76 
BANKING STANDARDS 
TABLE 54 
COMPARATIVE PERCENTAGE AMOUNTS OF DEVIATION FROM DISTRICT 
LEVELS AND NET YEAR-TO-YEAR CHANGE IN RATIOS OF 
Gross EARNINGS To EARNING ASSETS 
endif 
DIFFERENCES FROM DISTRICT AVERAGES, 1919-1925 
Sien 
Number of 
Cases 
Percentage | Average 
Groups Percentage 
31 
Average 
6.30 
8 
1x 
12 
10.00 and over 
5.00 to 10.00 
Under =.00 
12.78 
| 6.09 
2.40 
~~ 
Under 5.00 
5.00 to 10.00 
10.00 and over 
2.14 
7.12 
11.21 
Average 
4.24 
NET PERCENTAGE 
CHANGE FROM 
YEAR TO YEAR 
- 3.78 
- 6.52 
— 6.01 
4+ 0.08 
+ 4.40 
+ 4.96 
+11.06 
+ 5.10 
of gross earnings, their composition depending primarily upon the 
demand for bank accommodation and the attractiveness of the 
investment market. As the demand for loans increases, interest 
and discount rates tend to rise; as it decreases, they tend to fall. 
High rates of interest have the effect (1) of discouraging bor- 
rowers from placing new and renewing old loans and (2) of at- 
tracting capital. Either or both tend to lower interest rates. 
Contrariwise, low rates of interest stimulate borrowing and the 
placing of loans in more attractive fields. Both conditions tend 
to increase interest rates. Moreover, there is a continuous flow 
of capital, in the form of loanable and investment funds, into and 
out of different markets (geographical but overlapping), which 
fact tends to equalize interest rates at the levels common to such 
markets because of the type of business transacted, risks and ex- 
penses incurred, and so forth. It is this process of equalization 
which is observed in the above phenomena. Gross earnings—in- 
terest received, for the most part—regress to type, the type being 
the average level peculiar to each district. And further, the 
amount of regression—net percentage change—varies directly 
with the extent to which the equilibrium is disturbed. 
Moreover, the gross earnings of a bank or of a group of banks 
depend upon the composition of its earning assets—matters under