
    Bank Reserves.
    
      Banks and banking — Reserve fund — Claims payable in future — Act of May 8, 1907.
    
    Under the Act of May 8, 1907, P. L. 189, a hank is not required to maintain a reserve fund for the protection of claims payable in the future.
    Jan. 21, 1924.
   Department of Justice. Opinion to Hon. John W. Morrison, First Deputy-Secretary of Banking.

Brown, Dep. Att’y-Gen.,

— Your letter asking to be advised whether or not a bank shall maintain a reserve fund for bills or claims payable in the future has been received.

- The Act of May 8, 1907, P. L. 189, the act providing for the creation and maintenance of a reserve fund in all banks, banking companies, savings banks, savings institutions, etc., provides for the creation and maintenance of two reserve funds.

The first is found in section 2 of the act, and is as follows: “Every such corporation receiving deposits of money subject to check or payable on demand shall at all times have on hand a reserve fund of at least 15 per centum of the aggregate of all its immediate demand liabilities.”

In the absence of legislative definition or judicial construction, there might be room for some discussion as to the meaning of “immediate demand liabilities” as used in the act. But section 4 has defined the phrase as follows: “Immediate demand liabilities shall include all deposits payable on demand and- all items in the nature of claims payable on demand.”

As was said by Attorney-General Todd in an opinion found in 34 Pa. C. G. Reps. 641, 17 Dist. R. 972: “It is clear that one of the purposes of the act is to provide for a reserve equal to 15 per cent, of the immediate demand liabilities of the institutions subject to its provision, and I am of the opinion that a liability given for borrowed money payable on démand is an item in the nature of a claim payable on demand, and is a liability that requires the protection of the reserve as fully as such protection is required for deposits subject to check or payable on demand.”

But this provision of the act applies only to “immediate demand liabilities,” whether deposits subject to check or payable on demand, or items in the nature of claims payable on demand. The reserve fund created under section 2 of the act cannot, therefore, be extended to cover claims payable in the future.

The second provision for a reserve fund is found in section 3 of the act, and is as follows: “Every such corporation, receiving deposits of money payable at some future time, shall, at all times, have on hand a reserve fund equal to at least 7i per centum of all its time deposits.”

The act further defines “time deposits” in section 4: “Time deposits shall include all other deposits not payable by the contract of deposit on demand.”

This provision of section 3 deals only with deposits payable at some future time.

By the terms of the act, provision is made for reserve funds protecting deposits subject to check or payable on demand, items in the nature of claims payable on demand, and deposits of money payable at some future time. Claims payable on demand are specifically mentioned as being within the protection of the reserve fund in that section of the act dealing with “immediate demand liabilities.”

The section of the act dealing with money payable at a future time does not mention claims payable in the future, but deals solely with deposits. There is not the slightest reference to the obligation of the corporation to have on hand a reserve fund to protect claims payable in the future, and the protection of the fund created by section 3 of the act is confined to deposits of money payable at some future time.

This is significant and evinces the intention of the legislature. If it had been the intention to include claims payable in the future in the protection of the reserve fund, it would have been so provided in section 3. Just as in section 2, it is provided that claims payable on demand shall be within the protection of the fund there established. But it is not so provided, and nothing appears in the act making it the duty of a bank to maintain a reserve fund for claims payable in the future.

You are, therefore, advised that the Act of May 8, 1907, P. L. 189, does not impose upon banks the duty of maintaining a reserve fund for the protection of claims payable in the future.

From C. P. A (Mams, Harrisburg, Pa.  