Burlington weekly free press. [volume] (Burlington, Vt.) 1866-1928, 1920-01-01
WOULD LIMIT VERMONT
BANKS INTEREST RATE
c Commissioner Finds Only a Few
Institutions Can Legally Pay
More Than Four Per Cent and
Hopes That Others Will Not
Do So


sioner George B. Carpenter is carried out
no State bank will pay interest for the
present at higher rate than four per
cent. In his opinion, which is backed up
by a ruling from Attorney General f.. G.
Archibald. but few banks csan legally do
so. Notwithstanding the fact that several
have for some time been paying at the
rate of AZ and Az per cent and they, with
some others. have announced that, be-
ginning with January 1. they would pay
depostors at a rate in excess of four per
cent.
Mr. Carpenter recently asked Mr..
Archibald for a ruling in this matter and
the letter which follows states clearly
that no Vermont bank can legally pay
any higher rate of interest thar per cent
unless that institution has a surplus fund
maintained apart from other funds and
resources which amounts to the per cent
of all other liabilities of that bank.
With this information at hand, the bank
commissioner has sent letter to every
bank In the State, stating just what
banks would be allowed to pay the higher
rates of interest and recommending that
those banks which are permitted to do
so under law voluntary revert back to
the rate of four per cent for the time
being.
ATTORNEY GENERALS OPINION
The letter of the attorney general to the
bank commissioner is as follows:
Manchester Center. VT
December 90 1919
Hon. George b. Carpenter.
Bank Commissioner.
Montpelier, VT.
Dear Sir:
Replying to your inquiry Of recent
date relative to the above entitled mat
ter, | beg to state:
The Legislature has, by Section 5429 and
1880, General Laws, declared, with GER
tain limitations, what rate of interest
may he paid by these banks and has
determined upon what conditions the
rate of interest so paid may exceed IA per
cent semi-annually.
BY section 5429 provision is made for the
accumulation of fund designated as a
surplus fund" This is "A distinct fund
not to be COMPOUNDED with other assets of
these banks. The method whereby such
fund is accumulated Is prescribed in
terms so plain that no one can be mis-
taken as to the course to be adopted
By the terms of Sec. $3.50, savings banks
are permitted to pay only ia per cent in
terest on deposits semi-annually until
one-half of the 10 per cent fund described
in the preceding section has been ac-
cumulated. This Enthusiastically refers to
that particular fund known as the sur
plus fund"
Whenever so per cent, or one-half Of the
10 per cent fund, described in section 5429
has been accumulated, and so long as the
fund so accumulated does not fall below
half of such 10 per cent. the rate may be
not more than two per cent semi-annual-
ly uuon accumulation of the entire 10
per cent provided for by section $500. then
and there after, so long as such surplus
fund equals exceeds such ten per
cent. such rate of interest may be paid
as the trustees consider warranted.
This Surplus fund can not, In my
opinion, be created by including as
part of such surplus any other funds or
resources than those expressly reserved
for such fund. If this statute is not to
be so construed, then at any time other
funds or resources may be treated as the
fund contemplated by the statute. And
if this is the correct Interpretation of the
statute, why have any fund that is re-
ferred to as the Surplus fund.-" Had
the intention been that the higher rates
Of interest might be paid when all re-
sources of such banks exceed its liabil-
ltioo ~ VIC PltSSiibe pei tthts tHeli
intention might and probably would have
been written into the statute.
Wherever in section 5430 the words
funds" or Surplus fund" occur, they
must he held as referring to the Sur
plus fund" of section 5429.
1t is my opinion, and l so advise you
that no savings bank in Vermont has
legal authority to pay interest in excess
of 2 per cent semi-annually until the
Surplus fund" a fund to be maintained
apart from any other funds or resources
of such bank amounts to 10 PEI cent of
all other liabilities of the bank
Yours very truly,
+. G. ARCHIBALD
Attorney General
LETTER SENT TO RANKS