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S Reserve Banks hanks Decide A to Revise con Collection System Elimina Elimination tion of Service Charge Is Expected to toI I Result in Increased Business May tay IS Representatives Representatives' C CHICAGO of or the twelve federal reserve e banks Imet j I met here hero to revise the tho time schedules sched sched- schedules aChed I ules for lor the tho collection of or checks The revision Is In iii connection with the proposal of or the fe federal eral reserve board to I eliminate the service charge of 1 to 2 cent cents an Item Hem Elimination of ot this ser service ser ser-I service vice charge was proposed to the federal I reserve board b by representatives of the federal reserve banks hanks and the tho board boar has I Indorsed tho the plan llan Back of the revision of time schedules I is an Interesting story partly woven about war conditions and the action of the government In taking over over the railroads One of the first acts of or the now new director general was wad to revise train schedules This revision seriously interfered with the normal course of or the malls mlIs Points which I could be bl reached and an answer received in two da days s 's now now take tako three days and other correspondingly Because of this condition the federal re reserve reserve re- re serve ser bank of or Philadelphia Ph found that it could not collect items as promptly as to tomake tomake tomako make mako the tho funds available ava for member banks banks' reserves as provided in the time schedules Tho The result was Vas that th the merit mem member ber her banks bank In drawing upon these Items Hems I before they were actually actual received made malle the reserve bank carry the float Tho The I reserve bank hanle then proposed to revise its time schedules and member banks pro pro- I tested The proposition was laid before 1 the federal reserve bo board rd and a n. conference conference conference confer- confer i ence of representatives of or all reserve I banks called to discuss the matl matter r. r The I j conference recommended a revision lIllon In in schedules and antI that the service charge be he eliminated These recommendations I were approved d at the conference of or re reserve reserve re- re serve bank governors held In Washing Washing- Washington I ton a month or so ago and finally were approved by uy the fe federal eral reserve board When hen the lie federal reserve bunk inaugurated inaugurated u- u I rated the check collection service for tho the convenience of It Its member banks a a. service service ser ser- vice charge at the flat rate of or 1 to 2 cents per item was charged to cover the actual cost of or handling handling- this thin new de department department de- de This was a departure from the method followed by banks particularly particularly country banks which charged from tenth one-tenth to one-fourth one of or 1 per cent or orl 1 l to 50 per 1000 according to the location of or the bank banle upon which the check was as Issued and the bank to whom remittance was to be made Country banks In this way built up tip a n. large and profitable collection business g. g With man many institutions the re revenues of the tho check collection department were sufficient to pay the dividends upon th the banks bank's stock Because of oC this profitable end of or their business country banks were bitter opponents opponents opponents I to the installation of a check collection collection collection col col- lection department by the tho federal reserve banks s and carried their fight to the floors I of congress In New York state the tho contest contest contest con con- test between state bankers and the federal federal federal fed fed- eral reserve bank wa waged ed especially hot and resulted in the Introduction of a a. bill billIn billIn billin In tho the legislature nt at Alban Albany to forestall the development of the federal system The elimination of or the service charge chargo Is expected to increase the business of or the transit departments of or the fe federal eral re reserve erve banks and it Is largely largel upon this point that Interest of bankers hinges Bankers in several sections of or the country countr have built up a largo large clearing business b by collecting col col- collecting checks for correspondents without Imposing a 3 service charge Philadelphia and Alban Albany are the two most notable examples ex ex- example ex- ex ample amples of this system While no service char charge e is imposed the correspondent banks maintain balances with the collecting e gb bank They are arc paid 2 per cent Interest upon these theRe balances and In return the hanks banks In the tho cities clUes named name not only collect checks free but they also alo render a n. number of or other services ser ser- vices without charge for their correspondents dents Over Oyer a period of or years ears the banks In these cities have ha built up a large largo outside outside outside out out- side business i and carry large d of or outside banks Many of or their correspondents correspondents cor cor- respondents aro arc IO located in federal reserve districts other than their own Under Jer the new plan it is expected that man many banks Instead of sending their checks to banks outside of their district will send them to their own federal reserve bank for collection col col- lection as the tho service will will wUl be rendered free This will probably affect tho the de deposits deposits deposits de- de posits of banks hanks In collecting centers al althou although al- al thou though h the tho full fun effect ma may not bo be so JO drastic as might be bo expected owing to many other services rendered the tho country country country coun coun- try banks which the federal reserve bank cannot duplicate These services include the purchase of or commercial paper and other Investments for the country banks the purchase o of bands and holding the bonds 1 In n their vaults for safekeeping rendering rendering- a n. credit dat data and performing many other services services' of or great value to the country banks In brief the operation of or the plan has been I to place the experienced and nd costly organization organization organization or or- of or the city bank at the disposal disposal dis dis- dis al of or its smallest correspondent S Under the fe federal eral reserve plan banks are given en immediate credit for Items sent Bont i in for collection but availability a la is determined de- de b by a zone system de depending upon the distance of the bank upon which the check Is drawn from the reserve bank I and the time lime required to send tho the check for collection and remit the fun funds s. s The schedules are to be revised so 50 that the I cheeps checks cles will not be available as aa r reserves serves until the they can be collected so the reserve I banks will not carry nn any float t. t Tho The federal reserve banks are constantly conI constantly con con- ex expanding their functions and I services |