On September 7, 1916, the Act of 1913 was amended so as to permit member banks to carry with the federal reserve bank any part of the reserves which by the Act of 1913 they were required to carry in their own vaults. But the members failed to respond to this permission, although they were solicited earnestly to do so by the federal reserve banks. The board accordingly decided to compel the transfer by legislative enactment, secured June 21, 1917. This law simply prescribes the per cent reserve to be held in the federal reserve bank and permits the member bank to keep what till money it finds expedient. The total required reserve of the member banks against deposits is, therefore, carried with the federal reserve bank and consists of a credit balance of 7, 10, or 13 per cent against demand deposits, for country, reserve city, and central reserve city banks, respectively, and 3 per cent against time deposits for all banks wherever located. While this change reduced the reserve requirements still further, it forced the immediate transfer of the portion of the reserves still held with the reserve city banks, the transfer of which was not, by the Act of 1913, to be effected until November 16, 1917. These shiftings in reserves were facilitated by the very easy money conditions caused by the war.
The reserve requirements were further amended in 1918, to provide that banks located in outlying districts of reserve cities, or in territory added to such cities by the extension of their corporate charters, may by the affirmative vote of five members of the Federal Reserve Board maintain the reserve balances prescribed for banks located outside reserve cities; and that banks located in the outlying districts of central reserve cities under similar circumstances may be permitted to hold reserves equal to those required of reserve city banks. The board has voted that it will not define such outlying sections in cities in districts other than Boston and New York, but that it will consider individual applications received from such banks as feel entitled to a change of reserve requirements. Application is made through and with the recommendation of the federal reserve agent. In New York City the banks of Brooklyn, Queens, Richmond, and the Bronx are permitted to carry 10 per cent under this law; whereas banks located in Manhattan, or located in other boroughs but having branches in Manhattan, carry 13 per cent reserve. This amendment was occasioned by the fact that these outlying banks performed none of the functions of a reserve city bank, or a central reserve city bank, respectively, but occupied the same relationship to the reserve banks as did the provincial banks, and it was thought the reserve requirements ought to be adjusted accordingly.