The Secretary of State to the Vice President of the National City Bank (G. E. Gregory)
Sir: The Department has received your letter of April 12, 1922, in regard to the proposed modifications in the Contract of Concession of the National Bank of the Republic of Haiti.
It has noted your statement that you were ready to proceed to the modifications to be made in the Contract of Concession as agreed upon at a conference held in the Latin-American Division of this Department on February 3, 1920, but that you were prevented from doing so by the Haitian Government’s refusal to give its consent to the transfer of the concession despite the fact that the State Department had assured you that this consent would be forthcoming. The Department feels constrained to point out that it is obviously impossible for the Department of State to give any assurances as to the action of the Haitian Government in this matter, and to state that any assumption that such assurances had been given must have been based upon a misunderstanding.
You state that you are willing, provided certain changes are made in the modifications of February 20, 1922, to agree to certain provisions which are set forth below with the Department’s comments upon each provision:—
- To eliminate from the agreement of February 20, 1922, between yourselves and the Haitian Government the portion relating to the issue of bonds for the stabilization of nickel currencies.
The Department believes the elimination of this portion of the agreement is essential.
- To allow interest in accordance with Article 3 of the
modifications contained in the Agreement between the Department and
the National City Bank, with the understanding that the following
clause be added to that Article:
“Provided, that the Bank will not be required to allow interest on Government funds on deposit in Haiti or New York when the Government of Haiti is indebted to the Bank for money borrowed”.
The Department cannot perceive the necessity for a modification of the understanding between the Department and the Bank regarding the payment of interest. The Bank’s concession provides for a permanent credit to the Government upon which the Government pays interest, and it is not clear why the Bank should refuse to pay [Page 530] interest upon sums deposited with it by the Government when the Government on its part is paying interest upon its debt to the Bank. The modification which you propose would render valueless the provision regarding the payment of interest on deposits.
- To include in the Agreement, Article 8 of the modifications agreed upon between the Department and the Bank on February 3, 1920, which relates to the sale of the stock of the Bank of Haiti provided the following clause is added, viz:— “to be exercised within 30 days from receipt of notice of proposed sale”.
No objection is perceived to the modification proposed.
- The Bank will agree to the interpretation regarding the Commission as outlined in the Department’s letter of April 6, 1922.
The Department regards this as a necessary condition to its approval of your Agreement with the Haitian Government regarding the compensation to the Bank for the Treasury service.
- You suggest that the Article relating to examination of the Bank
be revised as follows:—
“For the general inspection of the Bank the Government of Haiti shall during the life of this Concession have the right, at its own expense, upon eight days’ notice to the Manager of the Bank at Port-au-Prince, to examine semi-annually, by one or more expert accountants to be chosen by the two contracting parties and the Financial Adviser, the books, funds, portfolio, affairs and operations of the Bank, and to call for reports (statements) quarterly, and the Financial Adviser during the life of the Haitian-American Convention have the right personally, or thru his agents, to inspect the operations of all the Government accounts in the Bank and call for monthly reports of such accounts if he deems it necessary to do so.
Copies of the reports of all semi-annual examinations and quarterly statements shall be handed to the Haitian Government and to the Financial Adviser.”
A revision in the sense proposed by you would deprive the Financial Adviser of the right conceded to him in the Agreement of February 3, 1920, to inspect the operations of the Bank at any time, and would limit his right of inspection to the accounts of the Bank with the Government. The Department cannot agree to this limitation of the Financial Adviser’s powers, and it is rather surprised that such a limitation should be proposed in view of the entire willingness of the Bank, as expressed by you in conferences with members of the Department, to have the Financial Adviser inspect all of the operations of the Bank at any time.[Page 531]
- You suggest that the following provision be incorporated in the
Contract of Concession in lieu of the original Article III of the
“The Bank shall be organized as a Haitian corporation in conformity with the Haitian Laws regulating such corporations and shall be exempt from all incorporation and registration fees. Its domicile shall be at Port-au-Prince where the annual shareholders’ meeting for the election of Directors shall be held, and where the archives (records) shall be kept. The Directors’ meeting may be held at Port-au-Prince or New York, according to the convenience of a majority of the Board. Copies of the minutes of the Board of Directors shall be kept in the Bank at Port-au-Prince. The Bank, upon agreement with the Government, shall have the right to establish branches and agencies wherever it shall be considered advisable for the needs of the business”.
The Department perceives no objection to this modification.
- You suggest that the phrase “within the limitations mentioned in Article 15 which follows:” be eliminated from Article 14 of the Contract of Concession.
The necessity for this change is not apparent, as the Department does not understand that Article 15 of the original concession will be abrogated either by the agreement between the Bank and the Department or by the recent agreement between the Haitian Government and the Bank.
- To add to Article 18 of the original Contract of Concession the
“The Bank shall hold in its vaults in legal tender money, gourdes or dollars, a reserve of twenty per cent (20%) of its governmental, bank, individual, and commercial net demand deposits and five (5%) of its time and savings deposits. The Bank may loan the remainder of its deposits as described above in the ordinary course of its business under rules prescribed by its Board of Directors”.
The Department feels that it cannot sanction in principle a provision authorizing the maintenance of what would appear to be an insufficient reserve against deposits, unless there are special considerations which have not yet been brought to its attention and which would make the maintenance of the reserve proposed a sufficient safeguard for the bank’s depositors. The Department is aware that there is no provision in the concession at the present time which requires the maintenance of any reserve. It agrees with you that a provision of this nature should, if possible, be incorporated in the Contract of Concession, but it does not feel that it could consistently approve of the amount of the reserve as suggested by you. It submits that a reserve of 35% or 40% against Governmental and demand [Page 532] deposits would appear to be more consistent with sound banking practice in a country like Haiti. A further expression of your views in this matter would, however, be appreciated.
In concluding, the Department desires to make it clear that it does not wish to be placed in the position of bargaining with you in regard to minor points in a bank concession which is to be granted by the Haitian Government. It feels, however, as you were informed in the Department’s letter of April 6, that the principles established by the Agreement of February 3, 1920, between the National City Bank and the Department should be maintained, and it is unwilling to admit any essential modification of these principles. It is therefore unable to agree to those proposals in your letter of April 12, which would deprive the Haitian Government of benefits secured to it by the Agreement under which the Department gave its consent to the purchase of the National Bank of Haiti by the National City Bank of New York.
I am [etc.]