Banking standards under the federal reserve system

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Monograph

Identifikator:: 1762969653

URN:: urn:nbn:de:zbw-retromon-142432

Document type:: Monograph

Title:: Banking standards under the federal reserve system

Place of publication:: Chicago

Publisher:: A. W. Shaw Company

Year of publication:: 1928

Scope:: xxxviii, 420 Seiten

Digitisation:: 2021

Collection:: Economics Books

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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part III. Correlated series for all Member Banks by districts

Collection:: Economics Books

260 BANKING STANDARDS of loans and discounts, must be allowed for in forecasting the changes in the equation, 6—4=2. From Table 149 it is seen that, in general, the larger the ratios of total deposits to earning assets, the smaller the ratios of gross earnings. Accordingly, in series in which these ratios exceed the average, the gross earnings ratio tends to be something less than 6%. The total expense ratios and ratios of total de- posits are indifferently correlated. Accordingly, ratios of total expense may be more or less than 4%, the assumed average. It follows, therefore, that the net earnings ratio may be less than 2%. This conclusion seems valid, because, as indicated in Table 153, ratios of deposits and ratios of net earnings are inversely or negatively correlated. That is, high or increasing ratios of de- posits tend to be accompanied by low or by decreasing ratios of net earnings. If this is true, then it appears likely, since ratios of gross earnings are positively correlated with net earnings and ratios of total expense indifferently correlated with them, that the effect of relatively large ratios of deposits in lowering net earnings exceeds that of relatively large ratios of loans and dis- counts in raising them. And yet this causal sequence does not necessarily hold, inasmuch as, under actual conditions, variables of a variety of sorts are operating simultaneously to determine net earnings. The only thing which, from the analysis, seems to be certain is that for the experience to which it relates, the types of correlation to which attention is called obtain—all variables, except those correlated, being ignored. In a word, conditions associated with relatively high or increas- ing net earnings in terms of earning assets are relatively high or increasing ratios of loans and discounts to earning assets, and vice versa; those accompanying relatively low ratios of net earnings to earning assets are relatively high ratios of total deposits to earning assets, and vice versa. The manner in which such causal relations probably extend through gross earnings and total expense, the immediate dif- ferentials determining net earnings, has already been indicated. Attenuated as is this chain of causal sequence, and unsatisfactory as are the data—relating as they do to groups of banks—by 4Tn this connection, the proportion of demand deposits and of time deposits to the total is of significance. See discussion in Chapter X.

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