• Registry No. 1707—02 NATIONAL RECOVERY ADMINISTRATION CODE OF FAIR COMPETITION FOR BANKERS AS APPROVED ON OCTOBER 3, 1933 BY PRESIDENT ROOSEVELT Executive Order 2. Letter of Transmittal 3. Text of Code 4. Schedule A UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON : 1933 For sale by the Superintendent of Documents, Washington, D.C. - - - .... Price 5 cents This publication is for sale by the Superintendent of Documents, Government Printing Office, Washington, D.C., and by district offices of the Bureau of Foreign and Domestic Commerce. DISTRICT OFFICES OF THE DEPARTMENT OF COMMERCE Atlanta, Ga. : 504 Post Office Building. Birmingham, Ala. : 257 Federal Building. Boston, Mass. : 1801 Customhouse. Buffalo, N.Y. : Chamber of Commerce Building. Charleston, S.C. : Chamber of Commerce Building. Chicago, 111.: Suite 1706, 201 North Wells Street. Cleveland, Ohio : Chamber of Commerce. Dallas, Tex. : Chamber of Commerce Building. Detroit, Mich.: 2213 First National Bank Building. 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(H) EXECUTIVE ORDER Code of Fair Competition" for Bankers An application having been duly made, pursuant to and in full compliance with the provisions of Title I of the National Industrial Recovery Act, approved June 16, 1933, for my approval of a Bank- ers' Code of Fair Competition, and hearings having been held there- on and the Administrator having rendered his report containing an analysis of the said Code of Fair Competition, together with his recommendations and findings with respect thereto, and the Adminis- trator having found that the said Code of Fair Competition com- plies in all respects with the pertinent provisions of Title I of said Act and that the requirements of clauses (1) and (2) of subsection (a) of Section 3 of said Act have been met: Now, therefore, I, Franklin D. Roosevelt, President of the United States, pursuant to the authority vested in me by Title I of the National Industrial Recovery Act, approved June 16, 1933, and otherwise to adopt and approve the report, recommendations, and findings of the Administrator, and do order that the said Code of Fair Competition be, and is hereby, approved. Franklin D. Roosevelt, President. Approval recommended : Hugh S. Johnson, A dminis tra tor. The White House, October 3, 1033. 14904* 133-196 33 October 2, 1933. The President, The White House. My Dear Mr. President : I have the honor to submit and recom- mend for your approval the Bankers' Code of Fair Competition. This Code was proposed by the American Bankers' Association, founded in 1875. The association represents slightly more than 70 percent of the total number of banks and more than 94 percent of the banking resources of the country. Membership requirements therein impose no undue restrictions. The Bankers' Code of Fair Competition has the approval of the association, the several Advisory Boards of the National Recovery Administration, and the cooperation of officials of the Federal Re- serve Board, the Treasury Department, and the Comptroller of the Currency's office. No objector from nonmembers of the association appeared at the hearing, nor did any such nonmember file any objection to the code. However, representation on the code committee is provided in the code for such nonmember banks. A complete report is being transmitted herewith. Important fea- tures may be summarized as follows : (A) Reemployment and wages. — Unquestionably, there has been a decided increase in both number of employees and their wages since the signing of the modification of the President's Reemployment Agreement, except in small country towns. Bank staffs have been held together as far as possible. Labor advisors stated that banks pay employees higher wages than are paid by industry generally. Nevertheless, with the desire to support the President's Recovery Program and to meet reasonably the request of labor, the bankers agreed to revisions of the code, principally to reduce the time of apprenticeship from 12 to 6 months and to confine this group of employees to approximately 5 percent of entire personnel, as against the prevailing 10 percent in leading centers. These concessions and the shortening of hours, both contained in the code, will bring about additional employment and higher wages. (B) Fair trade practices. — (1) Uniform maximum banking hours are provided for similar institutions in any given area. (2) Payment of interest on deposits by all banks is brought under the Banking Act of 1933 and the rules and regulations of the Federal Reserve Board. This provision should eliminate competitive bidding for deposits and thus enable the banks to invest more conservatively than in the past. (3) Service charges: These charges form a highly complicated phase of banking. I believe the Code Committee will be empowered more fully to handle these problems and to unify the practices there- under than any other agency heretofore established. (4) Trust serv- ices: In effect this provision is designed as an ethical standard for trust institutions. I find that the code complies with the pertinent provisions of clauses (1) and (2), subsection (a) of section 3 of the National Industrial Recovery Act. Respectfully, Hugh S. Johnson, Administrator. (IV) CODE OF FAIR COMPETITION FOR BANKERS Preamble To effectuate the policy of Title I of the National Industrial Re- covery Act during the period of emergency, the following provisions are established as a Code of Fair Competition for Banks : Article I — Definitions The term " bank " as used herein shall include all national banks, State banks, savings banks (except mutual savings banks), trust com- panies, and private bankers accepting deposits, in the United States proper. The terms " employee " or " banking employee " as used herein shall mean any person employed by a bank in any capacity in con- nection with its banking functions and operations. The term " United States proper " as used herein shall mean the forty-eight (48) States of the United States and the District of Columbia. The term "Administrator " as used herein shall mean the Na- tional Recovery Administrator. Population for the purposes of this code shall be determined by reference to the 1930 Federal Census. Article II — Effective Date The effective date of this Code, except as specifically provided for hereinafter, shall be the second Monday after its approval by the President of the United States. Article III — General Labor Provisions Employers shall comply with the following provisions of Section 7 (a) of Title I of the National Industrial Recovery Act: (1) Employees shall have the right to organize and bargain col- lectively through representatives of their own choosing and shall be free from the interference, restraint, or coercion of employers of labor, or their agents, in the designation of such representatives or in self-organization or in other concerted activities for the purpose of collective bargaining or other mutual aid or protection. (2) No employee and no one seeking emploj-ment shall be re- quired as a condition of employment to join any company union or to refrain from joining, organizing, or assisting a labor organi- zation of his own choosing. (3) Employers shall comply with the maximum hours of labor, minimum rates of pay, and other conditions of employment, ap- proved or prescribed by the President. (l) Article IV — Child Labor On and after the effective date of this Code no person under sixteen (16) years of age shall be employed by any bank; provided, however, that where a State law prescribes a higher minimum age no person below the age specified by such State law shall be em- ployed within such State. Article V — Hours of Employment (1) On and after the effective date of this Code no banking em- ployee shall work or be permitted to work more than forty (40) hours per week averaged over a period of thirteen (13) consecutive weeks. (2) The maximum hours of employment prescribed in the fore- going paragraph shall be subject to the following exceptions : (a) In districts or sections of the country where the seasonal nature of commerce, agriculture, or industry making necessary the moving of some product within a limited period imposes upon banking facilities an unusual demand, employees of banks subject to such peak demand may work forty-eight (48) hours per week for a period not to exceed sixteen (16) consecutive weeks in any calendar year. Any such increase in hours of employment shall be reported monthly to the Banking Code Committee provided for in Article VII hereinafter. (b) All banking employees required to perform extra work or observe later hours in connection with periodic examination by Fed- eral or State banking authorities, over which the bank has no control either as to the time of occurrence or as to the duration, shall be exempt during such periods from the limitations upon hours of employment prescribed in the foregoing paragraphs. (c) Employees in banking institutions employing not more than two (2) persons in addition to executive officers, in towns of less than 2,500 population, not part of a larger trade area, and employees in a managerial or executive capacity or in any other capacity of distinction or sole responsibility (regardless of the location of the bank), who receive more than thirtj-five (35) dollars per week, shall be exempt from the limitations upon hours of employment pre- scribed in the foregoing paragraphs. (d) These provisions for working hours shall not apply to night watchmen employed to safeguard the assets of the bank, who can- not with safety be shifted or changed during the night period. Article VI — Wages (1) On and after the effective date of this Code no employee in cities of over 500,000 population, or in the immediate trade area of such cities, shall be paid less than at the rate of $15 per week; no employee in cities between 250,000 and 500,000 population, or in the immediate trade area of such cities, shall be paid less than at the rate of $14.50 per week; no employee in cities between 2.500 and 250,000 population, or in the immediate trade area of such cities, shall be paid less than at the rate of $14 per week. In towns of less than 2,500 population the wages of all classes of employees shall be increased by not less than twenty (20) percent, provided that this shall not require an increase in wages to more than the rate of $12 per week. (2) It is provided, however, that employees without previous banking experience or training employed as apprentices may be paid during a continuous period of not more than six (6) months at the rate of eighty (80) percent of the minimum wages prescribed in the foregoing paragraph. No bank shall include within the cate- gory of apprentices more than one such employee for every twenty (20) employees or fraction thereof. (3) Employers shall not reduce the compensation for employ- ment now in excess of the minimum wages provided for herein, not- withstanding y that the hours worked in such employment may be hereby reduced. Article VII — Administration ! (1) To effectuate further the policies of the National Industrial Recovery Act, a Banking Code Committee is hereby set up to act as a planning and fair-practice agency and to cooperate with the Administrator in the administration and enforcement of this Code. This Committee shall consist of fifteen representatives of the Amer- ican Bankers Association, who shall be truly representative of the membership of the Association, a representative selected by fifty- one (51) percent (measured by total resources) of the nonmembers of the American Bankers Association, and a representative or rep- resentatives, without vote, appointed by the President of the United States. (2) The Banking Code Committee may from time to time present to the Administrator recommendations, based upon conditions in the banking business, which will tend to effectuate the operation of the provisions of this Code and the policy of the National Industrial Recovery Act. Such recommendations shall, upon approval of the Administrator, after such public notice and hearing as he may pre- scribe, become operative as part of this Code. (3) The Banking Code Committee may, subject to the approval of the Administrator, require from all banks such reports as are neces- sary to effectuate the purposes of this Code, and shall upon its own initiative or upon complaint of any person affected make investiga- tion as to the functioning and observance of an}' provision of the Code and report the results of such investigation to the Administrator. (4) The Banking Code Committee shall, subject to the approval of the Administrator, supervise the setting up of Regional Commit- tees according to the following plans : (a) Where banks are now organized through State banking asso- ciations, city clearing-house associations, county groups, or other- wise, such organizations shall, with the approval of the Banking Code Committee, appoint a committee for the purpose of assisting the Administrator and the Banking Code Committee in the ad- ministration and enforcement of this Code within such local region. (b) Banks in regions or districts not now organized shall, within thirty (30) days after the effective date of this Code, send duly qualified representatives to a joint meeting called for the purpose of organizing under the supervision of the Banking Code Committee a Regional Clearing House Association or such other committee along the lines of procedure set forth in the Manual of Organiza- tion and Management of Regional Clearing House Associations com- piled by the American Bankers Association. (c) Where such action hereinbefore stipulated shall not have been taken within thirty (30) days after the effective date of this Code, the Banking Code Committee may set up through the State banking association or associations a Regional Committee or Committees. (5) The Committees provided for in the preceding paragraphs shall assist the Administrator and the Banking Code Committee in the administration and enforcement of this Code within local areas and shall, subject to the approval of the Administrator and of the Banking Code Committee, adopt local rules and regulations govern- ing competitive practices within local areas. (6) The Administrator may from time to time, after consultation with the Banking Code Committee, issue such administrative inter- pretations of the various provisions of this Code as are necessary to effectuate its purpose within the provisions of the National Indus- trial Recovery Act of 1933, and such interpretations shall become operative as a part of this Code. Article VIII — Fair Trade Practices To effectuate the purposes of the National Industrial Recovery Act all banks shall comply with the following rules governing fair competition in banking practices, which shall become effective sixty (60) days after the approval of this Code by the President of the United States: (1) Hours of banking. — Within cities, trade areas, counties, or such other area as is covered by the regional clearing house, or other organized group, banking institutions of the same kind or character shall, subject to the approval of the Administrator, establish uniform maximum hours of banking operations, but any bank in such a group may observe shorter hours than the maximum established. (Banks having both commercial and savings accounts are to be construed as of the same character.) By hours of banking operations is meant the period during which the doors of the banking institution are open for the purpose of serving the public. It is not intended or required that all banks within a given area shall maintain uniform banking hours, but it is the express intention of this provision that all banking institutions of like kind and character shall maintain uniform maximum hours each with the other. The uniform hours so adopted shall not be less than those in effect in the majority of the banks within any given district prior to June 1, 1933, and if the hours of any bank are so reduced to conform with the majority, or if any bank observes shorter hours than the majority, then no such bank shall by reason of this fact reduce the number of its em- Eloyees below the number emploj'ed at the time such reduction in ours is made. (2) Interest.— Subject to the rules and regulations of the Federal Reserve Board with respect to maximum rates of interest to be paid on time and savings deposits and the method of calculation thereof, as prescribed in the Banking Act of 1933, all banks within groups or districts hereinbefore referred to (except investment banking houses accepting deposits, which houses are subject to the Code of Fair Competition for Investment Bankers) shall maintain the same maximum rates of interest and the same method of calcu- lation thereof upon deposits of like character, but this shall not be construed to require any bank to pay such maximum rates if it does not so desire. The Banking Act of 1933 (Section 11-B) provides that no bank which is a member of the Federal Reserve System may pay interest on demand deposits; the rules and regulations provided by clearing-house associations or other groups shall contain a stipulation that no interest is to be paid by any bank (except in- vestment banking houses accepting deposits, which houses are sub- ject to the Code of Fair Competition for Investment Bankers) within such group, whether member or nonmember of the Federal Eeserve System, on demand deposits, provided that nothing in these rules and regulations shall be in contravention of the permis- sive provisions of Section 11-B of the Banking Act of 1933. (3) Service charges. — Each clearing house, county association, county group, or State bank association shall, subject to the approval of the Administrator, adopt rules fixing uniform service charges to be charged by banks within such district or group in accordance with the practice now in effect whereby services rendered by banks shall be compensated for either by adequate balances carried or by a scale of charges. The Federal Reserve Act prohibits member banks from making any exchange charge for remitting to the Fed- eral Reserve Bank of their district for cash items, and since the Federal Reserve System provides a par clearance plan, exchange charges as such shall be left to the determination of each individual bank. (4) Trust service. — Trust departments shall be operated in ac- cordance with the provisions of the Statement of Principles of Trust Institutions, adopted by the Trust Division of, and approved by, the Executive Council of the American Bankers Association on April 6, 1933. A statement of these principles is appended as Schedule A and made a part of this Code. Article IX — General Provisions (1) Membership in the American Bankers Association shall be open to all banks included within the provisions of this Code, and said Association shall impose no inequitable restrictions upon admis- sion to membership therein. (2) It is expressly provided that no provision of this Code shall be interpreted or applied so as to conflict m any way with any Federal or State banking law or any rule or order which has been or may be issued by the Federal Reserve Board, the Comptroller of the Currency, or by any State banking authority. (3) This Code and all the provisions thereof are expressly made subject to the right of the President, in accordance with the pro- visions of Section 10 (b) of Title I of the National Industrial Ke- covery Act, from time to time to cancel or modify any order, ap- proval, license, rule, or regulation issued under Title I of said Act, and specifically to the right of the President to cancel or modify his approval of this Code or any conditions imposed by him upon his approval thereof. (4) Such other provisions of this Code as are not required to be included therein by the National Industrial Eecovery Act may, with the approval of the President, be modified or eliminated as changes in the circumstances or experience may indicate. (5) The provisions of this Code shall expire on the expiration date of Title I of the Act or on the earliest date prior thereto on which the President shall by proclamation, or the Congress shall by joint resolution, declare that the emergency recognized by Section I of the National Industrial Recovery Act has ended. Schedule A A STATEMENT OF PRINCIPLES OF TRUST INSTITUTIONS TRUST DIVISION AMERICAN BANKERS ASSOCIATION, 1933 FOREWORD This statement of principles has been formulated in order that the fundamental principles of institutions engaged in trust business may be restated and thereby become better understood and recog- nized by the public as well as by trust institutions themselves, and in order that it may serve as a guide for trust institutions. In the conduct of their business trusts institutions are governed by the cardinal principle that is common to all fiduciary relation- ships — namely, fidelity. Policies predicated upon this principle have for their objective its expression in terms of safety, good manage- ment, and personal service. Practices developed under these policies are designed to promote efficiency in administration and operation. The fact that the services performed by trust institutions have become an integral part of the social and economic structure of the United States makes the principles of such institutions a matter of public interest. R. M. Sims, President Trust Division, American Bankers'* Association. Article I. Definition of Terms Section 1. Trust institutions. — Trust institutions are corporations engaged in trust business under authority of law. They embrace not only trust companies that are engaged in trust business exclusively but also trust departments of other corporations. Sec. 2. Trust business. — Trust business is the business of settling estates, administering trusts, and performing agencies in all appro- priate cases for individuals; partnerships; associations; business cor- porations; public, educational, social, recreational, and charitable institutions; and units of government. It is advisable that a trust institution should limit the functions of its trust department to such services. Article II. Acceptance of Trust Business A trust institution is under no obligation, either moral or legal, to accept all business that is offered. Section 1. Personal trust business. — With respect to the accept- ance of personal trust business, the two determining factors are (7) 8 these : Is trust service needed, and can the service be rendered prop- erly ? In personal trusts and agencies the relationship is private and the trust institution is responsible to those only who have or may have a financial interest in the account. Sec. 2. Corporate trust business. — In considering the acceptance of a corporate trust or agency the trust institution should be satis- fied that the company concerned is in good standing and that the enterprise is of a proper nature. Article III. — Administration of Trust Business Section 1. Personal trusts. — In the administration of its personal trust business a trust institution should strive at all times to render unexceptionable business and financial service, but it should also be careful to render equally good personal service to beneficiaries. The first duty of a trust institution is to carry out the wishes of the crea- tor of a trust as expressed in the trust instrument. Sympathetic, tactful, personal relationships with immediate beneficiaries are essen- tial to the performance of this duty, keeping in mind also the inter- ests of ultimate beneficiaries. It should be the policy of trust insti- tutions that all personal trusts should be under the direct supervision of, and that beneficiaries should be brought into direct contact with, the administrative or senior officers of the trust department. Sec. 2. Confidential relationships. — Personal trust service is of a confidential nature and the confidences reposed in a trust department by a customer should never be revealed except when required by law. Sec. 3. Fundamental duties of trustees. — It is the duty of a trus- tee to administer a trust solely in the interest of the beneficiaries without permitting the intrusion of interests of the trustee or third parties that may in any way conflict with the interests of the trust ; to keep and render accurate accounts with respect to the administra- tion of the trust ; to acquaint the beneficiaries with all material facts in connection with the trust; and, in administering the trust, to exercise the care a prudent man familiar with such matters would exercise as trustee of the property of others, adhering to the rule that the trustee is primarily a conserver. Sec. 4. Corporate trust business. — In the administration of cor- porate trusts and agencies the trust institution should render the same fine quality of service as it renders in the administration of personal trusts and agencies. Promptness, accuracy, and protection are fundamental requirements of efficient corporate trust service. The terms of the trust instrument should be carried out with scrupu- lous care and with particular attention to the duties imposed therein upon the trustee for the protection of the security holder. Article IV. Operation of trust departments Section 1. Separation of trust properties. — The properties of each trust should be kept separate from those of all other trusts and separate also from the properties of the trusts institution itself. Sec. 2. Investment of trust funds. — The investment function of a trustee is care and management of property, not mere safekeeping at one extreme or speculation at the other. A trust institution should 9 devote to its trust investments all the care and skill that it has or can reasonably acquire. The responsibility for the investment of trust funds should not be reposed in an individual officer or employee of a trust department. All investments should be made, retained, or sold only upon the authority of an investment committee composed of capable and experienced officers or directors of the institution. When the trust instrument definitely states the investment powers of the trustee, the terms of the instrument must be followed faith- fully. If it should become unlawful or impossible or against public policy to follow literally the terms of the trust instrument, the trustee should promptly seek the guidance of the court about vary- ing or interpreting the terms of the instrument and should not act on its own responsibility in this respect except in the face of an emer- gency, when the guidance of the court beforehand could not be obtained. If the trust instrument is silent about trust investments or if it expressly leaves the selection and retention of trust invest- ments to the judgment and discretion of the trustee, the latter should be governed by considerations of the safety of principal and de- pendability of income and not by hope or expectation of unusual gain through speculation. However, a trustee should not be con- tent with safet}^ of principal alone to the disregard of the reason- able income requirements of the beneficiaries. It is a fundamental principle that a trustee should not have any personal financial interest, direct or indirect, in the trust investments, bought for or sold to the trusts of which it is trustee, and that it should not purchase for itself any securities or other property from any of its trusts. Accordingly, it follows that a trust institution should not buy for or sell to its estates or trusts any securities or other property in which it, or its affiliate, has any personal financial interest, and should not purchase for itself, or its affiliate, any securi- ties or other property from its estates or trusts. Article V. Compensation for Trust Service Section 1. A trust institution is entitled to reasonable compensa- tion for its services. Compensation should be determined on the basis of the cost of the service rendered and the responsibilities as- sumed. Minimum fees in any community for trust services should be uniform and applied uniformly and impartially to all customers alike. Article VI. Promotional Effort Section 1. Advertising. — A trust institution has the same right as any other business enterprise to advertise its trust services in ap- propriate ways. Its advertisements should be dignified and not overstate or overemphasize the qualifications of the trust institu- tions. There should be no implication that legal services will be rendered. There should be no reflection, expressed or implied, upon other trust institutions or individuals, and the advertisements of all trust institutions should be mutually helpful. Sec. 2. Personal representation. — The propriety of having personal representatives of trust departments is based upon the same principle 10 as that of advertising. Trust business is so individual and distinc- tive that the customer cannot always obtain from printed matter all he wishes to know about the protection and management the trust institution will give his estate and the services it will render his beneficiaries. Sec. 3. New trust department. — A corporation should not enter the trust field except with a full appreciation of the responsibilities involved. A new trust department should be established only if there is enough potential trust business within the trade area of the institution to justify the proper personnel and equipment. Sec. 4. Entering corporate trust -field. — Since the need for trust and agency services to corporations, outside of the centers of popula- tion, is much more limited than is that of trust and agency services to individuals, a trust institution should hesitate to enter the cor- porate trust or agency field unless an actual demand for such services is evident, and the institution is specially equipped to render such service. Article VII. Relationships Section 1. With public. — Although a trust department is a dis- tinctly private institution in its relations with its customers, it is affected with a public interest in its relations with the community. In its relations with the public a trust institution should be ready and willing to give full information about its own financial responsi- bility, its staff and equipment, and the safeguards thrown around trust business. Sec. 2. With bar. — .Attorneys at law constitute a professional group that perform essential functions in relation to trust business, and have a community of interest with trust institutions in the com- mon end of service to the public. The maintenance of harmonious relations between trust institutions and members of the bar is in the best interests of both, and of the public as well. It is a funda- mental principle of this relationship that trust institutions should not engage in the practice of law. Sec. 3. With life underwriters. — Life underwriters also constitute a group having a community of interest with trust institutions in the common purpose of public service. Cooperation between trust institutions and life underwriters is productive of the best mutual service to the public. It is a principle of this cooperation that trust institutions should not engage m the business of selling life insurance. o UNIVERSITY OF FLORIDA 3 1262 08338 093