CO129-555-6 Banking crisis 24-9-1935 - 18-10-1935 — Page 69

*Copy.

F.25 36/2.

Dear Williams,

Treasury Chambers,

Whitehall, S.W.1.

24th April, 1935.

69

Before answering your letter of the 26th February (75176/35) about mushroom banks in Palestine, we thought that it would be useful to get the views of the India Office

and of the Bank of England. I attach copies of what they sent us, and set out our views (which you will see are in

many respects based on theirs) as follows. References are

to the paragraphs of the Palestine Committee's Report.

Paragraphs 14 and 15.

We agree on the whole with the policy of

controlling minimum capital but think that it should not

be a flat rate universal minimum, but should be related

either to the area to be served, or to the magnitude of the

bank's operations, or both. This suggests (a) different

limits for banks operating only in one town or village,

banks operating over a region or province, and banks operating throughout Palestine, (1)

(b) a limiting ratio

(2)

of deposits to paid up capital, (c) consideration of

Baxter's suggestion about authorised capital, etc. which we

agree is preferable to the proposal in Paragraph 18 of the

Report.

0.G.R.Williams, Esq., C.M.G.,

Colonial office.

Paragraphs 19

(1) In Italy banks operating on a national basis must have à capital of not less than 50 million lire, regional or zone banka a capital of not less than 10 million, and those operating in a single province not less than 5 million: other countries have similar provisions.

and

(2) In Sweden banks may not receive deposits in excess of eight times their paid-up capital. This is in addition to differential minima for paid-up capital - see note (1) above.