The Bank Statement
“A statement or exhibit of the condition of banks.
“In New York the Bank Statement is issued from the clearing house on Saturday. The consolidated statement (or as it is officially designated, the “summary of the weekly statement of the associated banks”) is the collective showing by the banks belonging to the clearing house—the showing when the returns of the individual banks have been consolidated (put together).
“The consolidated bank statement shows the average deposits, loans, specie, legal tenders, circulation, reserve and surplus reserve of the banks for the week ending with and including Friday.
“The term deposits includes the net deposits (credit balances) of persons and concerns (designated as individual deposits), balances to the credit of other banks and all money and credits subject to withdrawal. Loans include money loaned and likewise paper (promissory notes, drafts, etc.) bought. Specie includes not only gold and silver coins, but also gold certificates, which are redeemable in gold or silver, as the case may be. Legal tenders as the term is used in the bank statement, means, United States notes (greenbacks) and Treasury notes (notes issued for silver bullion purchased under the so-called Sherman act).
“Note.—As defined by the statutes, legal tenders include United States notes, Treasury notes, gold and silver coins and minor coins, but not gold certificates, nor silver certificates.
“Circulation means the notes issued by national banks, to secure the redemption of which Government bonds have to be purchased by the banks and deposited with the Treasurer of the United States. A bank cannot count circulation in its reserve; whether it is its own circulation or the circulation of some other bank, makes no difference. Reserve means the total amount of specie and legal tenders held. Surplus reserve means the total amount held in excess of legal requirement. A national bank (in New York City) must, by law, maintain a reserve equal to 25 per cent. of its deposits; a state bank must, by law, maintain a reserve of 15 per cent. In compiling the bank statement a reserve of 25 per cent. is allowed or figured for state banks as well as for national banks.
“The consolidated statement formerly was issued from the clearing house in the following form, the changes (increases and decreases) resulting from comparison with the preceding statement (the statement issued the week before):
| Loans | $874,647,900 | $2,344,000 | Increase |
| Specie | 152,338,200 | 1,068,300 | Increase |
| Legal Tenders | 67,274,300 | 1,319,000 | Decrease |
| Deposits | 872,340,600 | 164,600 | Increase |
| Circulation | 36,072,500 | 411,600 | Increase |
| Decrease of reserve, $291,850 | |||
“The (final) item reserve in the statement as issued from the clearing house, meant surplus reserve, although not specifically so stated.
“In the newspapers the statement appeared as follows; being elucidated so as to show the reserve held (that is, specie and legal tenders which are generally referred to as cash holdings), the reserve required and the surplus reserve with the changes in these items:
| Current Week | Preceding Week | Changes | |
|---|---|---|---|
| Loans | $874,647,900 | $872,303,700 In. | $2,344,200 |
| Deposits | 872,340,600 | 872,176,000 In. | 164,600 |
| Circulation | 36,072,500 | 35,660,900 In. | 411,400 |
| Legal Tends. | 67,274,300 | 68,593,300 De. | 1,319,000 |
| Specie | 152,338,200 | 151,269,900 In. | 1,068,300 |
| Reserve held | $219,612,500 | $219,863,200 De. | $250,700 |
| Res. req’r’d | 218,085,150 | 218,044,000 In. | 41,150 |
| Surplus | $1,527,350 | $1,819,200 De. | $291,850 |
“In 1902 the Secretary of the Treasury (Leslie M. Shaw) suspended the requirement to keep a reserve against government funds on deposit in national banks upon the ground that these funds were special deposits which were fully secured by pledge of bonds with the Treasurer of the United States. This action by the Secretary of the Treasury caused a change in the make-up of the bank statement by the addition to it of figures showing the average amount of government funds on deposit. The consolidated statement was thereafter issued from the clearing house in the following form:
| Loans | $874,647,900 | $2,344,200 | Increase |
| Specie | 152,338,200 | 1,068,300 | Increase |
| Legal Tenders | 67,274,300 | 1,319,000 | Decrease |
| 3Deposits | 872,340,600 | 164,600 | Increase |
| Circulation | 36,072,500 | 411,600 | Increase |
| Reserve on all deposits | 291,850 | Decrease | |
| Reserve on all deposits other than United States | 325,825 | Decrease |
“In the newspapers the statement was made up in both the old and the new forms as follows:
| Current Week | Preceding Week | Changes | ||
|---|---|---|---|---|
| Loans | $874,674,900 | $872,303,700 | In. | $2,344,200 |
| Deposits | 872,340,600 | 872,176,000 | In. | 164,600 |
| Circulation | 36,072,500 | 35,660,900 | In. | 411,400 |
| Legal Tends. | 67,274,300 | 68,593,300 | De. | 1,319,000 |
| Specie | 152,338,200 | 151,269,900 | In. | 1,068,300 |
| Reserve held | $219,612,500 | $219,863,200 | De. | $250,700 |
| Res. req’r’d | 218,085,150 | 218,044,000 | In. | 41,150 |
| Surplus | $1,527,350 | $1,819,200 | De. | $291,850 |
Deducting the United States deposits held by the banks from the aggregate deposits the bank statement compares as follows:
| Current Week | Preceding Week | Changes | ||
|---|---|---|---|---|
| Tot. deposits | $872,340,600 | $872,176,000 | In. | $164,600 |
| U.S. deposits | 40,633,400 | 40,769,300 | De. | 135,900 |
| Dep’s 25% | $831,707,200 | $831,406,700 | In. | $300,500 |
| Reserve held | 219,612,500 | 219,863,200 | De. | 250,700 |
| Res. req’r’d | 207,926,800 | 207,851,675 | In. | 75,125 |
| Surplus | $11,685,700 | $12,011,525 | De. | $325,825 |
“The detailed bank statement, which is issued simultaneously with the consolidated statement, contains first the number of each bank (each bank has a number by which it is known at the clearing house) and then the name of the bank, after which follow the amounts of its capital, net profits (surplus and undivided profits), specie, legal tenders, deposits and circulation.
“The bank statement is said to have been made up on rising averages when the items in it have been increasing in amount during the week, or the statement is said to have been made up on falling averages when the items in it have been decreasing in amount during the week.
“Generally speaking, the bank statement is favorable or good when it shows that the position of the banks has been strengthened, as by an increase in the surplus reserve through, or by means of an increase in their cash holdings rather than by a decrease in their deposits, which often is effected by the calling of loans—by demanding and obtaining the payment of money loaned on call. As money loaned is credited to borrowers on their deposit accounts and increases the total deposits of the bank, so the payment of loans by borrowers takes from and decreases deposits. As will be seen, the calling and consequent payment of loans does not increase cash holdings but merely changes balances in individual accounts. A reduction in deposits reduces the amount of cash required to be held as a legal reserve and correspondingly expands (increases) the surplus reserve. Generally speaking, also, the bank statement is unfavorable or, if particularly unfavorable, is bad when the position of the banks has been weakened, as by a decrease in the surplus reserve through a decrease in their cash holdings rather than by an increase in their deposits, which often is effected by an expansion in (increase in amount of) their loans, which correspondingly expands (increases) their deposits and correspondingly increases the amount of cash required to be held as a legal reserve. This additional amount is deducted from and correspondingly reduces the surplus reserve.
“The bank statement may be said to be favorable or good, however, if an increase in loans is reported when the banks are surfeited with money: also the bank statement may be said to be unfavorable or rather not good (but hardly bad) when it shows that money is accumulating in idleness in the banks—when deposits are increasing, not as a result of increasing loans, but in the absence of a borrowing demand for money.
“There are other circumstances which make the bank statement favorable or unfavorable as disclosed in the circumstances themselves.
“There is also a non-member bank statement, which is a statement of the conditions of banks which are not members of the clearing house but clear through members. This statement is issued from the clearing house on Monday and shows the average condition of the banks for the week ending with and including the preceding Friday.
“The non-member bank statement contains the name of each bank, followed by its capital, net profits, average amount of loans and discounts and investments, average amount of specie, average amount of legal tender notes and (national) bank notes, average amount on deposit with its clearing house agent (the bank through which it clears at the clearing house), average amount on deposit with other New York City banks and trust companies, average amount of net deposits and average amount of circulation.”—From Smith’s Financial Dictionary.