The national bank act gives national banks the following general powers: to receive deposits; to discount promissory notes, drafts, bills of exchange and other evidences of debt; to buy and sell exchange, coin and bullion; to loan credit on personal security; to issue circulating notes; and to exercise such incidental powers as shall be necessary to carry on the business of banking.

With these powers go certain restrictions and limitations.

A national bank cannot become indebted to an amount exceeding its capital except for circulating notes, deposits, drafts against its own funds and unpaid dividends. The capital cannot be withdrawn in the form of dividends or otherwise. If the capital should become impaired by bad debts or otherwise, it must be restored within three months under penalty of being closed by the Comptroller. A national bank cannot lend, directly or indirectly, more than one-tenth of its capital and surplus to one person, firm or corporation. It cannot make loans on the security of its own shares, or buy or hold them unless they are taken as security for a debt previously contracted, in which case they must be sold within six months. A national bank may own only such real estate as is necessary for the conduct of its business and such as comes into its possession in the settlement of previously contracted debts. If it takes real estate in this way it must dispose of it within five years. Under the Federal Reserve Act, however, any bank not in a central reserve city may loan 25 per cent of its capital and surplus, or one-third of its time deposits, on improved and unincumbered farm land within its Federal reserve district. Such loans are limited to 50 per cent of the actual value of the land and may not run for more than five years. No bank may certify a eheck for a larger amount than the customer has on deposit.