Savings Banks

Savings banks are conceived of as neighbourhood institutions, and in New York State they may have only one branch and only in cities of the first class. In Massachusetts a savings bank may establish one or more branches in the town where the main office is situated and in towns not more than 15 m. distant therefrom where there is no savings bank, but only with the written per mission of the commissioner of banks.

All of the earnings and surplus of a savings bank belong exclu sively to depositors. In New York, when the undivided profits and guaranty fund as determined under the law amount to more than 25% of the money due depositors, the trustees must at least once in three years divide the accumulation in excess of 25% as an extra dividend to depositors. In Massachusetts such division must be made where the guaranty fund and undivided profits amount to io% of the deposits, after an ordinary dividend is declared.

The investments

of all savings banks are governed by the law of the States in which they are situated. In New York State, savings banks may invest in the stocks and bonds of the United States, of any State of the Union, the District of Columbia, and of the cities of such States which meet certain tests as to size and powers and record of responsibility in the payment of its debts. They may invest in the mortgage bonds of railroad corpo rations meeting certain fiscal qualifications and which have regu larly and punctually paid the maturities of principal and interest on their indebtedness for a fixed period preceding the date of the investment, and also in certain other bonds specifically named in the statute. In 1928 they were authorized to invest in the securities of public utility corporations and in railway equipment trust cer tificates under specific restrictions. They may invest in bankers' acceptances eligible for purchase by the Federal Reserve Bank, in promissory notes secured by collateral eligible for savings bank investments and in loans secured by the pass-books of depositors.

On Jan. 1, 1929, 63% of the combined assets of the mutual savings banks of the State of New York were invested in bond and mortgage on real estate.

Supervision.

Semi-annually a New York savings bank is required to make a written report to the superintendent of banks on a form prescribed by the superintendent, covering full de tails of the transactions of the bank. There is a drastic penalty imposed for the failure of the bank to make such reports. Sup plementing these reports the superintendent from time to time makes unannounced examinations of the records and transactions of the bank.

Similar although not identical provisions are contained in the laws of other States. Thus once a year in Massachusetts a thorough examination and audit of the bank must be made by a certified public accountant, not connected with the bank, selected by the auditing committee of the trustees and approved by the bank commissioner. In the event that the committee fails to have such an examination made, the commissioner must have one made and the bank must pay for it.

These rigid restrictions, on the operation of mutual savings banks with a view to maintaining their integrity, arose out of early disastrous experiences with irresponsibly managed banks. The steady improvement in the standards of business morality, the effect of supervision by State officials, advances in methods of accounting and internal administration, and also the growth of competition between banks for the business of the public have all contributed to the present general high level of efficiency and responsibility of the management of banks, only emphasized by occasional individual lapses.

A considerable number of banks organized under State charters have established thrift departments. Commercial banks have accumulated in the State of New York alone upwards of $2,817,882,000 of thrift deposits (1928). These funds are not subject to segregation for special investment and may be com mingled with the general funds of the bank and used in any man ner in which such general funds may be used. The growth of deposits of this character is a reflection of the increased public confidence with which banks generally are held by the working class.

Extended Facilities.

Savings banks maintain and are in creasingly establishing service departments to give counsel on in vestments, to help in the preparation of family and individual budgets, to advise regarding the use of funds, and to explain the functions of the savings bank not only to depositors but to such part of the public as comes within the walls of a bank seeking in formation. The progressive savings banks responding to the mod ern spirit of business are reaching out to encourage the public to make a maximum use of the institutions which have achieved prestige and stability, and therefore have it within their power to serve a large number of individuals satisfactorily. Some of these banks now have individually several hundred thousand depositors.