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INTERPRETATION OF BANKING ACT OF 1933.
(Copies to "be sent to a l l Federal reserve "banks)
November 17, 1933.
Mr. W. B. Geery, Governor,
Federal Reserve Bank of Minneapolis,
Minneapolis, Minnesota.
Dear Governor Geery:
Reference i s made to Mr.
's l e t t e r of October 17,
1933, addressed to the Chief of the Board's D i v i s i o n of Bank Operat i o n s , r a i s i n g the question whether deposits of receivers of i n s o l vent national "banks and deposits of conservators of national "banks
may "be regarded "by a member "bank i n which such funds are deposited
as demand deposits "due to "banks" within the meaning of Section III("b)
of the Board's Regulation D.
The Board has taken the p o s i t i o n that a Federal reserve
"bank has no authority to receive deposits from a receiver of a
national "bank, on the ground that Section 6 of the Federal Reserve
Act requires a member bank, upon the appointment of a receiver, to
surrender stock held "by i t in a Federal reserve bank and that, theref o r e , a national bank for which a receiver has been appointed can no
longer be considered a member bank within the meaning of Section 13
of the Federal Reserve Act, which authorizes a Federal reserve bank
to receive deposits from i t s member banks.
I f , upon i t s insolvency,
a national bank can no longer be regarded as a member bank, i t may
be argued that i t cannot be considered a bank for any other purpose.
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Furthermore, the receiver of an insolvent national bank holds l e g a l
t i t l e to the a s s e t s of the bank as trustee for the b e n e f i t of the bajik's
creditors.
Accordingly, upon h i s appointment, the bank may be said to
cease to e x i s t as a going banking organization, and to e x i s t only f o r
the purpose of winding up i t s a f f a i r s .
On the other hand, a national bank in the hands of a conservator may continue to perform c h a r a c t e r i s t i c banking f u n c t i o n s .
Under
Section 206 of the Bank Conservation Act of March 9, 1933, as amended,
the conservator may, under the d i r e c t i o n of the Comptroller of the Currency, r e c e i v e deposits and allow withdrawal of d e p o s i t s on a l i m i t e d
basis.
Moreover, that act authorizes the Comptroller of the Currency,
i n h i s d i s c r e t i o n , to terminate the conservatorship and permit the bank
to resume the t r a n s a c t i o n of i t s business under the management of i t s
own o f f i c e r s .
It i s c l e a r , therefore, that the appointment of a con-
servator contemplates not the c e s s a t i o n of banking a c t i v i t i e s , but the
conservation and p r o t e c t i o n of the bank's a s s e t s , temporarily.
For the reasons above i n d i c a t e d , the Board i s of the opinion
that, while d e p o s i t s made by a conservator of a national bank may proper
l y be considered d e p o s i t s "due to banks" within the meaning of Regulat i o n B, d e p o s i t s made by a receiver of an i n s o l v e n t national bank may
not be so regarded.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
@FedFRASER