The Manchester journal. [volume] (Manchester, Vt.) 1861-current, 1920-01-01
SURPLUS rrNp RULING
Action Of Rank Commissioner frae-
ticauy Limits Banks 70 -Four fcr
Cont Inter.s..

dcaIl, Limits Bank, 20 -Four PEE
Cent Inters~,.
George h Carpenter. state bank
commissioner. hes made 4 ruling e.
fcetive january I neat "a tho efcct
that savinps banks and trust compan-
ics n computing the surplus fund
required hy statutes hall not include
as part 81 the surplus accrued inter
rst account. The effect Of this ruling
will be TO place practically all hanks
on four per cent basis beginning
January i, 1920,
In making up their statements fer
some time past. banks have includes
the accrued interest account which has
resulted in several Institutions arcum-
ulating surplus in excess Of ten per
cent Of their deposits, and under this
method Of determining surplus som"
banks have felt justified in paying in
tercst on their deposits at the rate Of
four and a quarter and four I'D half
per cent.
Mr.. Carpenter has believed for soms
time surplus accounts should be -
tlblshed and maintained in accord
ance with section 5429 and 5437 and
that the intent Of these sections y
primarily to provide for the protec-
ton Of depositors, certain reserved
fund. and that II should be maintained
at all times in a certain ratio 10 dc
posts Because Of the Interpretation
which has been given, however, he was
reluctant 20 make any ruling without
submitting the question to the attor-
ney general, which he has done, and
Atty. Gen. Frank c. Archibald. in a,
opinion rendered holds this view
about "accrued interest" and has in
torprcted the surplus fund" to mean
that an actual surplus Of ten per cent
excepting surplus, is necessary before
a rate exceeding four per cent may be
paid on deposits. Backed by the
opinion OF the attorney general, Mr.
Carpenter has taken the firm 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
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
depositors. Any competition among
banks - increase the rate Of interest
unless warranted after fulfilling stat
ute requirements might result, II If
felt. in the accumulation Of assets
which although paying a higher re-
turn would n1t be Of a class hitherto
considered. II is recognized fact
that Vermont banking institutions
have an enviabe record for safety and
II is the purpose Of the department
that this reputation be maintained.
In respect to the question raised by
certain trust companies ms TO whether
they must accumulate a surplus Of ten
per cent of their savings deposits
alone. the commissioner holds that as
the fund Is reserved for the protection
Of dcpositors, the surplus Of ten per
cent Of all deposits, savings ms well as
commercial, will be required, which he
considers ample though not excessive
The commissioner also Is satisfied that
the policy Of paying -four and quar-
ter and -four and a half per cent would
not be wise to adopt or have IN force
throughout the state in view Of the
state tax Of seven tenths Of one per
cent levied on all deposits in state
banks. Mr.. Carpenter is sending out
letters to all state banking institutions
calling attention to the ruling.