Hand-book for Bank Officers

Form B.-Calculation of the Lawful-Money Reserve of National Banks Not Located in Reserve Cities or Central Reserve Cities. Items on Which Reserve is to be Computed.

is the entire reserve required, which is

Deduct 5% redemption fund with Treasurer U. S.

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$132,531

1,125

$131,406

Silver dollars.

4,450

Silver Treas. cert.

8,575

Exceptional Cases.

It sometimes happens that, while the "aggregate" reserve of a bank located outside of a "central reserve city" is more than sufficient, it has not a sufficient amount on hand in bank; in other words, it has more than is necessary in the hands of " reserve agents." In such a case, while the law does not permit such excess with "agents" to offset a deficiency in the reserve needed in bank, such "excess" may be regarded as "due from other banks," and, as such, applied in the same way to reduce liability on "deposits," with the result sometimes of so reducing the amount of reserve needed in bank as to show that the "lawful money" on hand is sufficient.

In order to find and apply the exact excess in the hands of "reserve agents" use the following:

Rules for finding Exact Excess with Reserve Agents and for applying it to Reduction of Liability on "Deposits."

From the amount actually in hands of reserve agents," deduct the amount which by the ordinary method of computation it seems should be there; the remainder will be the "apparent excess."

I. In the case of a reserve city" bank, add one-seventh of the "apparent excess" to such "apparent excess

and

their sum will be the "exact excess" which may be applied to reduction of liability on "deposits."

II. In the case of a 15 per cent. bank, add nine-ninety-firsts of the "apparent excess" to such "apparent excess," and their sum will be the "exact excess."

Having ascertained the "exact excess" in this way proceed to apply it to reduction of liability on "deposits" and to the consequent decrease of reserve apparently required to be in bank as follows:

I. Where the "exact excess" equals or exceeds the balance due to other banks and bankers, as shown by ordinary method of computation, the amount by which the reserve apparently required in bank may be decreased will be

(a) In the case of a "reserve city" bank, one-eighth of the balance due to other banks and bankers.

(b) In the case of a 15 per cent. bank, 6 per cent. of the balance due to other banks and bankers.

NOTE. The reason for this is, that in such a case the treatment of the "excess" with "agents" as an amount due from banks and bankers causes the amount due from to offset the amount due to other banks and bankers and so eliminates the balance due to them from the computation, and therefore renders it unnecessary to provide for a reserve on such balance.

II. Where the "exact excess" is less than the balance due to other banks and bankers, the amount by which the reserve apparently required in bank may be decreased will be

(a) In the case of a "reserve city" bank, one-seventh (4) of the "apparent excess."

(b) In the case of a 15 per cent. bank, six-ninety-firsts (1) of the "apparent excess."

As of any amount is a little less than one-fifteenth () of such amount, it will involve less labor to find of the " apparent excess" and this portion will be nearly enough correct, unless the "excess" is a large amount.

NOTE. The reason for this is that in such a case the treatment of the " excess" with "agents" as an amount due from other banks has the effect of reducing the liability on the balance due to other banks, and therefore renders it unnecessary to provide for a amount of such "excess."

"" reserve on the

To illustrate the application of these rules for "exceptional" cases, two examples are given: the first (Form A) illustrating the case of a 25 per cent. bank; the second (Form B) illustrating the case of a 15 per cent. bank, each of which has an amount with "agents" in excess of legal require

ments.

NOTE. In all computations for ascertaining reserve it should be distinctly understood that any excess in the hands of agents can not be counted as reserve for the reason that the law (Secs. 5192 and 5195) fixes a limit to the amount in the hands of agents which may so be counted, and any amount over and above the designated limit or proportion has not the legal status of reserve and can not so be regarded.

Form A.- Calculation of the Lawful-Money Reserve of National Banks Located in Reserve Cities and Central Reserve Cities.

Items on Which Reserve is to be Computed.