6 
[ncrease from 7% 
to 10% Proposed 
Reserves of 
State Banks 
Review of Reserve 
Requirements 
Reserve 
Authorities 
Recommendation 
hea 
Extension of 
Membership 
Attractiveness 
of Membership 
Distribution of 
Earnings of 
Reserve Banks 
COMMITTEE REPORT 
a country institution is not obliged to maintain as high a reserve for 
bank deposits as a reserve city bank. In view of the recommendations 
above, which would have the effect of lowering country bank reserve 
requirements, it would be only equitable to require country banks 
to keep a ten percent reserve, instead of the present seven percent, 
against net deposits due to other banks. 
A factor which has engendered other inequalities is the differ- 
ence in the reserve requirements of the various state laws, a number 
of which do not coincide with the federal statutes. State require- 
ments generally should be correlated with the reserve provisions of 
the Federal Reserve Act. 
As indicated, the changes advocated above are put forward to 
remove discrepancies and to make the system somewhat more at- 
tractive to member banks. Their adoption would not confuse the 
situation pending a review of the whole subject of reserve schedules. 
Such a review has been proposed from time to time by federal re- 
serve authorities and we support the suggestion, provided the review 
is undertaken in the first instance within the system itself. We be- 
lieve that recommendations should be made by administrative offi- 
cials of the system because of the complicated nature of the subject 
and the many ramifications of the effects of changes. 
The Committee recommends that based on the recommendations 
of administrative officials of the reserve system there should be a 
legislative revision of those provisions of the Federal Reserve Act 
relating to member bank reserves. 
Approximately one-third of the banks of the country belong to 
the federal reserve system. This membership includes all the na- 
tional banks, some seventy-five hundred in number, as compulsory 
members, and some twelve hundred state banks as voluntary mem- 
bers. 
It is sometimes urged that steps should be taken to bring into 
the membership a larger number of state banks. From the stand- 
points either of increasing the resources of the reserve banks or of 
providing greater effectiveness in the distribution of credit to all 
localities, no additional membership is now urgently required. 
If, however, measures can be taken, which, without lowering 
membership standards, will make membership more attractive to 
present and prospective members, they should be given considera- 
tion. One such, we believe, is the distribution of reserve bank earn- 
ings in greater part to member banks. 
At present each reserve bank, after payment of a six percent 
dividend to member banks of its district, passes the balance of its 
Continued on page 38)