OOO in towns of 5000 or less; s5o,0O0 in towns of from 5000 to 5000; $f0o,oOO in towns of from 5000 to 5O.ooO, and s2o0,Ooo in cities of more than 50,0oo. Such banks would be allowed to ask for reserve bank stock to the amount of per cent of the capi- tai and surplus of the applying bank. Then the application would be invest- gated by a committee consisting of the district federal reserve agent, the gov ernor of the reserve bank and a director of the reserve bank, whose recommenda- ton would be submitted to the federal reserve board.
 In passing on the application the fol- lowing points will be especially consid- cred:
 'The financial condition of the applying hank or trust company and the general character of it's management
 Whether the nature of the powers ex- ercised by the bank and it's charter pro- visions are consistent with the proper con- duct of the business of banking and mem- bership in the federal reserve bank.
 Whether the laws of the state in which the applying bank is located contain pro- visions likely to interfere with the prop CT regulation and supervision of member banks"
 What Loans Are Allowed
 In issuing a certificate of approval the board reserves the right to impose such condition "as will insure compliance with the federal reserve act and the regua- tions." State banks entering the system will be allowed to invest 'only in loans on real estate and mortgages of char acter and to an evtent which considering the nature of its liabilities will not inn pair it's liquid condition, and shall main- tain such improvements and changes in its banking practice as may have been specifically required of it by the federal reserve board as a condition of it's ad mission" Loans by bank on Its own stock, or to a single borrower would be limited to 10 per cent of it's capital ane surplus or 30 per cent of it's unimpaired capital.
 A method is provided for state banks withdrawing from the system 12 months notice. The board announces it's intention of accepting of examinations of state banks by the state authorities when conditions are satisfactory.