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 IV. Norms, trends, and correlations of series in the Boston and in the New York districts by Member Banks

Collection:: Economics Books

GROSS EARNINGS IN DISTRICT I 283 upon differences in interest rates, and these in turn are functions of the demand for and the supply of capital funds, of risk, and so on. Similarly, district differences in ratios of total expense are traceable largely to interest rates—the rates paid on deposits and on borrowed money—and to wage and salary scales. As between districts, this common element, interest, serves only in part to explain the direct relation between the two series. But does it explain the positive correlation between gross earnings and total expense ratios within a given district, when the entire member banking structure or any significant part, as banks in tity or volume groups, is considered, and when presumably rates of interest, as expense and as revenue, vary less widely from bank to bank over the entire district or within any city or volume (earning assets) group than they do between districts? Addi- tional reasons, it is believed, must be sought to explain the phenomenon. These are found in the varying proportions of time deposits to total deposits and of investments to earning assets —topics discussed at length in Chapter X.1° Positive correlation between gross earnings and net earnings cannot be explained even in part on the basis of a common ele- ment such as that suggested above for that of gross earnings and total expense. Other things being equal, if gross earnings ratios are high or low, those of net earnings are high or low. But other things are not equal, inasmuch as total expense and net earnings ratios are negatively correlated, and net earnings are the difference between gross earnings and total expense. Accordingly, net earnings ratios are dependent upon the rela- lions between variable gross and variable total expense ratios, each of which series itself is dependent upon variable operating conditions. Data are not available with which to trace out for individual sanks the relations between these antecedent conditions and ratios of net earnings. We shall content ourselves here with the statement that gross earnings ratios are positively correlated and total expense ratios negatively correlated with net earnings ratios, and leave to a later chapter the measurement of the relative effect on net earnings of these divergent factors. 10 See pages 190-204, particularly.

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