Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-10-14
BANKS BENEFITED
BY RESERVE RULING
Board. Amends Regulation
Governing Computation of
Required Reserves.
BY EDWARD C. STONE.

The Federal Reserve Board announces
very important amendment to its
regulations, which now permits the
computation of deficiencies in reserves
on the basis of member banks deposits
at the opening of business, instead OF
at the close of business, on the same
day. The new ruling is of much i'm
portance to the Federal Reserve mem
Der banks in Washington, and has the
same significance to banks everywhere
else.
In brief, the board has amended
subsection "a" of section OF its regu-
lation D so as to provide that, in COM
putting penalties for deficiencies in re-
serves the required reserve balance OF
each member bank at the close OF bust
ness each day shall be based upon its
net deposit balances at the opening OF
business. instead of at the close of bust
ness, on the same day"
mo change" the board adds. was
made in the existing practice OF COM
putting such deficiencies on the basis OF
average daily net deposit balances COW
ering semi-weekly, weekly or semi
monthly periods"
This change in the regulation was
made because fluctuations in their own
deposit balances during the day, espe-
It dificult for member banks accurate
" to estimate what their reserve re-
ouirements would be each day when
they were computed on the basis OF
their deposit balances as of the close
Of business.
vital TO Big Institutions.
The new ruling means more to the
larger banks of the country than to the
l.
er banks run along more evenly, thus
making the computation more simple.
In the computation of such reserves the
week begins on Friday and ends on
Thursday.
At the end of the week big member
banks often have some large corpora
ton deposits of some big transfers by
wire just before the close OF business
AS they have no advance information
of these late transactions, they either
had to keep extra large sums on de-
post with the Federal Reserve to meet
such emergencies or pay penalty for
being under requirements.
Under the regulation amendment the
banks will continue to compute their
reserves on the weekly average basis
but by using the net deposit balances
at the opening Of business will always
know exactly how they stand. The
new method will be perfectly accurate
as no deposit fluctuations late In the
day, at the end of the week, will make
any differences with the computation.
The internal pressure" will be wholly
relieved. The amendment is declared
to be a distinct step forward and is
already in effect. It is believed that
the new ruling will function so smoothly
that bankers and Reserve officials will
wonder that the computations were
ever made on any other basis.
Banks Cut Failures Losses.
Even with a considerable increase in
the number of banking failures during
the third quarter of this year, the la
bilities were slightly smaller than those
for the corresponding period Of 1929.
At 102 the number for the three months
recently ended was about 26 per cent
above the total of 81 reported to r.. @.
Dun & Co. for the third quarter of
last year, but the Indebtedness declined
TO $73,e77, 3e7, from STA, 1e0,370, or a
reduction Of approximately 0.5 per cent.
In the same quarter Of both 1928 and
1927 there were IS banking failures,
involving some $40 800 900 in each year.
The numerical. increase I'm banking
failures during the third quarter Of the
present year, In comparison with the
returns for the. corresponding three
months Of 1929, occurred principally in
the Central East and the Central West,
while there was marked Improvement
in the South Atlantic States Else
where, moderate increases were the
rule. A sharp falling on in the South
Atlantic section, together with 9 con-
siderable reduction In the Western
group, accounted for the smaller liabili-
ties for the country, as a whole.
A comparison Of banking suspensions
10 made by sections for the third quar-
ter Of the past three years.