This section is from the "Practical Banking" book, by Albert S. Bolles.
Every National banking association is required to keep on deposit in the Treasury of the United States a sum equal to five per centum of its circulation, which sum is counted as part of its lawful reserve. All notes of National banks worn, defaced, mutilated, or otherwise unfit for circulation, are forwarded to the Treasurer of the United States for redemption. Such redemptions are reimbursed from the five per cent, fund, and notes worn and unfit for circulation are then forwarded to the Comptroller of the Currency for destruction. After making a record of the notes thus received, the Comptroller directs their destruction in the presence of four persons.
National banks having a capital of $150,000 or less are required to keep on deposit with the Treasurer of the United States, United States bonds equal in amount to one-fourth of their capital stock. Other banks are required to keep on deposit not less than $50,000 in United States bonds. Upon a deposit of bonds the association making the same is entitled to receive from the Comptroller circulating notes equal in amount to ninety per centum of the par value of the United States bonds so deposited, but the total amount of such notes issued to any association may not exceed ninety per centum of the amount of its capital stock actually paid in.
Every bank annually examines or has examined the bonds deposited in the office of the United States Treasurer, comparing them with the books of the Comptroller, and with its own record of them, and if the bonds exist and the record of them is correct, executes a certificate to that effect to the Treasurer.
A National bank can hold real estate under the following conditions and no others:
A.—The building needful to transact its business.
B.—Land mortgaged to it in good faith to secure debts previously contracted.
C.—Land conveyed to it in satisfaction of debts previously contracted in the course of business.
D.—Land purchased under sales ordered by courts in order to secure debts due to the bank.
E.—In the last three cases the real estate cannot be held beyond five years.
The rate of interest which a bank may take on any note, bill of exchange, or other evidence of debt is the rate permitted by the laws of the State or Territory where the bank is located.
Every bank in sixteen of the principal cities of the United States must keep on hand always in lawful money as a reserve fund, twenty-five per cent, of the amount of its deposits; and the banks in other places must keep on hand fifteen per cent, of their deposits. The banks last mentioned, however, may keep three-fifths of their reserve on deposit with such of the National banks as may be selected by them, approved by the Comptroller of the Currency, and doing business in any of eighteen specified principal cities of the United States.
National banks in any of the sixteen cities excepting New York, may keep one-half of the required twenty-five per cent, reserve on deposit in the City of New York.
Whenever this reserve of twenty-five per cent, for one class of banks and fifteen per cent, for the other, falls below that amount, the bank can make no new loans, except by purchasing or discounting bills of exchange payable at sight, nor make any dividend until the requisite proportion of reserve to circulation and deposits has been restored.
They cannot make loans on the security of their own stock, except to prevent a loss on a debt previously contracted, nor can they pledge their own notes of circulation for the purpose of getting money to pay in their capital stock.
They are also subject to examination by officers appointed by the Government.
The banks must make reports to the Comptroller of the Currency according to the forms which he prescribes, exhibiting in detail the resources and liabilities of the associations at the close of business on any past day specified by him. The Comptroller is required to call for not less than five such reports during each year. These reports must be verified by the oath of the president or cashier and attested by the signatures of at least three of the directors.
In addition to the reports mentioned above, each association is required to make a sworn report within ten days after the declaration of any dividend, of the amount of such dividend, and the amount of the net earnings. In order to enable the Treasurer to assess the duties, each association is required to make a sworn return to the Treasurer of the United States of the average amount of its notes in circulation.
The Comptroller employs district agents to examine from time to time, usually once a year, the affairs and assets of the several banks. For this service a stipulated charge is assessed upon the bank.
The charters of many National banks expired in 1882. On the twenty-fifth of February, 1883, the charters of 297 more expired. On the twelfth of July,1882, Congress provided for their renewal. Many of the National banks are now existing under this law. The same period of life is given to them as was given before—twenty years.