Exactly

as in Report

*The data for Hamilton County is as of December 31, 1950.

EXPLANATORY NOTE: The column of the foregoing table headed "Percent of Total Deposits of all Commercial and Savings Banks" shows the percentage relationship of demand deposits in commercial banks to all deposits in all banks, both commercial and savings.

That entitled "Time Deposits of Commercial Banks as Percent of Demand Deposits" shows the percentage relationship of time deposits in commercial banks to demand deposits in commercial banks. A percentage of 100 would indicate both are equal; of 75 that time deposits are 75% of demand deposits; and of 125 that time deposits are 125% of demand deposits.

It will be seen from the foregoing Table 6 that outside New York City savings deposits are just as important to commercial banks as their demand deposits. Without their savings deposits, commercial banks in upstate New York would not have adequate resources to finance the business of their communities.

Every student of banking agrees that a commercial bank is absolutely essential to the economic welfare of a community. A savings bank, a savings and loan association and a credit union can be dispensed with and the community will still be economically healthy and thriving. The commercial bank cannot be dispensed with. Its services are essential. Without them there would be no businessno savings and shortly, no modern community.

As of today, substantially half of the deposits of our commercial banks outside of New York City are represented by savings deposits. In the large banks in our upstate and Long Island industrial centers, the ratio is about onethird savings deposits and two-thirds demand deposits.

Exactly as in Report

However, outside the largest banks, savings deposits represent more than one-half total deposits. State-wide outside New York City the ratio is just about one-half demand deposits and one-half savings deposits.

Savings deposits are of relatively lesser importance to commercial banks in New York City than in the remainder of the state. Of the appproximate $22,000,000,000 of deposits in commercial banks in New York City on June 30, 1954, only about 10% were time deposits and only a minor part of that 10% represented savings or thrift deposits. The reason for this situation is the intense competition for savings and thrift funds from the 53 large mutual savings banks located in New York City. On June 30, 1954, those 53 mutual savings banks in New York City had aggregate savings deposits of $11,971,321,000. The remaining 76 mutual savings banks in all of upstate New York and Long Island had aggregate savings deposits of only $3,009,788,000. This intense competition from mutual savings banks in New York City accounts for the relatively small percentage of savings and thrift funds in the deposit structure of New York City commercial banks.

Just what will the banking situation in this state be like if the commercial banks upstate lose all or even a substantial part of their savings deposits? Will the business life of our upstate communities be adversely affected! Will their growth and development be retarded? What will be the effect on employment? What will be the effect on agriculture!

These questions deserve the most careful reflection before anything is done that will tend to drain these savings deposits out of our New York State commercial banks, and particularly those outside of New York City.

Exactly as in Report

Question Two:

How far can rate competition for bank deposits go before it becomes unhealthy?

We had an example of unbridled rate competition for bank deposits in the late 1920's. It received a major portion of the blame for the banking difficulties encountered in the early 1930's. The Banking Act of 1933 sought to correct it by prohibiting payment of interest on demand deposits and by authorizing the Board of Governors of the Federal Reserve System to regulate it rigidly as to savings and time deposits. This the Board of Governors has done insofar as member banks of the Federal Reserve System are concerned by Regulation Q which currently provides

"(a) Maximum rate of 2% per cent. No member bank shall pay interest accruing after January 31, 1935, at a rate in excess of 212 per cent per annum, compounded quarterly, regardless of the basis upon which such interest may be computed,

(1) On any savings deposit,

(2) On any time deposit having a maturity date six months or more after the date of deposit or payable upon written notice of six months or

more.

(3) On any Postal Savings deposit which constitutes a time deposit.

"(b) Maximum rate of two per cent. No member bank shall pay interest accruing after January 1, 1936, at a rate in excess of two per cent per annum, compounded quarterly, regardless of the basis upon which such interest may be computed,

Exactly

as in Report

(1) On any time deposit (except Postal Savings deposits which constitute time deposits) having a maturity date less than six months and not less than 90 days after the date of deposit or payable upon written notice of less than six months and not less than 90 days.

"(c) Maximum rate of one per cent. No member bank shall pay interest accruing after January 1, 1936, at a rate in excess of one per cent per annum, compounded quarterly, regardless of the basis upon which such interest may be computed,—

(1) On any time deposit (except Postal Savings deposits which constitute time deposits) having a maturity date less than 90 days after the date of deposit or payable upon written notice of less than 90 days."

However, this regulation does not apply to mutual savings banks, savings and loan associations, or credit unions, as they are not members of the Federal Reserve System.

Some banks are already at the rate ceiling permitted by this regulation. Others are likely to go up to it shortly. However, the ceiling rate is scarcely competitive with rates currently paid by savings and loan associations and mutual savings banks are considering going to rates which will move them out of competitive range of this ceiling.

Question Three:

Are the mutual savings banks and the savings and loan associations attracting funds on a rate basis that are not savings in any proper sense of the term?