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BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Office Correspondence Ofrfl'*twir| ^Secifts Date-j^ry mt Subject: The following is a summary of the salient provisions of otar proposed bank holdirg company 1. All bank holding companies are required to register with the Board and to supply current relevant financial and other information. 2. Each bank holding company and its subsidiaries are subject to examination by the Board, 3. It is Bade unlawful for a bank holding company, after two years f to own shares in nonbanking companies or to engage in nonbanking business* There are two exceptions to this prohibition* It does not apply (a) to shares owned by a bank holding company in companies ?daich the Board determines are so closely related to the business of managing or controlling banks aa to be proper incidents thereto, or Cb) to shares acquired by a bank holding company at the request of a State or Federal authority. 4* Ho new bank holding companies can come into existence without approTal of the Board* 5* No existing bank holding company may expand without approval of the Board* [Hote: It is anticipated that our bill will provide that if and when peimission of the Board under numbers 4 or 5 is sought, such permission will be granted only upon affirmative showing by the applicant that it is in the public interest that such permission be granted*] 6* No bank in a bank holding company system can buy the assets of another bank without the approval of the appropriate Federal authority* 7. Neither the bank holding company nor its subsidiaries may borrow from any of the banks in the system or sell any securities or other property to such banks* This does not apply to such loans as the Board may permit to meet the proper financial requirements of those companies in a bank holding company system which the Board has determined are reasonable and incidental to the business of managing and controlling banks. 8* The Board is authorized to determine the reasonableness of management or other service fees charged by a bank holding company or any of its subsidiaries to the banks in the system* 9. Bank holdiig companies are required to accumulate an appropriate reserve fund* ^ To: Chairman Eccles -2- 10• The Board is given the authority to issue rules, regulations and orders necessary to enable it to administer and carry out the Act* The Board is also given authority to make investigations and ta subpoena witnesses in aid of such investigations* 11* Any person aggrieved by any order of the Board is authorized to obtain a review of such order in the Circuit Court of Appeals* 12* The penalties for violating any of the provisions of the Act or of the rules, regulations or orders issued thereunder are: (a) a bank holding company shall not pay any salary to any officer or director of the company found by the Board to have participated in such violation, (b) no subsidiary bank shall pay dividends or any management or service charges to the bank holding company, (c) the bank holding company shall not thereafter vote the shares owned by it or participate in the management of any subsidiary bank, (d) a criminal penalty of #10,000 or imp ri so mien t of not more than two years or both is imposed upon those who wilfully violate the law or any rule, regulation or order issued thereunder*