The Barre daily times. (Barre, Vt.) 1897-1959, 1919-12-24
ACCRUED INTEREST
NOT OF SURPLUS FUND
Effect of Ruling BY Vermont Bank
Commissioner Will Reduce Num-
Der of Banks Paying More Than
4 Per Cent Interest

George b. Carpenter, Vermont state
bank commissioner, has made ruling
effective Jan. | next, to the effect that
savings banks and trust companies in
computing the surplus fund" required
by statute shall not include as part OF
me surplus, accrued interest account.
The effect Of this ruling will be TO place
practically all banks ON per cent
basis Jan. ! 1920
In making up their statements for
some time past, banks have included
as surplus the accrued interest account
which has resulted in several institu-
tlons accumulating surplus in excess
.of 10 per cent of their deposits, and
under this method of determining sur.
plus some banks have felt justified in
paying interest on their deposits at the
rate Of Az and AZ per cent.
MIR. Carpenter has believed for some
time that surplus accounts should be
established and maintained in accord.
ance with sections 1920 and 5437 and
that the intent Of these sections is
primarily to provide for the protection
OF depositors, a certain reserved fund.
and that II should be maintained ait all
times IN certain ratio TO deposits.
Because of the interpretation which
has been. given, however, he was re-
hetant to make any ruling without
submitting the question to the attorney
general, which he has done, and ATTY.
Gen. Frank c. Archibald, in an opinion
rendered, holds this view about "ac.
crued interest" and has interpreted the
surplus fund" to mean that an actual
surplus Of 10 per cent of the deposits
and other liabilities, excepting surplus.
IS necessary before rate exceeding
4 per cent may be paid on deposits.
Backed by the opinion of the attorney
general, Mr. Carpenter has taken the
flrm position that this fund must be
established in strict accordance with
the provisions of law and the item of
accrued interest shall not be construed
as any part of the surplus other than
undivided profits.
In taking this step, which may not
meet with favor in some quarters. Mr..
Carpenter is guided by the basic prin.
ciple of conservative banking which he
believes To be in the interest of the de-
positors. ANY competition among
banks to increase the rate Of interest
unless warranted after fulfilling stat
ute requirements might result, it is
felt, in the accumulation of assets
which although paying higher return
would not be OF a class hitherto con.
sidered. 1t is recognized fact that
Vermont banking institutions have an
record for safety and it il the
purpose Of the department that this
reputation be maintained.
In respect TO the question raised by
certain trust companies as TO whether
they must accumulate a surplus Of 10
per cent Of their savings deposits alone,
the commissioner holds that as the
fund $ reserved for the protection Of
depositors, the surplus OF 10 per cent
Of all deposits, savings as well as com.
mereial, viii be required, which he con
siders ample though not excessive. The
also IS satisfied that the
policy Of paying IA or az per cent
would not be wise TO adopt or have in
force throughout the state in view Of
he state tax of seven tenths Of / per
,ent levied on all deposits in state
banks. Mr.. Carpenter is sending out
letters to all state banking institutions
'alling attention to the ruling