Full text of Mimeograph Letters and Statements of the Board : Interpretation of Banking Act of 1933: National Bank as Affiliate of State Bank, Number X-7532, Volume 39, Page 101

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X-7532
(INTERPRETATION OF BANKING ACT OF 1933)
Copies to be cent to all Federal Reserve Banks.
August 2, 1933.
Mr*

, President,
of
,
3

•

Dear Sirs
Your letter of July 14, 1933, addressed to the Comptroller
of the Currency, has been referred to the Federal Reserve Board for
reply.
From the statements and other information in your letter,
the Board understands that you own a majority of the outstanding stock
of the ______ National Bank of
National Bank of
State Bank of

,

,
,
,

,

,

, of the

, and of the ____________
, respectively; and that you

and your wife, who own 189%- shares of stock of the _ _ _ _ National Bank
___
of

, out of a total of _____ shares outstanding, also own a

majority of the stock of the State Bank of

,

,

. From

the list of stockholders which you submitted, it appears that certain
other individuals own stock in more than one of the banks in the group.
You state that, notwithstanding such common stock ownership, each bank
in the group is operated independently of each other bank in the group,
and you request to be advised whether, under the circumstances stated,
the national banks and the two State banks, neither of which is a
member of the Federal Reserve System, are "affiliates11 of each other
within the meaning of Section 2, subparagraph (b) of the Banking Act of
1933.



X-7532

• 2 *•
•

102

It is the opinion of the Board that the __________ National
Bank of
of

, the _______

State Bank of

, and the State Bank

, are "affiliates" of the ______ National Bank of

and that the
Bank of

National Bank of

, the

;
State

, and the State Bank of ______ are "affiliates" of the

__________ National Bank of

. Neither national bank is an "affili-

ate" of either State bank, and neither State bank is an "affiliate" of
the other.
Section 2, subparagraph (b) of the Banking Act of 1933,
provides in part that "Except where otherwise specifically provided,
the term 'affiliate' shall include any corporation, business trust,
association, or other similar organization * * * * * *

"(2) Of which control is held * * * through stock
ownership or in any other manner, by the shareholders
of a member bank who own or control * * * a majority
of the shares of such bank."
Under this definition, in deciding whether a corporation,
business trust, association, or other similar organization is an
"affiliate" of a member bank, the determinative factor is whether
control of such organization is held by shareholders of a member
bank who own or control a majority of the shares of such member
bank, and not whether such organization and member bank are operated




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X-7532

independently of each other. Accordingly, since shareholders of the
______ National Bank of

, a member bank, who own a majority

of the shares of stock of such bank, own more than 50$ of the outstanding stock of the other banks in the group, it appears that control of each such other bank is held through stock ownership by
shareholders of a member bank who own more than a majority of the
shares of the member bank, and it is the opinion of the Board that
____
each such other bank is an "affiliate" of the _ _ _ _ National Bank of
within the moaning of the Banking Act of 1933. Likewise,
it appears that the _ _ _ _ National Bank of
____
State Bank of

, and the State Bank of

by shareholders of the _________ National Bank of

, the ___________
are oach controlled
, who own a

majority of the shares of such member bank, and that such banks are
"affiliates" of the ________ National Bank of ______ within the meaning
of the Banking Act of 1933.
You will note that the definition quoted above has reference
to corporations, business trusts, associations, and other similar
organizations which are owned or controlled by shareholders of a member
bank, and does not include any such organization which is not controlled
by shareholders of a member bank. Accordingly, the national banks are
not "affiliates" of the State banks, as that term is used in the definition quoted, even though they are controlled by shareholders of the




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X-7532

State banks "who own a majority of the shares of such State banks,
for the reason that the State banks are not member banks»

For a like

reason, neither non-member State bank is an "affiliate" of the other.




Very truly yours,

Chester Morrill,
Secretary.