Evening star., 1933-08-27
RULINGS ISSUED
ON STATE BANKS
Reserve Board Announces
Requirements to Join
Federal System.
By the Associated Press.

By the Associated Press.
Interpreting the 1888 bank act, the
Federal Reserve Board, in one Of a
series of rulings made public yester-
day, held that State bank having cap
ital stock of less than $500,000 and 10
of more than 100000 cannot become
a member of the Federal Reserve sys-
tenn and continue to operate outside its
home city station for receiving de-
posits and cashing checks.
At the same time, it held that a
State bank or trust company organized
prior to the date Of approval of the
banking act last June 16 and situated
in a place with a population of not
more than 5000 and having a capital
stock Of not less than S25,000 is eligible
for admission to membership in the
reserve system. If the capital were
less than $25000 on June l6, the bank
to that amount prior to admission to
membership.
Warning to be Given.
On the section Of the law prohibiting
excessive loans on stock collateral by
member banks after a warning by the
Federal reserve bank of the district
the board held that a member bank
which has obtained advances from the
Federal Reserve bank is not required
to refrain from making further loans
secured by collateral or to dealers in
securities until an official warning is
given by the Federal Reserve bank. An
increase in the amount of such collat-
eral loans during the life or continu
ance of an advance does not subject the
bank to the penalties unless such in
crease were made after the offlcial
warning.
The board ruled that deposits Of
moneys paid into State courts pending
outcome Of litigation and deposited in
banks are not deposits OF public money
and therefore a member bank may not
lawfully pay interest on such deposits
when they are payable on demand.
1t held that payment by member
bank of a premium on a bond given to
secure deposit of public funds payable
on demand was an indirect payment of
interest en- the deposit which is pro-
hibited by the law but does not apply
to any such deposit Of funds made on
behalf Of State. county, school dis
trict or other subdivision or munich
pa,ity
Rigid Rule Impossible.
The board said it could not lay down
any hard, fast rule and enumerate
"eXecutiv, officers of banks" who are
prohibited from borrowing from member
banks with which they are connected.
The law also requires reports to be made
to the board of borrowing from one
bank by executive officers Of another
member bank.
Duties of the officers varied so great
ly, the board said. that while one hav-
Ing certain title in one bank might
be an executive officer, another with
the same title in another bank might
not be such an officer. Prosecution of
such offenses is entirely in the hands
Of the Department of Justice ard the
board said it was without authority to
prescribe regulations on the subject.
1t also held that where investments
made by member bank in the capital
stock Of its affiliates. prior to June 16,
1888, exceed the limits prescribed by
the law, the member bank NAV not
lawfully make loans to the atiliates
while it holds such investments. The
law requires that in such cases the
loans on the obligations Of the afiliates
must not exceed 10 per cent of the
capital stock and surplus of the member
bank for one affiliate or 20 per cent for
all affiliates.