New-York tribune., 1918-03-20
Fix Maximum
Interest Rates on
Bank Deposits
Sliding Scale Adopted to
Prevent Competition for
Out-of-Town Balances


members Of the New York Clearing
House Association, representing fifty
eight local banking institutions,
adopted an amendment to the constltu-
tion yesterday fixing sliding scale OF
maximum interest rates which men,
bcrs and non members of the assocla-
ton will be allowed to pay on various
classes of deposits. This action
brought to an end a fight which has
been waged ever since it was first pro-
posed several weeks ago to curb in
terest rates on out-of-town bank bal
ances at the suggestion of the Fed
eral Reserve Board authorities, who
wished to prevent competitive bidding
among the banks for deposit accounts.
The amendment finally adopted was
the result Of conferences held between
the members of the clearing house
committee and committee represent
ing the trust companies. Unlike the
first resolution presented recently by
the clearing house committee, the
amendment adopted yesterday, and
which becomes effective April !, is sat
isfactory to the trust company mem
bers who had opposed the original plan
of fixing a single maximum rate on all
deposits.
Complies With Boards Suggestion
The amendment, which takes effect
the beginning of April. states only the
maximum rates members and non-mem-
bcrs are allowed to pay, and does not
compel them to pay that maximum, but,
on the contrary. allows entire freedom
of action, provided the maximum rates
arc rot exceeded. Moreover, the
amendment complies with the sugges-
,ior OF the Federal Reserve Board that
the interest rates allowed should be
based upon the discount rates fixed by
tho Federal Reserve bank, and further
complies with their expressed views of
thc two objects of the Reserve Board -
first, to bring about cessation of com
pctitve bidding for deposits. and, sec
ond, to reduce to a considerable level
interest rates which under prevailing
conditions have been, in it's opinion, un-
duly advanced. The Clearing House
committee, of which Walter +. Frcw, Of
the Germ Exchange Bank, is the chair
man, announced that in its opinion the
proposed amendment will accom- plish
/ these results and tend to reduce com
petition with the government in fDanc-
! ing :hc war.
Text Of Amendment
The amendment as adopted follows:
No member of this association, bank
or trust company or Others clearing
through any member, shall agree to pay.
or shall pay directly or Indirectly. on any
hall will
! in thirty days, or certificate of deposit
payable. by its terms. issued to or FOR the
account of any bank (other than Il mutual
savings bank located in the Second Fed
cra Reserve District), trust company or
other institution conducting a banking
] business, private banker or bankers.
located in the United States Dominion
/ of Canada, interest at a rate in excess OF
per cent per annum when the then
nnety-day discount rate for commercial
paper at the Federal Reserve Bank of New
tional Il of l per cent for every y
ot | per cent that such discount rate of
the Federal Reserve Bank shall exceed .
per cent. except that the maximum rate
credit balance or certificate of deposit shall
not in any be higher than per
cent per annum; nor shall any member
or non-mcmber clearing through mem
bcr. pay or agree to pay on any like
credit balance Of like certificate of de-
poslt issued to, any mutual savings bank
located in the Second Federal Reserve
District or any person, persons, co-partner-
ship, corporation or assoc iation. other than
those specified aud included above, interest
at righer rate than 3 per cent per an
num- nor on any time deposit or certifi-
cate of deposit payable by its terms later
than thirty days from the date thereof, at
higher rate than 3 u. per cent per an
mum. The foregoing provisions are not in
tended to apply to the account of. or any
certificate of deposit issued to, any person
persons
ness IN any foreign country other than
the Dominion Of Canada. or to any cor
poratlon, association or co-partnership or
Eanized and located therein, nor to affect
such interest rates as arc or may be fixed
or regulated by law.
The Clearing House Committee upon as
certalning to the satisfaction of Il major
ity of its members that member or non
member clearing through Il member has
violated the provisions Of this section.
snail report their findings to the associa-
ton. and if approved by a majority vote
OF all the members of the association the
oncndlng member or non-mcmber shall be
tned hve thousand (S5.000) dollars. On
the second offence the member or such
from the Clearing House Association and
the committee will proceed to act as tho
constitution provides for the expulsion of i.
member. N
Board Will Not Object
In letter written to Mr. Fro,
chairman of the clearing house con,
mittee, by W. p G. Harding, governo
of the Federal Reserve Board. an
made public yesterday, Mr.. Hardin
: approves of the plan and expresses tn
belief that the amendment adopted wi
:, be instrumental in preventing a rur
! away competition among the bank
throughout the country "Thc propose
amendment to your bylaws has hoo
: considered by the Federal Rescrv
board" says Mr.. Harding. "and Will
the board regrets that it has not prove
practicable to reach an agreement pr(
Vldlng for an interest schedule baso
on maximum of 2 per cent for han
balances, 1T appreciates the diiIicultie
winch have been in the way of reachin
3 such an agreement The board undo
= stands that no bank or trust comnan
;; Will be obliged to increase any low1
4 existing rates, but that the rates nv,
y. Il posed are maximum rates, to whif
level any higher rates now obta;n;r
must be reduced; and it is grati6,
! to know that the plan proposed vii
= II adopted, materially reduce the ave-
age rates of interest now being M
py banks and trust companies on II
various classes of accounts-naro, y,
bank balances, open accounts cert;t
Gates OF deposit payable on demand ~
time deposits and certificates.
"Ihe schedule, therefore, is r