Alabama Constitution Section 248 Banking laws to be general specie basis authority of banks to issue bills to circulate as money
Alabama Constitution – Section 248: Banking Laws to Be General; Specie Basis; Authority of Banks to Issue Bills to Circulate as Money
Text of Section 248:
"All banking laws shall be general in their operation, and no bank shall be established otherwise than under a general banking law. The state shall not be a stockholder in any bank, nor shall the credit of the state ever be given or lent to any banking company, association, or corporation. After the first day of January, nineteen hundred and three, no bank shall be established or incorporated under the laws of this state unless it shall have at the time of its organization a paid-in capital of not less than twenty-five thousand dollars. Every bank incorporated under the laws of this state shall at all times maintain a reserve of at least twenty per centum of its demand liabilities, in available funds. The legislature shall by general law provide for the registry and supervision of all banking companies; provided, that the provisions of this section shall not apply to any banking company now in existence under the laws of this state. No bank shall issue bills to circulate as money."
Explanation:
This section outlines strict constitutional rules regarding how banks must operate in Alabama, especially regarding state involvement, capital requirements, and issuing currency.
🔹 Key Provisions:
1. Uniform Banking Laws:
All banking laws must be general (i.e., apply equally to all banks — no special treatment or local/private laws).
2. No Special Banks:
Banks can only be created under a general banking law — not by special legislative acts.
3. State Not Involved in Banks:
The State of Alabama cannot own stock in any bank.
The State cannot lend its credit (i.e., financial backing or guarantees) to any bank or banking corporation.
4. Capital Requirement:
Any bank established after January 1, 1903, must have at least $25,000 in paid-in capital at the time of incorporation.
5. Reserve Requirement:
Banks must maintain a reserve equal to 20% of their demand liabilities (e.g., checking accounts and other immediately payable funds) in available funds.
6. State Oversight Required:
The legislature must enact general laws to ensure registration and supervision of all banks.
7. Prohibition on Private Currency:
Banks are forbidden from issuing bills or notes to circulate as money (i.e., private banknotes are banned).
⚖️ Historical Context:
Reflects the early 20th-century push for tighter regulation of banks.
Intended to prevent bank failures, uncontrolled credit, and fraudulent banknote circulation common before federal monetary regulation.
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