The new law grants to national banks several additional powers that will widen their service and their opportunity for profit. Under special permit of the Federal Reserve Board, when not in contravention of state or local law, national banks are given "the right to act as trustee, executor, administrator, or registrar of stocks and bonds under such rules and regulations as the said board may prescribe.' As noted in an earlier chapter, trust companies have steadily extended their activities until in many cases they have become active competitors with commercial banks for ordinary commercial business. Now national banks may undertake trust functions, and so can compete with trust companies on even terms. In some states, however, legislation may be necessary to permit national banks to exercise these new functions.
Hitherto national banks have been greatly handicapped in competition with state banks, especially in the West, because of their inability to lend on mortgage security. This disadvantage is now removed. All national banks, except those in central reserve cities, may lend for periods not exceeding five years, 25 per cent of their capital and surplus or 33 1/3 per cent of their time deposits on improved and unencumbered farm land within their district up to 50 per cent of the value of the property. The Reserve Board has power to add to the list of cities in which national banks are not permitted to make these farm loans.
Though the national banking act does not give specific authority to national banks to organize savings departments, the competition for deposits and the payment of higher rates of interest on savings than on other accounts by trust companies and other state banks, has led national banks to establish savings departments or to pay interest on savings accounts. Nearly one-half of them now have such departments and altogether they hold over $800,000,000 of savings deposits. The uncertainty as to whether national banks could enforce their savings department rules has been removed, as the new Act includes in the definition of time deposits "all deposits payable after thirty days, and all savings accounts and certificates of deposits which are subject to not less than thirty days' notice before payment." In some states the investments of savings banks are very strictly limited. National banks under the new law will have an advantage in not being so narrowly restricted in the employment of savings deposits.
Heretofore national banks have not been permitted to have branches in foreign countries. Under the new Act national banks having a capital and surplus of at least $1,000,000 may establish foreign branches, subject to the approval and regulations of the Federal Reserve Board. They may also accept bills of exchange maturing within six months drawn or issued in connection with exports and imports.