Extension of Charter The law authorizes the extension of the charter of a national bank whose term is about to expire. For such extension the written consent of shareholders owning at least two-thirds of the capital stock is required, at any time within two years prior to the expiration of the existing charter. Consent may be given in person or by proxy, on special forms furnished by the Comptroller, and it is not necessary to call a shareholders' meeting for the purpose. When the requisite number have signed, the directors should hold a meeting and adopt a resolution directing the officers to certify the fact to the Comptroller. The amendment, with the appended certificate and the request for approval, should be sent to the Comptroller at least two months prior to the expiration of the charter so as to allow sufficient time for the making of the special examination required by law. The expense of this ex amination must be borne by the bank. If the Comptroller finds the bank in satisfactory condition, he will issue a certificate of extension. The law requires that the bank notes issued after the bank begins its new term shall bear different devices from those issued before. This necessitates the procuring of new plates, which are prepared at the expense of the bank. No transfer of bonds is necessary. The new notes are issued as the old ones are received for redemption.
Change of Name or Location A national bank may, with the consent of the Comptroller of the Currency and by vote of shareholders owning two-thirds of the shares, change its name or its location to any other locality in the same state not more than thirty miles distant. This vote requires a special meeting of the stockholders. A certified copy of the vote is sent to the Comptroller, and the Treasurer is author ized to transfer to the bank under its new title the bonds held by him as security for bank notes. New plates are also prepared for the notes. Removal of a bank to a different street location but within the city limits does not require any action by the share holders or the Comptroller.
Requirements in Amending Charter The law provides that no change shall be made in the charter of a national bank by which the rights, remedies, or security of the existing creditors of the bank will be impaired. This, by implica tion, authorizes amendments not contravening the rights of creditors. Such amendments require authorization by vote of shareholders owning not less than two-thirds of the stock, at a special meeting for the purpose. The law specifically provides for amendments of the charter changing the corporate title, location of the bank, increase or reduction of the capital stock, consolida tion, and extension of corporate existence. These amendments require the written consent of shareholders owning two-thirds of the stock. Clauses are sometimes put in the charter authorizing amendment, in any respect not conflicting with law, by a majority stock vote. When any changes are contemplated it is best that the proposition to amend be submitted to the Comptroller in advance of action by the stockholders for his approval and specific instructions.
Reasons for Consolidation of Banks There are many motives for the consolidation of banks. One no doubt is to allay competition. Another is to be able to offer a more varied service, as the combination of trust com panies and national banks since the law has permitted national banks to do trust business not only cuts down the overhead of conducting two institutions but also lets the consolidated institu tion offer its customers a more diversified service than before. Sometimes the motive for consolidation is simply the desire for enlargement. Mere size is a real factor in the success of banks, and concentrated control is much better than mere affiliation with other institutions. Our bankers are finding large size necessary, in the first place, to enter the foreign field in competi tion with the gigantic banks abroad, and in the second place, to handle the constantly increasing scale of domestic business, inas much as domestic industries are increasing in size and are oper ated on a higher price basis.
In England and other European countries there has been a marked tendency for banking houses to consolidate, one bank gradually absorbing others until finally enormous institutions with world-wide connections are formed. During the war the English public became alarmed at the concentration of the money power, and to allay criticism further combinations were forbidden by the government. In Canada, also, the process of consolida tion is marked. In the United States during the last two years many large consolidations have taken place, particularly in New York City. To date no protest has arisen against this, but bankers realize that their consolidated control over capital must not be abused lest an aroused public put intolerable burdens upon them.
The Agreement of Consolidation National banks proposing to consolidate should advise with the Comptroller of the Currency and apply for his approval. If the consolidation seems advisable and the terms of it are not objectionable, the Comptroller issues instructions for procedure. The directors of the two banks enter into an agreement covering the terms of the consolidation, that is, with respect to the charter to be used by the consolidated bank, the title, the capitalization, the distribution of shares to the present stockholders of the two banks, the assets to be contributed by each and at what valuation, the disposition of such assets as are not desired for the consoli dated bank, the continuance of the present boards of directors for the remainder of the year, and the provision for votes of approval by the stockholders. This agreement may provide for an increase of capitalization in excess of the aggregate capitaliza tion of the two banks, or for payment of cash to equalize the contributions of assets of the two banks—the payment of these sums in cash to be certified to the Comptroller by the officers. If by the terms of consolidation the capitalization is reduced, it is necessary to secure the consent of the Federal Reserve Board.