Reserves
In most of the antebellum state banking laws reserves were required only against note issue. In Ohio, for example, the general banking law required a reserve of 30 per cent., against circulation, but none whatever against deposits. Several of the state banking laws which survived the destruction of the state bank-note issue contained, however, provisions requiring banks to hold a reserve against deposits; but in none of these States was the increase in the number of state banks important. In those States in which the state banks were organized under the "business incorporation laws" there were, of course, no reserve requirements. Until 1887 a reserve was required for state banks in only three States, Ohio, Minnesota, Connecticut, and in these the required reserves were small. Even since the revival of state bank regulation, which began in 1887, the requirement of a reserve has not been regarded in many of the States as an important part of the state banking law.
The most striking and important difference between the reserve required by the national-bank act and the reserves required by the state banking laws is that under the national-bank act the reserve is a percentage of "deposits"—i. e., of all deposits—while under the banking laws of a majority of the States either no reserve is required against time or savings deposits, or a smaller amount of reserve is required than against demand deposits.
None of the state banking laws require that the reserve of any class of banks shall consist wholly of cash in bank. All the laws permit balances in other banks to be counted at least as a part of the reserve. There are great differences among the laws, however, with respect to the amount which may be so counted.
The laws in all the States leave the banks almost entirely free to deposit their funds in banks in the great commercial centres. The strong economic pressure toward concentration is thus left free to act toward drawing reserves into banks located in the reserve and central reserve cities.
In the greater number of States which incorporate both state banks and trust companies the reserve requirement is the same for both classes of credit institutions. Slight differences between the requirements for trust-company reserves and those for state-bank reserves are chiefly of two kinds. In the first place, the provisions for trust-company reserves more frequently permit the counting of bonds as a part of reserve; secondly, the provisions for differing amounts of reserve against time and demand deposits.
In recent years there has been much complaint in some States that the reserves required for trust companies are inadequate.