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„,<..«„„ BOARD OF GOVERNORS OF THE , „,,,,, ... 2,-196<3(On office FEDERAL RESERVE SYSTEM co P ies ' WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD December 17, 1 CONFIDENTIAL Dear Sir: At the conference of Presidents of the Federal Reserve Banks on June 7-8, 1946, it was suggested that consideration be given to the elimination of special conditions of membership heretofore prescribed in connection with the admission of State banks to membership in the wSystem and the substitution of standard conditions of membership for other conditions to which banks are now subject. c A study is being made to determine what, if any, changes should be made in the standard conditions of membership. The study also will include consideration of any changes in other provisions of the Board's Regulation H which may be desirable at this time. In connection with this study, it would be very helpful to the Board if it could have the benefit of the views of the Federal Reserve Banks, after consultation with their counsel, concerning the following questions; (1) What has been the reaction of prospective and existing member banks to the present standard conditions of membership? (2) Do you consider it necessary or advisable to prescribe any conditions governing a bank after its admission to membership? (3) Do you recommend a modification, restatement, consolidation, or elimination of any of the present standard conditions? Do you recommend any other conditions, and if so, what? In this connection, please consider the following more specific questions: (a) Bearing in mind that standard condition numbered 3 relates only to dealings in a particular class of asset and dealings in other assets are not specifically mentioned in the standard conditions, should this condition be eliminated, modified, or retained in its present form, and why? -2(b) What arguments can be made for the elimination or retention of any or all of the three standard trust conditions (numbered 4* 5, and 6)? Should there be any conditions relating to specific practices in connection with the exercise of trust powers? Should there be a general condition of broader scope relating to trust activities? (c) Are the first clauses of standard conditions numbered 1 and 2 necessary or desirable, and why? (l+) Apart from the standard conditions of membership, what changes, if any, should be made in the text of Regulation H? In recommending the elimination or modification of any of the standard conditions of membership, due regard should be given to the factors which the Board is required by law to consider in admitting State banks to membership (including the corporate powers of the banks), the specific statutory authority to prescribe conditions of membership, the responsibilities of the Board and the Federal Reserve Banks for the supervision of State banks after their admission to membership, and the nature and extent of their powers to discharge these responsibilities in the absence of conditions of membership. Consideration also is being given to questions with respect to the standardized letter which the Board uses to inform a bank of approval of its application for membership. A copy of the form of the letter is enclosed for convenient reference, We would like to have your views concerning the following questions relating to this matter: (1) Has there been any indication that applicant banks consider the letter too long, formal, complicated, technical, or otherwise objectionable? (2) Do you consider the letter satisfactory? What, if any, changes do you recommend? In this connection, please consider the following more specific questions: (a) Would you consider it advisable to delete the recitation of the standard conditions from the letter and to incorporate them only by a reference to Regulation H or some other enclosure with the letter? (b) Do you believe that it would be advisable to delete any of the other contents of the Board's letter, with the view that, insofar as necessary, the Federal Reserve Banks will advise the applicant banks concerning the deleted items? You will understand, of course, that at this stage we are -3seeking comprehensive information and recommendations concerning the foregoing matters as a basis for further study, without having reached conclusions as to what, if any, action should be taken. In answering these question, please be as specific as possible, and set out the exact language which you recommend in any instance where you believe a change should be made in the standard conditions cf membership, ether provisions of Regulation H, or the letter. The Board is in full accord with the recommendations of the Presidents of the Federal Reserve Banks that steps should be taken to achieve uniformity, insofar as practicable, in the conditions of membership to which State member banks are subject. Following consideration of the replies to this letter and determination as to what, if any, changes should be made in the standard conditions of membership, it is contemplated that conditions heretofore prescribed will be reviewed for this purpose. The Board would be glad to have .any suggestions which you may have concerning the procedure which should be followed in accomplishing the desired uniformity in conditions of membership. It is suggested that you do not contact member banks or others outside of your organization concerning this matter at this time. Very truly :? , \jJ\tUVA \J S. R. Carpenter, Secretary. Enclosure TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS
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