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X-9843 Sec. 11(m) FRA-1 INTERPRETATION OF LAW OR REGULATION (Copies to be sent to all Federal reserve banks) March 12, 1937. Mr. , Assistant Vice President, Federal Reserve Bank of , • > Dear Mr. ; This refers to your letter of February 13, 1937, and inclosures, with regard to certain loans made or the security of stock or bond collateral by The . . , Bank of , which the examiner, in ' the report of examination as of September 26, 1936, states are in excess of the 10 per cent limitation prescribed by section 11(m) of the Federal Reserve Act. and counsel for The It appears that certain officers of Bank of maintain that surplus, for the purposes of section 11(m), includes not only the bank's stated surplus but its undivided profits and reserves for contingencies as well, in which event the loans in question would not be in excess of the 10 per cent limitation; but that it is your view that the term "surplus", as used in section 11(m) of the Federal Reserve Act, does not include undivided profits or reserves for contingencies, and that counsel for your bank is in accord with this view. Careful consideration has been given to the question raised in your letter and the Board is in agreement with your view and that of your counsel with regard to this matter. It is suggested X-9843 Sec. 11(m), FRA-1 that you advise The Bank of of the Board's position in this matter and request the bank to take such steps as are necessary to bring its loans secured by stock or bond collateral within 10 per cent of its capital and surplus, exclusive of undivided profits and reserves for contingencies, as prescribed in section 11(m) of the Federal Reserve Act. Very truly yours, (Signed) L. P. Bethea, L. P. Bethea, Assistant Secretary.
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