BANK ORGANIZATION AND CONVERSION Introductory The purpose of this and the following chapter is to set forth in a general way the necessary procedure to be followed when a new bank is organized, a state bank converted to a national bank, two banks consolidated, a national bank liquidated, or when related events occur. These matters are defined by statutes and by regulations of the Comptroller of the Currency and of the state superintendents of banks. Statutes and regulations applying to national banks differ from those applying to state institutions; and even among the state institutions, the law and regulations differ according to the various states and also differ with the kind of institution, whether commercial bank, savings bank, trust company, private bank, etc. In general, the procedure in case of national banks is taken as the standard for the state law and regulations.' .
Organization of a New National Bank A national bank may be started in one of three ways, accord ing to existing conditions and desires: (r) by creating a new bank, (2) by reorganizing a state or private bank into a national bank, or (3) by converting an incorporated state bank into a national bank.
The initial step in organizing a national bank is to write the Comptroller of the Currency asking him to reserve the desired title and stating the bank's location and proposed capital. The Comptroller will reserve the title for 15 days, within which time a formal application to organize is expected to be filed. The title of a national bank must include the word "National" or be followed by "National Banking Association" (usually abbre viated, "N.B.A."); it should include the name of the place where the bank is situated, but not of the state; it may not include the word "First" if a national bank already exists in the place, nor may it be identical with the name of a national bank heretofore in existence, nor materially similar to the name of any bank in the place, whether national, state, or other. The reason for these rules is obvious.
Requirements for Formal Application The formal application for reservation of title and authority to organize a national bank—made on a blank furnished by the Comptroller—must be signed by at least five persons who are prospective shareholders of the bank, and preferably also prospec tive officers or directors. It should be indorsed by three promi nent public officials, preferably the local mayor and postmaster and a judge of court, persons who are sufficiently acquainted with the incorporators to certify that they are reputable citizens and that their business and financial standing is favorable for the success of the new bank. The relation, if any, in which the appli cants stand toward other banks must be stated.
A list of the officers and directors should be furnished to the Comptroller as soon as possible. If any of the applicants has ever been connected with the organization, or attempted organ ization, of any other national or state bank, the facts of the case must be stated. The organization expenses allowable are limited to those strictly incident to the actual organization of the bank, and do not include commissions for the sale of stock or promotion fees. The capital and surplus must be paid in money alone. These rules tend to eliminate the professional bank promoter, their object being to show there is a genuine local demand for the bank. thereby lessening the chances of failure. Bank failures seriously affect public confidence and favor. Hence it is essential that such failures be kept as few as possible. For this reason the Comptroller generally refuses the application to establish a bank at a place where, because of apparent lack of business, there is little likelihood of the bank's success, where existing banking facilities, state or national, already are unquestionably ample, where the character or financial ability of the applicants is ques tionable, or where the demand for the bank springs from outside promoters and not from the local business interest.