Should a bank reduce its circulation, either by depositing lawful money or by permitting notes to be redeemed by the Treasurer and destroyed and asking for no new notes to take their place, the amount of the 5 per cent fund may be correspondingly reduced. In such case the Treasurer will, upon receiving the proper advice, surrender any excess in the 5 per cent fund that may result from such destruction or reduction of notes; but he will not so release a portion of the 5 per cent fund until the details of the reduction of circulation are completed by depositing lawful money and withdrawing the bonds.
The bank must pay the charges for transportation and the cost for assorting redeemed notes. At the end of each fiscal year, account having been kept of its expenses by the National Bank Redemption Agency, the several banks are assessed in proportion to the amount of their notes redeemed, and this sum is then charged to their 5 per cent funds respectively. If a bank deposits lawful money for the retirement of its circulation, it is assessed at the time it makes such deposit for the cost of transporting and redeeming the notes then outstanding, the assessment being equal to the average cost of the redemption of national bank notes during the preceding year. The rate charged to the national banks in 1915-1916 for redemption expenses was $.817229 per $1,000 redeemed.
Any bank desiring to withdraw all of its circulation, or any part of it, may do so by depositing with the Treasurer of the United States lawful money to an amount equal to the notes it wishes to retire. The Treasurer will then reassign the bonds to the bank which is withdrawing circulation, and will destroy the redeemed circulation. The retirement of circulation by depositing lawful money is limited to $9,000,000 in any one calendar month.2 In certain cases, however, this limitation does not apply: (1) when a bank reduces its capital stock to an amount below its outstanding circulation; (2) when a bank retires its circulation by surrendering the notes for cancellation without reissue, as in this case no deposit of lawful money is required; (3) when bonds are called for redemption by the Secretary of the Treasury and circulating notes are withdrawn in consequence thereof. The purpose of limitation on the rate of retirement of national bank notes is to prevent too sudden reduction in the volume of currency, with its train of undesirable consequences.
2 See Acts Of July 12, 1882, March 4, 1907, And May 30, 1908.