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281 BOARD OF GOVERNORS CJF' THE FEDERAL RESERVE SYSTEM WASHINGTON ADDRESS OF'FICIAL. CORRESPONDENCE TO THE BOARD X-9510 March 4, 1956. Dear Sir: For your information and guidance, there is inclosed a copy of a letter sent to the Cashier of the Federal Reserve Bank of San Francisco, with respect to the deduction of "branch clearing" accounts from gross demand deposits in the determination of required reserve balances of member banks. Very truly yours, ~ ---- ~~..AA~ L. P. Bethea, Assistant Secretary. Inclosure. TO ALL FEDERAL RESERVE AGENTS X-9510-a March 4, 1956. Mr. w. M. Hale, Cashier, Federal Reserve Bank of Srm San F~ancisco, California. Fr~tncisco, Dee. r l'Jlr. Hale: In tho fifth paragraph of your letter of January 10, 1956, giving the results of a comparison mad.o of deposits as shown in the November 1, 1955 call reports and as shown in the reports of deposits submitted for reserve purposos, you state that the only differences that were difficult to reconcile or to dLJcuss with tho member banks were in connection with "branch cle£,ring" balances carried on tho books of branch banking insti tutions, <md you make inquiry as to tho prop13r clascification of such bLlances in preparing call reports and in computing the daily deposit liability for re:3erve re p:Jrts. As you knovr, this matter has boon considered informally on a number of occe. sirms in the past, from the stc. ndpoint of vvhothor such "branch clearing!! <Weounts could be tuting b~tlcnces considcrr.~d r.w consti- "due from banks" within the meaning of the former provisions of section 19 uf tho Federal Reserve Act. It appears from a letter which IVIr. ,..Jc.rgent addrossod tJ tho Board under date of March 5, 1954, that most cf tho items in the "branch clearing" account represent (1) checks drawn on a member bank (or offices 283 -2- X-9510-a or branches thereof) for which deposit credit or its equivalent has been given at offices or branches of such membor bank other t~~n those at which the depositors' accounts are carried, and that sufficient time has not elapsed for the items to have reached the latter offices or brunches and be charged to the depositors' accounts, and (2) checks drawn on another bank which have been deposited in a member bank (or offices or branches of such member bank) and have been forwarded for collection to other offices or branches of the member bank located in the same city or vicinity as the drawee bank. It is the view of tho Board that items of the type described above constitute "cash items in process of collection" within the meaning of paragraph (g) of section l of Regulation D and, accordingly, to the extent that the "branch cleo.ring 11 account consists of such itoms, the balance in tho account may be deducted from gross demand deposits in determining required reserve balances and should be included in item 2 of Schodule I in call reports. Very truly yours, (Signed) L. P. Bethea L. P. Bethea, Assistant Secretary.