Nogales international., 1936-03-28
BANK CHARTERINC
POLICY reviewed
State Official Declares Sound
Principles in Licensing
Banks Are Essential


pt licy in chartering banks was dis
cussed by Carl K. Withers, Commis.
sioner of Banking and Insurance of
the State OF New Jersey, before the
Eastern Conference on Banking
Service, held here recently under
the auspices of the American
Bankers Association. He declared
that "few questions bearing on the
future stability and security of our
banking systems loom as more i'm.
portant than that Of sound policy
to be pursued in bank chartering."
Alluding to competitive policies
Of both state and national banking
authorities to charter the most
banks in the past. he said that this
country was over-bankel. and that
aside from any other consideration
economic or otherwise. this condi
tion was brought about largely
through an unwise. unsafe and un
thinking charter policy. alternating
between the state and national sys
+cms, which has marked and ham
pered banking progress in this coun
try since it's very inception"
Political Influence
He decried political considera-
tions in connection with the charter.
ing of banks saying: political in
fluence has no more place in bank
ing that it has N the deliberations
OF our highest tribunal-The Su
preme Court of the United States.
Until this is recognized and brought
into being within both our state and
national systems, we may never feel
safe against the shifting sands of
political expedience and favor"
AS to the element Of sometimes
ridiculous competition heretofore
existing between the state and ma
tional systems" he said that much
may be said in favor Of the progress
made in recent years. In many
states there exists a practical work.
in, agreement between local super
vising authorities and the federal
authorities, whereby all charter ap-
plications are mutually considered
o a basis of community need rather
than competitive advantage as be-
tween systems. In some states this
arrangement goes even further In
the refusal of the one authority to
even consider charter while pend.
ing with the othar.
Aside from the competitive and
political aspects of our future char
for policy, he continued, there are
several others more individual and
local which merit consideration.
Among these he mentioned honesty
0f purpose. community need, the
character of management and ade-
quacy of capital.
Most state laws make reference
tt the character, possibility and
fitness" of the incorporators of a
new bank, he said, continuing:
$50 important do conceive this
factor to be, that place it first
among those fol consideration, for
unless the motive is sound, honest
and sincere, there is little likelihood
that the resultant institution in it's
service to the community will reflect
other than the spirit of its founders.
The Lessons of the Past
"Too often in the past have char
ters been granted to promoters pure
and simple-not always pure. and
by no means simple. The country
was dotted with such. The expert
ence has been costly and, it is to be
hoped, the lesson well learned, NOT
only by charter-granting authorities
but by the general public as we'll"
Other factors to be considered as
among the most important in grant
ing new bank charters, he said, are
the number of institutions already
serving the area, the record of earn
ings Of existing institutions, the
number Of failures since 1920, and
the reasons therefor, public con
venience and advantage, the reason
able prospects for growth of the
community, expectation of profit
able operation and whether a branch
Of an existing institution could
serve as well.
Sound public policy demands
that no new banks be chartered un
less there is a definite, necessitous
and permanent need" he declared.
Sound mergers. consultations and
the sensible extension of branch
banking are much to be preferred
to any general movement toward a
flood of new charters. But here
again we must guard carefully
against monopoly or unbridled
bIanch competition, either of which
might become as dangerous as the
organization Of new banks"